Updated 15/1/2024
On the 30th November 2023, the Government announced that the Clean Heat Market Mechanism (CHMM) will become effective from 1st January 2024, placing a quota on manufacturers to deliver 4% of their boiler volume as heat pump installations. As the Edinburgh and the Lothians gear up for the Clean Heat Market Mechanism (CHMM), many homeowners are facing a new reality – a new ‘boiler tax‘ that could significantly increase the cost of gas boilers.
The CHMM boiler levy, which is essentially a regulatory measure to promote low-carbon heating systems like heat pumps, is expected to result in an increase in costs of around £120 per boiler, with predictions of further increases in 2025 and beyond.
This situation puts a spotlight on those who rely on gas heating and may feel penalised by these changes. In this blog, we’ll explore strategies to mitigate these increased costs and what this means if you are replacing your gas boiler in 2024 or after.
Understanding the CHMM boiler levy
The CHMM mandates boiler manufacturers to sell a quota of heat pumps proportional to their boiler sales, with a fine for non-compliance. In 2024, this quota is 4% of boiler sales, rising to 6% in 2025. The CHMM aims to boost the uptake of heat pumps, but it also translates into additional costs for manufacturers, which are likely to be passed on to consumers in the form of higher boiler prices.
The implications for homeowners
For those unable to install renewable energy solutions and dependent on gas, this feels like a punishment. Worryingly, the anticipated £120 levy per boiler is just the start, and future increases could strain household budgets further.
It’s essential to consider proactive measures to avoid these escalating costs.
It would be sensible for the government to allow homeowners to claim back the costs of the levy, if they can prove natural gas is the only reasonable heating solution that they have (Example, a mid floor flat in new town Edinburgh, where fitting an air source heat pump is not practically possible), however there is nothing proposed which suggests this will be their approach.
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What are the manufacturers saying about the CHMM boiler levy?
What Worcester Bosch have said:
“Currently, the UK market does not exist at sufficient scale for manufacturers to satisfy the proposed CHMM quotas for heat pumps or hybrid heat pump systems. Therefore, as an obligated manufacturer, we face inevitable and significant financial penalties through CHMM levies which we have no alternative other than to pass on to the market.
We will not be adjusting list prices but will recoup the levy for relevant boiler sales on a monthly basis via a retrospective invoice that will be sent to your head office. The levy that will be applied is £120 per boiler. A separate invoice will be sent to you after month end for all relevant purchases during the preceding month. Please see attached file for the full list of affected boilers.
Due to the exceptional and unprecedented circumstances around this matter, the levy will be effective for all orders delivered on, or after, 1 January 2024. Due to inventory levels, additional orders placed to avoid this levy cannot be fulfilled at this late stage.”
What Ideal Heating had to say:
As a manufacturer of gas boilers, we have a significant obligation placed upon us of a quota of qualifying heat pump registrations as a proportion of our UK boiler sales.
As a result of these obligations, which will be impossible to achieve, we face significant punitive fines from the Government, starting in 2024. Consequently, we have no alternative but to increase the price of each of our domestic gas boilers by £110.
Given the Market Mechanism is outside of our control and fines start to accrue from 1st January, we have no alternative but to apply our increase from the same date (1st January 2024).
What Vaillant had to say:
There are multiple factors announced by the Government that will impact the Vaillant Group and, given the changing market dynamics and heat pump installation burden generated by the CHMM, we in the current circumstances are left with no option but to act.
Having analysed our own business data, we are writing to inform you that we will introduce a CHMM levy at the value of £95 per boiler on all boiler sales under 70kW. This levy will apply to any boiler ordered or invoiced from 1st January 2024. Due to the demand on our supply chain and stock situation from the recent increase in orders, where we are unable to deliver any orders placed in 2023, then they will be delivered in 2024 and be invoiced including the CHMM levy.
Our strong belief remains that more needs to be done to educate consumers on the technology, upskill installers and urgently rebalance gas and electricity prices in the UK and will endeavour to work with all areas of the Government and our supply chain to continue to drive the UK transition to decarbonise heating.
Celsius conclusion
The demand for Air SourceHeat Pumps is just not there yet, especially in cities like Edinburgh with so many tenement properties. So in short, the fines the boiler manufacturers will certainly face, will be paid for by the property owner who buys a new boiler from 1st January 2024.
The upcoming CHMM, dubbed the ‘boiler tax,’ presents a challenging scenario for many homeowners in the Edinburgh and Lothians. Whilst it aims to push towards a greener future, it also imposes additional costs on those reliant on gas heating.
As we move towards 2024 and beyond, a balanced approach that blends cost-saving measures, energy efficiency, and sustainable alternatives will be more important than ever as homeowners navigate the landscape of home heating in Edinburgh and the Lothians.
Do you think it is fair that homeowners should bear the costs? Should the government be doing more to promote renewable energy solutions like Air Source Heat Pumps?
Unfortunately, this looks like just another example of things becoming more expensive and for families already in fuel poverty, this could make things harder even worse.
If you’re a bit on the ‘nerdy’ side, then more detailed information on this government initiative can be found here.
Michael
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Boilers News