by Ministers are to cut heat pump targets next year in a move that will lead to a “boiler tax” on households, industry sources have said.
Ed Miliband, the Energy Secretary, is expected to introduce the policy from April, despite warnings that it will increase the cost of new boilers.
Under the plans, boilermakers would face hefty fines if they fail to meet targets for the number of heat pumps they have to sell each year. Manufacturers have warned it would force them to add up to £180 to the price of a boiler, although campaigners have accused them of making a profit.
Officials have privately told the industry that the scheme will definitely be introduced next year, sources told the Telegraph. A Government source insisted that no final decision has been made.
The Clean Heat Market Mechanism (CHMM) would set a number of heat pumps they must sell as a percentage of their total boiler sales. It was originally drafted by the Tories and was set to come into effect earlier this year before being shelved after a backlash.
Claire Coutinho, the shadow energy secretary, delayed the introduction until at least next April and privately indicated she wanted to kill the policy.
She said: “I ended this policy last year because I felt strongly that we should think again. It is a classic example of policy designed for the green lobby and vested interest groups rather than the consumer.
“It will increase the costs of getting a boiler for ordinary households, possibly hundreds of pounds, when many cannot afford a heat pump.
“If Labor goes ahead with this on top of cutting the Winter Fuel Payment, it will make an even bigger mockery of their promises of bill savings for consumers.”
Mr Miliband is now set to revive it, with industry sources saying officials in his department have told them the targets will be introduced next year. Manufacturers and suppliers have been warned that legislation to introduce the scheme will be tabled in November, suggesting a start date of April.
An industry source said: “Ministers and officials are in contact with the boiler manufacturers with a view to introducing the MCTC in 2025. The details that have not yet been finalized are the details of the amount of the fine. There’s a conversation to be had about whether it’s set at the appropriate level.”
Under Tory plans inherited by Mr Miliband, manufacturers would have to ensure that at least six per cent of their total sales were made up of heat pumps. They would be fined £3,000 for each lost sale, with companies warning that they would have to pass on the cost of the multi-million pound penalties to customers.
Industry insiders have said demand for heat pumps, which are much more expensive than boilers, will not be enough to meet the targets.
Another source said that “as far as we know the CHMM is yet to start in 2025”, but said there was little involvement from officials. The source said manufacturers were still hopeful that ministers were “reconsidering or revising the punitive measures that the policy will impose”.
Around 1.5 million new boilers are installed each year, with the majority being switched in during the winter when the appliances are used the most.
It is estimated that a quarter of those – around 375,000 a year – are in pensioner households, most of whom have just lost their £200 winter fuel allowance.
Boiler makers temporarily raised their prices by £120 last January when they believed a four per cent target for heat pump sales was about to be imposed. They reversed the price increase and issued refunds when the policy was delayed.
Industry sources said that if Mr Miliband were to go ahead with the proposed six per cent target this year, that would mean a £180 rise would be needed next January.
Some green groups have accused boiler manufacturers of scaremongering about the policy and using it as an excuse for “price gouging”.
Jess Ralston, head of energy at the Energy and Climate Information Unit, said: “The boiler tax was a self-imposed price increase brought in by boiler manufacturers to lobby against the heat pump policy so they can keep selling longer gas boilers.
“Unless the UK starts to switch from gas boilers, we will have to import more gas from overseas as North Sea output continues to inevitably decline, so this is an issue of energy security.”
Andy Manning, head of energy system transformation at Citizens Advice, said: “Boiler manufacturers must not raise their prices again in response to a scheme that would help homes across the country switch to clean energy. Instead, they should focus on meeting the requirements of the scheme.
“If reintroduced, the Government must not reduce the Clean Heat Market Mechanism in response to similar action by manufacturers. Doing so would reward behavior that has left many people out of pocket, and subject us to volatile gas prices for a longer period of time.”
Fewer than 37,000 certified heat pump installations were recorded last year, which is well short of the 90,000 that would be needed to reach the six percent target.
Mr Miliband, in opposition, promised to support the Clean Heat Market Mechanism” if Labor won the election. Speaking in March, he said: “On the Clean Heat Market Mechanism, we will have to deal with what we inherit from the government.”
A spokesperson for the Department of Energy and Climate Change said: “The energy disruptions of recent years have highlighted the urgent need to upgrade homes in Britain and ensure our energy independence.
“Our Warm Homes Plan will set out a range of measures to support low carbon heating, including heat pumps. Our ambitious plans will protect bill payers, reduce fuel poverty and put the UK back on track to meet our climate targets.”
