Government giving into ‘big boiler’ could leave the UK importing 20% more foreign gas

The increased imports would be required even if North Sea Transition Authority estimates of gas that could be produced from new fields and future discoveries in the North Sea is produced [2].

The Clean Heat Market Mechanism [3], set to be implemented from 1st April, is the Government’s flagship heat pump policy which requires fossil fuel boiler manufacturers to sell an increasing proportion of heat pumps relative to their fossil fuel boiler sales. In total, by 2035 the Clean Heat Market Mechanism could displace around 260TWh of gas, the equivalent needed to heat 22 million homes for one year or gas contained within around 300 LNG tankers.

Jess Ralston, Energy Analyst at the Energy and Climate Intelligence Unit, said: “The UK has been the worst hit by the energy crisis because of our heavy reliance on gas, including for heating, according to the International Monetary Fund. Policies which reduce this gas dependency should be a priority for any Government that has energy independence at the top of its agenda.

"The big four boiler manufacturers have said that they will scrap their ‘boiler tax’ – which they may make millions from – if the Government scraps its scheme. Citizens Advice has said that scrapping the policy would ‘hurt’ consumers, and any U-turn would make us more dependent on foreign gas imports as the North Sea continues its inevitable decline. The question is, does the Government want to protect consumers and the UK’s energy security or give in to these boiler companies?” [4] [5]

Some gas boiler manufacturers have already introduced a so-called ‘boiler tax’ of £110, on average, per boiler from the start of 2024, before the new policy is due to start. They claim it is required to cover the costs of any penalties incurred by failing to meet the required level of heat pump sales. However, previous research [6] has shown that these four manufacturers may make tens of millions of pounds from the so-called ‘boiler tax’ that they have imposed on each gas boiler sold.

It has been reported that the Secretary of State (SoS) for the Department for Energy Security and Net Zero (DESNZ) is considering delaying the penalty element of the scheme, or scrapping it altogether, to avoid the boiler manufacturers continuing with their levy [7]. However, the SoS has also claimed that the so-called ‘boiler tax’ is “price gouging, plain and simple” [8], and asked the Competition and Markets Authority to look into the issue [9]. A DESNZ spokesperson said that “we have looked into the figures from manufacturers and do not recognise their reason for raising prices for hardworking families” [10].

It has also been reported that two Ministers in DESNZ are considering resigning their positions if the Government does not go ahead with the scheme, as it may threaten the UK’s ability to meet its legally binding carbon budgets [11].

It has recently been reported that one trade body for the boiler industry, the Energy and Utilities Alliance, has been campaigning against heat pumps in the UK [12]. Some of the members of this trade body manufacture or sell both gas boilers and heat pumps, either in Europe or the UK. A gas company was also found to have potentially mislead consumers over their claims on hydrogen boilers in an investigation by Sky News [13], which has since triggered another CMA investigation [14].

Currently, heat pump manufacturing sites in the UK include those in Cornwall, Derbyshire, Northern Ireland and Scotland [15]. Previous research has shown the UK could lose more than £65m worth of central heating boiler (and parts) exports every year by 2030, if the industry does not start switching to clean heating solutions. This could cost a total of £1.3bn in lost exports between 2030 and 2050 [16].

Over the last few years, the worldwide gas crisis has forced gas prices up with energy security concerns triggered by Russia’s war in Ukraine. In the US, heat pumps have been dubbed ‘freedom pumps’ and sales are up 11%, overtaking sales of gas furnaces for the first time [17].

The Government recently increased grant funding under the Boiler Upgrade Scheme to £7,500 for an air source heat pump and applications tripled the week after, with applications remaining nearly 60% higher in the weeks following [18]. January 2024 saw 40% more applications than January 2023 [19]. Before the increase to the grant, Octopus Energy and British Gas announced that they would reduce the costs of fully installed heat pumps, including the grant, to as low as £2,500 and £2,999 respectively [20]. British Gas will also offer a money back guarantee.

A UK Government study showed that heat pumps are highly efficient, typically 3x more efficient than gas boilers, in the UK even down to -6C [21]. An earlier study also found that “There is no property type or architectural era that is unsuitable for a heat pump”, “from Victorian mid-terraces to pre-WWII semis and a 1960s block of flats” [22].

ENDS

Notes to editors:

1. Under the CHMM between 1st April 2024 and 31st March 2025, 60,000 heat pumps are required to be sold in the UK in total, which is around 4% of the 1.8 million gas boilers currently sold every year, with the percentage rising in future years. This analysis considers a scenario in which sales of heat pumps rise to around 100% by 2035. The gas saved per heat pump is the difference between the gas demand for a home at TDCV (11,500kWh/yr) and the gas used in power generation for a heat pump which will fall as more renewables come online (following the ‘Government Targets’ scenario in Getting off Gas (ECIU, 2023)). Future gas imports are estimated as the difference between future gas demand (from the ‘Government Targets’ scenario in Getting off Gas (ECIU, 2023) i.e. c.510TWh in 2035) and UK gas production (from Oil and Gas Production Projections (NSTA, Sep 2023) i.e. c.115TWh in 2035 even with new fields and future discoveries), giving imports in 2035 of just under 400TWh. Without the CHMM, demand would be 74TWh higher in 2035, which would increase imports by the same amount which amounts to an extra 19%.
2. North Sea Transition Authority (2023).
3. HM Government (2023).
4. The Guardian (2022)
5. The Telegraph (2024)
6. ECIU (2024).
7. The Telegraph (2024)
8. LBC (2023).
9. Edie (2024).
10. PA, via the Standard (2024).
11. Edie (2024).
12. The Guardian (2023).
13. Sky News (2023).
14. https://www.gov.uk/government/...;
15. Kensa manufacture in Cornwall, Vaillant manufacture in Derbyshire, Octopus Energy in Northern Ireland and Mitsubishi Electric in Scotland.
16. The UK’s central heating boiler and part exports (code 8403 in the UN Comtrade’s databases) were analysed for the years 2019-2022. Exports were converted from US$ to GBP£ using a conversion rate of 0.78, correct as of 21st July 2023.
17. The International Energy Agency (2023).
18. HM Government (2023).
19. HM Government (2024).
20. Energy Live News (2022).
21. Energy Systems Catapult (2023).
22. Energy Systems Catapult (2022).

For more information: George Smeeton, Head of Communications, ECIU, Tel: 07894 571 153, email: george.smeeton@eciu.net