Homeowners are set to face a “boiler tax” as manufacturers adjust to cover the costs associated with the rollout of heat pumps.
Worcester Bosch has declared a £120 increase in the price of its gas boilers starting next year, while Vaillant is also planning a £95 hike in its prices.
The UK Government’s goal to install 600,000 heat pumps annually by 2028 has led Worcester Bosch to state that increasing boiler prices is unavoidable due to the UK market’s limited capacity to meet these targets.
This decision comes in the wake of new regulations aimed at encouraging heat pump installations. These rules penalize companies that fall short of government-set quotas, leading Worcester Bosch to increase boiler prices to manage these fines and stay operational, effectively passing on what it describes as a “boiler tax.”
The Government’s “Clean Heat Market Mechanism” (CHMM), part of its strategy to achieve net zero carbon emissions, is set to launch in January 2024.
The upcoming price hikes are a response to government measures that will penalize manufacturers for not meeting heat pump sales quotas starting next year.
Under the scheme, manufacturers are required to ensure that 4% of their gas boiler sales match heat pump sales in volume.
Newly constructed homes, mandated to have heat pumps from 2025, are not included in this scheme. However, projections indicate that about half of the heat pumps to be installed next year will be in new builds, which do not contribute to the sales quota.
In 2024, an estimated 80,000 heat pumps will be installed, but only 40,000 of these will be retrofits. With a boiler market of 1.5 million homes, the government’s plan necessitates manufacturers installing 60,000 heat pumps in the first year, a figure 50% higher than the anticipated market size, leading Worcester Bosch to anticipate inevitable penalties.
The target rises to 90,000 installations in the second year and 450,000 by the fourth year. Manufacturers will face a £3,000 fine for each heat pump they fail to sell under this target.
Worcester Bosch criticizes these targets as “clearly unachievable within the given timeframe,” and warns that manufacturers will have to transfer these fines to consumers through a CHMM levy.
