Boiler manufacturers could face having their targets for selling heat pumps more than doubled by 2030-31 – even as ministers consider cutting the grants that help households pay for them.
The proposals form part of the Clean Heat Market Mechanism, dubbed the “boiler tax” by critics.
Under the scheme, manufacturers have a target for heat-pump installations in proportion to their fossil-fuel boiler sales – or make a payment if they fall short.
In a consultation published by the Department for Energy Security and Net Zero (DESNZ), ministers proposed raising the target from 8 per cent of relevant boiler sales in 2026-27 to 18 per cent by 2030-31. The plans are subject to consultation and are not yet final.
Heat pump grants set to be cut
The proposals come as the Government seeks more than £2bn in savings from the DESNZ to help fund increased defence spending.
The Guardian reported on Monday that Energy Secretary Miatta Fahnbulleh had been asked to identify savings, with hundreds of millions of pounds potentially coming from the Boiler Upgrade Scheme.
The scheme offers grants of £7,500 towards eligible heat-pump installations – which can cost up to £15,000 – rising to £9,000 for certain properties off the gas grid that replace oil or LPG heating.
The scheme has supported nearly 80,000 installations since 2022.
The potential cuts could make heat pumps harder for some households to afford, just as manufacturers face stronger incentives to obtain credits for qualifying installations.
However, industry insiders said that increased targets could lead to lower prices as manufacturers compete. This happened with the electric vehicle mandate as makers offered bigger discounts if they were failing to reach their targets.
Higher upfront costs
Heat pumps can involve higher upfront costs than conventional gas boilers, and the grants are intended to help reduce that initial outlay.
The Clean Heat Market Mechanism was introduced by the former Conservative government to encourage the heating industry to expand its heat-pump business and support the transition away from fossil-fuel heating.
It formed part of a wider policy push that included an ambition to reach 600,000 heat-pump installations a year by 2028.
Under the mechanism, manufacturers can meet their obligations by obtaining credits for qualifying installations rather than necessarily selling every heat pump themselves. The scheme operates through tradable credits, giving manufacturers some flexibility in how they meet their targets.
The policy faced opposition from boiler manufacturers, who argued that the targets were out of step with consumer demand and that compliance costs could push up prices and threaten jobs.
The proposed payment-in-lieu was initially £5,000 per missing credit, before being reduced to £3,000 in 2023 and then set at £500 ahead of the scheme’s launch in April 2025, a year later than originally planned.
The latest proposals would give manufacturers additional flexibility in meeting their targets. From 2027-28, qualifying heat pumps installed in new-build homes would be eligible to generate credits for the first time.
The Government says the targets have been set on the basis that they could be met through supported installations in existing buildings, with eligible new-build installations providing an additional route to compliance.
The DESNZ estimates that the proposed 18 per cent target would equate to up to 236,000 heat pumps in 2030-31. The Government’s wider ambition is to install more than 450,000 heat pumps a year by 2030, including around 250,000 in existing homes.
The Heat Pump Association said they were consulting with its members on how to respond to the consultation.