The UK Government consulted earlier in 2022 on a flagship clean heating policy that would require manufacturers of fossil fuel heating appliances to achieve the sale and installation of heat pumps equal to a proportion of their fossil fuel boiler sales in a given period, according to a Nesta report published on 20 April 20221. The government has not specified what the proportion would be, and notes that it could be stepped up over time1. The mandate is a UK government policy proposal that would apply across all parts of the UK1.
Under the proposal, the government may allow manufacturers to trade credits with each other, where manufacturers sell excess heat pump credits to manufacturers responsible for otherwise insufficient heat pump installations1. Manufacturers who do not produce sufficient credits to match their fossil fuel boiler sales, or procure them through trading, would face penalties, for example a fine proportionate to the amount of fossil fuel boilers sold beyond the allowance implied by their heat pump credits1.
The policy sits against a target of 600,000 heat pump installations per year by 2028, a large increase on current figures of approximately 30,000 heat pump installations per year1. Heating homes accounts for 17% of all UK emissions1. Heat pumps use electricity, which by 2035 should be 100% zero-carbon, to provide heat, taking a unit of electricity and turning it into between two and four units of heat1. Nesta states that the annual running costs of a typical heat pump in the UK are currently higher than for a gas boiler, despite heat pumps being around three to four times more efficient in turning electricity into heat1. It adds that a heat pump can take about a week to install1.
Nesta's research included an online hypothetical choice experiment run from 9 to 14 December 2021, in which participants saw a randomly selected heat pump price ranging from £2,000 to £12,0001. Seven in ten of those who chose gas boilers said they would change their mind and buy a heat pump if they were cheaper to install1.
"The UK Government plans to mandate that manufacturers of fossil fuel heating appliances achieve the sale and installation of heat pumps equal to a proportion of their fossil fuel boiler sales in a given period"
Nesta lists supporting measures already announced: £60m towards a Heat Pump Ready programme to spur innovation in heat pump design and installation; £3.9bn to 2025 to be shared by the Social Housing Decarbonisation Fund, the Home Upgrade Grant scheme, the Boiler Upgrade Scheme, the Heat Networks Transformation Programme, and the Public Sector Decarbonisation Scheme; and a Future Homes Standard under which new homes must come with low-carbon alternatives to fossil fuel boilers from 20251. Nesta states that by 2035, new fossil fuel boilers will likely be completely phased out, and that given boilers last approximately 12-15 years, the vast majority of the 29 million existing homes in the UK will end up with a low-carbon heating system by 20501.
Why it matters for households
The mechanism works on manufacturers rather than on households directly, but its effects would reach homes through the price and availability of both boiler types. Nesta assumes that, to meet the mandate, manufacturers will reduce the cost or increase the desirability of heat pumps, likely financing this by increasing the cost of gas and other fossil fuel boilers, or by investing in marketing or research and development1. It describes the mandate as creating an implicit subsidy for heat pumps, financed by an implicit tax on fossil fuel boilers1. For a household, that points to a shift in the relative upfront cost of the two options, though the government has not set the proportion, so the size of any shift has not been reported1. Nesta's own conclusion is that the policy is a crucial tool to increase heat pump adoption but needs supporting policies to work well, chiefly a scale-up in installer training, policies to increase consumer demand, and ideas to ensure high-quality installations1. Its stated concern was that the policy would encourage an increased quantity of heat pumps without ensuring high quality1.
What happens next
The consultation had closed by the time of publication and the policy remained under consideration1. No date for a government response or for the mandate coming into force is given in the report1.