The Clean Heat Market Mechanism was introduced by the Government in November 2024, obliging heating appliance manufacturers to meet targets for the proportion of heat pumps they sell each year1. Energy UK described the measure as the first major step in the Warm Homes Plan, which carries an ambition that up to 300,000 homes will benefit from upgrades next year2.
The mechanism was introduced "much weakened since the former Government's proposals in 2022", according to Energy UK, the industry body whose blog set out its position on 22 November 20242.
"the introduction of a Clean Heat Market Mechanism to incentivise manufacturers to sell more heat pumps over time, although much weakened since the former Government's proposals in 2022"
The mechanism sits alongside existing support for clean heating. Energy UK lists the Energy Company Obligation (ECO), Warm Homes: Social Fund, Warm Homes: Local Fund and Home Upgrade Grant as schemes providing fully funded measures for low-income or vulnerable households, and the Boiler Upgrade Scheme as a market intervention1. ECO, delivered by energy suppliers and regulated by Ofgem, has run for more than ten years and is described as the longest running fuel poverty scheme in Great Britain; it has delivered 26,000 heat pumps and 30,000 solar PV installations, and lifetime carbon savings of 58.2 MtCO2e2.
Progress on heat pumps has lagged the trajectory set for Net Zero. Energy UK reports that fewer than half the number of heat pumps needed were installed in 2023, and that 190,000 fewer heat pumps than required have been installed in the four years since 20202. The Climate Change Committee's 2024 Progress Report to Parliament identified households receiving energy efficiency measures, heat pump installations and trained heat pump installers as "significantly off track"2.
| Measure | Figure reported |
|---|---|
| Homes in the UK relying on natural gas for heating | 85% of roughly 30 million homes1 |
| Share of natural gas burned in 2023 accounted for by homes | more than a third, more than any other use1 |
| Share of emissions accounted for by homes | 20%1 |
| Required fall in building emissions by 2035 | 45%, per the Climate Change Committee1 |
| Heat pumps installed in 2023 against the Net Zero pathway | less than half the number needed2 |
| Shortfall in heat pump installations since 2020 | 190,0002 |
Energy UK states that the UK has some of the most expensive electricity prices relative to gas in Europe, and that electricity needs to be cheaper before there is a major shift away from gas heating1. It also notes that around two-thirds of households suffer from damp, drafts or overheating, which wastes energy whatever the fuel type but can be particularly problematic for low-temperature heating systems such as heat pumps1.
Why it matters for households
The mechanism acts on manufacturers rather than on individual homes: it sets a sales obligation on heating appliance makers, so its effect on any one household depends on what equipment is offered and at what price. Energy UK's assessment is that the version introduced is weaker than the 2022 proposals, which bears on how quickly the heat pump market is expected to grow2.
For a household weighing up a heat pump, the running-cost comparison against gas is central. Energy UK states that the price of electricity relative to gas is a core factor in whether households save money by switching to electric heating, and that policy costs funding legacy renewables and some social schemes are part of the problem1. Fabric matters too: better insulation makes any heating system cheaper and easier to run, and the UK's housing stock is described as generally old with poor energy efficiency1.
The wider policy framework, including the Future Homes and Buildings Standards and the outstanding consultations on EPC reform and minimum energy efficiency standards, remains unsettled2. Energy UK says there are more questions than answers about what the Warm Homes Plan will look like in practice2.
What happens next
Energy UK expects the Spending Review in late spring to provide more clarity on funding and on the types of capital schemes the Government will use2. It also calls for clarity as soon as possible on post-2026 arrangements for ECO, noting that the conclusion of every ECO scheme has led to a rapid fall in installations2.
A strategic decision on the role of hydrogen in home heating is not expected until 2026; the Climate Change Committee estimates there will be no role for hydrogen in home heating1. The Climate Change Committee's Seventh Carbon Budget projects that 6% of heat pumps installed by 2040 will be hybrid systems1.
The Government has relaxed permitted development rights for air source heat pumps, which Energy UK describes as a positive step while saying more action is needed to give customers clarity on the most appropriate heating technologies for their homes1.
Sources2 cited
- Fuelling the future: Prioritising the gas transition for Net Zero - Energy UK, energy-uk.org.uk
- Putting people first in a Warm Homes Plan - Energy UK, energy-uk.org.uk