Boiler makers are pushing back against government efforts to force them to quickly manufacture thousands more heat pumps, in a new flashpoint on the pace of the transition to low-carbon heating.
The government plans to impose fines on companies from next year unless they meet strict quotas for the production and installation of heat pumps. But bosses are pressuring Whitehall to delay and change plans.
They argue the quotas are unrealistic given low demand for heat pumps and constraints on the number of installers, and say penalties of £5,000 per missing heat pump could drive up costs for consumers and jeopardize investments and jobs.
Vaillant UK, a leading boiler manufacturer which has invested £4m in a new heat pump production line at its Derbyshire factory, has warned it will review its UK investment plans if the plans went ahead.
Henrik Hansen, Managing Director of Vaillant UK & Ireland, said: “In total, in the UK, we employ around 1,000 people. If we start getting penalties, we will revise our investment plans. We believe there is a risk that this could not only hold back investment, but also potentially lead to job losses in Derbyshire.
The planned quotas and fines echo proposals to encourage a switch to electric cars, and proponents argue the mechanism is needed to help stimulate the market and reduce costs for consumers.
“We believe the government’s proposed program design is fair to the obligated parties,” added a spokesperson for Electrify Heat, a campaign group to promote heat pumps.
However, the row highlights the complications the government faces as it tries to push through a major overhaul of home heating to help meet its legally binding target of net zero carbon emissions by 2050.
The vast majority of UK homes are heated with gas boilers, but ministers want to rapidly increase the uptake of heat pumps. These draw heat from the outside air and run on electricity, which is increasingly produced from low-carbon sources.
Around 8,790 heat pumps were installed in the UK in the first three months of this year, but the government wants installation rates to reach 600,000 a year by 2028, requiring a major overhaul of the supply and demand chains.
Adoption of heat pumps has been held back by relatively high appliance costs, while estimates from Nesta last June suggest that the number of heat pump installers is expected to increase by around 800%, from around 3,000 to 27,000 by 2028.
As part of the market recovery plans, currently being consulted, manufacturers will have to sell a certain proportion of heat pumps compared to gas or oil boilers from next year, on pain of fines.
British industry is consolidated around a handful of large European groups which already manufacture and sell heat pumps alongside boilers. Vaillant, Baxi and others have raised their concerns with the government.
Mike Foster, chief executive of pressure group Energy and Utilities Alliance, said there was now a “standoff between the industry and Whitehall. . . Whitehall is separated from the workings of industry.
An industry executive said: “We also want to drive this market forward, but you have to bring consumers with you. Penalties are significant and commercially significant.
Colm Bitchfield, policy adviser at E3G, an environmental think tank that runs the Electrify Heat campaign, argued that the policy would help develop the supply chain and had broad support in the energy industry.
“The fines are where they are because you need the costs of compliance to be lower than the cost of non-compliance,” he said.
The Department of Energy Security and Net Zero said heat pumps are a proven way to decarbonise heating across the UK and are key to increasing the country’s energy security.
“We are consulting on proposals to further incentivize industry to invest in ways to make heat pumps a more attractive and simpler choice for more UK households,” he said.
