Boiler manufacturers are pushing back against government efforts to force them to rapidly make thousands more heat pumps, in a new flashpoint over the pace of the shift towards lower carbon heating.
The government plans to fine companies from next year unless they meet stringent quotas for heat pump production and installation. But bosses are lobbying Whitehall to delay and amend the plans.
They argue the quotas are unrealistic given sluggish demand for heat pumps and strains on the number of installers, and claim that penalties of £5,000 per missing heat pump could push up costs for consumers and put investment and jobs at risk.
Vaillant UK, a leading boiler manufacturer which invested £4mn in a new heat pump production line at its Derbyshire factory, warned it would review its UK investment plans if the plans went forward.
Henrik Hansen, managing director for Vaillant UK & Ireland, said: “Altogether in the UK we employ around 1,000 people. If we start having penalties imposed on us, we will revisit our investment plans. We think there is a risk this could not only hold investment but also potentially lead to job losses in Derbyshire.”
The planned quotas and fines echo proposals to encourage the shift to electric cars, and supporters argue the mechanism is needed to help stimulate the market and drive down the costs for consumers.
“We believe that the government’s proposed scheme 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 facing the government as it tries to foster a major overhaul of home heating to help reach 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 warmth from the outside air and run on electricity, which is increasingly generated from low carbon sources.
About 8,790 heat pumps were installed in the UK in the first three months of this year, but the government wants installation rates to hit 600,000 per year by 2028, requiring a major overhaul of supply chains and demand.
Uptake of heat pumps has been held back by the relatively high costs of the devices, while estimates by Nesta last June suggest the number of heat pump installers would need to climb about 800 per cent, from about 3,000 to 27,000 by 2028.
Under the plans to jump start the market, which are going through consultation, manufacturers from next year will have to sell a certain proportion of heat pumps relative to gas or oil boilers, or face fines.
The UK industry is consolidated around a handful of big, Europe-wide groups that already make and sell heat pumps alongside boilers. Vaillant, Baxi and others have raised concerns with government.
Mike Foster, chief executive of the lobby group Energy and Utilities Alliance, said there was now an “impasse between the industry and Whitehall . . . Whitehall is divorced from how industry works.”
One industry executive said: “We want to get this market going as well — but you’ve got to bring consumers with you. The penalties are significant and commercially material.”
Colm Britchfield, a policy adviser with E3G, an environmental think-tank which manages the Electrify Heat campaign, argued the policy would help develop the supply chain, and had wide support in the energy industry.
“The fines are at the level they are as 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 were a proven means of decarbonising heating across the UK and were key for increasing the country’s energy security.
“We are consulting on proposals to give industry greater incentive to invest in ways to make heat pumps a more attractive and simpler choice for more UK households,” it said.
