In a new dispute over the speed of the transition to lower-carbon heating, boiler manufacturers are fighting back against UK government attempts to force them into rapidly making thousands more heat pump.
From next year, the government will fine companies who fail to meet strict quotas in heat pump production and installations. Whitehall is being lobbied by the bosses to delay or amend these plans.
The quotas they claim are unrealistic, given the slow demand for heat pumps as well as the strain on installers. They also claim that the penalties of £5,000 for each heat pump not installed could increase costs for consumers.
Vaillant UK warned that if plans for a heat pump production line in its Derbyshire factory were to proceed, it would review UK investment plans.
Henrik Hansen is the managing director of Vaillant UK and Ireland. He said, “We employ about 1,000 people in total across the UK.” We will review our investment plans if we are penalized. “We think that there is a danger this could lead to not only a reduction in investment, but also job losses in Derbyshire.”
The proposed quotas, fines and incentives echo previous proposals to encourage the switch to electric vehicles. Supporters argue that the mechanism is necessary to stimulate the market and lower costs for consumers.
“We think that the proposed scheme design by the government is fair to all parties,” said a representative of Electrify Heat.
The dispute highlights the difficulties facing the government in its efforts to encourage a major overhaul of the home heating system to help it reach its legally-binding target of zero net carbon emissions by the year 2050.
Heat pumps are a great alternative to gas boilers. Heat pumps are able to draw heat from outside air, and they run on electricity. This is increasingly being generated by low-carbon sources.
Around 8,790 heat pump installations were made in the UK during the first quarter of this year. However, the government is aiming to install 600,000 heat pumps per year by the year 2028. This will require a major overhaul in supply chains and consumer demand.
The relatively high cost of heat pumps is holding back the uptake. Nesta’s estimates from last June indicate that the number of heat-pump installers will need to increase by about 800%, from 3,000 to 27,000.
According to the plans for jump-starting the market that are currently being consulted, manufacturers will be required to sell a certain percentage of heat pumps compared to gas or oil heaters or risk fines.
The UK boiler industry is concentrated around a few large, Europe-wide companies that also make and sell heat pump systems. Vaillant Baxi, and other companies have expressed concerns to the government.
Mike Foster, CEO of lobby group Energy and Utilities Alliance said that there is now “an impasse between industry and Whitehall.” . . Whitehall is disconnected from the way industry operates.”
A senior executive in the industry said: “We also want to see this market grow, but we need to bring consumers along.” The penalties are substantial and commercially significant.”
Colm Britchfield is a policy advisor with E3G. This environmental think-tank manages the Electrify Heat Campaign. He argues that the policy will help develop the supply chains and has wide support within the energy industry.
He said that the fines were set at this level because the costs of compliance must be lower than those of non-compliance.
Heat pumps are a proven way to decarbonise heating in the UK and they’re key to increasing energy security.
It said: “We are consulting about proposals to give the industry greater incentives to invest in ways that heat pumps can be a more appealing and simple choice for more UK homes.”