Energy companies could be set to make millions in ‘boiler tax’

Analysts have warned that the top four gas boiler manufacturers could be set to make millions over “boiler tax.”

The industry could impose a levy on new boilers which will cover the cost of penalties that manufacturers have incurred after they have failed to meet the new requirements over the level of heat pump sales which comes under the government’s Clean Heat Market Mechanism (CHMM).

Boiler manufacturers will be required from April to either match or substitute 4% of their sales with heat pumps or they will face a £3,000 fine for every missed installation, by April 2025 this cost will then rise to 6%.

The government are wanting to deliver 600,000 eco-friendly heat pump installations a year by 2028, which is part of their programme to phase out gas boilers.

Baxi are to introduce a levy of £120, Vaillant are to increase boiler sales that are under 70 kilowatts by £95 and Ideal Heating are to increase prices on gas boilers by £110.

In anticipation of the penalties Worcester Bosch has warned that all of their gas boilers will increase by £120, they have claimed that the government’s target is “clearly unachievable within the timescales allowed.”

The gas manufacturers could therefore make a “windfall” from the levies, according to the Energy and Climate Intelligence Unit (ECIU).

Jess Ralston, ECIU energy analyst, said: “Anyone slowing the heat pump rollout is leaving us less energy secure and at risk of higher bills as the gas price is notoriously volatile and set to remain high even after the last two years of high energy bills.

“The Government has said that the gas boiler lobby is price gouging by increasing their boiler prices when they are likely to meet the required number of heat pump sales, raising the question, would the manufacturers pocket the so-called boiler tax that they have imposed?”

A Baxi spokesman said, “We are not profiting from the CHMM surcharge. We have always been transparent about the need to add a surcharge to residential gas boiler prices, based on anticipated penalties introduced under the CHMM.

“This is because we do not currently have market share of UK heat pump sales and it is unrealistic to suggest we could avoid CHMM penalties.”

A Worcester Bosch company spokesperson said, “Worcester Bosch will not benefit in anyway and, interestingly, neither will market growth for heat pumps as the revenue raised from the fines will go to the Treasury and not be used to grow demand for heat pumps.

“We will continue to monitor and observe the scheme and will remove or reduce this CHMM levy in line with policy changes or exponential growth in heat pump demand though both currently seem unlikely to materialise in the near future.”

A Department for Energy Security and Net Zero spokesperson said, “We have looked into the figures from manufacturers and do not recognise their reason for raising prices for hardworking families.

“Targets under the CHMM are realistic and achievable, and manufacturers have failed to recognise they can carry over up to 35% of their heat pump targets under the scheme into the subsequent year.”