Market-based mechanism for low carbon heat: consultation response

The Department for Business, Energy and Industrial Strategy (BEIS) recently sought views on proposals to introduce a market-based mechanism to support the development of the UK market for low-carbon electric heat pumps. The proposed mechanism aims to create a market incentive to grow the numbers of heat pumps installed in existing premises each year, providing industry with a clear, long-term policy framework for investment and innovation.

Views on a range of design features of the proposed mechanism were invited, including:

  • the proposed scope of technologies and installations
  • the choice of core target for the mechanism
  • options for trading within the mechanism
  • options for scheme administration, penalties and enforcement

We welcome the opportunity to respond to the consultation given our expertise in the decarbonisation of heat and buildings, our extensive work on Zero Carbon Buildings policy, the delivery of large-scale innovation trials such as the Electrification of Heat (EoH) programme and our work with innovators in the low carbon heat space.

Key points

We’ve responded to the market-based mechanism consultation with the following key points:

  • We support action to kickstart the market for heat pumps during the 2020s (alongside other interventions and technologies to decarbonise homes and other buildings)
  • However, we have concerns about the proposal to introduce of a market based mechanism based on a technology specific incentive/obligation for manufacturers, particularly around complexity, qualifying criteria and the risk of distorting incentives/low quality installations
  • It is our view that policy attention would be better focused on introducing technologyneutral outcome-based drivers to the market for low carbon heating solutions for buildings
  • If BEIS chooses to go ahead with a manufacturer obligation policy then it should seek to:
    • frame the obligation in a way that maximises technology-neutrality and minimises distortions to incentives for innovation
    • time-bound policy, giving the market long term incentives to move towards low carbon heat
    • develop a clear transition pathway to a more demand-led technology-neutral approach to incentivise supply chains to offer building decarbonisation solutions and packages.

Read the consultation

Market-based mechanism for low carbon heat

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