The Clean Heat Market Mechanism Regulations 2025

Made: 27th January 2025

Coming into force: 1st April 2025

The Secretary of State makes these Regulations in exercise of the powers conferred by sections 143 to 151 and 331(2) of the Energy Act 2023[^f00001].

In accordance with section 151(4) of that Act, the Secretary of State has given notice to, and considered the representations of, the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland.

In accordance with section 151(1) and (2) of that Act[^f00002], a draft of these Regulations was laid before and approved by a resolution of each House of Parliament.

Part 1 — Preliminary

Citation, commencement and extent

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• (1) These Regulations may be cited as the Clean Heat Market Mechanism Regulations 2025 and come into force on 1st April 2025.

• (2) These Regulations extend to England and Wales, Scotland and Northern Ireland.

Interpretation

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• (1) In these Regulations—

• “administrator” means the Environment Agency, appointed as the administrator of the Scheme under regulation 8(1);

• “authorised person” means a person authorised in accordance with regulation 31;

• “building” means a fixed or moveable roofed construction having walls, for which energy is used to condition the indoor climate, and references to a building include a building unit within that building;

• “building unit” means a section, floor or apartment within a building which is designed or altered to be used separately;

• “certificate” means a certificate acquired in accordance with regulation 13;

• “certificate holder” has the meaning given in regulation 13(3);

• “certification scheme” has the meaning given in regulation 6;

• “excluded sale”, in relation to a fossil fuel boiler, means a sale of a fossil fuel boiler which is, or is to be, installed at a building—outside the United Kingdom; orwhich has not been first used or occupied before the installation takes place;

• “financial year”, in relation to an undertaking, has the meaning given in section 390 of the Companies Act 2006[^f00003];

• “fossil fuel boiler” means a gas boiler or an oil boiler;

• “gas boiler” means a heating appliance which—generates heat and is capable of burning natural gas (within the meaning of the Energy Act 1976[^f00004]) or liquified petroleum gas to do so; andhas a capacity of no more than 70 kilowatt thermal;

• “group of undertakings” means two or more undertakings which are group undertakings in relation to each other;

• “group undertaking”, in relation to another undertaking, has the meaning given in section 1161(5) of the Companies Act 2006;

• “heat pump” means a stand-alone heat pump or a hybrid heat pump;

• “hybrid heat pump” means the part of a hybrid heating system which is described in regulation 4(1)(a)(ii);

• “hybrid heating system” means a heating system which falls within regulation 4(1);

• “installation” in relation to a heat pump, means an installation that meets the requirements of regulation 5, and related expressions are to be construed accordingly;

• “near-threshold supplier” means an undertaking or a group of undertakings which is a near-threshold supplier in accordance with regulation 10;

• “oil boiler” means a heating appliance which—generates heat and is capable of burning a liquid heating oil within class C1, C2 or D of British Standard BS2869[^f00005] to do so; andhas a capacity of no more than 70 kilowatt thermal;

• “publication” means the publication by the administrator of the name of a person, or of the name of each member of a group of undertakings, and details of the failure in respect of which a civil penalty has been imposed on that person or group of undertakings under Part 8;

• “qualifying sale”, in relation to a fossil fuel boiler, means a sale of a fossil fuel boiler which is not an excluded sale;

• “registry” has the meaning given in regulation 8(2);

• “responsible undertaking”, in relation to a scheme participant or a near-threshold supplier, means the undertaking which is identified as such in accordance with regulation 11;

• “sale”, in relation to a fossil fuel boiler, means the first transfer of the general property in the fossil fuel boiler which is made in the course of a commercial activity, whether in return for payment or free of charge, where—the transfer is pursuant to a contract under which—transfer of possession of the boiler takes place in the United Kingdom;the boiler is sent to a place in the United Kingdom;the transferee is an individual for the time being present in the United Kingdom; orthe transferee is an undertaking contracting through a place of business in the United Kingdom; orparagraph (a) does not apply, but the supplier of the fossil fuel boiler has reason to believe that the boiler is to be installed at a building in the United Kingdom;

• “Scheme” means the low-carbon heat scheme[^f00006] known as the Clean Heat Market Mechanism established by regulation 7;

• “scheme participant” means an undertaking or group of undertakings which is a scheme participant in accordance with regulation 9;

• “scheme year” means the period of 12 months beginning with 1st April 2025 and ending with 31st March 2026 or any of the three subsequent periods of 12 months; and a reference to a scheme year described by a calendar year (for example, the “2026 scheme year”) is a reference to the scheme year beginning with 1st April of that calendar year;

• “stand-alone heat pump” means a heating appliance which falls within regulation 3(1);

• “supplier”, in relation to a fossil fuel boiler or a heat pump, means the undertaking—which manufactured the fossil fuel boiler or heat pump, or which had it manufactured; andwhich owns, or has the right to use, the brand name, trade mark or other distinctive mark under which the fossil fuel boiler or heat pump is marketed in the United Kingdom;

• “undertaking” has the meaning given in section 1161(1) of the Companies Act 2006.

• (2) For the purposes of these Regulations—

• (a) a group of undertakings which is a scheme participant by virtue of regulation 9(2) is treated as being the supplier of a fossil fuel boiler or a heat pump of which any of the undertakings forming part of the group is the supplier; and

• (b) a group of undertakings which is a near-threshold supplier by virtue of regulation 10(2) is treated as being the supplier of a fossil fuel boiler or a heat pump of which any of the undertakings forming part of the group is the supplier.

• (3) For the purposes of interpreting a reference in these Regulations to a building which has, or has not, been first used or occupied before the installation of a heat pump or a fossil fuel boiler takes place at the building, use or occupation of a building in which a building unit is situated counts as use or occupation of any building unit within that building.

• (4) Where more than one undertaking falls within the definition of “supplier” in relation to a fossil fuel boiler—

• (a) the supplier of the fossil fuel boiler is the undertaking which manufactured it; but

• (b) if none of the undertakings manufactured it, the supplier of the fossil fuel boiler is the undertaking which was the supplier of the greatest number of fossil fuel boilers which were sold during the scheme year preceding the scheme year during which the fossil fuel boiler is sold.

• (5) For the purposes of paragraph (4)—

• (a) the period beginning with 1st April 2024 and ending with 31st March 2025 is treated as the scheme year preceding the 2025 scheme year;

• (b) a reference to a fossil fuel boiler being sold is a reference to the fossil fuel boiler being the subject of a sale which falls within the description in the definition of “sale” in paragraph (1).

• (6) Where more than one undertaking falls within the definition of “supplier” in relation to a heat pump—

• (a) the supplier of the heat pump is the undertaking which manufactured it; but

• (b) if none of the undertakings manufactured it, the supplier of the heat pump is the undertaking which is recorded in the register of a certification scheme for the purposes of regulation 5(c)(iv) (information concerning installation of heat pumps), unless more than one undertaking is so recorded, in which case paragraph (7) applies.

• (7) Where this paragraph applies—

• (a) the undertakings which are recorded in the register of a certification scheme for the purposes of regulation 5(c)(iv) must notify the administrator, on or before 30th September of the year following the end of the scheme year during which the heat pump is installed, which of them is the supplier of the heat pump for the purposes of regulation 13 (acquisition of certificates); and

• (b) in the absence of such notification, the heat pump is treated as not having been installed.

Stand-alone heat pumps

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• (1) A heating appliance falls within this paragraph where—

• (a) it is incapable of burning fossil fuels[^f00007] or peat to generate heat;

• (b) it generates heat using a thermodynamic cycle by—

• (i) transferring energy stored in the form of heat in the air and using that energy to heat a liquid; or

• (ii) transferring energy stored in the form of heat in the ground, including heat in water in or on the ground, and using that energy to heat a liquid;

• (c) subject to paragraph (2), no part of the heating appliance which generates heat was used before the heating appliance was installed;

• (d) it has a capacity of no more than 45 kilowatt thermal;

• (e) it uses a compressor which is driven by electricity;

• (f) it provides heating for the purpose of space heating, whether or not it also provides hot water heating, using liquid as a medium for delivering that heat; and

• (g) the heating appliance—

• (i) is capable of meeting the full space heating and hot water heating demands of the building at which it is installed, whether alone or in combination with other appliances that generate heat and are incapable of burning fossil fuels to do so; and

• (ii) if installed at a building in combination with one or more additional stand-alone heat pumps, its and their combined capacity is no more than 70 kilowatt thermal.

• (2) The requirement in paragraph (1)(c) does not apply to a shared ground loop.

• (3) For the purposes of paragraph (2)—

• “ground loop” means equipment which absorbs energy stored in the form of heat in the ground, including heat in water in or on the ground;

• “shared ground loop” means a ground loop which provides heat energy through a hydraulic connection to heating appliances at two or more buildings.

• (4) For the purposes of paragraph (1)(f) and (g)(i), and regulation 4(1)(b) and (c) (hybrid heating systems), “hot water” means hot water which is intended for the personal use of the individuals who use or occupy the building, and does not include hot water used for the purposes of—

• (a) space heating;

• (b) heating a swimming pool; or

• (c) carrying out a process.

Hybrid heating systems

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• (1) A heating system falls within this paragraph where it—

• (a) is a heating system which includes both—

• (i) a heating appliance capable of burning fossil fuels; and

• (ii) a heating appliance which meets the requirements of regulation 3(1)(a) to (f) (stand-alone heat pumps);

• (b) provides heating for the purpose of ... space heating whether or not it also provides hot water heating, using liquid as a medium for delivering that heat; and

• (c) is capable of meeting the full space heating and hot water heating demands of the building at which it is installed.

• (2) For the purposes of paragraph (1)(a), it is irrelevant whether or not the heating appliances described in paragraphs (i) and (ii)—

• (a) were installed at the same time;

• (b) were manufactured by the same manufacturer;

• (c) were supplied by the same supplier; or

• (d) form part of the same product or unit.

Installation of heat pumps

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An installation of a heat pump meets the requirements of this regulation where—

• (a) the installation takes place at a building located in the United Kingdom which has been first used or occupied before the installation takes place;

• (b) the installation is carried out in compliance with all statutory requirements applicable to such installations;

• (c) information concerning the installation is recorded on a register maintained by a certification scheme to which the administrator has access and that information includes—

• (i) the date on which the installation took place;

• (ii) whether the installation was of a stand-alone heat pump or a hybrid heat pump;

• (iii) the model and capacity of the heat pump installed; and

• (iv) the identity of the undertaking which manufactured the heat pump, or which had it manufactured, and which owns, or has the right to use, the brand name, trade mark or other distinctive mark under which the heat pump is marketed in the United Kingdom.

Approval of certification schemes

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• (1) The certification scheme is the Microgeneration Certification Scheme.

• (2) The Secretary of State may approve a subsequent version of the Microgeneration Certification Scheme as the certification scheme.

• (3) The Secretary of State, when exercising the power in paragraph (2), must publish—

• (a) the details of any subsequent version of the Microgeneration Certification Scheme which is approved under paragraph (2);

• (b) the date from which the subsequent version of the Microgeneration Certification Scheme is approved;

• (c) the details of any transitional arrangement to the subsequent version approved under paragraph (2).

• (4) In this regulation “Microgeneration Certification Scheme” means the scheme under that name operated by the MCS Service Company Ltd (a company registered in England and Wales with company number 07759366).

Part 2 — Establishment and administration of the Scheme

Establishment of the Clean Heat Market Mechanism

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• (1) These Regulations establish a low-carbon heat scheme, to be known as the Clean Heat Market Mechanism (“the Scheme”).

• (2) The purpose of the Scheme is to encourage the installation in the United Kingdom of heat pumps through the imposition of low-carbon heat targets[^f00009] on scheme participants.

Administration of the Scheme

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• (1) The Environment Agency is appointed as the administrator of the Scheme.

• (2) The administrator must operate a system (“the registry”) for the purposes of the Scheme, in particular to keep track of—

• (a) scheme participants, near-threshold suppliers and certificate holders;

• (b) scheme participants’ low-carbon heat targets;

• (c) the acquisition of certificates by scheme participants and certificate holders;

• (d) the transfer of certificates by scheme participants and certificate holders; and

• (e) the surrender or expiry of certificates.

• (3) The administrator must create an account in the registry for each scheme participant, near-threshold supplier and certificate holder.

• (4) The administrator is exempt from liability in damages for anything done or omitted in the exercise or purported exercise of functions conferred or imposed on the administrator by these Regulations.

• (5) Paragraph (4) does not apply—

• (a) if the act or omission is shown to have been in bad faith; or

• (b) so as to prevent an award of damages made in respect of an act or omission on the ground that the act or omission was unlawful as a result of section 6(1) of the Human Rights Act 1998[^f00010].

Part 3 — Scheme participants and near-threshold suppliers

Scheme participants

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• (1) An undertaking which is not a group undertaking in relation to another undertaking is a scheme participant for a scheme year where—

• (a) it is the supplier of—

• (i) 20,000 or more gas boilers which are the subject of a qualifying sale during the scheme year; or

• (ii) 1,000 or more oil boilers which are the subject of a qualifying sale during the scheme year; and