In a bid to strengthen and enhance the UK’s emerging green finance market, E.ON has partnered with Energy Systems Catapult and Heatio to develop two green finance products to promote greater uptake of energy efficiency and low-carbon heating measures.
The project has been supported by the Department for Energy Security & Net Zero (DESNZ), through its Net Zero Innovation Portfolio (NZIP), as part of the department’s Green Home Finance Accelerator (GHFA). The GHFA was established to provide innovation funding for the development of green finance products which can enable uptake of home energy efficiency and low carbon heating measures.
The funding will provide the consortium with the opportunity to innovate an underdeveloped green finance market model which can be replicated nationally beyond the lifetime of the programme.
Research by Energy Systems Catapult on the DESNZ-funded Electrification of Heat Demonstration Project highlighted how UK consumers were often put off by the upfront capital cost and the perceived lifetime running cost of a low carbon heating solution.
Heat-as-a-Service (HaaS) would remove the upfront costs associated with installing, operating, and repairing low carbon heating solutions. Initial costs would be covered by a financial provider and paid back by the consumer over an agreed long-term period.
The consortium’s development and piloting of HaaS will focus on the removal of upfront costs associated with the purchase and installation of a heat pump. A wraparound care package to include ongoing optimisation, servicing, maintenance, and breakdown support, will be developed as part of the HaaS project.
To further enhance the offering available to consumers the consortium will develop a series of simple ‘heat packages’ to make HaaS an attractive offering for customers, helping to encourage their adoption and to act as a replicable model throughout the UK energy market.
The E.ON-led consortium will examine how the pairing of power purchasing agreements (PPAs) and innovative grid services can remove the upfront costs faced by consumers when considering a heat pump, solar PV, or battery storage, while simultaneously lowering the household’s energy costs by integrating preferential energy tariffs.
The aim of rolling out both HaaS and EaaS is to spread the cost of low-carbon energy and heating solutions over a significant contract period to deliver savings for consumers. The project aims to better understand how HaaS and EaaS could accelerate the adoption of alternative heat and energy sources by opening the market up to those on lower incomes and no available capital.
“Our work with E.ON and Heatio has the potential to reshape the UK’s approach to green finance. We need to convince consumers that decarbonisation can work for them, rather than being imposed on them. If we do not get this right, we will not get their buy-in,” said Becky Sweeney, business leader – Homes, at Energy Systems Catapult.
“The rollout and adoption of HaaS and EaaS models can help change this view, by deferring the up-front capital costs associated with low carbon heat and energy solutions – barriers which often convince consumers that decarbonisation is out of reach for them. Innovative services can also help to streamline the process for consumers. This will go a long way in convincing homeowners to make the switch to alternative heat and energy sources.”
“Unlocking the potential of innovative green finance is vital to driving progress towards Net Zero. Our partnership with E.ON and Energy Systems Catapult is a fantastic opportunity to pilot two very exciting finance initiatives, based on a data driven specification approach,” said Simon Roberts, Heatio managing director. “Heat and Energy-as-a-Service will make clean energy accessible to households across the UK whilst delivering energy security. Accuracy of specification and validation is key to ensuring consumer confidence and savings validation, we are delighted to be able to develop and deploy our Home Energy Management System to drive this uptake.”
“Energy efficiency makes people’s homes more comfortable, it cuts energy costs, grows the economy, reduces our reliance on imported fossil fuels and it contributes to net-zero on a sustainable basis. When it comes to more efficient heating the task we’ve been set is a twenty-fold increase in heat pump installations to 600,000 a year by 2028,” Michael Lewis, E.ON UK chief executive, said. “To achieve that we need to inspire significant consumer demand through stronger, simpler and more specific policies: greater guidance to homeowners, longer term access to grants, and new building regulations so all new properties are built to net-zero standards.
“Working with the Catapult and Heatio we hope to unlock that demand by providing an affordable funding system that makes the greener choice the easier choice.”