Tessa Clark is Head of Subscription research at LCP Delta, where she oversees the research services offered by the consultancy. She has over 15 years of experience in the low-carbon energy sector in research, consulting and management roles.
In a recent podcast interview, we chatted about ClimateXChange research conducted by Tessa and her colleagues on heat pumps on subscription. This blog post is a summary of some of that conversation.
Why was this research needed in the context of Scottish climate policy?
A large part of meeting climate change targets in Scotland is going to be decarbonising heating systems in our homes. Heat pumps are going to be one of the main solutions for that.
However, heat pumps cost a lot more to install than gas boilers, which are currently the most common type of heating system. Our research looked into the options for financing the upfront cost of heat pumps.
What were the main aims of the project?
We had three aims. Firstly, we wanted to understand what financing options could be available to Scottish consumers.
We then wanted to look at the market landscape in Scotland and Europe, to see what offers are available or being developed to finance heat pumps.
Thirdly, we wanted to understand what financing options we could adapt into Scotland and what schemes could be piloted here.
How did you do the research?
We started off with desk-based research to assess what offerings were available on the marketplace. We conduct heating business research at LCP Delta, so we’ve already got a good bed of research and industry contacts. We looked at what offerings were out there and did some internal analysis to categorise these into five key offerings.
From that, we interviewed a number of stakeholders in Scotland, such as heat pump industry representatives, trade bodies, installers, finance providers and consumer representatives. We interviewed them to get their views on the various financial models from our desk-based research, such as heat pumps on subscription. We also wanted their views on how we might be able to implement some of these in Scotland, and what some of the opportunities and barriers might be.
What were your main findings?
There are quite a lot of different financing options that could be available to consumers to install heat pumps, ranging from quite simple mechanisms to more sophisticated options.
At the moment, most people just pay for the heat pump themselves when they install it. There is a growing number of loan type offers where customers would pay for the heat pump upfront cost over several years. This includes the Home Energy Scotland loan provided by the Scottish Government.
But increasingly we see industry providing more finance options. This includes loan finance but also more sophisticated schemes such as leasing and subscription.
Under these types of schemes, the customer typically doesn’t own the product –the supplier does. But they also can bundle in other services to make this more attractive for the customer, such as maintenance, repairs and/or the energy tariff. This is when we get into heat as a service type propositions, where the supplier keeps the home at an agreed temperature.
What we also found through our research from speaking to Scottish stakeholders, was that there’s a lot of appetite for something like this. There’s recognition that we need some financing options, but there are also a number of barriers and challenges that need to be overcome before these can be adopted on a large scale. For example, looking at customer protection or details around contractual arrangements.
In the report we recommended some pilot schemes that could be adopted in Scotland to test both customer appetite and other aspects of developing these schemes. We recommended a progressive approach, starting with the more straightforward models and building up to more sophisticated ones.
Who else apart from the Scottish Government might find this interesting?
Essentially anybody who is working in the heating industry such as energy suppliers, installers and manufacturers. There’s a lot of interest in heat as a service, or heat pumps on subscription so the research should have wide appeal. The research is useful in categorising the various financial options and understanding practical barriers to rollout.
ClimateXChange podcast
This is an amended extract from our podcast episode: Evidence for climate policy in Scotland – CXC podcast
Related links
Heat pump use in Scotland – an evidence review Experiences of early adopters of zero emissions heating