Green finance pilot projects to accelerate the decarbonisation of UK homes

  • Green mortgage provider Perenna, and energy provider E.ON, have secured funding through the government’s Green Home Finance Accelerator in May 2023, with consortium partners Energy Systems Catapult and Heatio
  • E.ON and Perenna have successfully moved to the pilot phase of their projects, bringing sustainable financial services to consumers
  • With support from Energy Systems Catapult, Perenna will pilot its green long-term fixed rate mortgage, while E.ON will offer a pay-monthly subscription service for heat pumps, solar, and battery storage

Energy Systems Catapult has teamed up with Perenna, E.ON, and Heatio in a bid to strengthen the UK’s emerging green finance market and support prospective and existing homeowners.

The projects are funded by the Net Zero Innovation Portfolio (NZIP) under the Department for Energy Security & Net Zero as part of the department’s Green Home Finance Accelerator (GHFA). The GHFA was established to support the design and development of innovative green finance products that incentivise domestic energy efficiency and low carbon heating retrofit.

Green mortgages

The start-up bank, Perenna, will use the grant funding to refine and launch its Perenna Retrofit Mortgage product to market. The product aims to solve the biggest barriers to decarbonising UK properties and encourage homeowners to make energy efficiency improvements to their homes.

Consumers will be afforded all the benefits of Perenna’s flexible long-term fixed rate mortgage with the additional benefits of a green rate discount, being rewarded for lowering energy usage. Customers who complete a qualifying retrofit will see their mortgage rate switched to a lower rate and will benefit from lower monthly payments for the rest of their term.

The mortgage will also offer a data-driven, digital approach to energy assessment, with installation and savings verification through a home energy management system (HEMS) from Heatio.  Once the product is live, Energy Systems Catapult will conduct qualitative and quantitative research on the consumer experience of the proposition at key touchpoints.

Arjan Verbeek, founder and CEO, Perenna said:

“Perenna wants to change the narrative on renewable energy technologies. There are too many obstacles currently to retrofitting a property, with confusing offers and unclear steps on what to do. This needs to change if we want to solve one of the biggest challenges for achieving net zero.

“We are delighted to be part of the Green Home Finance Accelerator and have the opportunity to work with Heatio and Energy Systems Catapult to pilot an innovative mortgage product that combines long term security with improvements in home energy efficiency.”

Energy Systems Catapult, Homes business lead, Rebecca Sweeney, said:

“The biggest barrier to the retrofitting homes for Net Zero is cost, with 44% of UK homeowners needing additional finance to install low carbon technologies and make energy efficiency improvements.

“During the first phase of the pilot, Energy Systems Catapult partnered with Perenna to gather key consumer insights from around 1,000 homeowners and potential homeowners to determine what would most appeal when considering longer term green mortgage.

“The results included: covering the cost of retrofit improvements, cheaper mortgage rates after energy efficiency measures are adopted, cheaper energy bills, predictable long-term mortgage rates, a more energy-efficient home.

“During the second phase we will conduct both qualitative and quantitative research to really get under the skin of the real-world consumer experience, to ensure the retrofit improvements match the quality of the financing product.

“We want to develop a rich understanding of the consumer experience at key points in the consumer journey, to provide insight into consumer motivations, needs and the impact of the Net Zero transformation experience.”

Thomas Farquhar, Co-Founder of Heatio, said:

“Our initiative with Perenna and Energy Systems Catapult is a bold step towards making energy-efficient upgrades not only financially accessible but also rewarding, alongside this next generation Green Mortgage, that drives energy reductions, not just rewarding those who are already efficient or low carbon. It’s important that we convey the idea that decarbonisation is not only achievable but beneficial. By making the transition to alternative heat and energy sources more seamless and appealing to homeowners we can drive forward the enthusiasm of homeowners to participate.”

Pay-monthly subscription services

Taking inspiration from other consumer markets such as mobile phones and broadband, customers can spread the cost of sustainable solutions such as heat pumps, solar, and batteries, thanks to a pioneering scheme led by E.ON and supported by Energy Systems Catapult and Heatio.

In a pilot scheme in the North West of England, homeowners could get an air source heat pump, solar panels and a battery fitted for as little as £150 a month*, over a 20-year term, covering the technology and installation as well ongoing servicing, maintenance and breakdown cover, support and optimisation. At today’s energy prices, switching to these sustainable solutions could save an average 4-bedroom property almost £800** a year.

The scheme will launch in April and give 350 households the opportunity to be the first to benefit.  Customers who sign up will pay for their solar, battery and heat pump system over a 20-year period through a monthly fee.

Chris Norbury, E.ON UK Chief Executive, said:

“Bundling the technology along with service is commonplace for the many millions of people around the UK who have a mobile phone contract. We’re bringing the same flexibility to energy customers so they can benefit from the transition to cleaner and greener homes without the need to find the upfront finance.

“This is a game-changer for home heating and makes sustainable energy more affordable in the first place, while lowering bills in the longer term and helping transform the energy system.”

“We’ve long argued the energy market in its current form is not designed to inspire homeowners to take their own steps towards improving their homes and helping to wean the country off our dependence on fossil fuels. We hope removing the finance barrier encourages more people to consider greener options when updating their homes by providing an affordable funding system that makes the sustainable choice the easier choice.”

Guy Newey, Chief Executive Officer of Energy Systems Catapult, said:

“The two biggest challenges to the retrofitting of millions of homes is giving consumers confidence that new low carbon heating and energy efficiency technologies will provide great comfort; and helping them with the upfront cost. Energy Systems Catapult is partnering with E.ON and Heatio to help test an Energy as a Service proposition, aimed at driving the uptake of low carbon technologies like heat pumps and solar panels.

“In the first phase, we helped test the proposition with consumers, alongside carrying out some Home Energy Dynamics modelling to determine which housing types would most benefit from this service, and business model innovation work to support the development of a successful financial model. We are excited to be part of the phase two pilot, where the Catapult will further draw on our consumer insight and business modelling capabilities to test the proposition with real people in real homes.”

*£150 is based on an average Energy as Service package for a 4-bedroom detached property.

**Estimated energy bill savings are based on a 4-bedroom detached gas heated property, typically heating their home to 21 degrees, switching to an ASHP, Solar PV and battery. Based on current price cap single rate gas/electricity tariff (Gas £0.07p kwh, Elec £0.29p kwh + relevant daily standing charge). This assumes full removal of gas and related standing charge from customers’ bills once switch to ASHP complete. No benefit from SEG export tariff included, which would further improve net energy bill savings. Annual bill before £2,280.73 vs £1,500.60 = annual savings of at least £780.13.

Green Finance

Removing financial barriers to help decarbonise UK homes.

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