Despite much work having been done to develop low carbon technologies to drive down emissions from homes, many of these products and services remain out of reach financially for many homeowners. An E.ON-led consortium is looking to shake up the green finance market and make low carbon products and services available to more consumers throughout the UK.

As part of the Government’s Green Home Finance Accelerator (GHFA), Energy Systems Catapult, in partnership with energy retailer, E.ON, and Home Energy Management System (HEMS) provider Heatio, will support the development of energy and heat as a service models.

The GHFA is part of the UK Government’s Net Zero Innovation Portfolio (NZIP)and provides 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.

The Challenge

23% of the UK’s carbon emissions come from housing alone. While there is growing recognition of the need to reduce our home emissions, research by Energy Systems Catapult on the Electrification of Heat Demonstration Project highlighted how consumers are put off by the upfront capital cost and the perceived lifetime running costs of a low carbon heating solution.

This is compounded by the lack of solutions to fund improvements, with the Green Finance Institute (GFI) acknowledging that current finance products do not encourage homeowners and landlords to invest in property improvements.

The solution

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 and pilot two green finance products to promote greater uptake of 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.

Heat as a Service (HaaS)

Heat as a Service 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.

Energy as a Service (EaaS)

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.

Energy Systems Catapult are taking the leading role in the Consumer Research and Engagement work package due to their extensive experience in this area. This will include a desktop review of previous Heat as a Service (HaaS) propositions, market research and dissemination reports and GAP analysis for consumer research. Furthermore, the Catapult will lead on the development and execution of the Consumer Research Plan, to include segmentation analysis to establish the size of the target market and to validate the consumer needs.

The Catapult will also be responsible for feeding insights into product design, utilising their Home Energy Dynamics modelling and testing the proposition with focus groups and defining a marketing strategy to feed into the Deployment planning which will encompass the route to market, geographic location and stakeholder engagement.

Michael Lewis, E.ON UK Chief Executive, said: “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. 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 Catapult and Heatio we hope to unlock that demand by providing an affordable funding system that makes the greener choice the easier choice.”

Simon Roberts, Heatio Managing Director said “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. 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.”