‘In-house disruptors’ needed to decarbonise heating

A Heat-as-a-Service (HaaS) model could be a key driver in the decarbonisation push but a lack of appetite from consumers for longer contracts may slow progress, an analyst has suggested.

Lindsay Sugden, principal analyst at Delta-EE, also told Utility Week, that the sector will need support from government or the big suppliers to reach critical mass.

Sugden describes a “true Haas model” as charging a fixed monthly fee to lease and maintain the heating appliance, with customers charged for the warmth provided rather than KWh of energy consumed. Crucially, it would see the provider of the service taking on the five key risks that have historically been borne by the customer – the financial and technical exposure as well as the uncertainties connected to performance, behaviour and energy price.

Sugden, who has co-authored a white paper on The Transition to New Heat, said the UK could look to follow the model adopted in the Netherlands by introducing HaaS through intermediaries such housing associations or councils.

So far in the UK, Bristol Energy has partnered with Energy Systems Catapult in a trial of charging customers in warmth provided as opposed to KWh.

Sugden said: “If we’re serious about decarbonisation we have to tackle heating. We’re still seeing one and a half million new gas boilers fitted every year – that’s three times as much as any other European country. Gas boilers are cheap and customers feel comfortable with them so it’s hard to see that changing without some innovation.

“We have seen expansive technology in areas like electric vehicles but not much evolving in terms of disruption inside the house.

“HaaS seems to offer a great opportunity to bring lower-carbon technologies into existing buildings and push out some of these gas boilers.

“It’s moving away from buying the heating system up front towards a model that’s more like how you would pay for a mobile phone.”

However, Sugden also pointed to research from Delta-EE’s focus group which found a resistance to energy contracts over five years, with a preference for periods as short as two to three years, even if that meant paying some of the cost for the new appliance upfront.

The study – of 38 households – found there were some who would be interested in 10-15-year deals if they had no plans to move, and even suggested tying the monthly payments to their mortgage, as is the case in green mortgages.

Sugden said: “If customers can’t be persuaded to take longer contracts then that could deter suppliers. What it needs is for a company to take the risk on a broad scale. If others can see success it’s likely to be more attractive.

“The big six could have the capital to do this.

“In other markets you have the government committing to get this off the ground.”

The report, which looks at trends shaping new heat market opportunities across Europe, also looks at the role of hydrogen in the heating system, at how new entrants such as Google and Amazon are reshaping the market and the connectivity of heating systems.

It also explores the greater need for grid flexibility and shifting consumption away from peak electricity consumption periods.