Octopus’ ‘free’ heat pump gets ‘ball rolling’ on market competition

Octopus Energy’s offer of “free” heat pumps indicates that there has been a shift with the market becoming more competitive, an industry expert has said.

The supplier’s chief executive Greg Jackson unveiled the ‘Cosy 6’, Octopus’ new 6kW heat pump and the first to be built entirely in-house, last week.

Speaking before prime minister Rishi Sunak announced the government’s heat pump grant would be increasing to £7,500, Jackson claimed the offering will see some customers have the devices installed for free after receiving the grant.

The device, he explained, will cost around £3,000 after the grant for a typical home and provided that a property already has a “reasonably up to date water cylinder and a reasonably well looked after heating system”, some people will be able to get the product for free.

Following the unveiling Utility Week spoke to Bean Beanland, director for growth & external affairs at the Heat Pump Federation, and asked him about the impact this will have on competition in the market.

While he does not think Octopus’ offer will spark a “race to the bottom” price war, he believes that it will ease the transition to heat pumps for more complex properties in the future.

He explained: “What they have done is they’ve set their sights on a specific demographic of property, one that has got all the straightforward attributes – it’s already got loft insulation, it’s already got cavity wall insulation.

“It’s a formulaic semi-detached that was built in the 80s, 90s and 00s where it’s relatively straight forward to identify the location of the heat pump which is again easy access into where the existing boiler is, so you get very simple pipework.

“The mechanics of switching between the gas boiler and the heat pump are very straightforward, that allows them to work on hitting this price point.”

He further explained: “Their intent here is to say ‘we’re going to address this demographic of property’ which is significant, we’re talking about millions of homes here, so it’s a huge demographic… once that cohort is really taking the heat pump transition seriously it builds scale, consumer interest, consumer understanding of the technology, which can then be applied to more complex sites. So to that extent you would say this is good news.”

Jess Ralston, head of energy at the Energy and Climate Intelligence Unit, agrees that increasingly competitive offers from the likes of Octopus and from competitors such as British Gas have “got the ball rolling” on creating competition in the market.

Ralston said: “In general having more variety when it comes to heat pumps on the market in the UK, that’s always going to be good. At the moment we have got a few big players including Octopus and British Gas who are also offering heat pumps which start at £2,999. So there’s already a bit of a price war kicking off between two big companies… they’ve really got the ball rolling already.

“At the moment the UK is such an untapped market for heat pumps. We have got all of these homes, around 25 million, that need to have their gas boilers replaced when they next break. So the solutions that are being built today, and research and development into those solutions, will pay off over the next 10 years when we start to see more and more people get heat pumps.”