Octopus predicts threefold rise in heat pump installations this year

Octopus expects to install up to three times as many heat pumps in 2024 as it did last year.

The UK’s second biggest energy retailer says it can “confidently report […] high and growing” customer interest in heat pumps, in evidence for the House of Commons environment audit committee’s ongoing inquiry into electrification.

While it doesn’t reveal its 2023 installation figures or the exact 2024 projection, Octopus claims that there will be “thousands” more heat pump installations in the coming months.

It adds: “We currently have thousands of customers who have signalled their interest in receiving a heat pump from us and we expect to install several thousands in 2024, two to three times the numbers installed in the last 12 months.”

This growing interest is fuelled by decreases in both installation and running costs of heat pumps that Octopus expects to see this year as the roll out begins of its own UK-manufactured Cosy 6 and later Cosy 10 devices, according to the submission.

It says that Octopus is already quoting customers a total installed cost of between £5,000 and £8,000.

This backs up Octopus director of regulation and economics Rachel Fletcher’s earlier claim to the committee that most of its customers will get a heat pump for less than £500, “or even for free”, following the government’s decision to increase Boiler Upgrade Scheme grants to £7,500

Octopus claims in its submission that it has been able to cut the price of its heat pump below the £10,000 mark, which it was previously quoting for heat pumps imported from Europe, through a combination of reduced labour, transport and unit manufacturing costs.

The company expects to cut the time it takes to install its heat pumps from around four to two days by purposely designing them for “plug and play” installation. This will cut labour costs, which Octopus says account for 60% of the total installed cost of heat pumps.

In addition, by developing a heat pump with fewer components and scaling up production, Octopus expects to be able to halve the typical £2,300 cost of a unit built on the continent.  Fewer components will also mean Octopus’ heat pumps are less likely to break down and easier to fix, it says.

Producing in the UK and not importing from the continent will also mean lower transport costs.

As revealed by Utility Week last month, a dedicated heat pump campaign body is being considered by government to expedite the uptake of the technology. In an email seen by Utility Week, a government official describes the proposed organisation as a “Smart Energy GB-style model for heat pump deployment”.

Its formation would support the government’s aim of installing 600,000 heat pumps a year by 2028.

The number of applications made to the Boiler Upgrade Scheme (BUS) for heat pump grants soared in the weeks after they were increased to £7,500.

Figures released by the government show that more than 2,600 voucher applications were received in the last week of October 2023 when that grant level increased. Of that number 1,500 were reapplications from consumers who had relinquished their vouchers at the lower £5,000 limit.

An additional 1,150 new applications were received during the week commencing 23 October, three times as many as the 2023 weekly average.

The figures show that while reapplication numbers are declining, new voucher applications remain high at between 500 and 600 per week – nearly a 60% increase on the previous weekly average.