Decarbonising heating systems in buildings is an important step towards achieving net zero by 2045 in Scotland.
The Scottish Government anticipates that we will need one million zero carbon heating systems in new and existing homes by 2030. Many of these systems will be heat pumps.
However, high upfront costs are a barrier to heat pump installations, especially when compared to gas boilers. ClimateXChange commissioned Changeworks and LCP Delta to research innovative business models that help with the upfront cost to support the rollout heat pumps. Our research explores how different business models—subscriptions including payment plans, financing and ‘heat as a service’ models—could be implemented in Scotland via pilot schemes.
Changeworks’ role in the project was leading on qualitative research.
Research methods
- Interviews with eighteen stakeholders from a range of organisations such as a heat pump installers, manufacturers, consumer bodies, financing organisations, and the electricity network
- Qualitative analysis of the interviews
Read the full report below
Summary of findings
- A limited number of heat pump finance offerings are currently available to customers in Scotland. Other than an upfront purchase, most of these are finance only payment plans for the purchase of the heat pump only. Uptake for these plans is very low. Funding from the Scottish Government currently includes an up to £7,500 interest-free loan and a grant to the equivalent value. Whilst there are heat pump on subscription offerings across Europe, these are also fairly limited, reflecting an immature market.
- Heat pumps in Scotland could use the following range of business models: a) finance only, b) financing lease, c) subscription, d) heat as a service.
- Adding the installation of energy efficiency measures, an energy tariff suitable for heat pumps and energy advice to these propositions could increase their appeal.
- There are non-financial barriers such as complexity of installation, consumer difficulties in understanding fuel bill savings and a current lack of consumer demand.
- Specific barriers to heat pump subscription models include lack of understanding and reassurance around consumer protection and contractual issues – for example, when moving properties.
- Stakeholders have a mixed appetite for piloting new approaches, with the main challenge being provision of finance. Other challenges and risks include ensuring heat pump performance and supply chain capacity.