Driving a clean heating system: turning an imperative into an upgrade

Today, the dominant form of heating in the UK is gas boilers. We are very aware of this, so much so that we’re currently one of the nation’s biggest suppliers of natural gas. And as a company who loves our customers we do the best possible job for them.

We also know that we must get carbon emissions out of our system rapidly. Home heating is responsible for 13% of all our emissions. The only way to decarbonise heating is to move away from burning natural gas in boilers.

Given we are one of the biggest gas suppliers, we have a big responsibility to provide a viable alternative. And there’s a fantastic one: 3-4x more efficient than the best boiler; powered by electricity; tried, tested and widely used around the world in all climates. The heat pump.

Of course, we could just sit around and wait to see if hydrogen for heating becomes the norm. It’s a lot more expensive, so we’d make more money than we do selling gas - but we don’t think consumers should have to pay so much more. It’s unlikely it’d be environmentally worthwhile, and it’d be incredibly expensive to do the engineering necessary. Almost every independent study agrees (indeed, we think 43 independent studies agree and none disagree).

But whilst heat pumps are cheaper to run than gas boilers (at least on Octopus’ tariffs), and cheaper to maintain, they’re currently more expensive to install.

We think that both government and companies can help change this.

For example:

• Over time, increase the number of heat grants available whilst reducing the value. When the Boiler Upgrade Scheme increased from £5,000 to £7,500, our enquiries shot up 500%.
  
  Today, cheaper heat pumps are very popular - and this is great- but endless high subsidies are expensive for the public purse so we believe that over time the value of the grant should decrease to put the onus on companies like us to innovate and drive costs down.
  
  So often, government has kick-started markets like this with great success (wind, solar, etc). As we get to a bigger market, economies of scale and innovations can drive down costs and ensure value for money.
  
  Octopus’s typical install is already around £7500-8000 before the government grant, and set to come down much further as we scale up our own manufacture. We expect other companies are set to do the same.
  
• Removing green levies from electricity. A few decades ago, gas was cleaner than electricity because coal dominated our fuel mix. Electricity began to be taxed with a green levy to pay for social funds and renewables, which were then expensive, and to deter electricity use.
  
  Now coal is nearly gone, and renewables provide more than 40% of all power, electricity is vastly cleaner than gas. Yet it still bears extra taxes.
  
  We’re open minded about where this cost moves – whether onto general taxation or onto gas (which would be balanced by electricity cost reductions - so households would see relatively little impact). But we must move on from a world where the cheapest, cleanest fuel gets taxed the most.

We don’t advocate increasing the price of gas boilers – but we must keep driving the cost of heat pumps, and electric heating, down, and driving to make heat pumps the best solution for households of all types.

Aside from supporting the policy directions above, here’s some of the things Octopus Energy is doing to make that happen.

• Building our own heat pumps. Last month we launched the Cosy 6: cheaper, smaller, and super user-friendly. It’s got simple controls in the same app where customers manage their Octopus Energy account, and service and maintenance from the same award-winning Octopus team.
  
  The first devices have rolled off the productions line and we’ll soon be manufacturing thousands every month from our factory in Belfast.
  
  
• Developing game-changing smart heat controls. Our smart controls intelligently optimise heat pumps to work at maximum cost- and energy- efficiency, make the most of renewables in the system and avoid stress on the grid (at times of high fossil fuels).
  
  Taking it a step further: our controls enable a heat pump to work within a Zero Bills home. We’re working with housing developers to build Zero Bills homes in their thousands, fitted with the right combination of solar panels, battery storage and green heat to mean that the homeowner simply never pays an energy bill.
  
  
• Streamlining heat pump install processes - increasing quality whilst reducing cost. We’ve invested £10,000,000 into our green heat R&D Centre in Slough, where teams of engineers are integrating ‘F1 pitstop’ style operations to reinvent the installation, so it’s much quicker to get heat pumps into homes. In the same centre, we’re…
  
  
• Training thousands of new heat pump engineers to meet the growing demand, helping move people into a green career fit for the future.
  
  Decarbonising heating may not look like it’ll be easy, but if we get it right - it can be a lot cheaper than many folk think - and deliver an upgrade to millions of homes. After all, what people want is comfortable homes, affordably - and whilst gas boilers have been ok - they’re often clunky and unreliable. So much so that a typical boiler insurance policy costs more than typical home insurance.
  
  Heat pumps could not only cut carbon and reduce the local pollution which contributes to 30,000 deaths a year in the UK - but they could also herald more reliable, better value heating systems.