In this model, heat pump owners pay no upfront cost; they instead pay a monthly service fee.
Resource
Business model: Heat Pump-as-a-Service
In this model, heat pump owners pay no upfront cost; they instead pay a monthly service fee.
Unlike simple equipment financing, which only covers the capital expenditure (CAPEX) cost, the monthly service fee for Heat Pump-as-a-Service (HPaaS) also includes maintenance and repairs, and a performance guarantee (e.g., ensuring the heat pump delivers a specified temperature consistently).
The monthly fee may also include optimisation of the heat pump to reduce running costs.
This model requires the heat pump owner to sign a
contract for a fixed term of typically 10-15 years. If the heat pump owner sells their property, they will still be responsible for monthly payments.
Primary benefits
- No upfront cost to consumer, reducing financial barriers to adoption.
- Performance guarantee, mitigating fears of not being warm enough.
- Risk is borne by finance and heat pump providers rather than the consumer.
- Business model already launched in UK.
Key risks and considerations
- Only suitable for owner occupiers.
- Consumer is tied into long-term contract.
- Consumer must pay off loan if they move house before contract end, but might recoup cost back from increased property value.
- Currently subsidised by the boiler upgrade scheme (BUS), but this may not be available in future.
- Could be combined with other business models (e.g., smart electricity tariffs and heat pump flexibility).
Case study: Aira
Overview
Aira is making heat pump technology available through an ‘all-inclusive’ monthly payment plan. This is a personal loan with the consumer meaning they are still responsible for making payments if they move home.
Customers face no upfront costs and are offered a 15-year ‘Comfort Guarantee’, which includes a performance guarantee and a product warranty. The performance guarantee ensures that the heat pump delivers a ‘cosy’ temperature between 18-22°C. The product and installation warranty covers all parts and labour.
At the end of the 15-year period, customers have the option to extend their comfort guarantee.
Financials
The heat pump could deliver up to 25% heating cost savings and 75% carbon emission savings (100% carbon savings if in combination with a green tariff)*.
The installation of a heat pump has the potential to increase property value by up to £8,000.
*Value quoted is for reference purposes only. Actual heat cost savings will vary depending on the household.
Scale of deployment
Aira has plans to invest £300 million into the UK market over the next three-years to encourage domestic heat pump adoption.
- Aira. (2024). Aira launches state-of-the-art heat pump with smart home energy solution.
- H&V News. (2023). Aira backs Heat-as-a-Service push with £300m UK investment.
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