This model enables rural households to benefit from the installation of a heat pump without paying upfront costs. Instead, households pay monthly instalments to recover the initial investment.
Resource
Business model: Heat pump finance
This model enables rural households to benefit from the installation of a heat pump without paying upfront costs. Instead, households pay monthly instalments to recover the initial investment.
*Heat pump supplier and maintenance provider may be the same organisation.
First, the heat pump supplier undertakes a home energy assessment to provide an installation quote.
The finance partner and household applicant then enter into a finance agreement which details the monthly payment amounts, duration of the agreement, and any applicable interest charges.
The heat pump supplier then arranges and carries out the installation.
The household applicant may also enter into a separate maintenance agreement which offers additional benefits beyond the standard warranty.
Primary benefits
- Offers heat pump installation at zero upfront cost to customers unless provider requires an initial deposit.
- Some providers may offer flexible terms, allowing customers to tailor repayment plans to their needs.
- Can be used in combination with other models (e.g., heat pump flexibility and/or smart tariffs), maximising the value of installing a heat pump for customers.
- Subject to satisfying eligibility criteria, customers can benefit from the Boiler Upgrade Scheme (BUS) grant, which currently provides a £7,500 discount towards air source and ground source heat pumps. The grant amount would be deducted from the total installation cost.
Key risks and considerations
- Unlikely to be accessible to customers with poor credit score as finance applications are subject to credit check.
- Customer will pay more overall for heat pump installation, compared to a direct purchase, due to interest rates.
- Requires commitment to multi-year contract (typically 5-15 years), though some providers may offer early payment options.
- Proposition likely to be most attractive to owner-occupied properties.
- Does not provide a full property retrofit solution to maximise heat pump performance unlike other models (e.g. Energy as a Service (EaaS)).
Case study: Aira
Overview
Aira and Stax have partnered to provide customers with flexible financing options for heat pump installations.
Customers first receive a free home energy assessment, undertaken by Aira, where they are provided with a fixed quote for the installation works. Stax then manage heat pump finance applications. Once a payment plan has been agreed between Stax and the customer, Aira reach out to customers to arrange the installation.
Financials
Monthly payment plans differ considerably depending on the total quoted installation cost, the term of the finance agreement, as well as the interest rate.
The length of finance agreements range between 5-15 years, with representative examples of finance payment plans outlined in the table to the right.
Scale of deployment
Accessible to all households though applicants are subject to receiving a credit check.
| Finance components | Example 1 | Example 2 |
|---|---|---|
| Cash price | £6,289 | £9,261 |
| % deposit | 0 | 0 |
| 60 monthly payments of | £130 | £192 |
| Interest rate | 8.9% per annum, fixed | 8.9% per annum, fixed |
| Total amount payable | £7,815 | £11,508 |
- Aira. (2024). Heat pump finance.
- Stax. (n.d.). Monthly payments from £78 a month.
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