Ovo CEO: Waste of time to debate hydrogen heating

It is a “waste of time” to debate hydrogen as a home heating option, Ovo’s chief executive has said as the supplier launched what it claims is the market’s cheapest heat pump tariff.

Under Heat Pump Plus, Ovo is offering a 15p per kWh so called “add on” rate for running the electrified heating devices.

The company said this will cut the costs of running a heat pump by 50%. This would make the running costs of a heat pump roughly half of those for a gas boiler, translating into savings of £500 cheaper per annum, it claimed.

The type of use add-on means customers have two rates – one for their heat pump and one for the rest of their home’s energy usage.

Speaking at a fringe event at the Conservative Party Conference, which his company sponsored, Ovo CEO Raman Bhatia said the advantages of heat pumps mean the technology is “unstoppable”.

“Our role as energy suppliers is to facilitate this transition. Heat pumps are a very proven technology right now.

“We can debate hydrogen and waste our time but for a household, heat pumps provide the most efficient way of heating,” he said, adding that home heating contributes 15% of the UK’s total carbon emissions.

Bhatia said the new rate is designed to remove what he described as the main barrier to heat pump uptake, the higher cost of electricity compared to gas.

Rishi Sunak’s recent decision to increase Boiler Upgrade Scheme grants to £7,500 means it is possible for “parity” with boilers on initial investment.

But the price of electricity remains “artificially high” due to factors like policy levies and the way wholesale prices are determined by marginal gas costs, he said: “We need clear, decisive signals from policy makers, that this is the way to go and then we have to step in and make this a reality.”

Ovo’s calculations about savings are based on a gas boiler with an annual consumption of 10,500kWh at 8.5p/kWh versus an air source heat pump with an annual consumption of 2,625kWh at its new tariff rate of 15p/kWh.

The more energy efficient nature of heat pumps means they are able to provide more heating per kWh than an equivalent gas boiler.

To tie in with the launch of its new tariff, research conducted by Ovo shows that 45% the population would install a heat pump if running costs were 40% cheaper than today’s average rate.

At the same session, Bhatia said the emphasis in Sunak’s recent announcement on a mix of carrots and sticks to facilitate net zero “makes sense” but expressed concern that the prime minister’s decision to drop energy efficiency targets for private landlords were “unhelpful”.