Utilita backs clustered heat pump installations to drive down costs

Utilita is pushing ahead with its proposition of high-density targeted installations of heat pumps, despite missing out on government funding to do so.

A government-funded study carried out by Utility last year concluded that high upfront costs associated with heat pumps can be dramatically reduced by targeting clusters of properties in a condensed area.

On the back of the study Utilita applied for £2.5 million of additional funding to carry out targeted installations across Sunderland, before targeting other areas of the country. However, that request was denied by the Department for Energy Security and Net Zero (DESNZ).

Despite not securing the funding Utilita head of sustainability Archie Lasseter told Utility Week that the company will continue with its approach regardless.

“To be honest, it doesn’t really matter that we didn’t get the extra funding as all the work we have done for the feasibility study means that we are able to get on and do this,” he said. “In truth, we probably didn’t get the funding as our proposition was more of a whole life scheme from engaging with residents, to installation to after care.

“The other schemes that did receive additional funding were perhaps more focussed on individual elements.”

The initial study – submitted to government in November 2022 – concludes that bulk ordering heat pumps to be deployed in targeted areas can result in huge savings for customers.

The report adds that manufacturers have offered discounts of up to 45% on heat pumps and associated products if ordered in bulk.

Combined with a streamlined approach to installation, Utilita estimates that the upfront costs of a heat pump can be brought down from an average cost of £10,200 to £7,713.

Consequently, the firm claims that installing and running a heat pump can be cheaper than a gas boiler by combining bulk purchasing with a streamlined approach to installation and maintenance.

In total, Utilita estimates that targeted mass deployment of heat pumps can save customers over £4,500 over a 20-year period compared to heating a home with a gas boiler.

However, this feasibility is predicated on public funding of at least £4,194 funded through the boiler upgrade scheme in the short and medium term and applied to the total cost of a heat pump.

Therefore, Utilita concludes that “bringing heat pump costs to parity with a gas boiler and customer expectations, without the need for public funding” should be a priority.

“High upfront costs are often a barrier to the deployment of heat pumps at high-density,” the study concludes. “Through the means of bulk purchasing to in-house storage arrangement with manufacturers and suppliers we will be able to achieve significant discounts across our supply chain, resulting in lower costs to consumers.”

As well as bulk purchasing, Utilita also aims to provide a “one stop shop” for the installation of a domestic heat pump. The entire offering to consumers and associated activities from lead generation through to aftercare will be completed ‘inhouse’ by Utilita. Again Utilita claims this will ultimately save the consumer money.

“A large part of the upfront costs associated with a heat pump install are down to the additional margin that is charged between different steps of the supply chain and getting the home to a heat pump ready status,” the report adds.

“To date, this may have remained high due to a lack of scale and the ability to coordinate across the supply chain. Utilita are in a unique position where a lot of the supply chain can be centralised and provided ‘in-house.’ Through the internalisation of the full installation process (recruitment through to commissioning), and the ability to bulk purchase heat pumps, Utilita believe the margin can be substantially reduced.”

The report does however flag potential barriers to the plans. The largest supply chain constraint identified by the initial study was a lack of qualified heat pump installers with only seven currently available in Sunderland.

In addition to the lack of installers available to meet customer demand, Utilita has also identified issues with availability of stock which could hinder bulk purchasing.

The report adds: “Utilita has experienced supply issues with a range of manufacturers for heat pumps and other heating products which results in longer lead times. Reasons for this have been indicated as a result of Brexit and the global pandemic. Similarly, the availability of stock for ancillary equipment is of concern.”

Utilita also said that mass deployment of heat pumps in a condensed area will require close work with the networks to ensure there is enough capacity to accommodate the installation of multiple heat pumps at the same time.

The report adds that there are “concerns around the impact of connecting multiple heat pumps in a condensed area” at one time.

In regards to its work in Sunderland, the report adds: “Currently, in Sunderland the electrical network will need reinforcing to satisfy the additional demand for electrical capacity that will stem from the future electrification of domestic heating system. […] If not addressed at an early stage, these could significantly delay the customer journey and more than double the costs to the customer.”

Lasseter is confident that the rollout in Sunderland can act as a springboard for more targeted rollouts across the country. He said that as they have an existing relationship with Northern Powergrid staying in the North East for the time being would “make sense”.

The majority of Utilita customers are also prepay, however Lasseter said that this method of driving down costs for heat pump deployment could benefit all demographics.

“There is no reason at all why this couldn’t be done elsewhere,” he said. “We focus primarily on prepay customers because that is who are customer base tends to be and it is also the customers who will benefit most from up front costs being reduced.

“That said, this proposition would make heat pumps more attractive in all areas of the country. It would also increase demand which in turn would drive down the cost of heat pumps as well.”