Finance for heat pumps: How exactly do we fill the £8,000 hole in the Government’s heat pump plan?

February 21, 2019

Many households will still need to come up with a balance of about £8,000 themselves if they want to invest in heat pump technology, despite the Government offering a £5,000 homeowner subsidy in the form of the Boiler Upgrade Scheme.

Here, Ryan Harmer, our Managing Director, explains why it's becoming more and more critical for heating experts to be able to provide flexible payment options to their clients and what that procedure would mean for sole traders and SMEs.

The objective of installing 600,000 heat pumps annually by 2028 is unquestionably a huge and ambitious one, especially considering that the median heat pump installation costs around £13,000[1]. Even while there are government incentives of up to £5,000 available for homeowners to help with their upfront expenditures, a growing body of research indicates that much more work needs to be done to promote uptake, particularly when it comes to funding.

Unfortunately, according to research, one-third of UK adults have savings totalling less than £1,000, [2] which means that many homes, whether they receive government assistance or not, simply cannot afford to enter the heat pump market.

So just how significant is the potential opportunity, and why is it crucial for installers to be able to offer their clients flexible payment options?

The heat pump finance necessity

The heat pump market has already experienced tremendous growth and is anticipated to continue expanding over the coming few years. While a sizeable portion of this earlier growth was attributed to government-sponsored programmes, such as the now-inactive Renewable Heat Incentive,[3] several installations in the private sector occur every year.

Although there is no shortage of data demonstrating the cost-effectiveness of heat pumps, the plain reality is that many homeowners would not be able to afford to replace their conventional boiler in the event of a breakdown, let alone upgrade to an air source heat pump, without access to some form of financial support or payment flexibility. The current cost-of-living crisis certainly hasn’t helped matters either.

So how can installers play their part in all of this?

Put simply, installers who can provide financing options have a clear advantage in the current climate, especially given that 72% of families already say that the cost of a home renovation project is a big obstacle.[4]

Greater access to financing options is essential for those homeowners who either need a new and efficient heating system or want one in their efforts to curb their rising energy costs. Without the capacity to offer more flexible, longer-term payment options, installers won't be able to make the most of the market potential, nor will the government be able to meet its objectives.

Possibilities for installers

Independent installers, who are able to provide consumer financing for heating installations, have the potential to advance the industry toward the government's Net Zero goals, aswell as lessen the impact of homeowners' rapidly rising energy bills and increase their share of the anticipated increase in heat pump installation work.

The government assistance that is presently available may help to some extent to encourage energy-efficient heating, but this planned advancement can only be accomplished if more installers are able to offer customers accessible financing choices.

While some independent installers might be able to provide these kinds of services, historically only major national companies with the necessary financial credentials, like BritishGas, have been able to offer consumer finance packages. That’s where we’re looking to instil change.

Unlocking opportunities with hiber

At hiber, we are working to make it much simpler for independent installers to provide their clients with quick and simple access to financing options at the time they quote a project.

Installers can provide a price for the installation of a heat pump, acquire the supplies and components they require, and manage the financing option for the project all from the same platform by using the hiber app.

Installers may establish themselves as a key resource for homes looking for an environmentally friendly heating option or who just want to cut their yearly heating costs by working with hiber. Heat pumps will become more and more popular as the nation intensifies its response to the climate issue, therefore installers should start preparing now to meet future needs.

If you haven’t already, you can sign up to hiber here.