The announcement of the domestic Renewable Heat Incentive (RHI) scheme in July this year is welcome news for the fledgling renewable heat industry, as discussed in our previous entry: ‘RHI = Really Happy Industry‘. But, will the proposed incentive levels ignite genuine interest amongst discerning UK customers and drive significant uptake?
I’ve been using our Pathways Tool and Roadmap Service research to explore this question, and the answer is yes!
Over the next decade, there’s going to be a huge shift in the structure of the UK’s domestic heating market. Overall boiler sales are set to fall by 30% (by more than 400,000 units per year). Oil boiler sales will almost disappear (see the figure below). These heating systems will be displaced by a range of low-carbon alternatives whose market will grow from low 10,000s today to 100,000s by 2025 – with an installed market value worth £2.5 billion in 2025.
Evolution of residential heating appliance sales in the UK to 2025.
Source: Delta-ee, 2013
And the winners will be….
- I expect to see a boom in sales of hybrid heat pumps to 2020 – the combination of a relatively low upfront cost with a great payback (even on gas), and a comparatively straightforward retrofit will grab the attention of UK customers. Most other low carbon alternatives will struggle to compete with this in the short term.
- And the market for ASHPs will take off – ASHP economics means they will become very attractive options for off gas homes, with this opportunity extending to on gas properties in the 2020 – 2025 period.
But many other technologies will also have a role to play!
Some other low carbon heating technologies are supported by the RHI (biomass, solar thermal, GSHPs), and others are supported by the feed-in tariff scheme (micro CHP and fuel cells). With growing awareness of low carbon technologies that will come with the RHI introduction, all will become more attractive to customers and grow their market shares in the next decade. I expect to see growing competition among the low carbon technologies and an increasingly dynamic market.
What does all this mean?
- There are great opportunities for energy suppliers to become service providers, and to develop new product offerings for their customers.
- Boiler manufacturers face a real challenge as their boiler sales take a hit in the next decade. But low carbon technologies, if added to their portfolio, could make up for this.
- The UK will miss its carbon target for decarbonising residential heat, if the uptake of low carbon heating appliances remains on this trajectory.
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For shorter term forecasts to 2016 and insights into what UK customers really think, please check out our Microgen Insight Service.