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The latest Delta-ee podcast focuses on the impact of the latest changes to the RHI (Renewable Heat Incentive) tariffs and the impact they will have on the UK heat pump market.
Steven Ashurst, Senior Analyst and Micro-CHP Research Service Manager, and Lukas Bergmann, Senior Analyst and Heat Pump Research Service Manager, suggest the changes in tariff point towards a positive future for air source heat pumps.
This time last year the UK heat pump industry was enthusiastic, expecting unprecedented growth driven by the Government’s Renewable Heat Incentive (RHI). A year later the hangover is slowly receding and a more realistic outlook is starting to prevail.
As shown in our latest country report published under the Delta-ee Heat Pump Research Service, the UK heat pump market declined slightly in 2014 and for 2015 we at best expect a slow recovery of sales. There are 4 key reasons for this:
Delta Energy & Environment’s latest Microgen Insight Service report on the UK Self Build market reveals a marked decline in the number of completions in 2012. Should the microgen industry be worried about the state of one of its key niches? We’re optimistic that, with the aid of measures such as the RHI, the market outlook for this sector will sufficiently improve.Self build stats give cause for concern, although Delta-ee sees the microgen opportunity being sustained.The figures are concerning; the annual number of self build completions fell by 25% in 2012. Serving as an indicator of market health around 2 years previous, the latest statistics reflect a contraction largely in line with the difficulties facing the housing market as a whole in 2010/11. Those who we spoke with, including the National Self Build Association (NaSBA) highlighted how people hoping to undertake their own project faced a particularly challenging credit scene. So, is it as doom and gloom as the figures suggest? And what does this slump in one of their key markets mean for microgen vendors? Currently, around 1-in-3 self builders install (at least) one microgeneration system and, despite the fall in the number of them, we expect their level of interest to be maintained – and even increase – over the coming years.In recent years the government, along with a handful of industry insiders including newly appointed ‘Champion of the Self Build Industry’, Kevin McCloud, has committed to a range of measures targeted at doubling the number of self builds by 2025. Such initiatives include the Custom Build Investment Fund, which, administered by the Homes and Communities Agency, provides £30 million worth of funding for self build projects. These drivers, along with DECC’s recent decision to grant self builders eligibility for the RHI, lead Delta-ee to conclude that this sector should remain an important destination for microgen products. A simplified passage through the RHI should facilitate greater engagement with renewable heat from self builders.In principle, the Renewable Heat Incentive offers a real opportunity for manufacturers to increase uptake rates amongst self builders. This group typically has an above average income, is made up of people designing their once in a lifetime dream home and, most importantly, is disproportionately open to innovative and environmentally-savvy technologies. Our customer research shows that self builders are primarily driven by economic motivations to install low-carbon technologies, however many are also attracted by the ethical merits as a secondary driver. In particular we see the added incentive of a <7 year payback buoying interest for products whose self build sales are crucial – namely biomass boilers and ground source heat pumps. Plus, with their brand new EPCs expected to stand in lieu of a Green Deal assessment, self builders should be in line for the simplest customer journey of the lot.Undeniably, a smaller pool of self builders equates to a smaller pool of potential microgren customers. But based on what we’re hearing from/seeing in the market, self builds should remain a key target audience for most microgen manufacturers. Delta-ee’s latest residential market forecast sees annual microgen installations in self builds rising by 75% to around 7,500 in 2016. Capitalising on such potential of course will require market players to develop a clear understanding of self builder preferences and their concerns in order to formulate a winning market strategy.For further insight from our report on the state of the self build market, and the outlook for microgen across all end-user groups, please click here.
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