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Why The Netherlands has all the right ingredients for innovative heat offers to succeed

netherlands-pastry

There’s been a lot of talk about the potential for ‘Heat as a service’ & ‘Comfort as service’ (HaaS & CaaS) to revolutionise Europe’s heating markets, reaching more end-users with new, potentially low-carbon, heating appliances. While our research has turned up a number of HaaS-like offerings, so far, we’ve only found one example of what we consider to be ‘true’ heat as a service: Eneco, in the Netherlands.

On reflection, this isn’t surprising. The Netherlands has all the right ingredients that make it the key market where innovative, ‘new heat’ offerings are likely to emerge, and ultimately to succeed. The 7 key has are:

the key ingredients of heat as a service

  • Europe’s highest penetration of smart thermostats . This leads to a high level of engagement with heating among households. The wide penetration of the OpenTherm protocol (~80% of boilers) has also enabled easy connectivity of many heating appliances. ‘Smart’ and ‘connected’ heating systems open up opportunities, such Home Energy Management, and remote diagnostics – which can be linked into maintenance contracts (my next point).
  • Maintenance contracts: ~50% of homes already have a maintenance contract, and they’re popular with social housing providers (see below). Connectivity of heating appliances (as above) allows service providers to offer better maintenance contracts, via remote monitoring, remote diagnostics, remote access and even predictive maintenance.
  • Good consolidation of the installer network. A relatively high proportion of installers work for large, specialist heating services companies such as Feenstra, Warmgarant or Kemkens, compared to other European markets. This makes it easier to engage large numbers of installers with training on new products and services, and for new customer propositions to be marketed by large numbers of installers. 50% of Dutch households say these sorts of companies are who they would go to for their next heating replacement – compared to a preference for local individual installers in other markets[1].

type of company chosen to install a heating system

  • Engagement from several proactive and innovative energy companies. The big energy companies (Eneco, Vattenfall, Essent) are all involved in innovative heat offerings, through supporting or launching new products and services, or working with the installer and maintenance companies mentioned above: Feenstra is owned by Vattenfall, and Essent is associated with the Warmgarant network. They also have a record – Eneco particularly – for bringing new offers to the market, around heating & connectivity (e.g. CaaS, the Toon smart thermostat) – as well as EV offerings (Jedlix).
  • The largest social housing sector in Europe. This makes it easy (or at least easier!) for those with new propositions to access large numbers of homes via a small number of managers, and is where many companies (like Eneco with their CaaS offer, and Feenstra with their boiler rentals) are starting or targeting their offerings. Social housing providers are key customers for solutions – like appliance rental, maintenance contracts and heat as a service – which reduce capital expenditure. The “EPV” fee structure means social landlords can pass on energy efficiency investment costs to tenants, giving an alternative to centralised government funded grants for building improvements.
  • The right financial supports and levers. The Dutch have been progressively changing the levels of taxation on the different heating fuels (gas and electricity), with further proposed changes coming soon. The rising gas prices (and falling electricity ones) are spurring innovation to help end-users avoid those higher costs. There is also an attractive upfront grant (the ISDE) on renewable heating technologies, providing about a fifth to a quarter on the cost of a heat pump (electric or hybrid). And (as above) the EPV fee enables social housing providers to share the cost of improving properties with their tenants.
  • Online heating sales platforms: Actually, this is the one area where the Netherlands is arguably lagging behind other countries. A few exist or are starting – but they’ve got a way to go to catch up with countries like Germany and the UK, where companies including Thermondo, Kesselheld (recently acquired by Ariston Thermo Group), Boxt and Hometree having become increasingly established as players.
  • Finally: a big challenge! They say necessity is the mother of invention, and the Dutch have arguably set themselves the biggest challenge of any European country in terms of transforming their heating market. From a situation today where 6.8 million homes (90%) are heated by natural gas – mainly individual boilers – they want to disconnect 1.5 million of those (almost a quarter!) by 2030, and to completely eliminate natural gas as a heating fuel by 2050. And, at the same time, they’re aiming to increase the share of electricity from renewables from just 17% today to 70% - while simultaneously planning a wide-spread electrification of transport. Talk about a big ask!

So, we shouldn’t be surprised to see the Netherlands produce the first ‘true’ Heat as a Service offer, and I’ll be keeping my eyes open for the others that are sure to follow. I’ll also be interested to see which European market can catch up with the Dutch - if any! - in terms of invention, and which of the innovative models that start there can successfully spread to other markets.

Do you agree with my assessment of the Dutch market? And do you think other markets will catch up? I’d love to hear your thoughts.

For Delta-EE Heat Service subscribers, you can read more about the Netherlands in our Country Reports (Electrification of Heat Service, Gas Heating Service, Connected Home Service), and Residential Heating Market Status Report (Heating Business Service). Our ‘Heat as a Service – definitions and examples’ Report (Heating Business Service) covers Eneco’s model, and other similar examples.

[1] Delta-EE annual European heating customer survey, 2019/20

 

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Saturday, 31 October 2020

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