What is Heat as a Service?
The Heat as a Service (HaaS) Model
Currently, UK energy suppliers can only sell energy to customers in strict units of fuel, called kilowatt-hours (kWh). The customer pays for the fuel (electricity, oil or gas) to heat their home.
Heat as a Service (HaaS) shifts away from buying fuel: instead, a customer pays the energy supplier to provide a full service that keeps them warm and comfortable. The energy supplier uses customer and property characteristics to come up with an optimised, tailor-made heating solution. The supplier then takes full responsibility for the owning, fuelling, maintaining and operating of the heating system.
Heat as a Service (HaaS) can work in several ways. For example:
- ‘Warm Hours’ – customers can choose the hours during which specific rooms are at a specific temperature. These hours can be adjusted (e.g. through a smart meter system in their home) to achieve optimum consumer comfort.
- Consistent Comfort – The energy supplier agrees to maintain a consumer’s property within a set temperature range e.g. 20 ± 2 °C, taking into account the external temperature and weather.
It is not just energy suppliers who are looking to provide HaaS. Housing associations are very keen on this as HaaS ensures their properties do not degrade due to unwanted heat and damp. This keeps occupants happy whilst helping to reduce fuel poverty.
How Does Heat as a Service (HaaS) Benefit the Consumer?
Consumers tend to care about the experience they get for their money rather than how that experience is brought to them. HaaS provides comfort to their home while taking on the following risks traditionally borne by the customer:
- Reduced Financial risk – Installation of new heating appliances can be a significant barrier to entry for consumers wanting to update their heating system, especially with decarbonisation schemes. The HaaS provider can waive the upfront installation payment by including it in the customer’s subscription payment over time.
- Reduced Fuel Poverty – Low-income families often use pay as you go keys or cards to purchase their electricity/gas. This is the most expensive way of buying fuel, leading to fuel poverty. HaaS can help resolve this issue by offering cheaper energy that can be purchased in bulk, passing on these savings to their customers. This would be particularly suited to council housing and housing associations.
- Reduced Technical risk – HaaS can provide routine maintenance and repairs on a customer’s heating system, ensuring systems are running efficiently. HaaS can also help maintain the infrastructure of the property e.g. damp reduction works.
- Simple Energy Pricing – Fluctuations in energy fuel prices can result in confusing billing for consumers. Rather than using kWh, HaaS suppliers can keep things simple by billing for more easily understood ‘warm hours’. This also simplifies bulk buying of energy by housing associations – they could purchase energy for their entire estate, getting a better deal than if each house negotiated their own price.
Therefore, HaaS gives the consumer peace of mind that they will remain in comfort while any maintenance, repairs or changes are managed and paid for by the supplier.
How Does HaaS Benefit the Energy Supplier?
HaaS has some positives for the energy supplier providing the service:
- Commercial Incentive – The energy supplier has the incentive to provide the consumer’s desired level of comfort with as little energy as possible, reducing operating expenses and increasing flexibility.
- Consumer Loyalty – If comfort is provided at a predictable price and nominal risk, consumers will trust and remain loyal to their service provider.
- Market Differentiation – HaaS stands out from existing heating services. Customers will be interested in the simplicity of the model and pricing.
- Big Data – Suppliers and manufacturers can gather valuable data on consumer preferences, allowing them to improve their services. This progress is especially important for reducing carbon emissions.
- Reduced Environmental Impact – HaaS providers will make the target property more efficient (e.g. insulation improvement) to use less energy while maintaining the same level of comfort for the consumer. More efficient properties reduce the environmental impact of the heating industry.
- Low Carbon Technology – the waiving of upfront installation costs will enable HaaS providers to install low carbon heating systems in more homes, helping them follow decarbonisation schemes.
A 100-home trial by Bristol Energy has verified that HaaS provides increased consumer comfort, control and convenience, while also offering energy suppliers a means of repaying the capital costs of investing in decarbonised systems.
These trials have paved the way for other UK energy suppliers and housing associations to get into HaaS. To find out more, visit here.