Unpacking Heat Pump Finance: The BUS Consultation & Third-Party Solutions

BetaTalk - The Renewable Energy and Low Carbon Heating Podcast

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Join Nathan's guests David & Rob from Fornax and dive into the nitty-gritty of the Boiler Upgrade Scheme (BUS) consultation and explore how third-party finance could be the key to unlocking widespread domestic heat pump adoption. We'll break down the "finance gap challenge," look at what makes third-party ownership work, and dissect the pros and cons of different financing models.

In this episode, we discuss:

• The Finance Gap Challenge: Why current BUS grants alone aren't enough for mass market adoption and how existing loan products fall short for consumers and installers.
• The Power of Third-Party Ownership: How it dramatically increases heat pump installations by offering:
  • Superior consumer protection: If the system fails, customers stop paying, and the financer is responsible for resolution.
  • Risk alignment: Financiers are incentivized to ensure proper installation and ongoing performance.
  • Better affordability and accessibility: Eliminates large upfront capital requirements.
  • Support for installer businesses: Creates sustainable, predictable maintenance income.
• What Works: Consumer Hire vs. What Doesn't:
  • Consumer Hire agreements: The only commercially viable third-party ownership model under UK regulation.
    • Subject to robust FCA Consumer Duty protections—not "lightly regulated."
    • Consumers have clear and simple mechanisms to keep their system; providers don't want them back!
  • Why Hire Purchase models are problematic: Despite being highlighted in the consultation, they remain commercially unworkable due to existing financial regulations.
• Consumer Protection Reality Check:
  • Consumer preference surveys don't equal deliverable products—regulatory constraints matter.
  • Consumer protection isn't free: Every additional measure either limits access to affordable heat pumps or makes them more expensive/unworkable. Duplicative measures unfairly penalize consumers.
  • Repossession rights are fundamental to risk pricing; removing them increases costs for all consumers (e.g., mortgages).
  • Maximum term limits would reduce affordability and increase financial exclusion.
  • Many proposed duplicative requirements (e.g., Ofgem doing things the FCA already does) deter small businesses and hinder independent installers.
• Innovation vs. Prescription Risk:
  • Over-prescription risks stifling innovation just as the market gains momentum.
  • Standard contract requirements could recreate past failures like the Green Deal/Green Homes Grant.

THIS SEASON IS BEING SPONSORED BY INTERGAS

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