Matthew Lipson, Catapult: The idea of selling heat as a service

Kaela: And our next speaker is Matthew Lipson from Catapult. He's going to be talking about the idea of selling heaters as a service, and I'm going to hand over to him to explain what that means. Thank you.

Matthew Lipson: So thanks very much. I'm really excited to be here. And I want to also thank you all for giving up your weekends to think about all of this stuff. I'll admit to being a little bit nervous, I think my kids probably watching at home my two little daughters so hopefully won't fluff my lines. So seven years ago, I was actually in your shoes, my colleagues at work they sat me down, and they told me about the sorts of technology you've been thinking about. Heat pumps, hydrogen boilers, insulation. They also showed me lots of other bits of technology district heating, batteries, solar panels. And they asked me, you know, about different roles local authorities, community groups, businesses, the government could take. And they kept asking the same question. What do people want? What's the best? What should we do now?

I just moved my whole family to the West Midlands for a new job to help decarbonise heat and a terrible truth was I actually didn't know the answer. And I was like you, working for a not for profit, a bit like Jonathan, Innovation Hub. So I was able to do something you couldn't, which is I lead the biggest study on how people use heat in their homes that had ever been done. It took several years. It cost millions of pounds, and it involved thousands of households around the country. Using the latest techniques, sensors to see how energy was being used around their homes. And I found that only 5% of homes had any of these technologies in their homes at the moment. You know, they've been around since the 1970s.

I also found that in the seventies, about a quarter of homes had central heating. But today practically everybody does, and they put up with the cost and the disruption because it was better than what they had. It was cleaner, safer, more convenient. And that made me think if we could just make low carbon as good as what we have, ideally better than what we already have, then it would be the natural choice to switch to it when we replaced our heating systems. Now, most of us are putting up with problems actually at home at the moment, if you think about it. It could be hard to control your heating to make the rooms feel comfortable. Nobody really knows what's best. Do you leave your heating on low the whole time and then boost it when you really cold or turn it off as often as you can? And as a result, we end up putting up with draughts, damp, overheating. Surely low carbon could maybe help us fix some of those sorts of problems, I feel.

Also, people are so different, aren't they? Some of us are out all day, you know, work or a college. Other people are popping in and out all day. Maybe they're enjoying their retirement or looking after young kids. We want our homes warm for different numbers of hours. Different times, to different temperatures. Sometimes we might even have a bit of a row about the thermostat, my home anyway.

So I went back to work and I was excited. I had some answers, I thought. But colleagues just asked the same question. Heat pumps or hydrogen? And I said, "well, people want what's best for them" and they said, "oh, right best for them, well, that depends", and they got all technical. What energy networks do they have in the area? How insulated are the homes in that area? How many homes and how densely packed? I said, "you can't expect people to know that kind of stuff". If I pick a TV service like Netflix or Virgin, I care what's on and how much it costs. I don't really care whether it comes down a cable or over the Internet. If you buy a mobile phone, you might choose the handset, texts, minutes, data, depending on how much you want to spend. I wondered, couldn't we make it a bit more like that? You look at energy, we buy kilowatt-hours. Does anyone know what a kilowatt-hour is? Or how many they'll need?

Beats me. It's certainly complicated.

But how many do you need for a year? Once you bought them are you going to be comfortable? That's what we kind of want to know. How much is that going to cost? And if we don't know that, how we're going to figure out whether we're going to be more comfortable with a heat pump or hydrogen boiler? Never mind how much insulation we might need. What we want is a warm home. Not a complicated technical choice that we don't really understand. So I thought, what about if we could buy heating as a service? Like these other services. We could buy maybe warm hours instead of kilowatt-hours? Where a warm hour might be an hour where your home is being warmed up. Maybe you could just pick the number you wanted and get that for a fixed price. That might be a bit simpler. And If you want another hour, maybe you could buy an extra hour. Well, how would you know how many hours you needed and what temperatures you liked? Some people have talked about using smarter thermostats. Perhaps we could control our heating from our phone. Just adjust the temperatures in our rooms until we found them comfortable. And then maybe our controls could tell us at the top there, it says 65 hours. That's the number of hours you're using per week and maybe could buy that service from your heating, like a heat plan or something like that. Right.

So how does that get us to a low carbon? Well, people care a lot more about their experience using heating than how it's delivered. So as long as we can sit comfortably on the sofa for a price that we think is fair, do we really care what box delivers the heat? So when you choose to replace your heating system, perhaps you wouldn't really care whether it was a heat pump, or hydrogen boiler, or something else as long as you can get the comfort you wanted. After all, if you enjoy a nice meal, you don't often ask what oven was this cooked in? It's a strange question. So I sat my wife down and I was quite excited by this point. I felt like I got somewhere. I explained everything that I just said to you, and she nodded and smiled patiently. But I could tell she really wasn't convinced. And then she tried it, and she absolutely loved having better control and being able to make each of our rooms comfortable temperatures. And so what I realised was, it's all very well asking people what they think, but it's so much better if you could give people it and let them try and see what they think of it. So we started to test it out around the country in a kind of living lab, if you like of homes around the country who could try it out, see what they thought.

And what we found was people really seem to like the idea. Different people with different preferences, pick different sorts of plan. So if you were out and you knew exactly when you're going to be home, you might prefer a plan which fixed the warm hours at those times. If you didn't really know when you're going to be home, you might prefer more flexible plans. So you could put the warm hours at the times you wanted. We've sold plans with Bristol Energy who are a not for profit, A bit like Jonathan's business, who's owned by Bristol Council. We've sold plans with Baxi, who are a British business who sell heat pumps, hydrogen boilers, and district heat lots of the options.

Most importantly, what we found was that once people have had some experience of these sorts of heat plans, they were hundreds of times more open to having a low carbon heat pump in their home a year later than the general public. They like the idea of kind of bundling that low carbon heating system into the plan so that they could be confident that we're going to get the comfort they wanted for a price they could predict and understand. So I know this all might seem a little bit out there but the first time you heard about Google or email or anything like that, that probably sound a little bit weird, too. The thing is, life changes quite a lot, and some of us need to try stuff out. For example, in a test environment to check, we like it before we sign up to it.

You think back also, the world's changing quite a lot. Think back 30 years, if you can. Very few of us had a mobile phone or a PC in our homes, but now most of us have probably several of those. So the world can change. I think that maybe over the next 30 years we could start to buy our heating as a service. The hours, the temperatures we pick. That might help businesses or cooperatives figure out what was the best system for us. It might be a heat pump in some instances. the hydrogen boiler in others, and the right level of insulation. So we can all gradually switch to low carbon heating when we decide to replace our heating systems.

Now there are some people who can't afford a basic level of heat today and quite rightly, tackling that fuel poverty is an important focus for us. But actually it's quite hard to find the people who need help and give them help. So with heat as a service, one of the good things is it helps show you which homes are expensive to heat so you can find people who can't afford it and make sure that they're the ones that get help. Great.

So how can we make all of this happen? First of all, we've got to make sure that they're really good low carbon heating options for us all to choose from like there are with cars. Today, government tweaks the cost of all of the different widgets, heat pumps, solar panels, insulation. And it leaves us up to decide as households what's best for us. That's actually pretty hard. Imagine having to pick the right battery and the right motor to design your own electric vehicle. It would be nuts. Instead, government told carmakers, you can sell any car you like, no carbon over the next 10-20 years. So gradually they've learned how to build great electric vehicles. We pick the car we want, they make sure it has the right battery and motor. So if government introduced some kind of zero-carbon target for homes, maybe businesses and cooperatives will start learning how to combine all the different widgets so we can have the heat we want and they could make sure it's low carbon. And with heat as a service, we just pick that level of heat. Maybe homes need some kind of carbon MOT, and gradually they can help us get that down to zero.

Second thing. We need to make sure that all of this works really well. So people need to be given the chance to try it out in the real world and check they like it. And we have to learn to make sure it works well. Third, we gotta make sure everybody can enjoy the benefits, not just the rich and the able. We have to include vulnerable people in all of this kind of innovation process. And we also have to make sure we use funding to make sure everybody can afford low carbon heating. Finally, gotta help people make good choices. So if you imagine yourself being a pioneer like Richard yesterday and getting a heat pump in your home, imagine how annoyed you'd be if a couple of years later there's a local scheme and your neighbour gets a hydrogen boiler for half the price. It would be great if local areas, like Polly suggested, could have a plan that you could look up and see what was planned in your areas, you could make the right choice for you. We've got just 30 years to get to net-zero. I think with innovation and creativity, we can find a way, with things like heat as a service to give people the heat they want without the carbon. Thank you very much.