Energy as a Service (EaaS) and Heat as a Service (HaaS) offer an alternative to the current ownership-based model that can benefit both the environment and consumers by helping overcome the main barriers to low carbon energy and heating solutions. This blog post explores how the ‘as a service’ business model can be applied to energy and heating to reduce the carbon footprint of UK homes. It analyses the barriers that currently prevent UK households from adopting low carbon technologies, and explores the disrupting potential of energy and heat as a service.

Adoption of low carbon technologies by UK households has been slow

Emissions from homes account for approximately a fifth of the UK’s total greenhouse gas emissions (Rowe and Rankl, 2024). Therefore, the rapid adoption of low carbon heating and renewable energy technologies, such as heat pumps, solar panels, batteries, and smart home energy management systems (SHEMs) by households is essential if the UK is to meet its target of net zero emissions by 2050. So far, the adoption of such technologies has been painfully slow. Taking heat pumps as an example, in 2021 the Johnson Government set a target of installing one million heat pumps per year by 2030. Achieving this would require 3.5% of households to install one each year, but the amount that has done so over the last three years has been less than a tenth of that (Nesta, 2023). 

Challenges of the current ownership model of heat and energy 

In the current status quo where the onus is on households, there are several barriers that inhibit adoption of low carbon technologies, including: 

• High upfront costs
• Time and effort to instal
• Low consumer knowledge and awareness of appropriate technologies
• Fear of novel technologies, specifically regarding their performance and reliability 
• Concerns that they will be hard to use and to operate (cost-)effectively

Without disregarding structural and financial factors, behavioural science offers an interesting perspective on these barriers. For example, consumers may have the cash available to install a heat pump (approximately £10,000), but their present bias may lead them to discount the value of future savings - to the environment, and their wallets - from a low carbon home and therefore use the money for something with a more immediate payoff. Likewise, consumers’ status quo bias, inertia and risk aversion will naturally lead them to favour energy and heating solutions they are already familiar with over unknown alternatives. Moreover, consumers have limited cognitive capacity, meaning that most do not have expertise in low carbon technologies that enables them to choose and use them efficiently. 

Introducing the ‘as a service’ business model

The ‘as a service’ business model has become increasingly popular across a range of products and industries. Software has been using this model for several years (software as a service), and other industries are transforming to reduce the expectation of ownership. Consumers are beginning to rent their clothes (clothing as a service) and choose public and shared transport over private vehicle ownership (mobility as a service). A clear example of this model in practice is music streaming; rather than purchasing and owning records or CDs, consumers ‘subscribe’ to a platform such as Spotify which allows them to stream music for a monthly fee. As a result, they have access to much more music than they could feasibly own, and they can try new music without facing additional costs.  

Energy and Heat as a service can help overcome these behavioural and market failures 

Rather than purchasing low carbon technologies themselves, with EaaS and HaaS consumers would instead subscribe to a provider who instals and maintains appropriate energy and heating solutions for them, for a fixed monthly fee. Under the current ‘as a commodity’ model, purchasing, for example, a new heat pump can cost thousands of pounds, despite significant grants offered by the government. The ‘as a service’ model has the potential to remove this barrier by making suppliers, who have far more knowledge and expertise in this arena than consumers do, responsible for the uptake and management of low carbon technologies. 

The specifics of an ‘as a service’ subscription, such as minimum length of contract, are yet to be worked out and will depend on the plan itself. Nevertheless, with this model consumers are not tied to these new technologies as tightly as they would be if they owned them and does not require them to be experts in energy and heating. 

The design and marketing of ‘as a service’ packages will be crucial

Despite the increasing discussion amongst industry experts around the potential for ‘as a service’ to revolutionise the way we power and heat our homes, providers are still designing packages to bring to market. Behavioural insights will be valuable to ensure that such packages are crafted around realistic models of human behaviour and are designed to overcome behavioural barriers such as status quo bias and inertia that may prevent consumers from switching. 

Providers should also use behavioural segmentation to identify those consumers who will be most likely to switch and the optimal ‘windows of opportunity’ to target them. Mnemonics like EAST (Easy, Attractive, Social, Timely) and MINDSPACE (Messenger, Incentives, Norms, Defaults, Salience, Priming, Affect, Commitments, Ego) as well as resources such as our behavioural toolkit will prove useful to providers designing and selling energy and heating as a service.

In sum, energy and heat as a service exist largely as a concept right now, but they have the potential to revolutionise the way that consumers, both residential and commercial, access energy and heat, and usher in the adoption of low carbon technologies in the process. Behavioural science can and should play a supporting role in this transition. 

The Behaviouralist is a Task Leader for Users TCP’s Energy Sector Behavioural Insights Platform. Our work has included producing an online interactive toolkit to that helps policymakers to include behavioural insights when designing policy, and a guidebook on applying behavioural insights to unlock residential demand flexibility. Other energy-related blogs we have written include applying a behavioural lens to heat pump adoption, and how to overcome everyday biases to save energy.