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Value Management - Overcoming barriers to smarter heat solutions in UK homes - Annex 3c: Factors affecting intervention take-up order


Citation Frontier Economics Value Management - Overcoming barriers to smarter heat solutions in UK homes - Annex 3c: Factors affecting intervention take-up order, ETI, 2015. https://doi.org/10.5286/UKERC.EDC.000504.
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Author(s) Frontier Economics
Project partner(s) Frontier Economics Limited
Publisher ETI
DOI https://doi.org/10.5286/UKERC.EDC.000504
Download SSH_SS1401_10.pdf document type
Associated Project(s) ETI-SS1401: Smart Systems and Heat (SSH) Programme - Value Management and Delivery
Associated Dataset(s) No associated datasets
Abstract This project studied how value can be delivered across a smart energy value chain - in the context of the UK. It built a clear understanding of how smart energy systems can deliver combined consumer value alongside commercial value for market participants - producers, suppliers, distributors. The analysis will help to make the commercial deployment of smart energy systems more likely. This £600,000 project was delivered by Frontier Economics, a leading economic consultancy.

The final report has 11 annexes. This is Annex 3c: Factors affecting intervention take-up order.

This annexe looks at the order in which interventions are taken up. Whether consumers take up interventions sequentially (and if so in what order) or simultaneously can have important implications for the design of business models and policies. For example, if the majority of factors lead to consumers wishing to carry out simultaneous upgrades, business models and policies which help overcome credit constraints may be more relevant. This is due to the significant up-front costs that consumers would incur when installing multiple interventions at once.

In this annexe, we explore the factors that may affect intervention take-up order for three types of consumer-level intervention: heat pumps, insulation retrofits and HEMS.

This analysis points to intervention take-up order being a particular problem for consumer groups with uninsulated solid walls and electric resistive or oil-fired heating. Although such groups may find it optimal to take up all three interventions within a short period, credit constraints may mean they need to delay the installation of a heat pump. Given the relative infrequency of trigger points, this could lead to a delay in heat pumpinstallation, with substantial missed financial savings for both consumers and society as a whole (due to higher carbon emissions). This is therefore a customer group that may benefit from tailored business models and policies.

This document was prepared at the time to contribute to ETI internal thinking and planning only.