Nesta, the research and innovation foundation, has decided not to pursue group purchasing for heat pumps. In a write-up of its rapid testing work published on 1 May 2022, the organisation said it had explored whether collective buying could cut the upfront cost of a heat pump and build householder confidence, and concluded it would not take the idea forward itself1.
The work began from two assumptions: that equipment and labour costs could fall through economies of scale, and that installers would accept a discount in exchange for lower marketing costs and a cluster of orders in one area1. Nesta mapped a customer journey in which a local authority identifies heat pump ready properties, invites residents to sign up, and runs an auction in which preselected installers bid for individual homes1. It then spoke to installers, wholesalers, an existing group buying platform and a small focus group of potential customers1.
On supply, Nesta reported that installers, wholesalers and existing group buy providers were generally positive and identified no deal-breaking barriers, though most installers already had busy order books, raising a question over whether a sudden spike in demand could be met1. Those spoken to were confident economies of scale were possible, suggesting discounts of around 5% from bulk buying heat pumps and related kit such as radiators and piping1. Nesta said labour costs were more interesting: because installation complexity varies from house to house, installers often quote a flat rate high enough to cover the most complex jobs, so grouping similar properties in one area could give more certainty of actual costs. Those costs would not necessarily be lower, but the need to over-quote could fall1.
On demand, the focus group started from a fairly low baseline of interest. Participants were positive about group buying but their expectations of savings were unrealistic, suggesting discounts ranging from 25% to 75%1. They spontaneously raised peer support as a benefit, for help with choice overload, confidence in a quality installation and coordination, but this did not outweigh the main barrier of high upfront cost1.
"we concluded that group buying as a model has real potential, but that it’s not something Nesta should pursue ourselves"
Nesta gave two reasons: it was not persuaded it was its role to compete with existing companies that offer group buying, and it did not think the heat pump market in 2022 was ready1. It pointed to the domestic solar market, where the Solar Together scheme has installed 79,500 solar panels in the UK since 2018, and to collective switching, where Ofgem found that 24% of the switches made through its collective switch trial were by customers over 75 years old1.
Why it matters for households
Group buying is one route by which households have cut the cost of home energy work, most visibly in solar, and Nesta's findings set out what a heat pump version could and could not deliver. The equipment saving identified by those it spoke to was around 5%, far below the 25% to 75% the focus group expected, so a scheme of this kind would not on its own close the gap between a heat pump and a boiler on upfront price1. The more concrete gain described was on labour: grouping similar homes could reduce the padding installers build into quotes to cover the most complex jobs, without necessarily lowering the underlying cost1. Nesta also judged that an off-the-shelf package, such as a single heat pump from one manufacturer, would suit less engaged customers rather than those who research a specific model1. For a household weighing up heat pumps, the practical picture is that collective buying remains a live model with modest identified savings, and that group buying schemes are already established in the solar market. Nesta's conclusion was that the wider market needs costs to be coming down and enough competent installers to meet demand before such a platform is likely to succeed1.
What happens next
Nesta has not said it will launch a scheme at a later date, and no timetable for revisiting the idea is given1. It said group buying has real potential to drive the UK heat pump market and that a peer support element would add value, but that the market conditions it set out would need to be in place first1.
Sources1 cited
- Group purchasing for heat pumps | Nesta, nesta.org.uk