At Nesta, we believe that a coordinated approach to decarbonisation should supplement the current individual-led pathway to acquiring a heat pump. Allowing multiple households to switch might streamline the adoption process, lead to economies of scale and ultimately accelerate decarbonisation. We call this alternative approach clean heat neighbourhoods.

While some schemes already exist, there is a lack of evidence on whether such an offer would appeal to consumers, or under what terms, and whether it would accelerate decarbonisation.

We collaborated with BIT (the Behavioural Insights Team) on an experiment to explore how consumers would respond to a coordinated offer. The following offers a round-up of our findings, which you can now read in our full report.  Here’s what we found.

To install a low-carbon heating system today, a household has to go through multiple steps. Clean heat neighbourhoods have the potential to simplify this process by coordinating installations for a whole area rather than a single household.

We presented participants with an explanation of this process. They were then asked to choose between a boiler and a low-carbon heating system. In the control group, the low-carbon heating system option was based on the current individual adoption journey. In all treatment groups, participants were presented with a generalised version of a clean heat neighbourhood scheme. 

All participants in the treatment groups were presented with the conditions of a ‘baseline’ clean heat neighbourhood: vetted suppliers, customer support and guaranteed standards. One subset of participants were asked to choose between this baseline and a boiler. Other groups were shown an enhanced version of the scheme, adding financial incentives such as a discount, cash-back, and paying in instalments.

Currently, many households’ decision to adopt low-carbon heating is impacted by its cost, which tends to be higher on average than that of a boiler. To isolate the effect that a coordinated scheme might have on households, we introduced two steps in the experiment. First, participants were asked to choose between a boiler and a low-carbon heating system, but assuming the two cost the same (‘cost parity iteration’). Then, they were faced with the same choice, but assuming a unique cost of £3,000 for a boiler and £5,000 for a low-carbon heating system (‘cost discrepancy iteration’). Section 2 of our report includes a more detailed explanation of our experiment design and methodology.

Offering a coordinated pathway to clean heat without any financial incentives does not increase the uptake of low-carbon systems. Reducing upfront costs will be a key factor in making an approach like clean heat neighbourhoods successful.

It’s worth noting that because participants in the test had to be homeowners, they tended to be richer than the average person, with 56% earning over £40,000 (see Appendix A of our report for a full breakdown of sample characteristics). Regardless, we found that simplifying the adoption journey does not increase the appeal of low-carbon heating systems compared to boilers, in either the cost parity or cost discrepancy scenarios. 

Instead, a larger number of participants opted for low-carbon heating systems in scenarios that included additional financial perks. However, the only financial incentive to result in a statistically significant increase in uptake was one where households could choose to reduce the upfront costs of adoption by spreading payments through a monthly plan. 

One factor that may explain this result is the perceived loss of agency that might result from a coordinated scheme. Participants often mentioned their familiarity with boilers, scepticism that their neighbours would join a similar scheme, and disruption as factors that led them to choose a boiler over a low-carbon heating system. Compensating this reticence with strong financial incentives should be at the heart of a coordinated approach to low-carbon heating to accelerate the transition.

Clean heat neighbourhoods present the opportunity to reach beyond early adopters. However, in addition to offering strong financial support, policymakers will need to consider how to engage a new audience of households less familiar with the technology in their communication about coordinated schemes.

A lack of knowledge impacted participants’ willingness to opt for low-carbon heating systems. Overall, few of those who chose low-carbon heating systems did so because they had prior experience with it either personally or through someone they knew, suggesting that having experience of a low-carbon heating system was not a strong prerequisite for them. This suggests adoption patterns consistent with those of early adopters, who are likely to be less risk averse. 

By contrast, when asked about their choice, people who chose boilers mentioned their familiarity with traditional heating systems and lack of certainty about the performance of low-carbon heating. Across all conditions, one in three indicated they needed more information about low-carbon heating, with 26% saying they weren’t convinced of the technology’s environmental benefits.

This is a clear call to action for policymakers that engagement will be crucial for a clean heat neighbourhood scheme to succeed in bringing low-carbon systems to a new audience. Among participants who chose a boiler and said they would need more information, 68% mentioned wanting reassurance that a low-carbon system would work as well as a boiler, and 56% wanted the opportunity to look at other homes nearby.

A campaign giving households information about the technology should obviously be a part of a coordinated rollout. But there is also scope for giving participants the opportunity to visit other homes fitted with low-carbon heating systems or showhomes to give them a way to interact with the technology. A service such as Visit a heat pump could help sway reticent households in favour of clean heat neighbourhoods.

Today, people who install low-carbon heating tend to be wealthier. Coordinated switching schemes could enable more people to make the switch, including those on lower incomes.  Because of this, we looked at how answers varied by income. 

We found that cashback offers could drive uptake among low-income households. In the cost-parity scenario, 27% of below-median income participants chose an individual heat pump installation over a boiler, while a significantly higher 36% chose to take up the coordinated switching offer when bundled with cashback. 

Clean heat neighbourhood schemes will be more successful if more people opt in, increasing benefits of scale. Individual households might therefore make a decision to participate based on their belief of what their neighbours might do. 

Looking at the sample as a whole, participants thought their neighbours would be less likely than they were themselves to switch to low-carbon heating. While 36.2% reported being likely to switch, only 26.9% thought that their neighbours would too if faced with the same choice. A perception gap – where people assume lower adoption among others – could make people less inclined to switch.

Mirroring the overall findings, participants in the financially-supported clean heat neighbourhood conditions were significantly more likely to believe that their neighbours would switch than participants exposed to a scheme without this support. But the magnitude of the difference is even larger.  It is possible that participants believe their neighbours are more likely to be swayed by a well-supported scheme than they are – the perception gap is smaller when support is present. As a result, a well-supported scheme might attract more opt-ins, not because households need or want the support but because they think this will make it more likely that their neighbours join. 

Adopting a coordinated approach has potential to accelerate decarbonisation, but clean heat neighbourhoods will face the same hurdles that currently slow down heat pump adoption: cost and a lack of engagement beyond early adopters of heat pumps. An approach that would reduce upfront costs for customers, use or emulate tools such as Visit a heat pump, and leverage social proofing by building on examples of positive experiences with low-carbon heating would strengthen consumer confidence and support towards making clean heat neighbourhoods a reality.