Heat as a service as a viable decarbonisation strategy and energy cost affordability in the UK

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Agyeman, Stephen and Calvillo Munoz, Christian (2026) Heat as a service as a viable decarbonisation strategy and energy cost affordability in the UK. Preprint / Working Paper. Centre for Energy Policy (CEP) University of Strathclyde, Glasgow.

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Abstract

Achieving affordable low‑carbon residential heating remains a major challenge in the UK due to the high upfront costs of electrified technologies and high electricity prices. Service‑based models, such as Heat as a Service (HaaS), offer an alternative by shifting ownership and financial responsibility, enabling households to access low‑carbon heating without large upfront capital investment. This paper uses cost-benefit analysis to assess the economic viability of HaaS adoption across UK household archetypes under different combinations of heating technologies, energy-efficiency improvements, and policy support mechanisms, and its potential implications for fuel poverty risks. The analysis shows that, in the absence of competitive gas and electricity prices in the UK, the most effective pathway for achieving the economic viability of heat‑pump (HP)‑based HaaS for households is the combination of heat pumps with flexible electricity tariffs and government capital subsidies. However, the benefits of flexible tariffs are unevenly distributed, accruing disproportionately to higher‑income households with greater heating demand relative to low‑income households, which risks potential household fuel poverty. Although standalone solar PV systems (especially without battery storage) and energy-efficiency insulation measures coupled with HP reduce operational costs compared with gas boiler systems, the high upfront capital expenditure associated with these technologies offsets these savings, with the effect stronger among the low-average-income households. These results imply that misaligned low‑carbon heating policies risk exacerbating existing inequalities, as households most vulnerable to fuel poverty risk are least able to absorb additional costs. Therefore, UK’s heating decarbonisation policies should evolve to deliver targeted and sustainable capital subsidies, expand access to flexible electricity tariffs, and provide tailored support for constrained households, to enable households to benefit from HaaS.

ORCID iDs

Agyeman, Stephen ORCID logoORCID: https://orcid.org/0000-0003-0607-5719 and Calvillo Munoz, Christian ORCID logoORCID: https://orcid.org/0000-0002-5495-6601;
CORE (COnnecting REpositories)