Octopus Energy Makes Major Investment in Heat Pump Manufacturer Renewable Energy Devices (RED)
Global energy tech pioneer Octopus Energy has acquired a controlling interest in the Northern Ireland heat pump manufacturer Renewable Energy Devices (RED) based in Craigavon, ahead of full acquisition by the end of the year.
The multi-million-pound partnership will see RED’s existing factory being significantly expanded with an additional 100 engineering jobs created by 2024. The initial expansion will enable the factory to produce over 1,000 heat pumps a month by the end of 2022. Octopus Energy is expecting the number of heat pumps produced to continue to grow over the years making heat pumps cheaper and better for UK customers.
Octopus Energy and RED are hoping that by scaling production they can bring down the costs of heat pumps.
Greg Jackson, founder and CEO of Octopus Energy Group, said:
“This agreement will involve major investments into heat pump manufacturing, creating valuable green jobs across the UK and helping increase our energy security by getting more homes off gas, and drive down costs for customers. This is the “Model T” moment for the heat pump industry. Thousands of heat pumps rolling out of RED’s Craigavon factory a month is just the beginning. Like the original Ford, we’re planning to scale production every year, cutting costs even further and making heat pumps affordable for everyone.”
The partnership will allow the companies to build quiet, efficient, cheaper and stylish-looking heat pumps initially for UK customers. The partners are also looking for other locations that are suitable for building further heat pump manufacturing facilities.
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As well as increasing production, Octopus Energy is planning to incorporate its smart grid technology into the heat pumps which will allow them to take advantage of cheap energy when there is surging renewables on the grid but reduce the load at peak times.
Furthermore, by using the smart technology, homes that also have an electric vehicle charger or solar panels can enhance their efficiency. For example, solar panels can reduce the cost of running a heat pump by as much as 70%.
The partnership with RED is just the latest investment made by Octopus Energy in their commitment to building an industry around low carbon heating and heat pumps. It follows their recent investment of £10m into the UK’s first research and development centre based in Slough for the decarbonisation of heat.
Business and Energy Minister Lord Callanan, said:
“The Energy Security Strategy has laid out a future where we will be powered by homegrown renewable and nuclear energy and heat pumps. Using this cleaner, cheaper electricity will allow us to warm our homes. The government’s Boiler Upgrade Scheme will make grants of up to £5,000 available for fitting this green technology and together with private sector investment such as this by Octopus Energy, we’re making heat pumps an affordable, convenient and obvious choice for consumers, especially with global gas prices at record highs.”
RED both designs and manufactures heat pumps and is the only company in the UK to source over 80% of parts for its products within the country. They produce a range of innovative patented air-source heat pumps in-house, including their controls, software and heating distribution systems, making low carbon heating more accessible and regionally sourced.
Dr Jason Cassells, founder and managing director of RED, said:
“When I founded RED, I had a dream to make heat pumps affordable, to put as many heat pumps in as many homes as possible and to make green heating accessible to everyone. With Octopus’ financial backing, industry knowledge and tech expertise combined with our heat pump know-how, this dream will finally become reality. We’re at the cusp of a clean heating revolution, and Octopus is leading it.”
With soaring energy prices in the UK, the economics of operating a heat pump have already changed. Since the jump in the energy price cap in April it is now around £260 cheaper to run a heat pump than a gas boiler over a year and it is likely that this saving will increase in the years to come.
The UK government has set a target of 600,000 heat pumps to be installed every year by 2028. They were given a key role for the decarbonisation of heat in the UK in the government’s Heat and Buildings Strategy released in October 2021. The strategy included the announcement of the new Boiler Upgrade Scheme which was launched on 2nd April which offers households a £5,000 grant if they install a new air source heat pump or £6,000 for the installation of a new ground source heat pump.
To both accelerate this process and lower the costs of heat pumps, Chancellor Rishi Sunak also recently announced in his Spring statement that the government would scrap the 5% VAT on home energy efficiency technology including heat pumps for the next 5 years.
Heat pumps play an important part in the government’s roadmap for a greener and more secure energy future. The Government announced the launch of a heat pump investment accelerator competition for 2022, in its recently released energy security strategy. The scheme will be worth up to £30 million and aimed at making heat pumps in the UK, increasing the country’s energy independence by reducing the demand for gas.
Interest in the technology has unsurprisingly increased making the latest move by Octopus Energy even more relevant. It is hoped that private investment will drive the cost of heat pumps down making them affordable for all households eventually and eliminating the need for government support.