The new boiler that generates electricity for the National Grid
A new generation of combined heat and power boilers that produce their own electricity – earning households up to £500 a year – are to be launched at the end of this month, backed by insurance giant Aviva. The promoters reckon they will be in 1m homes by 2018.
Flow Energy says households which currently have large heating needs – typically spending about £2,000 a year or more on gas and electricity – will have to pay a typical £1,200 to install one of the new boilers and after five years will share in the “feed-in tariffs” earned from generating electricity.
So what’s the catch? The structure of the deal is unusual, to say the least. You will have to sign a five-year agreement with Flow’s finance partner Zopa and pay it £77 a month. Flow Energy will then rebate you £77 a month in cashback. In effect the household gets a new money-making boiler for the cost of installation. (A typical boiler costs around £2,500.) But for the first five years Flow Energy keeps the feed-in tariffs (FITs) plus the electricity you generate. Only after that does it share the income 50-50 with the homeowner.
The firm says it has been working on a new combined heat and power (CHP) boiler for the past decade that is suitable for the mass market. CHP boilers generate electricity as a by-product of heating the home or hot water at relatively little cost. But while they have been around for several years they have yet to be taken up in serious numbers, partly because of their higher cost and concerns over reliability.
Flow Energy aims to install 20,000 of these A-rated boilers in 2015 and 1m by 2018, by which point it hopes that the economies of scale will mean the boilers won’t cost significantly more than standard models.
The electricity produced results in an income paid via the government’s FIT scheme – in this case 13.24p per kWh.
The deal, called Flow Freedom, launches on 26 January and is aimed at households with older heating systems – with a conventional boiler and a hot water cylinder in the loft, rather than households with “combi” units.
Customers also have to agree to switch energy provider to Flow, which undercuts most standard tariffs. After five years – at which point the householder has paid £4,620, but received the same amount as a cashback – the £500 worth of electricity generated and the FIT payment is subsequently shared 50/50 between the company and the householder.
One concern for buyers is likely to be the robustness of the new boilers.
Unlike other manufacturers who offer more generous warranties, Flow’s boilers – manufactured in Scotland by a US firm called Jabil – only have a two-year warranty. The electricity generating module is warranted for five years extended up to a period of 10 years if the customer continues to get their home energy from Flow.
Tony Stiff, who runs Flowgroup, the Aim-listed company behind the scheme, says the product is aimed at the 6 million higher consuming households – those with gas and electricity bills close to (and above) the £2,000 a year mark.
Past usage data will be examined as part of the survey that will be carried out to establish the home/householder’s suitability. The company says the new boiler will reduce a household’s carbon emissions by roughly 20%, or 1,000kg of CO2, a year. Later in the year consumers will be able to buy a Flow CHP boiler outright – for around £3,600, plus installation.
The biggest risk for buyers is if the boiler turns out not to be as reliable as the company suggests and the buyer starts incurring repair bills in year two onwards. Another fear will be if something happens to Flow Energy it may not be able to rebate customers the £77 a month. Stiff says the firm has been listed on the stock market since 2006 and has major shareholders such as Aviva, which holds a 20% stake. Flow’s home-energy business supplies more than 30,000 happy customers, who generate more than £40m in revenue for the company.
The hardware
CHP boilers were originally designed for industrial premises where heating was being provided for long periods. The early UK domestic models incorporated a free-piston Stirling engine and were capable of generating around 1kWh – enough to run a washing machine and several lights. The Flow boiler uses a scroll expander, which starts to spin once the heat goes, allowing it to act as a mini-generator.
Five years ago British Gas was talking up CHP boilers as the next big thing, but then went very quiet. Some early adopters who fitted the first Baxi models reported reliability issues. This week British Gas said it is currently trialling a new model.
It remains to be seen how reliable the Flow model is – the scheme’s success will rest on this. CHP boilers only generate while the heating/hot water’s on and therefore only make sense for those, say, in Scotland, who run their heating for long periods. If money is no object, Viessmann has launched its CHP boiler in the UK. The company says it will generate £1,000 in electricity and FITs each year, but it costs £22,000 to buy.
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