Octopus Energy’s generation arm is boosting Britain’s heat pump rollout by investing £70 million in Kensa Group, the country’s leading manufacturer and installer of ground source heat pumps.
Partnering in the investment are insurance giant Legal General and the pension fund of a south London borough, Wandsworth Council.
Today’s purchase is Britain’s biggest single investment yet made in ground sourced heat. As many as 7,000 green jobs stand to be created this decade, the parties estimate. Legal & General has held a 36% stake in the manufacturer since 2020.
Kensa believes today’s move can aid its ambition to install 50,000 ground source heat pumps a year by 2030.
Air source heat pumps have already benefitted from Octopus’ deep pockets. Last year the firm bought Craigavon-based manufacturer Renewable Energy Devices.
Across air and ground varieties, UK government policy is to have heat pump installations running at 600,000 a year as early 2028. But grants of £6,000 available to homeowners have failed to spark the market: installs were running at a mere 2 per 1,000 homes last year, according to one estimate from the European Heat Pump Association. Fewer than 1,000 registered installers have not helped.
In February Octopus announced it was co-operating with grid operator UKPN, allowing pump technicians to sign off new fuse installations protecting the DNO’s network.
Octopus Energy Generation makes this investment as its first deal from its £500m Energy Transition Fund (OETF), currently raising capital from investors. The initiative includes a cornerstone investment from Wandsworth’s pension fund, assisting OETF in its support for companies rolling out decarbonising technologies such as low carbon transport, green hydrogen and e-fuels.
The arrangement includes finance provided by Kensa to house builders, housing associations and non-domestic customers for their ‘Networked Heat Pumps’ solution. The manufacturer says this effectively creates a new renewable asset class, kick-starting a sector that could exceed £1 billion by 2030.
“The heat pump revolution is off to a flying start” commented Zoisa North-Bond, CEO of Octopus’ generation division.
“This deal is a huge milestone for our exciting new Energy Transition Fund, as we invest in ambitious companies rolling out tech to turbocharge the clean energy shift.”
Kensa Group CEO Dr Matthew Trewhella added: “This is a monumental moment for ground source heat pumps. This investment will help unlock Kensa’s vision of a mass transition to low carbon heating by replacing the gas grid with its 21st-century equivalent – an ambient temperature heat network.
“Our approach harnesses the power of investment capital funding infrastructure, reduces the strain on our electricity grid and enables a just transition – keeping heating costs low and addressing fuel poverty simultaneously”.
The investment is subject to regulatory approval and is expected to complete before October.