Mark Kelly: government has a huge role to play.

Domestic heating is right on target

Published:  22 October, 2010

Mark Kelly, chief executive officer of the Baxi Group, talks to Lisa Arcangeli about the future of the UK domestic heating market.

“Clarity is needed. As a manufacturer, we have a choice as to where we place our research and development expenditure and the products that we make available to the market,” says Mr Kelly.

“The low and zero carbon market will be driven by the Renewable Heat Incentive (RHI) and Feed-in Tariffs (FIT). These will have a great influence on the marketplace. And, we will

respond to them. That is why we need certainty in the market so that we can assist the Government in making the best possible return on our joint investment.” The more help the Government can give the industry with stability and direction, the better things will be, he believes.

“Feed-In Tariffs are right on target and, with confirmation of the RHI still to come, we hope that the Government will provide clarity on its continued support for these measures.

“The Green Deal appears to be insulation-based. However, we hope other energy-efficiency measures such as boiler upgrades and heating controls will also be included, as they can make a major contribution to home energy efficiency and reducing fuel bills.”

All this causes confusion in the market. “And, every time there is confusion, the industry hesitates and then no-one gets the returns we are all looking for.”

One sign of hesitation is that, to-date, only a small number of companies have signed up to the Micro-generation Certification Scheme (MCS). Their reluctance to sign up may be in part attributed to the cost of certification compared to the expected returns for the installer.

Mr Kelly believes that there is a huge role for the Government to play in supplying green energy direct into the home. “A lot of properties will be difficult to convert and it will be expensive to do this on a home-by-home basis,” he says.

“The issue of green energy is starting to be addressed, with carbon capture, nuclear fuel and ‘green electricity. However, the UK has a fantastic gas network. This could be harnessed to supply biomethane into people’s homes. We don’t believe the Government is putting enough effort into this area.

“Companies like Baxi Group”, says Mr Kelly, “are looking for new solutions to bring into the marketplace and at ways of helping the general public, the installers and the merchants to ensure they all get what they need.

“For the consumer, that is saving money or perhaps having boilers installed in a different way so that they will not have to pay upfront costs. But, one can only do this when you understand the environment in which you are operating,” he says.

“The boiler scrappage scheme lifted a bleak market. Of the 125 000 boilers that were being funded by Government, over 117 000 have been claimed and installed, along with associated products.

A large proportion of Baxi Group’s work is to communicate with merchants and provide them with the logistics to ensure they have the necessary products to hand.

“We also put a lot of information onto our website,” Mr Kelly explains, “because prior to purchase, many people start by looking at manufacturers’ websites. We want to make our means of communication as clear as possible.”

The company also works closely with the installer. “We make sure they have all the products available where they want them and all of the back-up and spares that they need.”

Training is a vital tool for Baxi. Over 7500 industry professionals passed through its numerous training centres last year.

Internal view of the Baxi Ecogen.

Where can the merchant create new revenue streams? “Everybody is grappling with low and zero carbon products and the ways in which they are changing. We are making quite a few add-on products that offer added benefits for installers and end-users, like the Multifit GasSaver flue heat recovery system. These give merchants the opportunity to up-sell.

“There will be changes in the future, but it is up to us and the merchants to work together to ensure we are delivering consistently high levels of value to our installers and their customers,” Mr Kelly states.

He says he has never experienced any reluctance from the merchants to become engaged with planning for the future.

“It is important that we work with them to create product pull-through. It is not just about stocking products. The merchants we work with do a great deal to ensure that their customers are aware of new products.

“It is also about providing security of supply, giving them the confidence that back-up is available and having the product available at the point of demand.”

Baxi Group’s sales team sells Heatrae Sadia, Santon, Valor, Baxi, Potterton and Main. Then there is the heateam, which services all the products that are installed and which also look after the entire brand portfolio.

“In terms of future developments, the big one for us is the launch of Baxi Ecogen – the micro-CHP boiler, generating electricity at the same time as it is generating heat,” says Mr Kelly.

“It has been hailed as the Holy Grail of the heating industry and it is here at last,” he says. “Because this technology is so new, we have chosen to work with British Gas, some key housebuilders and public sector programmes so that they can understand the product and how to install it.”

In October, Baxi is launching Bioflo, a small biomass product that generates between 12-14kW of heat. It has been designed to be used inside, and can be a focal point in the home. Bioflo made its debut at this year’s at Ecobuild show.

Baxi has also launched a replacement for the back boiler. “This product is normally ripped out and replaced by a combi, but that doesn’t suit a lot of people,” says Mr Kelly. “It is convenient for them to have their boiler in the chimney breast, and now we can provide a replacement high efficiency model.”

Merchants, Mr Kelly believes, “have to concentrate on the big brands, the companies with the sales forces and the service back-up.

“Going forward, merchants are going to need a lot of guidance,” he states. “There are the certification requirements, like having MCS accreditation. Then, there will be all of the complications of the forthcoming Energy-Using Products Directive. It will require the bigger brands to sort out solutions and to control those solutions.

“Merchants, therefore, have to be brave and stick with the brands that are delivering solutions and a total package into the marketplace, rather than being tempted to go for the cheapest import.

“Everybody has got to work out how to optimise the supply chain – not only the nationals, but the independents, too. We recognise the hugely important role that the independents and second-line merchants offer.

“We also recognise that they have a right to make a decent living out of offering a bespoke and a local service and we will to assist them with our brand strategy now and in the future.”

The Baxi Bermuda with Valor Dimensions Lyrica fire.

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