Heat Trust, the consumer champion for heat networks, has urged the Government to take action to lower the cost of heat. It has recently met the new heat networks minister, Miatta Fahnbulleh MP, to set out the two reforms needed to bring down heat prices.
With a district heating network, instead of having a boiler in each property, heating and hot water comes from a communal network. Energy is released as heat from a range of energy sources and delivered to customers through a system of highly insulated pipes.
Usage in each connected property is metered – meaning, in theory at least, you pay for the heating and hot water you use. However, the network chooses the energy supplier, with end users not protected by regulation in the same way other domestic energy customers are.
Calls for reform and regulation
Heat Trust wants to see the district heat networks system reformed so that the price of energy used by residential heat networks is regulated. It is also calling for billions of pounds of “essential remediation works” to be done. It said the work is needed to address the poor efficiency of existing heat networks.
Heat networks are classed as “non-domestic” despite many end users being residential homes. Non-domestic energy prices are currently around three times higher than before the energy crisis, whereas domestic capped energy prices are less than double pre-crisis levels.
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Heat Trust said regulating the price of the energy that heat networks use to generate their heat, with an equivalent to the domestic price cap, would ensure fair and stable prices for heat network consumers by shifting the hedging risk to the commercial energy suppliers, where it can be much more effectively managed.
The consumer champion said regulation would also end the inequity of heat networks. Currently, lower-income households face a poverty premium in energy costs due to being seen by commercial energy suppliers as high debt risk.
Heat Trust said regulations should also require the commercial energy suppliers to guarantee the same security of supply to a heat network with domestic customers that they would to an individual domestic customer.
This might include, for example, a ban on disconnection of a building for debt where it contains vulnerable residents.
Heat Trust said lowering heat prices will require major remediation works to improve the efficiency of existing heat networks – many of which are currently only 30-40% efficient.
Increasing costs
The consumer champion warned that, without Government action, the cost of these works will fall on leaseholders, many of whom will already be facing the burden of cladding replacement costs.
Local authorities and housing associations have many of the oldest heat networks and therefore are likely to face the highest remediation or retrofit costs and will need Government support to pay for these works.
Stephen Knight, chief executive of Heat Trust, said: “Heat networks will have an increasing role to play in how we heat our homes in cities and towns in the coming decades, as we move away from a reliance on gas boilers.
“However, we currently see too many examples of poorly designed, inefficient heat networks that generate heat using expensive commercial energy contracts. This often results in high heating bills for their residents as the end consumers. The regulations around how they are built and powered need urgent reform to ensure that they are efficient and can deliver low-cost heat to homes. This goes beyond the scope of current plans to regulate heat network operators.
“The current regulatory structure of the energy market means that we see some heat network operators having to pay even more for their energy than the domestic price cap. This requires regulatory change to get a better, more consistent deal for heat network consumers.”
