On paper, a heat network seems like an excellent idea. Surely heating hundreds of homes from one central system should be more efficient than running hundreds of individual boilers? In theory, heat networks should cut energy use and make decarbonising heat much easier.
Sadly, as many of the million or so households connected to one will know all too well, the reality can be very different. Regular outages, soaring bills and flats that are punishingly hot in summer and dangerously cold in winter have become a feature of Britain’s network of heat networks. And residents connected to them have been brutally exposed to the price volatility that has characterised energy markets since the war in Ukraine began – unprotected as they are by the energy price cap which covers most households.
Recognising these problems, the Government recently got moving on a new system of regulation and oversight. As of January this year, Ofgem took over responsibility for regulating heat networks as well as other gas and electricity consumers.
But this regime has hit early problems and bigger issues are looming as further price rises creep up thanks to the conflict in Iran. While this may be framed as a niche problem, it is one that Andy Burnham’s new administration should take a keen interest in before it becomes a bigger scandal.
Another winter without basic protections
The first issue is that the guaranteed standards of performance promised by Ofgem are not yet in place. These performance standards grant consumers the right to compensation if heating or hot water is off for too long, and require alternative provision for vulnerable customers.
This has been a major problem on heat networks. I have spoken to people in their 80s who have spent weeks without heating in the middle of winter, and young professionals who have had to drop off at the local gym every morning for months before work to get a warm shower.
But nothing has happened. Heat Trust – a consumer group – is extending its voluntary standards regime to fill the gap, but this only covers part of the market. As it stands, consumers face another winter without protection.
Consumers are paying for wasted heat
The next problem is technical performance. In many cases, only 35% of the energy contained in the gas burned in the communal boiler is delivered to homes for heating and hot water, and in the worst cases efficiency drops as low as 15%. By contrast, a household boiler is about 85% efficient. This is a terrible state of affairs – both because it wastes energy and because consumers still have to pay for it.
New technical assurance standards were supposed to require building owners to bring existing networks up to a minimum level of performance, while ensuring new systems are built properly. Much of the problem is remarkably basic: pipes aren’t insulated and heat is wasted.
This has contributed to some devastatingly hot temperatures in blocks of flats this summer: the heat that leaks out doesn’t just disappear, it goes into communal areas and people’s homes. I know of flats where indoor temperatures stay artificially high all summer thanks to the heat network. In the summer just past, that was a very, very dangerous state of affairs to live through.
But building owners are fussing about how the upgrades will be paid for, and the lobby for builders is worried that tighter new standards will result in delays and red-tape.
“[W]e’ve had a lot of people in industry talking to officials and ministers, trying to claim that the scheme as proposed is too burdensome, is too difficult to deliver, can’t be done, and so on. And at the moment, it’s on hold,” says Stephen Knight, chief executive of the Heat Trust.
“And my concern is that the voice of consumers and the interest of consumers is going to get lost in this a little bit, and people will forget that the reason that we’re doing this is that the current heat networks are often so inefficient that they’re completely unaffordable for consumers. We can’t carry on just expecting consumers to be a magic money tree to pay for all this energy that’s being wasted.”
Who pays to fix the system?
The question about how the upgrades will be paid for is a legitimate concern. The Government does not have enough money on the table currently to cover what could be substantial work. Without additional funding, the cost could ultimately fall on leaseholders and social housing tenants through their service charges and rents. Part of the £450 million boiler upgrade programme could be rerouted to heat networks, producing a bigger carbon saving for less money.
Finally, there is a looming disaster on costs. Unlike households with conventional gas heating, heat network customers are not protected by the domestic energy price cap. Their building owner typically buys energy on commercial markets and passes the cost on. In the aftermath of the War in Ukraine, some tenants faced eviction because they could not pay bills which rocketed by more than 350% as gas prices spiked. The conflict in the Middle East may not have caused spikes quite this severe, but it has sent prices up. Without protection, some of the poorest households in the country will face the biggest energy bill increases.
Some form of price capping is essential to avoid this. “We’ve argued the answer is to regulate the price of energy supplied to heat network, so all heat networks can get a reasonable, fair price for their energy,” says Mr Knight. “The prices have to be smooth – based on an average price over the preceding three month period or similar, to avoid these horrible spikes. There is no reason why heat network customers should be totally unprotected when other homeowners are. It’s unfair.”
The Government has a lot of things to think about currently, and heat networks are easily forgotten. But there are millions of people out there in homes that are expensive to heat and often far too cold or far too hot.
Postscript
A spokesperson for Ofgem said: “The introduction of heat networks regulation marks a significant milestone in strengthening consumer protections. Our focus is on getting the framework right so it delivers better outcomes across the whole sector. Where heat networks currently provide protections or compensation arrangements, including through voluntary schemes, we expect suppliers to continue to honour these.”
“The Guaranteed Standards of Performance (GSOPs) were always intended to be a phased element of the new heat network regulatory framework. We will consult on the next stage of these proposals later this year.”
Pete Apps is the author of Homesick: The End Of London, which covers the impact of housing policy changes on communities in the capital. It is out in paperback now and available here. He is speaking in Manchester with Isaac Rose from the Greater Manchester Tenants Union about housing crisis in both cities on October 13. Free tickets are available here.
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