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Local heat networks' value under the spotlight

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The value of domestic heat networks to consumers is to be assessed by the Competition and Markets Authority (CMA) over concerns that it ”may not be working as well as it could be”.

Around half a million homes in the UK are served by about 17,000 heat networks, with some of the largest at the Queen Elizabeth Olympic Park in east London, Sheffield, Southwark energy-from-waste plant (pictured) and Nottingham. Together they provide 10TWh a year – around 2% of UK buildings’ heat demand.

This number is expected to grow significantly to around 20% of all households by 2030, and this forms a significant part of the Government’s strategy to reduce carbon and cut heating bills.

However, the sector is not subject to the same regulation as other forms of energy supply such as mains gas and electricity, and the CMA is concerned that customers may be unable to switch suppliers easily or are locked into long contracts.

It is examining a range of potential issues:

  • Whether customers are aware of the costs of heat networks both before and after moving into a property
  • Whether heat networks are natural monopolies and the impact of differing incentives for builders, operators and customers of heat networks
  • The prices, service quality and reliability of heat networks

Andrea Coscelli, CMA chief executive, said: “We have concerns that this sector may not be working as well as it could be for the half a million homes heated by these systems now and the millions that may be connected in the future.

”That is why we’re taking a closer look at this market to ensure that heat network customers get a good deal on their energy now and in the future.”

The study will be completed within the next 12 months with an interim report planned within six months.

Meanwhile, the Department for Business, Energy and Industrial Strategy has carried out the first survey of local heat network consumers.

The survey, with more than 5,000 responses between April and July 2017, suggests that, on average, consumers were likely to pay less than non-heat network consumers. They were as satisfied overall with their heating systems as non-heat network consumers.

Consumers on Heat Trust-registered schemes (the voluntary industry-led consumer protection scheme) received more comprehensive billing information, and service interruptions tended to be rectified more quickly.

Claire Perry, minister for climate change and industry said: “As we set out in our Clean Growth Strategy, encouraging the uptake of heat networks is an important way to reduce carbon and cut heating bills for customers.

“This survey of consumers provides an important evidence base as we seek to expand the use of heat networks from now to 2021.”

How much do heat networks consumers pay?
There is evidence of great variation in pricing in the heat network sector, with pockets of heat network consumers paying high annual prices, including some paying more than £1,000 or even £2,000 a year. The mean average price reported was similar on heat networks and domestic gas heating systems. The median price suggested that heat network consumers paid, on average, around £100 less for their heating and hot water compared with non-heat network consumers.

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