Last Friday, with little ceremony, the government laid an amendment to the Heat Network (Metering and Billing) Regulations. The industry has been waiting for these changes for five years but when they finally arrived, it became clear that they undermine the government’s commitment to low carbon heat and the principle that customers should be billed based on the energy they consume.
The regulations include a requirement for operators of existing networks to install customer meters if they’re viable. Unfortunately the test as originally published back in 2014 almost always said meters weren’t viable, no matter what data was fed into it. As a result, the test was suspended and this part of the regulations hasn’t been enforced – until now.
Currently only about a quarter of customers on heat networks are billed based on consumption. The government originally estimated that as a result of this amendment 285,000 additional customers (65% of homes on existing networks) would have a meter installed into their home. However in the accompanying Impact Assessment also published last week, this number had been revised down to just 84,000 – or just 14% of the existing networks.
It’s hard to understand how such a drastic change could have happened between the consultation, and the laying of the amendment.
By watering down these regulations, the government has guaranteed that the huge savings from behaviour change and efficiency improvements will not be realised. Most people on heat networks with unmetered connections will continue to pay a flat fee regardless of how much heat they use, robbing them of control over spending and giving them no incentive to save energy and carbon. Network operators will have no visibility of heat network performance at the dwelling level and (because you can’t improve what you don’t measure) large inefficiencies will remain hidden.
Installing meters is an important step toward greater transparency and better customer outcomes. Installing meters on heat networks has been shown to reduce customer energy consumption by 5-20%, and the data that can be captured from heat meters gives network operators a chance to fix problems that increase costs and carbon over time.
Guru’s real-world monitoring of heat networks over a three year period, delivered in collaboration with the UK Government, showed that the cost of heat and carbon emissions can more than double on a heat network within three years if action is not taken – even when the network has been properly commissioned.
This amendment, and the drop in the expected pass rate for the cost effectiveness assessment tool from 65% to 14%, is worrying because it seems as if policy makers are simply following a path of least resistance.
The Heat Networks Industry Council (of which Guru is a member) has committed that all heat networks will be zero carbon by 2035 – but this change of direction knocks us backwards.
Not only that, but while heat networks are currently unregulated, a regulator (most likely Ofgem) is expected to be in place by 2023, and it’s essential that customers in these homes aren’t left behind when new customer protection regulations are rolled out.
To have waited five years only to see the regulations watered-down beyond recognition is more than disappointing. This is a terrible outcome for customers and the planet.
Frequently asked questions
Why install heat meters across a heat network?
Heat meters monitor the consumption of heat in a home – just as gas or electricity meters count how much gas or electricity is used in most homes across the UK.
Like gas or electricity meters, heat meters make it possible for customers to pay only for the energy they use. Meters also make it possible for energy managers to see a birds eye view of heat use across an entire building. They can then use this information to spot problems and inefficiencies, thereby reducing overall costs and carbon emissions.
What percentage of UK heat network customers are billed based on consumption?
Currently, unlike in the regulated market (where customers give periodic gas and electricity readings to their energy supplier) customers living in buildings heated by heat networks aren’t always required to have heat meters installed. In fact, currently only about a quarter of customers on heat networks are billed based on consumption.
Scotland – 38%
England – 28%
Wales – 5%
Northern Ireland – 13%
What do the Heat Network (Metering and Billing) Regulations 2014 require heat suppliers to do?
In 2014 the Government published the Heat Network (Metering and Billing) Regulations that placed certain responsibilities on anyone supplying and charging for heating, cooling or hot water (the ‘heat supplier’), including:
- To notify the government of the existence of their network(s)
- To fit heat meters (where it is cost-effective and technically feasible) to accurately measure, memorise and display consumption of final customers and some buildings
- In buildings with more than one final customer, to fit Heat Cost Allocators (HCAs), hot water meters and Thermostatic Radiator Valves (TRVs) to measure the consumption of final customers where installing heat meters is not feasible
- To ensure heat meters or HCAs are continuously operating, maintained and periodically checked for errors
- To bill customers transparently and based on actual consumption where economically justified to do so
What was the pass rate of the cost effectiveness assessment tool when it was first published in 2015?
When these regulations first came into force, the methodology used to assess whether it was cost-effective and technically feasible to fit heat meters (as per the second bullet point above) was published alongside. Heat network operators could enter the details of a scheme into a cost effectiveness assessment tool and would receive either a yes or a no to whether they were required to install meters into homes.
The first version of this tool almost always concluded that no, it was not cost-effective and technically feasible, and as such the tool was suspended. But the expectation was always that a new version of the tool would be published.
What did the 2019 government consultation on the cost effectiveness assessment tool indicate would happen to the pass rate?
In October 2019, four years after suspending the viability tool, the government finally published a public consultation on a revised methodology for assessing the cost effectiveness of metering for district and communal heat networks. In the information provided at the time, the government estimated that the revised tool would capture 65% of homes on heat networks – meaning that around 285,000 customers on heat networks would get the opportunity to be billed based on the amount of heat they used for the very first time. The consultation closed in January 2020.