At long last, a voluntary code of practice for heat network operators came into being in November 2015. The ‘industry led’ initiative is managed by the newly formed Heat Trust and sets out deal with some of the fundamental market differences between people with their own central heating, who can change their energy supplier and heat consumers, who cannot. This is a great step forward and comes at a time when the UK Government is looking to encourage the uptake of district heating. Although heat networks currently only account for 2% of all of the heat we consume in the UK, studies show that a substantial growth is possible and necessary as part of our energy strategy. For too long however, there has been too little consideration of the consumer.
When a heat network is built in the UK, there is a risk that the consumers will be effectively trapped in a monopoly. That situation is not unique of course; water companies also have captive local markets. The big difference is that unlike in many European countries, in the UK there has never been effective regulation or licensing of heat. This means that price competition, customer rights and levels of service are not standardised or universally upheld. This has caused problems in the past and if heat networks are to become a bigger feature in the UK, lessons need to be learned. This is particularly important when considering that various local and national UK Government bodies operate incentives for heat networks. In many areas (London being a prime example) heat networks are required for Planning. Renewable CHP and biomass also receive support through the Renewable Heat Incentive. With fuel poverty still all too real, the Government cannot be seen to subsidise unregulated heat supply monopolies. Responsible heat network operators know this and it is hoped that as the industry expands, consumer friendly regulation becomes the norm. There is more to this than just good PR though.
I have been frustrated in the past that regulation of heat was shunned by some in the industry. The word ‘Regulation’ conjures thoughts of red tape and interference, but it brings benefits to business as well. The cost of setting up consumer contracts, project agreements and price formulae are all done on a case by case basis at the moment. Many if not most clients (those, like Local Authorities who sponsor new networks) have to learn the commercial rules from scratch in this newly emerging industry. The legal cost for clients and contractors can often kill a potential project. A standardised and appropriately regulated industry, with freely available contract templates which have been tested and proven, makes perfect sense. Furthermore, network developers can access cheaper capital in a regulated market, because it is considered less risky by lenders. So this first step towards hopefully robust regulation should be embraced by the industry and all consumers of network heat in the UK. In the future, that could be any of us.