What does the future hold for the Heat Network Regulations?
The Heat Network (Metering and Billing) Regulations 2014 are designed to drive carbon savings by motivating energy efficient behaviour through charging end-users for the heating and cooling they consume. The first compliance deadlines relating to building level meters and Notifications have now passed, but many organisations are yet to meet the requirements.
In addition, the Government is working towards launching a public consultation in early 2017 on a revised methodology for assessing the cost effectiveness of metering for district and communal heat networks. Carbon Smart met with the Department for Business, Energy and Industrial Strategy (BEIS) to learn what is planned next and what this means for organisations affected by the Regulations.
The supply of heating through networks has been around since Ancient Rome. The UK started installing large district heating schemes in the late 20th Century. As the sector is expanding, it makes sense to have greater legislative management.
Heat networks have significant benefits over individual systems; they can be more efficient and, with fewer heat sources per final customer, there is often less to go wrong. For example, heating costs for flats can be more than 30% lower on a heat network than using individual gas boilers.
The Heat Network Regulations aim to add further benefits to this efficiency. When charging for heat according to meter readings, energy usage has been found to decrease around 20% through behavioural change. Not only does this reduce carbon emissions, it also empowers individuals to control their outgoings more, just as they do with water and electricity.
The Regulations affect many organisations that supply and charge for heat, cooling or hot water through a communal or district network, regardless of whether this is billed for directly or through a service charge. This covers a wide range of landlords and managing agents including commercial landlords with multi-tenanted offices, housing providers, universities, local authorities, and sheltered housing.
BEIS, who is implementing and enforcing the Regulations, has received Notification submissions from around 900 organisations, so far relating to approximately 17,000 heat networks. Of these systems, only around a third already have meters installed, showing that there is significant potential for large carbon savings to be achieved through increased network metering.
Steps to compliance, deadlines and challenges
Since December 2014, all new buildings on district networks need to be fully metered, with bills charged accordingly. Communal buildings on district networks of any age must have building level (block / point of entry) meters installed too. BEIS has helped and will continue to help organisations with particular difficulties. There are two main requirements for most organisations to comply:
1) Notify BEIS of each heat network
2) Install meters and amend billing
Be able to demonstrate why installing meters is not economically feasible or technically possible.
Organisations captured by the Regulations must submit a Notification to BEIS which provides key information on the systems. This is to be repeated for each network at least once every four years. The first deadline was 31 December 2015. Notifications are a statutory requirement. Those who have not completed this should speak to BEIS as soon as possible.
Installation and billing
After meters are fitted in line with the Regulations, heat (and/or hot water and cooling) must be billed according to meter readings.
Where final customer meters have not yet been subject to mandatory installation, such as with communal systems and older district networks, retrofitting meters will be subject to a cost-effectiveness test. This will demonstrate whether it is economically feasible to install meters. Subject to the outcome of the proposed public consultation (described below), a new tool for completing this test is planned to be released later in 2017.
Complying with the Regulations is not always a straightforward exercise. The information required is often not readily available and needs to be obtained from a range of sources such as asset registers, technical specifications, O&M manuals, site visits, or online research. Retrofitting meters can be expensive and disruptive to tenants, and needs to be carefully managed. For larger organisations with multiple systems in scope, the compliance exercise can be a significant undertaking and many are seeking external help to support the process. However, feedback has shown that the process of compliance has helped organisations better understand their network systems and plan improvements where appropriate.
In representing both business and energy interests, BEIS is committed to minimising regulatory burden on organisations whilst working to achieve the primary objectives of this legislation. The team of officers at BEIS responsible for implementing the legislation throughout the UK are available to answer technical questions and agree pragmatic solutions wherever possible.
Simplifying the process
Following an initial feedback period and a review of the legislation, BEIS proposes to clarify and amend the Heat Network Regulations in 2017. A public consultation is proposed for early 2017. Subject to feedback, the amended Regulations should be finalised and released later in the year. Details of the proposed consultation and how to get involved will be publicised on gov.uk/heat-networks, where organisations can also subscribe to relevant heat network email alerts.
The main focus of the proposed consultation is the revised cost-effectiveness assessment tool, and timing of any subsequent meter installation. The revised tool will detail who will need to retrofit meters (and benefit from these) and bill according to actual consumption. Organisations would only need to invest in meter installation where it is clearly predicted to save money in heat bills over a set time period. Therefore, this should be seen as investing to save. However, BEIS recognises that there may be capital investment challenges for some regulated entities, and is currently working with them to understand and minimise the burdens.
It is important to note that the proposed consultation would not impact the deadlines given above and the requirement to notify BEIS about the network and provide key information on the system remains as 31 December 2015. Although BEIS has stressed it will work with companies to help them comply with the Regulations, breaches could be subject to compliance notices, penalties or even criminal prosecution. BEIS’ team of officers has started to contact organisations and to act on non-compliance. Therefore, if you are yet to comply with this element, you need to act now.
When appropriate, BEIS will be publishing details of the public consultation, including how to get involved and stay updated. Carbon Smart will continue to monitor the process and provide updates and commentary.
Heat Networks Investment Project
In conjunction with the Heat Network Regulations, BEIS has recently launched the new Heat Networks Investment Project (HNIP), administered by Salix*. This aims to provide £320m of capital support to increase the volume of heat networks being built, deliver carbon savings, and help create the conditions necessary for a self-sustaining heat network market.
HNIP will only be supporting high quality projects. To be eligible, applicants must be compliant with the Heat Network Regulations.
Louise Quarrell, director, Carbon Smart and Simon Trevenna, UK Implementation Manager (Heat), BEISCarbon Smart