UK Government set to create central heat network authority and extend price cap to customers
The Government has confirmed that it will create a central body to oversee the UK’s growing stock of low-carbon heat networks, and extend Ofgem’s price cap to households connected to these networks amid the energy price crisis.
Late last week, the Department for Business, Energy and Industrial Strategy (BEIS) published its response to a recent consultation on the ways in which heat networks should be planned, delivered and operated in the future. The Government is aiming for heat networks to expand to serve one-fifth of UK households by 2050, up from around 2% in 2020, as part of its plans to bring heat and buildings to net-zero emissions. Heat networks will also serve commercial and public sector buildings.
Environmental groups, civil society organisations and local councils alike have previously warned that delivery is currently off track, with BEIS needing to make key decisions on strategy and delivery. These include mapping out zones and implementing plans to ensure networks are completed to time.
BEIS’s response documents confirm that 81% of those responding to its consultation believe that certain responsibilities for scaling, operating and regulating the heat network zoning process should be carried out by the central government. These include the creation of a standardised methodology for calculating and reporting on the performance of heat networks, data collection and management.
Respondents said a central approach could help to “maximise consistency”, “make heat network zoning more efficient” and “reduce pressure on local authorities”.
Most of the consultation respondents also believe that some responsibilities must be held by local authorities – meaning that they will need adequate powers, financing and support for skills to collaborate with private sector developers.
“Some respondents, including one industry trade association, stated that the central authority needs to be flexible and quick to respond to ensure that the development of heat networks are not held up by cumbersome, centralised processes,” the consultation response paper states. “We will work to ensure that the central authority functions work smoothly and are as light-touch as possible to maximise efficiency and ensure the effective implementation of heat network zones”
Regarding local authorities, the documents confirm that BEIS is planning to support councils in appointing ‘Zoning Coordinators’ at local authorities serving regions planning to host heat networks. These Coordinators may be established at combined authority, county, district, or metropolitan level.
Coordinators will be tasked with providing advice and guidance to a range of stakeholder groups throughout the heat network planning, delivery and operation stages. They will be required to contribute to zone identification from the outset, BEIS is proposing, and will have powers to intervene to accelerate planning and delivery. BEIS will launch a separate consultation on the funding and governing of the Coordinators by the end of 2022.
BEIS’s paperwork states: “Zoning Coordinators will have the flexibility to determine the delivery model of heat networks within their zones. Developers and operators will be subject to any outline conditions specified by the Zoning Coordinators. Additionally, we will introduce a new provision such that, where Zoning Coordinators have opted for a public or private-sector-led delivery model, they will have the power to veto the development of other new networks in their zones to ensure the delivery of their overall strategy.
“Zoning Coordinators will lead on local zone enforcement, with the ability to impose civil sanctions where requirements to connect buildings and heat sources, and the provision of information, are not met. We will ensure that payment of a fine will not be an alternative route for entities to comply with these obligations. This local zone enforcement is distinct from Ofgem’s national enforcement role.”
A national heat network authority could be launched in the second half of next year at the earliest. Within this timeframe, Zoning Coordinators could also be appointed to councils. BEIS will give itself powers to appoint Coordinators where local authorities are unable or unwilling.
Late last year, Ofgem was confirmed by BEIS as the heat network market regulator for England. BEIS’s new documents confirm the next steps for ensuring that protections which apply to customers not connected to heat networks are extended to those using heat networks inside and outside of dedicated zones.
At present, the UK’s 500,000 households served by a heat network are not covered by the Ofgem price cap. This is because heat networks are classified as commercial arrangements rather than domestic. BEIS has confirmed that pricing protections will be extended to all households within dedicated zones – but only if they are required to connect to a heat network.
Additionally, Ofgem will be asked to extend its regulation in other areas, such as quality of service standards, to domestic heat network users. This extension will apply within and outside of dedicated zones, covering those for whom connection was mandatory and those for whom it was a choice.
BEIS’s documents also confirm that it will implement a requirement for new heat sources within designated zones to connect to heat networks. This will help maximise their efficiency and prepare them for future expansion. New heat sources within dedicated zones will be required to meet emissions standards, in a bid to stop developments which would undermine the net-zero transition.
The documents also reveal that BEIS is being requested to play a role in listing energy users, mapping out their future energy use plans, and matching this for existing and planned energy generation.
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