Robust policies to protect heat network consumers are crucial

Across Scandinavia and Northern Europe, heat networks are a familiar and established technology.  For consumers, they are a natural choice for low carbon home heating at scale. As part of meeting the climate change challenge, the UK and Scottish Governments are looking to heat networks to provide a solution for the decarbonisation of our built environment. The targets they have set (growing the sector from 3% of buildings on heat networks to 18% by 2050) are ambitious but achievable, and Vattenfall is keen to bring its expertise in this field to the UK market.

But first we need to meet head on the issue of consumer resistance. This is based partly on unfamiliarity, but also because heat networks currently sit outside the regulated market. Put simply, customers on heat networks at the moment are not served by the same regulatory protections offered to consumers of electricity and gas.  

Vattenfall fully supports moves by the UK government to regulate in this space – to bring to heat network customers the same benefits in terms of rights and protections as those currently enjoyed by users of other utilities. Legislation is underway and welcome. We were therefore pleased to be able to work in partnership with the Energy Systems Catapult, bringing together a range of voices advocating on behalf of consumers to look at how best to achieve these consumer protections.

As the ‘Heat Networks: Consumer Protection Regime’ report states: ‘the unique characteristics of heat networks pose different challenges compared to the electricity and gas retail markets – lessons can be drawn from the electricity and gas retail sector.’  

We looked at the task of regulating through this lens and have arrived at several key recommendations. Chief amongst these was the finding that a hybrid model of regulation – combining both rules-based and principles-based approaches to regulation will achieve the best outcomes for consumers. We also recognise that the balance between rules and principles may change over time, as both the regulator and market participants become better familiarised with regulation. In that regard, the appointment of Ofgem as a regulator for heat networks is a vital step to help bringing continuity of approach across the energy sector.

We also support analysis that as the regulatory regime and market evolves, a proportionate approach is favourable, to help ensure participants and infrastructure have time to respond to the new regulatory regime, and to ensure further facilitation of innovation and market development.

Finally, it’s important to recognise that, in developing the consumer protection regime, a balance must be struck between ensuring appropriate protections are in place for different consumer groups, and the need to enable new business models and innovation.

By following these principles, we are confident that we will see a rapid uptake of low carbon heat networks as a solution for home and non-domestic building heating, serving the needs of customers to be more climate aware and helping the UK accelerate the net zero transition.