Some households have seen bills rise by as much as 700%, and more could be in line for pain without a timely response, the Social Market Foundation warns today.
1 in 25 houses are part of a heat network, getting energy from a single source shared with several other buildings. Such arrangements are particularly common in social housing, where 1 in 12 households are part of a heat network.
The Government’s most recent published estimate is that heat networks serve 480,000 households, based on 2014 data (See notes). However, new analysis based on more recent experimental statistics published by the Social Market Foundation, a cross-party think tank, finds that this figure is now as high as 900,000 homes.
The paper identifies three challenges facing heat networks:
- Poor energy efficiency and high maintenance costs
- A lack of metering, which means that people do not get charged more for using more energy – leading to excessive use and unnecessary costs
- A lack of regulatory protection from Ofgem, since energy bills for those in housing networks are treated as housing service charges.
These longstanding issues have been exacerbated by the ongoing energy crisis. People reliant on heat networks did not benefit from the Government’s Energy Price Guarantee, which caps bills at £2,500 for the typical households, since heat networks’ energy purchases are treated as business sales.
However, most households have been protected until recently because heat networks tend to purchase energy at rates fixed for a year or two. As those deals expire, households are facing bills doubling or increasing by 500-700% in some cases.
In order to secure a fairer deal for those living in heat networks, the report recommends that the Government should:
- Improve the bill support scheme, with more generous help, pegged to domestic energy prices, targeted help for schemes in deficit, and a cap on service charges
- Accelerate the transition to metered networks, removing exemptions, increasing grant funding and encouraging the uptake of support
- Set a target for Ofgem to start regulating heat networks by April 2024, and incentives for heat networks to improve efficiency
- Dismantle inefficient and outdated networks, mandating operators to run feasibility studies and providing funding for households in dismantled networks to transition to heat pumps
Will Damazer, the report’s author, said:
“Heat networks have a significant role to play to get the UK to net zero – but they are not living up to that potential. The problems in heat networks disproportionately affect the worst off families. They have to put up with higher prices, worse regulation and less control over their heating and energy use. The Government has belatedly recognised the problem, and is starting to take action – but the scale and timing is not good enough. Increasing the pace of metering would not solve everything, but would be a crucial step in the right direction, reducing bills for households whilst helping the UK reduce its carbon emissions.”
- The SMF report will be published at https://www.smf.co.uk/publications/a-fairer-deal-for-heat-networks/ on Tuesday 23rd May at 7 AM.
- Government estimates for those living in heat networks: https://www.gov.uk/government/publications/energy-security-bill-factsheets/energy-security-bill-factsheet-heat-networks-regulation-and-zoning
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