Ofgem, the energy regulator for Great Britain, recently announced some changes to the way they will regulate heat networks.
In this post we will take a look at what these heat network regulation changes entail, and assess how they may affect developers.
What are the New Heat Network Regulation Changes?
The heat network regulation changes include a set of new consumer protection rules. The goal is to ensure that all customers can:
- Better understand their bills
- Trust that they are paying a fair price
- Depend on their heat supply
- Know who to contact for help, if necessary
These consumer protection rules are already in place for the gas and electric networks. The changes will simply ensure that heat network customers can expect the same level of transparency and reliability.
At the same time, Ofgem anticipates that building a more stable regulatory environment will attract more investors to the sector. In the long-term, they believe this will lead to new services and technologies that will benefit both customers and network operators.
When Will The Heat Network Regulation Changes Come In?
The new regulatory framework will be phased in between early 2026 and 2028, but they are expected to be in full force from 2027.
Ofgem is encouraging heat network operators and suppliers to join the Energy Ombudsman Heat Network Supplier scheme, to help manage any unresolved customer disputes.
From April 2026, all existing operators will need to register on Ofgem’s new digital service, which will enable them to stay up to date on the new regulations while demonstrating compliance.
How Will The Heat Network Regulation Changes Affect Developers?
As these new regulations come into force, developers may have to deal with higher upfront costs and certain delays to the planning process. In the long-term, they will have to commit to more demanding monitoring and reporting responsibilities too.
Higher Upfront Costs, Longer Turnaround Times
Installing a compliant heat network requires a centralised plant room, heat exchanges, elaborate pipework, and smart meters. Any new heat network will have to be smart compatible from the start, as retrofitting can be prohibitively complex and expensive. All of this will lead to higher upfront costs for new developments.
These elaborate systems will also lead to more complex designs and longer lead times. For instance, the construction schedule will have to account for lengthier installation times, along with sufficient time for testing.
Stricter Regulations, Growing Responsibilities
Developers will have to ensure that any heat network they install meets the applicable standards on performance, transparency, and consumer billing. To stay compliant, there will have to be accurate metering systems for every individual unit.
In the long-term, developers may be held responsible for the ongoing monitoring of these systems, and for regular reporting to regulators. This means managing:
- Customer support
- Emergency response procedures
- Accurate billing processes based on actual use
- Maintenance and servicing schedules
Developers may choose to appoint an operator to oversee these processes. But this will still add some additional long-term responsibilities, along with added costs.
What Are The Fines If You Don’t Meet Heat Network Regulations?
As part of these new heat network regulations, Ofgem will have certain powers to enforce compliance. You could face severe fines and penalties if you do not meet the regulations, or if you do not properly register and maintain your heat networks.
Also, as these new regulations are designed with consumer protection in mind, you may also face legal claims from residents, which may ultimately lead to serious reputational damage.
Developers: Are You Ready For The New Heat Network Regulation Changes?
This is not the sort of thing you can leave until the last minute. To ensure compliance, and to avoid fines, penalties, and legal action, it is vital that you act as soon as possible. You must consider compliant heat networks as early as the concept and design stages, and you must account for higher costs, lengthier installations, and ongoing compliance.
Building partnerships with engineers, heat network operators, and compliance consultants could help you avoid a lot of trouble in the long-term. It’s also important to ensure that you have the right insurance in place for all your development projects and that’s where our specialist real estate team at James Hallam can help.