In the wake of the UK Government’s Heat Strategy and subsequent investment in heat mapping, feasibility studies and heat networks “the need for the UK’s district heating industry to be properly regulated has been emphasised by a survey from leading consumer watchdog, Which?“
“The watchdog has called on the British government to reconsider allowing the UK’s emerging district heat market to operate without regulation, after research revealed that many customers feel ripped off and confused by contracts they cannot escape from.”
In the UK, regulation has hardly kept energy companies on track but consumers are likely to seek some protection when committing to long term connections with sole suppliers of heat. My experience of networks in Sheffield suggests this to be the case. Even if the product is good, the price stable and the infrastructure sound, consumers (led, often, by their insurers interest in liabilities) will seek protection. The cost of this will be borne by the end-user without doubt and this might mean some marginally economic schemes will fall by the wayside.
The report, unveiled yesterday, said some district heat providers effectively create monopolies because properties linked into the networks cannot switch suppliers if they are unhappy with the service. This is, in most cases, fact. Many UK heat networks have heat supplied from one source, or one supplier. Only when you start to see integrated heat networks with multiple technologies and suppliers will you see genuine competition that will self-regulate. Heat networks are a long way from that position.
The news, which comes just at a time when the Association for Decentralised Energy is pushing its new code of practice, called Heat Trust. Around 210,000 homes in the UK are currently connected to the networks and this is expected to rise to eight million by 2030 as part of efforts to reduce greenhouse gas emissions from the heat sector.
4 thoughts on “Consumer Protection Needed for Heat Networks – Which?”
In the Netherlands about 600K households are connected to district heating networks. The government wants to expand that number to 1M, also seeking to reduce greenhouse emissions. The government also sees it as a replacement for gas, as Dutch gas production is expected to go decline (also related to the earthquakes in the north eastern corner of the country).
District heating has been regulated in the Netherlands since 2014. The main goal of regulation was to protect consumers from the monopolists. The ministry of economic affairs publishes the parameters which are filled into a formula, which determines the maximum prices. The lobby of the energy companies have succeeded in influencing the parameters. So the government has effectively legalized the abuse by the monopolists. Guess what they all charge? The maximum tariff.
To make things worse, since 2000 most houses which are connected to the district heating networks have been built with LESS isolation. Policymakers were convinced that district heating was environmentally friendlier, thus the efficiency on primary fuels was considered to be higher (110%) in comparison to a “HR” class combi boiler (95%). The money which was “saved” by applying LESS isolation was charged by the heating companies in order to finance their expensive heating networks. All of this could have worked, if the price per GJ would be based on the higher efficiency (110%). But policymakers decided that 82.83% was high enough. In 2015 this policy costs households which occupy these houses 24% on their variable energy costs..
The Netherlands has an free energy market, where consumers can shop around for an electricity and gas contract. This isn’t the case for district heating. There gas prices from the largest energy companies (which are also the most expensive) are used in the maximum GJ tariff. If we would be able to shop around, we would be able to save an additional 20%.
In the neighborhood where I live, the average annual costs of heating a home is over 1300 euro’s on district heating. Heating the same type of house (same energy label, etc), but heated with a gas fired HR combi boiler will cost little over 800 euros.
Same problem in the Netherlands , Dutch customers pay 20-30% more as aggreed, also nowhere to go when there’s a problem. Government looks away and helps the heat company’s because they think it is sustainable but when you put less insulation on property’s because of the so ‘sustainable’ heat there’s no adventage anymore. Customer pays more and uses more…
RIP District Heating as we know it