Policy background Part 8: Heat Networks
Heat networks are a crucial part of how the UK will reach its net-zero targets as they are one of the most cost-effective ways of decarbonising heating. There are over 14,000 heat networks in the UK, providing heating and hot water to approximately 480,000 consumers. The Climate Change Committee, in its advice on the fifth carbon budget 23 estimated that around 18% of UK heat could come from heat networks by 2050 to support cost-effective delivery of the UK’s carbon targets (up from around 2% currently). The measures within this Act will drive forward the growth and decarbonisation of the market whilst ensuring consumers receive the same level of protections afforded to other energy consumers.
	Currently, there are no sector specific protections for heat networks consumers. In its 2018 heat networks market study 24 the CMA found that, although on average heat networks deliver a comparable service to individual heating systems, there was a sufficient minority of consumers who receive significantly worse outcomes and government should therefore regulate the sector. These measures will deliver on this recommendation and the commitment in the 2020 Energy White Paper to regulate the sector and will extend Ofgem’s role to cover heat networks. As the regulator Ofgem will help to ensure consumers get a fair price and reliable supply of heat.
	In the Heat and Buildings Strategy 25 and Net Zero Strategy 26 , the Government committed to invest £338m in the Heat Network Transformation Programme, and to enable heat network zoning to create a step-change in low-carbon heat network market growth. The measures in this Act contain key zoning provisions and will facilitate central and local government working together, with industry and local stakeholders, to identify and designate areas within which heat networks are expected to be the lowest cost solution for decarbonising heat. This will help to accelerate deployment of heat networks by enabling long term planning and coordination between stakeholders and increasing investor certainty. The proposals are expected to deliver an additional 7% of England’s space and water heating demand through low carbon heat networks by 2050 and save 14.3 million tonnes of CO2 emissions over carbon budgets 4 to 6 (2023 to 2037).