What you need to know about district heat networks

Energy iStock 000010421988XSmall 146x219Mark Routley looks at the opportunities and challenges for local authorities presented by district heat networks.

Over the next decade, we will be seeing major changes to the way in which local authorities deliver energy to their buildings, both commercial and residential. District heat networks have been identified as the way forward. They have been a feature of energy supplies in Europe since the end of the Second World War and if central government is proven correct they will have a major impact in the UK.

Local authorities will need to consider the opportunities they present and how they fit with existing property arrangements with end users such as secure tenants, long leaseholders and businesses

What is a district heat network?

A district heat network is a method of distributing heat from a central production source through a network to multiple buildings or sites so that it can be used to heat or cool those buildings.

It is thought that having a central heat production source, rather than each building generating heat within its own boiler system, increases energy efficiency.

Why is the government encouraging the development of district heat networks?

There are currently approximately 2,000 heat networks in the UK, supplying heat to more than 200,000 dwellings and more than 1,500 commercial and public buildings. Although the amount of heat supplied to buildings in the UK via heat networks is only 2%, estimates show that approximately 15% of UK heat demand could be met by heat networks by 2030 and around 50% by 2050. If distribution via a district heat network improves energy efficiency, this would go some way to assisting the UK in meeting its carbon reduction targets.

Issues with existing district heat networks

Although central heating and hot water supplied from a district heat network can be controlled in the same way as with individual gas boilers, customers in older schemes are generally billed for a fixed proportion of the total heat generated. This means that lower or average energy users subsidise abnormally high usage by other customers.

Newer schemes tend to have meters installed as standard and charge on the basis of heat usage by individual properties. In addition to ensuring that individual customers are charged for the energy that they actually use, metering enables customers to see what energy they are using and identify, and reduce, wasteful consumption. The installation of meters also enables heat network operators to identify inefficiencies, manage systems better and reduce energy use. The general feeling is that when users pay for what they actually consume this drives them to be more efficient.

Changes required by EU legislation

The Energy Efficiency Directive 2012 places on local authorities a number of obligations to install heating metering both to measure individual consumption and consumption at building level. Some of the requirements are dependent on tests of technical feasibility and cost-efficiency. However, meters must be installed in the following circumstances, regardless of whether it is technically feasible or cost-efficient:

  • Where a new connection is made in a new building;
  • Where a building undergoes major renovation; and
  • Where energy is supplied to a building from a district heat network or from a central source servicing multiple buildings (the meter must be installed at the point of delivery).

Therefore, if you are dealing with a district heating network that supplies more than one building, a meter must be installed at the point of delivery to the building.

In the case of a multi-apartment or multi-purpose building, supplied from a district heat network or common source, individual consumption meters must be installed by 31 December 2016 where it is technically feasible and cost-efficient to do so.

It is, as yet, unclear what can be taken into account when deciding if installation is technically feasible and cost-effective  In January 2014, the government issued a consultation entitled Implementing the Energy Efficiency Directive as it applies to the metering and billing of heating and cooling. It stated:  

"Further guidance will be issued ahead of the transposition deadline on 5 June to help organisations assess the need to heat meters or heat cost allocators in those instances where tests of technical feasibility and cost-efficiency apply".  

No such guidance has been issued, and, although Member States were required to implement the Energy Efficiency Directive 2012 into national law by 5 June 2014, regulations have not yet been issued.

What should local authorities be planning for?

Although the regulations have not yet come into force, local authorities should be identifying what is required for their property portfolios and considering how they will comply.

The Energy Efficiency Directive 2012 also contains obligations on what information must be provided and on billing which need to be considered.

Local authorities should also review existing lease and tenancy arrangements. For long leaseholders and business tenants, the lease will set out how energy supplied by the landlord is to be paid for, typically through a service charge. Whether the local authority can move to payments based on actual consumption will depend on their being sufficient flexibility within the lease to do so. For the future introducing more flexibility into standard forms of lease makes sense.

For secure tenants the Housing Act 1985 contains provisions allowing a local authority to vary tenancies where there is no express provision for this.

Finally, the Department of Energy and Climate Change has set up a Heat Networks Delivery Unit to provide advice and support to local authorities in the roll out of district heat networks.

Mark Routley is partner at TLT Solicitors. He can be contacted on 0117 917 7955 or This email address is being protected from spambots. You need JavaScript enabled to view it..

DISTRICT HEAT NETWORKS - FLOWCHART