DESNZ eyes funding solutions for heat network upgrades as new regulations loom

Mr Newton was speaking on a panel chaired by Gareth Jones, managing director of consultancy FairHeat. He was joined by Sophie McNiffe, communal heat network manager at housing association The Guinness Partnership, and others in the sector.

Mr Newton added: “They are used to dealing with multibillion-pound kind of propositions, and when you’re having to pass it out into a few million here and a few there, they just find it really difficult.

“What we’re trying to do is find a way of having aggregate and use government to help [housing providers] put together bids that are across multiple different areas to have a power of collective action.

“That’s some of the things we’re exploring.”

The government published a consultation on the HNTAS regulations in February. Under the plans, heat network operators will have to ensure a minimum level of performance and reliability for their systems.

According to consumer protection group Heat Trust, the cost of remediating all existing heat networks to meet the standards could be as much as £5bn, with social landlords and leaseholders potentially on the hook.

Although the government is providing £77m of funding through its Heat Network Efficiency Scheme (HNES), it is unclear where the rest of the funding to meet the new standards will come from.

At the conference on Wednesday, Mr Newton said that if the government did not have a “viable way to pay” for the upgrades, they would not be mandated. He added that the government will have a “credible solution to how [the upgrades] are paid for”.

At an earlier session at the conference, Mr Newton said the government was “keen to ensure” that whatever it “delivers” regarding the new regulations is “deliverable, proportionate and doesn’t place undue burden on consumers and residents”.

He said: “Be assured that we are all about making sure that... the final proposals will be fully costed.

“We will have a viable approach to how [the upgrades] are going to be funded because we have to.”

Meanwhile, Ms McNiffe said that The Guinness Partnership was challenged by meeting the “milestones and the timescales” of the upcoming regulations.

Ms McNiffe said: “We’ve got 117 heat networks which fall under HNTAS, 75% of those are becoming end of life.

“They will never meet the 200 watts per dwelling [regulation requirement].

“We will have to either rip them out and retrofit – to try and spend all of that money, and have all of the resource, and all of the project managers and admin teams and staff to deliver all of that is really difficult.”

She added: “It’s trying to get that balance right between cost-value and... actually just delivering a better service for residents.”

Heat networks are communal or district heating systems that provide heat and hot water to multiple dwellings or buildings, from a central plant room or energy centre. There are more than 500,000 households connected to heat networks across the UK, according to Heat Trust.

Many heat networks are believed to have been designed and constructed poorly and are highly inefficient, with much of the heat generated leaking in transmission from energy centre to home, resulting in much higher fuel use and heating costs, according to Heat Trust. 

Last month, housing association Platform was among the successful bidders for £15.6m in government funding under the latest round of HNES. The landlord secured funding to improve two of its heat networks.

In April, a senior official at DESNZ said switching social housing heat networks to “renewable gas” could protect residents from rising costs.