3 ways the government can balance the heat network upgrade bill fairly

Heat networks have a role to play in the UK’s energy future. Heat networks supply heat from a central source to consumers, via a network of pipes carrying hot water. Done right, they could deliver affordable, low-carbon heat to millions of consumers. But many existing heat networks are ageing and inefficient, meaning that households are facing higher and more volatile prices.

The Heat Network Technical Assurance Scheme (HNTAS) will represent a major shift for the sector, bringing in mandatory technical standards. But it comes with a price tag. The government estimates the cost of HNTAS at £2.9 billion, with another £1 billion in assurance costs. Without funding, some households on gas heat networks could face costs of up to £15,000 per property.

If the government wants heat networks to supply 20% of the UK’s heat by 2050, it must treat HNTAS as a major upgrade to national infrastructure and balance the bill fairly. Without a clear strategy for fair financing, there is a very real risk that these costs will be passed immediately onto the consumers who have already suffered the most from poor service.

Heat network consumers need mandatory standards

Our experience helping heat network consumers highlights a stark reality: the current voluntary approach has failed consumers, as only a small handful of heat networks participated. Without mandatory standards, poor performance continues, and consumers end up paying the price.

Consumers have been left exposed to:

• Infrastructure failure: Poorly designed and maintained networks leave consumers experiencing outages in the coldest months and overheating in the summer.
• Inaccurate billing: 57% of heat networks have no meter. This rises to over 80% in the private rented sector. This prevents people from being billed based on what they actually use — as well as Ofgem being able to collect the data it needs to regulate.
• High prices: Inefficient networks mean high bills. When prices go up, consumers on inefficient networks are more exposed. We’re aware of some bill increases of over 300% since 2022.

Consumers could be left to pick up bill

Technical standards will raise the bar across the sector over time. Reliable heating is an important part of building consumer trust. However, consumers can’t be left facing unfair costs for upgrades. Without proper funding, leaseholders could face life-altering bills. For social housing tenants, where major works costs can’t be directly passed through, the cost could be met by sacrificing other essential maintenance or services.

“Our heat network is now apparently getting to this age where we’re going to have to shell out thousands of pounds to fix it. I don’t know how people are going to deal with it. A lot of people don’t have £2,000 in their bank account to pay for that.”

- Research participant interviewed for our 2025 report

How the government can balance the heat network upgrade bill fairly

The government’s Warm Homes Plan sets the direction of travel for heat networks. Heat networks are expected to deliver a fifth of our heat by 2050. They can be run on a variety of heat sources, so they can help build the UK’s energy security. Using local fuel sources, rather than imported gas, is an important part of protecting consumers from price shocks. The best way to promote the consumer and investor confidence needed to grow the sector is to deliver improvements for consumers right now.

1. Use grants from the Warm Homes Plan to improve existing heat networks and decommission those that don’t work

The government recently earmarked £1.1 billion for heat networks within the Warm Homes Plan. More of this grant funding should go to existing networks that would struggle to recover the costs of finance. It should be delivered through an expanded Heat Network Efficiency Scheme, and the government should also consider whether future locally-delivered fuel poverty upgrade schemes could provide delivery mechanisms.

Per year, grant funding available to new networks through the Green Heat Network Fund (£195 million) is 13 times greater than the grants available to existing networks through the Heat Network Efficiency Scheme (£15 million).

Consumers on existing gas-dependent networks have been locked into high-carbon, high-cost heating for years. These shouldn’t be deprioritised over support for the creation of new networks. The government should look for opportunities where funding can be applied to both, for instance providing support to new networks to adopt poor quality networks in heat network zones.

Some of these networks will need to be decommissioned because it’ll be too expensive to bring them up to scratch. The government should think about how other grant schemes can help to ease this — for instance, the Boiler Upgrade Scheme. Without support for these old, inefficient networks, there’s an increased risk of some collapsing. This would harm consumers and knock the reputation of heat networks.

2. Use innovative financing from the Warm Homes Fund to help meet the costs

Grants alone won’t cover a £2.9 billion gap. We’re pleased to see the government consulting on the Warm Homes Fund, which has £3.3 billion available for financing via government lending. The government should use some of these funds to help spread the costs of large-scale retrofits to heat networks.

They should consider how models like the Green Finance Institute’s catalytic fund can be used to help existing networks upgrade — not just to expand networks into zones or to support new projects. There are also opportunities to partner with the National Wealth Fund to bring down the costs of private sector capital to smaller networks. An aggregated fund of this kind has been developed before for home energy efficiency upgrades.

By spreading the costs of HNTAS upgrades over 25 or 30 years (the break-even time period estimated by the government) the immediate impact on leaseholders could be reduced from high shock bills to manageable, low-interest repayments. If HNTAS is delivered as intended, this could eventually pay for itself through lower energy losses.

3. Support needs to be targeted towards the heat networks causing most harm for consumers

Whatever the type of support, grant funding or long-term finance, it needs to focus on existing networks with the worst outcomes. The government needs to help these inefficient networks upgrade, or provide the expertise to help them plan their ‘end of life’ process which could include transitioning to a different type of heating. These consumers have been the worst hit by high prices and poor outcomes. These networks also house a disproportionate number of low-income and vulnerable residents.

It’s also important that consumers shouldn’t have to pay for upgrades to networks that didn’t meet the standards that they should have at the time that they were built. The government should explore how they can facilitate this.

The cost of doing nothing will fall on consumers

The industry pressure to scale back HNTAS is rooted in a fear of the cost. But the cost of doing nothing is even higher: continued high bills, heating outages in winter, lack of control to turn the heating off in summer months and a creaking infrastructure.

The government has the tools to make this work. It can blend targeted grants, innovative long-term finance and support for end of life networks to make sure technical standards don’t come at the expense of consumer finances and trust.