Ofgem’s remit should be extended to cover the regulation of heat networks, the government has said.
Around 14,000 district heating system currently serve nearly half a million customers, equating to around 2.4 per cent of the UK heat market.
The Clean Growth Strategy has set a target that by 2050, this proportion should grow to meet nearly a fifth of the UK’s heating needs.
In Denmark, 60 per cent of all households are served by heat networks, a proportion which rises to 98 per cent in the capital Copenhagen.
However a Competition and Markets Authority (CMA) investigation earlier this year found that lack of regulation for heat networks means their customers enjoy less protection than those using other energy services.
A paper issued by the Department for Business, Energy and Industrial Strategy (BEIS) on Friday (7 December) accepts the CMA’s view that there are “good reasons” for Ofgem to take on regulation of district heating.
It says “Ofgem has extensive relevant experience to draw on from regulating the companies which run the gas and electricity networks.
“We and Ofgem recognise that a regulatory framework for heat networks is likely to be distinct from other regulated utility markets to account for the unique characteristics of the heat networks sector and that Ofgem would need to extend their expertise accordingly.”
The BEIS paper points to the advantages of having a single regulator for all energy consumers, including avoiding unnecessary duplication and ensuring synergies across different and evolving markets.
It says: “Establishing an entirely new regulatory body would likely incur higher costs and require longer to set up.”
But the report says that a final decision on the sector regulator will only be made once the government has a better understanding of how the potential regulatory framework is shaping up.
Outlining its next steps on heat networks, BEIS also promised to consult on the regulations governing the energy performance of buildings next year.
The announcement that part L of the building regulations is due to be reviewed during 2019 is contained in a suite of documents from BEIS setting out next steps on heat networks.
And the paper says the government will review the best form of support for low carbon heat beyond 2022, when the next phase of the Eco scheme is due to end.
Mark Sommerfeld, policy manager for the Renewable Energy Association, said: “The government’s next steps to consult on standards, building regulations and skills are all welcome. However, it is disappointing that they have not used this opportunity to go further.
“Current support for the decarbonisation of heat comes to an end in March 2021 and firm new policies are needed urgently to address the impending policy gap if we are to keep in line with our heat decarbonisation targets.”