Feeling the heat: What happened to HNTAS?
The government has had to push back the Heat Network Technical Assurance Scheme while it continues to mull over industry feedback. Utility Week unpicks the main issues holding back progress.
Lucinda Dann, features editor
Feeling the heat: What happened to HNTAS?
The government has had to push back the Heat Network Technical Assurance Scheme while it continues to mull over industry feedback. Utility Week unpicks the main issues holding back progress.
By Lucinda Dann, features editor
The introduction of heat network regulation at the start of the year was intended to improve customer experiences through new rules around fair pricing, transparent billing, and high service standards. However, a critical piece of the consumer protection puzzle remains missing. This is the impact of poor network efficiency and design across the industry, which is costing some customers up to £1,000 a year in wasted heat, according to consumer champion Citizens Advice.
The Heat Networks Technical Assurance Scheme (HNTAS), the second part of the new regulations, is set to address these long-standing issues by forcing existing and new networks to meet a minimum set of technical and performance standards. The new rules were meant to be in place in time for Ofgem to take on its authorisation role of the sector in January 2027. However, these have now been pushed back to an unknown date as a government consultation on the HNTAS proposals has yet to conclude.
This is believed to be due to a wealth of “fairly negative” feedback from the industry, with the scheme being labelled “disproportionately complex” and failing to “strike an appropriate balance”.
The annual cost incurred by some customers from wasted heat due to poor network design
Among the key concerns is the cost of remediation work, which currently falls unfairly on leaseholders and risks financially crippling social housing providers. Far from delivering the consumer benefit envisaged by the government, many believe the expensive and complex scheme could jeopardise the government’s targets for heat network deployment and lead to many social landlords abandoning legacy schemes in favour of alternative heating sources.
Meanwhile, for new schemes the checks are seen as too onerous and have the potential to delay housing developments, again potentially encouraging developers to look at alternative heating sources.
Despite these concerns, industry consumer champion the Heat Trust says the sector desperately needs better standards and the government will need to push forward with their implementation. However, it warns the government will not be able to do this without finding a source of funding to cover the spiralling costs.
Performance problems
While the Heat Trust believes heat network efficiency should be between 65-70%, current standards across industry are largely believed to hover around 35%, driving up costs for consumers.
A voluntary technical standard covering the design, installation, commissioning and operation of heat networks was introduced in 2014 with the aim of raising standards, but this has achieved little, says the Heat Trust’s chief executive Stephen Knight. It has found that newer networks perform no better than legacy systems.
“While there are examples of high-performing modern heat networks, there are also many newer heat networks that suffer from very poor heat losses and poor reliability issues,” Knight says.
Of those operators surveyed between 2019 and 2022, 93% said they were not members of a voluntary standards scheme.
Knight adds that heat networks serving modern developments operating at just 35% efficiency are all too common, with some operating as low as 25%, leading to extremely high fuel costs for consumers.
While efficiency is a real concern within the industry, so too is reliability. In the last representative survey conducted on heat network consumers and operators by Citizens Advice, 40% of operators reported unplanned outages, with a third of operators with outages stating that they expected tenants to pay at least some of the costs for repair.
HNTAS was designed by the government and its “technical author” Fairheat as a performance-based assurance scheme. It will apply to different identifiable elements of a heat network, such as the energy centre, with assessments made against minimum standards at various lifecycle stages.
What the efficiency of a heat network should be, according to the Heat Trust
What the efficiency of most heat networks actually is
Efficiency of the worst performing heat network
Despite the government stating that it is keen that HNTAS “does not place undue burden or cost on heat network operators or heat network consumers”, this is the main criticism of the scheme in industry responses to the consultation. For legacy systems in particular the overriding issue is cost. The government estimates that average cost per dwelling to meet the standard will be £5,500 but could be up to £15,000.
The consultation’s options assessment estimates the sector-wide cost of meeting the proposed HNTAS is £2.9 billion with a further £1 billion in assurance costs. However, the Heat Trust has put the true figure of carrying out remedial work at £5 billion. Meanwhile the funding currently available for efficiency upgrades through the Heat Network Efficiency scheme is £77 million until 2029-30, equating to just £15 million a year.
Government's estimated cost per dwelling to upgrade legacy heat networks
The government's estimate of what the sector will need to spend to meet HNTAS
Annual government grant currently available for efficiency upgrades
In contrast, the government has committed to £185 million of grant funding per year until 2029-30 for the development of new low-carbon heat networks through the Green Heat Network Fund. This means that despite existing customers facing poor performance and high bills, they have access to less than 8% of the grant funding available to new networks.
For social housing providers, who own and operate a large proportion of legacy systems, the consequences of these unfunded costs could be significant. There is an urgent need for more social and affordable homes in the UK, with social housing providers having a critical role in financing and developing these homes.
The government has put in place a number of policies to help the sector deliver this, including the introduction of rent convergence in England, which gradually brings up particularly low social rents. The Chartered Institute of Housing (CIH) estimates that based on figures from the government’s HNTAS options assessment and Ofgem, up to 36% of the additional income from rent convergence over the next 10 years will be absorbed by HNTAS.
HNTAS could therefore significantly reduce the capacity of social housing providers to build new social homes. CIH is also concerned that the costs of HNTAS could “fatally” affect the viability of supported and older people’s housing schemes. It warns that feedback from its members suggests that the cost and complexity of heat network policy could see them decommission networks that are not close to end-of-life and retrofit alternative heating systems, while also preventing them for considering heat networks for newbuild schemes.
“In turn, this could jeopardise the government’s targets to more than double the amount of heat demand met via heat networks by 2035, and to have one fifth of all heat provided by heat networks in 2050,” it says.
Citizens Advice also warns in its response that HNTAS risks damaging the reputation of heat networks by saddling leaseholders with unfair regulatory costs. “Without targeted support, there is a real risk that the cost of the transition to HNTAS will be unfair and unaffordable for consumers, particularly leaseholders. HNTAS is a statutory compliance cost so networks can pass through the costs of upgrades as major works,” it says.
“The costs of the transition to mandatory technical standards shouldn’t be shouldered completely by consumers who have already seen high prices and poor outcomes. The government needs to think creatively and ambitiously about how to support the sector to ensure that costs are balanced fairly, and for those consumers who do pay for HNTAS upgrades, over a reasonable period.”
One idea being put forward is for government to re-examine the cost versus benefit trade-off and potentially streamline the scheme.
In its response to the consultation the Local Government Association (LGA) says: “The proposed framework is disproportionate, costly and operationally unachievable within the consultation timeframes. The projected administrative burden — approaching £1 billion —would fall directly on consumers, with limited corresponding benefit. Experience from the sector demonstrates that excessively complex governance arrangements do not reliably improve customer outcomes.”
Others have called for the current scheme to be paused entirely. In its response the CIH says: “Overall, until the issues outlined in this response have been satisfactorily reviewed and addressed, our view is that the implementation of HNTAS should not be taken forward and should instead be paused.
“A simpler solution is required that delivers better technical standards and outcomes for households connected to heat networks, while significantly reducing the cost and complexity of the current HNTAS proposals.”
New builds
The current proposed HNTAS scheme has also been met with criticism for its approach to new-build developments, with concerns focused on how the new assessment process could hinder developers.
Energy UK, in its response, stressed the importance of HNTAS being able to provide certification to new networks at a pace that is aligned with the build-out of new homes. “HNTAS should support more networks to be incorporated into new-build sites, rather than acting as a hindrance. HNTAS should require a similar amount of regulation as installing individual heating systems and should avoid enforcing an unnecessary high regulatory burden, which would deter the use of heat networks,” it says.
It advocates for the scheme being applied on a development basis rather than delays being caused by having to sign-off on a building-by-building basis.
“It is crucial HNTAS does not compromise heat networks' competitiveness within the new-build sector. Heat networks and shared ground loops provide an efficient and cost-effective solution for new house building schemes of all densities, including new towns. However, as it is proposed, HNTAS could place undue cost pressures on heat network developers, which individual heating systems are not subject to. Therefore, we have significant concerns that the regulation will exclude heat networks from the new-build market.”
Energy UK also has concerns that the current proposed approach is not compatible with the development of large, city-wide heat network projects because they are built out in stages, meaning at the start the process many of the elements will be oversized, affecting the efficiency of the scheme.
However, Knight has hit back at the criticisms from the industry around new builds, calling out the poor standard of work. “What you’ve got is many parts of the industry saying 'we don’t need a regulator to oversee our work, to check our work and certify that our work is built to a high standard'. The message is: 'trust us we can do it',” he says.
“To that I would say just look at the evidence of what industry has built in the past five years. Trust is not something you just get, you have to earn it. And right now, we do need a rigorous assurance process to make sure that future heat networks are fit for purpose.”
“Trust is not something you just get, you have to earn it. And right now, we do need a rigorous assurance process to make sure that future heat networks are fit for purpose.”
Stephen Knight, chief executive, Heat Trust
“Trust is not something you just get, you have to earn it. And right now, we do need a rigorous assurance process to make sure that future heat networks are fit for purpose.”
Stephen Knight, chief executive, Heat Trust
Moving forwards
While Knight acknowledges that a lot of the submissions to the HNTAS consultation have been “really negative”, he doesn’t believe this should hold the scheme back. However, he does agree that the industry’s point about cost is a valid one and is likely to be the true hold-up in government.
“You’ve got an awful lot of questions and concerns and opposition to HNTAS, but we desperately need better standards, and we desperately need a scheme to deliver high-quality heat networks that are going to deliver for consumers,” he says. “The reality is government is going to have to find more capital, particularly for local authority and housing association heat networks, which is probably where the older heat networks with the biggest cost of remediation will sit.”
While some in the industry have highlighted the Warm Homes Grant Funding as a possible option for remedial works, Knight thinks a mixture of loans to cover work with a shorter 10-year payback period, and grant funding for work that is likely to only pay back over 30 years is needed.
“Government is going to have to put some money in. I actually think this would be good value for money investment from Treasury.”
Knight stresses that the government will need to resolve the issues with HNTAS soon or risk making heat network the pariah of the heating world.
“One of the things I’m saying to government is get this in place as soon as possible, don’t just listen to complaints from industry who don’t want the burden of having to be checked to a higher control standard.
“Consumers are paying for twice as much gas as they should be paying for. In the context of high gas prices that we’ve had over recent years, and going into a winter with gas prices shooting up, that’s going to cost consumers a small fortune in heating bills. The status quo is not a sustainable situation for the heat network sector.”
