Response to Heat Network Technical Standards consultation

About us

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• to enhance understanding and awareness of consumer issues by strengthening the evidence base
• to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
• to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

We have a particular focus on three consumer challenges: affordability, climate change mitigation and adaptation, and consumers in vulnerable circumstances.

Introduction

Consumer Scotland welcomes the opportunity to provide this submission to the Department for Energy Security and Net Zero (DESNZ) to assist the ongoing work to establish minimum technical standards for heat networks.

The introduction of minimum technical standards as set out in the consultation is a positive step forward to raise standards within the sector and ultimately improve the experiences of consumers that use heat networks.[1] The Heat Network Technical Assurance Scheme (HNTAS) will help to ensure that newly developed heat networks are built to a higher technical standard from the very beginning. It will also help to raise the standard on existing heat networks to improve thermal efficiency, reliability and technical performance.

The Competition and Markets Authority’s (CMA) heat networks market study found that the absence of mandatory technical standards in the sector led to heat networks being built to poor technical specifications.[2] Lower technical standards were identified as a driver of poorer consumer experiences, such as frequent interruptions to heating or overheating on some networks. This underlines the importance of mandatory technical standards for the sector and the role they will play in addressing these challenges.

In our response we have drawn on Consumer Scotland’s experience working on heat networks. We have provided more detailed responses to selected questions, and we would be happy to provide further engagement and input as the work on developing technical standards progresses.

Our response

Consumer Heat System

Question 1: Do you agree with the proposed approach to not include the Consumer Heat System in the scope of HNTAS after the construction phase? If not, can you please suggest an alternative approach and set out your justification.

Consumer Scotland agrees with the proposed approach not to include the Consumer Heat System in the scope of HNTAS after the construction phase. This will help to minimise any unnecessary intrusion on consumers. This also brings heat networks more closely in line with regulation in the gas and the electricity sector, where a similar distinction is made for anything downstream of the meter, such as internal wiring and appliances.

Scope of HNTAS

Question 2: Do you support the use of 6 properties or more for domestic-only networks, or the connection capacity equivalent for non-domestic/mixed use networks, and an appropriate minimum heat network size to which HNTAS participation would be mandatory for new networks after scheme go-live? Please provide reasoning for your answer and, if the answer is ‘no’ please provide an alternative approach.

We agree that small heat networks may struggle to meet the technical requirements of HNTAS and that there should be a de minimis threshold for the scheme. The HNTAS Technical Author concluded that the assurance elements subject to assessment and certification – e.g. an energy centre, distribution system, etc. – would not commonly be present in a network with fewer than six properties, and that equipment here is likely to be more comparable to a domestic property than a heat network. We therefore support the use of six properties or more as an appropriate minimum heat network size for mandatory HNTAS participation.

New building developments will now have the benefit of knowing the expectations of HNTAS in the design and development phases, meaning that developments should be built to the expected standard if they are due to be within scope of the scheme upon completion.

One potential downside of creating a de minimis threshold for HNTAS is that there may be a coverage gap for consumers living in buildings that fall below the threshold. Consumer Scotland welcomes confirmation in the consultation that entering into a relationship with the HNTAS Code Manager will be an authorisation condition for applicable networks. Therefore, there is a need to ensure that consumers who fall within this gap – i.e. those living on networks with between two and five properties – are not left with insufficient heating standards.

Question 3: Based on the trade-off between the benefits and costs of bringing smaller networks in scope of HNTAS, what, in your view, is the appropriate minimum heat network size to which HNTAS participation would be mandatory for existing networks? If this differs from the proposed use of 11 properties for domestic networks, or the connection capacity equivalent or non-domestic/mixed use networks, please provide supporting evidence and justification.

Meeting technical standards will be more challenging and potentially more costly for existing networks, as they will have to retrospectively improve or replace existing network infrastructure. For the smallest operators, the costs of carrying out the upgrade works needed to meet HNTAS requirements would be spread over a small number of properties, with the potential for greater costs being passed on to consumers. Therefore, for existing networks we agree that HNTAS requirements should only apply to networks with a higher number of properties.

Consumer Scotland is satisfied with the proposed use of 11 properties or more for existing domestic-only networks. However, there appears to be less rationale for how this figure was arrived at compared to the threshold for new networks. We are supportive of maintaining this threshold until existing networks begin achieving HNTAS certification, with a view to eventually bringing networks with between 6 and 10 properties within scope.

Question 4: Do you consider there to be need to subject existing networks with between six and ten properties to minimum network performance and monitoring requirements, or any other HNTAS requirements? What do you consider to be the implications of doing so?

Consistent with our view that there may be a gap between Ofgem’s definition of a heat network and the de minimis threshold for new domestic-only networks for HNTAS, there may be implications in terms of heating standards for consumers on existing networks with between six and 10 properties. Therefore, we agree that requiring these networks to meet minimum network performance and monitoring requirements is a reasonable compromise. We also welcome Ofgem’s commitment to explore what other approaches can be taken to improve the performance and efficiency of the smallest networks which will not be compelled to meet the HNTAS technical standards, including broad authorisation conditions for all heat networks on security of supply, and the application of guaranteed standards of performance.

Question 5: Do you agree with the proposals for minimum network measurement and that industrial networks (as defined above) should be exempt from HNTAS at scheme launch? Please give reasons why you agree or do not agree with the proposal.

Consumer Scotland has not taken a view on the inclusion or otherwise of industrial networks within HNTAS.

Question 6: What, in your view, are the implications of including consumer heat pumps on Ambient loop and Shared Ground Loop networks with HNTAS past the design and construction phases? If you think an alternative approach is needed, please provide details and reasoning, including (if applicable) if this differs with respect to new build networks and existing networks.

In order to drive up standards and consumer confidence in heat network technology, Ambient loop and Shared Ground Loop networks need to be subject to technical requirements. However, there may be an argument that a bespoke approach may be better suited to these networks given the extent to which their technical design, and how consumers interact with them, differs from other forms of heat networks infrastructure. For example, we have previously highlighted that on Shared Ground Loops, a majority of the consumer’s heat costs are paid through their electricity account, meaning that much of the consumer’s protections are covered within those frameworks.[3]

Inclusion within HNTAS will ensure that consumers on these networks are not excluded, but Consumer Scotland would support this approach remaining under review should a more effective solution be identified.

HNTAS Governance Structure

Question 7: Do you agree or disagree with our proposed governance structure, and in particular with the appointment of a Code Manager? Please provide reasons for your response.

We are satisfied with proposed governance structure, and the appointment of a Code Manager with overall responsibility for the scheme.

Question 8: Do you agree or disagree with the need for a Code Management Committee and sub-committees to ensure the views, interests and experiences of those involved in, or impacted by, HNTAS are taken into account to further evolve and improve the scheme? Please provide reasons to support your views.

We agree that a Code Management Committee and sub-committees could have a positive role in the governance of the scheme. Having a feedback loop consisting of stakeholders with varying roles in relation to the HNTAS will be beneficial to its continual evaluation and evolution.

Question 9: Do you support our proposal for the Code Manager to be housed within DESNZ initially, whilst we work through long term governance options? Please provide a justification for your answer.

We are satisfied with the Code Manager being housed within DESNZ initially, whilst longer-term governance options are worked through.

Question 10: Do you support our proposal to recover 100% of the Code Manager’s costs through the gas and electricity licence fee mechanism in the short term? Please give reasons or supporting evidence for your answer and clearly outline any alternative proposals.

Consistent with our view on the recovery of Ofgem’s heat networks regulation costs, we support the proposal to recover 100% of the Code Manager’s costs through the gas and electricity licence fee mechanism in the short term. This will prevent burdensome cost recovery on heat networks consumers, whilst their numbers are comparatively small, and whilst the market is still nascent.

Question 11: Do you support our proposal to recover the Code Manager’s costs through a blend of gas and electricity licence fees and fees from the heat network sector in the longer term? Please give reasons or supporting evidence for your answer and clearly outline any alternative proposals.

Consistent with our view on the recovery of Ofgem’s heat networks regulation costs, we support the proposal to recover the Code Manager’s costs through a blend of gas and electricity licence fees and fees from the heat networks sector in the longer term. As the number of consumers on heat networks grows, and more standardised billing processes emerge which would allow for fair and effective cost recovery, it is appropriate that heat network consumers should begin contributing towards the Code Manager’s costs. A blended approach will continue to protect heat networks consumers from burdensome costs whilst the market remains nascent.

HNTAS Requirements: Technical, Assessment and Certification

Question 13: Do you agree with the proposed approach of KPIs, Statements of Conformity and assessment gateways that will ultimately contribute to certification? Please give reasons why you agree or do not agree with the proposal.

We agree with that the approach outlined creates a clear and robust process for Responsible Parties as they work towards certification. KPIs will be a useful tool for assessors in determining process across the various stages of the compliance pathway.

Question 14: Do you agree with the gateways for new build heat networks being at the end of design, then end of construction/commissioning, followed by proof of measured in-use performance after 2 years. If you disagree, please suggest an alternative approach and set out your justification.

We are satisfied that the approach and timescales proposed in the consultation for new build heat networks are reasonable.

Question 15: If you anticipate that introducing HNTAS will any impact on the Government’s housing supply ambitions please provide expected impacts with reasoning and evidence to support your answer.

Consumer Scotland has not undertaken analysis on the potential impact of introducing HNTAS on housing supply ambitions, and it should be noted that ambitions are different in Scotland to those referenced in the consultation. However, we are aware that there some operators in the social housing sector have concerns about this.[4] If budgets need to be redeployed to carry out upgrades to meet new heat network technical standards, particularly when this had not been anticipated, then it may impact on planned expenditure in other areas. However, we would suggest that any such impact should only be temporary, with developers able to make the necessary adjustments to ensure that new builds are HNTAS complaint. Therefore, the impact on housing supply ambitions should not be used to justify delays or the watering down of new heat network standards which are vital for both existing and future consumers.

Question 16: Do you support the proposed milestones for existing heat networks given in Table 6, or do you think there is a case for the final certification standard to be set at Milestone 2? Please provide reasons for your answer including your assessment of the impact on consumers of your preferred option.

Consumer Scotland has commissioned qualitative research with parties involved in the operation of heat networks in Scotland to baseline sector practice across metering, billing and other consumer-related activity, in the time period that sector regulation was introduced. [5] The findings demonstrate the extent of the challenge that existing heat networks will face in achieving HNTAS compliance, particularly in relation to network efficiency. One third-party service provider working across hundreds of heat networks argues that networks rarely operate to their original design specifications, with many operating at 40-45% efficiency, and some as low as 30%. This participant added that networks commissioned in the 2010s are approaching the point at which major components require replacement, creating a timing problem where regulatory compliance and routine capital lifecycle replacement may coincide. This is the reality for many existing networks, and the position from which they will begin their HNTAS compliance journey.

We welcome the recognition in the consultation that it will take time for many existing heat networks to make the improvements needed to achieve satisfactory performance, and we support the proposal for a pragmatic transitory approach of several years to bring networks up to standard. Placing unrealistic timescales on networks to achieve compliance is likely to exacerbate the poor consumer outcomes that the scheme aims to minimise, and which we repeatedly see the raised by consumers through our delivery of the Heat Networks Advice Service in Scotland.[6]

Despite seeing the potential benefits of a pragmatic approach in relation to timescales, Consumer Scotland is not in favour of allowing existing heat networks to be held to lower overall standards. Having achieved the minimum requirements at Milestone 2, which the consultation states addresses only the very worst performance issues, it is important that Responsible Parties continue to drive improvements across their networks until the required standard is achieved. We therefore support the proposed milestones as set out in Table 6. If, over time, there is evidence that a significant proportion of the sector is unable to achieve conformity at Milestones 4 and 5 – owing to, for example, technical barriers – then the requirements could be revisited at that stage. But we do not believe there is currently a case to be made for setting final certification at Milestone 2. 

Question 17: Do you agree with the milestones for existing networks? If you think there is a case for requiring these milestones to be met more quickly or more slowly, please give details to explain your answer.

The timescales outlined for existing networks to meet the various milestones seem proportionate, based on the rationale outlined. The five year deadline for the installation of customer-level metering, and the Certification 2 deadline of 10 years, feel like the absolute limit of what is reasonable given that consumers will continue to experience sub-optimal operating standards until these milestones are met.

Question 20: Do you think our proposed treatment of Mixed Age heat networks is effective in appropriately applying different assurance pathways to newer and older parts of a heat network? Please provide reasons for your response.

We are satisfied that this is an appropriate response to circumstances where different constituent parts of heat networks will be subject to different assurance pathways.

Question 21: Do you agree that the HNTAS Metering and Monitoring Standard should cover the monitoring points and the Automatic and Remote Monitoring Systems (ARMS)? Please provide reasons for your answer.

The HNTAS Metering and Monitoring Standard needs to deliver on the policy intention of driving improved outcomes for consumers across billing accuracy and security. Consumer Scotland does not take a view on how this should ultimately be achieved.

Question 22: Do you agree that the HNTAS Metering and Monitoring Standard should also cover smart metering systems and a Metering and Monitoring Strategy? Please provide reasons for your answer.

Consumer Scotland agrees that a Metering and Monitoring Strategy will be a useful tool in promoting compliance with the Metering and Monitoring Standard, by requiring Responsible Parties to set out how their meter data will be measured, extracted, recorded and reported. We also agree that HNTAS Metering and Monitoring Standard should also cover smart metering systems and we have discussed this further in our response to question 24.

Question 23: Do you agree with the proposed metering milestones and timelines for existing networks? Do you agree that they allow sufficient time for installation while ensuring consumer outcomes and network performances can be improved as soon as practicable? If you disagree, please set out your reasons and a justification for an alternative proposal.

Consumer Scotland agrees with the proposed metering milestones and timelines for existing networks. They allow sufficient time for installation whilst ensuring consumer outcomes and network performances can be improved. On the surface, it could be argued that five years is excessive for demonstrating compliance with metering milestones, but we recognise that timescales need to reflect a number of challenges that existing networks face. In our qualitative research, opposition to mandating customer-level metering from operators in the social rented sector is described as ‘deeply held’, which is consistent with the perspectives we hear regularly in our engagement with the sector.

Consumer Scotland recognises these concerns but has consistently argued that they can be overcome. In response to Ofgem’s heat networks regulation: implementing consumer protections consultation, we stated that: “whilst metering can support fairer and more transparent billing, Consumer Scotland is concerned that the presence of metering should not be interpreted as meaning that all consumers must be billed solely on a consumption basis. There may be circumstances where alternative billing approaches remain appropriate, for example to support affordability, reflect building characteristics, or to protect consumers in vulnerable circumstances. Consumers should retain a degree of choice in how charges are structured, and billing arrangements should be clearly explained and justified”.[7]

We therefore welcome recognition in the consultation that the benefits of metering and monitoring go beyond consumption based billing. We also welcome the proposed approach to mandating the installation of meters in supported housing, almshouse accommodation and purpose-built student accommodation to use consumption based billing for heat. Consumers should continue to be able to use other billing methods if appropriate to do so.

Question 24: Do you agree that “smart meter” requirements should also be mandated, and included in the HNTAS metering and monitoring specifications?

We agree that “smart meter” requirements should be mandated and included in the HNTAS metering and monitoring specifications. To be considered an effective and viable alternative heating solution as part of the energy transition, there is a need for heat networks to be future-proofed across the design, development and operational phases. Consumer Scotland considers smart meters to be a important gateway technology to the future energy system, which will be key for consumers to be able to become active participants. This includes access to, for example, flexibility services, which may increasingly become a feature of heat networks in future. 

Question 25: Do you agree with our proposal to disallow the use of the wired M-Bus, and other unencrypted communication protocols, on new heat networks with remote disconnection capability from the point at which HNTAS commences?

Consumer Scotland agrees that data security is an important consideration in technical assurance, and that the necessary protections should be put in place. However, we do not take a view on how this outcome is ultimately arrived at, including the use or otherwise of unencrypted communication protocols.

Question 28: Do you agree with our approach to set the minimum level of accuracy at the equivalent of at least Class 2 of the MID 2014?

Metering has an important role to play in ensuring that heat network consumers receive accurate consumption-based billing, but consumer trust in metering will depend on industry-wide consistency being achieved. Therefore, Consumer Scotland agrees that HNTAS should look to go further than the existing Heat Network Metering and Billing Regulations (HNMBR) and introduce a minimum level of accuracy that all heat meters are required to meet.

Question 29: Do you agree that ongoing testing and recalibration is required for existing networks?

Consistent with our answer to question 28, ongoing testing and recalibration will be required to ensure that metering standards are maintained and that consumers retain confidence in the accuracy of their consumption-based billing. However, to fulfil the policy intention, requirements on existing networks need to be proportionate as part of their broader assurance pathway.

Question 30: Do you agree with proposal to extend metering requirements to existing buildings of supported housing, almshouse accommodation and purpose-built student accommodation, so that they can be covered by HNTAS?

Yes, we agree with the proposal to extend metering requirements to existing buildings in these types of accommodation. Please see the rationale for this as set out in our response to question 23.

Question 31: Do you think HNTAS requirements, including metering requirements, should be applied to buildings with leasehold related HNMBR exemptions? Please provide reasons for your answer.

We support the move to mandating the installation of customer-level meters, but we recognise that in some instances exemptions will still be necessary, for example in the case of physical constraints. However, leasehold does not exist in Scotland in the same way it does in England and Wales, and therefore Consumer Scotland does not take a view on whether or not HNTAS requirements, including metering requirements, should be applied to buildings with leasehold related HNMBR exemptions.

Housing is a devolved responsibility in Scotland, which means that there will be instances in the development of heat networks policy at a GB level which require legislative differences to be navigated. Consumer Scotland welcomes the definition of ‘Relevant Lease’ in the authorisation conditions to cover ‘any other agreement covered by legislative provisions with similar effect in any jurisdiction within Great Britain’.[8] Undertaking repairs or upgrades in mixed tenure buildings is increasingly challenging in Scotland, and is one example of how an understanding of distinct processes and legislation in Scotland will be required in the application of heat networks policy, including HNTAS.[9]

Question 34: Do you agree with the proposal to disallow the use of heat cost allocators to demonstrate compliance with HNTAS requirements? Please give reasons why you agree or do not agree with the proposal.

We understand that at least some heat networks still use heat cost allocators and that there may be a use case for them in instances where physical constraints make consumer-level metering difficult. If the proposal to disallow heat cost allocators is accepted, we would encourage UK Government to keep this under review should there be a need to revisit their potential use in future.

Question 35: Do you have any comments on our proposal to provide heat network operators powers of entry to conduct necessary maintenance of heat network equipment for health and safety reasons, meeting required technical standards and to install and maintain metering systems?

We are satisfied with this approach, which brings heat networks into line with practice in the gas and electricity sector. 

Question 36: Do you have any comments on our proposal to provide the HNTAS Code Manager with the powers of entry to enable meter accuracy activities to be conducted, replicating the powers of entry currently provided to OPSS under HNMBR?

We consider it appropriate that the Code Manager would take on this responsibility moving forward.

Question 37: Do you have any comments on our approach to provide necessary and proportionate protection to customers regarding the use of power of entry?

We are satisfied with the proposals as outlined, but Consumer Scotland would welcome further engagement on the design of powers of entry protections as the policy develops.

Question 39: Do you agree that heat networks which have already submitted planning applications but have not yet signed M&E construction contracts at the point of HNTAS commencement should be subject to the new build requirements and assurance pathway from stage 3 (i.e. technical design) onwards? Please provide reasons for your answer.

Where heat networks have submitted planning applications, but have not entered into construction contracts, there will still be scope to alter their development plans to best ensure compliance with technical standards. This would also be preferable to retrofitting changes later in the process. Therefore, it seems reasonable that these networks would be subject to the same requirements from stage 3 onwards.

Question 40: Do you agree that two years from completion is an appropriate timeframe to base the decision on the appropriate entry point at which pre-operation heat networks would join the existing networks assurance pathway? Please provide reasons for your answer.

We are satisfied that this is an appropriate timeframe, based on the rationale outlined in the consultation.

Question 42: Do you support the proposal to permit non-conformities in certain circumstances where non-comformities are unavoidable and have a negligible impact on heat network performance?

The Statement of Applicability outlined in paragraph 5.9, will be a useful tool in determining and recording which technical requirements a heat network is required to meet. Consumer Scotland agrees that it is reasonable to permit non-conformities where a scheme’s design does not allow it to meet a particular technical requirement, and where the impact on heat network performance will be negligible. This will provide a degree of flexibility in the assurance pathway, which is necessary to allow for the variance of heat network models in the market. If implemented effectively, permitted non-conformities should be an aid to heat network development whilst ensuring that consumers are protected.

Consumer Scotland would welcome further clarity on the process for measuring the impact of a non-conformity as this is not clearly set out, and therefore what is deemed to be ‘negligible’ is not defined. A non-conformity may be considered to have a negligible impact at the point when dispensation is granted, but this impact could change over the lifecycle of the network, i.e. it could become a bigger issue over time. Therefore, to ensure that permitted non-conformities deliver on their policy intent, we support ongoing monitoring of them across the assessment and certification phases.

Question 43: In addition to physical constraints and specific technology applications, are there any other categories of non-conformities that you think should be permitted? We are interested in suggestions where permitting non-conformities would have little impact on network performance and would not negatively impact consumer outcomes.

Consumer Scotland is not currently aware of any other category of non-conformity that should be permitted. We note that, as proposed, permitted non-conformities will only be available to new build heat networks. As highlighted throughout this response, existing heat networks face significant challenges in achieving HNTAS compliance, with failure to do so likely resulting in sub-optimal outcomes for consumers on those sites. It is therefore vital that equivalent dispensations to permitted non-conformities be built in to the assurance pathway for existing networks – for example, as part of the performance improvement plan.

Question 44: Do you support the process outlined for duty holders to submit, and assessors to grant, a dispensation for permitted non-conformities?

We are satisfied with the approach as outlined in the consultation.

Question 45: Do you support the process outlined for the handling of non-conformities present at assessment?

We are supportive of the process for the handling of non-conformities present at assessment.

Question 46: Do you support the process outlined for the handling of non-conformities present at certification?

We are satisfied with the process for the handling of non-conformities as outlined in the consultation. We agree that where a non-conformity is not permitted at this stage, and where requests for additional information or mitigating action have been unsuccessful, a HNTAS Failure Notice should be issued. 

Question 47: Do you agree with the milestones for End of Life heat networks? If you think there is a case for requiring these milestones to be different, or to be met more quickly or more slowly, please give details to explain your answer.

In principle, Consumer Scotland agrees with the milestones for End of Life heat networks but we would encourage that action is taken at the earliest possible stage to ensure consumer certainty and better outcomes. Through our advocacy work we have seen many of the challenges that consumers experience when a network is approaching End of Life. It is important that the requirements on Responsible Parties as regards the End of Life process are robust and clearly set out.

Question 48: What is your estimation of the impact HNTAS will have on heat network insolvency and market exit risks? Do you agree that the risk is low and manageable? Further to existing proposals, what mitigations would you suggest?

Consumer Scotland has not carried out analysis on the potential impact of HNTAS on heat network insolvency and market risks, and therefore we are not currently in a position to take a view on whether or not the risk is low and manageable. However, the risk to consumers in the event of heat network failure is significant. We would therefore encourage DESNZ to continue to review these risks, and that any proposals taken forward be consistent with Ofgem’s approach to mitigating the risk and impact of financial failure.[10]

Question 50: Do you agree with the general approach set out in the data hierarchy (pyramid) above?

We are satisfied with the general approach as set out.

Question 51: Do you support the development of a ‘golden thread’ of evidence throughout a network’s life, to ultimately be maintained by the heat network operator?

We support the development of a ‘golden thread’ as a tool to support heat network operators in managing their HNTAS compliance journey. 

Complaints, Appeals and Enforcement

Question 64: Do you agree with our proposed arrangements for handling complaints against and non-compliance of heat network operators? Do you consider that remedies other than withdrawal of certificates, such as financial penalties on non-compliant heat network operators, would be appropriate?

In principle, Consumer Scotland is supportive of the proposed arrangements set out in the consultation document for handling complaints about non-compliance. However there are a number of additional issues that also need to be considered as part of this process, including:

• Making any complaints process clear, accessible and transparent to ensure that consumers can raise complaints related to HNTAS if they need to
• Consider how any HNTAS complaints process fits within the existing consumer complaints journey and the different bodies already working across the consumer and regulatory landscape
• Consider how consumers can access the relevant information about their networks performance in order to inform, progress and escalate any complaint

Consumer Scotland has not taken a view on specific remedies to address non-compliance by operators outwith the withdrawal of certification. It is essential that both the Code Manager and Ofgem as regulator have the sufficient tools to take any action if non-compliance is identified. Financial penalties may be an appropriate tool to address non-compliant operators, however it will be essential to ensure that these cost are not passed on to the consumer.

Incentives

Question 69: Do you agree there is a need for additional grants and/or financial support for installing particular types of equipment to support HNTAS? If so, what types of equipment would you propose?

As highlighted throughout this response, existing heat networks face significant challenges in achieving HNTAS compliance. Operating efficiency across this segment of the market is low, and remediation costs are expected to be substantial. In some cases it has been estimated that remediation costs will exceed £10,000 per property, with an overall cost in Scotland estimated at £145m.[11] Consumer Scotland is concerned about these costs and the scale of the undertaking it represents, as failure to improve operating standards risks compounding poor experiences and higher heat costs for consumers, as well as deterring potential heat network consumers. It is unrealistic to expect the sector to absorb these costs on its own, and we therefore agree that there is a need for additional grant and/or financial support for installing equipment required by HNTAS.

Of the incentives proposed, we believe that there is a strong case for grants or financial support for metering and monitoring equipment, including Heat Interface Units. Much of the sector is currently unmetered, and we are aware through industry engagement that even where networks are subject to metering requirements under HNMBR, compliance monitoring in recent years has been minimal. It is therefore expected that much of the sector will be required to undertake upgrades related to metering infrastructure in order to meet the Metering and Monitoring Standard. There is significant opposition towards mandatory consumer-level metering particularly from operators in the social rented sector, with cost cited as a key barrier. If both UK and Scottish Governments can support the sector in its transition to metering, this could further encourage operators to begin undertaking the required works.

Although not proposed as a potential incentive here, we are aware of concerns from industry related to the extent of capital works which will need to be carried out across the different technical elements, for example the distribution network. A process whereby operators could apply for support for undertaking specific upgrades that are proving to be a barrier to compliance, could be an option for targeted funding.

Question 70: Do you believe there is a need for additional grants and/or financial support for services undertaken as part of HNTAS? If so, what types of services would you propose?

We are not aware of how prohibitive or otherwise the cost of the development of Performance Improvement Plans or subsidised assessment costs will be for operators. But where need can be evidenced, we would support additional grants or financial support for this purpose.

Question 71: Do you believe there is a need to encourage early movers toward HNTAS certification? If so, what form would incentives take and when would these need to be applied?

It is in consumers’ interest for heat networks to meet technical standards as quickly as possible. Consumer Scotland would therefore support incentivising early movers, where it can be guaranteed that incentives do not encourage poor practice.

Question 72: Do you believe there is a need for subsidised training to support all the above? Please specify what you believe are the key skills gaps?

Consumer Scotland would like to see an equivalent to the Heat Network Training Grant made available in Scotland.[12] This would support the sector to mitigate any costs incurred when looking to upskill on various aspects of heat network design, development and operation. It will also help to develop the skills base required to support the growth of heat networks in Scotland.

Question 73: Please suggest any other types of incentives not considered above that could assist existing heat networks in becoming compliant with HNTAS?

We note the reference in the consultation to the Heat Network Efficiency Scheme (HNES) which currently operates in England and Wales.[13] HNES was launched to help improve existing heat networks by enabling optimisation studies to identify actions to optimise heat network operation and in the delivery of eligible improvement measures. The scheme works to support the sector to make heat networks more efficient, which will ultimately lower the cost to consumers.

Many existing heat networks operate at a low level of efficiency, and we know that poor network optimisation leads to unplanned outages and reliability issues. These issues, if left unresolved, will harm the potential of heat networks to be a key technology in the decarbonisation of the built environment in Scotland.

The operation of the scheme in England and Wales has encouraged the sector to improve network efficiency in advance of the implementation of HNTAS. This support is not currently available for heat networks in Scotland. Consumer Scotland has recommended to the Scottish Government that they establish equivalent support to improve the efficiency of heat networks in Scotland.[14] The absence of this support could lead to heat networks in Scotland being disproportionately affected by HNTAS associated costs, which will ultimately be passed on to consumers. There is also a risk that networks in Scotland will be at higher risk of non-compliance with HNTAS. Other stakeholders, including the Heat Trust, and bodies in the social housing sector have raise similar concerns about the lack of financial support available.[15]

HNTAS provides a framework to drive improvements in operational standards across the sector, but this opportunity will be missed if existing heat networks are not supported to participate.

Question 74: Do you agree that incentives should focus on supporting and encouraging existing heat networks as they are likely to have a more difficult transition pathway to meeting HNTAS requirements?

For the reasons already stated, we agree that incentives should focus on supporting and encouraging existing heat networks. We welcome confirmation that new build heat networks will be expected to self-fund their compliance with HNTAS and therefore will not require financial support.

Question 75: Do you think introducing this type of strengthened and targeted framework could help the heat networks sector? Are there any other areas that could form part of the frameworks?

We support the development of a procurement framework of approved providers for use by existing heat networks. This should serve to streamline the process for contracting work, including in the areas referenced – i.e. metering, HIUs, consultancy and assessor services. This should also serve to ensure that required work is sourced and contracted quickly and that the work is carried out to an expected standard. However, any framework needs to be fluid enough to ensure there is a constantly a healthy supply chain of providers available, and that there are no unreasonable barriers to entry for providers looking to join.

Next steps

We would be happy to discuss the content of our submission to this consultation in more detail. Looking forward, we would be particularly keen to engage further on the impact that technical standards will have on existing heat networks.

References