Ensuring Compliance – Preparing for OFGEM’s Heat Network Regulation
The UK’s transition to net-zero carbon emissions has driven regulatory changes across the energy sector, with Ofgem set to oversee the heat network industry, as established in the Energy Act (2023).
Under current proposals, we expect Ofgem to formally undertake their role as regulator of the heat sector from 26th January 2026, followed by a 12-month transition period.
It’s essential for heat network providers to proactively positioned themselves to comply with upcoming regulations. Here we look at what can be done to prepare for Ofgem’s regulatory framework and how we are leveraging compliance as a competitive advantage.
Ofgem’s role as the regulator for heat networks will focus on key areas such as consumer protection, ensuring fair pricing, reliability, and service standards, as well as technical and performance requirements, including efficiency and metering obligations. Regulatory licensing will become available to heat network entities, providing statutory rights like other utilities, such as access to public highways enabling construction and maintenance of assets.
All heat networks will have to be authorised by Ofgem to be able to operate and supply heat, this will be achieved at the entity level rather than per scheme. The purpose of authorisation is to ensure that all heat networks adhere to standards set in consumer protections and technical assurance requirements. We are well-placed to ensure authorisation due to our standardised designs and construction processes. There will also be an emphasis on aligning with the UK’s net-zero objectives and the Future Homes Standard.
Our existing business model and infrastructure already align with these regulatory principles in several ways. The company operates transparent and predictable pricing models, ensuring competitive rates for housebuilders and end-users. Through its smart thermostat controllers, consumers can monitor and control their heat usage efficiently, improving transparency and billing accuracy. We adhere to best practices in customer service, ensuring responsiveness and clear communication with end-users, which is a key regulatory requirement.
We also have a price promise, where we guarantee to our customers that the price they will be paying for their heat will be the same or lower to the closest counterfactual heating solution. For example, on our electrified Community Heat Hub solution the price promise is linked to individual air sourced heat pumps. Therefore, the solution ensures that consumers can expect a similar or better outcome compared to counterfactuals, while simultaneously helping house developers alleviate some of the increasing issues obtaining energy loads from the upstream electricity networks, which remains a challenge for individual air sourced solutions.
Networked Ground Source Heat Pumps and Community Heat Hubs provide highly efficient and low-carbon heat networks that align with Ofgem’s efficiency and reliability criteria. The modular design of the Community Heat Hubs ensures scalability and compliance with future performance standards.
As an established multi-utility provider, we are already accustomed to operating under Ofgem’s regulations in the electricity and gas markets. This experience ensures a smooth transition into heat network regulation. The company’s governance structure supports regulatory compliance, including data reporting, consumer complaint handling and service level commitments. We are actively engaging with Ofgem, industry bodies and housing developers to ensure our heat network models align with expected licensing conditions.
The Networked Ground Source Heat Pump and Community Heat Hub solutions align with the Future Homes Standard by providing low-carbon alternatives to gas boilers, ensuring housebuilders meet the 2025 regulatory requirements. By integrating heat networks with other utilities such as electricity, water, and fibre, a holistic multi-utility solution is offered, making it easier for developers to comply with net-zero legislation. These systems are designed to integrate with renewable energy sources, ensuring long-term sustainability and resilience against future regulatory changes.
With regulation approaching, heat network providers will need to adapt quickly to meet Ofgem’s requirements. Our proactive compliance strategy provides several advantages. By already meeting regulatory expectations, we can differentiate ourselves from competitors still adapting to compliance.
We can already demonstrate our compliance with the expected regulatory regime through our Heat Trust Scheme membership and accredited heat networks, combined with our designs and operation complying with the industry led CP1 technical standards, both of which have been used as a basis to develop the incoming regulations.
Compliance ahead of regulation is a strategic advantage for heat network providers. By staying ahead of regulatory changes and continuing to bring innovation to the sector, we can drive the adoption of sustainable, future-proofed heating solutions across the UK housing market.