The UK Heat Network Regulations; why a ‘compliance only’ approach misses the true, underlying opportunities of the scheme.
By Peter Stockwell, Managing Director of Concept Energy Solutions
This year, The Government’s Heat Network Regulations (HNR) will try and revolutionise heating efficiency in tenanted buildings. They are complex, but in a nutshell they require building owners to install meters that can measure the consumption of heat, cooling and hot water of each tenant.
The benefits of the new law for landlords are readily available. The outcome will be more sustainable buildings that give tenants more control over their energy costs – clearly a very marketable proposition for landlords looking to achieve an edge over competitors. Contrastingly, failure to comply exposes commercial and private landlords to myriad risks. My argument is; merely doing the minimum isn’t the right way to embrace the rules either.
Why going beyond ‘compliance only’ is essential
Understanding one thing is vital; the Regulations have great potential benefits. They could lower energy bills and lower costs for tenants, and they could also deliver more sustainable UK buildings. Wider benefits like lower UK CO2 emissions are at hand, and the rules could even help mitigate UK energy shortfalls.
There is a problem however. Landlords are not obliged to install heat metering, on the proviso they can prove it is not cost effective or technically feasible. This potential hole in the rules means, sadly, there will be many companies seeking to prove this is the case in order to avoid the cost burden.
It is also worth mentioning that some tenants might be worse off if new measurement confirms they are using more energy than they were being charged for hitherto. These few might be less than keen to get heat meters in also.
Either way, HNR only really works when landlords go beyond the minimal legal requirements and actually install the heat meters, regardless of the cost. Once the meters are in, they deliver better information on bills, and should therefore drive tenants to be more energy efficient.
Overall, this open approach builds longer term tenants, delivers sustainability plus transparency and healthier and greener UK buildings too. There is genuine potential for the rules to create positives, but only when the installation work is taken to its logical conclusion.
What opportunities do the right installations offer?
As an example, imagine four commercial office tenants share their building’s heating bill, based on their percentage share of the floor space they rent.
If one office works hard to use less heat, they will not be rewarded, because their bill has nothing to do with the heating they really use. So there is no incentive to close windows, turn thermostats down or become more carbon efficient.
Because the largest share of CO2 emissions from UK buildings comes from space heating and water heating, encouraging more meter installations would save tenants valuable money, and improve buildings’ environmental impacts. But we must have the meters to provide the information.
Crucially, HNR metering could also be an important part of ‘futureproofing’ buildings to ensure they are in line with new Energy Performance Certificate (EPC) regulations coming into play. From 2018, landlords will be unable to lease out properties with an EPC rating of ‘F’ or lower. HNR metering should encourage tenants to use less energy, which in turn will lower the EPC rating of the building.
Why the scope of the Regulations makes positivity vital
Remember, the Regulations apply to anyone who supplies or charges for heating or cooling a building, either through a communal heating system, or a district heat network.
Therefore, the scope of the Regulations is wide. That means the scope of the benefits could be wide too, assuming installations and positive work actually take place. They would affect a landlord renting out office space, where offices share heating powered by a central boiler.
They would also affect a landlord renting property in a domestic building where heat comes from a shared district heat network. As a rule of thumb, if you rent out space shared by more than one tenant, you are likely to be affected.
It all means vast improvements can be made; the sector must step up and encourage landlords to make metering a reality, not dismiss the Regulations with denials.
The next steps
Affected landlords, often called ‘heat suppliers,’ should already have provided detailed information in relation to each of their heating systems and buildings to the National Measurement Office (NMO). The deadline was December 31, 2015. This information then needs to be updated every 4 years.
Heat suppliers must also ensure that heat meters are installed, to measure the consumption of heat, cooling or hot water by December 31, 2016. This assessment must be repeated every 4 years. But, as we’ve discussed, meters need only be installed if it is feasible or cost effective to do so.
Understanding the scope of this caveat is challenging, but experts such as Concept Energy can help landlords establish their precise obligations and then advise on what action to take. Help is at hand in the form of undertaking both surveys and works, proving and identifying whether meter installations are necessary, and, if they are, getting the installation done on time and on budget.
The business opportunities from installation are there
Clearly, avoiding the punitive risks of non-compliance, potentially £5,000+, is a key driver. Further, you can win reputational advantage, gaining extra tenants and winning longer term business from those tenants you already have.
Remember, tenants will be delighted at the prospect of cheaper heating bills, and at the potential to live or work in a greener building.
In addition, you can use your compliance as part of your overall CSR reporting and sustainability marketing.
