The price of heat and the regulation of the UK's heat market

District Heating makes a relatively small contribution to heat supply in the UK, although national and local policy is encouraging wider implementation. A small industry, it is unregulated in this country and lacking in standardisation. Therefore design quality, prices and standards of performance tend to vary quite widely. The industry has recently come under scrutiny in relation to heat prices, which many customers consider to be high. Concern particularly relates to the high standing charges that are often levied on heat customers’ bills. These can seem very high when compared to the standing charge for a gas supply (e.g. £300 for heat versus £80 for gas).

Our research has found that the picture changes considerably when the cost of boiler replacement and maintenance are incorporated. Under these circumstances, the occupant of a new studio apartment heated by a gas boiler system could be paying over 20p/kWh, far more than the 4p/kWh gas price most customers consider to be their cost of heat. This study compares the real price of heat from gas boiler systems against costs for different (existing) district heating systems, with some surprising results.

In order to protect residential customers, charges levied by district heating systems should be benchmarked against a gas solution, while connection charges should be allowed to vary, thereby allowing the developer to assess if a district heating system is the best option for carbon abatement. The benchmarking of heat prices, and the modification of existing schemes through a process of ‘special measures’, is proposed through municipal regulation.