Emily McAlindon, Commercial Director at Insite Energy
As heat networks become a central part of the UK’s decarbonisation strategy, they’re growing increasingly controlled. Ofgem’s new regulatory regime demands high standards of performance and consumer protection across a system’s entire lifecycle.
Procurement decisions therefore carry greater long-term consequences than ever before. It’s no longer enough to focus on capital delivery or lowest cost. Operational performance, compliance, customer outcomes and long-term flexibility are now key considerations.
However, many organisations are still deploying tendering processes better suited to conventional maintenance contracts. This approach is becoming increasingly problematic.
Outsourcing risk
With the introduction of formal regulation, including the detailed technical standards laid out in the Heat Network Technical Assurance Scheme (HNTAS) due to come into force in 2027, compliance can no longer be seen as a one-off exercise. It’s now an ongoing operational responsibility requiring continual monitoring and reporting.
This has led many procuring organisations to focus heavily on risk transfer. Tender documents increasingly attempt to push responsibility for compliance, performance standards and potential penalties onto service providers.
For many housing associations and local authorities in particular, this reflects natural caution. In practice, though, blanket risk displacement is rarely the most effective solution. It can result in rigid contracts, inflated pricing and strained service provider relationships.
Heat networks operate over decades, during which regulations, technologies and operational requirements inevitably evolve. Procurement should therefore be viewed less as buying a fixed service and more as establishing a long-term, flexible partnership.
Choosing the right delivery model
There is no single optimal commercial structure for heat networks. Full Energy Services Company (ESCo) arrangements allow for the transfer of significant operational responsibility, making them attractive to organisations with limited in-house capability. However, this often comes at the cost of reduced control over customer engagement and operational decision-making.
Conversely, in-house models provide greater autonomy but require specialist expertise across billing, compliance, technical operations and customer service. Hybrid models are increasingly emerging as a pragmatic middle ground, enabling organisations to retain ownership across short 12-month contracts while outsourcing specific technical or operational functions. Key to making the right choice is aligning with the organisation’s appetite for risk, control and long-term involvement.
Communicating across functions
Another recurring issue in tendering exercises is the disconnect between teams responsible for development and those tasked with long-term operations. Procurement specifications are often shaped during construction phases, with limited input from energy management, customer service or operational teams.
This creates a mismatch between what’s procured and what’s needed in practice. Reporting requirements, billing functionality and resident communication processes may be inadequate or misaligned with operational realities. Bringing all stakeholders into the procurement process earlier helps ensure that service provider contracts reflect the full spectrum of lifecycle requirements, not just capital delivery priorities.
Heat networks should be treated as whole-life assets rather than standalone construction projects. The question should not simply be: “What do we need on day one?” but also: “What will we need in five, ten or twenty years’ time?”
Early conversations
One of the more positive developments emerging within the sector is the growing use of early market engagement before formal tenders are released. Traditionally, service providers might simply receive a procurement document with a fixed specification and a deadline for pricing submissions. Increasingly, however, heat network operators and heat suppliers are opening discussions with prospects early on, through consultation events, workshops and informal dialogue.
This approach helps bridge knowledge gaps on both sides. It reflects growing recognition that heat network regulation remains a developing area, with many organisations still uncertain about what good procurement should look like in practice.
By involving service providers earlier, energy managers gain a better understanding of current market capabilities, likely delivery challenges and realistic compliance expectations. This can lead to more accurate pricing, stronger competition and better-aligned service proposals.
Clarity of focus
Effective procurement depends on being clear about priorities. Service providers need to understand what matters most: cost reduction, compliance assurance, operational flexibility or risk reduction. Too often, tender requests attempt to prioritise everything equally, resulting in vague requirements and inconsistent responses.
Clearer specifications allow proposals to be more precisely tailored, which in turn helps energy managers evaluate bids more effectively against genuine operational objectives.
As heat networks continue to expand across the UK, procurement processes will play an ever more critical role in determining whether these complex systems deliver long-term value or never-ending problems. Success will depend less on transferring risk and more on building resilient operational partnerships capable of adapting to a rapidly changing regulatory landscape.
This article appeared in the June 2026 issue of Energy Manager magazine. Subscribe here.
