The introduction of the new ‘Heat Networks Market Framework’ represents a watershed moment. It aims to transform heat networks from proven-but-niche solutions into fully regulated utilities. Robin Abram, Associate Director, Heat, at Last Mile Asset Management, explains how they are primed to cut up to 17% of Britain’s emissions from heating buildings.
Building confidence through heat network regulation
With the Government targeting 1.5 million new homes in the next five years, will regulation be a platform for growth, or will it slow the expansion of this low-carbon heating solution?
Establishing regulation is a vital step in building confidence throughout the value chain. Historically, housing developers have often been left in less-than-ideal circumstances when it comes to their heat networks, often having to manage the asset themselves or outsource them to a provider.
The new regulations aim to remedy this situation by requiring all heat networks to be operated by a regulated heat network operator that is authorised by Ofgem. Ofgem will begin regulating the sector in January 2026.
The new regulations build on both the success of the Heat Trust standards and the Chartered Institution of Building Services Engineers’ (CIBSE’s) Code of Practice 1 (CP1). Recognised as strong voluntary standards, they will now form the basis of the Government’s regulatory approach.
By requiring authorised operators to operate heat networks, this removes the burden from developers to act as a utility provider and assures investors of the proper, ongoing operation of their assets. Heat networks have a major role to play in delivering low carbon heat and utility-level regulation solidifies their position as a future-proof asset that will serve as a long-term investment.
At Last Mile, we have always operated with the mindset of an already regulated heat network provider and believe standardisation will help improve consumer confidence. All of our heat networks are designed and built to CP1 standards, and we have signed all our heat networks up to the Heat Trust to meet the highest standards ahead of regulation.
Regulation as a foundation for heat network growth
While forthcoming regulations under Ofgem’s oversight promise to build market confidence with essential consumer protections and technical standards in the form of the Heat Network Technical Assurance Scheme (HNTAS), they must be carefully calibrated to avoid stifling innovation and hampering development.
As a regulated utility provider in water with over 25,000 satisfied customers, we recognise the benefits of regulation. Consumers, developers and investors all benefit from technical regulations and consumer protections. And as many of the proposed regulations and technical standards are based on successful existing gas and electricity network regulation models, we are keen to see the best parts of those models replicated to ensure confident growth in the sector.
However, flexible, forward-looking regulation should be designed to allow the sector to move quickly, bolstering developers’ and consumers’ confidence, while supporting the transition to net zero. For heat networks to fulfil their promise and expand from today’s modest 3% market share to a projected 20% by 2050, regulation must serve as the springboard for growth, rather than a barrier to progress.
Site-by-site authorisation could hinder new networks
HNTAS, which is set to be piloted mid-way through 2025 and is currently expected to come into force in 2026, will require new and existing heat networks to be ‘certified’, i.e., authorised to supply heat to customers, on a site-by-site basis. The certification pathway comprises a series of gateways along the full heat network lifecycle of design, construction, completion and operations, that together ensure the network is more likely to meet operational requirements. This process is intended to create a level playing field to hold the heat networks industry to account and ensure a high-quality efficient utility is delivered to the consumer.
However, many consider such an approach to be overtly onerous, with significant potential to stifle the heat networks industry. It risks diluting the government’s intention to promote heat networks industry as a key component of decarbonising heat produced and consumed by our new and existing building stock.
This site-by-site authorisation process is also stricter than for other utilities like gas. Whereas equivalent gas legislation allows developers to be audited annually, heat network developers would be required to certify each individual site through several gate stages. This could create an unlevel playing field and risk slowing progress toward broader net-zero goals, especially as the government proposes to build 1.5 million new homes over the next five years. These additional authorisation ‘hoops’ could deter developers from adopting heat networks due to potential delays. While each heat network is unique in its size and layout, consistent principles around technology, network type (decentralised and centralised), and performance expectations could help balance oversight with progress.
Consumer pricing
Under the new regulations, existing heat networks will need to meet enhanced standards. Given the history of some networks performing poorly – part of the reason regulations are being introduced following the Competition and Markets Authority report into heat networks – it’s assumed that some will find it difficult to meet the new standards. Nevertheless, consumers will benefit significantly as the regulations ensure standardised levels of performance.
Until the regulation consultations are finalised and take effect in January 2026, Last Mile is focused on supporting the development of new low-carbon heat network that meet or exceed upcoming standards. By designing our networks to align with Heat Trust and CP1 standards, we aim to provide reliable, high-performance heat delivery. This also means that there should be little consumer-facing change that impacts the daily service or performance of the heat networks we’re building in low-carbon housing developments across Great Britain. Consumers will have new protections and continue to benefit from the high level of performance our networks deliver nationwide.
Heat network pricing should be transparent and fair. With new regulations come opportunities for new tariffs and pricing structures. For example, fixed-rate prices in ambient heat networks are simple, effective, and a suitable form of pricing for the system. Heat network operators can charge a fixed monthly fee, and then homeowners can shop around for electricity suppliers to run their heating. Any regulations or metering requirements that would inhibit such innovation would not be in consumers’ best interests, and we believe approaches to metering should be appropriate to the form of heat network in use.
What next for heat network regulation?
Heat networks currently account for almost 3% of UK heat. If the market is properly regulated while encouraging innovation and rapid delivery, the market share could expand to 20% of all heat by 2050, representing an investment potential of between £60 to £80bn, the largest heat network investment opportunity in all of Europe.
We want to see the new regulations and technical standards shaped to encourage growth and investment, so that heat networks fulfil their low carbon cost effective potential.
Speak to our team if you’d like to learn more about how we can support projects with fully compliant, future proof solutions.
This article appeared in the September 2025 issue of Energy Manager magazine. Subscribe here.