(1 week, 6 days ago)Westminster Hall
I remind hon. Members that there have been some changes to normal practice in order to support the hybrid arrangements. Members who are participating physically and virtually must be present at the beginning of the debate and stay for the entire debate. I remind Members who are participating virtually that they will be visible at all times, not just to each other, but to us in the Boothroyd Room. If Members have any technical problems, they should email the Westminster Hall Clerks’ email address. I ask Members who are attending physically to wear masks until they are speaking. I call Elliot Colburn to move the motion.
I beg to move,
That this House has considered district heat networks.
It is a pleasure to serve under your chairmanship for the first time in Westminster Hall, Ms Ghani. I am grateful to the Speaker’s Office for granting me this debate, as some of my Carshalton and Wallington residents, particularly those living in the New Mill Quarter development in Hackbridge, have been adversely affected by district heat networks. In my efforts to support them, I have encountered many issues.
For the benefit of the House, I should briefly explain what a district heat network is. They are designed to take energy from a local energy source and distribute it to consumers through a series of highly insulated pipes. A common source of the energy is incinerators or so-called energy-from-waste facilities, as their proponents like to call them. That is the model used in my constituency.
When the Lib Dems gleefully secured the incinerator in Beddington that they fought so hard to deliver, one of their most common arguments was that the waste heat from the incinerator would be used to heat local homes. The idea was that highly insulated pipes would be laid, water would be heated at an energy transfer station, using heat from the incinerator, and sent along the pipes to residents’ homes, providing a reliable and supposedly clean heating source at a reasonable price, all run by an arm’s length company called Sutton Decentralised Energy Network—SDEN—which is wholly owned by the council. The reality is a system that has been dogged with failure, residents being ripped off and the complete absence of any action or even empathy from the council. I will expand on that point later.
My central point is that this relatively new form of energy production is almost entirely unregulated. When residents have problems, they have very little in the way of consumer protections or rights. I hope I can persuade the Government to fix that. The Government have already launched a consultation into the networks, which I contributed to, and have made space for discussions about the networks in the design of the Green Heat Network Fund. The consultation describes the heat networks as “central heating for cities”. When someone’s central heating breaks down in a traditional home, one family is affected. When a heat network breaks down, the entire network is affected, impacting hundreds or even thousands of people. As the consultation states, a heat network
“avoids the need for individual heating solutions in every building.”
Therefore, it encounters problems that will impact every building jointly. That is why there needs to be greater consumer protection.
I want to draw focus on several key themes today. The first is reliability. There have been extended delays in the SDEN system going live, meaning residents were until last month being provided with heat by the back-up boilers, which have proven less than reliable. By my count, judging from the contact I have had with residents from New Mill Quarter, in the past year, there have been nearly 20 hot water or heating outages, including over the cold winter months, leaving people without hot water or heating and putting vulnerable people at risk. On two occasions since December, the hot water and heating blackouts have required a call-out from the London Fire Brigade due to problems in the back-up boiler room.
The situation is not confined to Hackbridge. The Department for Business, Energy and Industrial Strategy heat networks consumer survey of 2017 found that a greater proportion of heat network customers experience loss of heating compared with customers not served by these networks. A report by the Competition and Markets Authority showed reliability concerns as a consistent theme of customer complaints on heat networks, particularly citing unplanned interruptions.
I am guessing that most of us live in a home heated by a boiler. For those who do, breakdowns are a rare occurrence. For New Mill Quarter residents, they are very common. Even if those of us who live in a home heated by a boiler are dogged with problems, we can vote with our feet, and switch provider or change our system and replace the boiler. That option is not available to those living in a district heat network. Residents in Hackbridge were sold a system that they were told would be 100%, 24/7 reliable. There are marketing documents to prove that. [Interruption.]
Thank you, Ms Ghani.
In a public meeting that the council tried—and failed—to keep me out of, despite my calling for it in the first place, residents were told that they should have somehow known that 100% did not mean 100% and that, inevitably, there would be problems. During that same meeting, residents expressed how they could never get through to someone when an outage occurred, were never updated and had no recourse to compensation because there were no obligations on SDEN to do anything, due to lack of regulation. The meeting ended with residents very unhappy, having received no answers and a pitiful compensation offer that did not make up for the stress and concern caused by the constant outages. Nor was there any hope that things would get better; indeed, outages continued well after the meeting took place.
The second issue I want to address is customer satisfaction. Residents in New Mill Quarter experience higher than average heating bills. I conducted a survey of those residents to acquire evidence of their experience. Some 71% of residents told me that their bills were a lot higher than before they moved into New Mill Quarter; that figure rose to nearly 100% when including those who said their bills were somewhat higher.
The pricing structure of SDEN is split into two categories: a variable rate, which is the usual cost of daily rate and usage; and a standing charge, which covers maintenance and repairs. However, the New Mill Quarter Residents Association calculated that the pricing model that SDEN uses as a basis for its costs is nearly £3 million higher for the estate than the next available alternative over the contract term. I can hear the Liberal Democrats shrieking at me—incidentally, they were so keen to keep information about the pricing model quiet and out of the public eye that it took freedom of information requests and a ruling from the Information Commissioner to get that information out of them. They would say that the costs are high because they include things such as insurance and system maintenance, and that is something that we mere mortals who have a boiler must pay for separately. But the numbers just do not stack up. There is evidence to suggest that residents are being completely ripped off. Some residents are looking into private litigation, and I do not think it beyond the realms of possibility that the matter is investigated by a series of Government Departments. Things are that serious.
The overall customer satisfaction with district heat networks is also in question. I detailed the service issues on the estate, which I will not repeat. It is worth noting that, on average, district heat network customers have lower satisfaction rates than customers of more traditional forms of heating. Despite being used as a flagship example of a nation embracing heat networks, Sweden has the lowest heating satisfaction of all five European countries surveyed in a recent 2021 study. The country has a history of consumer distrust of district heating operators, due to fear of being taken advantage of in a natural monopoly.
Potentially one the harshest elements of the district heat network for residents in New Mill Quarter is the totally restrictive and monopolistic nature of the project. There are no boilers in the properties, so there is no ability to switch energy providers. SDEN is the only option. The fundamental market freedoms that have helped make our country thrive are being denied there, and elsewhere in other district heating networks. There is no incentive for SDEN to help reduce the high energy bills, because there is no threat of their customers switching providers.
New Mill Quarter residents are trapped in high energy bill contracts. When I asked residents as part of my survey if they would like to change providers, 91% said yes and the remaining 9% were unsure. Not a single person wanted to stick. When asked if they were aware of SDEN and the obligation to use it when they moved in to their new property, 35% of residents said that they were not, and 13% were unsure. It is clear that many residents were not aware that they would be trapped in the scheme before they moved in, and an overwhelming majority would support freedom in the market to choose.
I am a Conservative because I believe in the principles of the free market. Competition and choice have been shown consistently to drive down prices while driving up reliability. Monopolies have no incentive to do either, because there is no chance of their losing their customer base. Of course there are other natural monopolies in the UK, such as water, for example; but those negative impacts are mitigated through tough regulation including an industry regulator, and consumer protections.
The final point that I want to make about the networks, at least in Hackbridge, is that the project was doomed from the start, owing partly to a faulty business model. The freedom of information requests and Information Commissioner’s Office complaints have revealed that SDEN was built on the back of a complete fantasy in terms of its financial and business modelling. That is probably why the council worked so hard to keep it secret. SDEN is not making any money. In fact, it is in a dire financial situation, and residents are the ones being asked to pay the price. It is really an issue of the customer base.
SDEN is still, even now after all the problems, being touted as a massive success of the delusional, out-of-touch and uncaring Lib Dem-run council. We were told that the incinerator would mean a district heat network that would power potentially thousands of homes, even with the potential to retrofit existing properties to connect to it, giving residents a so-called greener energy alternative. In truth, that was never going to happen. The logistical nightmare of getting the pipes laid and the infrastructure in place even to heat the New Mill Quarter new build development, which is an estate of just over 800 homes, was cripplingly expensive. So it was only ever really going to be an option for new builds, and it only really happened in New Mill Quarter because as the crow flies from the estate to the incinerator there are no obstructions in the way, so laying the pipes was relatively easy.
However, it is not as if developers want to be connected in the first place. The council essentially had to strong-arm Barratt Homes into accepting SDEN and is now trying to force other developers in the borough to accept it too. On more than one occasion it has been caught with egg on its face because it failed to persuade others, including the local hospital, to become customers. That has caused real financial difficulty. Owing to the delays in getting connected and failure of the back-up boilers, in addition to failing to find new customers, the council has to foot the bill for the high gas consumption costs. That, in my opinion, offers a much better explanation for why residents’ bills are so high. It is not that hard to follow the money. The council has to pay a high cost for the gas and residents have high energy bills: put two and two together. Even now that the landfill gas engines at the incinerator site have been switched on, I have it on good authority that they are not enough to heat the homes in New Mill Quarter, so a lot of the work is still being done by back-up boilers. It is going to take yet another two years before the incinerator turbines come on line.
Looking to the future, even if the system was reliable, the incinerator was connected and working well, and prices were reasonable, it would not change the fact that the business model is still fatally flawed. There is something glaringly obvious coming down the line that I fear has been overlooked. That is the fact that the Government’s own resources and waste strategy calls for the phasing out of incinerators—or so-called energy from waste facilities—as a form of waste management, as we look further up the waste hierarchy. The less waste we produce and the more existing waste can be recycled or reused, the less necessary disposal through incineration becomes.
What happens then? The day will come when not enough waste will be produced to burn, and consequently power the heat networks. What, then, happens to the residents who get heat from them? The back-up boilers are not the answer, as has been demonstrated, because they cannot cope with the stress of maintaining an entire heat network. There can only possibly be two options. One is to import waste to keep the incinerator and the supply going, which means more vehicle movements and more pollution, and scrapping the fantasy that it is some kind of green alternative. The other is an expensive, time-consuming and in many cases potentially impossible retrofit of an alternative energy supply. The networks are not future-proofed at all and it may be 20 or 30 years away but the day will come when the failure to future-proof could lead to an even greater problem for residents down the line.
I have covered a lot of ground today, but I hope that I have demonstrated the seriousness of the problems facing New Mill Quarter residents, who feel ignored and abandoned by their ward councillors, the council at large and SDEN. SDEN’s problems are not unique, although I imagine some of the dodgy dealings might be. However, tougher regulation is clearly needed, as examples of what I have described can be found across the country. At the very least, consumers need to be given greater protections and there should be a regulator on a statutory footing, which must compel the pricing model to be on par with the market average. There should be a 24/7 helpline to report faults, a compensation package for every outage, the ability to escalate complaints to a higher organisation, and so on.
I also urge the Government to look at whether these monopolies are a good idea at all. The inability to choose a provider is not just unfair; we are also heading to a point where the source of energy might not even be available in a couple of decades. It is not fair of our generation to burden a future generation with tackling that problem. I urge the Government to let SDEN be a lesson in what not to do. Let us not resign residents in Hackbridge or anywhere else to this poor state of affairs.
It is a pleasure to serve under your chairmanship, Ms Ghani. In preparing for this afternoon’s debate, I looked back over my records and discovered that the first time I raised concerns about inadequate consumer protection for customers of district heat networks was in early 2016, a matter of months after I was first elected to this House.
In some ways, the situation has moved on significantly since that date. I recall at the time making the case for greater protection for heat network customers, only to be told by Ministers that statutory regulation would not be appropriate, and that it risked strangling an emerging industry with red tape. There is now at least a consensus that further regulation is required in this area.
I remember pressing the Competition and Markets Authority to open an area of investigation into the industry, only to be told it had no plans to do so. The CMA eventually carried out a market study that determined that many customers of privately operated communal heating schemes are not well served on price and service, and it recommended a statutory regime governing the regulation of heat networks.
Yet, taken in the round, there has been a tangible lack of progress when it comes to doing what is necessary to ensure that heat network customers are adequately protected. That should be a concern to each of us, but it should particularly concern the Government, not only because of their avowed aim to keep customer bills as low as possible, but because low levels of consumer confidence in heat networks, born of consistently poor service and expensive bills, will make it that much harder for the UK to decarbonise heat and reduce our overall greenhouse gas emissions.
In the time I have today, I do not intend to delve into the enormous challenge presented by the urgent need to decarbonise heat, and what more the Government must do to meet that challenge, not least because I know that my hon. Friend the Member for Southampton, Test (Dr Whitehead) will do so with his customary rigour and incisiveness when he responds from the Front Bench. I do want to make the point that we will struggle as a country to take the public with us when making the case for the benefits of large-scale heat network deployment if we continue to put off addressing the systemic problems in the sector.
It is true that for many customers, heat networks offer an efficient supply of heat and hot water, at prices that are close to or lower than other sources of supply, such as gas and electricity. I am sure the Minister will cite evidence indicating that the majority of customers are satisfied with their systems. However, it is beyond dispute that a significant minority of customers of privately owned heat network schemes, including thousands of my constituents, given the number of new build developments in my constituency, are still not getting a fair deal.
Whether it is unreasonably high tariffs; significant variation in unit prices and average bills, not only between schemes but between customers on the same scheme; significant month-by-month variation on standing charges, which are often incredibly high; a lack of transparency in billing; or frequent outages that are the result of sub-standard or poorly installed equipment, far too many heat network customers are being badly let down.
As a voluntary consumer protection scheme, the Heat Trust does a good job. It is a welcome development that a growing number of sites are registering with it, but the protection it affords to customers on such sites are inherently limited. Similarly, the process of attempting to secure redress by means of a complaint to the energy ombudsman is time-consuming, constrained by the fact that the service deems issues such as heat price increases to be commercial decisions that it cannot adjudicate on. Of course, that is not available to customers on sites that, for whatever reason, have not registered with the Heat Trust.
The simple fact is that neither the trust nor the ombudsman is a substitute for providing heat network customers with the same degree of protection that is afforded to gas and electricity customers by means of formal regulation of the sector.
I say to the Minister: no more delay. The heat markets framework consultation closed on 1 June last year, and we have heard nothing since. Every month that passes without legislative action means yet more expensive bills and continued poor service for heat network customers at the sharp end of industry practice, who cannot afford to wait another year or two for the Government to provide them with the protection that they deserve.
I fully appreciate the demands on the Minister’s time, but I urge her to give the matter greater priority and, subsequently to this debate, to forcefully make the case for bringing forward the necessary legislation to introduce a regulatory framework for the sector as early as possible in the next parliamentary Session. In the interim, will she look again at what more the Department might do to cajole reluctant suppliers and operators to register all their communal heating schemes with the Heat Trust?
It is a pleasure to speak in this debate with you as Chair, Ms Ghani.
This is not the first time that I have spoken in a Westminster Hall debate on district heat networks. Such technologies are important for bringing green energy into ordinary people’s homes and making Britain carbon-neutral as soon as possible. However, as we have heard, work needs to be done to ensure that district heat networks provide not only energy efficiency, but cost efficiency. District heating providers must be brought under the control not just of formal regulators, but of consumers.
The Catford Green area of my constituency is home to leaseholders, private renters and social tenants. All those residents are locked into a heating scheme that is more expensive and less functional than the standard heating system—they are paying more money for less energy. I am sure that all colleagues agree that that does not make sense, but they have no choice.
One constituent told me that he found out about the contract with E.ON only on the day he moved into the flat that he had just bought. Unable to shop around, he feels trapped in a contract that suits his building’s owners’ finances, rather than his own. Another constituent in the same estate told me that the nature of the contract meant that she could not opt out of bills when her flat was empty. She went travelling for a few months but still had to pay a minimum of £30 to £40 a month for energy that she did not consume. Catford Green residents have also reported frequent power outages with a lack of acknowledgment or compensation from E.ON. Again, that is not fair and not right.
District heat networks clearly need regulation. With an uncompetitive market, consumers are being overcharged for a low-quality service. The current Government position of relying on voluntary membership of the Heat Trust network cannot continue. Regulation must be enforced by the Government with exactly the same expectations that are placed on other parts of the energy industry, and the same consequences for breaching standards. There must be a cap on the standing charges that companies rack up, and greater transparency in pricing tariffs. Customer service must improve and customers such as my constituents in Catford Green must be listened to and respected.
Like me, the residents I spoke to are committed to reducing their environmental impact. They support the objectives of district heating, but their valid points about high costs and low standards must be addressed to ensure the effective progress of this innovative technology. It is not good enough for the Government to say that they will look at this; they must regulate the service. My residents deserve it, and so do the public.
It is a pleasure to serve under your chairmanship for the first time, Ms Ghani. You will be pleased to know that the word “resignation” does not appear once in my prepared notes.
I congratulate the hon. Member for Carshalton and Wallington (Elliot Colburn) on securing the debate; I should have realised that potentially it would relate to a constituency issue, rather than being a plug for district heating. He made his case well about the issues that his constituents are suffering, and there is no doubt that the Minister has to provide a robust response. We also heard from the hon. Members for Greenwich and Woolwich (Matthew Pennycook) and for Lewisham East (Janet Daby) about the need for a regulator and for consumer protections—that was certainly a theme common to all three speeches.
The hon. Member for Carshalton and Wallington highlighted the fact that energy from waste is causing a traffic movement issue. There is a proposed site next to my constituency where residents are concerned about movement and emissions. The point about there being no future-proofing is interesting, and it certainly seems that the local council has a lot of questions to answer. I must say that I was really shocked and surprised that it was not a Conservative council that the hon. Gentleman was laying into; he let slip at the end that it was a Lib Dem council.
Looking at the big picture for heating overall, we face conflicting problems when it comes to heating our homes. For too many people, fuel poverty is an issue, yet 85% of our homes rely on methane gas heating—a system that is cheaper than electricity and, for the most part, clearly very convenient, given that a boiler can be activated at leisure. That is illustrated by the fact that until it was recently overtaken by China, the UK was the biggest market for gas boilers in the world, but we know that cannot continue. We need to decarbonise, and we need plans, strategies and funding to get there.
The UK Government are good at soundbites and targets, but targets are meaningless without policies—for example, the target of 600,000 heat pump installations by the year 2028, from circa 20,000 a year right now. That means almost doubling the number every year from next year onwards. Without coherent policies and funding strategies to put that in place, it does not seem realistic, especially when we factor in that the installation cost for a full system is circa £15,000. Without grants or some sort of long-term route to market strategy, strong action is required for the Government to get heat pump installations in place.
The 10-point plan also has targets for carbon capture and storage from hydrogen production. We are still awaiting strategies for them, but district heating is not even mentioned in the document. In fact, district heating has not featured significantly enough in debates to date, which means today’s debate is very welcome. Looking forward, the reality is that if we are to decarbonise, we will have a rise in some form of district heating in some cases.
As far back as 2017, the then director of the Department for Business, Energy and Industrial Strategy stated that
“whatever you do you end up with 17-24 per cent district heating”,
so why does district heating lag behind in discussions and planning? It is quite clear that we need more of that. We need the heat and buildings decarbonisation strategy, as well as the Government’s net zero strategy. The Scottish Government published theirs in February 2021. If re-elected, the SNP pledged to decarbonise the heating of 1 million homes by 2030—over a third of the housing stock in Scotland—and all new homes and buildings from 2024 will use renewable or zero-emission heating. That is backed by a £1.6 billion investment plan.
Scotland is trying to reduce emissions and heating costs, and to fight fuel poverty. Compared with Westminster, we spend four times more per capita on energy efficiency, which is vital in reducing emissions. By contrast, the UK Government’s future homes standard involves eliminating the connection of new homes to the gas grid by 2025. That means that by 2024, something like 200,000 new homes will be connected to the gas grid and will then need retrofit measures in order to decarbonise at a later date.
That is not to say the UK Government have not made attempts to introduce a greater range of district heating. Some £320 million was allocated through the existing heat networks investment project, but that comes to an end in 2022, and two pilots—in Sheffield and Manchester—were pulled. What has been the extent of spend on district network creation to date? What lessons, if any, have been learned, including what we have heard today? What would the success of the green heat network fund look like, and how much of the green heat network’s £270 million is new money?
As we have heard clearly, the big issue for district heating is the fact that there is no regulator. This means that consumers in district heat networks have less security than traditional gas and electric consumers, and there is no ombudsman to receive complaints. That discourages consumers from connecting to the heat network. As we have heard, the ones who are connected have real issues trying to resolve matters.
Looking to Scotland again, the Scottish Government passed the Heat Networks (Scotland) Act in February 2021, which provides a regulatory framework to cover heat networks. What is the UK Government’s position on introducing a regulator or a regulatory framework for district heating? I hope the Minister can answer that. As the hon. Member for Greenwich and Woolwich said, the industry and the Heat Trust are trying to fill the gap with a voluntary standard, but at the end of the day it is voluntary. That belies the issue, so we need statutory protections.
We need to see greater investment in energy efficiency. What of the Tory manifesto’s £9.2 billion commitment? We need to see a coherent heat and building strategy that will deliver a suite of options. They will still need to include district heating, which the Committee on Climate Change reckons will account for 18% of heat in our homes going forward. That means ensuring a route to market for the capital cost and/or a Government funding plan.
It is interesting that the Association of Decentralised Heating estimates that energy bills for those in district heating is £100 cheaper compared with gas, so this could be a good tool for fighting fuel poverty. Again, clearly we need protections. As the hon. Member for Carshalton and Wallington said, we cannot have a closed shop where consumers start paying higher charges than they otherwise would need to.
As we look forward, there is plenty to be done. I look forward to the Minister’s response. With COP26 on the horizon, this should be our ideal platform to demonstrate a coherent, complementary heat decarbonisation strategy.
I congratulate the hon. Member for Carshalton and Wallington (Elliot Colburn) on securing the debate. Although such positions are not declarable on the Register of Members’ Financial Interests, I ought to say that I am a vice-president of the Association for Decentralised Energy, formerly the Combined Heat and Power Association. The position I hold reflects my long-standing interest in district heating and local energy schemes, which I have maintained throughout my time in Parliament, which is now a very long time. I will mention briefly in my comments my interest in these schemes and arrangements.
I was not sure what the thrust of the debate was going to be, but I anticipated that it would probably be about the concerns that some Members have expressed over time about circumstances relating to the operation of some, but by no means all, district heating schemes. Like my hon. Friend the Member for Greenwich and Woolwich (Matthew Pennycook), I have expressed concerns about that, and I have put forward remedies for those concerns over a number of years in this House.
I think district heating will be an important part of our approach to the decarbonisation of heating. It certainly has a substantial part to play, under particular circumstances and in particular areas, in delivering low carbon heat reliably and satisfactorily to populations. At its heart, it is a system about networks, not about what goes into the networks. A variety of different forms of fuel can go into the network and deliver heat very efficiently. It is not just about taking heat from incinerators. It has much wider applications through heat engines or through low-carbon sources of energy that can be a part of a network. The network can adapt and change over time.
The efficient use of heat that this represents has been rolled out much more in other parts of Europe than has been the case in the UK. I visited Denmark a little while ago, which has more than 50% of its total heat provided by district heating schemes, and in Copenhagen it is about 90%. They are well-regulated schemes with a very low level of complaints and a very high level of delivery and efficiency, and they generate affordable heat in the process.
My city of Southampton now has five district heating schemes within the city boundary, including the nation’s only geothermally heated district heating scheme, which I often draw attention to. That demonstrates that the fuel types for heat schemes can be very different. Where the schemes are well run, there are few complaints and they continue to deliver affordable and, in this instance, low-carbon energy to the city.
That is one side of the coin. The other side is what happens with the schemes that already exist, and indeed have existed for a long time and have different forms of ownership and input. I am pleased that the Government have recently woken up to the potential of district heating. Through the green heat network fund and various other things, they will be providing money and support, mainly for local authority-based schemes, to bring forward district heating in the future, but I am well aware that the good schemes that may be brought about in the future are by no means the whole picture of district heating across the country. There are currently about 2,000 schemes in the country, which produce something like 2% of domestic, public sector and commercial heat demand, and supply just over 200,000 buildings and almost 2,000 commercial and public buildings across the UK.
As we have heard, a proportion of those 2,000 schemes are not well run at all, frankly, and for various reasons they have produced a bad deal for customers. Indeed, in some instances, because of the age of the system, there has not been any investment in the system and they are producing very inefficiently. In some instances, because of a frequent change in private ownership, they have simply been starved of the sort of investment they need to run at a good level, and there has not been the level of customer care that there should have been in the systems over the period. The points that hon. Members made about their local schemes are well founded. It is up to us to recognise that that is the case and to do something about it; otherwise, the next generation of district heating schemes, which will be essential, will not be well founded, as far as their operation is concerned, for the future.
The Government have sort of recognised over the years that that is a problem, but I am afraid they have not done very well by customers in those circumstances. Until relatively recently, they considered that regulation should not be statutory, as my hon. Friend the Member for Greenwich and Woolwich said, but that it should be entirely voluntary and done on the basis of an industry scheme. The 2013 paper “The future of heating: meeting the challenge” stated:
“The Government does not want to stop the growth of the sector through introducing unnecessary regulation. DECC is therefore initially seeking an industry-led scheme”.
Up to relatively recently, that was the position of the Government over a long period.
A heroic effort to do just that was introduced by the Combined Heat and Power Association, now the ADE, through the Heat Trust, which, in its own right, is a good scheme. Of course, as hon. Members have mentioned, it is entirely voluntary. If schemes do not want to join it, they do not have to—a lot have not. The redress is strictly limited to those people who are already likely to be the good guys in the first place, and not those that are, perhaps, the most egregious underperformers as far as the overall system is concerned.
Fair play to the Government, who have recognised that that system is not the right way to go about regulation for the future. In spring last year, we had the “Heat networks: building a market framework” consultation, which set out a scheme for universal regulation —not a perfect scheme, but a scheme nevertheless. We had that consultation, introduced last February and concluded last summer—and have heard nothing whatsoever since. There has been no Government response or discussion of how the very sketchy scheme set out in the original consultation could be improved and assured as a universal scheme, both retrospectively and prospectively, for district heating.
In the end, we only have one line on the subject in the energy White Paper:
“We intend to legislate in this Parliament for the regulation of heat networks to protect
consumers and reduce carbon emissions.”
That is a fine ambition, but hon. Members will notice that the proposal is to legislate in this Parliament on something that we do not know the content of because there has been no comeback from the consultation on what a scheme might be. Should we legislate in this Parliament, say at the very end, there will inevitably be a time lag in bringing a scheme to fruition, and we could be well into the end of this decade before we get the sort of regulation that we clearly need. I guess the Minister is going to make some considerable play of the fact that the Government intend to legislate, but, frankly, that really is not good enough. As I say, we do not know what this regulation will consist of, how universal it will be, what redress will be in it, how legally enforceable it will be and how it will shape new networks, or retrospectively encompass all existing networks.
Finally, a vague suggestion that we might legislate sometime in this Parliament, with a possibly extended implementation date, does not answer the issues that hon. Members have raised in any coherent and satisfying way. First, we need to get the response to the consultation out as soon as possible, so people are much clearer about what it is we might be considering, and if they think it is insufficient, they can talk about how better to deal with the issues mentioned in that regulation in a satisfactory and comprehensive way.
Secondly, we need a commitment from the Minister this afternoon that she will not just rest on the idea that there might be legislation some time in this Parliament, but that she will go away this afternoon and get writing that legislation—not personally, necessarily, but with the support of some of her colleagues and civil servants in BEIS— and get that through Parliament as quickly as possible. That means next year. I know the Minister is close to being a miracle worker in her position, but if she can achieve that over the next period she will certainly have my full support.
It is a pleasure to serve under your chairmanship, Ms Ghani. Let me begin by congratulating my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on securing this really important debate. I also thank the hon. Members for Greenwich and Woolwich (Matthew Pennycook), for Lewisham East (Janet Daby) and for Kilmarnock and Loudoun (Alan Brown) for raising issues of concern in their own constituencies. As ever, I thank my friend the hon. Member for Southampton, Test (Dr Whitehead), who turns out to be an expert and an advocate on the subject of domestic heat networks—who knew? He was able to take us from Denmark to Southampton in demonstrating why they can and should be an important part of the mix. I thank to all colleagues for their contributions to the debate.
I was very sorry to hear of the troubles experienced by the constituents of my hon. Friend the Member for Carshalton and Wallington in the New Mill Quarter of his constituency. They have had really awful challenges with their district heat network. I sympathise with the difficulties that has clearly caused them all and it is profoundly disappointing to hear that their Lib Dem-run council has failed them all so very badly. I absolutely agree with the need for protections for heat network consumers. The experience of my hon. Friend’s constituents highlights the importance of the Government’s commitment to regulate the heat networks market within this Parliament.
Heat networks play and will continue to play an important part in assisting us to meet our net zero challenge. They will unlock larger-scale renewable and recovered heat sources, both energy from waste heat and heat from rivers and mines. It was interesting to hear about the geothermal heat source being used in Southampton. When deployed effectively, they can bring greater heat efficiency than individual gas boilers, lower costs for consumers and support local regeneration. However, we recognise that we need to regulate the market to ensure that those outcomes are real, for which protections for heat network consumers are needed.
As colleagues have highlighted, in 2017 the Government commissioned a survey to quantify consumer experiences with heat networks in England and Wales. The results showed that consumers connected to a heat network have generally received good service and were as satisfied as non-heat network customers, which makes the terrible experiences of those in New Mill Quarter all the more upsetting. The results of the survey also showed that, on average, a heat network consumer was likely to pay £100 less per year for heating and hot water compared with consumers on other utilities. Again, this makes it all the more shocking that my hon. Friend’s constituents have got such a raw deal from their Lib Dem council’s activities.
The Government also noted, however, a report by the Competition and Markets Authority in 2018, which showed that a significant minority of heat network consumers experienced high prices, frequent outages and a lack of transparency. Therefore, we committed to the Competition and Markets Authority’s recommendation of regulating the market and, last year, consulted on establishing a heat networks market framework.
The framework will include introducing consumer protection rules to combat cases of detriment, such as the outages being experienced by the residents of New Mill Quarter. We want heat network consumers to have comparable levels of service and protection to those using electricity and gas on individual contracts for their homes. As part of the market framework, we will introduce quality of service standards requiring notification periods for planned outages and compensation for all outages.
Consumers will have access to an independent redress scheme and a consumer advocacy body, which will provide a consumer helpline and priority services for consumers in vulnerable circumstances. The regulator will have powers to enforce price transparency, introduce guidance on fair pricing, set requirements on cost allocation and conduct investigations into heat networks where prices are disproportionately high. Finally, consumers will be provided with a minimum level of easily accessible information and guidance on heat networks at the pre-contractual stages of property transactions and during residency. There will be requirements on the provision of heat supply agreements and billing information.
We are preparing to introduce legislation to regulate the market, but, as colleagues have mentioned, there are some measures already in place to improve standards for heat network consumers. The Heat Trust provides an independent market-led voluntary standards scheme and consumers on heat networks registered to the Heat Trust benefit from terms of service similar to those in the gas and electricity markets. They can also access the energy ombudsman if they have a complaint against their heat supplier. In 2019, BEIS wrote an open letter to all heat network operators encouraging them to register their schemes with the Heat Trust and we continue to encourage schemes to sign up to raise standards now and to prepare for regulation.
If only I could do it tomorrow, but I think Prorogation would stop me. We have also supported the Heat Networks Industry Council in its work to establish the consumer protection agreement and the heat network emergency responders group in response to the covid-19 pandemic. We encourage heat suppliers to sign up to that agreement and we have written to signatories urging them to do more to tackle outages and improve compensation standards for those outages. Although these schemes have benefited many consumers, we recognise that regulation is needed to drive up consumer standards across the heat networks market. I therefore reiterate our commitment to that regulation today, but I am afraid that I cannot give a precise date.
The Government have introduced several schemes to support heat network deployment. Our heat networks investment project has made £320 million of capital funding available for investment in heat network projects through grants and loans in England and Wales. That will be succeeded by the green heat network fund in 2022, which will support and incentivise the use of low-carbon heat sources in heat networks. Both investment projects will ensure adequate consumer protection measures are in place by requiring projects to demonstrate Heat Trust or equivalent standards, which will ensure that taxpayers’ money supports only heat networks that deliver fair pricing and which are well designed, efficient systems.
Furthermore, we have been carrying out work on improving performance across a number of existing heat networks. That provides an evidence base for the development of the heat networks efficiency scheme, which will part-fund operational performance improvements and carbon emission reductions in existing systems. Further details will be announced later this year.
It is essential that heat network consumers are provided with clean and reliable heat at an affordable price. As such, we are developing the heat networks market framework that will place consumers at its heart, deliver sustained investment in the sector and maximise heat networks’ potential economic and environmental benefits. We committed in the energy White Paper to legislate for the market framework by the end of the Parliament.
We are working closely with the industry and consumer groups to ensure that regulation delivers positive outcomes for consumers, and we will shortly publish the Government’s response to last year’s consultation. I look forward to working with all colleagues on the proposals that we will bring forward. In the meantime, I wish my hon. Friend the Member for Carshalton and Wallington and his constituents well as they seek redress from their council, whose failure to meet the standards that residents could have reasonably expected is motivation indeed for the Government to get protections in place.
I thank the Minister for her response. It is really reassuring to hear that the Government have heard my concerns and those of colleagues across the House and will take action in the form of regulation. I look forward to working with her constructively to bring that about and get it on the statute book, because it is really needed. If heat networks are to form a big part of our heating for the future, they must be regulated and have consumer protections. At the moment, residents in New Mill Quarter can only dream of living under a heat network that lives up to the standards expected in a normal home, let alone those of an innovative scheme for the future. I am grateful to the Minister and look forward to working with her.
Question put and agreed to.
That this House has considered district heat networks.