Lisa Dubinina, Chirpy Heat

As the demand for low carbon, reliable heating solutions rises in the form of heat networks; understanding the importance of setting the correct heat tariff is critical for both operator and customer.

Here are some key reasons why a correctly set heat tariff is essential:

1. Fair pricing:  It ensures that residents pay a fair price for their heat and hot water.
2. Cost recovery: It helps to recover relevant costs associated with the operation of the heat network.
3. Regulatory compliance: Implementing an appropriate heat tariff helps ensure compliance with current and upcoming regulations.

Understanding the system efficiency of a heat network provides oversight of heat losses and inefficiencies throughout the generation and distribution system. Heat network schemes with low efficiency (high heat losses) require increased input fuel consumption to meet heating demand, resulting in:

• Increased operational costs – which will ultimately reflect on to residents through higher heat tariffs 
• Higher carbon emissions – as the drive increases to reduce environmental impacts across the sector, inefficient heat networks will be required to meet pre-defined performance standards under upcoming regulation with the introduction of the Heat Network Technical Assurance Scheme (HNTAS).
• Quality of service – an efficient heat network corelates with low system heat losses and increased service reliability for residents. A well performing heat network is less likely to face disruptions or fluctuations in heating supply, leading to a better living experience of residents.
• Shorter lifecycle of the system and its components

At Chirpy Heat, we support organisations to review and set their heat tariffs. Throughout this work, we gain insight into the performance of heat networks across the sector. Typically, we see an average system efficiency of just 42%. While this figure stands as an average, it is still distinctly low, and highlights that many heat networks require significant improvement.

A new or well-performing heat network can achieve efficiencies as high as 65-70%. Given these considerations, understanding your heat network’s performance and system efficiency across your portfolio is crucial. Understanding performance allows for the prioritisation of schemes for improvement opportunities, such as current Heat Network Efficiency Scheme (HNES) funding, identifying measures to reduce distribution heat losses, therefore reducing operational costs and subsequent heat tariffs.

To demonstrate the impact of efficiency on heat tariffs (using average heat consumption and current average gas prices); by increasing the efficiency of a system from 30% to 50%, residents could save in the region of £480 on their annual bills.

Therefore, regularly monitoring your heat network’s performance is not just a recommendation; it’s essential and will become mandatory with upcoming regulation in Spring 2025.

If you’re ready to assess your heat network’s efficiency or ensure your heat tariffs are set correctly, reach out to us at simplybetterheatnetworks@chirpyheat.com.

We’re here to help you make the most of your heat network!