Get Ready: Heat Networks Becoming a Regulated Market in Great Britain

More heat network regulations in England, Scotland and Wales come into force today, signifying a further step towards the regulation of this historically unregulated market. 

By introducing the Heat Networks (Market Framework) (Great Britain) Regulations 2025 (Regulations) Government hopes to protect consumers and promote greater adoption of the lower carbon energy source.

From 1 April 2025, it will be illegal to conduct regulated activities, i.e. operate or supply heat from a heat network, without authorisation. However, from 1 April to January 2027, existing heat network operators and suppliers receive deemed authorisation under the Regulations. Operators are entities with control of the transfer of thermal energy on the network or significant control over the network infrastructure, and suppliers are those entities which are party to a heat supply contract with customers. To keep this authorisation, these businesses will have to submit certain information to Ofgem by 26 January 2027. There is a tighter timeline for the implementation of other requirements under the legislation– with Ofgem scheduled to be empowered to enforce minimum standards of networks within a year (January 2026). 

In the pipeline: how will heat network regulation affect stakeholders?

While deemed authorisation of existing heat networks will last until 26 January 2027, any new entrants to the market after that date will need to apply to Ofgem for authorisation. It is not yet clear exactly what the application will entail, but we do know that Ofgem has powers from 1 April 2025 to make authorisation subject to general or specific conditions. Examples of these listed in the Regulations include price caps for supply to domestic customers and compliance with technical standards. 

27 January 2026 is the "launch date" for the enforcement of these conditions. From the launch date, Ofgem will have the power to impose significant penalties and compensation on suppliers and operators who break authorisation conditions – as high as 10% of turnover (or £1 million, if higher). 

Businesses should ensure that record-keeping systems are robust – from the launch date, Ofgem will have the power to request documents, inspect premises and remove materials and equipment from operators and suppliers. The regulated entity might be required to cover the reasonable costs of such inspections.

As consumer protection is a priority for Government regulation of heat networks, consumer advocacy bodies are being involved. As such, Citizens Advice in England and Wales and Consumer Scotland will provide advice and advocacy services and may refer disputes over standards of performance to Ofgem. 

What else should heat network businesses look out for?

• The Regulations give Government the power to extend the January 2027 deadline for deemed authorisation. It will therefore be important to monitor if this power is exercised as the market adapts to the introduction of the new authorisation regime.
• Government is required under the Regulations to carry out regular reviews of their implementation. This must be done at least by March 2030 – which may surprise some given Government's goal of achieving clean energy in the UK by 2030.
• In addition to the Regulations, the Heat Network Technical Assurance Scheme, which will mandate minimum technical requirements, such as pipe insulation and water flow temperatures, and minimum levels of performance and reliability, is due to launch at some point in 2025. These will apply to both new and existing heat networks.

Get in touch

At Bird & Bird we have been at the forefront of legal advice in district heating and utility projects for over 15 years, with a client base comprising operators and suppliers, commercial landlords, developers, local authorities, energy offtakers and network customers. We're there for our clients from project start to finish and beyond, advising on the structuring, procurement, negotiation and compliance aspects of transactions. Our expertise has been recognised by our appointment on the Department for Energy Security and Net Zero’s heat networks zoning framework.

If you want to learn more about how these Regulations will affect your business and future plans for heat networks, then do not hesitate to get in touch.

Written by George Matthew and Eloise Barry