Rising energy prices are a concern for many in the UK and around the globe at present. According to the latest BEIS statistics, in 2020, there were an estimated 13.2 per cent of households (3.16 million) in fuel poverty in England under the Low Income Low Energy Efficiency (LILEE) metric.
Community and district heating can provide a cost-effective, low carbon solution to reducing fuel poverty, however there are mixed experiences when it comes to value for money and more does need to be done to mitigate price rises and protect residents.
Since the energy crisis, the considerable increase in gas prices with commercial gas rising from approximately 2p /kWh to 9p/kWh, means that residents on unmetered heat networks are facing significant increases to their flat rate fees, without the means to mitigate the cost.
It is a proven fact that households who are paying flat rate for their heat, used up to twice as much as those paying bill based on metered consumption.
Domestic heat metering provides significant benefits to residents when it comes to tariffs and bills, particularly in the current energy climate. There are also significant benefits to social housing providers and local authorities who operate schemes.
Why do heat networks need to be metered?
In the UK, there are currently more than 250,000 homes connected to UK heat networks which are unmetered, leaving residents with a fixed flat rate fee, unrelated to their usage.
For residents who are charged a flat rate fee, they have no incentive to reduce consumption. By installing domestic heat meters, social housing providers and local authorities are giving residents the opportunity to mitigate the rising cost of gas, through understanding their consumption and changing their behaviour to use heat less heat and reduce their costs. Moving to consumption-based billing (using heat meters to record consumption) means that price increases, losses and subsidies can be limited.
Metering your heat network also ensures compliance with regulation. Under the Heat Network Metering and Billing Regulations which came into force in 2014, all homes on heat networks (old or new) should be fitted with meters where it is viable to do so, with older networks requiring retrofitted meters to be installed no later than 1st September 2022. Heat network operators must also meet obligations to the residents on the scheme, which includes providing clear, accurate bills to residents, which again helps them to take control of their usage.
For social housing providers and local authorities, installing domestic heat meters also provides greater visibility over the efficiency of their network. Through heat metering, social housing providers can effectively monitor and measure consumption across the network which allows them to better understand efficiency and identify any areas for concern.
How can metering a heat network help to reduce fuel poverty?
In our experience, when residents pay based on their consumption – they start making conscious decisions about their energy usage. We see behaviour changes, such as turning the heating off when they are out, closing windows and turning the heat down when unneeded, not by conscious self-disconnection which has been a concern for local authorities and housing associations in the past.
On a metered scheme, residents only pay for their individual usage (along with any standing charges) through credit billing or Pay-As-You-Go (PAYG) and save between 35-50% off their bills, without any loss of comfort. Domestic heat metering allows residents to take control of their consumption and use heat and hot water in line with their budget, reducing the risk of fuel poverty.
How heat metering helped Sheffield City Council and their residents
In 2015, Sheffield City Council (SCC) undertook a major upgrade of the heating systems in 6,000 of their residential properties fed by 135 plant rooms linked to the district heat network across the city.
A thousand of these properties were currently utilising pay-as-you-go (PAYG) energy technology and were already receiving and paying for their heating on a metered basis while the others were receiving an unmetered supply and were paying for their heating on a flat rate system. This meant residents paid a set weekly amount irrespective of how much they used.
Over a 2-year period, Switch2 supplied and installed 6,000 heat meters and our G6 prepayment system across 120 sites. All 6,000 installations were completed in March 2017 and figures released by SCC from the first 227 homes on the new system for a full year, show that households are saving an average of £238 on their heating bills per year. Further to this council tenants are expected to save more than £1.4 million from their annual heating bills.
“Heat metering gives customers greater choice over the amount of heat they take and therefore the size of their heating bills. Used sensibly we anticipate customers will have the potential to make real savings in their heating bills in the future.”
Stephen Parker, Sheffield City Council
What are the benefits of metering for a social housing provider or local authority?
As well as the clear benefits to residents, changes in energy demand because of behavioural changes through metering, mean cost benefits for social housing providers and local authorities too.
Reduced energy demand means that providers can expect to see their costs of procuring gas reduce by 50%, running costs to reduce by 50% and a reduction in maintenance call outs. They can also benefit from reduced capital replacement costs when the plant and assets are reaching end of life, as after metering, the lower demand on the system makes way for less boilers and less pumps to be required.
The resulting cost savings are even greater now that gas prices are around 250% higher than they were in 2021 and while these prices may soften, forecasters don't expect gas tariffs to return to the low 2020 levels.
What are the paybacks of installing heat meters?
Heat network operators are often put off by the initial cost of metering a network. Previously, metering may not have been a cost-effective exercise because of the low gas prices, with paybacks often taking up to 18 months.
However, since the rise in gas prices, the cost of procuring gas has more than quadrupled, increasing costs for providers. This increased cost is then passed on to residents and for those on an unmetered scheme, they will see bills rise by over 100% regardless of their consumption, with no way to mitigate the increase. Installing meters and billing based on consumption will reduce the cost increase and help to protect residents from fuel poverty.
Through our experience in helping unmetered schemes to meter, heat networks which failed the cost effectiveness tool assessment prior to the gas crisis are now likely to see paybacks happen much quicker, with the average payback now taking between 6-9 months because of the rising cost of fuel. This means benefits for you as a provider and benefits for your residents and their finances.
How can Switch2 help?
With over 35 years’ experience in heat networks, and as experts in heat network metering, retrofit and billing, as well as a range of other services, we can help you to:
- Understand your requirements under the Heat Network Metering and Billing Regulations 2014 and ensure you’re compliant
- Assess the cost effectiveness of residential heat metering on your scheme and calculate potential savings
- Support your residents to combat fuel poverty through metering and billing
- Consult with residents on switching to a metered heat network
- Operate and maintain your plant rooms and properties
- Optimise your heat networks to deliver heat efficiently
- Decarbonise your network and reduce your carbon emissions