New heat network regulation marks "huge shift"

“The regulation of district heat networks is a huge shift in the legal and operational environment for the sector,” says Laurence Lacey, commercial property partner and an energy and infrastructure, real estate development specialist at Clarke Willmott.

“For developers, owners, and operators, compliance planning is essential - from governance reviews and technical audits to customer service redesign. Acting proactively will ensure compliance and protect project value and give confidence to consumers and investors in this newly regulated market.”

The Energy Act 2023 and Heat Networks Regulations 2025 give Ofgem authority to regulate heat networks, improve standards, protect consumers and drive decarbonisation, while supporting investment, encouraging waste heat use and safeguarding against local monopolies.

Operators must secure Ofgem authorisation, similar to licensing in the gas and electricity sectors, and comply with technical standards, reporting, consumer communication, pricing and performance rules, and provide access to the Energy Ombudsman.

“Getting authorisation in place early is key to meeting the new standards and keeping projects on track,” adds Laurence Lacey.

“Operators and developers must review governance, audit technical systems and update customer processes now to protect project value and ensure compliance in this newly regulated market.

“Networks that plan ahead and align with these requirements will be best placed to meet expectations and thrive in this regulated environment.”

By January 2027, most of Ofgem’s regulatory conditions, including pricing rules and performance standards, are expected to be fully operational. In Scotland, similar standards are being introduced under the Heat Networks (Scotland) Act 2021.