17:24 Meg Hillier (Labour)

The key issue is quite a simple definitional issue: the energy price cap sets a price limit on domestic supplies of electricity and gas, but not on domestic supplies of heat. So developments of the type that my hon. Friend the Member for Lewisham East (Janet Daby) referred to will often have wood-chip burners or an equivalent in the basement, or some other source of supply, and they provide heat to the home, but it is purchased for the building and then sold on to an individual. Ofgem, as we know, regulates the supply of gas and electricity but not, at present, the supply of heat. That means that while the supply of gas to a heat network is regulated, the supply of heat from the heat network to homes is not, because Ofgem classifies supplying heat to a heat network as a commercial arrangement, not domestic. But let us be clear: the end user of this is someone living in a home—a flat, an apartment—who benefits from the communal heating system, often arranged for good reason, sometimes in an attempt to provide green energy, but it has actually left individual residents, whether they are homeowners or tenants, in the lurch.

I am not alone in asking for regulation: the Heat Trust has called for it to happen; the Business, Energy and Industrial Strategy Committee, as part of a recent report on decarbonising energy, called for heat networks to be regulated; and crucially, it is in Ofgem’s forward programme for 2022-23. It could stretch out for quite a long time to come, but that is not fast enough for those residents who are sorely affected.

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17:47 Matthew Pennycook (Labour)

The first issue is the statutory regulation of the sector. We have come a long way. I remember raising this matter when I was a member of the Select Committee on Energy and Climate Change before the Department was abolished, and Ministers would tell me that statutory regulation of the sector was not required, that introducing it risked strangling an emerging industry at birth and that they were not going anywhere near it. I remember asking the CMA— [ Interruption. ]

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20:33 Dr Alan Whitehead (Southampton, Test) (Lab)

Before I go any further, I will say that heat networks are a good thing. They are not just a substantial part of the Government’s plans for future decarbonisation of our heat systems but provide—or should provide—a cheaper deal overall as far as heat is concerned for those who get their heat through them. Also, of course, the networks themselves are not necessarily dependent on gas. A particular network can have any particular fuel—for example, as I have said on several occasions, Southampton heat network is fuelled by geothermal means—so it is not necessarily the case that gas goes into the networks. However, it is a fact that the vast majority of the 14,000 networks, either communal or district, are gas-fuelled and will probably continue to be so for quite a while.

I think we may well have wider debates about how that works for the market as a whole, but this is one area where we must be clear. An intervention is needed to protect those 500,000 people on district heating networks from the consequences of the volatile gas market for the future, and also to protect those people who are running those heat networks from the consequences of a one-sided price cap. We must appreciate that they operate in very different ways to the rest of the energy market, and need different protections to ensure that they are fit for purpose now, and are available for the future. We will certainly need them to operate effectively within the low-carbon economy, and to provide the low-carbon heat that we all know is desperately needed as we decarbonise our energy systems as a whole.

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20:42 The Minister for Energy, Clean Growth and Climate Change (Greg Hands)

I begin by congratulating the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier) on securing this important debate. I apologise, Mr Hollobone, for having been late for the debate, which now seems some time ago. I think it is the first time, in the 17 years I have been in the House, that I have been late for a debate. It may seem a bit academic, at 8.43 pm, to apologise for being here at 5.25 pm instead of 5.24 pm, but I apologise none the less. I was a guest speaker in the Boothroyd Room for the Net Zero all-party parliamentary group, with the hon. Member for Leeds North West (Alex Sobel), but I of course apologise—as you know better than anybody, Mr Hollobone, Westminster Hall always takes precedence over APPGs.

Heat networks are part of the pathway to decarbonising heat. By operating at scale and, in some cases, by making use of waste heat sources, heat networks can supply heating more cheaply than individual gas boilers. The study commissioned by my Department in 2017 found that heat networks supply heating at a discount of £100 per annum on average compared with individual gas boilers—it is literally a case of economy of scale.

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