As energy generation methods continue to advance and diversify, heat networks are emerging as a popular solution for delivering heating & hot water to both homes and businesses across the UK. 

Heat networks offer a lower carbon and more sustainable solution to traditional methods of heating your home, making them not only cost-effective but also environmentally friendly. However, if you’ve tried to compare your heating & hot water tariffs to tariffs you may have seen for gas or electricity, you may have noticed distinct differences in pricing. 

Because of this, we wanted to explore the key differences between these tariffs, and why direct price comparisons can sometimes be misleading.

A tricky comparison

The energy consumed on a heat network and resultantly seen on your energy bill or pay-as-you-go  display typically covers the heat delivered to your taps and radiators or underfloor heating within your home. On the other hand, gas and electricity consumption and their associated charges commonly cover a wider range of household energy uses. For gas, this may include not only heating & hot water but also cooking. Electricity can also include lighting, and powering appliances and electronics such as TVs, and laptops. As a result, comparing heat network tariffs to traditional gas and electricity tariffs ‘tat for tat’ can be challenging as they operate so differently. 

In addition to this, with gas and electricity heating, residents in theory buy the raw fuel direct from their energy supplier, which is then converted to heat inside their boilers. In contrast, this act is done within the plant room of the heat network, meaning residents receive ready-to-use heat. As a result of this, costs can often include maintenance and infrastructure costs to keep the heat network operating efficiently. Due to this inclusion, the standing charge for a heat network tariff might be higher than the average gas tariff, but the overall annual costs are often lower. This is because, unlike with individual gas boilers, sometimes customers on a heat network do not need to cover separate maintenance fees, as these are built into the tariff. This centralised approach not only reduces the risk of unexpected repair costs but also ensures reliable, efficient operation, offering you predictable, all-inclusive pricing that simplifies budgeting for energy expenses.

Factors that could affect your heat network tariff

Several variables can influence the unit rate and standing charge of your heat network tariff. Understanding these factors can provide you with insight into why these prices may fluctuate.

Unit rate:

The unit rate for heating & hot water can be impacted by:

Incoming fuel price: If your heat network uses gas or electricity as the energy generation source, the cost of bulk fuel will have a direct effect on the unit rate. Incoming fuel contracts for heat networks are based on fixed term contracts, meaning that the cost will vary depending on when the fuel was procured, and the length of your heat supplier's contract. If fuel was purchased during a period of high prices – such as during the recent energy crisis, when gas prices spiked dramatically – this will increase the unit rate price passed onto you as a consumer.

Network and plant room efficiency: The efficiency of the heat network itself and the plant room is crucial. If the system operates efficiently and loses minimal heat between the plant room and your home, your unit rate will be closer to the cost of the fuel. However, if there are inefficiencies, heat losses can result in higher unit rates as more fuel is required to generate the same amount of heat.

Standing charge:

The standing charge reflects the fixed costs required to maintain the heat network typically broken down into a daily figure. This price can be influenced by:

Incoming fuel price: This is the standing charge for the bulk incoming fuel supply to the entire network. It covers the transportation and delivery costs of the fuel needed to supply your heat network. This directly impacts the standing charge for all properties connected to that heat network. When fuel sources change, the costs to transport and deliver these fuels to a plant room can also increase. As these delivery expenses are necessary for maintaining a consistent energy supply and ensuring that the system operates smoothly, any increases in costs may be passed onto customers.

Maintenance: Constant maintenance of the heat network is important. Heat network tariffs can therefore cover a range of costs including plant room upkeep, heat interface unit (HIU) maintenance, and water quality testing. The tariff may also include contributions to a sink fund for the long-term replacement of network assets. For developments where Insite Energy is the ESCo Manager, the asset replacement sink fund charge might be included in the standing charge rather than in your service charge.

Inflation: Over time, as with everything, inflation can increase a heat network’s operational costs, such as software-as-a-service fees (SaaS fees), Insite Energy’s metering & billing fees (M&B fees), and 3rd party administrative fees. These added costs are often reflected in the standing charge.

If you’re an Insite Energy customer and want to find out exactly what’s included in your energy tariff, you can easily download a ‘Tariff breakdown’ document by searching for your home on our website.

Comparing heat network tariffs to traditional gas and electricity

For Insite Energy customers, the average unit rate is 16.03 pence per kilowatt-hour (kWh), with an average daily standing charge of 69.42 pence per day. While these figures help provide a baseline for understanding prices, it's important to remember that heat network customers generally consume less energy than those with traditional or gas or electric combi-boilers due to the efficiency of the system.

Fig 1. Average unit rates and daily standing charges of heat network customers at Insite Energy and gas and electricity customers in the UK (source: Ofgem). All figures taken from November 2024. As explained throughout this article, please be mindful when looking at these figures, of the challenges of comparing heat network tariffs with gas and electricity.

To see how your heat network costs compare, we recommend using the Heat Trust calculator. You will need to know your total annual metered heat use in kWh to use this tool. If you don’t have this information, you can find standard consumption figures on our average consumption page. 

Please note that the Heat Trust calculator provides estimates only and is designed for consumer use. The results are based on assumptions that may vary depending on the property and heat usage. For more accurate details, it’s important to review the additional information provided on the Heat Trust website.

Why do heat network tariffs vary?

Heat network tariffs can differ significantly by heat network due to several unique factors. The age of the heat network plays a role as older networks may experience more heat losses due to outdated infrastructure, leading to higher energy usage and costs. Additionally, the type of fuel source impacts pricing, for example, networks powered by electricity (through air source heat pumps) can often have higher unit rates than those using gas. The size of the scheme and the number of users also influence costs; networks with fewer customers must distribute operating expenses across a smaller base, unlike gas and electricity providers who spread costs over millions of users, potentially making heat network tariffs higher. Heat network tariffs can therefore vary widely as they are tailored to the specific needs and conditions of each system.

Upcoming heat network regulations and your tariffs

While heat networks have historically operated majoritively outside of regulations, this will change with Ofgem named as the awaited regulator of the industry. This change will bring new standards for consumer protection and greater transparency in tariff structures starting from 2025. 

To learn more about the upcoming heat network regulations, check out our blog post: The current state of heat network regulations.

Conclusion

While we understand it’s human nature to want to compare prices, particularly when it comes to household bills, it’s important to keep in mind that heat networks and individual gas and electricity systems operate in very different ways. Comparing these tariffs is complex, not only because of the fundamental differences in what each tariff covers, but also because the cost structures are vastly different. 

Heat network tariffs are often tailored to specific developments and can be influenced by local factors such as network efficiency, fuel procurement, and the ongoing maintenance of the network. Meanwhile, gas and electricity tariffs are subject to national market conditions and regulations, which makes them more standardised and easier to predict.

As a result, direct price comparisons can be misleading. 

As the UK prepares for future regulation of heat networks, customers can expect more standardised protections. With greater transparency and improvements in efficiency, heat networks will continue to deliver sustainable energy solutions, making them a valuable option for future energy needs.