Preparing for the November 2021 deadline – it’s all in the approach
Many landlords and property management companies are now taking steps towards ensuring compliance with the upcoming Heat Networks (Metering and Billing) Regulations (HNR) deadline in November. Whilst time is of course critical in light of this fast approaching compliance requirement, so too is the approach taken to ensure the completion of compliant assessments which will pass audit, whilst also thinking about cost effectiveness over the long term, and not just in terms of the completion of the assessment itself.
The regulations apply to heat networks which are defined as shared heat systems where water is heated or chilled at a central source of production and distributed to more than one building or customer through a pipework network, for the provision of heating, cooling, or hot water use. ‘Heat suppliers’, the operators of these networks, must ensure compliance with the regulations.
For many networks, heat meter cost effectiveness assessments must be completed by 27th November 2021. Where the outcome of this assessment is positive, and it is deemed cost effective to install heat meters, these must then be installed by 1st September 2022. The cost effectiveness assessments are based on a Net Present Value return on investment calculation over a 10 year period, which assesses the estimated energy saving, against the cost of installing the meters.
The Approach – Choice of Tool
The government has developed two ‘tools’ for use in completing the assessments:
- Reduced Input Cost Effectiveness Tool (RCET) – this tool relies on actual input energy/fuel data relating specifically to the heat network itself. In this case, 12 months actual energy data is gathered and input into the tool, along with the estimated meter costs. This option can generally be undertaken as a desktop assessment.
- Full Input Cost Effectiveness Tool (FCET) – this tool is used where actual energy/fuel input data for the heat network is not available. Information will instead be gathered and input relating to the building fabric and building services. This option will generally require a site survey to gather the necessary information.
The reduced tool offers some benefits over the full tool. Firstly, the assessment is based on actual energy data. The assessment is therefore a more accurate reflection of the actual cost effectiveness of installing the meters. Secondly, the reduced input tool is much simpler and quicker to use – there are fewer inputs required as the name suggests.
However, it is not appropriate to use the reduced tool in all cases. The tool is calling for actual energy data – but this must relate to the heat network itself, i.e., the kWh usage for operating the plant which generates the heating, cooling, and/or hot water. We have witnessed cases where the total building consumption is erroneously being inputted into the tool. This could result in a skewed picture of cost effectiveness as the tool applies an assumed percentage saving to the energy use. The total building usage will be higher than just the usage for the network alone. Therefore, if this figure is entered, the calculated saving will also be higher as it is a set percentage of the total energy usage and costs. This increases the likelihood that the result of the assessment will be positive and could result in meters being installed in instances which were not truly cost effective.
Therefore, whilst the use of the reduced tool may be perceived as the quicker and lower cost option, this is only the case when it is used appropriately, for sites which have the correct energy data available. Where there is not sufficient metering to record the usage for the heat network, use of the full tool will give a more representative assessment, ensuring heat meters are only required to be installed where cost effective to do so.
The Approach – A Two-Step Process
In order to complete the initial assessments as cost effectively as possible, it is permitted to use the government published ‘average’ heat meter costs. Where a negative result is attained, no further action is required in terms of installing meters at that time. The assessment and backing evidence must be kept on file in case of audit and the exercise must be repeated again in 4 years.
Where the result is positive, it needs to be remembered that this is based on estimated costs for installing the meters. The flow part of the heat meters would need to be installed within the pipework, and in our experience access restrictions and technical constraints can sometimes make this difficult. In these cases, the retrofit of heat meters can therefore be disruptive and costly.
Upon receipt of a positive result, our approach is therefore to conduct a heat meter survey. The purpose of the survey is to confirm the required heat meter positions; ascertain what is required to facilitate the installation of the meters; and provide accurate costs for the meters and their installation, to check whether this changes the outcome of the cost effectiveness assessment. This provides a more accurate result for the assessments, ensuring funds are only expended on heat meters where it really is cost effective to do so.
The Approach – Understanding Nuances within the Tool
As with all compliance requirements, the government has tried to develop a one size fits all solution, which must be applied to a myriad of different client and property types. The result – there are a number of circumstances where the tool doesn’t quite work for certain scenarios, and exceptions/deviations have to be made. What is important, is that the tool is used to complete the assessment in a way that is compliant.
At Carbonxgen we maintain good relationships with Office of Product Safety and Standards (a sub department of BEIS which is responsible for enforcing these regulations). We are in regular contact and from our questioning have developed a comprehensive understanding of the nuances required to ensure a compliant assessment is undertaken. We continue to raise queries as any new issues materialise.
There are many benefits to the installation of heat meters such as increasing the scope for energy monitoring to drive savings, ensuring more fair and transparent billing, and minimising service charge energy costs. However, a pragmatic approach is required (which is supported by the government), in which the benefits are weighed up against the costs.
Whilst time and cost are undoubtedly critical considerations for property sector professionals given the tight deadline and high demand, as well as the potential for large capital costs required to comply, so too is the approach taken. What may seem like the simplest and cheapest option for completing cost effectiveness assessments, may not always be the most appropriate or cost effective over the long run.
Ensuring a well thought out and robust approach reduces risks associated with non-compliance and ensures heat meters only end up being installed where it is cost effective to do so.