Heat Network Regulations – Data Centres
17 July 2017
The Heat Network (Metering and Billing) Regulations 2014 (the “Regulations”) were introduced as part of the continued drive for better energy efficiency (and reduced emissions) around the European Union.
The Regulations implement the metering and billing requirements of the 2012 EU Energy Efficiency Directive. They affect those who supply and charge separate legal entities for heating, hot water or cooling through Communal Heating or a District Heat Network.
Communal Heating concerns the distribution of heating or cooling within one building to at least two separate legal entities, while a District Heat Network refers to a system distributing heating or cooling to more than one building and to one or more separate legal entities. The Regulations cover most District Heat Networks and Communal Heating within the UK and partially came into force in December 2014. The first phase of the legislation included a requirement for suppliers to notify the National Measurement Office with details of their system or network by 31 December 2015; suppliers must make these notifications every four years. The second phase of the legislation included a duty to install heat or cooling meters by 31 December 2016 (unless specified exclusions are relevant) and to ensure that bills are accurate and based on consumption (together with the provision of information relating to current prices and comparisons against previous energy usage).
There are certain circumstances in which the Regulations could impose duties on Data Centre Operators. Data Centre Operators could fall within the scope of the Regulations if:
- they provide heating or cooling to a separate legal entity externally (District Heat Network); or if they provide heating or cooling to more than one legal entity within the same building as the data centre (Communal Heating);
- the separate legal entity is paying for the heating or cooling. Note that indirect payment would still be in scope, for example, if this was included as part of ground rent or a service contract;
- chilled water is being used at the point of cooling; and
- the separate legal entity/entities are situated in self-contained areas.
Where this is the case, Data Centres will be required to notify the National Measurement Office retrospectively. This can be done by filling in the notification template (found on www.gov.uk/heat-networks) and then emailing to firstname.lastname@example.org
Despite the deadline already being passed (December 2015), the Department for Business, Energy and Industrial Strategy (“BEIS”) are still permitting, and processing, late notifications, provided that that person is not deliberately avoiding notification, is not refusing to notify and is providing accurate information.
It may also be the case that heating or cooling meters may need to be added. To assess whether this is necessary, consideration should be given as to whether the Data Centre meets the ‘economic feasibility’ and ‘technical feasibility’ tests set by BEIS. In order to satisfy these tests (and therefore exclude this obligation), the supplier must demonstrate that:
- the installation is not cost-effective. To achieve this, a comparison between the costs of installation and the estimated savings over a 10 year period needs to be carried out (it is worth noting that, as at this date, this part of the test has not yet been published and so the Government is taking a proportionate approach to compliance); or
- it is not technically practicable. The analysis here is complex and relating to the design and method of heat distribution. Listed buildings are more likely to benefit from this exclusion.
Failing to comply with the regulations can lead to a fine of up to £5,000 in each case and potentially to criminal sanctions and/or unlimited fines:
- if they export heat and provide district heating;
- if they supply heat or cooling to customers on a campus; or
- if they supply chilled water cooling to more than one customer in self-contained units within a single building.
Remember though: if the heating/cooling is not provided to a third party, the Regulations will not apply – if there is no end ‘customer’, you need not worry.
The Regulations are wide-reaching and can have significant consequences if not complied with. Anyone who is, or is likely to be, affected by them (including Data Centre operators) would be well-advised to consider the installation of meters and other equipment and to take professional advice to ensure compliance where necessary.