Why the Strait of Hormuz affects heat tariffs (but not in the way you think)

For heat suppliers in Belgium and the Netherlands, that link can seem more indirect at first glance. Heat networks are locally organized and often run on waste heat, biomass, or hybrid systems. But even when production looks “sustainable,” volatility from global markets still finds its way into the economic reality of a heat network.

It just rarely happens immediately. Most of the time, the effect arrives later, with a delay.

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From conflict to price impact: why markets react instantly

In escalations like the Strait of Hormuz or Ukraine, the impact is rarely only about physical scarcity. What mainly moves markets is uncertainty. That uncertainty is priced in right away:

• risk premia are added
• LNG flows shift to other destination markets
• countries compete more aggressively for available volumes

As Europe has leaned more on LNG, gas has become even more of a global commodity. Futures and spot markets react within minutes. That makes gas prices structurally more volatile. Between that fast-moving global market and the end-customer price sit several layers, each moving at its own pace.

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Why heat tariffs still move, even with sustainable production

Even when heat comes from waste heat, biomass, or heat pumps, there is usually an economic link to the broader energy market. In practice, three channels show up repeatedly:

• electricity prices often track gas, because gas frequently remains the marginal price-setter
• gas still matters as backup fuel and for peak production in many systems
• contract and investment models have historically relied on fossil benchmarks

The result is that a geopolitical gas price shock can work its way into the cost base through electricity, reference indices, or backup costs. And what enters the cost base will, sooner or later, influence tariff logic.

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Heat tariffs do not follow global markets in real time

For heat suppliers, the story does not end there. Between a volatile gas market and the final customer price sit mechanisms that deliberately build in delay:

• procurement contracts and hedging
• the cost structures of plants and networks
• indexation formulas
• regulation and concessions
• annual or contract-based tariff adjustment moments
• historical reference points in energy pricing

👉 That is why direct, real-time pass-through from price moves to heat tariffs is rare.

Heat tariffs are not less influenced, but they are influenced with a lag.

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What this means in practice for heat suppliers

That lag creates a familiar dynamic. When gas prices spike due to geopolitics, suppliers usually see movement in market references first. Then it filters into procurement and cost expectations. Only when tariff moments or indexations allow does an adjustment follow.

By the time a tariff actually changes, the market has often already shifted again. That creates a structural tension:

• costs move faster than tariffs
• tariffs follow the market with a delay
• customers mainly experience the end result, disconnected from the intermediate steps

Heat tariffs are typically revised annually, fixed contractually, or adjusted via indexation. 👉 That is the third layer: tariff logic, deliberately slower to create predictability and stability.

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Gas price as a reference point by country

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🇳🇱 Netherlands: from NMDA to the Wet collectieve warmtevoorziening (WCW)

In the Netherlands, the link was long explicit via the ‘not-more-than-otherwise’ principle (NMDA):

heat could not be more expensive than a comparable gas connection

That made the transmission from gas to heat tariffs relatively direct.

With the Wet collectieve warmtevoorziening (WCW), the focus shifts toward cost-based regulation and transparency. As a result, the “automatic” NMDA link largely disappears, although gas can still exert indirect influence through market practices, indexation, and reference frameworks.

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🇧🇪 Belgium: less uniform, often contract-driven

Belgium has no national NMDA counterpart. Heat networks there are more often project- and contract-driven, with regional differences.

That provides flexibility, but also makes tariff setting dependent on:

• indexation and reference clauses
• the chosen cost pass-through logic
• concession and financing arrangements

Here too, gas often remains an implicit reference, but more through economic than legal mechanisms.

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🇫🇷 France: regulated networks, but a hybrid price logic

France has a long tradition of délégations de service public (DSP) for heat networks.

Key characteristics:

• municipalities grant concessions to operators
• tariffs are regulated contractually within concessions
• public interest and stability often play a strong role

👉 Key difference:

France does not use an NMDA-like gas linkage as a formal principle.

But in practice:

• gas prices still influence indexation formulas
• heat contracts often contain energy index clauses
• investment models remain sensitive to gas volatility

👉 So: no direct coupling, but a clear indirect dependence.

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🇬🇧 United Kingdom: a fast-evolving regulatory market

The UK is in a different phase: the rapid build-out of regulation for heat networks.

With the rise of:

• Heat Network Zones
• new Ofgem-like oversight structures in development
• stronger consumer protection

👉 The UK is moving toward more regulated heat market structures.

But today:

• many heat networks are still private or hybrid models
• pricing is contract-based and project-driven
• indexation is often linked to broader energy prices

👉 Result: high exposure to gas price volatility, without a uniform national benchmark like NMDA.

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An uncomfortable observation

Heat networks are in a special position. They operate locally, but are economically influenced by global markets through a chain of delays. That delay is exactly what makes it complex: it dampens volatility, but it does not remove it.

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From Hormuz to the tariff debate

Tensions around the Strait of Hormuz will ease again at some point. That is inherent to geopolitical cycles. But the mechanism they reveal remains.

We live in a world where energy prices react rapidly to geopolitics, while heat tariffs follow later through contracts and regulation. 👉 And that makes one question increasingly important for suppliers:

How do you translate volatile input markets into stable and explainable tariffs?

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Transition to a broader question

That question connects to a broader debate that goes beyond today’s news, but is accelerated by it. If gas prices are increasingly determined by global geopolitics, and if that volatility still ends up in heat tariffs through multiple layers…

is it still logical to keep using gas as the reference point for heat prices?

That is why the debate around the ‘not-more-than-otherwise’ principle is becoming relevant again today. Not as a technical detail, but as a fundamental question about how we want to value heat in a changing energy world.

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Conclusion

Geopolitical tensions like those in the Strait of Hormuz rarely affect heat suppliers directly. They do, however, work their way through via a chain of markets, contracts, and timing mechanisms.

Not immediately, but structurally.

And that is where the sector’s challenge lies: not in predicting the next price spike, but in clearly managing the delay with which that spike ultimately shows up in tariffs.