The company has failed to meet its environmental obligations under the Community Energy Savings Programme (CESP) and Carbon Emissions Reduction Target (CERT) by the 2012.
Under CESP, energy suppliers and generators should deliver energy saving measures to households by the end of December 2012.
However, British Gas delivered only 62.4% of its obligations and also did not respond to changes in market conditions or effectively manage its supply when problems were raised in 2012.
The £11.1m penalty, which will be used to help customers through energy efficiency advice and improvements, has also been issued to the company for failing to reach obligations under the Carbon Emissions Reduction Target (CERT), delivering 99% of its overall obligation.
Ofgem senior partner Sarah Harrison said: "British Gas’ failure to deliver two environmental obligations on time is unacceptable. Thousands of households had to wait for energy efficiency measures, like insulation, to be installed during the winter.
"The payment reflects British Gas’ failure to meet its obligations on time but also recognises its commitment to put things right."
British Gas New Energy managing director Claire Miles said: "We’re hugely committed to the success of our energy efficiency programmes and are sorry that we missed the December 2012 deadline.
"We take our responsibilities to our customers very seriously and do all we can to help them keep their bills as low as possible. Providing free insulation is a big part of that, as well as giving our customers ways to manage and understand their energy use through smart meters and other new technologies."
