9th January 2025 by Adam Hylan
For many years, the UK has lagged other northern European countries in the development of heat networks. This now looks set to change with key Government initiatives to develop an investable pipeline.
Heat networks (also known as district heating) supply heat from a central source to consumers via a network of underground pipes carrying hot water. Heat networks are one of the most cost-effective ways of reducing carbon emissions from heating.
Identifying heat network zones
Heat network zoning is designed to encourage the deployment of heat networks by requiring particular buildings to connect to heat networks within their local area.
To help developers identify where heat networks are expected to provide the lowest cost, low carbon heat to buildings in the future, the Government has made maps available for 21 of the towns/cities that took part in its Heat Network Zoning Identification Pilot (Heat network zoning maps – GOV.UK)
In addition, the Government will respond to last year’s zoning consultation in spring 2025. It is also committed to setting out its broader strategic vision for heat networks, including new growth targets, to give the market confidence about the scale of our national ambition.
Boosting public confidence
In November, the Government launched a joint consultation with Ofgem on implementing consumer protections focussed on pricing, quality of service, transparency of information, and protecting consumers in vulnerable circumstances.
The first piece of secondary legislation on the heat network market framework was laid before Parliament on the 28th November. Taking steps to address these areas will be key to the success of heat networks particularly in light of some recent bad press relating to historic networks that do not perform for residents.
Building a pipeline
Six towns and cities have been selected to develop the country’s first heat network zones. The pioneering schemes in Leeds, Plymouth, Bristol, Stockport, Sheffield, and two in London – OPDC and South West Area Network (Swan) in Westminster – will receive a share of £5.8 million of government funding to develop the zones, with construction expected to start from 2026.
Key questions for owners and investors
Can local authorities continue to combine their role as the owner of many heat network with their new role as heat network zone co-ordinators? Will we start to see the sale of existing heat networks by local authorities, not least due to ongoing financial constraints?
How can local authorities best secure private partners to finance the expansion of heat networks? What is the potential role for Mayoral Combined Authorities to generate efficiencies across smaller local authority areas?
What is the best way for private infrastructure investors to develop platforms to grow in the UK heat network sector and bring much-needed new capacity?
How Newbridge can help
Since the beginning of 2023, Newbridge has raised £4.25bn of infrastructure debt finance from bank and institutional funders.
Newbridge advised the Old Oak and Park Royal Development Corporation (OPDC) on the commercial strategy and procurement for the Old Oak and Park Royal Energy Network.
