Heat Network Zoning is a regulatory framework that designates specific areas where heat networks are deemed the most cost-effective solution for heat decarbonisation. Within a zone, certain buildings will be required to connect to a heat network. This strict requirement aims to achieve a smooth and efficient transition to low-cost, low-carbon heat.
The Energy Act 2023 introduced a comprehensive regulatory framework for heat networks, as well as powers to enable heat network zoning in England. This legislation aims to reduce the cost of living by regulating prices and ensuring that the sector can contribute to delivering net zero in the most cost-effective way. The ambition of the Department for Energy Security and Net Zero is that 20% of UK heat could come from heat networks by 2050, up from less than 3% currently.
Latest developments
The Advanced Zoning Programme was announced in 2024. It is a pilot scheme for Heat Network Zoning, with a focus on six towns and cities: Leeds, Plymouth, Bristol, Stockport, Sheffield and two schemes in London. Government funding will be released to support the construction of these networks, with works expected to start from 2026. The aim is to create tens of thousands of jobs in engineering, planning, manufacturing and construction. How will this impact those within these pilot schemes?
As a starting point, zoning maps have been introduced. These maps, together with the Advanced Zoning Programme, are designed to support local authorities and investors in planning and implementing heat networks more efficiently, but they are also useful for owners, occupiers, and developers. Developers, occupiers and interested stakeholders can assess whether their interests will fall within the potential area for a zone and then begin to consider their readiness for zoning’s introduction.
Impact on building owners, occupiers and developers
Heat Network Zoning could affect most owners and occupiers of buildings in large towns and cities, beyond just those that find they will be within the Advanced Zoning Programme. The biggest legislative change will be that certain buildings within a designated zone will be required to connect to a heat network. This mandatory connection may require investment in infrastructure and retrofitting existing systems.
For developers, this means that new buildings within these zones must be designed with heat network connectivity in mind. Developers who want to lean into environmentally-conscious practices or wider business goals may see connection to a heat network as a way to enhance their green credentials while also benefiting from the efficiencies of heat networks.
Occupiers of buildings within these zones will also be impacted. They may have to connect to a designated heat network, which could raise concerns about pricing and service reliability. However, the government is taking steps to address concerns through consumer protections and regulatory oversight.
Reassurances from Ofgem and DESNZ
As the heat network market develops, so do the protections for those using heat networks (for schemes inside and outside of Heat Network Zones). For instance, Ofgem’s role has been extended to cover heat networks. This is significant because, although heat networks generally deliver a comparable service to individual heating systems, studies have found that a minority of consumers receive significantly worse outcomes. These include higher prices and outages. The regulation aims to address this and provide a fair price to consumers while supporting local regeneration.
Additionally, within Heat Network Zones there will be a zone co-ordinator which will ensure that operators and building owners and occupiers comply with their obligations. For instance, ensuring the carbon intensity of the heat is below certain thresholds and that specified buildings are connected to the designated heat network.
DESNZ has consulted on authorisations for heat network operators. The eventual outcome may be relevant to developers who operate their own heat networks. The proposed authorisation scheme aims to set standards for operators to ensure they provide reliable and efficient services. DESNZ also seeks to establish a framework that balances the need for robust consumer protections with the flexibility required for operators to innovate and improve their services.
Pay attention
Heat Network Zoning represents a significant step towards achieving the UK’s net-zero targets by 2050. Building owners, occupiers, and developers must navigate the new regulatory landscape, ensuring compliance with mandatory connections, consumer protections, and collaboration with local authorities.
By staying informed and engaged with these developments, stakeholders can contribute to a sustainable and efficient transition and, crucially, ensure they are ready to adapt to and thrive in the new energy landscape.
Image © Adobe Stock
Andrew Hirst, partner, Womble Bond Dickinson and Rory Ibbotson, solicitor, Womble Bond Dickinson
