The Heat Network Efficiency Scheme (HNES)

To meet our net zero targets, we need to improve the efficiency of our heating systems. Heat accounts for around 37% of UK carbon emissions and to hit net zero by 2050, virtually all heat from buildings will need to be decarbonised.

In areas of high-density heat demand, heat networks are likely to offer the least cost and lowest carbon solution. Currently heat networks account for around 3% of the UK’s heat demand, with the Committee on Climate Change (CCC) suggesting this needs to increase to around 20% by 2050.

As part of the Department for Energy Security and Net Zero’s (DESNZ) Heat Transformation Programme, the Heat Network Implementation Project (HNIP) and the subsequent Green Heat Network Fund (GHNF) have been introduced to support the deployment of new heat networks. However, there are also many existing heat networks, some of which date back to the 1970s, that need upgrading.

As a result, DESNZ has developed the Heat Network Efficiency Scheme (HNES), which is designed to improve the efficiency of existing district and communal heat networks in England and Wales. The key aims of HNES are to:

1. Reduce carbon emissions by making heat networks more efficient
2. Reduce customer detriment to improve consumer confidence
3. Help prepare the heat network market for sector regulation and technical standards

The scheme launched in February 2023 and runs until March 2025, with funding being awarded across two financial years (FY23/24 and FY24/25) via eight funding rounds.

The grant funding is split into two pots. £30M of capital funding is available to support improvements to heat networks, covering the energy centre / plant room, primary, secondary and tertiary networks. Installation of metering may also be supported, where this is not already a legal requirement under the Heat Network Metering and Billing Regulations (HNMBR). Capital funding can account for up to 50% of a total project’s cost, with the remainder to be funded by the project themselves.

It is worth noting that replacing primary plant in the energy centre, be that replacing like-for-like systems (such as a gas boiler with a new gas boiler) or switching technology (for instance, replacing a gas boiler with a heat pump), is not eligible under HNES. Heat networks in England looking to switch to a greener heat source should consider GHNF as a potential funding route instead.

For heat network operators who know they have an underperforming heat network, but don’t know why or how to improve it, £2M of revenue funding is also available. This will cover up to £24,000 to enable a third party to undertake an Optimisation Study. Optimisation Studies will review the current performance of a heat network and identify measures or packages of measures that could be implemented to improve its efficiency. A techno-economic analysis will also be included to explain the costs and paybacks related to each measure, thereby helping heat network operators to make decisions on which measures are most appropriate for their network.

HNES is already well underway, with Funding Round 3 due to close on Friday 7 July. If you are a heat network operator, or are aware of a poorly performing heat network that needs improving and want to find out more about the scheme, either email hnes@gemserv.com or read our Guidance for Applicants document, which provides a detailed overview of the scheme and the application process.

By improving our existing heat networks, and ensuring that heat network customers have a good experience, we can help decarbonise our heating systems and move further towards achieving our 2050 Net Zero targets.