Consultation outcome

Heat network zoning consultation 2023: summary of government response

Updated 21 January 2026

Introduction

Heat networks are an essential part of our path towards lowering bills, decarbonising heat, enhancing energy security and achieving net zero by 2050. In the Warm Homes Plan we are setting a target to more than double the amount of heat demand met via heat networks in England to 7% (27TWh) by 2035 with them expected to provide a fifth of all heat by 2050.

Heat network zoning will transform the development of heat networks in towns and cities across England. By designating areas where heat networks are expected to offer the lowest-cost solution for decarbonising heat, local communities will have the tools to accelerate the development of heat networks, ensuring that more homes and businesses can access greener, cheaper heat.

A public consultation was held between 18 December 2023 and 26 February 2024 on further proposals for heat network zoning. The consultation built on an earlier zoning consultation published in October 2021.

We received 156 responses to the 2023 consultation from a wide range of stakeholders. We have analysed the responses and found that stakeholders supported most of our proposals. The outcomes from the December 2023 consultation are being used to draft secondary legislation to implement heat network zoning, using powers in Part 8 of the Energy Act 2023.

The regulations that will implement the proposals outlined here are currently in development. The regulations are expected to be laid in Parliament in spring 2026, subject to parliamentary time.

We have summarised the key elements of the heat network zoning policy below.

Zoning Bodies

A note on terminology

The consultation referred to the proposed zoning bodies as the “Central Authority” and “Zone Coordinators”. Following consultation with various stakeholder groups, we now refer to them as the “heat network zoning authority” and “zone coordination bodies”. These terms are intended to be more accurate and understandable.

Heat network zoning authority

The heat network zoning authority will coordinate heat network zoning across England. It will be housed in the Department for Energy Security and Net Zero (DESNZ) initially, moving to the Warm Homes Agency once it is established.

The heat network zoning authority’s responsibilities will include:

• developing the standardised methodology for identifying, refining, designating and reviewing heat network zones
• overseeing the identification, designation and review of heat network zones
• overall responsibility for zone delivery, including publishing and updating a national pipeline of priority heat network zoning opportunities coming to market in the near future
• coordinating the designation of zone coordination bodies
• managing heat network zoning data
• supporting zone coordination bodies via guidance and funding
• reviewing zone coordination bodies’ decisions

Zone coordination bodies

Zone coordination bodies will coordinate the development of heat networks within specific heat network zones and carry out other local functions. Their roles and responsibilities will include:

• collecting data to refine the boundaries of a zone
• running a public consultation on the proposed zone boundary prior to designating the zone by registering it with the heat network zoning authority
• considering whether to divide the heat network zone into more than one zone delivery area
• developing and publishing a “zonal market prospectus”, setting out the opportunity for developing a heat network in each zone delivery area
• running the competitive, nationally standardised processes to appoint heat network developers (“zone developers”) with exclusive rights to develop a district heat network in the zone delivery area
• overseeing the process for connecting certain buildings in the zone to a heat network
• investigating heat sources and where necessary overseeing their connection to a heat network in the zone
• ensuring compliance with the rules which apply in heat network zones.

The heat network zoning authority will oversee the establishment of zone coordination bodies through a co-design process with local authorities.

Heat networks zones may cross multiple local authority boundaries, including local authorities at different levels of local government. Because of this, the structure of zone coordination bodies will be adaptable to different local circumstances. The zone coordination body could consist of a single body that fulfils all functions, a two-tiered multi-party structure, a multi-party structure with a lead local authority, or a consortium where resources are shared between different zone coordination bodies. Local authorities may also consider which tier of local government would be most appropriate to fulfil the zone coordination body role e.g. at Combined Authority or District Council level.

For example, a zone coordination body may be established jointly by several relevant borough councils. Alternatively, the zone coordination body may be led by a Combined Authority who delegates tasks to local authorities in their jurisdiction. The heat network zoning authority may carry out certain roles of a zone coordination body, on a case-by-case basis as agreed with that zone coordination body, while retaining a strong local input. The heat network zoning authority will also provide ongoing support and guidance to zone coordination bodies once established and there will be additional regional level support for zone coordination bodies through the Local Net Zero Hubs.

Zone coordination bodies will be assessed against specific ‘fitness to operate’ criteria before they are established, and zone coordination bodies will be required to comply with national standards on governance. These will ensure a consistent minimum standard of performance for zone coordination bodies across the country and ensure local accountability is retained. There will also be mechanisms for the heat network zoning authority to intervene where a zone coordination body has failed satisfactorily to fulfil its functions.

The heat network zoning authority will provide funding for local government to take on the zone coordination body role in line with the national zoning pipeline. This funding will come from DESNZ budgets initially, with longer term funding arrangements to be established in due course.

We will be supporting at least 10 of the biggest English towns and cities to establish their heat network zones soon after Heat Network Zoning Regulations go live, with further zones to follow.

Zoning process

Ensuring consumers on heat networks in zones benefit from high quality, affordable infrastructure

Zone coordination bodies will run a competitive process to select parties to develop heat networks in zones (“zone developers”). Zone developers will be subject to a consenting framework which gives them exclusive rights to develop district heat networks in the zone while holding them accountable for delivery.

In the competitive process, prospective zone developers will need to provide evidence of their ability to develop the zone. They may also provide information on their plans for heat generation, by taking advantage of local heat sources, which will be one factor amongst others in the zone coordination body’s decision to select one zone developer to move forward (explained further below). From this point, zone developers will be subject to ‘consents’, requiring them to adhere to a standard set of conditions on a range of areas, including speed of delivery (design and construction), and providing benefits to local communities.

A single zone developer will be selected to move forward to detailed commercial and engineering planning (design stage), which is estimated to last 12 to 18 months. After this, alongside their detailed plans for developing the zone, the zone developer will be required to inform the zone coordination body of the prices it will offer to consumers in the zone in a pricing schedule. The zone coordination body will analyse these prices, as outlined below, and be able to reject the appointment if these charges do not represent a good deal for consumers.

Analysis of prices will include:

• comparing the offered prices to those charged by heat networks in other zones, and those from other technologies, such as air-source heat pumps or gas boilers.
• comparing the final pricing methodology with any approach outlined by the zone developer in the first stage of the competitive appointment process, and any heat source plans.
• a role for Ofgem, the national heat networks regulator, to comment on prices. This will ensure Ofgem can flag to zone developers and zone coordination bodies whether the proposed schedule of prices may breach Ofgem rules.

In addition to this, Ofgem’s national role as heat network consumer regulator will apply to the heat network which is being developed in the heat network zone.

Community Benefits

Zone coordination bodies will ask potential zone developers how they plan to deliver the following social value outcomes: creating more integrated communities, local job creation, protecting and improving the local environment, supporting local health and wellbeing, and providing educational opportunities. The zone coordination body will apply these commitments as a condition of the consent they award to the winning bidder.

These five social value outcome areas will be a minimum set of social value obligations which apply to the zone developer. The zone coordination body may also choose to add further social value outcomes to this list as part of the zone prospectus, with the approval of the heat network zoning authority.

Emissions in Heat Network Zones

From 2030, all zone heat networks - and new connections to existing district heat networks within zones – will be required to meet a carbon emissions limit. This will be based on a benchmark scenario assuming 85% of heat is delivered by low-carbon air source heat pumps using electricity and 15% is supplied by gas boilers. Heat networks may use any technology mix, such as surplus heat from industry, provided their annual emissions remain below the benchmark.

This limit will leave some residual emissions from zone heat networks that will need to be dealt with to reach net zero by 2050. We believe it will be better to phase out this remaining gas capacity later in the transition to net-zero, when it will be easier to secure the additional investment in making all heat generation low-carbon rather than adding these costs to the heat network sector now when it needs high levels of capital investment. 

In order to strike the right balance between transparency and certainty, the emissions limit will be reviewed and updated every 5 years, or sooner if major changes happen in the energy sector, such as shifts in energy markets or significant price volatility. Exact emissions factors will be published before 2030 to give heat network developers time to adapt.

Failure to comply with emission limits could see the removal of zone developers’ rights to further development in the heat network zone.

The zoning emissions limits will be consistent with the forthcoming Future Homes and Building Standards. Zone heat networks connecting to new buildings will either need to deliver heat at emissions levels equivalent to the standards, or will need to demonstrate they have sufficient spare low-carbon generation capacity to provide an equivalent level of low-carbon heat to the new buildings (this is often called “sleeving”).

Connecting buildings in zones

Heat networks that operate at city or town-scale will be best placed to make use of multiple heat sources and thermal storage and this will lead to lower heat prices for consumers. Low-carbon heat networks currently fail to grow to this scale in much of England because of heat network developers and investors lack confidence that buildings will connect.  

Zoning will reduce these risks by requiring that the following types of buildings in heat network zones may be asked by the local government-sponsored zoning coordination body to connect to the zone’s heat network within a specified timeframe:

• New buildings which receive planning permission after the designation of the zone,
• Pre-existing communally heated domestic and non-domestic buildings, and
• Pre-existing non-domestic buildings with an annual average heat demand greater than 100 Megawatt-hours (MWh), such as a medium sized office block, which have a ‘wet’ heating system i.e. not exclusively heated through electric radiators.

Communally heated buildings are those which have a centralised heating system which provides heat and hot water to the individual dwellings or units within the building.

The local zone coordination body may only ask buildings to connect if requested to do so by the zone developer, and if they are confident the developer can connect the building to the network in the proposed timeframe.

We currently do not have the legislative powers for heat network developers to charge for connecting buildings which have received a connection notice. This will be resolved through new primary legislation when parliamentary time allows. Until this is done, we anticipate low levels of connection notices will be issued. Instead, we expect that the zone heat network developer will continue to negotiate connection costs and heat supply agreements commercially with buildings as they do currently.

In future when these changes are made and as the sector matures and the cost of low-carbon heating falls, we intend to introduce protections so that the costs of connection when the building is required to connect can be no higher than the building’s alternative heating technology. We intend to cap these costs at zero for pre-existing communally heated domestic buildings, ensuring no costs on leaseholders. For new buildings, we propose setting a cap equivalent to the upfront costs of an equivalent low-carbon heat pump when the Future Homes and Building Standard comes into force so there is no additional cost to building developers. For non-domestic buildings, we will align the connection cost cap with an appropriate counterfactual, again to ensure there are no additional costs.

For new buildings, we expect that local planning authorities will inform new build developers of this element of the heat network zoning framework through pre-application advice to applicants. If new build developers are not notified, they will be able to install alternative heating systems.

In future we intend that new buildings in zones which are not required to connect and which install alternative heating systems will also need to be “heat network ready”. For example, these requirements could include designing enough space in the building to accommodate the equipment needed to connect it to the heat network or installing a wet heating system, rather than a forced air or direct electric heating. The specification of heat network readiness will be set out in building regulations when time allows, and this will not take effect until the relevant approved documents are updated.

For pre-existing buildings within zones, zone coordination bodies will issue a connection notice to the building owner when requested to do so by the zone developer. The zone developer will be able to ask the zone coordination body to send the notice once it receives consent to develop a heat network in the relevant zone delivery area. The notice will give the building a 12-month window to connect, with a minimum deadline of 6 months to agree the exact connection date within the given time window.

Building owners and developers will be able to apply to the zone coordination body for an exemption based on specific criteria, such as having an existing low-carbon heating system installed or unresolvable technical incompatibilities. Building owners can apply for long-term (‘conditional’) exemptions once the zone has been designated, or a short-term deferral lasting a maximum of 2 years (a ‘temporary exemption’) after receiving a connection notice. The heat network zoning authority will issue guidance to zone coordination bodies to assure fair and consistent assessment of exemption applications within and between zones.

A building which has been issued with a connection notice may choose whether to buy heat from the network post-connection and pre-existing buildings may opt to keep their existing heating system while maintaining a connection to the district heat network. This will ensure pressure on zone heat network developers to keep heat prices competitive, even after the building has been connected to the heat network.

Connecting heat sources in zones

A variety of heat sources owned by third parties, such as water treatment centres, data centres and waste incinerators, could provide low-cost low-carbon heat to networks in zones. Making greater use of this heat from commercial or industrial processes will reduce heating costs for consumers and benefit the country as it will reduce the costs of expanding the electricity grid as we transition to net-zero.

We want to encourage the owners of heat sources and heat networks to negotiate to sell heat that would otherwise be wasted to provide heating for consumers. There will also be the backstop under zoning that if no agreement is reached, the zone coordination body will be able to require connection of the heat source to the heat network and for it to provide heat where connection is viable. The heat network zoning authority will support zone coordination bodies with national guidance and advisory support on this negotiation with heat sources. This will ensure that heat network developers and heat sources can strike an acceptable heat price that secures low-cost low-carbon heat for consumers while covering at least the cost of abstracting heat for the heat source.

This will apply to heat sources located within and around zones, provided they can feasibly supply heat to a heat network in a heat network zone.

Crown application

The zoning powers under the Energy Act 2023 do not apply to bodies with Crown Status, meaning, for example, that buildings or heat sources owned by the Crown cannot be required to connect to a heat network in a zone. We are engaging with the relevant bodies with Crown Status to make them aware of the benefits and opportunities of heat networks and how they can support the implementation of heat network zoning. We are also exploring legislative amendments that would enable us to apply appropriate parts of the heat network zoning framework to the Crown.

Identifying, refining and designating zones

The National Zoning Model

The National Zoning Model is a data-led spatial energy model developed by DESNZ to ensure a standardised approach is taken for identifying heat network opportunity areas across England. The model uses a range of data and a standard set of assumptions about technology costs and performance to produce maps and datasets showing the location and scale of heat network opportunity areas.

The heat network zoning authority will be required to publish outputs from the National Zoning Model, which will be hosted on a new heat network zoning digital service. This will be an online tool providing information about heat network zoning, both in general and for information about specific heat network zones including interactive maps. We intend to publish outputs from the National Zoning Model on the zoning digital service prior to the zoning implementation regulations coming into force.

Ahead of the National Zoning Model going live we have published a number of zone opportunity reports and heat network zone maps) from pilots of heat network zoning. 

National zoning pipeline

The heat network zoning authority will use the outputs from the National Zoning Model to build a pipeline of the heat network zones it expects to be designated and in construction in the near future. The heat network zoning authority will review and update the pipeline annually which will provide clarity to customers, the heat network supply chain, and investors on when and where heat network zones are expected to be delivered across the country.

Zone refinement and designation

Zone coordination bodies will work with local stakeholders to review the accuracy of the maps and data outputs from the National Zoning Model. Where necessary they will submit missing or incorrect data, for example relating to a building’s heat demand or the presence of a potential heat source, to the heat network zoning authority. The National Zoning Model may be re-run with the new local data to update the zone boundary. Zone coordination bodies will also be able to propose more general refinements where they are supported by evidence to demonstrate that they have a sound technical basis, for consideration and approval by the heat network zoning authority. This could include, for example, proposals for new buildings that weren’t confirmed at the point the National Zoning Model was run.

The designation of heat network zones will be a two-step process. The zone coordination body will consult with local stakeholders on the proposed boundaries of the heat network zone following the zone refinement activity, consider whether to change the heat network zone boundaries in light of feedback received, and then formally designate the area as a heat network zone by registering it with the heat network zoning authority.

While the consultation will be open to the public, the zone coordination body will be required to consult specific parties with a relevant interest in the zone. This includes, for example, heat network operators with assets in the zone and other utility providers.

Zone delivery and consent

Once a heat network zone has been designated, the zone coordination body may decide whether the zone will be split into parts called zone delivery areas. This will help to accelerate overall delivery, avoid the market becoming overloaded with projects and will enable smaller companies to enter the market.

For each zone delivery area (which may cover an entire zone, a smaller section of a single zone, or an amalgamation of more than one zone) the zone coordination body will produce a ‘zonal market prospectus’ which will advertise the nature of the opportunity to the market. As noted above, zone coordination bodies will use a competitive process to confer special and potentially exclusive rights to parties to develop (design and construct) heat networks in zones, based on standardised evaluation criteria.

Most of the proposed evaluation criteria have been tested as part of the SWAN procurement and wider Advanced Zoning Programme projects.

Following the appointment of a heat network zone developer the zone coordination body and the developer will agree a ‘consent’ agreement which will set out the requirements on the developer for designing and building the heat network within the zone, including the expected pace of delivery.

Existing heat networks (“incumbents”)

We recognise that heat networks may already be in development or operation in areas which are subsequently designated as heat network zones. While the zone delivery process grants zone developers exclusive rights to deliver district heat networks in zones, we want to ensure that existing investments in heat networks are respected. The zone coordination body may grant consent to existing heat networks to continue operating and, in some cases, allow them to compete with the zone developer for new customers.

In some cases, the rights to develop in a zone delivery area may be awarded to the developer or operator of an existing heat network without a competitive process. This would occur where the existing investment makes it economically infeasible for competitors to develop and deliver a new zone heat network in the same area. This will avoid unnecessary duplication of investment and construction, which would otherwise increase consumer bills.

We anticipate that this form of direct award would only be available in limited areas, and not for entire zones but only for smaller zone delivery areas.

Zone review

Zone reviews will occur after designation if there are “relevant changes” in the local area that may require modifying the boundary of the heat network zone. To prevent the possibility of a zone review undermining market and investor confidence, zone reviews can only lead to the enlargement of a heat network zone, and relevant changes that may trigger a zone review will be narrowly defined: a large new development adjacent to or near an existing zone, or the connection of a new heat source to a heat network in the zone. Zone coordination bodies will be able to request information about these changes and then reassess whether the heat network zone boundaries remain appropriate. They can then redesignate the zone with amended boundaries.

Zone revocation

Zone revocation will be the process for undoing the designation of a heat network zone if it no longer fulfils the lowest cost low-carbon criteria. Zone coordination bodies will only be able to revoke zones when, over a multi-year period, appropriate interventions have not resolved the issue, and a thorough investigation indicates that revoking the zone would avoid poor outcomes for consumers and heat network developers e.g. prices are consistently higher than the equivalent cost of the buildings being heated by individual heat pumps.

Enforcement and appeals within zones

Enforcement

The zone coordination body will be responsible for enforcing compliance with the rules which apply in heat network zones. If someone (e.g. a zone developer, building owner, or heat source owner) fails to fulfil their responsibilities, the zone coordination body can take the following enforcement measures:

• Initial Compliance Notice - if the zone coordination body suspects non-compliance, they can issue a notice asking the person to prove they’ve complied.
• Formal Compliance Notice - if the person fails to demonstrate compliance, the zone coordination body can issue a formal compliance notice, which may prescribe specific steps they must take to fix the issue and the timeframe for doing so.
• Penalties - If the breach continues or is serious, the zone coordination body can impose fixed or variable monetary penalties. The variable penalty can be up to £1 million or 10% of annual turnover, whichever is higher. When determining the amount of any penalty, the zone coordination body will consider specific factors set in legislation and a penalty calculation guidance issued by the Department. These factors will include: the severity of the contravention; any mitigating or aggravating factors; the size and turnover of the heat network developer or the size of the building; the cost to the building owner of obtaining alternative low carbon heating; any losses suffered by the building owner or any other person as a result of the contravention; the impact of the contravention on the zone development plan; and any other factor the zone coordination body considers relevant to the contravention in question.

Appeals

If a party is directly affected by a decision made by the zone coordination body they will have the right to challenge the zone coordination body’s decision through a formal appeals process.

In some cases, particularly for major decisions, the person affected will be able to first ask the heat network zoning authority to review the decision. The heat network zoning authority may confirm the original decision, change it, replace it with a new one, or send it back to the zone coordination body to reconsider. After this review, or if the heat network zoning authority has not been asked to review the decision, the person can appeal to an independent tribunal, called the First Tier Tribunal (General Regulatory Chamber). This is a specialised judicial body, part of the two-tier tribunal system for England and Wales, handling appeals and disputes against decisions made by government regulators. This tribunal will look at whether the decision was fair, factually accurate and lawful. Appeals will need to be submitted within 28 days of receiving the decision or the outcome of the heat network zoning authority’s review.

While the appeal is ongoing, most decisions remain in effect, but any financial penalties are paused until the appeal is resolved. The First Tier Tribunal will have the power to cancel, change, or confirm the decision, and will also be able to send it back to the zone coordination body for further consideration.