Looking forward towards low and zero carbon (LCZ) heat networks
It is widely recognised that heat networks will play a crucial role in decarbonising the heat sector throughout the United Kingdom (UK), which will subsequently contribute towards achieving the UK Government’s policy on reaching Net Zero by 2050.
At present, it is estimated by the Committee on Climate Change (CCC) that heat networks currently supply roughly 2% of the UK’s overall demand for heating, whereas in the future with strong endorsement and investment this supply could be increased up to 18% by 2050.
As a result of this, several regulations, frameworks, and schemes have been implemented throughout the UK to enable a transition to low and zero carbon (LCZ) heat networks. In this update we will talk about heat network funding availability across England and Wales.
The Green Heat Network Fund (GHNF)
The Green Heat Network Fund (GHNF) is arguably one of the most notable schemes that the Government has implemented in England thus far. The GHNF is a successor to the Heat Networks Investment Project (HNIP), which since its implementation in 2018 successfully granted over £250 million of funding to various heat network projects throughout the UK.
The GHNF is a capital grant programme which is distributed over a course of funding rounds, which was first implemented in 2022.
To begin with, the GHNF had a total fund of £288 million. However, with the volume of interest the scheme has had since its implementation, further funding has been secured for organisations in the public, private and third sectors across England.
The scheme will provide this funding across the financial years of 2022 to 2023 and 2026 to 2027.
The main purpose of the scheme is to help support the retrofitting and expansion of existing heat networks and the construction and commercialisation of new LZC heat networks.
The maximum grant the scheme will provide to an applicant, is up to 50% of the estimated eligible commercialisation and construction costs of the project and no more than 4.5p per 1kWh of heat delivered to customers over the first 15 years of operation.
Those who wish to apply for the GHNF, must meet the eligibility criteria of the scheme, which is based on the scheme’s gated metrics, which are categorised into the following sections:
- Carbon intensity of network
- Consumer detriment
- Annual thermal demand
- Social IRR
- Subsidy control
- Market transformation
To see if you are eligible for the scheme, you can do so through the ‘Green Heat Network Fund: Guidance for Applicants’.
The deadlines for applications to the GHNF for Round 6 is the 29th of September 2023 and for Round 7 is the 23rd of February 2024.
The Heat Network Efficiency Scheme (HNES)
Another notable scheme the Government has implemented within England and Wales is the Heat Network Efficiency Scheme (HNES). The HNES’s purpose is to help improve the performance of existing district and communal heat networks, which are resulting in poor outcomes for the network’s operators and customers due to the network operating sub-optimally.
The scheme aims to achieves its purpose through helping network operators:
- Improve their operational performance.
- Address any customer detriment
- Identify improvement measures to improve both their operational performance and reduce customer detriment.
The HNES has a total £32 million to provide in funding and it is open to applicants from the public sector (such as NHS Trusts), the private sector and third sectors (such as registered charities).
The scheme offers two forms of grants which are:
- Revenue grants: the budget of the scheme is up to £2 million for the financial years 2022 to 2023 and 2024 to 2025.
- Capital grants: the budget of the scheme is up to £30 million for the financial years 2022 to 2023 and 2024 to 2025.
For applicants to the scheme to be approved they must meet the eligibility criteria.
The following deadlines apply for each funding round of the HNES:
The Heat Networks Delivery Unit (HNDU)
Unlike the GHNF and HNES which are national schemes, a scheme which has had widespread success on a local scale throughout England and Wales is the Heat Networks Delivery Unit (HNDU). The HNDU aims to support local authorities in the early stages of their heat network development.
Unlike the GHNF, the HNDU does not offer grants for the commercialisation, construction, operation, and maintenance costs. However, it does offer grants to aid projects through each development stage, such as:
- Assessing the techno-economic feasibility of a project
- Detailed project development
- Detailed project management
Since the scheme’s implementation, 12 rounds of funding have already occurred, which has distributed a total £33.8 million across 188 local authorities, which has supported over 300 projects.
As of now, applications for Round 13 are open with the deadline for applications being on the 31st of December 2023.
The eligibility criteria outlines what conditions an applicant must meet. However, it is important to note that the although the scheme heavily references ‘local authorities’, the scheme does not just apply to this group as the HNDU also accepts applications from:
- NHS Trusts
- Universities
- Government Departments
- Registered Social Landlords
If you have any questions on the information provided within this blog, then please contact bethany.bailey@swanenergy.co.uk
Within the next few days, we shall publish our next blog in this instalment which will focus on heat network funding availability in Scotland.
