New Guidance: Key Commercial Considerations when Connecting to a Heat Network

Local Partnerships, with funding and support from the Greater South East Net Zero Hub, has developed much needed commercial guidance for prospective heat networks customers. The government wants to see heat networks grow from 3% of the UK’s heat market to 20% by 2050, with public sector customers a big part of this growth.

To date, public bodies have had a lot of attention on developing heat networks. However, with forthcoming heat network zoning mandate connections to heat networks where they are the lowest cost, lowest carbon option – and growing private sector interest – public bodies are more likely to be offered connections, rather than proposing them.

Heat network supply contracts are long term (20 years+ possible) and form a natural monopoly for their customers’ heat supply. It’s critical that public bodies know what to look for in the small print. This guidance fills a gap in the support available to public bodies who will increasingly find themselves weighing up the benefits and risks of such connections, over alternate low carbon supply options.

This guidance draws on Local Partnerships’ experience and ongoing support to public bodies developing heat network opportunities, including:

• Staffordshire County Council – supporting the development of the Four Ashes  heat network linked to the council owned Energy Recovery Facility (ERF)
• Milton Keynes City Council – supporting the development a city wide heat network including the potential to supply waste heat from their council owned  Energy from Waste (EfW) facility
• London Borough of Tower Hamlets – providing support to decarbonise an existing heat network through the expiry process of their PFI (Private Finance Initiative) contract
• City of London Corporation – providing support for the development of a heat network programme for the Square Mile
• East of England NHS Trust – work to assess the potential for heat decarbonisation (using heat networks) across 19 pre-identified Acute Trusts