Local Partnerships supports London Borough in setting a new course for the Barkantine Heat Network

Case Study: From PFI expiry of a heat network to opportunity

How could the expiry of a heat network’s PFI contract be a catalyst to create a flagship low carbon solution in one of the most densely populated areas in the UK?

When the London Borough of Tower Hamlets went through the PFI expiry health check for its Barkantine Heat Network contract, the findings raised a number of questions about its future. The contract, a long-standing agreement with EDF Group (via Dalkia), is due to expire in October 2025. While the infrastructure had served its purpose, the future of the network was far from certain.

Rather than simply continuing with operation or replacing like-for-like, a project team was established, headed by public sector delivery partner Local Partnerships and working closely with technical advisors WSP and legal advisors Sharpe Pritchard, to explore how re-procurement could align it more closely with the borough’s climate targets.

The Barkantine Heat Network was originally conceived in 2000 under a 25-year PFI contract, originally designed to provide reliable, affordable heat to around 700 homes on the Isle of Dogs. This is a complex and diverse community, representing one of the most deprived estates in the UK, with an extensive housing need. The network also served community assets, including a leisure centre, school and nursery, supporting broader goals of regeneration and tackling fuel poverty. During the 25-year life of the PFI contract, a number of new commercial and residential connections have been made, further increasing the customer base.

The system’s energy centre was equipped with a gas-fired combined heat and power (CHP) engine and supporting boilers, reflecting the technology of choice at the time. As the expiry of the PFI neared, the question wasn’t just how to maintain service continuity; it was how to meet the political, environmental and economic challenges, whilst aligning with both national and strategic carbon ambitions.

The initial PFI expiry health check, undertaken by the National Infrastructure and Service Transformation Authority, identified typical end of contract observations, including asset condition, residual value and contract handback risks. But the bigger revelation was that while the system was technically operable, it was misaligned with the council’s declared climate emergency, Net Zero commitments, and the pace of growth across the borough, particularly on the Isle of Dogs. To recommission the existing service without an options review would have been a missed opportunity.

With support from Local Partnerships, the project team initiated a wider options review. It examined not only asset condition and contractual options, but also the strategic potential of the network in a future decarbonised heat landscape. The result was a structured options appraisal, designed not only to keep the heat on, but to position Barkantine as a core component of the borough’s wider Net Zero carbon plans. The London Borough of Tower Hamlets has pledged to become a Net Zero council by 2025 and is aiming for full borough-wide Net Zero by 2050. This is an ambitious statement in any context, but particularly in a dense and diverse urban environment with complex energy and social needs.

In this light, Local Partnerships led the project team in evaluating three broad pathways for the post-PFI phase:

• Minimum intervention – A limited rejuvenation of assets within the current energy centre, with some decarbonisation but minimal expansion or flexibility.
• Middle ground – A phased development of a new, nearby energy centre while maintaining the current system in parallel, allowing for gradual integration of low-carbon heat sources and increased network capacity.
• Maximum ambition – An expansion to borough-wide scale in line with future Heat Network Zoning potential, requiring significant investment and transformation.

The project team identified that the maximum ambition option was deemed too ambitious for immediate progression due to spatial and logistical constraints, plus several dependencies on external factors. The minimum intervention path, while the least disruptive, was also the least aligned with long-term policy and commercial objectives. The middle ground strategy emerged as the clear lead, offering a blend of continuity, flexibility and future-readiness.

This preferred option includes the development of a new energy centre on a site within the vicinity of the heat network, while allowing the existing infrastructure to remain operational during the transition. Importantly, the project team identified that this approach aligns with national policy and heat network zoning regulations, which are expected to place obligations on new developments to connect to existing networks where feasible. This would make Barkantine a critical anchor within a localised low-carbon heating system.

Local Partnerships is now supporting the council in conducting a preliminary market engagement (PME) process to test the delivery appetite and shape the procurement strategy. The PME will help determine how best to package, phase and contract the new solution, potentially blending delivery models to suit LBTH’s partnership preferences.

With the expiry of the current PFI now approaching in October 2025, and a bridging extension to the current PFI planned until 2027, the next two years will be pivotal. The council plans to launch procurement in early 2026, with award and mobilisation to follow later that year.

In doing so, Tower Hamlets is not only addressing the practical implications of PFI expiry, but using the moment to reset the role of public heat networks in the borough’s climate and development journey.

As contracting authorities across the UK face similar expiry and transition decisions, Barkantine may well serve as a model for how to link legacy infrastructure with future-facing policy, using partnerships, policy alignment and structured analysis to turn obligation into opportunity.

You can also read this article in Partnerships Bulletin.