Concept’s quick guide to the Heat Network Efficiency Scheme

Government funding is available to help organisations improve existing district heating and communal heating projects. This scheme is open to public, private, and third sector organisations across England and Wales.

With the most recent funding round (Round 9) having closed in March 2025, details for Round 10 are expected to be announced shortly.

What is the Heat Network Efficiency Scheme (HNES)?

HNES provides funding to improve underperforming district or communal heating systems. It’s open to public, private, and third sector applicants across England and Wales. The aim is to boost performance, reduce emissions, and lower customer costs.

A total of £77 million in grants is available between 2023–2024 and 2027–2028.

Who can apply for HNES funding?

HNES is open to applicants responsible for operating or managing existing district heat networks or communal heating systems in England and Wales. Eligible organisations include:

• Public sector organisations, such as NHS trusts and universities
• Private sector organisations that are registered companies
• Third sector organisations, including registered charities

Applicants must be legal entities with the authority to make investment decisions for the heat network they manage.

What are heat networks?

Heat networks supply heating, cooling, or hot water from a central source to multiple customers through a network of pipes. These networks can serve multiple buildings (district heating) or multiple units in one building (communal heating).

What projects are eligible for funding?

HNES supports projects that aim to improve the efficiency and performance of existing heat networks. Projects can apply to HNES for two different types of funding: revenue grant funding (optimisation studies) or capital grant funding.

• Optimisation study grants cover the cost of bringing in external experts to assess a heat network. The studies identify why the network is underperforming and recommend targeted improvements. HNES will fund up to 100% of the estimated costs for each Study – between £15,000 and £24,000 per application, depending on the scale of each project for which the application is made.
• Capital grant fundingis for physical improvements to a heat network. Applicants can apply for up to, but not including, 50% of the total estimated eligible costs. Types of projects include (but aren’t limited to) replacement of controls, pumps and insulation in energy centres and control rooms, reconfiguration and replacement of pipework, tertiary network system balancing and controls upgrades; and sub-metering installations.

Projects serving a mix of customer types (residential, commercial, or mixed) are eligible, with no restrictions on the existing primary heat generation plant.

What types of projects get funding?

The government prioritises funding for projects that benefit a higher proportion of “customers in need,” such as:

• Social housing residents
• Low-income households
• Customers in fuel poverty
• Supported housing and care home residents

Projects that do not serve these groups are still eligible but may be assessed with lower priority.

What is the process for drawing down funds if successful?

Local Authority applicants can apply to draw down the full forecasted value of a grant per financial year in advance, subject to approval. Payments are made as a lump sum once a Memorandum of Understanding and grant claim form are signed.

Non-Local Authority applicants can only claim funds after the work is completed and paid for. Applicants must provide evidence—such as invoices or quantity surveyor reports—showing that costs meet or exceed the grant amount. Proof of payment to contractors is also required.

Next deadline

As of April 2025, Round 9 has closed. Details for Round 10 will be announced on the official HNES webpage, and we will continue to update this page as information is released.

How we can help

Our heat network consultants are experienced in conducting Optimisation Studies and guiding organisations through the HNES application process. We offer tailored support to help you identify improvements, prepare applications, and implement efficiency measures.

For more information and no-obligation advice, contact our team.