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 – and it’s open to public, private and third sector organisations.
With the next funding round deadline approaching on 10 November 2023, here is our quick guide to the Heat Network Efficiency scheme.
What is the Heat Network Efficiency Scheme (HNES)?
The Heat Network Efficiency Scheme (HNES) provides funding to public, private and third sector applicants in England and Wales to support improvements to existing district heating or communal heating projects that are operating sub-optimally and resulting in poor outcomes for customers and operators.
£32 million of grant support is available in total, spanning 2023-2024 (Year 1) and 2024-2025 (Year 2).
Who can apply for HNES funding?
HNES is open to applicants that are responsible for operating or managing existing district heat networks or communal heating systems in England and Wales. It includes public sector organisations including NHS trusts and universities, private sector organisations, and third sector organisations such as charities.
How does HNES work?
HNES is a multiple-funding-round revenue and capital grant support programme with funding to be deployed across FY23/24 and FY24/25.
HNES has deadlines for funding drawn down of Friday 29th March 2024 (Year 1) and Monday 31st March 2025 (Year 2).
It can provide:
- Up to 50% of eligible project costs (incl. non-recoverable VAT) for capital grant applications.
- Up to 100% of eligible project costs (incl. non-recoverable VAT) for revenue (Optimisation Study) grant applications.
HNES runs multiple funding rounds, which take place approximately bi-monthly from the start of the scheme (March 2023).
What are heat networks?
For the purposes of HNES, heat networks are systems in which heating, cooling or hot water is generated at a central source and supplied by an operator to multiple third-party customers through a pipe network serving either multiple buildings (district heating) or multiple occupants in a single building (communal heating).
What kinds of projects will be funded?
Projects can apply to HNES for two different types of funding: revenue grant funding (optimisation studies) or capital grant funding.
- Optimisation study grants are for the procurement or mobilisation of external support to carry out Optimisation Studies. These studies assess heat network projects to identify causes of sub-optimal performance and recommend targeted and costed interventions or improvement measures. 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 funding is 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 project 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.
What types of projects get funding?
The government says it will prioritise awarding funding to projects that support a higher proportion of “customers in need”. That could be include social housing, low-income housing, customers in fuel poverty, supported housing, and care homes. The government wants the funding to deliver benefits which can demonstrate improvements to networks where baseline performance metrics are considered particularly poor.
Applicants who do not supply heat to third parties (e.g. campus sites) or “customers in need” are not excluded from applying, however their application will be assessed in the above context.
Applicant projects can be made-up of different customer types (e.g., residential, commercial, or mixed), with no restrictions on the existing/operational primary heat generation plant (boiler, heat pump, CHP etc.). District cooling systems can be included within the scope of a project application, too.
What is the process for drawing down funds if successful?
Local Authority applicants may apply for drawdown of the full Financial Year value of the revenue or capital grant (as forecast at application for each Financial Year) ahead of need, and as outlined/scheduled in the Memorandum of Understanding. This is subject to approvals. Payment of grant funding will be paid as a single lump sum per Financial Year and will be made upon receipt of a signed Memorandum of Understanding and a signed grant claim form.
Non-Local Authority applicants may only apply for drawdown of funds in line with work and services rendered by contractors and after the cost has been defrayed by the applicant. Evidence will be required in the form of invoices or quantitative surveyor reports that equate to or exceed the grant value requested for drawdown, as well as evidence of cash having been remitted to contractors. The final funding drawdown dates are 29th March 2024 for the FY23/24 and 31st March 2025 for the FY24/25.
Applications for round 5 of the HNES are open now, and the deadline for applications is 10 November 2023.
For more details, visit the government HNES web page.
How we can help
Our heat network consultants can help you through the process, and are highly experienced in carrying out optimisation studies that meet the requirements of the scheme. For more information and no-obligation advice, get in touch.