Heat Network Efficiency Scheme (HNES)

Aims/priorities: The Heat Network Efficiency Scheme (HNES) provides funding 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.

Heat networks offer carbon emissions savings by supplying heat to buildings from a central source, avoiding the need for households and workplaces to rely on individual, energy-intensive heating solutions - such as gas boilers. As such, heat networks provide a significant contribution to the UK’s carbon reduction commitment.

In particular, the HNES will focus on addressing customer detriment as a way of supporting heat network consumers impacted by the cost-of-living crisis and the cost-of-energy crisis, with a focus on where customer need is greatest. The HNES objectives are:

  • Objective 1: Reduce carbon emissions by making heat networks more efficient.
  • Objective 2: Reduce customer detriment to improve consumer confidence.
  • Objective 3: Help prepare the heat network market for sector regulation and technical standards.

Objectives 1 and 2 form key principles against which the HNES assessment methodology has been developed.

The scheme will deliver improvements to existing heat networks, helping consumers in more than 100,000 homes reduce their energy use - lessening the burden of increasing heating bills.

Who can apply? The scheme is open to applications from public, private and third sector organisations operating in England and Wales. Organisations that are responsible for operating or managing existing district heat networks or communal heating systems will qualify. These include:

  • NHS trusts, universities and other government departments.
  • Registered companies and submit annual accounts.
  • Registered charities, community investment companies and other organisations that are officially registered and submit annual accounts.

Grant amount: HNES has an overall budget of £77 million, which will be distributed through revenue and capital grants.

HNES opened to applicants in February 2023 as a £32 million grant support programme spanning FY23/24 (Year 1) and FY24/25 (Year 2). It is expected to deploy an additional £45 million of capital funding covering FY25/26 (Year 3) until FY27/28 (Year 5).

Capital grants

An expected budget up to £75 million across FY23/24 to FY27/28 is available to part-fund delivery of network efficiency upgrades. The scheme can provide up to 50% of eligible project costs for capital grant applications. There is no upper or lower limit for capital grant funding bids.

Revenue grants

£2 million is available to fund heat networks procuring third-party support to identify and assess packages of efficiency improvement measures. The scheme can provide up to 100% of eligible project costs for revenue (Optimisation Study) grant applications. Grants will typically be between £15,000 and £24,000 per project.

Grants will span these years: 2023-2024 to 2027-2028.

Application process: Applicants are able to register an Expression of Interest (EoI) ahead of submitting their applications for funding. This is voluntary and is not a pre-requisite of applying.

Interested parties are advised to contact hnes@gemserv.com to request an application form. Potential applicants that are unsure whether their projects meet the HNES eligibility criteria should also email this address.

More information can be accessed at the Department for Energy Security and Net Zero website.

Deadline: Friday 28 March 2025.

Contact information: Email: hnes@gemserv.com

Website: Apply for the Heat Network Efficiency Scheme (HNES) - GOV.UK