Heat networks: £90m for 750,000 homes

What was announced

The Department for Energy Security and Net Zero (DESNZ) announced on 23 September 2026 that more than 750,000 homes will benefit from cheaper, cleaner heating, backed by 90 million pounds of government funding. The package is expected to create more than 2,000 jobs across all projects. Heat networks heat multiple buildings from a central source, such as excess heat from a data centre or factory, through pipes carrying hot water. The funding is split between building new networks and repairing existing ones. A total of 41 million pounds is allocated to a project under and alongside the River Thames in London, while 13.3 million pounds is committed to upgrading 76 inefficient heat networks across England and Wales. Other awards include 11.5 million pounds for a network in Bexley and Greenwich that could serve up to 100,000 homes, 11.4 million pounds for a Marble Arch scheme using water-source heat pumps, 9.7 million pounds for Bradford, 3.9 million pounds for Solihull, and smaller sums for projects in Manchester, London and Wales.

The announcement forms part of the government's wider push to expand heat networks as a lower-cost, lower-carbon alternative to individual gas boilers. Heat networks are common in countries such as Denmark and Sweden, where they supply a large share of domestic heating. The UK government has committed to growing the sector, and the latest funding round is intended to accelerate that growth while addressing inefficiencies in older systems. The 90 million pounds package is expected to leverage additional private investment, particularly for the larger projects such as the Thames scheme. The jobs created will range from construction and engineering to planning and maintenance, spread across the regions receiving awards. The funding is administered by DESNZ, with delivery expected to take place over the coming years, subject to planning consent and local approvals.

The Thames project

In London, a project under and alongside the River Thames will supply 650,000 homes, backed by 41 million pounds. Initially, hot water will be transported 25 kilometres a day by electric barge, and then through a tunnel under the river. The scheme is subject to planning consent and could unlock around 5 billion pounds of investment. The project is one of the largest heat network proposals in the UK and, if approved, would rank among the biggest in Europe. Similar systems already operate in Copenhagen, Amsterdam, Vienna and Berlin, where heat networks supply a significant proportion of homes and businesses. The Thames project aims to replicate that model by using the river as a conduit for moving heat from a central source to multiple buildings. The electric barges would carry hot water along the river, reducing the need for road transport and lowering emissions associated with construction and operation. The tunnel under the river would provide a more permanent infrastructure for the long term.

The 41 million pounds of government funding is intended to support the initial stages of the project, including feasibility studies, design work and early construction. The remaining investment, potentially up to 5 billion pounds, is expected to come from private sector partners. The project could serve 650,000 homes, which would make it one of the largest heat networks in the world. However, it remains subject to planning consent, and no final decision has been made. If approved, the scheme could provide a template for other cities with rivers or waterways that could be used to transport heat. The comparison with Copenhagen, Amsterdam, Vienna and Berlin highlights the potential scale of the project and the role that heat networks play in other European countries. In those cities, heat networks are often municipally owned or operated by large utilities, and they have been developed over decades with consistent government support.

Fixing the networks that already exist

The government has committed 13.3 million pounds to upgrade 76 inefficient heat networks across England and Wales. The work includes replacing leaky pipes, insulating pipework and replacing heat interface units. These measures are intended to reduce heat loss and lower bills for residents. Old networks often produce high bills because heat escapes from poorly insulated pipes before it reaches homes, meaning more energy is required to deliver the same level of warmth. In some cases, systems run at very low efficiency, forcing residents to pay for heat that never arrives. The funding is part of the Heat Network Efficiency Scheme, which has already delivered savings in some buildings. For example, residents of Southern Housing Group's Vega Building in Brighton are saving 438 pounds a year after a 200,000 pound grant. The system had been running at 35 percent efficiency, and the building now uses 50 percent less gas.

Other awards under this strand include 1 million pounds for Cornwall Court in Gorton and Cundiff Court in Levenshulme in Manchester, and 5.5 million pounds for Prospect House in Bermondsey and the Packington Estate in Islington in London. In Wales, 374,900 pounds is allocated to Eschol Court in Newport and Victoria Court in Abergavenny, benefiting 62 residents. These projects target some of the worst-performing networks, where residents have faced high bills and poor service. The upgrades are expected to reduce energy consumption, cut carbon emissions and improve comfort for residents. The government has said that fixing inefficient legacy systems is as important as building new ones, and the funding reflects that principle. The 76 networks selected for upgrade are spread across England and Wales, and work is expected to begin in the coming months.

What it means if you are on a heat network

If you live in a home served by a heat network, you cannot switch supplier in the same way as a gas or electricity customer. Heat networks are typically owned and operated by a single company or organisation, which sets the price for heat. Since January 2026, heat network customers in Great Britain have been regulated by Ofgem, the energy regulator. This means that Ofgem oversees standards of service, transparency and fairness, and customers can escalate complaints to the Energy Ombudsman. However, the energy price cap does not apply to heat networks in the same way as it does to gas and electricity. The price cap limits the amount that suppliers can charge per unit of gas or electricity for domestic customers on standard variable tariffs. Heat network customers are not covered by that cap, so their bills depend on the terms of their contract and the efficiency of the network.

The government has acknowledged that some heat network customers have faced high bills and poor service, and the funding announced today is partly aimed at addressing those issues. The 13.3 million pounds for upgrading inefficient networks is intended to reduce costs for residents by improving the performance of the systems. For those on networks that are not upgraded, bills may remain high if the system is inefficient. Ofgem regulation is expected to improve transparency and give customers more power to challenge unfair charges. Customers who have complaints should first raise them with their heat network operator, and if unresolved, they can contact the Energy Ombudsman. The government has said it will continue to monitor the sector and consider further measures if needed. Heat networks are seen as a key part of the transition to net zero, but the experience of existing customers will be important in building public confidence.

Who said what

Minister for Local Energy and Jobs Martin McCluskey said clean power and clean heat benefit communities across the country, and that for those already using heat networks the government is upgrading inefficient systems. Meghan Newman, Policy Manager at ADE: Heat Networks, said the funding is a clear signal that heat networks matter and that fixing inefficient legacy systems matters as much as building new ones. The quotes were issued as part of the announcement. The government has framed the funding as part of its wider efforts to reduce energy bills and create jobs while cutting carbon emissions. The Association for Decentralised Energy (ADE) has welcomed the funding, noting that it addresses both new build and retrofit. The announcement has been welcomed by industry groups, who see it as a sign of long-term commitment to the sector. However, some have noted that the funding is modest compared to the scale of investment needed to decarbonise heating across the UK. The government has said it will set out further details on heat network regulation and support in due course.

The 90 million pounds package is expected to leverage additional private investment, particularly for the larger projects such as the Thames scheme. The jobs created will range from construction and engineering to planning and maintenance, spread across the regions receiving awards. The funding is administered by DESNZ, with delivery expected to take place over the coming years, subject to planning consent and local approvals. The government has emphasised that heat networks can provide cheaper, cleaner heating for millions of homes, and that the latest funding will help to scale up the sector while improving the performance of existing systems. The announcement follows a consultation on heat network regulation and is part of a broader strategy to reduce reliance on fossil fuels for heating. Further announcements on the future of heat networks are expected in the coming months.

Source: DESNZ press release, 23 September 2026.

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Frequently asked questions

What is a heat network?

A heat network heats multiple buildings from a central source, such as excess heat from a data centre or factory, through pipes carrying hot water.

How much funding has been announced?

90 million pounds of government funding, benefiting more than 750,000 homes and creating more than 2,000 jobs.

Which projects are receiving funding?

A 41 million pound Thames project, 13.3 million pounds for 76 inefficient networks, 11.5 million pounds for Bexley and Greenwich, 11.4 million pounds for Marble Arch, 9.7 million pounds for Bradford, 3.9 million pounds for Solihull, and smaller sums for Manchester, London and Wales.

Are heat network customers protected by the energy price cap?

No. Heat network customers are not covered by the energy price cap in the same way as gas and electricity customers. Ofgem has regulated heat networks since January 2026, and complaints can be escalated to the Energy Ombudsman.

Can I switch supplier if I am on a heat network?

No. Heat network customers cannot switch supplier in the same way as gas or electricity customers.