Heat zoning will have a pivotal impact on the planning and delivery of heat networks. With the response to the 2023 consultation expected to be published by Autumn 2025, this article sets out an overview of the key proposals.
Heat network zoning
Heat network zoning is intended to significantly accelerate the roll-out of district heat networks. By providing heat network operators with a guaranteed customer base, the proposals are intended to give greater confidence to heat network investors, operators and suppliers, and unlock private investment in the sector.
Zoning policy also aims to reassure offtakers that connection to a heat network will provide an appropriate, reliable and cost-effective solution to decarbonising heat in that area.
All investors, developers, landlords and other relevant stakeholders will need to be aware of zoning policy when planning new developments or retrofitting existing buildings within towns and cities.
Regulatory context
The Energy Act 2023 introduced the regulatory framework for designating heat network zones through secondary legislation. This forms part of the wider move towards heat network regulation, with consumer protection regulation to be introduced for heat network customers from January 2026.
The Government published a consultation on 18 December 2023 on heat network zoning, which set out detailed proposals to grant one or more heat network operators exclusivity over new geographical "zones" to develop and operate new connections.
Within these heat zones, certain buildings and heat sources will be legally required to connect to heat networks under specific conditions. These changes could have a significant impact on how heat networks are planned and delivered.
Key proposals
In designated zones, new buildings, existing communally heated buildings and some commercial buildings may be required to connect to a heat network, unless they qualify for an exemption.
A "Central Authority" will lead the development of the zoning framework. This includes setting criteria for defining zones, standardising access to the market, managing central funding, and identifying projects on a national scale.
Local authorities, acting as "Zone Co-ordinators" will tailor zones to local needs. Their role will involve creating a "Zonal Market Prospectus", running tenders to select network operators, reviewing development strategies, and collaborating with planning teams to support delivery.
Exclusive rights to serve new customers in a zone will be awarded to one or more heat network operators.
Exemptions
Certain buildings may be exempt from the requirement to connect to a heat network. These exemptions fall into two main categories:
- Temporary Exemptions: granted for a fixed period, after which connection may be reassessed.
- Conditional Exemptions: granted until a specific barrier to connection is resolved (e.g. technical or planning-related obstacles).
The Zone Coordinator will be responsible for determining whether an exemption will be granted and what conditions may apply.
Automatic exemptions may also be issued under exceptional circumstances by DESNZ, such as for reasons of national security or other public interest concern.
Low-carbon approach
Heat zoning also aims to decarbonise heating, by expanding the use of low-carbon heat networks. Carbon emission limits will apply to all new heat networks and existing networks with high carbon emissions will not be able to expand unless they incorporate additional low-carbon sources.
Heat recovered from sources such as energy from waste or data centres will be a key focus for supplying energy to these networks.
Zoning pilots
Through a number of zoning pilots, DESNZ is developing a methodology to identify potential heat zones. A number of local authorities across 28 cities in England are currently participating in pilots looking at how heat network zones could be identified, implemented and managed in practice.
Lessons learnt from these pilots will inform the development of the final regulatory framework and help refine roles, responsibilities, and processes before national rollout.
Next steps
Response to the 2023 consultation is expected to be published later this year, confirming the details of zoning policy that will be introduced through secondary legislation.
With consumer protection regulation launching in January 2026, it is vital for stakeholders to have clarity on zoning proposals and how these will interact with the wider regulatory structure, particularly the approach to pricing protections.
Our Energy and Sustainability team advise a wide range of clients on district and communal heating and cooling projects, including property developers, landlords, local authorities and commercial and industrial off-takers.
If you are concerned about any of the issues raised under the consultation or how heat network zoning may impact you, please get in touch with a member of our Energy and Sustainability team.
