A hot topic for the North East: Achieving net zero ambitions

We all want to switch to lower carbon sources of heating and support green growth. Heat networks – also known as district heating – are a system of pipes that carry heat from a main source, and deliver it through insulated pipes to different buildings, such as homes or offices. Heat networks are flexible as they can use heat from a variety of heat sources including energy from waste plants, industrial processes, air and water source heat pumps and data centres.

They can offer lower-cost lower-carbon heat that can help the UK meet its legal commitment to slash greenhouse gas emissions. Heat networks aren’t new, right now there are over 14,000 in the country, but there is little public awareness of them.

The UK government says heat networks can play a vital role in making the UK net zero by 2050 (and save some households more than 30 per cent on their heating bills) by supplying up to 18 per cent of the UK’s heat demand. A main driver behind heat networks is that they also offer a solution for businesses to achieve their own decarbonisation targets, but we have a long way to go as heat networks currently only provide three per cent of UK heat.

Andrew Hirst, partner and heat network expert at international law firm Womble Bond Dickinson. (Image: Womble Bond Dickinson)

How are heat networks regulated and what does it mean for you?

Heat networks can be an effective way of providing low carbon, affordable, and reliable heating to homes and businesses, especially in urban areas. But until now, they faced some hurdles that slowed down their growth, such as high upfront costs, low public awareness, and little regulation. The Energy Act 2023 will aim to bring a renewed focus on heat networks and boost the sector by making it easier, faster, and cheaper to build and run heat networks across the country.

How will the Act do that? Well, for starters, it’s set out standards for how heat networks should operate, to make sure they are efficient and fair to consumers. It will also create a new system of licences for heat network operators, to make sure they meet these standards and provide good service to their customers. It also introduces a new way of planning and developing heat networks, called heat network zoning.

The Act emphasises the need for cooperation and information sharing among stakeholders, and also empowers local authorities to facilitate the development and operation of heat networks within the designated zones. Importantly the Act also grants access rights, imposes connection obligations and penalties for non-compliance.

The Act is a game-changer for the heat network sector in England. As a result it’s likely we’ll see an acceleration of projects over the next five years which will have significant implications for the public and private sector as both potential customers and enablers. Heat networks offer opportunities, such as reduced carbon emissions, improved air quality and enhanced energy security. However, it will be necessary to prepare for the challenges and risks that the new regulations entail, such as complying with the licensing requirements, adapting to the zoning system and engaging with the relevant stakeholders.

How the North East is leading the way

Gateshead district energy scheme. (Image: Womble Bond Dickinson)
With its high population density, industrial heritage, and abundant natural resources, the North East is well placed to benefit from heat networks. The region already represents the UK’s first designated ‘heat network cluster’ with projects such as the Gateshead Town Centre District Energy Scheme, the Newcastle Helix District Energy Scheme (where Womble Bond Dickinson’s Newcastle workforce is based), and the Sunderland Low Carbon Energy Centre, and is continuing to develop an ambitious pipeline of more than £500 million of new projects which will offer local businesses the chance to deploy at scale, reduce costs and create advanced innovations for eco-friendly heating solutions.

The Department for Energy Security and Net Zero has been working with 28 English cities and towns including Newcastle, Sunderland and Darlington, as part of the Heat Network Zoning Pilot Programme with Newcastle likely to be amongst the first areas to adopt a zone. Further south, at another of Womble Bond Dickinson’s office locations, the Wilton Centre and adjacent industrial site in Teesside is home to an advanced heat network which provides combined heat and power to various energy intensive industrial businesses on-site. The network is a crucial component of Teesside’s strategy to attract and support sustainable industrial development, whilst contributing to the UK’s transition to a low-carbon economy. The dense local industrial landscape and infrastructure provide the ideal environment for the development of multiple other schemes which can support clean growth.

Other projects in the wider region include the Seaham Garden Village, an innovative plan that will use mine water heat to provide low-carbon energy to a new residential development, Core 364, a pioneering retrofit scheme in Sunderland, and the Tees Valley Heat Network Cluster.

The plan for Seaham Garden Village. (Image: Womble Bond Dickinson)

What’s next and what’s needed?

We are at a turning point when it comes to heat networks. New legislation and financial support, such as the Green Heat Networks Fund will drive new projects. But these alone won’t be sufficient to grow the heat networks sector. Approximately £30-50 billion of investment is needed to develop the sector in order to help the UK meet its 2050 net zero target, this investment isn’t going to be delivered by the public sector alone – there will need to be collaboration between the public and private sectors.

Heat network zoning – which will identify designated areas where heat networks are the most cost-effective low-carbon solution to provide heating – will be a key player in this. The Energy Act gives the power to set up these zones. Importantly it will be mandatory for most buildings within a zone to connect to the heat network and sources of heat within a zone may also be required to connect to the network. Zoning is therefore relevant to anyone with real estate interests within a prospective zone. Benefits include cheaper low carbon heat, exciting opportunities for supply chains, increased certainty for investors and potential for local job creation.

The public sector has a central part to play in driving the uptake and development of heat networks, with roles being established to act as a regulatory body for zones. This zone co-ordinator role in many instances will be taken on by the local authority for that area.

The second consultation on heat network zoning closed earlier this year and the concept is therefore still developing, so it’s important to continue to monitor the progress of zoning as it could affect many businesses who have previously never considered connecting to a heat network.

Playing a key role

With offices across the UK, including Newcastle and Teesside, our team of dedicated heat network experts at Womble Bond Dickinson has advised public and private clients on all aspects of heat networks, from project development, procurement and contracting to supply and offtake arrangements, and we are primed to support many more of these projects across the UK.

As our client, you can rely on us to help you navigate the opportunities and challenges of the heat network sector, and to deliver successful and sustainable outcomes for your customers, communities, and the environment. There is no doubt the North East benefits from strong local expertise, supportive policies, and significant investment in heat network infrastructure so there’s no reason why collectively we can’t all play our part in supporting further growth and a greener future.

Heat networks need substantial investment to grow. Zoning offers many chances for investors, contractors, and developers to launch new heat network projects with opportunities to operate exclusively and decrease risks. It’s crucial for stakeholders to engage with heat network zoning now so that they are ready for its implementation as it will present a massive shift in the sector and also for anyone that finds themselves within a zone.