A Guide to the UK Heat Network Efficiency Scheme (HNES)

The Heat Network Efficiency Scheme (HNES) is a Government scheme that 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.

The deadline for HNES Round 3 funding applications concluded on 7th July 2023.

Watch our HNES webinar for an introduction and key takeaways to this new government scheme

Communal heating is a centralised heating plant that heats a single building, for example a block of flats. Whereas district heating is a centralised heating plant that heats multiple buildings, for example, an entire estate of hundreds of houses, or multiple tower blocks.

The HNES is a £32 million grant funding programme spanning 2023-2024 (Year 1) and 2024-2025 (Year 2). Projects can apply to the HNES for either revenue grant funding or capital grant funding:

Revenue Grants

Revenue grants (HNES budget up to £2m across FY23/24 and FY24/25) are grants to fund procurement or mobilisation of external third-party support to carry out Optimisation Studies. These are 100% funded and the studies will assess heat network projects to identify causes of sub-optimal performance and recommend costed intervention or improvement measures.

Capital Grants

Capital grants (HNES budget up to £30m across FY23/24 and FY24/25) are grants to 50% part-fund the delivery (installation) of eligible intervention/improvement measures at heat networks.


Communal and district heat networks already provide about 2% of UK heat requirements. Pathways proposed by the Climate Change Committee and the UK government envisage up to 20% of all UK heat to come from low-carbon district heating sources by 2050. This represents a step change in new system deployment across the UK as well as often a substantive alteration of trajectory in existing systems.

district heat network

Many legacy communal or district networks are based on fossil fuel heat sources and operate at high system temperatures. Increasingly pressure is on asset owners or operators to amend or replace existing systems with modern ‘4th generation’ district heating systems operating at lower system temperatures. This not only increases the opportunity for increased energy efficiency arising from lower heat losses, but allows for economic optimisation through reduced pipe sizing and potential capital spend, as well as often also improving the quality of service for the end user.

Furthermore these actions are also widening the choice of low carbon heat sources to serve systems and networks, including heat pumps at varying scales. They are also facilitating the introduction of modern billing systems, to comply with increasing regulation in this area and appropriate apportionment of costs across system users.

Meanwhile, masterplanning, feasibility and commercial investigation are taking place of other heat network development opportunities in energy dense urban or industrial areas, and around waste heat or future potential low carbon heat sources, including Anaerobic Digestion facilities, water treatment works and EfW plant. Here new networks are being proposed with potential to substantively decarbonise on a city block scale. We work with clients both developing, or looking to connect to such systems reviewing both technical and economic feasibility as well as facilitating procurement and delivery of works and seeking sources of funding.

These systems in turn will also require designing and operating efficiently, especially as they start formal regulation under the government, so that consumer experience, energy price, energy security and realised carbon emission reductions achieve favourable outcomes.

The grant programme, worth £32m, is for 2023/2024 and 2024/2025 and applications opened in February 2023. The scheme includes £2m of Revenue Grant funding available to complete detailed optimisation studies, and £30m of Capital Grants to part fund (50% of project value) optimisation works.

The aims & objectives of the HNES scheme

  1. Improve energy efficiency & reduce emissions in communal heating and district heating systems 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.
  2. Help towards decarbonisation of UK and our goals of energy efficiency & net zero targets

HNES Main & Demonstrator applications

The main HNES is now open for applications for revenue grant or capital grant funding.

The HNES Demonstrator was a £4.175 million grant scheme to support performance uplifts to existing heat network or communal heating projects. The demonstrator finished in 2022.

Application timeline

HNES will be released in Rounds with Round 1 currently open:

  • Round 1 – closes on 31st March 2023
  • Round 2 – May 2023
  • Round 3 – July 2023
  • Round 4 – August 2023
  • Round 5 – October 2023
  • Round 6 – February 2024
  • Round 7 – March 2024
  • Round 8 – May 2024

The application process

You must submit an expression of interest to hnes@gemserv.com to request an application form. Applicants must submit a completed application form for either a capital grant funding application or a revenue grant funding application.

You must provide details of the grant recipient, including applicant type, contact details and information regarding number of communal or district heating networks in the portfolio.

You must provide details of the communal or district heating network for which a funding application is being made. This will include the network name, energy centre, address, types/numbers of network customers. You must also provide an overview of the project to act as an executive summary for the funding application, covering current network performance, proposed improvement measures and intended benefits.

Eligibility & Exemptions

The scheme is open to organisations in the public, private or third sectors in England and Wales with sub-optimal communal heating or district heating systems.

The assessment criteria

Projects for which data availability and quality are high are more likely to deliver robust and accurate outcomes, including for monitoring and reporting requirements. Consequently, applications will be scored higher where data availability and quality are high.

UK decarbonisation regulations

The UK government’s statutory target for Net Zero is 2050. Although this appears far away it is in reality no more than one or two plant replacement cycles away for these systems, where a primary plant typically has a lifetime of 15-20 years and pipework 30-40. This means that owners or operators of these systems need to consider their decarbonisation strategies and phasing now. Although it appears that these can be potentially deferred there are opportunity costs associated with this approach, in other words a decision to defer decarbonisation today may already be an active decision to incur financial losses in the future.

This is easiest to see in primary plant replacement, with a typical lifetime of 15-20 years. If this time frame passes through any internal targets for decarbonisation or even future statutory goals, then replacement of the plant may be forced ahead of its full lifecycle incurring additional cost relative to an alternative approach phasing in low carbon heat solutions from the current day.

Anthesis can support your heat decarbonisation transformation through:

  • Heat network transformation program
  • Green heat network fund
  • Clean heat grant
  • BEIS heat investment vehicle (BHIVE)

The Anthesis team are experts in communal heating and district heating and can support you with technical project development. We can also support applications to the HNES for capital funding.

Best practice for designing and operating heat networks

It is an exciting time within the UK District heating and communal heating industry. Modern systems offer substantively increased efficiency in comparisons to previous design approaches as well as access to alternative low-carbon heat sources previously wasted or underutilised.

Clients can now access best practice guidance, informed from international and national experiences constructing and operating these systems, and provided via professional institutions. The CIBSE heat networks bundle, including the CIBSE/ADE heat networks Code of practice provides a comprehensive set of procurement and design guidance for system owners or developers, and is usually cited in government funding or contracts for these systems.

Anthesis not only utilise these in our design works but were part of the development team contributing to the principles and guidance for the industry. We continue to bring this market-leading technical insight to our clients at scale on a daily basis.