The Heat Network Efficiency Scheme (HNES) provides funding to public, private, and third sector applicants to improve heat network performance in existing/operational projects where customers and/or operators are experiencing sub-optimal outcomes.
Provided by: Department for Energy Security and Net Zero (DESNZ)
Upcoming
19/09/2025
Applications for Round 9 of the Heat Network Efficiency Scheme closed on 28 March 2025. The opening date for Round 10 will be announced shortly. However, it has been announced that it will close on 19 September 2025.
The 2018 Competition and Markets Authority found that although operational heat networks offer customers a cost-effective and efficient supply of heat compared to alternatives, some customers experience poorer outcomes in terms of price and service. Previous work by the Department for Business, Energy, and Industrial Strategy (BEIS) (now the Department for Energy Security and Net Zero (DESNZ)) has indicated that some existing heat networks in England and Wales are operating sub-optimally, leading to customer detriment. In addition, the cost-of-living crisis has resulted in additional pressures on energy tariffs for some heat network customers, particularly where networks operate at lower efficiencies and increasing fuel costs are passed through.
Large-scale investment is essential to the development of this market and the Heat Network Efficiency Scheme (HNES) forms a key part of the government’s Heat Network Transformation Programme (HNTP) – this aims to continue to develop and grow the heat network market and to address some of the challenges of decarbonising the UK’s heat sector.
The Heat Network Efficiency Scheme was launched to help improve existing heat networks by enabling optimisation studies to identify actions to optimise heat network operation and in the delivery of eligible intervention/improvement measures.
The aim of HNES is to improve heat network performance in existing/operational projects where customers and/or operators are experiencing sub-optimal outcomes. In particular, HNES focuses 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 focus on where customer need is greatest. The grant scheme has proven extremely popular so far, and we have received many high quality applications which will deliver significant benefits for consumers, reducing cost and carbon emissions.
£77 million grant support scheme:
HNES is open for applications from projects that will:
HNES is open to applicants that are responsible for operating or managing existing district heat networks or communal heating systems in England and Wales:
Successful applicants will be the recipients of grant funding and will be responsible for ensuring that grant funds are deployed in accordance with the funding award, meaning procuring or mobilising third parties to deliver the funded activities.
Applicants must be legal entities, with authority to sign off investment decisions for the heat network they are responsible for and instruct delivery of funded works. Individuals cannot apply to HNES.
Applicants can apply to HNES for either revenue grant funding or capital grant funding:
Through these two grants, HNES supports existing/operational district heating or communal heating networks to:
Here are some examples of measures that may be eligible for support. A full list of eligible measures and ineligible costs is also provided in the HNES guidance for applicants document.
Applications can be made for projects that consist of different customer types (for example, residential, commercial, or mixed), and there are no restrictions on the existing/operational primary heat generation plant (boiler, heat pump, combined heat and power (CHP), and so on). District cooling systems can be included within the scope of a project application, where improvements to these systems meet the HNES objectives.
The funding can provide:
HNES will typically fund between £15,000 and £24,000 (including non-recoverable VAT) per project for revenue grant funding applications, depending on the scale of each project for which the application is made. Applications for funding awards outside of this budget range may be submitted by applicants, but will need to include compelling justification as to why this is considered appropriate.
Hackney Council received around £41,000 to undertake two Optimisation Studies. They wanted to understand and improve the efficiency and performance of each network, which in turn would support a move towards decarbonisation, ensure all costs were being recovered, lower the administration of the networks, and discover learnings that could be applied across their entire heat network portfolio. They appointed Chirpy Heat, who through data gathering and site visits identified 18 efficiency measures. If implemented, these would save £3,000 annually in energy costs and reduce carbon emissions by 676 tonnes over a 20-year period. Hackney now intends to apply for further HNES funding to implement the measures identified.
"The HNES Demonstrator funding allowed us to give our heat networks a health check, and to understand the impact of efficiency with little to no capital investment."
Daisy Clarke – Mechanical and Gas Service Manager, Hackney Council
