Minister sets 7% heat network target and confirms £200m of Green Heat Network Fund awards

Martin McCluskey, Minister for Local Energy and Jobs, has told the heat network industry that the government wants networks to meet 7% of heat demand in England within ten years, while recognising that changes in policy direction had created "real uncertainty" for the sector.

Speaking at the Association for Decentralised Energy (ADE) Heat Network Conference at OEC Sheffield on 22 October, the minister said recent changes in policy direction had made it harder for the industry to plan with confidence. The Department for Energy Security and Net Zero (DESNZ) published the transcript on 23 October.

McCluskey said the 7% target would double the current share of heat demand met by networks in England, and that the government wanted them to supply a fifth of all heat across England by 2050. The Warm Homes Plan, published by DESNZ, allocates £1.1bn to heat networks.

Funding confirmed

The minister said four Green Heat Network Fund (GHNF) announcements over the past 12 months had confirmed more than £200m of government funding for 20 low carbon heat network projects.

He said government-supported networks at Seaham Garden Village in County Durham and Lancaster University had started supplying low carbon heat this year, with West King Street in Hammersmith to follow. Funded schemes range from heat delivered by barges along the River Thames to town-centre networks in Sunderland, Stockport, Oldham and Milton Keynes.

Among the awards was a January 2026 package of more than £47m for four projects in Waterloo, Hounslow, Sunderland and Media City in Salford, according to DESNZ. The Waterloo scheme will take heat from the Thames.

DESNZ extended the GHNF to Wales on 7 April 2026, saying £195m a year would go into heat network projects across England and Wales for the rest of the decade. The same release cited a £15m heat network in Sunderland that will recover energy from a data centre. Rebecca Evans, Welsh Government Cabinet Secretary for Economy, Energy and Planning, welcomed Welsh organisations gaining access to the fund.

Existing networks

The minister said the Heat Network Efficiency Scheme (HNES) had allocated almost £35m of capital funding across 65 projects, affecting more than 10,000 residents on existing networks. DESNZ describes HNES as a £107m grant programme running from 2023-24 to 2029-30, led by delivery partner Talan and supported by Ramboll, Lux Nova and Gleeds.

McCluskey said gas boilers were not the answer where networks underperform. "The answer to me for a poorly performing heat network is a better performing heat network," he said.

Standards and finance

The minister said the government consulted earlier in 2026 on mandating minimum technical standards for heat networks and was still considering the feedback.

"I want to ensure that the final scheme that we come up with is proportionate, affordable and deliverable," he said.

On finance, McCluskey said the government was assessing a range of options including a Regulated Asset Base model, and continued to work with the National Wealth Fund on greater support for the sector. He said industry had told the department that the cost of low carbon heat remained a key barrier to growth.

On zoning, he said at least 10 of the biggest English towns and cities would receive government support to establish heat network zones once the Heat Network Zoning Regulations go live. Areas in the Advanced Zoning Programme had completed developer procurements and were moving on to develop zonal-scale opportunities, he said.

The minister also said the Secretary of State had announced that the Warm Homes Plan would be devolved in the coming years.

Consumer regulation

The speech follows the start of Ofgem regulation of heat networks in January 2026. DESNZ said more than 500,000 heat network customers would be shielded from unfair price rises, with Ofgem given powers to act if an operator raises prices unfairly and customers able to seek compensation for service outages through the Energy Ombudsman.

Helena Charlton, Director of Heat Networks at Ofgem, said the regulator was committed to putting consumers first.

McCluskey took on the Local Energy and Jobs brief in July 2026 after a year in the department. He said one of his first ministerial visits had been to Cardiff to see construction of the city's main district heat network.

HNES Round 13 closed on 9 October 2026. DESNZ expects applications for Round 14 to open on 30 November 2026.