Green Heat Network Fund Awards £47m to Four Low-Carbon Heat Projects

What’s happening

The latest GHNF funding round has awarded £47 million to four projects developing low-carbon heat networks across England. These schemes will use a range of technologies, including air source heat pumps, sustainable biomass and recovered waste heat, to supply heating and hot water to residential and commercial users.

The Green Heat Network Fund is a capital grant programme launched in March 2022. Its purpose is to support the design, development and construction of low-carbon heat networks, helping replace fossil-fuel heating with shared systems that are cheaper to decarbonise at scale.

The fund was initially set at £288 million but has since been expanded in response to strong demand. Government has confirmed that funding will continue to be available through to 2028, with multiple competitive rounds planned.

GHNF grants are available to public bodies, private companies and third-sector organisations in England. Funding can cover both commercialisation costs, such as detailed design and commercial planning, and construction costs for new networks or significant upgrades to existing ones.

Projects are assessed against clear criteria. Applicants must demonstrate technical feasibility, sufficient customer demand, and a minimum social internal rate of return of 3.5%. Bids are scored on carbon savings, heat output and value for money for the taxpayer.

To date, the GHNF has allocated more than £500 million across its various rounds. Collectively, funded projects are expected to deliver substantial long-term carbon reductions by making better use of renewable and recovered heat sources that would otherwise go to waste.

Why this matters for UK businesses

Heat network investment has direct and indirect implications for UK businesses, even if you are not applying for GHNF funding yourself.

First, many SMEs are customers of heat networks, particularly in city centres, mixed-use developments and industrial estates. As new low-carbon networks are built, businesses may be connected as end users. This can affect energy costs, contract structures and long-term pricing certainty.

Second, the expansion of heat networks increases regulatory oversight. Heat networks are moving towards tighter regulation, including consumer protection and potential technical standards. SMEs operating buildings connected to networks need to understand their responsibilities and risks.

Third, decarbonising heat is increasingly relevant for compliance and reporting. Businesses working towards net zero targets, or responding to customer questionnaires and tender requirements, will need to account for how their heat is supplied. Being connected to a low-carbon network can materially reduce reported emissions.

There are also supply-chain implications. Businesses involved in construction, engineering, facilities management or energy services may find new commercial opportunities as heat network investment increases. At the same time, buyers will expect suppliers to demonstrate competence in low-carbon systems.

Finally, public sector and large private buyers are paying closer attention to whole-life carbon and operational emissions. For SMEs bidding into these supply chains, credible low-carbon heat arrangements can support tender competitiveness and reduce future transition risk.

Key facts at a glance

• £47 million awarded to four heat network projects in the latest GHNF funding round

• Projects are located across Manchester, London and Sunderland

• Supported technologies include air source heat pumps, biomass and waste heat recovery

• The Green Heat Network Fund launched in March 2022

• Initial funding of £288 million has been expanded due to strong demand

• More than £500 million has been allocated across GHNF rounds to date

• Funding is available to public, private and third-sector organisations in England

• Projects must demonstrate feasibility, customer demand and a minimum 3.5% social internal rate of return

• Future funding rounds are planned, with Round 11 expected to open in March 2026

• Funded projects are expected to contribute millions of tonnes of carbon savings over their lifetimes

SBS insight

From our perspective, the GHNF is a clear signal that low-carbon heat is moving from pilot projects into mainstream infrastructure investment. Government is backing technologies and delivery models that are proven, scalable and capable of serving dense urban demand.

For SMEs, the key is not whether you can access this funding directly, but how these developments affect your operational decisions. Heat networks can offer long-term stability and lower carbon emissions, but they also involve long contracts and less control than on-site systems.

We are also seeing increased scrutiny from customers and lenders on how businesses plan to decarbonise heat. Being able to explain your heat source, costs and emissions trajectory is becoming part of good commercial housekeeping.

Where SBS supports clients, this typically involves helping them understand their current heat demand, assess options such as heat networks versus on-site alternatives, and factor heat decarbonisation into broader net zero and compliance planning. The aim is always to balance carbon reduction with cost, resilience and practicality.

Further reading

• UK government: Green Heat Network Fund overview
  https://www.gov.uk/government/publications/green-heat-network-fund

• Department for Energy Security and Net Zero
  https://www.gov.uk/government/organisations/department-for-energy-security-and-net-zero

• UK government guidance on heat networks
  https://www.gov.uk/guidance/heat-networks