Note on heat network development in Lambeth, in advance of Heat Network Zoning regulations being enacted
Central government is supporting the development of heat networks as “vital to making net zero a reality in the UK”. The Government has published consultation on proposed regulatory measures to identify, commercialise and govern heat networks in urban areas, with a degree of mandatory connections expected (“heat network zoning”), measures to protect consumers within heat networks, and mandated technical standards for the design, construction and operation of heat networks (“HNTAS”). Regulations on heat network zoning are expected to be published in summer 2025, and it is likely that parts of Lambeth will be designated as heat network zones.
Lambeth Council welcomes the Government’s ambition for heat network zoning and the planned regulatory framework. The Council intends to work closely with central government, the Greater London Authority, and neighbouring boroughs to ensure successful local implementation.
Lambeth Council supports higher standards, greater consumer protection, and a clear regulatory and governance framework for heat network development and operation. Heat networks using renewable energy have the potential to heat our homes and workplaces in a way that improves local air quality, reduces carbon emissions, and, as part of a wider package of measures, delivers secure and affordable energy. In this context, the council is supportive of heat network development in those parts of the borough where networks have the potential to deliver the greatest benefits for residents, the community and environment.
Lambeth Council has undertaken Phase 1 Local Energy Area Planning with a grouping of South London boroughs. Analysis undertaken as part of this planning identifies priority strategic heat network areas in Lambeth. Further to this, Lambeth Council is currently commissioning an HNDU-funded techno economic feasibility study on heat network potential in Waterloo and South Bank, which is the most promising part of the borough for heat network development. This will result in a Zone Opportunity Report which describes the heat network opportunity within South Bank and Waterloo, and recommendations as to the preferred option for taking the project forward.
At the same time, the council is mindful that lack of regulation in the heat network sector has led to issues with pricing, transparency, and design and build. Heat networks are large infrastructure projects that remain in place for many decades and require careful planning and coordination to get right. They are natural monopolies, and as such present inherent risks on price and quality if not managed well. This is in a context in which the cost-of-living crisis has strained the budgets of Lambeth households, many of whom were already living in fuel poverty before the onset of the crisis. With the right regulations and processes in place however, the council’s view is that heat networks can bring many benefits to Lambeth, and the council is supportive of heat network development subject to the following seven principles:
1. Heat network pricing must represent good value for money for all Lambeth residents and businesses.
2. Heat networks must offer prices, reliability of service and customer responsiveness that meet the needs of Lambeth's most vulnerable residents and do not exacerbate pressures on those already living in fuel poverty.
3. To ensure affordability, heat networks must be delivered alongside measures at the local and national level that improve energy efficiency and reduce the unit costs of energy.
4. To minimise disruption and maximise utilisation of low cost heat sources, heat network design should be developed in coordination with neighbouring boroughs and the GLA, so that developments at the neighbourhood level align with longer-term subregional and regional planning.
5. In line with Lambeth’s net zero target, heat networks must prioritise waste, ambient and renewable sources of heat to minimise the use of fossil fuels.
6. Heat network development and operation should maximise local investment, job creation and delivery of social value.
7. Heat network development should be designed to maximise sectoral reach, serving diverse communities across the borough, and should not be solely concentrated in the areas with the highest commercial value. Areas within potential zones should not be ‘sterilised’ and there should be no restrictions on the use of heat network pipework or heat sources via commercial, contractual, or other means such that the expansion of heat networks is limited. Strategic heat resources within or near to a potential zone area should be able to supply heat into and between zones to maximise utilisation of these heat resources without contractual constraint.
Central government foresees an important role for local authorities in heat network governance through Zone Coordination. Lambeth Council looks forward to working collaboratively with central government and the GLA to clarify roles and ensure effective governance structures are established, enabling successful heat network delivery. The specific details of Zone Coordination across London’s two-tier system, especially for cross-borough heat networks, will require further clarification, including resource commitments from central government and responsibilities of the proposed new Central Authority. Lambeth Council expects to play a key role in energy master planning and the design, commercialisation, approval and governance of heat network developments in the borough and welcomes the forthcoming legislative framework and resources to support this.
A wide range of delivery models exist for heat network development and operation, including public delivery, publicly tendered service concessions or licenses to the private sector, and public-private joint ventures. The council anticipates that the appropriate delivery model and commercialisation process for each heat network in Lambeth will be determined taking into account multiple factors, including the legislative framework and levels of resource set by central government, the commercial case, the specific characteristics of a heat network including the customer base, the results of a full market engagement process, and the ability of any one model to meet the principles set out above. In consultation documents published to date, central government has envisaged a competitive process for allocating the rights for heat zone development and delivery.
The council is aware that grant funding is available for the commercialisation and construction of heat networks via the Green Heat Network Fund. The council notes that third parties may wish to submit funding applications for round 9 of the Green Heat Network Fund, and that funding decisions may be made shortly before Heat Network Zoning regulations are in place. The council is broadly supportive of efforts to bring extra resource into the borough. However, this is only to the extent that:
1. GHNF grant awards do not constitute “incumbency” as described in the Government’s Heat Network Zoning consultation. The council notes that while GHNF funding supports valuable early-stage heat network development, funding awards must align with the Government's clear objective of competitive, fair, and transparent heat network zoning processes, and not create incumbency or limit delivery options.
2. GHNF funding decisions do not curtail powers and responsibilities of Heat Network Coordination to be created by forthcoming regulations, that would otherwise be in place without a GHNF grant.
3. Bids submitted to the GHNF, and projects developed pursuant to GHNF funding, are consistent with the seven principles described above.