Driven by the Energy Act 2023 and eagerly awaited secondary legislation, it is intended that heat network zoning will transform the way heat is delivered, regulated and invested in across England.
As the UK pushes toward its net zero targets, heat networks (which currently supply around 2-3% of national heat demand) are expected to expand to nearly 20% by 2050. This shift reflects the broader governmental commitment to reducing reliance on fossil fuels and enabling local low carbon heat infrastructure.
For heat network operators, developers, investors and building owners the new framework brings both significant opportunity and substantial regulatory responsibility.
To ensure that key stakeholders remain compliant with the new obligations, it is worth understanding the legal implications and compliance duties of heat network zoning.
What is changing with heat network zoning?
Heat network zoning introduces designated geographic areas where heat networks are expected to be the lowest cost solution for decarbonising heat. Within these zones certain buildings, including new buildings, existing communally heated buildings and some commercial buildings, may be legally required to connect to a heat network. This creates a guaranteed customer base for operators and crucially increases investment certainty for developers and investors.
Key players in the new zoning framework
The new zoning framework involves three core stakeholder groups. It is intended that these roles will interlock to deliver an efficient and well-regulated heat network system. The Central Authority (CA) acts as the national body overseeing the regime, responsible for identifying and designating zones, managing data and central funding, publishing pipeline opportunities, and supervising zone coordination bodies.
Working at a local level, Zone Coordinators (who will typically be local authorities) are tasked with tailoring zones to local needs, running tenders to appoint heat network operators, producing zoning market prospectuses, and coordinating planning and community engagement.
Finally, Heat Network Operators, who are granted exclusive rights to develop and operate networks within a zone, must provide detailed technical and commercial plans, demonstrate the capability and long-term viability of their networks, and prepare for extensive regulatory and data reporting duties.
Commercial implications for operators
Heat network zoning presents significant commercial opportunities. Exclusivity rights within zones offer operators predictable demand and revenue, while mandatory connection requirements help to reduce investor risk. At the same time, tenders for operating rights will be highly competitive, favouring operators who can demonstrate cost-effectiveness, technical competence, and strong local engagement. However, operators must also prepare
for long-term performance monitoring, stricter technical and consumer protection standards, and increased regulatory scrutiny from Ofgem.
Compliance obligations and regulatory requirements
Since January 2026, Ofgem is regulating heat networks in a manner similar to traditional utilities. Operators are required to register and obtain authorisation from Ofgem, and ensure billing transparency and uphold consumer rights. This includes clear pricing and accurate metering, as well as compliance with technical and performance standards such as the Heat Network Technical Assurance Scheme (HNTAS). They also need to maintain effective complaints handling procedures, provide support for vulnerable customers, and submit regular network notifications every four years under existing metering regulations.
Some buildings may qualify for temporary or conditional exemptions from mandatory connection requirements, often due to technical constraints or planning-related issues. These exemptions require periodic reassessment, and operators are responsible for monitoring whether the exemptions remain applicable. They must also renotify regulators every four years and be prepared to connect buildings once an exemption no longer applies. Failure to manage exemptions appropriately may result in financial penalties for operators.
What are the exemptions to the heat network zones?
There are two main categories by which a building can be exempted from connecting to a heat network.
The first is a temporary exemption wherein the exemption is only granted for a fixed period of time, after which the decision must be revisited.
The other type of exemption is a conditional exemption. A conditional exemption is when there is a specific barrier that is preventing a building from being connected to the heat network. This may be a planning-related reason or an entirely technical one, but the aim should be to resolve the barrier and ensure that the building can be connected to the heat network at the earliest convenience.
How will government frameworks affect operators?
The main burden that will be placed on heat network operators will be the need to provide detailed network plans that show evidence of capability.
This means doing more than just highlighting what authorities do and instead focusing on the effectiveness of the established heat network. Performance metrics will need to be included in these plans, so heat network operators should ensure that the network is independently assessed so that the data is reliable and accurate.
Beyond just the current network that is established, you should also make provisions for future connections, and these may include provisionally making allowances for currently exempt buildings.
As these networks are designed to stand the test of time, you should implement procedures for the continuous monitoring of system performance with an eye on pressure and temperature. This is vital for determining the efficiency and legality of the network as it is established and operates.
Preparing for the new regime: practical steps
To succeed in the new regime, heat network operators should be working on providing the best possible service for heat networks to ensure that tenders can be won and obligations fulfilled. CAs and local authorities need to determine which providers can meet the local needs in a way that is most cost-effective.
Practical steps should include:
– First, a review of the actual performance of their existing networks, checking heat losses, plant efficiency, customer billing accuracy and complaint patterns, so it is understood where upgrades may be required before entering any tender.
– Second, begin assembling the documentation that tenders and Ofgem authorisation will require, such as asset registers, network diagrams, financial models, and evidence of customer service processes. Internally, operators should ensure their billing, metering and data-handling systems can meet Ofgem’s expected standards and identify any gaps now rather than once regulation is in force.
– Thirdly, engagement with local authorities should be practical and targeted, focusing on understanding whether a zone is likely to include their assets, what the authority’s delivery priorities are, and what information will be needed for procurement.
– Finally, operators should take a realistic view of their capacity, assessing which upcoming tenders they are genuinely equipped to deliver, where partnerships may be needed, and how expansion plans would impact their existing networks.
Key Contacts
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at March 2026.