What is the state of play for district heating across London Boroughs?

‘Turning up the Heat: London Borough’s role in shaping the heat transition’ was the most recent event in the Steer and Amberside Advisors’ series London Borough Knowledge Exchange (LBKE) which is designed to bring together officers from across London’s boroughs to share insight, explore challenges, and collaborate on solutions to the capital’s most pressing urban issues. You can find out more about previous and upcoming events here.

What role will London Boroughs play in decarbonising heat across the UK capital?

This was the central question at ‘Turning up the Heat: London Borough’s role in shaping the heat transition’, an event that brought together London borough officers and technical experts to explore the changing landscape of heating and cooling networks.

The ending of the Public Sector Decarbonisation Scheme (PSDS) has left a big hole in the district heating landscape, with many unsure of what will come next. What emerged in the room was an opportunity for the Greater London Authority (GLA) to show leadership to Borough councils on discussions, collaboration and funding approaches as well as an understanding that private finance will be needed going forward for large projects.

This timely discussion, hosted by Amberside Advisors, gathered like-minded professionals into the same room for a vital discussion on the picture of heat decarbonisation in a global city. Our LBKE format fosters open dialogue across interactive roundtables and informed by real world and expert case studies we covered a lot of ground but here are our key takeaways:

Bill payers must be a top priority: The session revealed deep concerns over energy bills and possible impacts on the consumer. Residents do not want to pay more, with heating bills an extremely politically charged issue. Across different residential profiles there are different concerns; lease holders face high upfront costs, private renters don’t wish to pay extra for their connection, and housing associations often bear responsibility for internal equipment associated with heating, without the benefit of the income, which increases their debt risk.

There is no consistent approach across sectors in price setting and regulations vary based on business size. Government messaging lacks clarity and there are understandable anxieties that district heating should not increase bills.

Boroughs themselves have an inconsistent influence on pricing and there were warnings that seeking more influence and involvement mean greater risk for the Boroughs themselves.

Recovered heat from Energy from Waste plants or data centres could help deliver schemes at lower cost, but this opportunity will be wasted if a fair and consistent approach to pricing such heat supplies across London is not established.

Funding is still a patchwork: Funding for district heating connections remains complex, with some councils and NHS Trusts having utilised PSDS funds, yet eligibility for capital support e.g. for connection infrastructure is very restricted, as the Green Heat Network Fund excludes this. While Department for Energy Security and Net Zero (DESNZ) seeks greater private sector investment, barriers such as Green Heat Network Fund’s match funding requirements and National Wealth Fund’s debt-focused loans limit progress.

The consensus was that a clear funding gap persists for connection costs, rather than for building the networks themselves, highlighting the need for targeted financial solutions.

New networks necessitate private sector investment but there is a tricky balance between return on investment for investors and tenant affordability making financing difficult. Investor confidence suffers due to long life projects with ever-present shifts in regulation.

An imperative to optimise internal Borough operations: There is limited in-house commercial understanding of district heat projects across the wider Borough teams. Budget cuts to sustainability and delivery teams have further squeezed capacity, and upskilling within councils is needed to build capability.

However, coordination and communication within council teams, are often more vital than niche technical expertise (which can be outsourced) for successful project delivery. Sharing insights within teams, and with counterparts across boroughs, helps accelerate learning and adoption of best practice. Forums such as the District Energy Practitioners Group and District Heating Divas already provide effective platforms for collaboration and peer learning across the sector.

Cross-borough collaboration can also prove useful by pooling expertise as well as bringing down cross border infrastructure costs. While this can increase complexity in some instances, it also spreads the risk for investors and increases the scale of investment, which may help drive prices down through more efficient financing.

Partnerships and shared platforms across industry bodies, academic institutions, energy companies and Borough-led groups focused on regulatory updates, technology innovation, commercial models and stakeholder engagement could prove useful.

One standout example of cross-borough coordination is Cory’s emerging heat-main transmission project: by building a Partnership Board with Greenwich, Bexley, GLA and major developers, Cory is shaping a heat network that could supply industrial waste heat across multiple boroughs. Their engagement has led to strong local support, regulatory consent, and a scalable model that could serve hundreds of thousands of homes. This kind of cross-boundary infrastructure could provide a replicable model for strategic, multi-borough heat systems.

Location, location and co-location: The location of energy centres is also a concern. There is limited space in densely populated Boroughs and placement of energy centres often appears to be random and by chance rather than coordinated with other development or nearby to existing homes. A zoning approach for placement of energy centres could help encourage developers to either set aside land or co-locate with other projects.

Propositions can be strengthened by option of having waste centre to provide another purpose, for example processing wastewater.  Meanwhile, thermal storage is key to bringing down price, councils can enforce developers to build a minimum amount of local storage to have some further control over price.

Community engagement and social value: Boroughs face significant challenges in securing resident support for low carbon heat solutions due to affordability concerns, technical confusion, and low awareness. According to DESNZ’s Public Attitudes Tracker 49% of people nationally have never heard of a district heating system, however, explaining the benefits (lower carbon, more stability in pricing) is complex and often ineffective.

Boroughs could seek to implement active engagement with the community, to create awareness and understanding of the wider opportunities this can unlock.  Hounslow Borough Council has implemented a radical overhaul of its consultation approach since 2024 and has engaged in extensive engagement on its Net Zero Neighbourhoods initiative.

Meaningful engagement can also help enable better Social Value outcomes for communities, ensuring residents see the local economic opportunities and not just fear of increased costs.

Many other boroughs have undertaken substantial engagement initiatives, and important lessons should be shared on how to maximise impact.

How we can help

As the UK balances housing ambition with climate action, heat networks offer a unique lever - bridging infrastructure and investment, public value and private capital.

At Amberside Advisors, we help local authorities and investors to shape, fund and deliver viable heat network projects that are commercially robust, socially responsible, and ready for future regulation. If you’re exploring a new opportunity - or want to better understand available options for your current scheme - we'd be pleased to discuss how we can help.

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See the highlights from the 'Turning up the Heat' event: