Heat networks need government backing to unlock £100bn
29 July 2026
Households will miss out on lower heating bills, and the UK economy will lose £100 billion in investment unless the government acts now to make heat networks cost-competitive with gas, a major new report has warned.
The Cost of Heat Report from ADE: Heat Networks presents evidence that the cost of heat from heat networks can undercut fossil fuels, but only with a clear and phased package of government support. Without that backing, consumers will remain locked into volatile international gas prices and the nation will squander billions in energy system savings.
The report sets out a straightforward roadmap to close the cost penalty heat networks face against gas. In the short term, a level playing field on carbon pricing would remove an immediate cost barrier. Medium-term measures including targeted electricity discounts and increased grant funding would drive costs down further. A long-term Regulated Asset Base (RAB) model would then manage construction risk, reduce financing costs and make heat networks cheaper than gas for consumers.
According to the report, failing to act would forgo £86 billion of potential electricity system benefits, prevent £100 billion of private investment and put an estimated 100,000 jobs at risk. It also argues households would remain exposed to volatile international gas prices.
The report recommends targeted intervention focused on 15 to 20 large-scale projects, concentrating support where it delivers the greatest impact and allows the market to scale. The analysis shows that once the sector grows, market forces will naturally drive costs down further, enabling support to be removed entirely by the 2040s.
Chris Unsworth, head of ADE: Heat Networks:
“Closing the cost gap between heat networks and gas is achievable and affordable if the government makes a clear commitment. We have a roadmap that works. It requires short-term measures to level the playing field which will deliver lower bills for consumers, £100 billion in private investment and 100,000 jobs.”
ADE: Heat Networks is urging the Treasury to commit £10 billion to district heat network deployment by 2035, a level of investment comparable to that allocated to nuclear power and carbon capture. It is also calling for enabling legislation that allows Ofgem to establish the regulatory framework needed for cost recovery. The alternative, the report concludes, is a persistent cost penalty for consumers and a continued reliance on imported gas for peak heating demand.
