Waste heat and heat networks: opportunity or obligation?

Heat networks are becoming an increasingly important part of the UK’s approach to decarbonising heat. Alongside this, policymakers and network operators are paying greater attention to opportunities to recover and utilise heat that would otherwise be wasted.

Data centres have become a key focus of waste heat discussions, reflecting both their rapid growth and the significant quantities of heat they can produce. However, data centres are only one example of a much broader category of assets capable of generating recoverable heat. Industrial facilities, energy-from-waste plants and other major energy users may also represent valuable sources of heat for existing and future heat networks.

For businesses operating such assets, an important question arises: is supplying waste heat an opportunity or might it ultimately become an obligation?

The answer currently differs across England, Wales and Scotland. There is no single GB-wide regime requiring businesses to supply waste heat to heat networks. However, legislation, planning policy and emerging regulation are increasingly encouraging the identification and use of waste heat and, in some circumstances, may affect how buildings and infrastructure are designed, located and developed.

England

A new legislative framework for heat networks was introduced under the Energy Act 2023 and brought into effect by the Heat Networks (Market Framework Regulations) (Great Britain) Regulations 2025. This marked a shift from a relatively unregulated heat network market to a regulated sector, in which heat network operators and suppliers must be authorised by Ofgem.

A key feature of the regulatory framework is the concept of heat network zones. These are areas in England identified as appropriate for district heat network development and where additional regulatory measures may apply. 

The Energy Act 2023 foresees the introduction of Zones Regulations for England which could include provision for zone coordinators to require information about a source of thermal energy that may be suitable to supply a heat network in a zone, to require the owner to allow equipment to be installed on its premises and connected to the network so that the source can supply it, and about the terms on which that heat is supplied, including the amount that may be charged. The Government has said it expected to lay the Zones Regulations in Parliament in spring 2026. However, these have not yet been laid, suggesting that the anticipated timetable for implementation has slipped.

The Government's response to its 2023 heat network zoning consultation, issued in January 2026, provides some indication of the content of the future English regulations. It identifies water treatment centres, data centres and waste incinerators as potential sources of low-carbon heat for networks in zones. Its preferred approach is for heat source owners and heat network developers to negotiate the sale of heat that would otherwise be wasted. However, there will be a backstop: if no agreement is reached, the zone coordination body will be able to require the heat source to connect to the heat network and provide heat, where connection is viable. The heat network zoning authority will provide national guidance and advisory support on these negotiations, with the aim of agreeing a heat price that secures low-cost, low-carbon heat for consumers while covering at least the heat source's cost of abstracting the heat. This will apply to heat sources located within and around zones, provided they can feasibly supply heat to a heat network in a zone.

Planning policy is also increasingly supportive of heat networks using waste heat. The National Planning Policy Framework, which sets out the Government’s policies for planning and for making decisions on development proposals in England, states that development proposals should identify opportunities to obtain energy including heat from decentralised networks such as district heat networks, and should seek to “take advantage of” suppliers of waste heat and energy, including by co-locating potential customers and suppliers of waste heat or energy.

This is significant for developments such as data centres and industrial facilities. Increasingly, consideration may need to be given not only to the energy requirements of a development, but also to its potential to provide or make use of local waste heat.

In summary, while businesses are not currently required to supply waste heat to a heat network, the emerging heat network zoning regime in England expressly envisages the introduction of such requirements through further regulations. Together with the increasing focus on waste heat in planning policy, this means that heat networks are becoming an increasingly important consideration for businesses generating significant quantities of waste heat, with the forthcoming zoning regulations particularly important to monitor.

Wales

The regulatory framework for heat networks introduced under the Energy Act 2023 and the Heat Networks (Market Framework) (Great Britain) Regulations 2025 also applies in Wales in respect of the authorisation of heat network operators and suppliers by Ofgem and compliance with consumer protection requirements. 

However, the position on zoning is different. The heat network zoning provisions in the Energy Act 2023 apply only to England, since a heat network zone is defined as "an area in England". The Welsh Government has instead focused on using Local Area Energy Plans to identify areas suitable for heat networks. Its Heat Strategy Action Plan commits it to use the evidence from those plans to identify opportunities for zonal planning in Wales and, after reviewing them, to assess whether the zoning powers in the Energy Act 2023 are required in Wales. It also intends to explore how spatial zoning could be used to accelerate and target investment in priority areas identified by Local Area Energy Plans. No decision has yet been taken to introduce a statutory zoning regime in Wales. There are therefore currently no equivalent proposals for requiring heat sources to provide information, connect to a heat network or supply heat.

The principal framework for heat networks in Wales is instead found in national planning policy, particularly Future Wales – The National Plan 2040, which forms part of the statutory development plan, together with Planning Policy Wales (PPW). Future Wales Policy 16 identifies Priority Areas for District Heat Networks, within which planning authorities are expected to identify opportunities for district heat networks and plan positively for their implementation. Importantly for waste heat producers, Future Wales states that large-scale mixed-use development should, where feasible, have a heat network using a renewable, low-carbon or waste heat source. Such developments should prepare an Energy Masterplan to establish whether a heat network is the most effective energy supply option and, where feasible, how it will be implemented.

PPW reinforces this approach. Planning authorities are directed to facilitate the co-location of major developments so that local heat opportunities can be used, to facilitate the linking of renewable and low-carbon energy with major development and high energy users, to maximise the use of waste heat and to promote heat networks. Development plans should also support the co-location of new proposals and land allocations with existing developments, heat suppliers and heat users.

In summary, there is no general statutory obligation in Wales requiring businesses to supply waste heat to a heat network, and, unlike in England, no zoning regime has yet been proposed under which such requirements could be introduced. At the time of writing (in autumn 2026), the Welsh approach is principally planning-led. However, the Welsh Government's future assessment of whether to adopt the Energy Act 2023 zoning powers will be important to monitor.

Scotland

Scotland was the first nation in Great Britain to legislate for a statutory heat network framework, through the Heat Networks (Scotland) Act 2021. The Act provides for heat network licences (now proposed to be opt-in to sit alongside the GB authorisation regime), heat network consents for the construction and operation of networks, the designation of heat network zones and zone permits. The GB-wide framework under the Energy Act 2023 and the Heat Networks (Market Framework) (Great Britain) Regulations 2025 applies in Scotland and the Scottish Government intends to make the two regimes interoperable.

The zoning provisions in the Energy Act 2023 do not apply in Scotland, since a heat network zone under that Act is "an area in England". Scotland has its own zoning regime instead. Under the 2021 Act, each local authority must review whether areas within its boundaries are particularly suitable for heat networks and may designate heat network zones. In deciding whether to designate a zone, local authorities must take into account the potential for a heat network to use waste heat. The Heat Networks (Heat Network Zones and Building Assessment Reports) (Scotland) Regulations 2023 set out how local authorities must consult on and publish zoning decisions. This includes a public notice allowing at least 28 days for representations. 

Statutory guidance issued alongside the Regulations shows how waste heat feeds into zoning decisions. Local authorities are expected to assess  waste heat opportunities in each potential zone. Sources outside a zone can also be relevant, since large sources such as energy from waste sites can supply heat in large volumes and at low cost. The guidance recommends engaging with owners of waste or recoverable heat, such as data centre operators and industrial sites, as part of the designation process. 

All Scottish local authorities have now produced Local Heat and Energy Efficiency Strategies (LHEES) and Delivery Plans, which between them identify over 300 potential heat network zones. The Scottish Government is also working with Zero Waste Scotland to build on the existing zone designation process, with that work expected to conclude during 2026/27. 

Looking ahead, the draft Buildings (Heating and Energy Performance) and Heat Networks (Scotland) Bill would allow buildings in zones to be required to decarbonise their heating, including by connecting to a heat network. It would also allow information to be required about heat sources, so that their potential for heat recovery can be assessed. The 2023 consultation went further, considering whether buildings with unused heat should be required to supply it where cost-effective. However, the Bill was not to be introduced until after the May 2026 election, so these remain proposals rather than law. Joint UK and Scottish Government guidance to support negotiations over recoverable waste heat, covering costs, technical issues and the regulatory pathway, was due in spring 2026 but has not yet been published.

Scottish planning policy also addresses waste heat. National Planning Framework 4 (NPF4) Policy 19 supports development within or adjacent to a heat network zone only where it is designed to connect to the heat network. Where a network is planned but not yet built, development must allow cost-effective connection later. NPF4 also expressly addresses waste heat. National and major developments that generate waste or waste heat and are located in areas of heat demand will be supported and a Heat and Power Plan should demonstrate how recovered energy will be used for electricity and heat.

In summary, there is currently no general statutory obligation on businesses in Scotland to supply waste heat to a heat network. However, waste heat is already a factor in zoning decisions and planning policy. The draft Bill and earlier consultation point towards information requirements and, potentially, supply obligations. Businesses generating significant waste heat in Scotland should monitor the introduction of the Bill, the publication of the joint waste heat guidance, and the development of future heat network zones.

Summary: what should businesses be doing now?

As described above, the legal position is developing differently across Great Britain. England is moving towards a statutory heat network zoning regime with specific requirements relating to waste heat. Wales is currently encouraging the use of waste heat through planning policy, while leaving open the possibility of introducing a similar regime to England in future. Scotland already has a statutory heat network framework and is proposing further legislation to support the assessment of waste heat sources and has previously consulted on requiring the supply of waste heat. 

But the direction of travel is broadly the same: waste heat is already recognised as an opportunity for heat networks, but is increasingly being treated as a resource that should be used, including through potential obligations to supply it where appropriate.

Businesses generating significant quantities of waste heat should already be thinking about what the developing policy and regulatory landscape could mean for their existing and future projects. In particular:

• Understand what heat you have available. Businesses should have a reasonable understanding of how much waste heat they generate, when it is available and, broadly, at what temperature and scale. That puts them in a much better position to assess whether there is a realistic opportunity to use it and to approach future discussions with heat network developers and public authorities.
• Think about location. For new developments, particularly data centres and other energy-intensive projects, proximity to existing or proposed heat networks, areas of significant heat demand and current or emerging heat network zones may become an increasingly relevant site-selection consideration. A site does not need to be inside a zone to be affected: in England, the proposed requirements would apply to heat sources within and around zones, and Scottish guidance treats large sources outside a zone as relevant to zoning decisions.
• Consider heat networks early in the planning and design process. In all three jurisdictions, planning policy is increasingly concerned with the relationship between sources and users of heat. If a site could potentially supply heat, that should be considered at an early stage, including whether space or infrastructure should be safeguarded to enable a future connection.
• Engage early where there is a credible opportunity. Discussions with local authorities, heat network developers and potential heat users can help establish whether there is a viable use for waste heat. That can work both ways: a significant heat source may help support the case for a new network, while the prospect of a network may influence the design of the development itself.
• Keep the regulatory position under review. The most important point for businesses developing long-lived infrastructure is that the absence of a current obligation does not necessarily mean that the regulatory position will remain unchanged throughout the life of the asset. Current policy suggests that a supply obligation is increasingly likely in some circumstances, particularly in England. Businesses should therefore consider heat-network issues alongside other long-term regulatory and planning risks when making investment and development decisions.

Prepared with assistance from Laura Nicol, Trainee Solicitor in our Energy and Infrastructure team.