What do central governments need to do to enable clean heat neighbourhoods
Policy changes that need to happen to enable this
ALPHA
Overview
There’s a lot that local authorities and others can be getting on with, in order to progress the clean heat neighbourhood model and deliver schemes to local residents - that’s what the rest of this playbook focuses on. But, if this model is to achieve widespread adoption, it will need policy change and resources from central governments to scale it and roll it out across the country.
Policy in this space moves quickly — we will keep this page updated as things change.
These are the policy changes we think matter most for clean heat neighbourhoods specifically; there's much more needed to decarbonise UK homes broadly (like making electricity cheaper), but this is where we are focused.
Have a view? Email us at cleanheatneighbourhoods@nesta.org.uk
What supportive policies already exist?
There are lots of hints from central governments that they would like to see more local delivery of the heat transition, and there are some useful policies from which to build. In England, there has been ad-hoc funding of some local retrofit delivery through a variety of schemes - most recently the Warm Homes: Local Grant (WH:LG) - and the UK government has long-standing plans to develop a policy infrastructure to deliver heat network zones which support new heat network developments. In Scotland, funding has been provided to all local authorities to deliver on their relatively new legal duty to develop local heat and energy efficiency strategies (LHEES), and a long standing programme of area-based scheme funding for local authorities has supported targeted retrofit in lower income areas. In Wales, all local authorities have developed local area energy plans (LAEPs) which provide some local overview of the heat transition, and local authorities have been involved in the Optimised Retrofit Programme (ORP)programme of social housing retrofit.
These programmes have resulted in some capacity and capability within local authorities to deliver area-based heat decarbonisation, but this varies a great deal between areas. Government funding schemes for area-based retrofit have generally been short-term, many of them have been competitive, and almost all of them have been restrictive in the tenures and households that they are open to - making it difficult to deliver broader and larger-scale schemes. Meanwhile, more general schemes, such as the Boiler Upgrade Scheme (BUS) grant - which provides £7,500 towards the costs of heat pumps in England and Wales - have had the primary purpose of supporting individual household decisions without any local tailoring.
The Warm Homes Plan
In January 2026, the UK government published a long-awaited Warm Homes Plan, aiming to spend £15 billion on making homes cleaner, cheaper and more comfortable. Amongst other things, the plan identifies a greater focus on local delivery. The plan emphasises the importance of strategic planning, coordination and delivery of home upgrades at a local level. This is reflected in statements in the plan about greater roles for local authorities, strategic mayoral authorities, DNOs and others.
Delivering the transition to electrification will bring significant benefits to local areas across the country. Local authorities and mayoral strategic authorities, with their understanding of their housing stock, communities and local supply chains, will be the critical actors in planning a transition that delivers for their local areas. Warm Homes Plan, page 80
While the plan sets out this general intent towards a greater role for area-based coordination and local authorities, it doesn’t yet go a step further towards detailing practically how coordination, planning and delivery should happen locally. And there’s nothing to address whether resource will be provided to support local authorities with this greater role.
The plan also sets out that the UK government’s approach to delivery of low-income schemes will shift further towards area-based delivery. While transitional arrangements will be in place until 2027/28, when existing local schemes will start coming together and orientating towards more local delivery. Further information on the UK government’s approach to this is expected later in 2026.
One area where the UK government has set out significantly more detail on its approach, is heat network zoning. Zoning is intended to de-risk the delivery of heat networks, and develop local and national pipelines of heat network schemes. Central to this will be the creation of zoning coordination bodies in England, many of which are likely to be mayoral strategic authorities. These bodies will be responsible for identifying which parts of the area will be best served by heat networks, designating these as heat network zones, and competitively appointing developers for these zones. This could be important infrastructure that lays the groundwork for a wider, more place-based approach to heat transition planning.
How to go further?
While the Warm Homes Plan lays out a strong intention to move towards more place-based delivery of heat decarbonisation in England, we think there are several areas where central governments need to go further and implement more practical arrangements if clean heat neighbourhoods are going to be viable across the country.
1
Resourcing detailed heat planning everywhere
There are many benefits to doing detailed local heat planning - fundamentally, it will make it easier and faster for households to switch to low-carbon heating. So, it should happen everywhere. At the moment, where it is optional, it will inevitably be patchy in quality. It should also be made clear by central government which organisations are asked to take a leading role, coordinating the input of other public bodies and stakeholders (including residents and the supply chain). At the moment, in England, we likely think these should be strategic authorities - particularly once all parts of England are covered by some form of strategic authority.
This could easily build upon plans in England for zoning coordination bodies - where these are brought into existence, they could be simply given a broader remit. That should include in the mapping process, mapping out other heat decarbonisation solutions - in addition to heat network zones - and identifying priority places for where an area-based heat decarbonisation scheme could be delivered. Although we aren’t proposing that zones for other technologies would have a legislative force (in the way that heat network zones will), there are other ways that these would help more schemes move forward into delivery, and accelerate the heat transition.
Eleven benefits of local heat planning
A blog from Nesta on the benefits we see emerging from clean heat planning.
But, there would need to be a plan to identify lead bodies for other parts of England, as all parts of the country won’t get a zone coordination body, at least to begin with. And for local governments to be able to do heat planning effectively, they will need adequate resourcing and expertise, and access to guidance, resources and tools. Providing a small amount of ongoing resource funding to those local authorities asked to lead heat planning is crucial, so that each area can employ permanent staff and build up their expertise and capacity. At the moment, there is only funding attached to the zone coordination body role. In Scotland, local authorities have had ongoing resourcing to support their statutory duty to produce local heat and energy efficiency strategies.
2
Central support and expertise
Central support and resource is necessary for local planning to happen effectively and efficiently. This should come from the Warm Homes Agency, and should include resources, templates and approaches which can be readily implemented and adapted at the local level. Again, this is equivalent to the role anticipated for the Warm Homes Agency in relation to heat network zoning in England, but extended across other key heat decarbonisation technologies, and applying to all parts of the country. For example, while DESNZ is developing a national zoning model, this will, as things currently stand, only identify priority places for heat networks.
3
RESPs
The UK Government, through NESO, is implementing regional energy strategic planning. This will result in the regular production of spatial energy plans across all of Great Britain. A standardised methodology will be used to produce plans for each of Wales, Scotland and 9 English regions. The plans are ‘whole energy system’, covering generation, distribution and demand, across all energy users (from households to big industrial sites), and across all energy ‘vectors’ (i.e gas, electricity and so on).
While we support the overall ambition of having a whole-system, bottom-up strategic energy planning framework, it will only be possible to get the heat element of this right, with the more granular, more local heat planning that we’ve talked about above - and, crucially, the central resourcing and support for it.
4
Implement heating network zoning fully
The approach that the UK government is taking to Heat Network Zoning should help de-risk large-scale heat networks in many of England’s cities - by creating the ability to require some building types and waste heat sources to connect. It will establish an institutional framework that could take on broader aspects of heat planning and delivery. One important question will be the extent to which Zone Coordination Bodies (at the local or regional level) are able to not just create a local pipeline for heat network delivery, but also work with zone developers to make heat networks an affordable and attractive option for some domestic buildings in their zones. Initially, heat networks are likely to target ‘anchor loads’ for connection, and most of these will be new buildings and non-domestic buildings, but longer-term they could also connect homes - the question will be whether this is affordable and attractive to the home owners.
The UK government should also make sure that Zone Coordination Bodies are able to go further and take on broader heat planning roles, as set out above, covering all low-carbon heating technologies.
5
Local delivery of low-income schemes
The Warm Homes Plan sets a clear direction of travel, towards greater local delivery of low income schemes in England. This could unlock greater alignment across schemes, and better enable multi-tenure delivery. Local authorities could also bring greater household trust to these schemes, and help ensure higher quality outcomes across the board. However, the levels of capacity and capability of local authorities to manage these sorts of programmes is varied, and the respective roles that different organisations might take remains undecided.
6
Wales & Scotland
A lot of the potential policy levers to accelerate clean heat neighbourhood approaches sit with the devolved governments in Wales & Scotland, and we therefore think the expansion of area-based approaches is a good priority for the devolved governments to have, as part of their wider heat decarbonisation strategies.
Both devolved governments have the responsibility to support heat planning, and both are already in a more advanced position than England - all local authorities have produced LHEES (in Scotland) and LAEPs (In Wales). But, local authorities need the support to go further, and get into more detailed and granular local planning, that supports the development of deliverable projects. The three nations have made uneven progress in delivering heat network zoning, with the greatest progress in implementing zoning policy having been made in England by the UK Government. Scottish and Welsh governments both need to make more progress implementing heat network zoning.
Zoning, legislation and funding need to work together. In Wales, despite the importance given to heat networks in the Heat Strategy, there is a lack of funding schemes for the construction of heat networks.
Both devolved governments can also fund pilots and ensure that devolved grant schemes are able to support multi-tenure projects. This is also an area where more policy development is needed from both governments.
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