Grants are being offered to English and Welsh local authorities by the Department of Energy and Climate Change, through its Heat Networks Delivery Unit (HNDU). The purpose of the funding is to develop self-sustaining heat network projects that are already strong enough to attract a range of finance options, including commercial investment. The first funding round closes on 15 November 2013, although five more funding rounds will follow over the next 18 months.

Funding from HNDU is available for up to two-thirds of the project development costs for heat networks, and can be used to meet the costs of specialist consultants developing technical proposals and financial evaluations.

The Carbon Trust is already providing support in project management and governance to a number of local authorities developing heat networks, including Bristol City Council and Leeds City Council. HNDU has recognised that project management and governance can be a challenge for local authorities that do not have experience in developing heat networks, so this funding is designed to overcome that barrier. HNDU funding can enable other local authorities to access assistance from the Carbon Trust. Support is also available from the Carbon Trust for local authorities at earlier stages of development, in order to bring a project to a point where it is eligible for HNDU funding.

Eligible projects include new heating and cooling networks, as well as the expansion of existing networks. The criteria for assessing projects includes the potential for commercial development, the reduction of carbon emissions and energy use, whether it supports wider low carbon and growth agendas, and whether there is a demonstrable commitment to robust project management and governance.

In particularly HNDU wants to fund projects that use renewable, sustainable or recoverable heat sources, which can complement more traditional sources such as combined heat and power using natural gas.