Decision details

To apply to the Heat Network Delivery Unit round 15 for £100k (maximum available funds) to further support Detailed Project Development for the Town Centre Heat Network. 

Heat networks (HN) will play a crucial role in decarbonising heat in buildings. HNs take heating, cooling or hot water from a central source(s) and deliver it to a variety of premises such as public buildings, shops, offices, hospitals, universities, and homes. The Department for Energy Security and Net Zero (DESNZ) have used research to establish a target of around 20% of total heat supply from heat networks by 2050. They currently provide about 3%. DESNZ is further enabling the development of HN infrastructure through a range of targeted funding, policy and legislative support to de-risk projects and attract investment.

In additional to national significance, the Cheltenham Heat Network exploration is a key action identified under the Power theme in the Gloucestershire County Council (GCC) Climate Change strategy, in the Energy theme segment of the Climate Leadership Gloucestershire (CLG) action plan and the Cheltenham Borough Council (CBC) Climate Emergency Plan: pathway to net zero. Although it is located in Cheltenham, it is believed that the learning, industry engagement and feasibility work will provide significant benefits across the county when exploring future heat network potential at other sites.

Cheltenham was 1 of 28 towns and cities in England to take part in the DESNZ led, HZ Zoning Pilot Programme, which aimed to standardise national methodology, and HN zones have been identified considering economic viability, investment scale and returns, decarbonisation impact and deliverability. This report was published 14^th February 2025, in advance of this, a briefing session was held with the Heat Network Industry Council (HNIC), which includes most of the major private sector HN operators in the UK, effectively promoting the opportunity for heat network development in the town amongst key delivery and investor organisations.

In 2023-24, CBC was successful in applying to the Heat Network Delivery Unit round 13 for over £80k, to complete a detailed HN techno-economic feasibility study, working with the consultants Greenfield Nordic (now Granlund). This focused on two zonal-scale opportunities in the Town Centre and Golden Valley areas of Cheltenham.

In 2024-25, CBC was successful in receiving partial funding Heat Network Delivery Unit round 14 for £70k, to develop the town centre HN. This phase of works is described as a Detailed Project Development ‘lite’ which took form as two workshops delivered to CBC leadership team, SW net zero hub project manager and County Climate Change Coordinator. The first workshop reviewed the key risks including the location of the energy centre, securing critical consumers, area of borough impacted, and development permissions. The second workshop (delivered by the Carbon Trust) reviewed commercial structuring and delivery model options, considering the role the Council would take in the development process.

The next round of available HNDU funding will enable the Council to continue exploring the feasibility and deliverability of a Town Centre Heat Network, which would supply buildings with low carbon heating within the borough. This phase of works would produce detailed project development, which will conclude whether the Heat Network development is a possibility, resulting in the output needed to apply for capital funding to the Green Heat Network Fund for construction or well documenting reasoning for why this cannot progress. 

If the bid is successful, the next phase would fund:

-       Establish an internal project board, with representatives from all relevant service areas

-       Further mitigate key risks and consider opportunities, key are:
energy centre location/approvals
conducting a de-steaming investigation of the Cheltenham General Hospital,
inclusion of additional consumers
Extended stakeholder engagement and communications campaign to resolve Memoranda of Understanding (MoU) / Heads of Terms (HoTs) for consumers and other critical relationships and to maintain the coalition of partners secured to date. 

-       Refresh of Techno-Economic modelling and viability sensitivities, especially in light of a revised energy centre location

-       Monitor and assess the impact of emerging policy, regulation and funding issues, i.e. Heat Network Zoning regulation (zone designation, zone coordination and ‘requirement to connect’), market controls and emerging public funding solutions, e.g. GB Energy and National Wealth Fund.

-       Soft market testing with the developer market, using this to inform views on project viability and hence design, delivery model and funding, and, approaches to procurement

-       Facilitate delivery and funding model decisions

-       Continue to engage with Triple Point, as operators of GHNF^[1], regarding the latest on funding allocations and key success criteria

-       Update risk review

-       Legal guidance, including around contracting and procurement issues

-       Generate Outline Business Case

-       Allow the Council and CLG partners to be fully informed and make a decision on how to support heat networks in Cheltenham and exploration of heat networks across the wider county

It was considered whether a different organisation could progress with the role of project lead, however it was decided that the Council would proceed with the funding application to guarantee the level of influence necessary for decision making.

Additional funding contributions are being explored from CLG, GCC and CBC.

Consultation is essential to project development. From initiation in 2022, this project has consulted:

-       CBC Cabinet Member for Climate Emergency CBC

-       GCC Cabinet Member for Nature, Climate & Waste Reduction

-       CBC senior leadership

-       Heads of Service

-       Gloucestershire County Council

-       Climate Leadership Gloucestershire

-       Southwest Net Zero Hub

-       Organisations engaged to connect: Cheltenham General Hospital, Cheltenham Ladies College, Cheltenham College, Tesco, Eagle Tower, CBC

-       DESNZ appointed consultants – Granlund and Carbon Trust