Energy Systems Nexus report sets out recommendations to make heat recovery the norm, from expanding the UK Emissions Trading System to mandating heat recovery assessments in planning
Misaligned commercial incentives and a lack of guaranteed offtake are among today's biggest barriers to connecting recoverable heat to heat networks
Nearly 4,780 recoverable heat sources sit within 1 km of heat network zones – from data centres and nuclear power to energy-from-waste plants and industry
Without coordination heat network zoning will miss the potential for large-scale sources such as nuclear plants, which could be of regional importance
A new report from Energy Systems Nexus calls for a coordinated policy approach – spanning carbon reporting, capital funding and data infrastructure – to overcome the barriers for unlocking the full value of recoverable heat through the UK's growing heat network sector.
The Recoverable Heat in Heat Networks report, co-funded by Energy Systems Nexus members including United Kingdom National Nuclear Laboratory, E.ON and Amazon Web Services (AWS), warns that recoverable heat – energy that might otherwise go to waste or be under-valued, from industry, nuclear, data centres and public infrastructure – remains an under-used low-carbon resource.
Heat networks currently meet just 3% of the UK's heat demand, but the UK government expects this to reach 7% by 2035 and 20% by 2050 as networks move from largely unregulated infrastructure to a strategic route for decarbonising heat in towns and cities. This shift that has already happened elsewhere in Europe.
Chetan Lad, Head of UK Strategy at E.ON UK, said:
“The technology to recover waste heat is already proven, and E.ON is delivering it at scale across Europe. The real opportunity now is to create the right commercial conditions in the UK. It's about who pays, where the risk sits, and whether there's a sound business case at the end of it. Continued government support will be important to build market confidence. Alongside this, better data on where recoverable heat is available would help the whole industry, and contracts need to reflect the source.”
Iain Darby, Head of Strategic Research at United Kingdom National Nuclear Laboratory, said:
“Nuclear heat could play a major role in decarbonising UK heat networks, but only if it's planned as a strategic infrastructure from the outset. The report shows that nuclear reactors can provide predictable high-grade heat at a scale few technologies can match. However, success depends on coordinating reactor development, heat network infrastructure, planning approvals and long-term heat demand together rather than trying to retrofit connections later. Nuclear heat is therefore a systems challenge as much as an energy opportunity.”
Energy Systems Nexus co-funded the study to explore the barriers to heat recovery and develop practical recommendations for overcoming them.
Key issues preventing wider recovery include:
Potential is scattered but sizeable: recovering heat is possible from a wide range of sources including industry, energy-from-waste plants, power generation including nuclear, data centres, retail refrigeration and public infrastructure – but connecting it means aligning heat grade, proximity, timing of development, demand profile, and network capacity.
Barriers are systemic: incentives, risk allocation, contracts, time horizons, data visibility, and infrastructure cost often block deployment.
Misaligned commercial incentives and a lack of guaranteed offtake are among today's biggest barriers to connecting recoverable heat to heat networks.
Policy is shifting: Ofgem regulation, technical assurance and zoning are creating momentum, but coordination and support is still needed.
The report’s recommendations are grounded in new evidence: the project reviewed 37 UK and international heat networks already using recovered heat; mapped 4,780 recoverable heat sources within 1 km of heat network zones; tested nine barriers to viable business models and six pricing and profit-sharing approaches; and interviewed 13 industry stakeholders.
Among the actions needed to make heat recovery the norm, the report calls for:
One size does not fit all: distinct business models are needed for predictable high-grade heat from the likes of nuclear power stations compared to variable low-grade heat such as from data centres.
Increasing recognition of the system value of heat recovery in procurement by Zoning Coordination Bodies in England, including “electricity network benefits” as a social value outcome that reflects the reduced dependency that diversified heat networks can have on the electricity network.
Creating a Carbon Reporting and Innovation Office with an economy-wide role in overseeing emissions monitoring, reporting and verification, to support decarbonisation and UK competitiveness.
Expanding the UK Emissions Trading System to include energy-from-waste plants from 2028, including free allowances for heat recovered for heat networks, with domestic heating fuels to follow over time.
Maintaining Green Heat Network Funding for infrastructure that connects recoverable heat sources in heat network zones, and exploring how the National Wealth Fund could de-risk construction through guarantees for early-stage infrastructure and loans repaid once projects reach agreed financial milestones.
Developing standardised contracting templates to reduce legal transaction costs and connection risk.
Mandating techno-economic heat recovery assessments during planning applications above a set energy threshold, and maintaining a live, open data platform on heat source potential for local planners and investors.
Alex Buckman, Energy Systems Nexus Lead, said:
“This work shows the importance of bringing diverse perspectives to a systems challenge like this. We know there is, and will be, a huge amount of recoverable heat in our energy system – wasting it would be a massive, missed opportunity. The question is how we can integrate it. We’ve found the challenges are less technical and more about coordinated actions that understand the needs and perspectives of both the offtaker and the heat supplier. Our members are the ones that can make wide-spread heat offtake a reality and look forward to working with Government to making it happen.”
About Energy Systems Nexus
Energy Systems Nexus brings together the most progressive energy industry leaders with the sector’s brightest minds to define, fund and deliver a whole-systems R&D programme, in pursuit of Net Zero. Funded by our industrial members and delivered by Energy Systems Catapult, the Nexus is collaboratively solving the biggest hurdles faced by the energy sector.
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Adam Duckett
Communications Officer
Energy Systems Catapult
Email: Adam.Duckett@es.catapult.org.uk