Burges Salmon releases report detailing investment trends in heat networks

Investors are bullish on the prospects of heat networks, yet developers appear more guarded, reveals new research conducted by law firm Burges Salmon. The latest net zero report, launched by Burges Salmon, highlights a divergence in sentiment between investors and developers regarding the potential of heat networks projects.

According to the report, a significant 69% of investors view heat networks as attractive investment opportunities, with 61% expressing confidence in the returns they can yield. However, developers exhibit a more cautious stance, with only 45% considering heat networks attractive and a mere 41% anticipating sustained investment returns.

The report, titled “Getting to Net Zero – The potential for heat networks in our communities,” consolidates insights from 80 UK-based investors and developers, alongside detailed interviews with key industry players such as Equitix, Related Argent, Hemiko, SSE, and Asper. These insights shed light on the funding and developmental landscapes of heat networks projects in the UK and Europe.

The timing of the report coincides with the imminent publication of the UK government’s findings from its public consultation on heat networks zoning proposals. The proposed zoning system aims to attract investment and expedite access to cost effective, environmentally friendly heating solutions for local communities.

Legislation such as the Energy Act 2023 has provided a much needed framework, easing concerns among investors. Approximately 60% of investors believe that this legislation will stimulate funding into heat networks. Furthermore, over a third perceive clean heat mandation – the obligation to connect certain buildings to heat networks within designated zones – as a pivotal factor in ensuring long term success and attractiveness for investments.

While government mandates bolster investor confidence, developers grapple with challenges in project delivery. Only 41% of developers view heat networks favourably, citing complexities in planning, construction, and workforce upskilling as significant hurdles. Moreover, the fragmented nature of supply chains, exacerbated by labour shortages and inflation, poses additional risks for developers.

Charles Robson, a director at Burges Salmon, emphasises the importance of addressing these challenges to realise the potential of heat networks fully. He underscores the need for collaboration between investors, developers, and regulatory bodies to navigate these complexities effectively.

Emma Andrews, another director at Burges Salmon, highlights the firm’s commitment to facilitating such collaborations and providing comprehensive support across all stages of heat networks project delivery. With a focus on strategic guidance and regulatory compliance, Burges Salmon aims to contribute to the realisation of a sustainable and low carbon future through the development of heat networks.

Main photo: Burges Salmon

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