Why the UK is doing this: the chicken-and-egg problem and how Denmark solved it

The problem in one sentence

A heat network costs a great deal to build and very little to run, so it only pays when enough buildings connect, and buildings are reluctant to connect to something that does not yet exist.

Why heat networks are expensive to start

Most of the cost of a heat network is spent before the first customer is warm. The energy centre has to be built. Pipes have to go under roads, which means excavation, traffic management and agreements with every other utility in the street. All of that is paid for up front.

Once the pipes are in the ground, the picture changes. The cost of supplying one more building on the route is small. The more buildings that connect, the more the fixed cost is shared, and the cheaper each unit of heat becomes. That is why heat networks work best in dense areas with large, steady heat users: hospitals, universities, offices, leisure centres and blocks of flats.

The chicken and the egg

This creates a deadlock. An investor will not commit tens of millions of pounds to a network without confidence that enough demand will connect to repay it. A building owner, faced with replacing a boiler, will not wait for a network that may never arrive, and will usually choose something they control.

Each decision is sensible on its own. Together, they mean networks get built only where a single large customer, often a council or a hospital, can underwrite the risk. Elsewhere, buildings that would have been cheaper to heat together each install their own system, and the opportunity is lost for a generation.

The result is visible in the numbers. Heat networks supply About 3% of UK heat demand[source]. Government's ambition is 7% of England's heat (27 TWh) by 2035[source], and it expects About a fifth of all heat by 2050[source].

Why government cares about the grid too

There is a second reason the government wants networks built in the right places. If every building in a dense city centre installed its own electric heat pump, the local electricity network would need expensive upgrades. Large heat networks can take heat from sources that are already there, such as rivers, sewers and waste heat, and spread the load.

The government's own modelling puts the benefit of building more heat networks at £5bn to £7bn of avoided upgrades to the electricity distribution network by 2050[source].

How zoning breaks the loop

Zoning tackles the deadlock from both sides.

For investors, it offers exclusivity. Under the government's policy, zone developers would be Appointed through competition, with exclusive rights to develop a heat network in the zone delivery area[source]. That removes the risk of a rival building a competing network in the same streets.

For demand, it offers certainty. Once the regulations are in force, the largest heat users in a zone could be required to connect when the network reaches them, subject to exemptions. That includes, for example: Existing non-domestic buildings with a wet heating system and average heat demand above 100 MWh a year[source]. Knowing those buildings will join is what makes the investment bankable.

The policy deliberately stops short of forcing everyone onto a network. Existing individually heated homes are not required to connect[source]. The aim is to secure the anchor loads that make a network viable, not to dictate every household's heating.

None of this is in force yet. At our last check the zoning regulations were: Not yet laid before Parliament[source].

How Denmark solved it

Denmark is the country most often cited in this debate, for good reason. About 69% of Danish households were on district heating in 2024[source].

That did not happen by chance. According to the Danish Energy Agency, Denmark's first Heat Supply Act of 1979 required municipalities to draw up heat plans. Those plans divided areas between district heating and natural gas, so that two networks were not built to serve the same streets. Over time, the planning was backed by rules allowing municipalities to require buildings in district heating areas to connect.

The underlying idea is the same one England is now adopting. Decide centrally which areas suit a shared network. Give that network a clear run. Make sure the demand is there to pay for it. The planning has since become a foundation for decarbonising heat, because a network can switch fuel at the energy centre without changing anything inside the buildings it serves.

The differences

England is not copying Denmark wholesale, and the starting points are very different.

Denmark set out its plans when heating systems were being built for the first time in many areas. England has a mature gas grid reaching most homes, and millions of buildings with working boilers. Zoning here has to work around that, which is one reason the policy targets new buildings, communally heated blocks and large non-domestic buildings first.

England's model also relies heavily on private developers and investors, with Ofgem regulating how networks treat their customers. Whether that model earns public trust will depend on prices and service once the first zone networks are running.

Finally, Denmark had decades. England's targets run to 2035 and 2050, and the first zones have not yet been designated.

The case against, briefly

Zoning has critics. Some building owners worry about being tied to a single supplier with no option to switch. Others question whether privately financed networks will deliver fair prices. And some argue that rapidly improving heat pumps make large networks less necessary than they once seemed.

Government's answer is the combination of exemptions, Ofgem regulation and the targeting of zones only where networks are the lowest-cost option. The Warm Homes Plan set out the funding behind it: Published 21 January 2026, with about £1.1bn for heat networks from 2025/26 to 2029/30[source]. Whether that balance holds will become clearer once the regulations are published and the first zones are designated.