Housing developers are at the sharp end of ambitious climate targets, requiring them to adopt greater electrification while contending both with a congested electrical grid, and with a time-consuming water licensing process. Craig Boath, Managing Director at Last Mile Group, explains the complexity of these challenges, the unique benefits of heat networks, and why working with a multi-utility can help.
Domestic heating accounts for a significant amount of the UK’s carbon emissions, coming in at around 18% of the total in 2021. As such, it’s a tough nut that the government and property developers will have to crack if they’re to achieve net zero by the 2050 target.
To reduce emissions in new homes, the government, through the Future Homes Standard (FHS), is now effectively requiring developers to use electrified heating in the form of heat pumps, or low-carbon heat networks. Such technologies are incredibly promising for emissions reductions.
Yet the electrification of heating has made some developers concerned about grid connections, with research suggesting that one-third of projects are being held up due to a lack of connection capacity. At the same time many house builders are also contending with the time-consuming new appointments and variations (NAVs) for clean and wastewater licencing process.
Despite these pressures, developers can find a way forward by choosing the right heating technology, and taking a holistic approach to utilities.
Future Homes Standard and the heat network advantage
There has been a back-and-forth uncertainty of information surrounding the FHS, leaving many developers confused about the timeline within which gas heating will be banned. As a consequence, we have witnessed house builders alternate between plans to heat developments with either gas or electrified heat; settling on gas if they think they can deliver it within the necessary timescale. Inevitably this approach creates additional costs, impacts project schedules and causes indecision around grid connections and the required capacity.
However, the confirmed timeline now makes 2025 a watershed moment for developers. Home heating must now be low carbon, and electrification of heat is currently the most likely way to deliver it.
Direct electric heating is one possibility but, with efficiencies of between 250-400%, heat pumps and heat networks are the preferred method. In October 2023 the government confirmed that these technologies will form the primary method for decarbonising home heating over the next decade.
There are a handful of different technologies within heat pumps and heat networks, but ground-source heat offers the greatest number of benefits to developers needing scalable low-emission heating. Ground-source heat pumps (GSHPs) draw geothermal energy from the earth that is transformed into space heating and hot water. In warm weather they can work in reverse to provide cooling. Stable ground temperatures make GSHPs highly efficient all year round, generating up to 80% fewer emissions than gas alternatives. They require minimal outdoor space above ground, offer exceptional longevity, and have lower maintenance costs than gas systems or air-source heat pumps (ASHPs).
For large new developments, perhaps the most compelling potential comes from heat networks. Ground-source networks can be more easily scaled to serve multiple homes or an entire development, significantly improving overall efficiency and reducing per-home costs. They typically consist of a series of boreholes or horizontal loops buried in the ground, which enable the absorption and transfer of geothermal heat from the earth to homes. Using either centralised plants or decentralised networks of individual heat pumps, that heat can be distributed to individual apartments, buildings or houses through a network of insulated pipes.
The upfront cost of ground-source systems remains one of the main barriers for developers, as does network adoption – simply who will be responsible for managing and maintaining the network once it enters service. However, innovative funding models like those we’ve implemented at Last Mile Group can overcome these hurdles. In our recent 48-plot housing development at Barnton near Edinburgh, we funded and constructed an ambient heat network, taking on 60% of the capital expenditure and adopting the network when complete. The result? The developer faces no operational costs, and benefitted from a 60% capital cost saving. The system delivers an approximately 80% reduction in carbon emissions compared to gas, and it offers customers competitive fixed-rate tariffs with low and predictable running costs.
For new-build developments where groundworks and utility connections are already part of the build programme, it simply makes sense to install a ground-source heat network that will provide ambient, geothermal heat for the whole development.
Grid connections delays
Connecting any significant electrical asset to the grid continues to be an issue for developers, one that has rightly become more of a concern as heating is electrified and developments require more capacity. Research has shown that a third of developers say the progress of their projects has been impacted by National Grid power constraints.
However, 2025 will see the National Energy System Operator’s (NESO) reformed connections process come into force. Recently approved by OFGEM, the reforms are based on a ‘first ready, first connected’ principle to connect new projects that can complete at speed, ahead of less viable or complete developments – even if those have been in the queue longer. By prioritising the connection of viable projects, grid connection times should be reduced for new and existing projects, speeding up the delivery of low-carbon infrastructure. And to ensure connections reform is delivered on time this year, NESO has also paused the connections queue.
These well-intentioned and necessary reforms will take some time to implement, and longer to be felt. The reformed process will also still be complex, so developers will need to find ways to proactively mitigate the risk of delay even under a new regime. What’s more, many connection delays have come from the incorrect estimates of the capacity that new housing developments require.
Un-muddying the waters
Few developers have the privilege of being concerned only with electrical connections. Water is also a pressing issue. The water utilities sector is experiencing significant upheaval, with impending changes to infrastructure costs creating substantial uncertainty for developers. The current new appointments and variations (NAV) licensing process for clean and wastewater connections is complex and time-consuming. This complexity introduces financial unpredictability, making it difficult for housebuilders to accurately budget and plan their development projects. That the water companies have a monopoly further complicates matters, potentially limiting innovative solutions and increasing overall project costs.
To avoid delays from water or grid connections, it’s crucial that developers engage in early, proactive communication with their utilities connection providers. But given the varied demands and complexities of getting connected, there’s clearly an advantage in working with a single, multi-utilities provider; cooperating to identify and resolve potential and multiple infrastructure challenges before they become critical-path issues. A multi-utility provider will present detailed site plans and development specifications well in advance, and conduct thorough, early-stage feasibility studies to help get all utilities connected on time and on budget.
Grid connection delays can be further mitigated by designing schemes that will reduce peak loads. For example, by specifying centralised ground-source heat networks which minimise electricity and water demand. Proper design and planning will also prevent overestimation of the required capacities.
By working closely with the distribution network operators (DNOs), multi-utility providers can find possible phased approaches to implementing the works and their grid connections. Such approaches are ideally suited for heat networks, which are easily extended to incorporate new homes that are part of, for example, a multi-phase development.
Moving toward an all-electric future
The path for home heating is clear: scalable, low-carbon solutions are a necessity, and all-electric schemes will make up the overwhelming majority. Innovatively financed heat networks – especially ground source systems – offer developers a rare combination of efficiency, reliability, and sustainability.
But due to grid-related setbacks and the complex NAV water licensing process, the success of any development hinges on early planning, smart partnerships, and a multi-utility mindset that anticipates challenges before they escalate. Through funded models and network adoption, developers can move beyond meeting the requirements of the Future Homes Standard to providing cleaner, greener, future-ready homes with confidence. As the Government signals its willingness to reform planning laws to achieve its goal of building 1.5m homes over the course of this parliament, developers have both a challenge, and a greater opportunity.
