Inside Veolia's Billion-Pound Plan for UK District Heating

District heating is one of the most innovative, most sustainable, yet chronically underfunded methods of space heating available today.

It is also founded on incredibly simple principles.

Rather than each home in a community having individual boilers, district heating works by siphoning wasted heat energy from a central power plant and pumping it through a network of pipes to each home in the region.

As such, district heating prevents the unnecessary waste of thermal energy, meaning that bills are lower and emissions are fewer. It is a classic case of circular thinking.

And while district heating does require large investments in infrastructure, it is a system that is eminently achievable with the tools, build profiles and climates of most countries.

Take Denmark, for example. It is a coastal nation in Northern Europe where temperatures can drop below -30°C, yet district heating is able to serve around 98% of buildings in the capital city of Copenhagen.

In fact, district heating is such a timeless concept that ancient Romans used to redirect the heat from their public baths to other buildings in close proximity.

Today, district heating can make use of the waste energy generated by all kinds of facilities, including incinerators, power plants, heavy industry sites and data centres.

So, given all its benefits, why exactly has district heating failed to catch on as a universal solution, and what is being done to roll it out further?

District heating in the UK

While the UK does currently operate some district heating networks, they account for just 2-3% of the country's heating solutions, or just 500,000 homes nationwide. Mostly, these networks are heavily concentrated in densely populated areas, like in London.

The British Government does, however, intend to invest significantly in its district heating capabilities going forward, with the express aim of heating 18-20% of homes through circular networks by 2050.

To do so will require substantial amounts of capital, though.

Enter Veolia. The French utility company recently announced a US$1.3bn pipeline of district heating projects set to be awarded by 2030 as part of its new Ecothermal Grid offering in the UK market.

Veolia has revealed that it has already secured US$273m worth of projects in 2025 alone, with developments planned across Wiltshire, London, Bristol, Yorkshire and Cambridgeshire.

With the government's plans to expand district heating, it is thought that the market in the UK could be worth US$104bn by 2050.

What are Veolia's current district heating projects?

Among the company's recent achievements is the completion of Phase One of its Southwark 2.0 District Heat Network in south London.

The extension currently provides over 2,500 homes with heat generated from Veolia's energy-from-waste plant in the area, saving approximately 8,000 tonnes of CO₂ annually.

When fully operational, the network will supply nearly 7,000 homes and save an additional 14,000 tonnes of CO₂ each year.

Phase Two is set to begin in March, subject to regulatory approvals.

The company has also been selected by Wellcome Genome Campus to design and build a fifth-generation heating and cooling network in Cambridgeshire.

This system will recover geothermal heat alongside waste heat from a data centre facility as the campus expands from 125 to 440 acres.

The role of regulation and policy

The expansion of district heating cannot rely on investment alone, however. Government policy must make its development as streamlined as possible.

At the moment, Veolia is calling on the UK government to implement three specific policy changes to support the sector's growth.

The company wants Energy from Waste facilities to receive reduced UK Emissions Trading Scheme allowance liabilities when supplying heat to local networks.

It is also pushing for long-term funding mechanisms beyond the existing Green Heat Network Fund to ensure continued project development.

Perhaps most significantly, Veolia is advocating for mandatory connections requiring new and certain existing buildings to connect to and use local heat networks.

"Veolia's ambition is to be at the forefront of a new wave of heating networks across Europe, and ultimately to become the number one player in urban heating in Europe," says Estelle Brachlianoff, who is the CEO of Veolia.

"In order for this to happen, we need – across Europe and in the UK – funding mechanisms that provide certainty, and stable regulatory frameworks."

The road to district heating

Buildings currently account for 37% of the UK's CO₂ emissions through space heating, industrial heating and hot water provision.

In the coming years, it is also expected that the need for cooling systems will rise drastically.

But Veolia estimates that if the government's 2050 target is met, district heating networks could help to deliver 15 million tonnes of carbon savings – enough to turn the dial on climate action significantly.

Gavin Graveson, Senior EVP for Veolia's Northern Europe Zone, believes his firm can contribute to that journey given the right regulatory support from Westminster.

"To encourage further investment in decarbonised heat in line with its 2050 targets, the government could use the UK Emissions Trading System to incentivise electricity producers to supply local heating networks," he says.

"Once the infrastructure is in place, the networks must also be fully utilised to optimise their profitability and carbon efficiency. Mandatory connections would guarantee operators stable demand."