Nottingham City Council is set to consider proposals that could see its district heating network sold to a third-party operator, as part of efforts to reduce financial risk and secure long-term investment in the system.
A report due to go before the council’s Executive Board on 21 April 2026 outlines plans to begin a formal market process to transfer ownership of the network’s assets, which currently supply heating and hot water to around 5,000 homes and businesses across the city.
The network, one of the largest of its kind in the UK, is powered by steam from the Eastcroft incinerator and distributes heat via a system of pipes to connected properties. The council has been reviewing its future since late 2024, when it first agreed to explore options for the scheme, including a potential sale, continued in-house operation or closure.
Closure of the network was previously ruled out after assessments found it would not offer value for money and would conflict with local and national policies promoting low-carbon heat systems. Continuing to run the system without major investment has also been discounted, as it would leave the authority exposed to ongoing operational risks and limit opportunities to expand the network.
The latest report recommends delegating authority to the council leader, alongside senior officers, to accept a suitable bid for the network if strict criteria are met. These include transferring financial and operational risk away from the council, ensuring the buyer has the technical and financial capability to run the system, and protecting customers through controls on tariffs and an obligation to continue supplying heat.
If approved, the council plans to begin engaging with the market from May 2026, with a view to completing any transfer within around 18 months. The process would be carried out under procurement rules to ensure transparency and competition, following advice that the inclusion of customer protection requirements means the deal would legally constitute a procurement exercise rather than a simple asset sale.
In the meantime, the report also seeks approval to extend existing short-term energy and hot water supply contracts linked to the Eastcroft facility, maintaining current arrangements while longer-term decisions are made.
The council says the proposed transfer could reduce exposure to risks associated with ageing infrastructure, such as potential turbine failure, while allowing a private or partner organisation to invest in upgrades and expansion. This aligns with wider government policy, which is encouraging the growth of heat networks as part of efforts to decarbonise heating. From January 2026, such networks are also being brought under regulation by Ofgem, introducing new consumer protections and oversight of pricing.
For existing customers, the council indicates any future operator would likely be required to continue supplying heat and meet regulatory standards, with additional safeguards potentially including limits on price increases. However, the report acknowledges risks, including the potential for increased fuel poverty if costs rise, and the need to ensure any buyer has sufficient financial strength to operate the system over the long term.
The financial implications for the council are also significant. A transfer could remove the need for more than £10m of planned capital investment in repairs and upgrades over the next three years, but it would also mean the loss of future income from the district heating service, creating an estimated £2.9m gap in the council’s medium-term financial plan.
Funding for the programme itself is also under pressure, with costs expected to exceed current budgets in 2025/26 and 2026/27. The report proposes covering any shortfall through the operational budget of the heating service rather than increasing the council’s base budget.
No final decision has yet been made on whether the network will be sold. If councillors agree the recommendations, the next stage will involve testing the market and assessing bids against the agreed criteria before any final transfer is approved.
The outcome will determine whether the city’s long-established heat network remains under council control or moves into private or partnership ownership, with implications for thousands of households and businesses connected to the system.
