About this guidance
This guidance provides ratepayers and local authorities with information about non-domestic rates (NDR) heat networks relief. It applies to Wales only and does not replace any existing NDR legislation or any guidance on other reliefs.
Billing queries about the relief should be directed to the relevant local authority. Enquiries about this guidance and the related legislation should be sent to the Welsh Government at the following email address: LocalTaxationPolicy@gov.wales.
A range of other mandatory and discretionary NDR reliefs are also available to specific types of property or occupiers. Further information about NDR relief schemes can be found on our Business Wales webpages.
Introduction
The Welsh Government is committed to decarbonisation and net-zero goals. Heat networks relief has been introduced to help support the growth in the low-carbon area of this sector that is anticipated over the next decade.
Heat networks supply thermal energy from a central source to consumers, through a network of pipes. They vary considerably in their scale and use, from a common heating system in a building with multiple occupiers, to large standalone networks providing heat or power to many customers and buildings across a large area. The Welsh Government is providing full (100%) relief to non-domestic hereditaments which are used wholly or mainly as a heat network and supply thermal energy generated from low-carbon sources. These conditions are set out and defined in the Non-Domestic Rating (Heat Networks Relief) (Wales) Regulations 2024, and are explained in more detail in this guidance.
The relief is intended to support the development and growth of this sector, by helping to minimise the financial barriers to the establishment of networks. This is intended to help support the transition away from the use of fossil fuels and the decarbonisation of heat.
The relief is in place from 1 April 2024 and will be available up to and including 31 March 2035.
Eligibility for heat networks relief
How is eligibility for the relief determined?
A hereditament (unit of property with a rating assessment) on a local rating list in Wales is eligible for the relief if it is wholly or mainly used as a heat network which supplies thermal energy generated from a low-carbon source. Local authorities are responsible for NDR billing and the application of reliefs. The relevant local authority must be satisfied that these eligibility conditions have been met before they apply the relief.
Wholly or mainly used as a heat network
For the purposes of the relief, a heat network is a facility which supplies thermal energy from a central source to consumers, through a network of pipes, for the purposes of space heating, space cooling or domestic hot water. Networks wholly or mainly providing heat for a different purpose (such as an industrial process) are not eligible.
The hereditament as a whole must meet this definition. Heat networks relief is not available for part of a hereditament. Many heat networks form part of the services to a property used for a wider purpose and do not have a standalone rating assessment. Such properties are not eligible for the relief.
Heat networks which are run as separate businesses and constitute a non-domestic hereditament in their own right are eligible for the relief. Such networks avoid the need for individual boilers or electric heaters in every building they supply. They, therefore, have the potential to reduce bills and carbon emissions from heating. Heat networks are uniquely able to utilise large-scale renewable and recovered sources, such as heat from waste, rivers and mines.
This condition relates to thermal energy, not the purposes of generating electricity. As a consequence, hereditaments comprising power stations and a heat recovery and network system are not expected to qualify for the relief. If a heat recovery and network system taking heat from a power station is in a separate hereditament from the power station, then it may still qualify. A combined heat and power facility which generates more electricity than heat is not eligible for the relief.
Similar considerations apply where the heat is being taken from an incinerator or plant used to generate energy from waste. If the heat network forms part of the same hereditament as the incinerator or plant then, unless it has been designed specifically as a heat network, it is unlikely to meet this condition. Its primary purpose is more likely to be the incineration of waste or generation of power. If the heat network forms its own separate hereditament, then it may still qualify.
Heat generated from a low-carbon source
The relief will be applicable if, for the 12 months beginning with the chargeable day concerned, it appears to the local authority in whose are the hereditament is situated that the thermal energy supplied by the heat network will be generated from a low-carbon source. This is considered to be a source which is at least:
- 75% cogenerated heat
- 50% renewable heat
- 50% waste heat
- 75% a combination of the above
Thermal energy generated from a renewable source is considered to be mainly or exclusively from:
- biomass
- biofuels
- biogas
- fuel cells
- photovoltaics
- water (including waves and tides)
- wind
- solar
- geothermal
- heat from air, wind or the ground
Waste heat includes thermal energy unavoidably generated as a by-product of another process which would be wasted if not used for the purposes of a heat network. This may include heat generated through the incineration of waste. Hereditaments which are primarily used for the incineration of waste would not, however, meet the condition of being wholly or mainly used as a heat network.
Cogenerated heat is thermal energy which is produced at the same time and in the same process as electrical or mechanical energy. It could be produced from combined heat and power sources, but the hereditament would also have to be wholly or mainly used as a heat network. For example, hereditaments used primarily for the purpose of generating and selling electricity, with cogeneration of thermal energy as a by-product, would not meet that condition.
This definition of a low-carbon source is based on parameters which the Welsh Government understands are widely recognised within the heat networks sector and is used for other purposes (e.g. the Heat Networks Investment Project). It is, therefore, expected that operators of eligible heat networks will be able to understand and reliably evidence that they meet this definition.
Administration of heat networks relief
How is the relief provided?
Local authorities will administer the relief, where they are satisfied that the eligibility conditions have been met. It is recommended that the relevant local authority should seek a declaration from the ratepayer to confirm that they meet the low-carbon condition. For this reason, it is anticipated that ratepayers will need to apply for this relief and will subsequently be asked to renew their declaration annually.
Heat networks relief will be applied before any other full or partial relief a ratepayer may be eligible for, with the exception of improvement relief (which is applied to the calculation of liability in a different way from other reliefs).
Local authorities will be asked to identify the total amount of relief provided in their NDR Returns (NDR1 and NDR3).
How will ratepayers benefit from relief?
Where a hereditament meets the eligibility conditions and continues to do so, the ratepayer will benefit from full relief from the chargeable amount of NDR until 31 March 2035.