Decision details

      i.         Since June 2023 officers have been working with experts and academic partners to develop an Outline Business Case for a Cambridge City Centre Heat Network.

    ii.         The Detailed Project Development (DPD) has now proposed a network using air source and river source heat pumps supported by a transition to electric boilers from gas boilers to generate energy.

   iii.         As part of this work, a Memorandum of Agreement was jointly signed with the County, and 19 Academic institutions with significant heating demand in the city centre. Connections to many of these partner heat loads forms the basis of a Minimum Viable Product identified for delivery at a cost of c. £121m.

  iv.         Compared to business as usual using gas boilers, the proposed district heating network could produce a 93% carbon emissions reduction over a 40-year project lifetime. A heat network would play a significant role in reducing the Council’s emissions as well as key anchor institutions in the centre of Cambridge.

    v.         Current modelling suggests that this communal approach to decarbonisation is more cost effective than individual institutional approaches by c.15-20% over 40 years. From the council perspective, it has been calculated that there is a saving of c £1m capital cost if DH is used rather than trying to decarbonise four strategic assets individually.

  vi.         The estimated cost of the £121m is made up of: connection costs of £70.5m (£75m as inflated in the Financial Model). This is split £4.1m to Council and £66.4m other customers); grant of £19.7m; on-lending by the council of £18.4m; and equity funding of £7.9m (£4m council and £3.9 from other investors).

 vii.         To date, 19 of the projects 20 Partners have expressed an in-principal support as customers, subject to continued review and viability. Seven Academic Partners have expressed interest in potential joint investment with the Council.

viii.         The DPD confirms that a council led Joint Venture (51% council ownership) offers the best outcomes for all parties. Alternatives considered and rejected are summarised in section 3.4. 3

  ix.         A Council led Joint Venture will mean the council shares construction, delivery and reputational risk with established academic partners; ensures a small return on investment; and ensures targeting a low enough connection charge to incentivise all partners to fast-track decarbonisation.

    x.         Current modelling for a Council led JV shows a respectable post-tax nominal equity IRR of 12% assuming c. £20m of grant is received from the Green Heat network Fund.

  xi.         This report outlines the next steps, which would be to develop the strategic objectives for a council led joint (51% ownership) venture to a market led scheme, applying for grant funding and progress procurement to identify and appoint a specialist delivery and management contractor.

 xii.         Officers would then produce a further report for Cabinet and Full Council no later than March 2028 outlining, if officers are minded to recommend, the final proposals and development costs, and to seek approval to appoint a long-term contractor and operator for a City Centre District Heating Network which can be expanded over time. This will be subject to scrutiny from a Shadow Authority if Local Government Review (LGR) proceeds.

Cabinet unanimously resolved to:

      i.         Support the next steps in this transformative project to decarbonise a significant portfolio of Council and Academic estates in the city centre of Cambridge.

    ii.         Support the Draw down of £0.6m from the Council’s Climate Change Fund to fund pre-commercialisation activities.

   iii.         Delegate authority to the Assistant Director, Development in consultation with the Director of Economy & Place and the Chief Finance Officer to submit a bid to the Green Heat Network Fund (GHNF) in 2026 to bring forward a City Centre Heat Network. This will require the Council to:

·    enter into an updated Memorandum of Agreement with Academic Partners and County Council,

·    appoint a Specialist delivery Contractor to undertake design and commercialisation plans.

Cabinet unanimously noted to:

      i.         Subject to the additional project development a final decision on whether to proceed would be brought to Cabinet and then to Full Council no later than March 2028

    ii.         Connecting a heat network to Council assets would enable budgetary savings and carbon benefits for the Civic Quarter project compared to the business case estimates presented to Cabinet in September 2025.

   iii.         At this outline stage the estimated project cost could be up to £121m, with the council share of £4m equity, £4.2m connection fees and a £18.4m loan at a rate compliant with Subsidy control.

  iv.         With planned Local Government Reorganisation (LGR), and conditions arising from a Structural Changes Order (SCO), it is recognised that this final decision to proceed or not will need scrutiny and agreement from the Shadow Authority.

    v.         Feedback to Cabinet from the Performance, Assets and Strategy Overview and Scrutiny Committee meeting of 3rd March 2026 will be issued separately.