SGN and Vital Energi launch joint venture for zero-carbon heat networks

Gas distribution company SGN and UK renewable energy solutions provider Vital Energi have agreed on a new 50:50 joint venture to create an energy services company (ESCO) that will own and operate low and zero-carbon heat networks.

SGN and Vital Energi launch joint venture for zero-carbon heat networks

It is estimated that around £30bn of investment into heat networks will be required by 2050 to meet the net-zero target

The ESCO will aim to provide affordable infrastructure for SGN’s existing land portfolio that enables the integration of low-carbon heat. This includes delivery of heat to developments planned by SGN’s property arm, SGN Place, while Vital Energi will use the joint venture to expand its business model into asset ownership.

SGN’s director of commercial services and investments Marcus Hunt said: “Heat networks are likely to play an increasing role in the delivery of UK heat in the context of net-zero. The creation of this joint venture with market-leading Vital Energi enables us to build a presence in this emerging market, delivering new heat infrastructure and supporting decarbonisation.”

One of the key objectives of the new joint venture is to supply new and existing residential, industrial and commercial facilities with low and zero-carbon heat. Already, two projects are underway in Scotland and the South East, with another 20 in the pipeline.

Representatives from more than 200 businesses, housing associations, local authorities and trade bodies are urging Ministers to ensure that the upcoming Heat and Buildings Strategy mobilises enough finance to address “major” barriers to decarbonisation.

The Coalition for the Energy Efficiency of Buildings (CEEB), which was established last year by the Green Finance Institute and now represents more than 200 organisations across the built environment value chain, has issued the call to action in a new report. CEEB members include Centrica, SSE and Worcester Bosch from the private sector, alongside ten local councils and a string of major financiers.

Entitled ‘financing zero-carbon heat: turning up the dial on investment’, the new report identifies a string of barriers to scaling up investment in low-carbon heat across the UK – particularly for domestic properties, which are responsible for two-thirds of annual emissions from the built environment.

According to the CEEB, some £65bn of investment is needed to ensure that all homes in the UK meet an Energy Performance Certificate (EPC) rating of ‘C’ or higher.

It is estimated that around £30bn of investment into heat networks will be required by 2050 to meet the net-zero target. The Climate Change Committee’s Sixth Carbon Budget recommendations suggest the UK should target 20% of UK heat demand through low-carbon heat networks by 2050. 

Vital Energi’s chief strategy officer Nick Gosling added: “We’re really excited to be extending our asset ownership portfolio and working alongside SGN on regeneration initiatives that will revolutionise the heat network market. Combining the resources, expertise and know-how of both organisations will allow us to play a major role in delivering the UK’s transition to low and zero-carbon heat.”

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Matt Mace

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