The 50:50 joint venture will create an energy services company (ESCO) to provide low-carbon infrastructure to SGN’s existing land portfolio.
SGN is looking to develop alternative heat solutions alongside its core gas distribution business and expand into the growing district heating market, recognising the future of heat is likely to include a mix of technological solutions and energy sources. Vital Energi is seeking to expand into asset ownership opportunities to complement its core design, build and operations businesses.
It is estimated that the heat network market requires approximately £30bn of investment by 2050 to meet the UK government’s net zero targets, and the decarbonisation of heat has been highlighted as a particular challenge where heat networks can offer a solution. The Climate Change Committee’s Sixth Carbon Budget suggested that the UK should target 20% of UK heat demand through low-carbon heat networks by 2050.
SGN and Vital have plans to develop redundant sites owned by SGN and others, on the back of Vital’s existing market presence. The objective is to supply new and existing residential, industrial and commercial facilities. Development activity is already under way for two projects in Scotland and southeast England, with another 20 in the pipeline.
SGN 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.”
Vital Energi chief strategy officer Nick Gosling said: “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.”