Heat Network Transition Study

Completed

Other Cross-Cutting Technologies or Research(Energy system analysis)

Applied Research and Development

SOCIAL SCIENCES (Business and Management Studies)

Not Cross-cutting

Project Contact
SGN

Network Innovation Allowance

Ofgem

01 October 2024

28 February 2025

ENA months

£260,000

Energy

South East

Network Innovation Allowance

Project Contact, SGN

Project Contact, SGN - Southern England

This Heat Network Transitional Study looks to offer a blueprint of why gas networks might be best placed to deliver heat networks using a technical assessment of how assets could be utilised or repurposed to facilitate future role out. A detailed report will be shared across the industry to stimulate debate and discussion as well as a launch event that will bring together key stakeholders, including DESNZ, to ensure this work gets the required exposure across the industry. This study is divided into two phases that will be completed in parallel:Phase 1A: Commercial WorkstreamEstablish the UK Governments expectations to define heat network objectivesSummarise the current UK heat network market landscape including DESNZ Zoning and Energy Act 2023Develop business model optionsEngage with agreed stakeholders (to be agreed between the Parties during the Project, with SGN ensuring appropriate approaches and confidentiality agreements are in place where required and preferred by such Stakeholders)Risk evaluation of zoningEvaluation of heat network business modelsPhase 1B: Technical WorkstreamEstablish the factual and counterfactual scenarios of interestIdentify customer archetypes and assetsCreate design conceptsUndergo a technical feasibility assessmentDeliver an initial cost-benefit analysisProduce a final report with summary insights across both workstreamsThe outputs of the Heat Networks Transition Study will apply to all Heat Networks across Great Britain. The project objectives are to:Analyse market outlook and challenges to investmentProduce strategic insights on the current regulatory framework and market outlook for heat networks based on the latest policy and industry developments. Workshops will be held to identify the key challenges and barriers to investment in heat networks, which will inform the list of criteria we develop to evaluate the suitability of different business models.Assess potential business models.Design a tailored assessment framework and use this to investigate the suitability of potential business models to scaling up opportunity for the deployment of UK heat networks. Profiles and case studies for each business model will be developed, drawing on lessons learned from the use of these models in other parts of the UK energy system and international heat network markets.Support stakeholder engagement. To capture the breadth of challenges in attracting investment in this emerging market and the needs of different groups, this project will conduct a soft market engagement with industry stakeholders including government, investors, and developers, building duty holders and customers. The views and perspectives on current barriers and potential business models will be tested, enhancing the insights captured in the report.Deliver report on insights.The analysis on the market outlook, potential business models and stakeholder insights will be brought together in a detailed report. The advisor will work closely with the SGN team at each stage to reflect feedback and deliver a completing piece of thought leadership on how best to attract solutions into heat networks in the UK.

The objective of this Project is to help inform (i) GDNs views on the investability of the heat networks business model proposed by DESNZ and Ofgem, in particular on the appropriateness of the proposed use of zoning and adaptations or alternatives to zoning which might be more appropriate; and (ii) GDNs understanding of the prospects for repurposing selected assets on its gas networks to form part of heat networks.

09/04/25