The UK Green Investment Bank (GIB) and Equitix have committed to investing £10m for the expansion of a 3.5MW combined heat and power (CHP) plant and associated district heating scheme in Scotland.

The two parties have acquired Ignis Biomass, the owner and operator of the CHP plant that provides heat and power to the Pulteney Distillery and heat to local customers, including 200 domestic residences.

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An upgrade is planned for the plant’s heating infrastructure, in addition to expanding the district heating system to an additional 150 customers by March 2017.

The project also involves implementation of at least four new smaller-scale stand-alone CHP systems for major heat users in and around Wick, which is not currently able to connect to the existing network.

"This project has the dual benefit of producing greener energy, saving thousands of tonnes of carbon dioxide each year."

The district heating network supplies heat from a biomass-fuelled plant direct to customers through a network of pipes, providing significant cost savings and environmental benefits.

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Expansion of the project will reduce greenhouse gas emissions by an additional 3,000t of CO2 per annum.

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Scotland Office Minister Andrew Dunlop, said: "This project has the dual benefit of producing greener energy, saving thousands of tonnes of carbon dioxide each year, while also providing heat in a far more efficient and cost-effective way for customers in a remote part of Scotland.

"This is exactly the sort of scheme we need to see and is yet another contribution to creating a sustainable and affordable energy system for the UK."

Equitix-managed fund Energy Savings Investments has committed £4.9m to the project and an additional £5.1m of private capital has been mobilised from the Equitix Energy Efficiency Fund (EEEF).

UK GIB chair Lord Smith of Kelvin added: "While the UK has made good progress in developing new renewable energy generation to decarbonise our electricity production, much, much more remains to be done to improve how we heat our homes and businesses more effectively and sustainably.

"The district heating project in Wick has already shown other parts of the UK how it can be done and I am pleased that GIB’s investment will play a key role in extending its reach."