London needs to be more like Copenhagen

Bob FiddikTeam Leader – Sustainable

Development & Energy

19th March 2012

Why…Copenhagen?The 3 objectives of UK energy policy objectives :-

low carbon

secure, diverse

affordable

• 98% of city supplied via DH• 40% carbon reduction against

individual gas boilers• 35% CHP heat from waste or

biomass

• hot water - flexible energy carrier• plant – 36% gas, 31% multi-fuel,

21% coal/oil, 12% waste – all CHP

• DH heat 44% below cost of individual gas boiler

• Authority owned heat companies

A long, and frustrating tale

• Heat supply law passed• Local authorities to

undertake heat planning• Authorities given power to

oblige connections to DH or natural gas

• Must demonstrate economic advantage to consumer

• Ban on electric heating

Post oil-crises1979

North sea gas, energy

privatisation

• Marshall reports on potential of district heating/CHP

• 30% high density urban areas could be supplied via DH/CHP

• Recommend heat strategy & set up of “heat board” to oversee development

But district heating is costly...? Pay for CHP energy plant

But have some ready...and have to build new plant anyway

Need whole new infrastructure

Pay for heat exchangers...but similar to individual boiler cost

The “all electric” orthodox plan... Pay for these & untested CCS

Pay for these to be there but not do much

Upgrade these

Install lots of these

Do lots of this

But getting started is tough...Croydon drivers for town centre DH/CHP schemeCouncil•Helping regeneration happen•Improve environmental standard of existing 70s stock

Developers•Meet council’s Code Level 4 & BREEAM “Excellent” at lower cost

Occupants•Lower heat costs •Low carbon, no CRC (for corporates)

Commercial modellingPhase 1 new build + cluster of

existing public buildings

IRR = 10.8%

Full scheme all new build + 25% existing over 1,000 m2

IRR = 18%

Heat revenues

Construction phasing

new build

existing

Occupancy : use of heat

Phase energy plant investment

Recover capital investment via connection charges

ESCo mitigation

Operating costs follow heat demandFunding gap circa £3- 4 m : ESCo would need a

combination of ...•underwriting of income from phased development•Up-front capital contribution•access to low public sector borrowing rates

Occupancy : use of heat

Someone has to bear the riskConstraint Initial oversizing of energy centre &

heat pipes to supply full scheme

Heat charges must be no more than having own system

Must be lower than meeting targets via onsite measures

So what does the wish list look like...?Policy, regulation & taxation•Danish example is long-term stability & rational energy planning (ministry still employs “experts”) •UK constantly re-invents energy policy, complex market with complex carbon “tweaks” – politically unstable (e.g FITs, “Zero-Carbon”)

For DH/CHP address the heat off-take risk•Danish obligation to connect is most cost effective – but in UK?•Anchors – oblige public sector connections (but estates are shrinking)•Existing buildings - new Building Regulation obligation on boiler replacement•Loan funds at public sector rates – help make connections attractive•Supply side – taxation + incentives for all thermal plant to operate in CHP mode