ppp framework for pvt companies in india

7/27/2019 ppp framework for pvt companies in india

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Local Authorities and

Renewable Energy____________________

A Framework for

Public Private Partnerships

Department of the Environment, Heritage and Local Government

First published February, 2003.

Revised May, 2004.

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Table of ContentsIntroduction....................................................................................................................4

Background ....................................................................................................................6

National Development Plan .......................................................................................6

Economic Development.............................................................................................6

Importance of Renewable Energy..............................................................................6Local Governments Responsibilities ........................................................................7

Public Private Partnerships ............................................................................................9

Public Service Contracts ................................................................................................9

Design and Build (DB) ..............................................................................................9

Design, Build and Operate (DBO) ...........................................................................10

Operation and Maintenance Contract (O&M) .........................................................10

Private Finance Options...............................................................................................10

Design, Build, Operate and Finance (DBOF) / Concessions...................................10

Joint Ventures ..........................................................................................................11

Stages of development of a PPP project in the Renewable Energy Sector..................12

Policy Framework for PPP's and Guidance Notes 12Interim Guidelines from Department of Finance.....................................................14

Framework for Public Private Partnerships..15

State Authorities (PPP Arrangements) Act, 200215

National Development Finance Agency Act, 2002 15

Circular IPPP 4/03 of 19 December, 2003. 16

Project Identification.. 17

Option Appraisal 17

Statutory Processes ..................................................................................................18

Procurement .............................................................................................................18

Construction.............................................................................................................19

Operation..................................................................................................................19

Review .....................................................................................................................19

General Information on the Renewable Energy Sector ...............................................21

Completed studies ....................................................................................................21

Pre-feasibility study software...................................................................................21

Funding of feasibility studies...................................................................................21

Capital Funding........................................................................................................21

Electricity Market ....................................................................................................22

Tax Incentives ..........................................................................................................23

Licences and Authorisations ....................................................................................23

Categories of Renewable Energy .................................................................................24Onshore Wind Energy..............................................................................................24

Offshore Wind Energy.............................................................................................25

Small Hydro .............................................................................................................25

Combined Heat & Power (CHP)..............................................................................25

Biomass....................................................................................................................26

Ambient Heat (Heat Pumps) ....................................................................................26

Geothermal...............................................................................................................27

Solar Energy.............................................................................................................27

Ocean Energy...........................................................................................................28

Community Schemes ...............................................................................................28

Appendix A Possible Sources of Funding ................................................................30Appendix B - Sources of Information..........................................................................33

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Appendix C Local Authority PPP Seed Fund- Review of Alternative Energy Projects- January,

2004..............................................................................................................................37

Appendix D Procurement Procedures.......................................................................50

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Introduction

This document is intended to provide both general information and guidance to local authorities,

who are considering implementing a Public Private Partnership project in the Renewable Energy

sector. In this document, the terms sustainable energy and renewable energy are taken as being

interchangeable.

The document aims to guide local authorities through the various stages of a project, from the initial

assessment through to the contract stage. It is not meant to be a comprehensive guide to the

development of sustainable or renewable energy projects but, as stated above, a guide to the

development of such projects via the PPP route.

Whilst a majority of projects are likely to focus on the conversion of kinetic energy to electricity,

other forms of energy projects may be eligible for funding, e.g. ambient heat (heat pumps) and

geothermal energy.

Whilst all efforts have been made to ensure that the information provided within this document is

up to date, it is important for local authorities to assure themselves of the current position,

especially where the commercial viability of the project is dependent on capital grants. In such

cases, the authorities should seek clarification from the relevant funding body on the possibilities of

funding provision.

Throughout this document reference is made to the set of guidance notes produced by

PricewaterhouseCoopers (PwC) et al, contained in A Policy Framework for Public Private

Partnerships: AReport to the Department of the Environment and Local Government. This

document should, therefore, be read in conjunction with the PwC guidance notes, and with the

Framework for Public Private Partnerships, issued by the Department of Finance. More recently

the Department of Finance issued Interim Guidelines for the Provision of Infrastructure and

Capital through Public Private Partnerships: Procedures for the Assessment, Approval, Audit and

Procurement of Projects July, 2003 and IPPP Section issued Circular IPPP 4/03 of 19 December,

2003 to local authorities with a Policy Framework Document (PFD) which seeks to bring together

the various guidelines and instructions concerning the appraisal, approval, management and review

of PPP projects insofar as they relate to local government. It is a comprehensive two part document-

Part 1 relates to the Evolution of PPP Policy in Ireland and Part 2 to Project Implementation in the

Local Government Sector- available on Departments websitewww.environ.ie

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IPPP Section


May, 2004.

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Background

National Development Plan

The National Development Plan 2000-2006 recognises the importance of the Public Private

Partnership approach in delivering infrastructure. In its November 2001 Framework for Public

Private Partnerships, the Government restated its commitment to developing the PPP approach

for the provision of public infrastructure and services. This commitment has been endorsed by a

number of cross-sectoral organisations, including the NESC, and the PPP principle is reiterated in

the Programme for Prosperity and Fairness and its successor Sustaining Progress. Whilst most of

the PPP projects envisaged under the NDP will be for major infrastructural requirements covered by

mainstream investment programmes, there is considerable potential for developing PPPs in other

areas, including alternative energy generation, for which there is no specific NDP investmentprogramme.

Economic Development

Irelands growing economy and increasing population have resulted in increased demands on

energy, which in turn have increased pressure on the environment and natural resources. In 1998

Ireland ratified the Amsterdam treaty, which introduced the principle of sustainable development

within the European Union. The regulations imposed by the Treaty are not merely aspirational, but

a legal requirement of Member States. In May 2002, Ireland ratified the Kyoto Protocol on Climate

Change. As a result of this and subsequently agreed EU arrangements for meeting our targets

collectively, Ireland is now legally bound to limit our greenhouse gas emissions to 113% of our

1990 levels by the period 2008 - 2012. Latest figures (2002) show emissions at 129%. Meeting our

Kyoto commitment, while still maintaining a competitive position, is one of the main environmental

challenges we face. The Government acknowledges the difficulties in achieving this commitment

in the context of a rapidly developing economy. It also acknowledges that economic and social

development should not be detrimental to environmental quality. Local authorities can make a

significant contribution to achieving the twin goals of sustainable economic development whilst

helping to meet our international commitment to the reduction of greenhouse gases. In the energy

sector, a key priority under the NDP is to identify those areas of expenditure that will assist Ireland

in complying with its obligations under the Kyoto Protocol.

Importance of Renewable Energy

Renewable Energy (RE) is energy from sources which are inexhaustible (such as wind, tidal, solar,

hydro, etc.) or which are replenishable at or about their rate of consumption (such as forests and

other forms of biomass). This contrasts with energy from fossil fuel sources that cannot be

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replenished when consumed, and hence will eventually run out. Renewables can therefore help to

ensure security of energy supply and contribute to price stability. Renewables have the added

advantage of being more environmentally friendly than fossil fuels, in that their harnessing

produces little or no net greenhouse gas emissions.

Ireland has one of the lowest production rates for renewable energy in the EU, at about 2% of our

total consumption, compared with an EU average of 6%. On the other hand, Ireland has one of the

most favourable wind energy resources in the EU. Up to 2001, however, Ireland only produced

0.9% of the total EU wind energy generation compared to Denmarks 16.6% of total production.

Economic growth and energy consumption are positively related and it is difficult to de-couple

these components. Future economic development will be restricted unless we can move energy

production away from non-renewable sources, such as fossil fuels, to more sustainable production

methods. Every region in Ireland has the potential to take advantage of renewable energy

generation and reap the accompanying environmental rewards, by utilising one or more of the

available technologies. Properly harnessed, renewable energy sources could practicably supply a

quarter of Irelands energy requirements by 2010.

Local Governments Responsibilities

Energy consumption is unavoidable. It is fundamental to all sectors of the economy. Irelands

isolation from European energy infrastructure increases the need for efficient energy usage and the

development of indigenous renewable energy resources to the maximum level possible. This has to

be done while respecting the need for that development to be sustainable.

Local Government, because of its position in society, has a major role in promoting and working

towards sustainable development. This means that local authorities should not only look into

opportunities for energy generation from renewable resources, but also into ways of improving the

efficiency of energy usage within their own facilities. Therefore, as a precursor to the development

of projects, local authorities should undertake an energy audit of their own operations highlighting,

for example, current usage, possible areas of excessive consumption, potential untapped resources,

etc. This could be done in conjunction with the local Energy Agency1, or via an authority appointed

Energy Officer.

1 As an example, Galway Energy Agency, as part of its Energy Management Services promotion, offers Public

Buildings energy surveys (including Local Authority Water Pumping Stations).

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Increased education is one way of improving awareness of RE and the opportunities that exist in the

sector. Some educational institutions provide training on areas specific to renewable and

sustainable issues, including part time, non-vocational evening courses. Tipperary Institute

(http://tippinst.ie/certrenewenergy.htm), for example, offers the Certificate in Renewable Energy,

covering topics such as RE technologies, Policy & Legislation, Planning, Consultation and Project

Finance.

Any local authority interested in availing of such training should check locally to see what suitable

courses may be available.

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Public Private Partnerships

The State Authorities (Public Private Partnership Arrangements) Act, which became law on 21st

March 2002, confirms the powers of local authorities to enter into joint venture Public Private

Partnership arrangements with the private sector. A Public Private Partnership (PPP) is an

arrangement between the public and private sector for the provision of infrastructure or services,

which would otherwise have been advanced through the traditional procurement route. Under the

PPP model, the private sector contractors become long-term providers of a service rather than up-

front asset builders. In a PPP arrangement, the private sector is responsible for not only

constructing the asset, but also for the long-term operation and maintenance, and possibly financing,

of the asset. Fundamental to the development of a successful partnership is agreement on the long-

term objectives and contractual responsibilities of each of the partners and also the allocation of riskto the party best able to manage that specific risk. This arrangement leaves the local authorities free

to plan resources and monitor services, rather than directly provide them. To date 105 projects have

been approved to proceed under a PPP arrangement and are at different stages of development.

There are a further 74 projects which have been identified as potential PPP projects.

More detail on Government policy on the use of PPPs can be found in the Framework for Public

Private Partnerships, issued in November 2001 by the Department of Finance- see national PPP

websitewww.ppp.gov.ie

Public Service Contracts

A wide range of contractual forms may be adopted by the public sector in establishing partnerships

with the private sector, ranging from those where there is a great deal of public sector involvement

to those where public authority involvement is very limited.

Design and Build (DB)

Although not strictly a form of PPP, DB contracts have a number of features in common with them.

Under this type of contract, the private sector is contracted to design and build an asset. On

completion of the construction phase, the asset is handed over to the contracting authorities, who

operate and maintain the plant throughout its life. However, this form of contract may not

maximise the value for money potential, as the operational and maintenance risks remain with the

local authorities, as would any risk of latent defects in design or construction. This type of

arrangement is of limited application, as the main benefits from PPP projects arise from designing

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and constructing on the basis of whole life costings, combined with operating a long-term service

contract. DB contracts do not involve the full ambit of risk transfer that is anticipated in a PPP

project. As such, this is generally the least desirable type of arrangement from a PPP viewpoint

and would appear to be the least suitable for projects in the renewable energy sector.

Design, Build and Operate (DBO)

Under this type of contract, the private sector will not only design and build the asset but will

undertake to operate and maintain the asset over an agreed period, generally not less than fifteen,

and up to thirty years. Here the emphasis is on the provision and delivery of a service by the private

sector, which bears the additional risks of providing the service. Cost efficiencies (over traditional

contracts) may be obtained through a more appropriate allocation of risk between the parties, the

use of a single contract based on whole life costing, the encouragement of innovation, and

enhanced competition. The asset, as with a DB contract, remains in public ownership with

responsibility for the operation and maintenance returning to the local authorities after expiry of the

contract period, although the option to extend the operations and maintenance contract may exist.

A Public Private Partnership DBO contract is the type most commonly used for the provision of

assets and services covered by the Water Services Investment Programme.

Operation and Maintenance Contract (O&M)

These are contracts awarded to the private sector for the operation and maintenance of a public

asset, which formerly had been operated and maintained by the public sector. Here the emphasis is

entirely on the provision of a service and the associated risks are transferred to the private sector.

O+M contracts would seem unlikely to arise in the renewable energy sector, because of the limited

amount of existing infrastructure owned or operated by local authorities. Where the infrastructure

does exist, the opportunity may arise to group a number of projects under one operational contract.

Private Finance Options

Design, Build, Operate and Finance (DBOF) / Concessions

These forms of contract differ from a DBO contract in that the private sector not only designs,

constructs, operates and maintains the asset but also finances the project from their own resources.

In a DBOF contract, the private sector recovers the investment out of regular payments from the

public sector over the operational period. Concession contracts are similar in form to DBOFs,

except that the private sector recovers some or all of its costs from direct user charges. For projects

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outside the main investment programmes and where public finance is limited or unavailable, this

type of contract may be the most favoured or, indeed, the only viable option.

Joint Ventures

An effective approach to PPP for local authorities, other than through the award of Public Sector

Contracts, is through the formation of Joint Venture arrangements with a private company or

companies. Under the State Authorities (Public Private Partnership Arrangements) Act, 2002, local

authorities and certain other public bodies may enter into such arrangements for advancing a PPP

project, subject to the approval of the Minister for the Environment, Heritage and Local

Government.

It should be borne in mind, however, that this is not a vehicle for avoiding public procurement rules.

In most cases the selection of a suitable private sector partner will be by way of public competition.

Where this is not possible, it should still be the case that any company having been set up by a

public body and in receipt of public funds would, in itself, be subject to public procurement law.

IPPP Section in co-operation with the Department of Enterprise, Trade and Employment,

Department of Finance, Fingal County Council and Local Government Finance Section has recently

produced Technical Note: 4 Guidance on PPP Joint Venture Companies- Guidance on the

adoption of a Joint Venture Company approach for a Public Private Partnership in Ireland. The

purpose of the document is to set out the relevant issues for a local authority in establishing a Joint

Venture company- see Joint Venture Process Flowchart on page 19 of document.

The Joint Venture Guidance document is available on the Departments websitewww.environ.ie

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Stages of development of a PPP project in the Renewable Energy Sector

There are a number of important documents with which State Authorities or those wishing to

advance a project through a Public Private Partnership require to be familiar. These include:-

- Policy Framework for PPPs and 15 Guidance Notes issued by DOEHLG 14

April, 2000.

- Framework for PPPs agreed by Social Partners- 21 May, 2001.

- State Authorities (PPP Arrangements) Act, 2002.

- National Development Finance Agency Act, 2002.

- Interim Guidelines on PPPs issued by Department of Finance 7 July, 2003.

- Circular IPPP 4/03 of 19 December, 2003 regarding The policy framework for the development

of Public Private Partnerships within local government and accompanying comprehensive Policy

Framework Document- Part 2 of this PFD related to Project Implementation in the Local

Government Sector.

- Technical Note 4: Guidance on PPP Joint Venture Companies- January, 2004.

Policy Framework for PPPs and Guidance Notes- 14 April, 2000.

This Framework and accompanying Guidance Notes was prepared by a team led by

PricewaterhouseCoopers . While the Framework relates to the advancement of PPP projects in the

roads, water and waste sectors, the guidance provided is in most cases applicable to all sectors

including Renewable Energy.

As part of the Guidance, a PPP Route Map was developed which outlines the steps required for a

PPP project. These are:-

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Project Identification.

Assessment of PPP Suitability.

Project Appraisal.

PPP Assessment.

Statutory Process Assessment.

Procurement Procedure Selection.

Project management.

Stakeholder Consultation.

Sharing of Statutory process Risk between Public Authority and Private Sector- Elements of

Statutory Process Risk likely to be retained by Public Sector would be Preparation of Contract

Documentation, Tendering Process and Contract Management of Planning Phase- Elements likely

to be transferred to Private Sector are Contract and Performance Management of Construction and

Operation.

The Policy Framework referred to above comprises a series of 15 individual Guidance Notes

dealing with the following topics and which should be consulted by anyone engaging in a PPP

project, i.e.,

Introduction to Public Private Partnerships.

Financial Context.

Legal Context.

Public Private Partnership Assessment.

Statutory Process Assessment.

Procurement Procedure Selection.

Project Management.

Stakeholder Consultation.

Procurement Management.

Output Specifications.

Risk Assessment.

Payment Mechanisms.

Key Contractual Issues.

Accounting Treatment.

Contract and Performance Management.

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Interim Guidelines for the Provision of Infrastructure and Capital Investments through Public

Private Partnerships: Procedures for the Assessment, Approval, Audit and Procurement of

Projects- Department of Finance, July, 2003.

These Guidelines are very important. Appendix 1 of the Guidelines integrates PPP Procurement

steps into the Guidelines on the Appraisal of Capital Expenditure Projects.

The Capital Expenditure Appraisal Guidelines view projects from viewpoint of Appraisal Stage,

Planning Stage, Implementation Stage and Post Project Review.

The Interim Guidelines view projects as having a number of streams- Project Assessment stream,

Approval stream and Audit stream. These Guidelines impose additional requirements over and

above those which had been in place.

For each PPP project, the Interim Guidelines require that the following steps should be taken:-

A1 Preliminary Appraisal.

A2 NDFA assistance.

A3 PPP Assessment.

B1 Approval to proceed and approval to appoint client advisors.

C1 Accountable Officer (Secretary General) appoints Process Auditor.

A4 Public Sector Benchmark.

B2 Affordability Cap

C2 PSB and Affordability Cap recorded by Sanctioning Authority.

A5 Procurement Process.

A6 Tender Evaluation.A7 Value for Money Comparison.

A8 Contract Close

Post Project Review.

One of the significant controls built in is that if the Affordability Cap is exceeded at any point

during the procurement process, the Sponsoring Agency must immediately revert back to the

Sanctioning Authority.

The Interim Guidelines expand on each of the above steps in more detail. The most significant

additional requirements imposed by these Guidelines for PPP projects are:-

For all PPP projects (or grouped projects) with a capital value of 20m or more:-

The appointment of a Process Auditor (PA) to certify that proper procedures have been

followed throughout the project. The PA will be appointed by and report to the Secretary

General of the DOEHLG.

For all PPP projects:-

The appointment of a Project Board to manage the project.

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The undertaking of a Public Sector Benchmark (PSB) to determine the estimated cost of

carrying out the project by traditional means.

The preparation by the DOEHLG of an Affordability Cap for each project based on the PSB.

If at any time the estimated cost of the project increases beyond the Affordability Cap, the

local authority concerned muse immediately seek Departmental approval before proceeding

further. The carrying out of a formal post-project review following completion of the construction

of the works.

Framework for Public Private Partnerships- Working Together for Quality Public Services- May,

2001.

This is also an important document having been endorsed by IBEC, ICTU, CIF, the Department of

Finance and the Departments and Agencies engaged in the PPP process.

The principal features of the Framework include clear statements of the scope (section 2), principles

(section 4) and goals (section 5) of the PPP programme, the identification of key projectimplementation issues (section 9) as well as a clear recognition of the critical role of social

partnership and stakeholder consultation (section 7) in underpinning the success of PPPs.

State Authorities (Public Private Partnership Arrangements) Act, 2002.

This legislation which became operative on 21 March, 2002 was introduced to remove any

uncertainties regarding the powers of State Authorities, including local authorities, to enter into PPP

arrangements.

National Development Finance Agency Act, 2002.

The National Development Finance Agency (NDFA) was established on 1 January, 2003 under the

National Development Finance Agency Act, 2002. The main functions of the NDFA are to:-

Providing advice to State Authorities, including local authorities, in order to assist in

the evaluation of financial risks and costs of infrastructure projects and to facilitate

them in availing of the best financial package for each project. The NDFA will also

advise on project insurance issues.

Assessing optimal financing for major infrastructure projects as set out in the

National Development Plan and other infrastructure priorities.

Raising finance for projects (including PPP projects) where this could be more cost-

effective than private funding and where, in the case of conventionally procured

capital projects, there are clear financial benefits in using Agency funding overExchequer funding; and

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Creating special-purpose companies that can raise project finance with guarantees,

raise revenues from projects with user-charging and receive land or other property

assigned or transferred from local authorities for use in financing infrastructure

projects.

The legislation establishing the NDFA places a number of obligations on local authorities. In

instructions issued by the Department of Finance these obligations are to be seen as follows:-

[i] for all major projects and grouped projects with capital costs estimated to exceed 20

million, to seek the advice of the Agency on how best to finance the project as soon

as practicable before commencement of the project,

[ii] for projects where local authorities intend to appoint financial advisers, to ask the

NDFA to act as financial adviser. Where the NDFA agrees to act as financial

adviser to a project they would expect to be represented on the Project Board and to

have access to all relevant correspondence,

[iii] for projects involving the use of private finance, to provide the NDFA with the

opportunity at an early stage of reviewing the financing options, including where

appropriate providing the funding itself. In this regard local authorities should take

care in framing the contract conditions forprojects to ensure that sufficient

flexibility exists to allow for NDFA involvement at any stage of the project.

Circular IPPP 4/03 of 19 December, 2003- The policy framework for the development of Public

Private Partnerships within local government.

This Circular was accompanied by a comprehensive two part Policy Framework Document (PFD).

Part 2 of the PFD is relevant in the context of this Framework as it deals with Project

Implementation in the Local Government Sector,

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Indeed the Project Implementation Guidance is consistent with the Guidance Notes referred to

above and the Interim Guidelines. It would again be a useful document for anyone using the PPP

procurement route. The following chapters contain detailed Project Implementation guidance, i.e.,

Chapter 3- Project Identification

Chapter 4- Option Appraisal.

Chapter 5- Statutory Process (and Pre-Procurement).

Chapter 6- The Procurement Procedure.

Chapter 7- Construction and Operation.

Chapter 8- Review of PPP Process.

Project Identification

The local authority may either identify a need that can be satisfied from local resources or

alternatively identify a local resource that has the potential to be commercially developed. Once

identified, an initial assessment is made of the project's commercial viability and its suitability for

procurement as a Public Private Partnership. This can be done by comparing the characteristics of

the proposed project with those of successful Public Private Partnership projects.

Presently there is no mainstream investment programme for renewable energy projects so funding

will most likely be a key issue, and more information on possible sources of funding can be seen in

Appendix A.

PwC Guidance Note No.1 Introduction to PPP and Chapter 3 of Project Implementation in the Local Government

Sector.

Option Appraisal

A feasibility study may be undertaken, either by the authority themselves or more likely by an

independent consultant employed by them, to determine the viability of the project. In addition, a

PPP Assessment should be carried out which should consider the following issues;

- the potential for improved value for money in pursuing the project as a PPP,

- the most appropriate form of PPP, if any,

- the most appropriate allocation of risk between the parties,

- the procurement route, and,

- any other relevant matters.

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The various risks associated with the project, including statutory process risk, should be allocated to

the party best able to manage that risk.

PwC Guidance Note No. 4 Public Private Partnership Assessment

PwC Guidance Note No. 11 Risk Assessment

Chapter 4 of Project Implementation in the Local Government Sector

Statutory Processes

Generally, the contracting authorities will perform the statutory processes, but these could be shared

between the parties or even transferred entirely to the private sector, if considered the most cost-

effective option. Unless the contracting authorities are transferring some of the statutory process

risks to the private sector, the contracting authorities may have to ensure that the necessary statutory

approvals are in place before tenders are invited.

PwC Guidance Note No. 5 Statutory Process Assessment and Chapter 5 of Project Implementation in the Local

Government Sector.

Procurement

If it is decided to proceed via the PPP route, the Clients Representative (CR) 2 will prepare the

contract documents, such as the Project Agreement, Employer's Requirements, etc., on behalf of the

contracting authorities, and also advise on the procurement and assist in evaluating the bids

received.

Procurement of PPP projects tends to be more complex than that carried out by more traditional

methods. The choice of procedure will be dependent on the nature, size and complexity of the

project. Most PPP projects will be of a size that requires that they comply with EU Procurement

Regulations. The procedure will depend on the nature of the project, but it is likely to be either the

restricted or in very limited circumstances the negotiated process or competitive dialogue which is a

new procedure provided for in the recently amended and consolidated Procurement Directive.

In the case of the restricted procedure, a two-stage process, involving the pre-qualification stage and

invitation to tender, is used, with the addition of a third stage for the negotiated procedure, e.g.:

(i) Invitations to submit expressions of interest and pre-qualification,

(ii) Invitation to tender, assessment of tenders and selection of the preferred bidder, and

2The Clients Representative, acting as the lead advisor in a project, is normally a technical advisor with extensivePPP experience who may call on other expert advice (including the Contracting Authority's legal and financial

advisors) as required. The skills required by the Clients Representative to successfully develop a PPP project depend

on the nature and scale of the project.

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(iii) Negotiations between LA and the preferred bidder on final contract terms.

More information on Procurement procedures can be found in Appendix D.

PwC Guidance Note No. 6 Procurement Procedure SelectionPwC Guidance Note No. 9 Procurement Management

PwC Guidance Note No. 10 Output Specifications

PwC Guidance Note No. 12 Payment Mechanism

PwC Guidance Note No. 13 Key Contractual Issues

Chapter 6 of Project Implementation in the Local Government Sector.

Construction

The PPP contractor has responsibility for the construction and commissioning of the asset. The

contracting authority, acting in a more regulatory capacity, maintains a management and monitoring

role during the construction period, with the assistance of the Clients Representative. For

renewable energy electricity projects, a link to the national grid is almost always necessary.

Negotiations for connecting to the grid can be a long process and this should be undertaken at the

earliest stage possible, even in parallel with the other statutory processes. Issues may arise, for

example, in relation to distribution, transmission and metering. Further information on grid

connection issues can be found in the publications Guide to the Process for Connection to the

ESBs Distribution System, available on www.cer.ie/cer0213.pdf andProcess for Connection of

a Power Station to ESBs Transmission System, available from [email protected].

PwC Guidance Note No. 15 Contract and Performance Management and Chapter 7 of Project Implementation in the

Local Government Sector.

Operation

In all but DB contracts, the operation and maintenance of the asset is the responsibility of the PPP

contractor with the contracting authorities maintaining a monitoring role. After the expiry of the

contract period, responsibility for the operation and maintenance of the asset will normally return to

the contracting authorities. There may be an option to extend or renew the period of the operation

and maintenance contract.

PwC Guidance Note No. 15 Contract and Performance Management and Chapter 7 of Project Implementation in the

Local Government Sector.

Review

A review of a project should be undertaken within six months of the commissioning of the works.

This review should focus on the management of the process, and whether the project was delivered

in a timely, efficient and cost effective manner. It will not be possible to determine the overall

economic success or otherwise of the project at this stage but details of the cost breakdown for the

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planning and construction stages should be provided. There is also the need for ongoing reporting

on the operational performance by the PPP contractor. Post Project Review is also a fundamental

requirement of the Department of Finance Interim Guidelines.

Chapter 8 of Project Implementation in the Local Government SectorandDepartment of Finance Interim Guidelines.

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General Information on the Renewable Energy Sector

Completed studies

IPPP Section, under the Local Authorities PPP Fund, has granted funding for several feasibility

studies in the renewable energy sector. These studies are a useful reference and primary source of

information for local authorities that are considering similar type projects. A Review of these

Alternative Energy projects is to be found in Appendix C.

Pre-feasibility study software

Another option/first step when considering a potential energy project would be to avail of pre-

feasibility study software from Sustainable Energy Ireland (formerly the Irish Energy Centre). This

software may help authorities identify critical issues that may fundamentally effect the potentialviability of the project. Sustainable Energy Ireland, which is also one possible source of capital

funding for energy related projects, requires that potential applicants for grant aid must have

undertaken a pre-feasibility study assessment.

Funding of feasibility studies

One possible source for the funding of feasibility studies is Sustainable Energy Ireland. In general

they do not fund feasibility studies, but they may do so in certain circumstances. The Renewable

Energy Research, Development and Demonstration - Program Strategy and Call for Proposals

documents, available from their Website www.sei.ie, outlines the priorities for renewable energy

and the areas most likely to be granted funding for feasibility studies. These areas include wind

projects, biomass projects, small hydro projects, solar projects and geothermal energy projects.

For more information on possible sources of funding, see Appendix A.

Capital Funding

Obtaining finance for RE projects can be difficult, due to a perceived high level of risk amongst

potential fund providers (as a consequence of a lack of knowledge and experience). Also, providers

can often associate RE projects with a need for higher capital investment, even though very often

this is offset by lower operating costs. Sustainable Energy Ireland may provide funding of between

10% and 25% for a projects capital costs in the renewable energy sector. The amount of funding

will depend on the type and scale of the project. These amounts may be subject to change, so it is

important for the applicants to establish the current level of funding available in respect of their

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specific project, particularly where the economic viability of the project is dependent on this

funding.

For more information on possible sources of funding, see Appendix A.

Electricity Market

The Alternative Energy Requirement (AER) programme, where potential projects bid to supply

electricity, is the principal Government support mechanism for renewable energy in the Irish

market. It guarantees successful bidders a 15-year power purchase agreement (PPA) with the ESB

at guaranteed prices, which are index linked. The amounts paid in terms of eurocent per kWh will

vary according to the scale and type of project. As a guide, the agreed prices paid for sustainable

energy facilities under the previous competition for this scheme (AER5), which closed in November

2001, was as follows:

Large-scale wind category 3 4.812 eurocent/ kWh

Small-scale wind category 4 5.297 eurocent /kWh

Hydro 6.475 eurocent /kWh

Biomass (including landfill gas) 5.916 eurocent/ kWh

A number of conditions were attached to the AER5 competition and prospective applicants should

familiarise themselves with these. For example, any electricity plant constructed in relation to this

programme had to be a brand new plant, neither built nor under construction on 1st May 2001.

Projects successful under the scheme could, however, locate at any site, e.g. adjacent to an existing

site. It may be advantageous locating close to an existing scheme, as connection costs to the

national grid can be significant, and may well impact on the projects business case. Another

important condition was that applications for the large-scale wind projects category could not also

be applicants in the small-scale category. The reason for this was to increase awareness and to

encourage the involvement at local community level.

AER6 was launched in November 2002, to support the development of an additional 578 MW's of

new renewable energy based electricity generating plant, predominantly wind power, Biomass

3 Large-scale wind projects have a capacity of more than 3 MWe

4Small-scale wind projects have a capacity not exceeding 3 MWe

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(biomass steam CHP and anaerobic digestion) and small-scale Hydro, by the end of 2005. The

details of the scheme have now been announced, and can be accessed from www.dcmnr.ie

Tax Incentives

In the Finance Act of 1998, the Minister for Finance provided tax relief for corporate investment in

certain renewable energy projects. To qualify for relief, the project must be in the wind, solar,

hydro or biomass categories and must be approved by the Minister for Communications, the Marine

and Natural Resources (formerly the Minister for Public Enterprise). The relief, subject to certain

condition, takes the form of a deduction for tax purposes from a companys profits for investment in

new ordinary shares in a company setting up a renewable energy project. The relief is capped at

9.5m for an individual project and 12.7m for a company or group. In addition, there is a capital

allowance incentive which allows for plant and machinery to be written off over a five-year period

at 20% P.A. These concessions were due to expire in 2002, but the Minister has extended the

qualifying period until the end of December 2004, subject to EU approval.

Licences and Authorisations

The Commission for Energy Regulation (CER) is an independent body established under the

Electricity Regulation Act 1999, which has the responsibility for the licensing and regulation of the

generation and supply of electricity and overseeing third party access to the ESBs transmission and

distribution systems. An authorisation to construct or reconstruct a generation station is required

under Section 16.1 of the Electricity Regulation Act of 1999. Licences are also required for the

generation of electricity [Section 14.1(a) of the E.R. Act 1999] and the supply of electricity [Section

14.1 (b)(c)(d) and 14.2 of the E.R. Act 1999]. Supply licence requirements may differ depending

on the nature of the project. It is important that local authorities ensure there will not be any

potential problem in relation to procuring of the necessary authorisation or licences and, therefore,

contact should be made with the CER in the early stages of a project.

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Categories of Renewable Energy

Onshore Wind Energy

Wind energy is one of the most cost-effective technologies for electricity generation. In 1992, the

countrys first wind farm, comprising of 21 wind turbines, commenced generating electricity in

Bellacorrick, County Mayo. It had a rated capacity of 6.45 MW. By the end of 2001, there were

over 20 wind farms operational in Ireland, with a combined capacity of 125 MW - generating

enough energy for over 80,000 Irish homes and avoiding the emission of 300,000 tonnes of CO2. A

stated Government objective is for an additional 500MW of electricity from renewable sources by

2005, most of which is expected to be generated from wind energy. Irelands onshore wind

resource is among the best in Europe, particularly along the western seaboard, but the current

production of green electricity from this resource is amongst the lowest in Europe.

Wind turbine technology for converting wind energy to electricity is well-developed and is now

commercially available and approaching open market competitiveness, particularly onshore turbines

in the 0.5 to 1.5 MW range. Capital costs for onshore, grid-connected systems in Ireland are

typically about 900-1,100 per kW installed. The cost of delivered energy depends mainly on the

capital costs and wind speeds but is estimated to be in the region of 0.03- 0.06 /kWh for onshore

wind. (Source: Sustainable Energy Ireland).

Other than capital costs, the main constraints to the development of wind farms is likely to be local

planning objections to the farm itself and to the means of physical connection to the national grid.

As local gridlines approach their maximum carrying capacity, so does the potential for further

development in the area. This carrying deficit can only be addressed by upgrading the local

network, which may be a low priority for the ESB. Past experience would suggest it is likely that

most planning objections would be on the grounds of visual intrusion. Besides the visual impact of

the turbines themselves, probably the most contentious issue is connecting the windfarm to the

national grid. Overhead power lines can have a significant negative impact on the landscape and

are probably the main source of objections to a scheme. The cost of putting the powerlines

underground can impose a significant, and in some cases prohibitive, additional cost on the

developers which may render the scheme uneconomical. Every effort should therefore be made to

take account of the visual impact when planning the project, and early stakeholder consultation is

essential in order to assess the level of local concern about a development, and also to inform and

educate the local community of the positive benefits of a project.

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Offshore Wind Energy

Irelands offshore wind resource is particularly well suited to the development of offshore wind

energy because of a very favourable wind resource available in relatively shallow waters close to

shore. There is enormous potential for offshore developments around the whole coastline, but

particularly close to major centres, as with the proposed development off the East Coast, which is

on a significantly larger scale than existing onshore developments. Although the technology for

offshore wind farms is less developed and likely to be more expensive than for onshore

developments, there are many positive benefits of locating offshore. These may generally include

less difficulty in securing planning permission, a superior wind resource, economies of scale and

reduced visual impact. The estimated capital cost for grid-connected offshore wind farms is

between 1,500-2,000 per kW installed and the estimated cost of delivered energy is in the region

of 0.05 to 0.08 /kWh. As there are no existing offshore windfarms in Ireland, these figures

should only be treated as tentative.(Source: Sustainable Energy Ireland)

Small Hydro

Hydroelectric power is one of the most developed forms of renewable energy both in Ireland and

world-wide. In Ireland, most of the larger rivers have been harnessed for the production of

electricity and, as such, the current programme excludes large-scale developments. The total

resource of small hydroelectric schemes has been estimated at 30-40 MW. Capital costs for small-

scale schemes are relatively constant although the implementation costs may be high due to

stringent environmental regulations. Depending on its proximity to the gridline, it is estimated that

production of electricity from a small hydroelectric scheme would range from 0.05-0.10/ kWh

(Source: Sustainable Energy Ireland)

Combined Heat & Power (CHP)

Combined heat and power systems generate electricity and usable heat simultaneously from the

same plant. CHP covers a range of technologies, but always includes a prime mover (an engine or

turbine) driving an electrical generator, plus a heat recovery system. In most CHP installations, the

heat recovered supplements heat from the site's boilers and the electrical output displaces some (or

all) of the electricity bought from the local supply network. In general, the fuel sources currently

utilised are non-renewable, but there is no reason that renewable fuels (biomass, for example)

cannot be used.

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CHP can provide a secure and highly efficient method of generating electricity and heat at the point

of use. Due to the utilisation of heat from electricity generation and the avoidance of transmission

losses because electricity is generated on site, CHP can achieve a 35 per cent reduction in primary

energy usage compared to conventional power stations and heat-only boilers. This can allow the

CHP operator to make economic savings where there is a suitable balance between the heat and

power loads on his site. The net result will be a significant reduction in greenhouse gas emissions

in comparison to the generation of heat and power from individual systems. There are a number of

successful schemes in operation in Ireland and more are in the process of being developed. (Source:

Sustainable Energy Ireland)

Biomass

The term biomass refers to a whole range of organic materials that have the potential to be

converted into forms of energy, for example heat, electricity, gas and liquid fuels such as

biodiesel. Biomass can be specifically grown for conversion to energy, or may be the residue

from industries such as agriculture, forestry or timber and wood processing. Energy can also be

recovered from the organic component of municipal and agricultural waste. Although the lack of

research and development into biomass as a viable source of renewable energy has limited the

technical and economic information available in Ireland, biomass has the potential to make a

significant contribution in the sustainable energy sector. Ireland has an ideal climate for growing

energy crops like short rotation coppice and oilseed rape and the agricultural industry is also a

potential source of materials for energy production. The area of the country under forestry is

increasing each year and the residue from this industry can provide another valuable source of

material for renewable energy production.

Irelands renewable energy resources have been quantified in the ALTENER supported study

Total Renewable Energy Resources in Ireland, conducted by the ESBI and ETSU (March 1997).

This study summarises the potential capacity for electricity generation from each form of biomass

on a county by county basis. The best estimated cost of electricity production using biomass is

between 0.03-0.07 /kWh (Source: Sustainable Energy Ireland)

Ambient Heat (Heat Pumps)

Ambient heat pumps extract solar heat from water, air or ground and use this energy for space or

water heating. This form of energy can reduce energy consumption for heating by as much as 75%

in comparison to conventional systems. Although the technology is still developing, there are a

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number of successful schemes operating in Ireland, such as that in the Tralee Motor Tax Office.

The capital costs of heat pumps are higher than for conventional system but with an estimated

payback period of between 5 and 10 years, it can be economically viable. The estimated cost of

energy using this form of system is between 0.04-0.07/kWh. (Source: Sustainable Energy Ireland)

Geothermal

Geothermal energy is renewable heat energy emanating from deep in the earths crust. Geothermal

resources range from surface hot water springs to hot rocks several miles beneath the earths

surface. This energy can be used for space and water heating and even for the generation of

electricity. In countries such as Iceland, Italy, France and the USA geothermal energy is

commercially exploited. In Ireland, near surface geothermal resources are limited but there are

several geothermal heat pumps in operation, like that in Trinity College Dublin, for example. While

site variability produces a wide range of capital and operating costs, it is estimated that the costs of

energy using this form of system would be similar to that of ambient heat (heat pumps), at between

0.04-0.07/kWh. (Source: Sustainable Energy Ireland)

Solar Energy

There are a number of ways in which solar energy can be exploited, for example using it directly for

lighting or converting it into electricity or heat. Although Irelands climate is not ideal for

exploiting solar energy such as Solar Thermal Power or Photoconversion, the climate is quite suited

to development of Solar Thermal Heat, Passive Solar and Solar Photo Voltaic systems.

Solar Thermal (Heat). Active solar energy systems convert direct solar energy into heat, which

can be used immediately or stored for later use. Solar collectors are normally placed on the

roofs of buildings or in other areas that have a maximum exposure to solar radiation. The

collectors absorb energy and transfer it to a circulating fluid, which heats the water in a tank.

Solar thermal technology for water heating is well developed and although the capital cost of a

solar thermal system is expensive, prices have decreased by between 30% and 60% over the

past decade and will probably decrease still further as technology develops. It is estimated that

the cost of producing an equivalent kWh of energy is between 0.04-0.07. (Source: Sustainable

Energy Ireland)

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Passive Solar. Buildings are designed to utilise the solar energy available to reduce energy

consumption and, as a consequence, reduce energy costs. Buildings are designed in such a way

as to maximise the passage of solar energy into the building and materials within the building

maximise the absorption of this heat. The heat is built up during the day and slowly released

during the night. Passive heating can be used for both domestic and commercial buildings.

Savings using this form of heat can be quite significant. To maximise cost effectiveness of this

type of energy, it is best to incorporate a passive solar design into the building at the planning

stage. It is estimated that the equivalent cost of energy saved is in the region of 0.00-0.07 per

kWh. (Source: Sustainable Energy Ireland)

Solar PhotoVoltaic (PV). Photovoltaic cells, made of semiconductor materials, directly convert

the sunlight energy into electricity. Its use is widespread, especially in small scale stand alone

developments such as isolated housing, and telecommunications and navigation aids. Although

capital costs have decreased by about 40% over the past decade and similar decreases are

expected over the next decade, it is still a relatively expensive energy system. It is estimated

that the cost of electricity using this form of solar energy is in the region of 0.20-0.50 per kWh.

(Source: Sustainable Energy Ireland)

Ocean Energy

Ocean energy includes wave and tidal energy, whereby the energy from the waves or tides is

converted into electricity. The tidal form is similar to a conventional hydro scheme where water is

released from a dam, which drives turbines, which in turn converts the energy into electricity. In

this case it is the tide which fills the dam rather than rivers. The technology is well understood and

the only barrier to development is the high cost of construction.

The wave form is somewhat more complex and still very much at the development stage. Irelands

combination of high wave power and deep water close to the west-coast make it an ideal country to

exploit this form of energy. Although there are no existing commercial developments of either of

these forms in Ireland at present, it is thought that electricity from a successful project could be

produced at a cost of between 0.04-0.07 /kWh. (Source: Sustainable Energy Ireland)

Community Schemes

Research, Development and Demonstration funding that encourages or enables community schemes

which aim to make that community more environmentally sustainable or completely green can be

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particularly useful in educating and raising community awareness. Details are available from

Sustainable Energy Ireland.

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Appendix A Possible Sources of Funding

In general, RE technologies have yet to become fully cost competitive with traditional fossil fuel

technologies. As a result, a number of support mechanisms and incentives have been put in place in

recent years. Some of these are explained in the following pages.

EU Framework Programme for Research, Technological Development and Demonstration

The EUs RTD Framework Programme has been an important source of funding for the renewable

energy sector in Ireland. The Framework Programme is the EUs main instrument for research

funding in Europe and was proposed by the European Commission and adopted by Council and the

European Parliament following a co-decision procedure. Framework Programmes have been

implemented since 1984. The 5th

Framework, with objectives relating to cleaner energy systems

and economic and efficient energy, is due to end in 2002 but its successor, the 6 th Framework, is

due to be fully operational as from January 1st, 2003 and will run until to 2006. This Programme

includes objectives on efficient and sustainable use of natural resources, and is likely to have

support provision of 810M for projects in the field of sustainable energy. Any legal entity can

apply and may receive supportunder this programme.

ALTENER IIThis is an EU programme targeted exclusively at the area of renewable energy technology.

Originally intended to operate from 1998 to 1999, an extension until December 2002 has been put

in place. Objectives of this programme include the encouragement of private and public investment

in the production and use of energy from renewable sources.

ALTENER II is focusing on renewable energy sources that are already viable or approaching

viability, such as Biomass, Solar energy, Small-scale hydroelectricity, Wind power and Geothermal

energy.

In April 2002, the European Commission proposed Intelligent Energy for Europe, a new

programme to follow on from ALTENER when it closes at the end of 2002. The new proposal is for

a four-year programme with a total budget of 215million, 86 million of which is targeted as

support for promoting renewable energy.

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INTEREG IIIA

Under Priority 2 of the INTERREG IIIA Programme, Measure 3 will focus on addressing the

energy problems within the INTERREG region through cross-border measures designed to increase

the use of renewable energy and energy efficiency technologies at a local level. A call for project

proposals was made in late February 2003. Further information on the application process is

available from the Special European Union Programmes Body (SEUPB) website

www.eugrants.org. Alternatively, information packs are available from the Renewable Energy

Division, Department of Communications, the Marine and Natural Resources.

Sustainable Energy Ireland Research, Development & Demonstration Programme.

Sustainable Energy Ireland promotes and assists environmentally and economically sustainable,

production, supply and use of energy in Ireland. The National Development Plan has made funding

provision of 234 million to support implementation of the Government's sustainable energy policy

through Sustainable Energy Ireland.

Under this policy, a 16.25 million programme of support was launched in July 2002, offering

support for projects aimed at generating and applying technologies, products, systems, practices and

information leading to the increased utilisation of renewable energy. The focus of the programme is

on stimulating deployment of renewable energies that are close to market and to assess and develop

technologies that have prospects for the future.

Department of Communications, Marine and Natural Resources

Since 1994, the development of electricity generating capacity from renewable energy has been

encouraged through a series of Government-supported Alternative Energy Requirement (AER)

competitions. The objective of the AER is to increase the contribution of renewables in the overall

electricity generating mix. The AER programme involves a series of tendering competitions, in

which prospective generators are invited to compete, based on price per unit of electricity, for

contracts to sell electricity to ESB. Successful competitors are offered ESB power purchase

agreements of up to fifteen years. Securing a PPA often makes a potential project more attractive to

investors.

The latest of these competitions, AER5, closed in November 2001, and its replacement, AER6, was

launched in November 2002. The details of this have now been announced, and it will concentrate

on wind energy, several categories of biomass, and small hydro power schemes. Information on

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how to apply, price caps pre kWh, and effective dates can be found in the energy pages of the

Departments website, www.dcmnr.ie

(Projects receiving funding under the EU RTD programme above are also guaranteed power

purchase agreements on similar terms to AER projects.)


The Local Authorities Public Private Partnership Fund was launched in December 1999 to

encourage and assist local authorities in developing partnership approaches with the private sector

for the provision of infrastructure and services. The 5m grant scheme is confined to projects

outside the mainstream investment programmes and applications for funding have only been

considered where no other source of funding was available from any other state agency. Feasibility

studies, for example, were eligible for funding under this scheme in certain circumstances. The PPP

Fund has provided grant assistance to 50 PPP proposals to date, some of which have renewable

energy elements - see Appendix C. The Fund, which was due to expire at the end of 2002, was

extended to the end of 2004.

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Appendix B - Sources of Information

Sustainable Energy Ireland (Formally Irish Energy Centre)

GlasnevinDublin 9Tel: 01 836 9080 Fax: 01 837 2848 Energy Hotline 1850-376.666Email: [email protected] Energy Ireland

Finnisklin Business ParkSligoTel: 071 915 9705 Fax: 071 915 9701

Sustainable Energy IrelandIndustry HouseRossa Avenue

BishopstownCorkTel: 021 454 7050 Fax: 021 454 7059

Sustainable Energy IrelandRenewable Energy Information Office

Shinagh HouseBandonCo. CorkTel: 023 42193 Fax: 023 41304E-mail: [email protected]

Department of the Environment, Heritage and Local GovernmentCustom HouseDublin 1.Tel: 01-8882000 Fax: 01 888 2107

ENFO (environmental information)

17 St. Andrew StreetDublin 2Tel: 1890 200191 Fax: 01 883946E-mail: [email protected] Web: www.enfo.ieEuropean Commission

Energy & Transport Directorate XVIIDirectorate DRue de la Loi 200B-1049 Brussels

BelgiumTel: +32-2 299 11 11 Telex: 21877 COMEU B

E-Mail: [email protected] for Energy RegulationPlaza HouseBelgard RoadTallaghtDublin 24

Tel: 01 4000 800 Fax: 01 4000 850E-Mail: [email protected]

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Electricity Supply Board (ESB)Corporate Centre,27, Lower Fitzwilliam Street,Dublin 2.Tel: 01 676 5831 Fax: 01 661 5376

Irish Wind Energy Association (IWEA),Arigna,Carrick-on-Shannon,Co. Roscommon,Tel: 071 9646072 Fax: 071 9646080

E-mail: [email protected] Wind Industry AssociationVester Voldgade 106

DK-1552 Copenhagen VDenmarkTel: +45 3373 0330 Fax: +45 3373 0333E-Mail:[email protected]

European Wind Energy AssociationRue du Trone 26

B-1000 BrusselsBelgiumTel: +32 2 546 1940 Fax: +32 2 546 1944E-mail: [email protected]

Irish Bioenergy Association (IrBEA)

Education Centre,Church St.Cahir,Co. Tipperary.Tel: 052 43090 Fax: 052 43012

E-Mail: [email protected] Hydropower AssociationC/o Darrell NightingaleGlengarriff, Co.CorkTel: 027-63212 Fax: 027-63187E-Mail: [email protected]

Tipperary Energy Agency Limited,Education Centre,Church St,Cahir,Co. Tipperary,

Tel: 052 43090 Fax: 052 43012E-Mail: [email protected] Kilkenny Energy AgencyCastle Hill, CarlowCo Carlow

Tel: 059 9143871Email: [email protected]

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City of Dublin Energy Management Agency (CODEMA)Unit 32,Guinness Enterprise Centre,Dublin 8

Tel: 01 4100659 Fax: 01 4100576

E-mail: [email protected] Web: www.codema.ie

Cork City Energy Agency (CCEA)The Lord Mayor's Pavilion,Fitzgeralds Park,

Mardyke Walk,Cork

Tel: 021 4251104 Fax: 021 4251056 Mobile: 087 816 9722E-mail: [email protected]

Cork County Energy Office

Spa House,Mallow,

Co. CorkTel: 022 43610 Fax: 022 43678E-mail: [email protected]

Donegal Energy Action Team (DEAT)Station Island,Lifford,Co. DonegalTel: 074 9172497 Fax: 074 9142130E-mail: [email protected]

East Connacht Energy Agency Ltd (ECEA) (Currently Inactive)King House,

Boyle,Co. Roscommon

Tel: 079 64048, Freefone: 1800 461100 Fax: 079 64049E-mail: [email protected] Web: www.iol.ie/~eceal

Galway Energy Agency Limited (GEAL)City Hall,College Road,

GalwayTel: 091 566 954 Fax: 091 567 493E-mail:[email protected]

Kerry Energy Agency

c/o Kerry County Council,County Buildings,

Rathass,Tralee,Co. Kerry

Tel: 066 7123576 Fax: 066 7120927E-mail: [email protected] Web: www.kerryweb.ie/kerryenergy/energy.html

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Mayo Energy AgencyU{PRIVATE}nit 1,The Quay,Ballina,Co. Mayo

Tel : 096 76113 Fax: 096 76199

Email : [email protected] Web: http://homepage.eircom.net/~mayonrgMeath Energy Management Agency (MEMA)Environmental Dept, Meath County Council2A Cannon Row (Ground Floor)

Navan, County MeathTel: 0 46 9060538 Fax: 046 9060537

Email: [email protected]

Waterford Energy Management BureauCivic OfficesTankfield

Tramore, Co. Waterford

Tel: 051 395555Email: [email protected]

Wexford Energy Management Agency LtdWORD Building

Johnstown CastleCo WexfordTel: 053 47400 Fax: 053 46456Email: [email protected]

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Appendix C Local Authority PPP Seed Fund- Review of Alternative Energy

Projects- January, 2004.

Introduction

Circular PPP 2/99 of 1 December, 1999 notified Local Authorities of the setting up of a Public

Private Partnership Fund for Local Authorities.

The purpose of the PPP Fund is to encourage Local Authorities to become more actively involved

in the development of new forms of commercial arrangement with the private sector. The Fund

provides grants to assist Local Authorities that are interested in developing innovative projects in

partnership with the private sector.

Since the Funds launch 50 projects, amounting to 4.076 million, have been approved for funding.

The categories covered by the successful applications are Business Parks/Industrial sites,

Alternative Energy, Crematoria, Urban Development, Tourism/Leisure, Car Parks, Public Sector,Housing and miscellaneous.

The I/PPP unit, as part of a Review of the Seed Fund under all categories, is reviewing all grant

aided projects with the objective of extracting information and lessons to guide and assist Local

Authorities who might be considering similar projects, now or in the future.

This Report outlines details in relation to Alternative Energy projects. Seven projects in four

different Local Authorities are reviewed.

A Local Authority considering a project in this sector should have regard to the contents of this

document and also the following: -

- Circular IPPP 4/03 of 19 December, 2003 issued to Local Authorities together with a Policy

Framework Document covering, inter alia, Project Implementation in the Local Government

Sector. These documents are available on the Departments websitewww.environ.ie

- Local Authorities and Renewable Energy A Framework for Public Private Partnerships,

first published by the I/PPP unit in February, 2003 and currently being revised, will be

accessible on the national PPP website, www.ppp.gov.ie and the Departments website.

I/PPP Unit

Department of Environment, Heritage

and Local Government

January 2004.

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Alternative Energy Projects

Index of Projects Page

South Tipperary County Council 2

Cork City Council 4

Kerry County Council 1(Hydro-electric)

5

Kerry County Council 2

(Wind power)

5

Kerry County Council 3(Landfill)

6

Kerry County Council 4(Hydro-electric 2)

6

Donegal County Council 7

Appendix I General Lessons 8

Appendix II Additional FundingSources

9

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South Tipperary County CouncilFeasibility study for the potential of aCHP PPP project for Council offices andleisure facilities.

Amount requested33,013Amount drawn down to date0

Contact name: Denis HollandContact number: 052 34455

Progress to dateSouth Tipperary County Councils remithas extended over the years and now

includes, in partnership with ClonmelBorough Council, the provision ofswimming facilities in Clonmel. TheCouncil also has responsibility for itsheadquarters, museum, library and otheramenities. These facilities are locatedcentrally in the town and are adjacent toeach other.

In order to reduce energy costs and CO2emissions the Council decided toimplement a Combined Heat and Power(CHP) plant on the site. The preliminarystudy by Irish Energy Management Ltd(IEM), at a cost of 2,540 concluded thatthe relatively high capital costs coupledwith low annual revenues made theproject unviable at that stage. However,changes brought about by the ElectricityAmendment Act, 2001 prompted arevision of this thinking and IEM

proceeded with a full feasibility study on 5November 2001.

Expressions of interest were invited and 6were received by the closing date of 29May 2002. The Council then issued aninvitation to tender; this task wascompleted by mid September. Thefeasibility study was presented on 7March 2003 and it found that a DB basiswith a separate O&M contract was the

most economical option for this project. Itprovided the highest annual savings andbest met the needs of the project. The

DBOF option provided the worst annualsavings.

The Council, through IEM, applied toSustainable Energy Ireland (SEI) for

capital funding. SEI granted 50% fundingin May 2003, on the proviso that theproject takes on a unique and/orpromotional aspect in regard tosustainable energy. In order to fulfil thisthe project will now have a live reportingsystem that is accessible to the public.This can be viewed on the Councilswebsite (www.southtippcoco.ie) once theproject goes live.

However, the project experienced a delayof about 2-3 months due to objections byESB networks. They felt that it would notbe possible to connect the Councilheadquarters from the swimming pool asthis would entail traversing a car park,which they deemed a public road. ESBnetworks were very adamant on thematter stating that Grid Code (seewww.cer.ie) did not allow the crossing ofa public road and the dispute had to bereferred to the Commission for EnergyRegulation (CER). The CER adjudged thecar park not to be a public road and gavepermission for the project to go ahead.

The Council completed their negotiationswith Edina in September and the plant iscurrently being built in Austria with adelivery date of 20 J anuary. It is expectedthat it should be fully commissioned by

the end of February.

Lessons learnt on this pro ject.

FundingAn important lesson to be learnt from thisproject was the Councils awareness ofadditional means of funding. The 50%grant received from SEI was crucial inensuring the viability of this particularproject with side benefit of promoting the

use of such technology to the generalpublic.

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Network issuesA problem that could arise in futureenergy PPPs is that of electricitynetworks. In this case, ESB networks

were opposed to the progress of thisproject. This difficulty may arise again inregard to similar projects, i.e. those thatare not self contained. While the CER didsupport Tipperary County Councils casein this instance, delays such as thisshould be either a) factored into a projector b) ESB networks (soon to be EirGrid)should be approached in the preliminarystages of the project and CERs GridCode should be consulted. On inspection

of the Grid Code the proviso in regard totraversing a public roadway could not befound.

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Cork City CouncilStart up phase for the installation of aPPP managed CHP plant at theLeisureworld complex, Bishopstown,Cork.

Amount requested25,234Amount drawn down to date25,234 (September 2001)Contact name: Michael OBrienContact number: 021 4924119Progress to dateCork City Council identified the potentialfor a CHP plant at the Leisureworldcomplex through an EC fundedprogramme, SAVE II. They applied for

start up funding under the Local AuthorityPPP fund to conduct a feasibility study onthe possibility of installing a CHP unitunder a PPP arrangement.

IEM were appointed as clientsrepresentatives. In mid J anuary 2001 thedesign and engineering phase wasfinished. Invitations to tender were soughtfrom interested parties and tenders weremade on a DBO and DBOF basis. Thebid made by Edina, on a DBO basis,provided the highest annual saving.Added to this the DBOF bid, made byanother bidder, proposed the use of a167kw engine. While savings weregenerated using this method the enginewas oversized for the needs ofLeisureworld both now and in the future.

Edina was selected to carry out the

project and contracts were signed at theend of May 2002. Two contracts wereinvolved, a) for the capital purchase of theunit and, b) for the operation andmaintenance of the plant.

On 11 J une 2002 the CHP generator wasdelivered. However, work was stalled dueto payment arrangements for the engine.This was due to an ownership issue.Edina was purchasing the engine from a

third party and wanted Cork City Councilto provide the finance for this. However,in this scenario Edina would still retainownership of the engine. The Council

were concerned that if Edina were to goout of business then the Council wouldhave paid for the engine but would nothave any rights to ownership. This wasresolved by Edina paying the supplier up

front for the engine. The Council paid partof the cost upon delivery (21 October2002) and the remainder wheninstallation was complete (10 March2003).

In addition to this, the Council also soughtand gained a guarantee from themanufacturer then in the event of Edinagoing out of business then ownership ofthe engine would revert to Cork City

Council. The plant was commissioned on23 May 2003 and is working well. IEM arecurrently compiling a 3 month report onthe running of the plant, which will beforwarded to this Department whenfinalised.

Lessons learnt on this projectCouncil AcceptanceThe main problem this projectencountered, prior to undertaking thestudy, was the acceptance of the Councilof the involvement of a private partner.The experience of the project has beenlargely successful and should encourageother Local Authorities of the benefits ofPPP projects. Michael OBrien, theproject engineer, commented that, thisproject was the first PPP project thatmany staff of Cork Corporation wereinvolved in. This was the beginning of a

learning process for legal, technical andadministrative staff. The process proved avaluable experience and highlighted theadvantages and disadvantages of PPPsas well as procedures and considerationsthat have been involved.

Contract IssuesIt was Cork City Councils experience thatthe contract process for a small projectwas as equally complicated as that for a

large one. The Council felt it was veryimportant to secure their investment andprotect against unnecessary financiallosses.


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Kerry County Council 1Feasibility study for two hydroelectricschemes in Co. Kerry.

Amount requested

50,790Amount drawn down to date26,200 (May 2002). The balance of24,588 has been decommitted.

Contact name: Willie MoynihanContact number: 066 7183576Progress to dateKerry County Council submitted anapplication under the Local AuthoritiesSeed Fund to carry out a feasibility study

into two hydro electric schemes, Torc andCurraheen. Torc catchment is in KillarneyNational Park and Curraheen catchmentis 5 kilometres west of Tralee.

Fehily, Timony & Co. was commissionedto undertake the study. The report wasfinalised on 5 May 2002. It concluded thatwhile both were technically feasibleneither the Torc or Curraheen projectswere economically feasible as thepayback periods exceeded 25 years. Inaddition to this there would have beenplanning difficulties and constructionconstraints in regard to Torc as itscatchment area is in a National Park.

Lessons learnt on this projectPreliminary WorkBefore commissioning consultants tocarry out a feasibility study, it is advisable

that the local authorities perform a certainamount of preliminary work andstakeholder consultation.

In this case initial consultation with theCouncils own planning office would havehighlighted the planning difficulties andconstruction constraints in regard to Torc.This may have reduced the cost of thefeasibility study.

Kerry County Council 2Start-up phase for installation of windfarm at a landfill site in the StackMountain, Co. Kerry.

Amount requested12,697Amount Spent to date0, all funding has been decommitted.

Progress to dateFehily, Timony & Co. was commissionedto undertake the study. However, therewas unrest in the community about thelandfill site itself. Due to this loss of publicsupport the Council decided not to

proceed on 9 May 2002.

The Council and community haveresolved the dispute in regard to thelandfill site and relations between themare now good. In addition to this KerryCounty Council have since grantedplanning permission for a windfarm on asite adjacent to the landfill. In light of thisthe Council hope to restart the project inthe future.

Lessons learnt on this projectPreliminary WorkPrevious to the feasibility study stage, it isprudent for local authorities to perform acertain amount of preliminary work andstakeholder consultation.

In this case the Council abandoned theproject due to local opposition. While the

grant was decommitted in this instanceand there was no financial loss, theCouncil spent considerable time on thisproject that could have been used forseeking out alternative sites.


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Kerry County Council 3Feasibility study to examine the economicand technical merits of a scheme toextract landfill gas for conversion to

electricity at Muingnaminnane landfill site,on a PPP basis.

Amount requested32,000Amount drawn down to date0

Progress to dateFehily, Timony & Co. was commissio

ppp framework for pvt companies in india

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