Building Engineering Manchester City Council November 2013 Stockport Council
Stockport Town Centre Heat Network: Feasibility Study Prepared by: ...... Elena Olloqui ...... Principal Consultant ......
Checked by: ...... Approved by: ...... Andrew Turton Paul Woods Associate Director Technical Director
Stockport Town Centre Heat Network: Feasibility Study
Rev No Comments Checked by Approved Date by 1 Draft report ACT PSW 1/11/13
1 New York Street, Manchester M1 4HD Telephone: 0161 601 1700 Website: http://www.aecom.com
Job No.: 60289952 Date Created: October 2013
This document has been prepared by AECOM Limited for the sole use of our client (the “Client”) and in accordance with generally accepted consultancy principles, the budget for fees and the terms of reference agreed between AECOM Limited and the Client. Any information provided by third parties and referred to herein has not been checked or verified by AECOM Limited, unless otherwise expressly stated in the document. The study presents feasibility results for a heat network in the Civic Quarter based on the assumptions set out in this document, but further work will be required to confirm the figures presented here and to design the scheme in detail. No third party may rely upon this document without the prior and express written agreement of AECOM Limited. Table of Contents
Acronyms ...... 1
Executive Summary ...... 2
1 Introduction...... 6
2 Energy Demand Assessment ...... 9
3 Energy Supply Options ...... 18
4 Network Layout Assessment ...... 26
5 Economic and environmental assessment ...... 39
6 Delivery Options ...... 50
7 Conclusions and Recommendations...... 56
Appendices ...... 61
Appendix 1: Site visits and questionnaires’ information ...... 62
Appendix 2: Energy demand estimates for Grand Central redevelopment provided by Hannan Associates...... 67
Appendix 3: Stockport Academy heat and hot water demand ...... 73 AECOM Feasibility Study 1
Capabilities on project: Building Engineering
Acronyms
AGMA Association of Greater Manchester Authorities CCHP Combined cooling heat and power CHP Combined heat and power
CO2 Carbon Dioxide CQHN Civic Quarter Heat Network CRC Carbon Reduction Commitment DE De-centralised Energy DEC Display Energy Certificate DECC Department of Energy and Climate Change DH District heating DHN District heating network DHW Domestic Hot Water EPC Energy Performance Certificate GIB Green Investment Bank GM Greater Manchester GMHNP Greater Manchester Heat Network Programme HIU Hydraulic Interface Unit IAG Interdepartmental Analyst Group (government group which produces projected energy costs and carbon emission factors to inform policy development) IRR Internal Rate of Return JV Joint Venture (generally refers to the Joint Venture proposed between AGMA and GIB) kW Kilowatt kWe Kilowatt electric kWh Kilowatt hour kWth Kilowatt thermal MCC Manchester City Council MW Megawatt MWe Megawatt electric MWh Megawatt hour MWth Megawatt thermal NPV Net Present Value PHE Plant Heat Exchanger AECOM Feasibility Study 2
Capabilities on project: Building Engineering
Executive Summary
Background This report has been prepared by AECOM consulting engineers at the request of our client, Manchester City Council (MCC) and for Stockport Metropolitan Borough Council. AECOM has been commissioned by MCC on behalf of the Association of Greater Manchester Authorities to produce feasibility studies, business cases, and project development plans for a Manchester Civic Quarter Heat Network (CQHN), a network in Oldham town centre, and a network in Stockport town centre. This report examines the options for Stockport Town Centre and forms the network feasibility study. A previous feasibility study of this part of Stockport has been carried out and this study builds upon this earlier work. Heat Loads Fundamental to developing a DH scheme is a committed customer base willing to sign long-term heat purchase contracts. Typically these are for buildings controlled by the public sector, often termed ‘anchor loads’. Although a number of heat loads have been identified suitable for connection to DH there are uncertainties surrounding many of them. The identified loads are listed in Table 1 below and are grouped as:
x Civic Buildings Cluster x Grand Central Cluster x College Cluster
The Mottram Street flats close to these clusters are already supplied with DH and a biomass boiler is being installed with financial support from the ECO scheme. Whilst this may form part of a wider network at a later stage no benefit was found for connecting to the DH scheme analysed for this report. AECOM Feasibility Study 3
Capabilities on project: Building Engineering
Table 1: Summary of Heat Loads
MWh Heat Load Comment p.a.
Civic Buildings Cluster
Town Hall 1168 Committed load
Stopford House 1039 Committed load
Fred Perry House 302 Committed load – supplied from Stopford House Archer House 617 HMRC staff vacating – new tenant being sought – future uncertain This area is subject to re-development or refurbishment in 3-5 years time and it Covent Garden flats (49No) 518 would be best to connect at that time as the load is small and 500m away Police Station Police are expected to vacate – future uncertain Dept Work and Pensions PFI contract – difficult to negotiate a change of energy supply Retail store In administration – future uncertain Mottram St flats Standalone biomass boiler scheme – no benefit in connecting at present
Grand Central Cluster
GC Swimming pool 2976 Has had existing CHP and good case for replacement or connection to DH GC development – offices Timing of development uncertain – could provide an Energy Centre site
GC development – hotel Timing of development uncertain
College Cluster
Existing College buildings supplied from Roland Hadlow Existing College buildings supplied from Joan Bakewell New college development on PCT Timing uncertain – could provide an Energy Centre site site
Definition of schemes Given the uncertainty of the heat loads it is proposed that the DH scheme is developed in stages. The first stage termed the Phase 1 Starter Scheme will comprise only the buildings close to the Civic Centre and will use space within existing buildings for the energy plant. We have then analysed Phase 2 of the DH development and considered three options for this development: x Option A) The Phase 1 Starter Scheme plus the Grand Central Cluster and Covent Garden with an energy centre at Grand Central. x Option B) The Starter Scheme plus the College Cluster using decentralised boilers and CHP units x Option C) The Starter Scheme plus both the Grand Central Area and the College Cluster with an energy centre at the College x Option D) As in option C, but with the energy centre located at Grand Central. AECOM Feasibility Study 4
Capabilities on project: Building Engineering
The proposed DH scheme for Option D) is given in Figure 1 below assuming an Energy Centre located at the Grand Central development (College site is an alternative option as in option C).
Figure 1: Network layout for option D with the energy centre at Grand Central.
Comparison of heat sources A review of available technologies for producing low carbon and lower cost heat has been carried out. It concluded that the most practical and established technologies were gas-fired CHP and biomass boilers. The use of biomass is supported by the Renewable Heat Incentive however the level of the RHI and its availability are uncertain into the future. Biomass also requires additional space for fuel storage. The comparison showed that gas-fired CHP provided a better economic case but the biomass option provides the grater carbon saving. The remainder of the analysis used the gas-fired CHP option but it is possible that as the scheme is developed biomass heating could also be used. Economic appraisal The Phase 1 Starter Scheme and the Phase 2 Options have been analysed with the results given in Table 2 below. Table 2: Summary of economic analysis Network option NPV IRR Phase 1 Starter Scheme £996k 9.4% Phase 2 option A ( £-1,035k 3.1% Phase 2 option B £2,228k 6.5% Phase 2 option C £-1,571 k 3.1% Phase 2 option D £-1,414k 3.2% AECOM Feasibility Study 5
Capabilities on project: Building Engineering
The results demonstrate that the Phase 1 starter scheme may have an IRR of around 9%, which reduces to around 6% when connected to the college (with distributed heat generation plant), and around 3% when linked to the other sites. The IRR for the Phase 1 scheme is heavily dependent on selling a large amount of electricity from the CHP plant directly to Stockport Council, and if this is not possible, the IRR drops to 2%. The IRRs demonstrate that there is not a strong commercial case for the smaller options, and the larger schemes are uneconomic unless additional grant funding can be obtained, or additional revenue made form electricity sales.
Business structures There are a wide range of options for the delivery of a DHN scheme. The selection of a governance model will need to consider both the level of risk and investment that Stockport MBC is prepared to accept, and the facts about the scheme as determined in this feasibility study. Key points identified in this work which may help influence the selection of a governance model are: x IRR. The schemes identified all deliver a relatively low rate of return. Even with further optimisation, this is likely to remain at a level which is unlikely to attract commercial investment. Therefore investment in the scheme will either need to be from the public sector or with the assistance of grants. x Customers. The majority of customers on the scheme are public sector and therefore may favour a public sector delivery vehicle. The customers may attach less risk to a public sector scheme and therefore commit to longer term heat supply contracts which will help de-risk investment in the scheme. x Land. The energy centre site will be key for the development of a scheme. . The sites identified in the Grand Central development and adjacent to the college are current possibilities, but will need further investigation. They are currently outside of the Council’s ownership and control which adds risk to the project and the cost of land has not been included in the economic model. Planning powers could be used by Stockport Council to ensure that development of either of these sites allows for the inclusion of an energy centre. x Electricity sales. Maximising the electricity revenue is vital to the viability of the schemes. Direct sales to customers could allow an increase in revenue, but due to licensing requirements, this will be more viable if the purchaser is also the scheme owner. As the largest potential electricity purchaser, it therefore would benefit the scheme if Stockport MBC also owned the CHP generation plant (but not necessarily the DH network). This arrangement would also provide long term security over electricity sales. Electricity sales in phase 2 and beyond need to consider the location and size of the CHP plant, but further work is required to examine how the sales of electricity can be optimised. x Strategic expansion. The vision for all of the Manchester networks is that they are the first stage of a wider scale development of DHNs. This may include the expansion of first phase networks. The control over this expansion may be greater with public sector ownership. Where the network can be used to deliver wider benefits, for example alleviation of fuel poverty, or to attract regeneration and commercial activities, this strategic control will be important.
In light of these observations, a suitable route for delivery of the Stockport scheme is by Stockport MBC or through a joint venture with some level of control and financing by Stockport MBC. Conclusions The work in this report shows that there are a number of potential options for the development of DH schemes in Stockport town centre. However is likely that the larger schemes will not be economic, and the economic viability of smaller schemes is heavily dependent on making direct electricity sales. This suggests that stand-alone CHP systems at each of the sites may be a more viable option reducing the expense incurred with DH network installation, and improving the potential for gaining revenue from electricity sales. AECOM Feasibility Study 6
Capabilities on project: Building Engineering
1 Introduction
1.1 Background This report has been prepared by AECOM consulting engineers at the request of our client, Manchester City Council (MCC) and for Stockport Metropolitan Borough Council. The Greater Manchester Heat Network Programme (GMHNP) has been set up by the Association of Greater Manchester Authorities (AGMA) to facilitate the efficient, cost-effective development and delivery of district heating networks (DHNs) across the ten authorities of Greater Manchester, and to support local and national carbon and energy policy commitments. The GMHNP is led by MCC. Phase 1 of the programme aims to enable the development of three DHNs which have already been identified as having potential through feasibility work: schemes in the centres of Manchester, Stockport and Oldham. AGMA has estimated that these three projects will lead to estimated CO2 savings of 4,500 tonnes per annum and estimated capital investment of £20m; and has secured funding from DECC to investigate the opportunities further. The projects have been chosen by AGMA based on the following key criteria: technical feasibility; financial feasibility; timescales for delivery; political support; local authority resources and capacity; opportunities for future expansion and decarbonisation; and ability to catalyse delivery of future phases of the Greater Manchester Heat Network Programme. AECOM has been commissioned by MCC to produce feasibility studies, business cases, and development plans for the three proposed DHN schemes. This report examines the feasibility of a DHN in Stockport Town Centre, following on previous studies which covered the civic buildings, a new commercial led development (Grand Central) and the local college. The previous studies resulted in schemes with too low an IRR to be viable. This study is needed to re-evaluate the options. In parallel with this project AGMA is investigating the potential establishment of a vehicle for the development and delivery of GM low carbon projects which would be a joint venture (JV) between AGMA and the Green Investment Bank (GIB) and which was committed to in the Deal for Cities. A potential portfolio of projects has been identified, of which heat networks make up a significant part. The outputs of the GMHNP Phase 1 are intended to inform this JV and the heat networks may therefore also be viewed as pilot projects. Heat network master planning work is also being undertaken in order to scope out the wider pipeline of potential heat networks in GM. Learning from the project is intended to inform the development of national policies to support and enable the deployment of heat networks; and to be shared with other project developers, including AGMA local authorities, Core Cities through the Core Cities Heat Network Group, and North West Local Authorities through the CLASP Heat Network Support Group1 with the aim of accelerating the delivery of heat networks across the UK. It will also be used to inform potential bids for European funding.
1 CLASP, http://claspinfo.org/resources/nw-heat-networks-support-day AECOM Feasibility Study 7
Capabilities on project: Building Engineering
1.2 The purpose of this study This feasibility will study the potential for an initial DH scheme which would involve a small network around the Civic Buildings, investigating the possibility of adding the Inland Revenue building, County Court and Covent Garden flats and other smaller buildings identified. The study will aim to assess whether a smaller network would be worthwhile in the context of the potential later extension of the scheme into a larger commercial one when other major developments are able to be assessed in greater detail. Specifically this study aims to: x Review and expand on existing feasibility research and technical modelling completed to date in the Stockport town centre area, x Identify potential DHN options, and develop into proposals for use in an outline business case, x Provide analysis of energy usage data from associated network buildings to refine required loads/outputs to support the outline technical design, x Review commercial viability of proposed network with options analysis, supporting proposals which show the potential to provide financial benefit for stakeholders, x Options analysis of procurement routes based on preferred technical and financial proposal, x Ensure sufficient detail and clarity to be easily read by potential project developers and funders, including Stockport Metropolitan Borough Council, x Outline the strategy for the potential expansion of the network in the future, identifying issues which need to be addressed during business case development and beyond. The outputs from this feasibility study will also be used to inform an outline business case.
1.3 Key Drivers The key drivers and policy background for the project have been set out in several existing national, regional and local documents, which are summarised below. UK Heat Strategies - The Future of Heating The Department of Energy and Climate Change (DECC) produced The Future of Heating: a strategic framework for low carbon heat in the UK in 2012, which set out a vision for the transition to affordable, secure, low carbon heating in the UK over the period to 2050. It then produced The Future of Heating: meeting the challenge in 2013, which revised the former document in response to stakeholders’ comments. The strategy sets out potential scenarios for the decarbonisation of the heat sector including support for heat networks. It sets out DECC’s commitments to support local authorities in the development of heat networks in their areas through the establishment of a Heat Networks Delivery Unit, support for technological innovation, provision of funding for feasibility work, exploration of potential additional financial incentives and government funding for heat networks, and provision of a consumer protection scheme. Initial modelling undertaking by DECC suggests that heat networks could form an important part of the least cost mix of technologies by 2050, with the potential to serve 14% of domestic heating and hot water demand (41TWh) and 9% of non-domestic heating and hot water demand (11TWh) by 2050.2 It suggests that in the period to 2030 heat networks will predominantly be fuelled by gas CHP. AGMA Decentralised and Zero Carbon Energy Study AGMA commissioned AECOM and Urbed to produce the AGMA Decentralised and Zero Carbon Energy Study in 20103. The study identified strategic opportunities for low and zero carbon energy in the city region, including
2 The Future of Heating: Meeting the challenge, DECC, March 2013 3 AGMA Decentralised and Zero Carbon Energy Study, AECOM and Urbed for AGMA, 2010 http://www.agma.gov.uk/what_we_do/planning_housing_commission/our-work/integrated-infrastructure-strategy-for- gm/decentralised-and-zero-carbon-energy/index.html AECOM Feasibility Study 8
Capabilities on project: Building Engineering
potential heat network areas. It set out recommendations for how these projects could be supported by the ten local authorities. Greater Manchester Climate Change Strategy 2011-20
The Greater Manchester Climate Change Strategy sets out the city region’s commitment to reduce its CO2 emissions by 48% by 2020, from a 1990 baseline.4 A significant proportion of these savings are planned to come from the local generation of heat and power. The strategy includes a 2020 target to generate 1TWh/year of electricity and 2-3TWh of heat locally, from schemes which have been estimated to require a total investment of approximately £3.5bn.5 The ten local authorities of Greater Manchester have committed to work together and with partners in order to deliver these targets. GM Heat Network Programme AGMA’s plan is for heat networks to be a significant proportion of the low carbon energy schemes to be delivered by 2020, as outlined above, and to represent a major new area of investment for Greater Manchester, delivering long- term returns on investment and helping to facilitate wider investment from companies attracted by supplies of low carbon energy which are less susceptible to fluctuations in national and global energy and carbon markets. The programme is currently made up of eleven heat network projects, with a capital value estimated at £200-250m. These projects were identified in the AGMA Decentralised and Zero Carbon Energy Study. Phase 1 consists of the three projects in Manchester, Oldham and Stockport, which have been assessed by SKM-Verco as part of the AGMA and GIB JV development and are now being further developed to prepare them for market. The aims of establishing a coordinated programme of activity are to create the opportunity for delivery and investment at scale; to take projects forward at an accelerated pace; to deliver wider social, economic and environment benefits to GM, including the development of the local supply chain; and to enable consistency in the approach to project development and procurement.
1.4 Structure of this report The remainder of this report covers the following sections: 2. Energy Demand Assessment 3. Energy Supply Options 4. Network Layout Assessment 5. Economic and environmental assessment
4 Greater Manchester Climate Change Strategy 2011-20, AGMA, 2011 http://www.agma.gov.uk/cms_media/files/gm_climate_change_strategy_2011_2020.pdf 5 Greater Manchester Energy Plan, AGMA, 2012 http://www.agma.gov.uk/cms_media/files/exec_summary_energy_plan_march_20121.pdf AECOM Feasibility Study 9
Capabilities on project: Building Engineering
2 Energy Demand Assessment
This section provides a detailed discussion of potential customers for the Stockport town centre DHN, and describes their energy demands and how they may influence the network design. This assessment is informed by site visits which have been conducted to the major potential building connections, and subsequent data requests made to the building owners or occupiers.
2.1 Identification of potential customers – scoping
2.1.1 Selecting suitable customer types The size and type of customer can have a significant impact on the development of DHN schemes. In general, customers are required who provide a large heat load, have an existing system which can be easily (and economically) connected to a DHN, are willing to sign long heat supply contracts, and are in a location suitable for connection. The mix of customers is also important and whilst the individual nature of heat demands is not critical, it is important to have a diversified demand which presents a relatively steady requirement for heat throughout the day and throughout the year. Private sector commercial customers will usually have a commercial driver for connecting, and will require an attractive heat tariff. They also tend to be less comfortable with long term contracts. Public sector organisations are good target customers for the early phases of DHN development and will generally take account of non-commercial benefits, though an economic proposition is still important. Therefore the most suitable customers in Stockport for the first stage of a town centre heat network are those which present a large and preferably diverse heat load, and in the public sector. This section identifies potential customers by examining the following: x Previous studies – original scope of customers x Revised scope of potential customers
2.1.2 Previous studies – original scope of customers A study carried out by Arup in 2011 originally investigated the potential for developing phase 1 of a town centre wide District Energy System to include the following buildings: x Stockport Town Hall x Stopford House x Fred Perry House x Grand Central Pool x Mottram Street However, subsequently the operators of Mottram Street installed a biomass boiler system connected to a district heating system under a funding programme (ECO) that ties the funding to the CO2 savings made. As a consequence, the DH study was then changed to remove Mottram Street residences replacing this with Stockport College. At this stage, the location of the energy centre was proposed to be adjacent to Stockport College. The Grand Central development was not included due to the uncertainty at the time of what the development would include. AECOM Feasibility Study 10
Capabilities on project: Building Engineering
This feasibility study showed the scheme was not viable: a large capital expenditure of DH pipework and other issues resulted in a low estimated sale of heat price (3 p/kWh) and a low IRR for Gas CHP of 2.2% and 1% for biomass CHP.
2.1.3 Revised scope of potential customers During consultation with Stockport Metropolitan Borough Council and a walk-round site visit, some additional information has thrown light into the potential buildings to form part of the DH network: x The Grand Central Pool CHP plant is ready for renewal and a direct replacement has a ~5 year simple payback. There are 6 new boiler burners installed February 2013, with 6 additional new boiler burners to be installed later in 2013, and 2 new condensing boilers also to be installed in 2013; x A shopping centre to the north which had been proposed as a potential candidate is unlikely to be suitable following survey as it does not cover the whole site noted and is currently in administration. While there would not necessarily be any objection to connection to a DH system, not money would be available for carrying out any works; x Although more detailed information is now available about the buildings within the Grand Central Development, this is still a long way off from construction. The development at this point in time appears to include a hotel and 8 office blocks, with some car park facilities. x To the East of the Inland Revenue (Archer House) is the Police Station, but this building is being vacated at the current time and it is not clear what plans exist for the building.
Most of the additional buildings identified for connection have proved not to be suitable as they are being sold off or redeveloped. Other smaller potential users identified are not likely to be viable. A potential candidate hosting DWP 6 is not suitable as it was constructed under a PFI contract 7. The old post office site to the north of the swimming pool is also a potential development site but again this is not expected to come forward for some years. In view of the above limitations, a proposal has been made for a reduced network option with a view to identifying whether the Council could implement a starter network that could then be developed into a more commercially-led scheme later in parallel with the new developments. We have also considered the linking of the network to the Mottram Flats which currently appear to have more boiler capacity than they need (though their gas boilers rather than their biomass boiler which is fully used for the flats) but the high level of uncertainty regarding heat costs has resulted in the exclusion of this from the study. Potential for adding the Mottram Flats to the scheme could be included at a later stage should certainty regarding levels of supply and cost become acceptable.
2.1.4 Proposed Phase 1 Starter Scheme The starter scheme could include: x The Civic buildings (Town Hall, Fred Perry House and Stopford House). Stopford House and Fred Perry House share an energy centre with boilers located at Stopford House. x Possible addition of Archer House (being vacated by Inland Revenue). This is a 15 years old, five floor office block with mezzanine plant room within the roof space comprising steel frame and brick cladding. Cedar Professional Services is acting as contract manager for Archer House on behalf of the landlord. HMRC staff will be vacating prior to January 2014, and the building will be vacant and cleared by April 2014. It is currently on the market for sale and to let. In principle, Cedar has indicated that they would be in favour of joining a District Heat Network in Stockport.
6 Department for Work and Pensions 7 Private Finance Initiative AECOM Feasibility Study 11
Capabilities on project: Building Engineering
A distributed network model appears to be appropriate, with enough space within the Civic building plant rooms to install a CHP (Town Hall) and the Boiler plant being in Stopford House. This may also supply Archer House as well subject to space availability in the plantroom.
2.1.5 Phase 2 expansion potential There are different options to carry out the potential expansion in Phase 1: Option A: the future extension of the network to be considered could be to the west, to the new Grand Central development and Grand Central Pool, and to the east, to include the redevelopment of Covent Garden. Covent Garden flats are some 500m to the north east of Stopford House and could be connected. Further residential development is planned adjacent to Covent Garden but this is probably 3-5 years away and the quantum is currently uncertain. Further connections here could be considered in future phases of expansion once details are known. It is assumed in option i that a central energy centre is located at Grand Central. Option B: another expansion opportunity may be offered by the connection of the starter scheme to Stockport College. Within the College site, it is envisaged that a first connection could be made to the Roland Hadlow building, as the boilers here also serve also Reuel Harrison and George Wood buildings which together make up 68% of the overall College heat demand. In addition, there could be potential also to connect to the Joan Bakewell building plant which also provides heat to the Sir John Whitworth building. These are 2 new buildings planned for the site with a heat demand of 23% of the overall College site. The remaining buildings amount to about 9% of total heat demand and may be included at a later stage (Greek Street and University Centre). Pipe routes through buildings look complex as there are a number of very different buildings on the site. However, it may be possible to route some pipework at roof level rather than run it in the ground. It is assumed in option ii that additional heat generation plant is located at the college as part of a distributed heat supply scheme. Option C: a third option for consideration could be to expand fully to include Stockport College plus the new Grand Central development, Grand Central Pool and Covent Garden flats. In option iii, it is considered that a centralised energy centre is located on land adjacent to the college providing heat to the entire scheme. Option D: this option considers the possibility of further expansion of option A to include the College and thus all buildings covered in the study, with the energy centre located at the Grand Central.
2.1.6 Future expansion potential There may be scope for further expansion of the scheme to areas not identified as part of this study, resulting in a wider town centre network.
2.2 Heating energy demands Energy demand information has been collected from each of the proposed buildings as summarised in Error! Reference source not found.. Data requests were made to stakeholders and site visits were undertaken to gather information to inform this study. The same level of information was not made available for all buildings and assumptions were required where sufficient information was not obtained. A summary of this review and data gathering process is discussed in the section below, and further information on the energy demands and characteristics of each building is provided in Error! Reference source not found..
2.2.1. Buildings included in the study Town Hall: monthly gas utility data was provided which was adjusted for boiler efficiency. No specific information was provided on boiler efficiency so a default estimate was used (80%) to reflect the higher performance expected AECOM Feasibility Study 12
Capabilities on project: Building Engineering
of more recent boilers. Peak demand was estimated from the installed boiler capacity. Electricity half hourly data was provided for Stopford House which included Town Hall so estimated consumption was calculated extracting the Stopford House consumption based on floor area.
Fred Perry House: demand was calculated from monthly heat meter data at Fred Perry House. Heat is supplied from Stopford House boilers as there are no boilers at Fred Perry House. Boiler efficiency was calculated from the gas input to Stopford House boilers and the boiler meter readings (78%). Peak demand was estimated from weighted consumption from installed boiler capacity. Electricity half hourly data was available for Fred Perry House.
Stopford House: demand was calculated from monthly boiler meter readings subtracting the contribution for heat supplied to Fred Perry House. Boiler efficiency was calculated from the gas input to Stopford House boilers and the boiler heat meter readings (78%). Peak demand was estimated from weighted consumption from boiler capacity. Electricity half hourly data was provided for Stopford House which included Town Hall so estimated consumption for Stopford House was calculated extracting the Town Hall consumption based on floor area.
Archer House: no specific demand data was available so monthly demand was estimated from the annual heat demand stated in the Display Energy Certificate (DEC), using relevant degree day data to obtain a monthly profile, adjusting also for hot water with an estimated allocation of 10%, except July and August where 100% of demand was allocated. No specific information was provided on boiler efficiency so a default estimate was used (75%). Peak demand was estimated from the installed boiler capacity. The electricity demand was estimated from the annual demand stated in the DEC, equally distributing across the year.
Covent Garden: monthly gas input data was provided which was adjusted for boiler efficiency. No specific information was provided on boiler efficiency so a default estimate was used (65%) based on information provided which suggests that the boiler is over 20 years old and in poor condition. Electricity quarterly data was available and monthly consumption was estimated from each quarter figure by equal spread across each quarter’s months. There are 49 flats and the gas data suggests an average annual consumption of over 15MWh per flat. This is relatively high therefore it is suggested that these flats should be connected alongside investment in improvements in fabric energy efficiency. To ensure that the economic analysis of the DH network is no over optimistic, a demand of 10 MWh per flat has been assumed, based on a 33% improvement in energy efficiency and local network efficiency. A demand of 10MWh per flat is typical of comparable units and could be achievable via improved fabric measures (e.g. insulation) and potential improvements to the heat network distribution as part of the retrofit. An estimated peak demand for the adjusted consumption has been taken as 735 kW. The 2011 Housing Energy Tool8 produced for the Cambridge Housing model suggests average energy consumption of purpose built flats of about 7.4 MWh, with an average of 14.4 MWh for average semi-terrace dwellings built between 1945 and 1964. The average across all dwelling types is estimated at about 15.3 MWh. Therefore the aim of achieving 10 MWh per flat following refurbishment would appear to be a sensible proposal.
Grand Central Pool: no specific demand data was available so monthly demand was estimated from the annual heat demand stated in the Display Energy Certificate (DEC), using relevant degree day data to obtain a monthly profile, adjusting also for hot water with an estimated allocation of 32%9, except July and August where 100% of demand was allocated. No specific information was provided on boiler efficiency so a default estimate was used (75%). Peak demand was estimated as total annual demand / 876, i.e. a 10% load factor. The electricity demand was estimated from the annual demand stated in the DEC, equally distributing across the year.
8 https://www.gov.uk/government/publications/cambridge-housing-model-and-user-guide 9 The Good Practice Guide 219: Energy efficiency in swimming pools available at http://www.swimming.org/assets/uploads/library/Energy_Efficiency_in_Swimming_Pools_219.pdf AECOM Feasibility Study 13
Capabilities on project: Building Engineering
Grand Central Development: projected area data for the proposed development buildings was provided by Hannan Associates (see Appendix 3) together with a wide range of benchmarks for both, the hotel and the offices blocks. There seems to be a great degree of uncertainty though about the estimates for energy demand of the new buildings at the Grand Central redevelopment. Hannan Associates indicated that TM54 appears to suggest that the standard benchmarks are not strongly representative of actual performance and provided some live data to support this argument. Due to this high level of uncertainty, additional research has been reviewed as follows: Hotel: Whitbread opened their first low-energy hotel in Tamworth (Premier Inn) in 2010 and heating demand from Corporate Social Responsibility data has been estimated as follows:
Heat Demand, Electricity Demand (including kWh/m2, (of which demand for cooling), kWh/m2 domestic hot water)
Part L 2006 Benchmark 278 (118) 80
Not provided (assumed to Whitbread Low Energy Hotel, Tamworth, estimated from CSR data 100 (70) be 80)
This hotel features the following energy efficiency measures: x Ultra high thermal performance and air tightness x Heat recovery ventilation x Hot water heat recovery (from greywater system and catering) x Low flow (aerated) taps and showers x LED lighting
As details are not known for the specification and energy performance aims for the Grand Central hotel and following evaluation of all available data, an average figure of 175 kWh/m2 has been selected of which 55% has been allocated to the provision of hot water. 80 kWh/m2 has been estimated as electricity demand. Offices: following research on some actual offices heating and electricity demand the following cases were examined:
TOTAL Heat Electricity Demand (including Demand, kWh/m2 demand for cooling), kWh/m2
Of which domestic hot water (or baseload) demand, kWh/m2 shown in brackets where known Recent University of Cambridge desk-based research 65 100 Example iconic low-energy offices: BRE Environmental Building (at the BRE campus, Garston) 65 (5.5) 48 Elisabeth Fry Building at University of East Anglia 32 (4.8) 61
Heelis (National Trust Headquarters) 76 (5 estimated) 31 Nottingham Jubilee Campus – non-residential buildings – purpose built low energy campus 49 103 AECOM Feasibility Study 14
Capabilities on project: Building Engineering
Again details are not known for the specification and energy performance aims for the Grand Central offices therefore following evaluation of all available data, an average figure of 60 kWh/m2 has been selected of which 10% has been allocated to the provision of hot water. 90 kWh/m2 has been estimated as electricity demand. Using relevant degree day data a monthly profile was obtained, adjusting for hot water as described above except July and August where 100% of demand was allocated. Boiler efficiency for all Grand Central buildings has been estimated as 90% as this is a new build. Peak demand was estimated as total annual demand / 876. i.e. a 10% load factor. The electricity demand was estimated using the benchmarks identified above to obtain an annual demand figure. Stockport College: annual gas consumption data were provided for Roland Hadlow Building, Reuel Harrison Building, George Wood Building, Sir Joseph Whitworth Building and Joan Bakewell Building. Monthly demand was estimated using relevant degree day data to obtain a monthly profile adjusting also for hot water with an estimated allocation of 12%10, except July and August where 100% of demand was allocated. The results were then adjusted for boiler efficiency. No specific information was provided on boiler efficiency so a default estimate was used of 75% except for the 2 new buildings (Sir Joseph Whitworth Building and Joan Bakewell) where the estimated efficiency was taken as 90%. Peak demand was estimated as total annual demand / 876 as no other data was available. Annual electricity demand was provided for each of the buildings.
The monthly data was used to determine the annual heating demand profile for each building.
10 See Appendix 4 AECOM Feasibility Study 15
Capabilities on project: Building Engineering
Annual Assum e d Electricity Annual Heat Estimated Peak Average Building Demand Demand Heat Demand Existing Boiler (and data source) (MWh) Heat Demand Rank by Size (MW) Efficiency (%) (MWh) Electricity Demand Rank by Size & Option & Option & Option & Option & Option & Option Starter Starter A B C or A+D A B C or A+D 1,168 1 80% 1,103 Town Hall Monthly Data 1 3 2 4 Half Hourly Data 2 3 3 4 (Jan 12 - Dec 12) (Plant Capacity) (Default assumption) ( D e c 11 - N o v 12 ) 302 0.38 78% 465 Fred Perry House Monthly Data 4 7 5 8 (Est. 10% annual Half Hourly Data 3 5 4 6 ( O c t 11 - S e p 12 ) demand) (From M eters) ( D e c 11 - N o v 12 ) 1,039 1.30 78% 1,660 Stopford House Monthly Data 2 4 3 5 Half Hourly Data 1 2 2 3 ( O c t 11 - S e p 12 ) (Plant Capacity) (From M eters) ( D e c 11 - N o v 12 ) 697 0.44 75% 435 Archer House 3 5 4 6 4 6 5 7 DEC (30 Jun 2013) (Plant Capacity) (Default assumption) DEC (30 Jun 2013) 518 1 65% 37 Adjusted M onthly Covent Garden flats Data 6 7 (Default Quarterly Data 7 8 (Feb 12 - Jan 13) (Estimated) assumption/age) (Feb 12 - Jan 13) 2,976 3 75% 1,099 Grand Central Pool 1 2 (Est. 10% annual 4 5 DEC (23 Dec 2011) demand) (Default assumption) DEC (23 Dec 2011) Grand Central re- 2,638 3 90% 3,470 2 3 (Est. 10% annual (Default 1 1 development Estimates demand) assumption/new) Estimates 75% Stockport College - existing/90% 1 1 1 2 Main 4,669 6 new buildings 3,088 Annual Data (Est. 10% annual (Unknown) demand) (Default assumption) Annual Data (Unknown)
Table 3: Annual Heat Demands and Peak Heating Demands for Potential Building Connections. AECOM Feasibility Study 16
Capabilities on project: Building Engineering
Starter Scheme (MWh) 600 500 400 Archer House 300 Stopford House 200 Fred Perry House 100 0 Town Hall
Figure 2: Monthly heat demand profile of Starter Scheme buildings
All buildings (MWh) 2500
2000 Stockport College - New Stockport College - Main 1500 Grand Central re-development Grand Central Pool 1000 Covent Garden flats Archer House 500 Stopford House Fred Perry House 0 Town Hall
Figure 3: Monthly heat demand profile of all the buildings/sites considered in the study.
2.3 Cooling energy demand Cooling demand can help to diversify the heat demand profiles of an energy network, by providing a use for heat from CHP engines in the summer period in absorption chillers. This is known as Combined Cooling, Heat, and Power (CCHP). Cooling can be provided to buildings either from centralised absorption chillers and a cooling AECOM Feasibility Study 17
Capabilities on project: Building Engineering
network, or by the use of localised absorption chillers in each building or group of buildings taking heat from the DH network. Some of the buildings which are being considered as potential customers do have cooling demands. There are a few DX/Split systems in the Town Hall and Stopford House and a central chilled water system in Fred Perry House. Six Mr Slim Split AC units are used in Archer House to cool server rooms. At the College there are four AC units which serve Reuel Harrison, University Centre, Hexagon & George Wood buildings; AC to server rooms and evaporative cooling to workshops in the Sir Joseph Whitworth building; and AC to server rooms and some teaching areas with heat recovery wheel in the Joan Bakewell building. However cooling demands are not currently sub-metered within the buildings (any electricity consumption for cooling is included in the overall electricity demand) and therefore robust data on the actual cooling demands is not available.
The benefits provided by CCHP in terms of CO2 savings are likely to fall over time where the heat source is gas-fired CHP. Even under current grid electricity conditions, the most efficient electrically driven chiller can provide coolth with equivalent CO2 emissions than by using heat from a natural gas CHP system via a single-effect absorption chiller. As the electricity grid continues to decarbonise, the electric chiller option will increasingly become lower carbon than CCHP. Therefore absorption chillers may only provide a long term environmental benefit where a much lower or zero carbon form of heat can be obtained, ideally from a waste heat source or deep geothermal heat which would otherwise be surplus heat in the summer period. In light of the uncertainties around the cooling loads, the absence of any significant cooling loads, and the lack of environmental benefit provided by CCHP, this report does not consider cooling further. AECOM Feasibility Study 18
Capabilities on project: Building Engineering
3 Energy Supply Options
This section provides an assessment of potential energy supply technologies which can be used to provide heat and electricity as part of a distributed energy scheme. The assessment is split into two stages: the first provides an overview of a wide range of technology options which may be applied to DHN schemes and identifies which are the most suitable for the town centre scheme, and the second provides a detailed assessment of the technologies deemed most appropriate.
3.1 Configuration of energy supply technologies For a DHN, two basic options for heat supply plant configuration in the initial phase of the scheme are considered: x Centralised: In this option, the majority of main heat supply system and peak / back-up boilers are located in a centralised energy centre. The DH network is used to provide all heating to the customers and sized for peak load. The benefits of this option are economies of scale through purchase and operation of centralised plant, and the reduction in need for dispersed plant in individual customers’ buildings (with possible increase in useable space). Disadvantages include the requirement for a large central energy centre (and hence land take), the need to size the network and connections to deliver peak loads (which increases pipe costs), redundancy of existing boilers which may have life remaining and therefore a value, and a lower level of resilience with no back-up at individual customers. x Decentralised: In a decentralised option, some or all boiler plant is retained at some or all of the customers’ sites, and the CHP plant is located at a separate energy centre, or at one of the customers’ buildings. The CHP plant provides the ‘base load’ heat with peak / back up being supplied by the decentralised boilers. Advantages of this option include reduced land take for central plant, potential for sizing the DH network for a lower ‘base load’ heat provision, greater resilience for customers, and maximising the use of existing assets. Disadvantages include the need to operate, maintain, and replace dispersed plant (with a possible loss of economy of scale), possibly more complex ownership and operation structures for the boilers, and less future flexibility. The choice between a centralised and de-centralised system has an impact on the network design. In the centralised option, it is assumed that all heat will be supplied by the network, and that customers have a heat supply contract for their entire demand. This means that the economic performance of the scheme can be assessed for the total heat demand, with an economic benefit being derived from the reduction in cost compared to the business as usual individual boilers. The need for a peak sized network may increase network costs, but does mean that the scheme could allow provision of heat from alternative sources without relying on peak provision from local gas boilers. There may be a perceived lack of resilience for some customers, with no on-site boiler plant, but in reality, the high reliability of DH networks means that this is unlikely to be a problem for most types of buildings. The decentralised boiler option may have a number of variations: x The network may be sized for peak loads or base load. A peak load network will incur higher costs, but allow for future flexibility and the move to a centralised system with alternative sources of heat. A base load sized network will result in lower initial investment costs, but limits future flexibility by requiring the on-going maintenance of on-site boilers for peak use. x The decentralised boilers may be owned by the main scheme operator, and the customer contract would then cover all heat provision. The scheme operator would be responsible for the maintenance and operation of the boilers to ensure heat supply, and may own or lease the boilers. Access arrangements would need to be considered for repair and replacement. The economics in this situation are based on total heat provision compared with the business as usual boiler heat provision. x The decentralised boilers may be retained by and operated by the customers, and the DH scheme operator is responsible for base load heat supply only. In this situation, the customers would be responsible for the AECOM Feasibility Study 19
Capabilities on project: Building Engineering
maintenance, operation and replacement of peak / back up boiler plant and purchasing gas. The scheme operator would sell a base load heat supply to the customers at a cost which is lower than the equivalent customer’s gas cost and efficiency adjustment. This option reduces the scope of service for the scheme operator, and the economics of the scheme are based on the provision of base load heat only and a correspondingly lower heat tariff. Regardless of the economic performance of the DH scheme, this option may not be as attractive to customers due to the requirement for them to continue to have responsibility for the continued operation and maintenance of distributed boiler plant. In addition, the gas price paid by the customers may be higher than that which could be achieved by the DH company due to their greater buying power. These options are all included in this section. The assessment of heat supply technologies therefore needs to consider: x Decentralised heat sources in potential customers buildings x Energy centre technology options
In addition to these, the location of an energy centre is also considered as this will both define the layout of the network, and impact on the choice of technology.
3.2 Decentralised heat sources for a Phase 1 starter scheme The Starter Scheme could be set up as a decentralised network with one or two CHP plants sited at the Town Hall and using existing boilers at Stopford House and Archer House. This system has a requirement for a total network capacity of just over 3 MW which could be served by the Town Hall CHP of around 1 MW and the existing boilers at the other buildings.
3.3 Decentralised heat sources for Phase 2 expansion options There could be potential for expansion of the original decentralised system to include the Stockport College. This network has a requirement for a total network capacity of about 9.5 MW and would include the boilers in the plant at the Roland Hadlow Building plus those in the plant serving the new Sir Joseph Whitworth and the Joan Bakewell building, with additional 1 MW (approx.) CHP capacity to that in the Starter Scheme.
3.4 Energy centre technology options 3.4.1 Standalone technology options – short term In the short term, technologies will be required which can supply heat to what is likely to be a relatively small DHN scheme in the early phases. Options will be constrained by the town centre location of the potential heat network, the need to site an energy centre or plant close to the buildings to minimise capital costs and reduce distribution losses, and the constraints on available space for an energy centre in the local area. x The supply technologies will need to meet the following requirements: x They are currently commercially available and reasonably mature to provide a low risk initial investment. x They are capable of providing CO2 savings in the current UK energy mix. x They can operate economically when connected to the DHN such that the entire scheme is deemed economically attractive for investment, allowing customer benefits. x They can operate at the scale of scheme envisaged for an early phase network and meet the energy demands posed by the scheme. Modularity may also be important in the build out of a first phase. AECOM Feasibility Study 20
Capabilities on project: Building Engineering
x They can meet planning constraints imposed by a town centre location, including for example air quality, noise, visual impact. x They can be hosted on land which is available in a first phase network. Potential supply options have been reviewed. A range of systems are available which may meet the above requirements, but the most mature and potentially the lowest risk and most reliable technology is natural gas-fired CHP. This is compact, flexible, available in a range of suitable sizes, and suited to modular operation on phased networks. Other variations around gas-fired CHP may also be suitable including bio-gas sources, gasification, and pyrolysis. However, each of these is less mature, potentially more unreliable in terms of fuel supply and processing, and potentially less economic in the absence of incentives. These systems are also more suited to larger scale applications, and require significant space. Biomass boilers could be an alternative to gas CHP subject to space for the boiler installation and fuel storage (and delivery access), the cost of fuel, and the RHI benefit. Whilst the RHI can offer an incentive for biomass boilers, this is aimed at ensuring stand-alone biomass boiler schemes are cost effective, and they may not cover the additional costs of a heat network. It should be noted that whilst biomass boilers have been selected for Mottram Street, this has required the input of grant funding from ECO to enable the scheme to be viable. The review demonstrates that whilst there are a number of technology options, the location and size of the scheme promotes gas fired CHP engines as the most suitable option. In addition to the gas fired CHP system, gas boilers would be used as a back-up to provide heat when the CHP system is not operational, and to provide heat during peak heat demand periods. A summary of the review of potential supply options is given in Table 4 below. AECOM Feasibility Study 21
Capabilities on project: Building Engineering
Table 4: Summary of energy supply technology options
Suitability for Phase Technology Comments 1 Whilst technically viable, this is not expected to lead to financial savings which can justify the costs of the Community gas boilers Not suitable distribution network, and there are unlikely to be any environmental benefits. Technically suitable for connection to a DH network and will result in environmental benefits. Requires significant space for fuel storage. Biogas requires particular consideration of the source of fuel; no local sources have been identified. Also requires Community Potential option consideration of air quality. biomass/biogas boilers Not expected to lead to financial savings which can justify the costs of the distribution network although the RHI may partially offset this. There are risks surrounding future availability and cost of fuel, but the costs could be partially offset by the RHI. Large power station heat No local power stations have been identified which could Not suitable take-off supply heat to the town centre network. No suitable industry or other high temperature waste heat Industrial/commercial source has been identified in the vicinity of Stockport town Not suitable waste heat centre. However sources could connect to a larger city wide network if viable. Gas CHP combines a mature, economic, technology with significant CO2 reductions. There are no fuel constraints. Gas-fired CHP Potential option Consideration is required of air quality (in relation to NOx) in the town centre.
Biomass CHP can deliver large CO2 reductions and requires consideration of air quality. The technology at the proposed scale is currently considered to be immature / pre-commercial. There are significant concerns over the availability and Biomass-fired CHP Not suitable future cost of fuel as for biomass boilers. The area required for an energy centre would be relatively large to allow for fuel delivery, storage, and processing. Biomass CHP may be suitable for connecting to a larger city wide network once the heat load is sufficient. No local sources of biogas have been identified for use in a CHP system. Biogas generated in sewage treatment Biogas-fired CHP Not suitable works is typically used entirely for the sewage treatment process. AECOM Feasibility Study 22
Capabilities on project: Building Engineering
This is currently considered an immature technology, and uneconomic compared with gas CHP engines. Whilst the Fuel cell CHP Not suitable electrical efficiency can be higher than for engines, the significant additional capital and operation costs outweigh this benefit. There are no EfW plants in the locality of the town centre Energy from waste - heat network. The network could connect to an EfW Not suitable incineration plant/s in the future if a town/city wide network grows which connects to a number of additional heat sources. AD requires a significant land take, and is unsuitable for a town centre location. AD systems located outside the city Energy from waste - Not suitable centre could connect to a future city wide network if viable. Anaerobic Digestion, Due to the significant feedstock requirement, AD is only ever likely to be part of the heat supply solution.
Heat pumps are not predicted to save much (if any) CO2 under the current grid mix unless a higher temperature Heat pumps - source (such as river water, or waste / exhaust heat) can Air, water, ground, waste Not suitable be used to improve their efficiency. heat They may be more suitable for later phases of the network with decarbonisation of the grid.
3.4.2 Standalone technology options – long term The selection of technologies for the longer term is inherently uncertain and will depend on a number of variables. Firstly the evolution of the heat network scheme needs to be considered, and technology options will need to be selected that can meet the energy demands of the mature scheme. The network may increase in size, and therefore have a higher heat demand and base load. A future technology option could be used to replace existing plant, and new energy centres may be constructed in line with phased extensions to the DHN. The step change increase in energy loads provided by mature schemes or aggregation of existing plant may open opportunities for using types of heat generation plant which are not available or viable for smaller schemes. Alternatively the increase in size may mean that more than one energy centre and more than one technology type is used to provide heat into the system. The increase in network extent may open up new opportunities for locating an energy centre, and could potentially justify longer transmission mains from the energy centre to the DHN. Secondly, external factors need to be considered which may influence technology and fuel selection. These include market conditions for fuel, maturity and development of technology, and the CO2 intensity of the electricity grid. This intensity effectively determines the CO2 savings from CHP-based and heat pump based DHN schemes. There is uncertainty around all of these variables and projections are required which present reasonable cases, with the possibility to examine sensitivities around these.
The CO2 intensity of the electricity grid in particular is important to consider and there are complexities in how this is dealt with. At the simplistic level: x In the short term it is expected that electricity generation will continue to be heavily dominated by fossil fuels and therefore have a relatively high CO2 intensity. Therefore technologies which generate electricity alongside heat (CHP) can provide large CO2 savings. x In the longer term, it is expected that the grid will decarbonise significantly with extensive uptake of renewable technologies, nuclear power, and potentially carbon capture and storage (CCS). However it is also expected that an element of gas generation will remain for peak generation. If the CO2 intensity is sufficiently low, then an electricity-powered technology (such as a large heat pump) could be more suitable most of the time and gas CHP may no longer provide CO saving benefits except at peak periods.
AECOM Feasibility Study 23
Capabilities on project: Building Engineering
The transition period during which the grid will decarbonise has a large number of uncertainties. In addition, any assessment should consider not only the average grid CO2 intensity, but the marginal CO2 intensity - this is the intensity of electricity generation based on the marginal technology which will be impacted by a DHN scheme. Current DECC projections suggest that non-CCS gas CCGT (combined cycle gas turbine) generation may remain in operation until at least 2050 to provide peak electricity generation, and so CHP generators operating at peak times may be offsetting electricity with a gas CCGT emissions factor. Given these uncertainties, there are a number of options for future technologies: x The use of larger systems suited to larger aggregated heat demands. This step change may open up a range of new systems not suited to early phases, such as capture of heat from new power stations if suitable located. x The use of electricity driven technologies, alongside CHP-based systems. By varying the use of technology under different grid generation conditions, CO savings could be maximised.
x The use of technologies which make use of alternative feedstocks such as biomass and waste. x The use of a mix of different technology types assuming that a number of heat suppliers are connected to the network. x The greater use of thermal storage to optimise the system.
3.5 Proposed technologies for analysis This report is concerned in the feasibility assessment of a phase 1 network and so will consider the assessment of short term technology options. From Table 4, gas fired CHP engines and biomass boilers are identified as potential options. These are discussed in further detail. In addition to these two options, gas fired boilers will be required for peak loads and back up. 3.5.1 Gas fired CHP engines In general, the economics of using an energy centre and DHN to supply heat to a number of buildings are much improved, as are the environmental benefits, when the heat is provided by a Combined Heat and Power plant (CHP) which generates electricity as well. Typically the CHP scheme is designed to be “heat led”, so that all of the “waste heat” produced as a bi-product of electricity generation is used and none is simply released. The electricity is either used on site, displacing grid supplied electricity, or it is exported to the grid. Ideally all of the electricity is used on site and none is exported to maximise the income from electricity generation. However, this requires a suitable host site with a large electrical demand or the construction of a private wire network to sell electricity direct to customers. In most cases these situations are not available and most of the CHP electricity generated will be sold in bulk to a licensed supplier for onward sale to customers Any CHP scheme should have a top-up and back-up energy supply, typically gas-fired boilers. AECOM Feasibility Study 24
Capabilities on project: Building Engineering
Figure 4: The efficiency benefits of CHP over conventional power generation and boilers (Source – CIBSE AM1211)
Gas-fired CHP based on reciprocating engines has been used widely for many years and is considered mature and economically viable. The most noticeable advancement over the years is higher shaft efficiency and lower emissions. The normal system configuration is that an electrical generator is connected to the engine mechanically and a heat exchanger is used to extract the heat from the engine jacket, oil cooler and exhaust gas. Apart from natural gas (i.e. most prevalent fuels), gas engines have been developed to run on fuels which have lower heating values and higher contents of impurities such as anaerobic digestion gas (biomethane), landfill gas and syngas. A CHP plant based on a gas engine can produce heat from three main sources - the engine jacket cooling system, the oil cooler, and the exhaust gases. Typically two-thirds of the heat is available in the engine jacket/oil cooler while the remaining one-third is in the exhaust. A gas-engine CHP is normally used in low temperature hot water applications due to the maximum temperature in the engine jacket circuit (typically 95oC). Gas reciprocating engine CHP is considered as potentially the most suitable heat source for a DHN in Stockport town centre. 3.5.2 Biomass boilers Biomass refers to the use of a wide variety of organic material such as wood, straw, dedicated energy crops (e.g. willow coppice or specific types of grasses), sewage sludge and animal litter for the generation of heat, electricity or motive power.
Biomass is regarded as a low carbon fuel because the CO2 released when it is converted for energy purposes by combustion/burning or fermentation and distillation to produce liquid transport fuels is largely offset by that absorbed by the organic material during its growth.
With the appropriate management this emitted CO2 can be recaptured provided new growth of the same amount of biomass is achieved. However the carbon balance may not be achieved overall as a result of energy used by harvesting vehicles or in transporting biomass to its point of use. Therefore careful selection of biomass source can be important. Biomass heating plant is available in a wide range of sizes from a few kWs to many MW of heat. At the smaller sizes, fuel is usually supplied as wood pellets. At the larger scale, wood chip is one of the most common fuels at
11 Combined Heat and Power for Buildings. CIBSE AM12. 2012. AECOM Feasibility Study 25
Capabilities on project: Building Engineering
present. Wood chip is lower cost than pellets, but also has a lower energy density and therefore requires greater transportation and storage capacity. The advantages and disadvantages of supplying a DHN from communal biomass boilers are identified below. The advantages are:
x Environmental benefits as a result of the low kg CO2 per kWh for biomass compared to gas x The eligibility of the technology for the Renewable Heat Incentive (RHI) x Ease of future heat source substitution.
However, any such scheme would require: x An energy centre large enough to incorporate not only the boilers but also a fuel store and a thermal store (to avoid operating the boilers at low loads), plus gas-fired top-up/back-up boilers x Measures to ensure air quality standards are met (there are concerns over particulates) x A suitable access route to the fuel store for delivery lorries x A secure source of biomass fuel over a significant period, say 20 – 25 years. In general, biomass boilers are only economic compared with gas boilers when the RHI is obtained. This means that there are no cost savings without the RHI which can be used to fund the required energy centre and distributed network infrastructure capital and running costs. In addition, the RHI is geared at a level for economic operation of biomass boilers with no heat network – in general the incentive is unable to support the investment of a heat network.
3.6 Potential energy centre location An energy centre site will be required for the proposed expansion of the phase 1 starter scheme into the Grand Central Redevelopment, Grand Central Pool and Covent Garden flats (Phase 2 Option A). For this, the proposal is to site the energy centre within the Grand Central Redevelopment. Phase 2 Option D proposes the potential expansion also into the College as part of this network with the energy centre att he Grand Central. Should the expansion include also Stockport College, either as part of Phase 2 (Option C) or as part of a later expansion phase, an additional energy centre location has been considered in a site to the west of the College. The College own the land and other adjacent land (which includes grade II listed buildings currently disused). The local PCT also owns land adjacent to the site that is currently unused. There is therefore local development potential. The site has space to expand and would probably be suitable for a wider DH network. The main disadvantage is the location being at the south end of the potential DH system, and therefore requires a longer heat transmission main. AECOM Feasibility Study 26
Capabilities on project: Building Engineering
4 Network Layout Assessment
This section describes the potential network route which has been identified for a town centre network. The exact routing of the network is likely to change at detailed design stage, but the scheme outlined here has been based on the major opportunities and constraints – largely determined by the location of existing plant rooms and the potential energy centre, and aiming to avoid busy transport routes and roads with high utility congestion where possible. The network route and sizing also provides future-proofing to allow for future expansion. The proposed DHN scheme is illustrated via network sketches and schematics, and has been used in the feasibility modelling.
4.1 Network route proposal The development of DHNs requires suitable routes to be found to install the networks. The installation of pipes and associated equipment is expensive and disruptive and therefore the routing needs to be carefully considered to ensure the network is as efficient as possible, so that the largest amount of heat possible is sold over the shortest length of pipe work possible. Key opportunities considered for the network routing are: x The use of existing roads and pathways where public ownership enables development. x The use of landscaped / pedestrian or internal building areas to reduce disruption to transport routes, and allow lower cost installation. x The use of existing utilities infrastructure such as service tunnels. x The use of minor roads where utility congestion may be less and where traffic disruption could be minimised. x Integration of DHN pipe work installation with other utilities works to prevent additional civil works and associated disruption and cost. The layout has not at this stage considered the presence of existing utilities. Whilst limited information on the location of utilities can be obtained at a strategic level, site surveys will be required during the detailed design of the network to confirm the location of services. Due to the width and nature of the roads used for the routing, it is considered that a suitable route alongside existing utilities will be available. AECOM Feasibility Study 27
Capabilities on project: Building Engineering
4.2 Phase 1 Starter scheme network route The suggested route is based on the proposal of a decentralised network with a CHP located at the Town Hall. It is suggested that the network connection is made at the rear of the Town Hall near the plant room onto Lacy Street turning up Edward Street, then coming onto Piccadilly where a connection will be made into the Stopford House plant room. Slightly further up, the route would turn up John Street to connect to Archer House.
Archer House
Stopford House
Fred Perry H. Town Hall
Figure 5: Suggested route for the Starter Scheme
This proposed scheme connects the core council buildings which offer a lower risk initial scheme. However the network routing allows for future expansion in Phase 2 for connection to additional buildings and sites. For this reason, the network uses the road network rather than routing through the council site, allowing for future flexibility in site use, and even potential redevelopment. AECOM Feasibility Study 28
Capabilities on project: Building Engineering
4.3 Phase 2 expansion options Following the development of a starter network (phase 1), a number of options may exist for expansion of the network. x Phase 2 Option A: expansion of phase 1 to the Grand Central Redevelopment, Swimming pool and Covent Garden Flats with an energy centre located at the Grand Central redevelopment; x Phase 2 Option B: expansion of phase 1 to Stockport College via a decentralised heat supply approach with additional CHP capacity installed at the college site. x Phase 2 Option C: expansion of phase 1 to the Grand Central Redevelopment, Swimming pool, Covent Garden Flats and Stockport College with a central energy centre located at / near the College; x Phase 2 Option D: further future expansion from option A to include Stockport College, retaining a central energy centre at the Grand central development.
These are discussed in more detail on the following pages: AECOM Feasibility Study 29
Capabilities on project: Building Engineering
4.3.1 Phase 2 Options A and D: Network route for expansion with an energy centre located at the Grand Central redevelopment The route for Option A is based on locating the energy centre at the Grand Central Redevelopment, connecting the hotel and offices there and the Grand Central Pool as the redevelopment takes place. To connect to the existing scheme, the route comes through Railway Road onto Wellington Road where a connection is made back up Edward Street. To join to the Covent Garden flats, the route through Picadilly is extended to meet and turn into London Place. The route here joins Covent Gardens and turn upwards at Banbury Street to connect to the plant room there serving the flats. Option D extends the route to join the College boiler plants, whereby the main pipe progresses along Wellington Road to join the Roland Hadlow Building from there and finally enters Junction Road to link to the plant room serving the new Sir Joseph Whitworth and the Joan Bakewell buildings. This route has been selected as requiring the most optimal length of pipe, but considerations need to be given to the potential major disruptions that maybe caused by the laying of a long stretch of piping along Wellington Road.
Figure 6: Schematic of the full scheme connecting all customers, with the energy centre located at Grand Central. In Option A, the college site to the south is not connected.
A potential variation of the above route avoiding Wellington Road has been considered. This involves crossing Wellington Road along Edward Street to meet Greek Street and enter into the College through Royal George Street, connecting to both College plants through here. To link to the Grand Central, another connection is suggested running from Greek Street to Thomson Street and joining the energy centre through the car park due for renovation during the redevelopment. Linking Thomson Street to the car park behind the dwellings would require further investigation to assess whether the pipe could be run through an area of existing housing which are along the northern side of Thomson Street. Some potential routes can be identified, but land ownership would need to be considered. AECOM Feasibility Study 30
Capabilities on project: Building Engineering
Figure 7: Variation route for full scheme with Energy Centre at the Grand Central Redevelopment AECOM Feasibility Study 31
Capabilities on project: Building Engineering
4.3.2 Phase 2 Option B: Network route for expansion to College via decentralised option The route proposed for the potential Phase 1 expansion to join Stockport College through a decentralised network would require an extension to the pipe in Edward Street to join Millbrook Street down joining Wellington Road via Union Street. A leg up from Wellington Road will connect to the plant room in the Roland Hadlow Building whilst another one going down and turning into Junction Road will join the plant room serving the new Sir Joseph Whitworth and the Joan Bakewell buildings. This route attempts to minimise the amount of pipe to be laid within Wellington Road (A6) as works in such a road are considered to be potential of higher complexity and cost due to the nature and high traffic levels.
Archer Stopford & House Fred PerryHouse
Town Hall
College Roland Hadlow
College New buildings
Figure 8: Suggested route for the expansion of the starter scheme to the college, retaining decentralised boilers (Phase 2 option ii). AECOM Feasibility Study 32
Capabilities on project: Building Engineering
4.3.3 Phase 2 option C: Network route for full expanded scheme with energy centre at Stockport College This route is based on the siting of the energy centre in land available adjacent to the College and starts up Royal George Street to join Greek Street. From Royal George Street it enters the College to connect to both College plants through here. The route joins the starter scheme by crossing from Greek Street into Edward Street and also connects to the Covent Gardn flats in the same way as previous routes. To link to the Grand Central area, the route through London Place is extended downwards through Norbury Street to meet Wellington Road, where it turns up. At the point on entry into the Grand Central area through the pedestrian street, the route enters to join to the Grand Central Pool on one side and further up the street to the hotel and offices of the future Grand Central redevelopment.
Figure 9: Main route for full scheme with Energy Central at Stockport College (Phase 2 option iii)
A variation of the above route has also been considered to join the College and the Grand Central areas via the redeveloped car park at the back of Thomson Street as described in the above variation in section 4.1.3.. AECOM Feasibility Study 33
Capabilities on project: Building Engineering
Figure 10: Variation route for full scheme with Energy Centre at Stockport College AECOM Feasibility Study 34
Capabilities on project: Building Engineering
4.4 Land ownership When DHN pipes are routed through private land, agreements will be required with the landowners, and easements needed for future maintenance and repairs. Consideration has been given when possible to prioritise network routes that lie within the public highway corridors and therefore under the control of Council. Key locations where land ownership may need to be considered include: x The route between the dwellings at Thomson Street has been identified as a location where land ownership may need to be considered and arrangements made. x Archer House, where Cedar Professional Services is acting as contract manager on behalf of the landlord. HMRC staff will be vacating prior to January 2014, and the building will be vacant and cleared by April 2014. It is currently on the market for sale and to let. x Covent Garden flats potential redevelopment and ownership: it appears there are planned for the sale and/or redevelopment/refurbishment of these properties and therefore future ownership and contractual leasing agreements would need to be taken into consideration. The potential for encouraging the new future owners to engage and consider the connection to the DH scheme should be further explored. x Grand Central Redevelopment and Swimming pool, which are owned privately and would be of key importance should an energy centre be required at this location, and the network to be routed though this area. x Potential routing of the network through the college site also needs considering. Whilst connections through the site for the college would be accepted by the college, and transmission of heat through the college site (if this helps optimise the DH layout and costs) to other sites would need to allow for access rights. A review of land ownership should be conducted on any further feasibility and design work.
4.5 Programme constraints For the starter scheme, the route selected has no major known impact on existing or planned works and therefore no major programme constraints for the network development appear to exist. However, the development of a DHN should consider any other works which may take place (for example, road resurfacing or utilities replacement) to ensure that the works are coordinated. For the proposed extensions, plans and timings for redevelopment or refurbishment need to be considered to ensure coordination of works and connections. Planned works to consider include: x Covent Garden flats redevelopment/refurbishment; x Grand Central redevelopment; x College redevelopment of adjacent land (with potential for development of an energy centre here).
4.6 DHN pipe sizing 4.6.1 Network details including operation assumptions The network is assumed to operate with a delta T of 30°C, representing a flow temperature of 90°C and a return temperature of 60°C. The limiting maximum flow velocity is assumed to be 2.5m/s, and the limiting pressure is assumed to be 250Pa/m of pipe length. At the detailed design stage, the temperature regime will need to be considered in more detail, in particular taking into account the flow and return temperatures of the heating system in each building, and the potential to reduce these as much as possible to allow the network to operate with lower heat losses and flow rates. AECOM Feasibility Study 35
Capabilities on project: Building Engineering
4.6.2 Phase 1 starter scheme For the starter scheme, the pipes are assumed to be sized for peak load for the network as modelled. This means that a peak heat supply can be provided for each customer, but that no additional capacity is provided. The total network length is 301m (giving a total pipe length of 602m for flow and return). Figure 11 8 provides a schedule of pipe diameters for the starter network. The largest 150 mm flow and return pipe is from the Town Hall after which the main reduces in size to 125 mm for the majority of the main transmission route.
600 w o l f 500 r o f e l
) 400 b n ) r u s u o e t r
d 300 t e ( r e e d m p i ( n 200 p a f o
h 100 t g n
e - L 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 11: Schedule of pipe sizes in the starter network (Phase 1 starter scheme)
In order to accommodate future expansion, the size of the main pipes within Edward Street and Piccadilly have then been adjusted to allow for later additional capacity as required (250 mm) which produce a profile as follows:
400 w o l 350 f r o
f 300 e l )
b 250 n ) r u s u o e t r 200 d t e ( r e e
d 150 m p i ( n p a
f 100 o
h 50 t g
n - e L 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 12: Schedule of pipe sizes in the adjusted Starter network
The results presented have been calculated based on the adjusted pipework as identified above to allow for the future expansion of the network. AECOM Feasibility Study 36
Capabilities on project: Building Engineering
4.6.3 Phase 2 option A. An expansion of phase 1 to include Covent Garden flats and the Grand Central redevelopment and swimming pool with an energy centre located at the Grand Central Redevelopment (Phase 2 option A) shows that the largest 250 mm flow and return pipe is from the Energy Centre to serve the Grand Central redevelopment and swimming pool. Pipes of 150 mm join the energy centre to the starter scheme remaining that size for most of this route. The variation scheme shows a very similar arrangement.
1,400 ) n r u t
e 1,200 r d n a 1,000 w o l f r ) 800 s o f e r e t l e b
u 600 m ( o d (
e 400 p i p f
o 200 h t g n e
L - 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 13: Schedule of pipe sizes in Phase 2 option i expansion
4.6.4 Phase 2 option B. An expansion of phase 1 to the College retaining existing decentralised boilers, and adding an additional CHP unit increases the maximum pipe diameter of 250 mm coming out of the Town Hall reducing to 200 mm on its way to the College. If the additional CHP unit was located at the college, then this capacity could be reduced. AECOM Feasibility Study 37
Capabilities on project: Building Engineering
800 d n
a 700 w o l
f 600 r o f e
) 500 l ) s b n e r u r t u o 400 t e d e ( m r ( e
p 300 i p f
o 200 h t g
n 100 e L - 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 14: Schedule of pipe sizes in Phase 2 option ii decentralised boiler expansion to the College
4.6.5 Phase 2 option C Expansion to add the College to the full network could take place by developing an energy centre located at the College. This also shows that the largest 250 mm flow and return pipe is the longest, running from the Energy Centre extending all the way from the College into the starter scheme.
1,600 d n
a 1,400 w o l
f 1,200 r o f e
) 1,000 l ) s b n e r u r t u o 800 t e d e ( m r ( e
p 600 i p f
o 400 h t g
n 200 e L - 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 15: Schedule of pipe sizes in Phase 2 option iii with a central energy centre located at or near the college.
4.6.6 Phase 2 option D. With the energy centre located at the Grand Central development, there is a greater length of network at the larger diameters to allow transmission of heat to the college site. This results in slightly higher network costs. AECOM Feasibility Study 38
Capabilities on project: Building Engineering
900 ) n r u
t 800 e r d
n 700 a w
o 600 l f r ) s o f e 500 r e t l e b u m 400 ( o d (
e 300 p i p
f 200 o h t
g 100 n e L - 50 65 80 100 125 150 200 250 300 Nominal pipe diameter (mm)
Figure 16: Schedule of pipe sizes in Phase 2 option vi with a central energy centre located at the Grand Central development
4.6.7 Summary of network capital costs and length
Table 5 below provides a summary of the costs for each network option, and the capital costs.
Table 5: Summary of network lengths and capital costs. Network option Length (m) Capital cost (£M) Phase 1 Starter Scheme 301 £2M Phase 2 option A (main route) 1,025 £6.2M Phase 2 option A (variation route) 1,057 £6.5M Phase 2 option B (decentralised boilers with College)12 864 £5M Phase 2 option C (main route) 1,721 £9.4M Phase 2 option C (variation route) 1,585 £9.2M Phase 2 option D (main route) 1,369 £8.7M Phase 2 option D (variation route) 1,468 £8.8M
The results show that a Phase 1 network will be circa £2M, which increases to £5M when connected to the college, circa £6.5M when connected to Grand Central, and circa £9M when connected to all sites.
12 Main Starter Scheme pipes oversized to 250mm although requirement for this configuration only would be lower. AECOM Feasibility Study 39
Capabilities on project: Building Engineering
5 Economic and environmental assessment
This section provides an assessment of the economic and environmental performance of a Town Centre Scheme. It outlines the assessment process and assumptions, and then examines a baseline option and a number of sensitivities and options.
5.1 Overview of Modelling Process An in-house lifecycle cost model developed by AECOM has been used which takes into account capital and operational costs and revenues associated with the DHN scheme, which are compared against the baseline of current operating practice in order to provide a calculation of economic benefit. This section assesses a number of options to identify the most suitable scheme for taking forward to the business case. The following sequence is used to identify the proposed scheme:
1. Analysis of the Phase 1 Starter Scheme using a decentralised approach with a gas fired CHP located at the Town Hall and other existing boilers. 2. Analysis of potential expansion to the Phase 1 Starter Scheme adding the Grand Central redevelopment and Swimming Pool and the Covent Garden flats, with the energy centre located at the Grand Central development. (Phase 2 option A). 3. Analysis of potential expansion to the Phase 1 Starter Scheme adding the College with additional decentralised boilers and an additional CHP unit. (Phase 1 option B). 4. Analysis of potential expansion to the Phase 1 Starter Scheme with all buildings being connected and the energy centre located at the college site. (Phase 2 option C). 5. Analysis of the expansion of the Phase 1 starter scheme with all buildings being connected and the energy centre located at the Grand Central site. (Phase 2 option D). 6. Assessment of energy supply technology. Biomass boilers and gas fired CHP are considered.
The economic modelling is conducted over a 30 year lifecycle period, taking into account all capital costs, operational costs, and revenues. The cost of the DH scheme is compared with the “business as usual” counterfactual cost of heating with gas boilers (based on current plant and expected replacement boilers). The difference in cost between the counterfactual and the DH scheme indicates the cost effectiveness of the DH option and provides the IRR. No discount is modelled on the heat cost – this means that all IRRs presented assume that customers pay the same for heat from the DH scheme as from their existing boiler heat source. If a discount is to be offered for heat, then this will reduce the IRRs.
5.2 Modelling Assumptions Key assumptions are used in the modelling include: x 30 year lifecycle analysis; x Discount rate: 6% (for NPV modelling); x Current energy prices input based on prices being paid by potential heat network customers, or on DECC Quarterly Energy Prices13 and future projections are made in line with the central projections for commercial customers from the UK Government’s Interdepartmental Analyst Group guidance.14;
13 DECC, Quarterly Energy Prices, Table 3.4.1 – costs for non-domestic consumers 4th quarter 2012. 14 IAG Toolkit, 2012, accessed March 2013. AECOM Feasibility Study 40
Capabilities on project: Building Engineering
x No discount on heat prices assumed over the counterfactual gas boiler heating and maintenance costs – the IRRs show whether there is potential to provide a discount (which will be a trade-off vs returns), and potential discounts will be considered further in the Business Case report; x Electricity generated by CHP is sold to a licensed supplier at a price of £55/MWh. Further sensitivities have been run on electricity price as specified where electricity can be sold directly to customers (see later);
x CO2 savings calculated as average annual saving over first 15 years of scheme. Potential income associated with CO2 emission reductions are discounted over the 30 year lifecycle assessment period; x Emission factors taken from SAP 201215; x No benefit is gained from CCL exemption – the Levy exemption for Good Quality CHP was stopped on the 1st April 2013 removing the incentives. This is as a result of proposals in the UK Government Consultation on Electricity Market Reform and announcements in the 2012 Budget. The introduction of a Carbon price Floor will pose an additional tax payable on the proportion of fuel used by CHP systems for electricity generation. However until the impact on the electricity market and prices is understood, it is not possible to model this at present. x Counterfactual case of existing gas boilers used in individual buildings, and replaced over time with new gas boilers. The capital for these is spread evenly over the assessment period to allow for a range of replacement dates. Whilst this may not represent the exact cost counterfactual for a specific customer, it provides an average counterfactual against which a heat price can be set and the economic viability of the DH scheme can be assessed. Gas costs include CCL in the counterfactual case; x All values are shown exclusive of VAT. The modelling is all conducted at 2013 price levels and no inflation is included. All changes (increases) in energy costs are expressed in real terms. x For all analysis options, it is assumed that the operation of the scheme commences in 2016, with development and capital costs being incurred over 2014 and 205. x CHP operation in all options is heat led, with excess electricity generation being sold at wholesale prices.
Table 6: Modelling assumptions used in all options.
Scheme Component Value Units CHP Lifetime 15 yrs Annual availability 90% % Turndown ratio 50% % Lifetime 15 yrs Annual availability 90% % Turndown ratio 50% % DH network building connections
Capital cost £100 £/kWth
Heat interface unit operation £1.00 £/kWth Heat interface unit lifetime 20 yrs DH network
Pumping energy (as percentage of heat delivered) 1% kWhe
15 BRE for DECC, SAP 2012 version 9.92, May 2013. AECOM Feasibility Study 41
Capabilities on project: Building Engineering
DH maintenance 1% total capex, per year Lifetime 50 yrs Counterfactual/distributed boiler heating
Boiler capex £150 £/kWth Existing boiler average efficiency 81% % New boiler efficiency 85% %
Boiler maintenance £3 £/kWth/yr Lifetime 20 years Other
Cost of carbon (based on CRC from 2014) £16 £/tCO2/yr Gas emission factor (15 year average) 0.205 kg/kWh Electricity emission factor (15 year average) 0.381 kg/kWh Climate Change Levy – gas 0.182 p/kWh Climate Change Levy – electricity 0.524 p/kWh Gas cost – energy centre and distributed boilers excl. CCL (2013)16 2.33 p/kWh Gas cost – counterfactual price excl. CCL (2013)17 2.6 p/kWh Electricity price - sale to grid (2013) 5.5 p/kWh Electricity price - retail (2013)18 8.5 p/kWh Development costs 5% % of total capex
5.3 Phase 1 Starter Scheme Network assessment The phase 1 network connects to the Town Hall, Stopford House (which feeds into Fred Ferry House) and Archer House. An assessment of this starter case, with pipework size adjusted to accommodate future growth of the network, is calculated on which to base the subsequent options assessment. Heat supply is assumed to be from existing decentralised boilers located in each of the buildings, and from two 428 kWe gas CHP units located at the Town Hall. From high level analysis of the CHP electricity output, and the electricity load profile of the Town Hall and Stopford House / Fred Perry House, it is estimated that around 62% of the electricity from the CHP units can be used directly in the council buildings. If the remainder is sold at wholesale price, the effective annual revenue from electricity would be about £240k (2016). This provides an important revenue for the scheme. Table 7 shows the key outputs from the modelling of the starter scheme. The scheme assumes that existing boiler plant is retained. Under these assumptions, the scheme is expected to provide circa 9.4% rate of return.
Scheme Component Value Units Capital Cost £2 £ M Net present value £996 £ k IRR 9.4 % Peak load 3.13 MWth
16 Based on DECC Quarterly Energy Prices, Table 3.4.1, gas cost excluding CCL for a large non-domestic consumer, 4th quarter 2012. The ‘large’ consumer cost was taken as this consumption band corresponded with the estimated CHP and boiler gas demand for the CQHN scheme. 17 Based on demand-weighted average price excluding CCL being paid by consumers, where data was provided, May 2013. 18 Based on MCC electricity price excluding CCL, as provided by MCC Energy Management Unit, May 2013. AECOM Feasibility Study 42
Capabilities on project: Building Engineering
Annual heat sales 3,206 MWh CHP heat capacity 2 X 428 kWth CHP electrical capacity 2 X 400 kWe % of heat from CHP 75% %
Table 7: Key performance characteristics of the starter scheme.
If the CHP electricity cannot be sold directly to the council buildings, but is all sold at wholesale price, then the IRR will reduce to 2%. This demonstrates the importance of configuring the CHP system to allow sufficient use of electricity by the council for the scheme to be economic.
5.4 Assessment of phase 2 network expansion options The next stage of analysis is to assess potential additional customer connections which could be produced in future following the development of a phase 1 scheme. These options are detailed in section 4.3. The following assumptions are used for electricity revenue: x In Phase 2 option B, it is assumed that 31% of the CHP electricity output can be sold to the council buildings, and 50% can be sold to the college. With the remaining 19% being sold for wholesale at £55/MWh, the average annual revenue value would be £600k (2016). x In options with a central energy centre (option A, C, and D), all electricity is sold at wholesale value.
Table 8: Summary of CHP capacity, peak load, annual heat demand, and capital cost of each option. Annual heat Peak load Capital cost Option CHP demand (MWth) (£M) (MWh) Phase 1 Starter Scheme (for comparison) 2 X 400 kWe 3.13 3,206 £2M 1 x 1560 kWe Phase 2 option A (main route) 10.3 9,338 £6.2M 1 x 400 kWe 1 x 1560 kWe Phase 2 option A (variation route) 10.3 9,338 £6.5M 1 x 600 kWe 19 1 x 800 kWe Phase 2 option B (decentralised with college) 9.6 7,876 £5M 2 X 400 kWe 1 x 2000 kWe Phase 2 option C (main route) 16.8 14,007 £9.4M 1 x 1200 kWe 1 x 2000 kWe Phase 2 option C (variation route) 16.8 14,007 £9.2M 1 x 1200 kWe 1 x 1200 kWe Phase 2 option D (main route) 16.8 14,007 £8.7M 1 x 1560 kWe 1 x 1560 kWe Phase 2 option D (variation route) 16.8 14,007 £8.8M 1 x 1200 kWe
The NPV and IRR figures for each of the scheme are show in Table 9. Values are also provided for each of the network variants outlined in section 4.3 to identify whether the variants may offer an economic benefit.
19 Main Starter Scheme pipes oversized to 250mm although requirement for this configuration only would be lower. AECOM Feasibility Study 43
Capabilities on project: Building Engineering
Table 9: NPV and IRR for each of the options. Network option NPV IRR Phase 1 Starter Scheme £996k 9.4% Phase 2 option A (main route) £-1,035k 3.1% Phase 2 option A (variation route) £-1375k 3.3% Phase 2 option B (dispersed to College)20 £2,228k 6.5% Phase 2 option C (main route) £-1,571 k 3.1% Phase 2 option C(variation route) £-1,364k 3.3% Phase 2 option D (main route) £-1,414k 3.2% Phase 2 option D (variation route) £-1,197 k 2.9%
It should be noted that the option provided for the expansion to phase 1 via option ii (dispersed to College) has been sized considering that the starter scheme has oversized pipework to allow for future growth to future energy centres. However if the scheme is not to be expanded beyond Phase 2 option ii, the DH pipes for Edward Street and Piccadilly would only need to be 125 mm for this configuration. With this reduced pipe sizing, the NPV would be in the region of £2,404,000 and the IRR about 9.4%. The benefits of connecting the college to the phase 1 starter scheme in a distributed boiler / plant arrangement is debateable. Whilst this offers the highest IRR of the phase 2 schemes, with the potential to locate CHP plant at both the town hall and the college site, there may be little benefit of a DH interconnection and the “scheme” may be more economic if operated as two separate schemes.
5.5 Assessment of energy supply technology The previous analysis in this section has used gas CHP as a baseline against which to assess the network options. In the review of energy supply technologies in section 3, biomass boilers were also identified as a potential suitable technology. These are investigated in more detail in this section in comparison to gas CHP. A biomass boiler scheme has been assessed for the Phase 1 Starter Scheme and for the full scheme incorporating all buildings with the energy centre built in land adjacent to the College (phase 2 option iii). For the Phase 1 Starter Scheme, a biomass boiler with 0.5 MW capacity alongside top-up gas boilers has been modelled. The biomass boiler capacity provides 87% of the heat demand on the network, with the remainder provided by the gas boilers. Modelling of alternative biomass capacities shows that this is the cost optimal size based on the NPV. Key input parameters for biomass scheme are shown in Table 10.
20 Main Starter Scheme pipes oversized to 250mm although requirement for this configuration only would be lower. AECOM Feasibility Study 44
Capabilities on project: Building Engineering
Table 10: Biomass boiler inputs for the Phase 1 starter scheme Biomass input parameters Value Notes Biomass boiler capacity 500 kW Based on a capital cost of £368 per kW for a commercial scale Biomass boiler capital cost £184 k 21 biomass boiler . A 20 year lifetime is assumed. Based on £15 per kW installed Biomass boiler annual operation cost £7,500 capacity Error! Bookmark not defined.. Typical wood chip costs22. Prices are assumed to change Biomass fuel cost £29 / MWh in line with IAG gas projections due representing market forces. Assumed constant over the Renewable Heat Incentive £20 / MWh lifetime of the scheme. 3,400 MWh This is equivalent to circa 55 20- Annual fuel demand (circa 1,100 tonne deliveries a year. tonnes)
The biomass boiler scheme is modelled in comparison with the gas CHP scheme based on the proposed Starter Scheme.Error! Reference source not found. Table 9 shows the key results from the comparison of the two schemes.
Table 11: Key results from modelling biomass boiler and gas CHP schemes for the Phase 1 Starter Scheme Modelling results Biomass boiler Gas CHP Total capital cost £2 M £2 M NPV -£0.5 M £1 M IRR 0.5 % 9.4 % Average CO reduction 2 85% 27% over 15 years for heat
The full scheme incorporating all potential buildings with the energy centre located in adjacent land to the College was also modelled using a biomass boiler scheme with 1.5 MW capacity alongside top-up gas boilers. The biomass boiler capacity provides 73% of the heat demand on the network, with the remainder provided by the gas boilers. Key input parameters for biomass scheme are shown in the next table.
Table 9: Key results from modelling biomass boiler and gas CHP schemes for the full network with a central energy centre. Modelling results Biomass boiler Gas CHP Total capital cost £9.3 M £9.3 M NPV -£3.5 M -£1.6 M IRR negative 3.1 %
21 The Potential and Costs of District Heating Networks. DECC. 2009. 22 www.biomassenergycentre.org.uk AECOM Feasibility Study 45
Capabilities on project: Building Engineering
Average CO reduction 2 71% 30% over 15 years for heat
These results show that whilst the biomass boiler scheme is similar in capital cost, it results in poorer economic viability even with a £20 / MWh value included for the RHI.
The benefit of biomass over gas CHP is the larger CO2 reduction. However unless a much larger value is placed on the CO2 savings, the schemes are less economic. This analysis suggests that the development of economically viable DH networks in Stockport town centre will need to be based around gas fired CHP.
5.6 Sensitivity assessment This section examines some sensitivities: x Variation in electricity revenue x Variation in capital costs. Results are shown for both the Phase 1 starter scheme, and the Phase 2 option C scheme (although the latter illustrates the range of schemes incorporating all buildings).
5.6.1 Electricity revenue Electricity revenue value can have the single most significant impact on the viability of a gas CHP scheme. Figure 16Error! Reference source not found. shows the relationship between IRR and the value obtained for electricity for average revenue values from £55 / MWh to £100 / MWh.
Figure 17: Sensitivity of IRR to a range of electricity revenue values for the Phase 1 Starter Scheme and Phase 2 Option C scheme. The results in Figure 16 Error! Reference source not found.demonstrate the importance of obtaining a good electricity price for CHP electricity sales. If all of the electricity could be sold at retail price (effectively used directly AECOM Feasibility Study 46
Capabilities on project: Building Engineering
by the scheme operator), then an IRR of 2% would be obtained for the Phase 1 Starter Scheme, and 3% for the large scheme. Achieving a higher value for electricity will need to consider a number of factors: x The ability to sell electricity directly to customers. This may require some form of direct connection. If the CHP is located on or adjacent to the electricity customer’s site, this may be viable, but if a longer “private wire” connection is required, the costs associated with this can be large. x The supply of electricity to customers within the licensing regime. If the CHP scheme becomes an electricity supplier to the customer, consideration of the electricity licensing regime will be required. If the customer is the same as the scheme owner, then this would be seen as self-generation and not subject to licensing. Other licensing exemptions exist and should be examined in further detail. x The economic benefit of being an electricity supplier. If a customer is supplied by the CHP scheme, the scheme will be its sole supplier. This means that the CHP scheme will need to buy in surplus electricity to meet the customer’s demands as required. Due to the lower volume of purchased electricity from the electricity grid, the cost of this surplus electricity may be higher than the customer’s existing electricity supply. Therefore whilst a higher electricity value could be obtained, there are a number of considerations, and it is unlikely that the full retail value could be achieved. One option for the scheme is to sell electricity under a License-Lite regime. Licence-Lite is a framework developed by Ofgem where a small electricity supplier (such as a CHP scheme) can make use of the licence of a large licensed electricity supplier for a fee. This means they can avoid the high licensing costs, and assuming that the fee charged by the licensed supplier is reasonable, sell electricity to customers directly. At present no Licence-Lite schemes exist although the Greater London Authority is currently developing a London-wide scheme which will operate across all London Boroughs. The intention is that all small electricity generators in London will be able to sell electricity to the Licence-Lite supplier for a higher rate than normally available, and the supplier can then re-sell this electricity at a retail value. It is recommended that Stockport Council and AGMA engage with the GLA and explore opportunities for developing a Manchester-wide Licence-Lite scheme.
5.6.2 Capital costs The capital cost clearly has a large impact on the economic viability of the scheme, with DH networks requiring significant up-front investment. A general sensitivity to capital cost is shown in Figure with a variation in capital cost of plus and minus 20% on all components. AECOM Feasibility Study 47
Capabilities on project: Building Engineering
4.50% 0.00 4.00% -0.10 3.50% -0.20 )
3.00% -0.30 n o i l l 2.50% -0.40 i R M R I £
2.00% -0.50 ( IRR V P
1.50% -0.60 N NPV 1.00% -0.70 0.50% -0.80 0.00% -0.90 -30% -20% -10% 0% 10% 20% 30% Variation in Capital cost of entire scheme
Figure 18: Sensitivity to capital cost for the Starter Scheme
6.00% 0.50 0.00 5.00% -0.50 )
4.00% n o
-1.00 i l l i R M
R 3.00% -1.50 I £
( Series1 V
-2.00 P
2.00% N Series2 -2.50 1.00% -3.00 0.00% -3.50 -30% -20% -10% 0% 10% 20% 30% Variation in Capital cost of entire scheme
Figure 19: Sensitivity to capital cost for the full expanded scheme.
The results show that even with an overall reduction in 20%, the Phase 1 starter schemes IRR may increase to 4% and the Phase 2 option C scheme may increase to over 5%. To achieve acceptable rates of return to attract investment, it is therefore unlikely that capital cost reductions can achieve this alone, indeed whether more than 20% reduction could be obtained through refinement of the scheme is uncertain. These results, in comparison with the electricity value sensitivities, show the importance in optimising operation costs over capital expenditure. 5.7 Capital Costs The capital costs of the Phase 1 Starter Scheme and the Phase 2 option C scheme (selected as indicative of the large schemes) are shown in Table 12 below AECOM Feasibility Study 48
Capabilities on project: Building Engineering
Table 12: Capital cost breakdowns
Full Starter Scheme expanded Scheme scheme (C)
Scheme Element Total Cost Total Cost
Pipework £0.4M £2.3M Energy Centre – CHP and thermal storage £0.05M £1.6M Boilers £0.95M £2.1M 2 Energy Centre – building costs (1000 m ) £0 £1M 23 Gas and electricity connection costs £0.2M £0.2M Heat interface unit costs £0.3M £1.7M Development costs (at 5% of capex) £0.1M £0.4M Cost adjustments £0 £0.1M Total £2M £ 9.4M
The largest proportion of costs are in the DHN.
5.8 Results Summary The following key points can be drawn from the analysis in this section: x A phase 1 starter scheme may provide an IRR in the region of 6%. This may attract public sector investment but not commercial investment. The larger schemes with centralised energy centres provide IRRs in the region of 3% which are unlikely to be considered economic. x The most viable expansion option appears to be to connect to the college maintaining a decentralised boiler strategy (Phase 2 option ii). However with an additional CHP unit located at the college, it is possible that this scheme would be more economic without the DH connection between the two areas and therefore it may be difficult to justify the development of a DH network on this basis. x Analysis of the energy supply options shows that Gas CHP is the most economically viable technology, with the opportunity to generate revenue from the sale of electricity. Biomass boilers provide a much larger CO2 reduction, but are not predicted to be economic, even with the availability of a lifetime RHI of £20 / MWh. x Achieving a good electricity revenue will be vital to the economic viability. This could be through direct sales to Stockport Council buildings (although a mechanism is required for this export), or through a Licence-Lite type mechanism which allows sales to other customers. If electricity is sold for wholesale value (assumed as £55 / MWh), then it is unlikely a scheme will be viable.
23 This is based on previous project experience, and a more detailed cost can only be obtained from the utility companies once a detailed study has been conducted by them based on the design proposals and exact site location. AECOM Feasibility Study 49
Capabilities on project: Building Engineering
x Reducing capital investment will also help improve the economic performance. Options include reducing the network length though optimising the network layout and selecting lower cost routes (in particular by not using the A6). x The economic performance can also be improved through the use of a decentralised back-up / top up boiler strategy as modelled for Phase 1 and Phase 2 option ii. This removes the need for new centralised boiler plant and a large energy centre.
Based on this analysis, it is clear that further work is required to optimise the Phase 2 options scheme, through working with customers to develop more robust data on heat demand (in particular the Grand Central development), identifying opportunities for maximising electricity revenue, and opportunities for reducing cost. AECOM Feasibility Study 50
Capabilities on project: Building Engineering
6 Delivery Options
This section provides an overview of the project governance considerations, and the main models for delivering a project.
6.1 Introduction This section provides an overview of a delivery options for taking forward the town centre network. These options are considered in more detail in the Project Development Plan.
6.2 Project governance and structure
6.2.1 The balance of risk The fundamental issue facing local authorities is whether they are willing to invest directly in the DH scheme and what the relationship is with the private sector. The evaluation of the options usually revolves around a number of considerations: x The tension between wanting control over project outcomes and the willingness to take on project risk; x The rate of return the project will actually support and whether this would be acceptable to the private sector x The recognition that the cost of raising capital for the private sector is generally greater than for the public sector which on a capital intensive project has a major impact on viability and ultimately on cost of heat supply; and x The availability of capital to both public and private sector is limited but is also closely linked to the degree of risk involved and the organisations’ understanding of the risks involved. Figure 18 and Figure 19 illustrate some of the above issues.
Delivery Vehicles for DH
Capital available Council Council leads provides finance, project, conventional risk limited by construction contract, contracts with most operation is in - Availability private sector house of capital to City Council Private sector Council leads ESCo leads but seeks finance project, from external Council facilitates sources (eg, grants) Capitall limited
Low risk Higher risk Limited control Appetite for risk Greater control Low reward Higher rewards
Figure 18: Appetite for risk and reward against availability of capital AECOM Feasibility Study 51
Capabilities on project: Building Engineering
Delivery Vehicles for DH
High IRR Private sector ESCo Council owns project leads project, and retains surpluses to Council facilitates expand scheme
Project Performance
Project does not Council owns project proceed unless low but needs low cost cost finance finance to proceed. available, e.g. grant funding. Low IRR
Low risk Appetite for Risk Higher risk Limited Control Greater Control Low rewards by Local Authority Higher rewards
Figure 19: Appetite for risk and reward against project performance
Governance means the structure by which control is exercised over an operation which follows the decisions around business structures. Procurement means the process by which services from the private sector are contracted by the public sector. Both of these issues are subsidiary and subsequent to taking decisions on the more fundamental question of delivery structures.
6.2.2 Typical energy scheme governance structures As for the privatised electricity and gas industries there are three clearly identifiable businesses in a district heating scheme: x A generation business producing the heat and selling electricity (GenCo). x A distribution business distributing heat through the district heating network (DistCo). x A supply business buying heat from the producers, selling energy to customers and paying the distribution company for the transport of energy (SupplyCo). The separation of these three businesses enables competition between energy generators and competition in the supply of energy to customers on the network as for electricity. The distribution business is a natural monopoly and if privately owned a Regulator is normally appointed to approve expenditure by the DistCo to protect customers and to ensure open access for the competing suppliers. In many cases, particularly small schemes, all these businesses have been combined as a vertically integrated organisation partly to reduce risk and partly for simplicity, although this may change as larger systems develop and grow. However it is helpful to consider each element separately when evaluating options for a scheme. It is also important to recognise the differing characteristics of these three businesses: x The heat generation plant typically has a shorter technical operating life and a higher requirement for operation and maintenance. Once built it is unlikely to require additional investment until plant replacement AECOM Feasibility Study 52
Capabilities on project: Building Engineering
or major overhaul. The major contracts will be for purchase of fuel and selling electricity and the sale of heat may be of lower priority as its value needs to be relatively low to justify the cost of the DH network. x In contrast the DH network has a very long life and is likely to require regular small additional incremental investments as it expands to serve new customers. x The supply business will need to be customer focused, able to manage a large number of small contracts with a wide range of requirements (although initially the customer base may comprise a few larger contracts). Gas and electricity supply is regulated by Ofgem and it is likely that if heat supply (currently un-regulated) becomes a regulated business, then Ofgem or a similar Government body would be responsible for overseeing the process. At a local level, Local Authorities involvement in schemes can help provide a degree of certainty and confidence to customers, but this would not constitute formal “regulation” of heat supply.
Regulator
GenCo DistCo Customer
Produces Distributes Buys energy energy energy
SupplyCo
Buys and sells energy
Figure 20: The basic elements of a delivery and governance structure for a district heating scheme.
6.2.3 Structure for district heating companies The structure described above was developed when the established large-scale businesses in electricity and gas were privatised. The development of district heating as an emerging energy infrastructure has a number of characteristics which mean a direct transfer of the above concepts may be either unsuitable or not easily achieved. These differences are: x The district heating networks will be more localised than the national electricity or gas grid. In the early days of a heat network or on small schemes, it may not be practical or possible to have multiple energy suppliers who compete to supply a heat market and a single heat energy source is more likely; x There is currently no system of regulation for the heat network so there is limited consumer protection. In the absence of regulation the long term contractual needs are better suited to public ownership of the network to provide some customer protection; AECOM Feasibility Study 53
Capabilities on project: Building Engineering
x The district heating network enables strategic objectives including CO2 emission reductions, affordability, resilience and energy security to be met and these will be realised through taking a wider strategic view that may go beyond the obligations and economic considerations of a private company; x There is a critical need to measure and confirm that the benefits of the heat network are being achieved and delivered over time and a detailed metering and data gathering strategy at the consumer’s sites, as well as an annual audit of energy use at the heat production plant, will be required; and x Existing utilities have ownership in perpetuity and an obligation to connect customers. A DH scheme set up as a concession agreement for a finite period raises questions as to what happens at the end of the period. There is a risk also that investment becomes progressively more limited as the time left to recover that investment decreases. This may be the opposite of what is desirable for the project.
Typically, the options evaluated for DH schemes are: x Fully private sector model – selecting an Energy Services Company (ESCo) to deliver the scheme; x Fully public sector model – local authority to deliver the project; x A hybrid (“joint venture”) scheme where an ESCo is set up as a special purpose vehicle (SPV) with the local authority as one of the shareholders together with other public and private sector partners. Further variations within the hybrid scheme may have benefits depending on the circumstances and political aims. For example an option might be to include: replacing shareholder ownership with a membership scheme that receives a dividend for investment into the scheme or a limited liability partnership; or creating a not-for-profit co- operative scheme. Creating a mutual or co-operative allows an asset lock to be placed on the distribution of surpluses which are instead either re-invested in the business, shared with customers through lower heat prices or channelled into complementary activities. The three main options of private, public or a private/public partnership can be applied to all of the three businesses together or each business could be treated separately. In addition the development of the project can be further subdivided into the construction, ownership and operation. In many cases the construction and operation will be taken forward through sub-contracts with specialist organisations. Figure 21 shows a number of delivery options based on taking the three businesses (generation, distribution, supply), the three ownership options (public, private and partnership) and the three functions of construction, ownership and operation and combining these in various combinations. The matrix is not exhaustive but it does cover the most practical and commonly found arrangements used so far in the UK. AECOM Feasibility Study 54
Capabilities on project: Building Engineering
OPTION Heat generation District Heating Network Supply of heat
Build Own Operate Build Own Operate
A PSC PSC PSC PSC PSC PSC PSC
B1 C C C C C C C
B2 C C PSC C C PSC C
C1 PPP PPP PPP PPP PPP PPP PPP
C2 PPP PPP PSC PPP PPP PSC PPP
D1 PSC PSC PSC C C C PSC
D2 PSC PSC PSC C C C C
E1 C C C PSC PSC PSC PSC
E2 C C C PSC PSC PSC C
Key C = Council PSC = Private sector energy services company PPP = Joint private/public sector company
Note: Where C is indicated as responsible for any of the functions, this does not preclude contracting with the private sector for actual delivery of this function.
Figure 21: Possible options for delivery structures for DH
In broad terms there are 5 groups of options: A. All private sector. A private sector company constructs, owns and operates the CHP and the new heat network and sells heat to each customer on the new network at each building connection. There is no public sector involvement. B. Predominantly public sector. The Council (C) constructs, owns and operates the CHP and the new heat network, and sells heat to customers on the new network (Option B1) with no private sector involvement. The day to day operational risk to C can be reduced if the operation and maintenance of the CHP and DH network are contracted to experienced private sector companies (Option B2). C. Public private partnership (PPP) ownership. A PPP is formed between C and a private sector company to jointly build and own the scheme and sell energy to customers. To reduce the public sector risk in operation, a private sector company could be contracted for the on-going operation requirements (Option C2). D. Split assets – network in public ownership. A private sector company constructs, owns and operates the CHP plant. The heat network is constructed, owned, and operated by C who either sell heat directly to the customers (Option D1), or who charge the private sector company a rental on the network on the basis of capacity and units of heat transferred in return for the private sector company selling heat to the customers (Option D2). E. Split assets – network in private ownership. C constructs, owns and operates the CHP plant, whilst a private sector company constructs, owns, and operates the heat network. The private sector company can purchase heat off C and sell to customers over the network (Option E1) or alternatively, C can sell heat to customers by paying the private sector company network owner/operator a distribution charge (Option E2). AECOM Feasibility Study 55
Capabilities on project: Building Engineering
In addition to the above options and as detailed in Figure 21, there are many other theoretical options. However we believe the above options represent the most practicable, and are the most fruitful to pursue further for Stockport Council.
6.3 The selection of a delivery model for Stockport Town Centre scheme – outcomes from this feasibility study. This section demonstrates that there are a wide range of options for the delivery of a DHN scheme. The selection of a governance model will need to consider both the appetite of Stockport Council to accept risk and invest in the scheme, and also the facts about the scheme as determined in this feasibility study. Key points indentified in this work which may help influence the selection of a governance model are: x IRR. The schemes identified all deliver a low rate of return. Even with further optimisation, this is likely to remain at a level which would not attract commercial investment. Therefore investment in the scheme will either need to be from the public sector or with the assistance of grants. x Initial customers. The phase 1 scheme is predominantly made up from public sector customers, and therefore may favour a public sector delivery vehicle. The customers may attach less risk to a public sector scheme and therefore commit to longer term heat supply contracts which will help de-risk investment in the scheme. x Expansion customers. It is possible that the expansion of the scheme during phase 2 may introduce a number of non public sector customers (n particular at the Grand Central development, but also potentially others not identified). This may help support a transition in governance of the scheme if the later phases can be made more commercial following initial development. x Land. The energy centre site will be key for the development of a scheme in the longer term. The sites identified in the Grand Central development and adjacent to the college are current possibilities, but will need further investigation. They are currently outside of the Council’s ownership and control which adds risk to the project and the cost of land has not been included in the economic model. Planning powers could be used by Stockport Council to ensure that development of either of these sites allows for the inclusion of an energy centre. x Electricity sales. Maximising the electricity revenue is vital to the viability of the schemes. Direct sales to customers could allow an increase in revenue, but licensing requirements need to be considered to ensure that the sales are within the licence exemptions. As the largest potential electricity purchaser in Phase 1, it would therefore benefit the scheme if Stockport Council also owned the CHP generation plant (but not necessarily the DH network). This arrangement would also provide long term security over electricity sales. Electricity sales in phase 2 and beyond need to consider the location and size of the CHP plant, but further work is required to examine how the sales of electricity can be optimised. x Strategic expansion. The vision for all of the Manchester networks is that they are the first stage of a wider scale development of DHNs. This may include the expansion of first phase networks. The control over this expansion may be greater with public sector ownership. Where the network can be used to deliver wider benefits, for example alleviation of fuel poverty, or to attract regeneration and commercial activities, this strategic control will be important.
In light of these observations, a suitable route for delivery of the Stockport scheme is for a fully or partially public sector / council led scheme. AECOM Feasibility Study 56
Capabilities on project: Building Engineering
7 Conclusions and Recommendations
7.1 Summary of Conclusions This report provides a feasibility assessment of a DHN for Stockport Town Centre. Previous studies have examined a town centre scheme which includes the Mottram Street flats, which have subsequently been connected to a biomass system. This study therefore examines alternative options. The schemes shown in this report have therefore not been examined before. The report identifies potential customers, and assesses their energy demands for the layout and sizing of a DHN. A phase 1 starter scheme network is proposed which is supplied from distributed boilers and gas CHP plant located at the Town Hall. This connects to Stopford House, Fred Perry House, and Archer House. Four phase 2 expansion options are then examined which include combinations of the Grand central development and the college. These options are: x Option A) The Phase 1 Starter Scheme plus the Grand Central Cluster and Covent Garden with an energy centre at Grand Central. x Option B) The Starter Scheme plus the College Cluster using decentralised boilers and CHP units x Option C) The Starter Scheme plus both the Grand Central Area and the College Cluster with an energy centre at the College x Option D) As in option C, but with the energy centre located at Grand Central.
Economic analysis of the phase 1 scheme shows that an IRR of around 9% may be achievable if a large amount of the electricity from the CHP systems can be sold to Stockport Council. However if these sales are not possible, then the IRR may drop to 2%. For the larger Phase 2 schemes (options A, C, D), the IRR is typically around 3%. It is therefore unlikely that the larger schemes will not be economic, and the economic viability of smaller schemes is heavily dependent on making direct electricity sales. This suggests that stand-alone CHP systems at each of the sites may be a more viable option reducing the expense incurred with DH network installation, and improving the potential for gaining revenue from electricity sales. The low IRRs and level of risk around the IRRs suggests that some form of public sector delivery and investment will be important for the development of the scheme. Conclusions and recommendations for each aspect of the scheme are detailed below.
7.2 Energy demand and customers Signing up customers for heat and potentially electricity sales is crucial for the economics of the scheme, and to reduce risks for investors. The majority of the customers are public sector, although from a number of different agencies, and so whilst there may be an opportunity to develop long term contracts with the potential customers, engagement with a number of people will be required at the next stage. Following the completion of this report, it will be important to commence discussions on both how contractual arrangements may be formed (including contract length) and the levels of heat sale price which may be attractive, but also to examine further the technical issues around building connections. The identified loads are listed in Table 1 below and are grouped as:
x Civic Buildings Cluster x Grand Central Cluster x College Cluster AECOM Feasibility Study 57
Capabilities on project: Building Engineering
The Mottram Street flats close to these clusters are already supplied with DH and a biomass boiler is being installed with financial support from the ECO scheme. Whilst this may form part of a wider network at a later stage no benefit was found for connecting to the DH scheme analysed for this report. Table 13: Summary of Heat Loads MWh Heat Load Comment p.a.
Civic Buildings Cluster
Town Hall 1168 Committed load
Stopford House 1039 Committed load
Fred Perry House 302 Committed load – supplied from Stopford House Archer House 617 HMRC staff vacating – new tenant being sought – future uncertain This area is subject to re-development or refurbishment in 3-5 years time and it Covent Garden flats (49No) 518 would be best to connect at that time as the load is small and 500m away Police Station Police are expected to vacate – future uncertain Dept Work and Pensions PFI contract – difficult to negotiate a change of energy supply Retail store In administration – future uncertain Mottram St flats Standalone biomass boiler scheme – no benefit in connecting at present
Grand Central Cluster
GC Swimming pool 2976 Has had existing CHP and good case for replacement or connection to DH GC development – offices Timing of development uncertain – could provide an Energy Centre site
GC development – hotel Timing of development uncertain
College Cluster
Existing College buildings supplied from Roland Hadlow Existing College buildings supplied from Joan Bakewell New college development on PCT Timing uncertain – could provide an Energy Centre site site
As can be seen from Table 13, there is conservable uncertainty around some of the heat loads, in particular the Grand Central development. In addition, the status of other buildings is uncertainty and therefore they present a risk to the scheme. Achieving a good value for the CHP electricity output is vital to improving the economics of the scheme. No single customer has been identified with a sufficiently large electricity demand and suitable profile for the purchase of all electricity from a CHP system, although Stockport Council could take a large proportion of the electricity in the phase 1 scheme. If the scheme expands in Phase 2 with a larger central energy centre, customers will need to be identified for the electricity if the IRR is to be improved. Private wire is one method by which electricity can be sold for the maximum revenue value but the cost effectiveness of a private wire is determined by the length (and thus cost) of connection and these can often exceed the increased revenue benefits. Where a private wire arrangement is not viable, an alternative may be to distribute AECOM Feasibility Study 58
Capabilities on project: Building Engineering
and sell electricity to specific customers using the local electricity network using an arrangement such as ‘Licence Lite’ arrangement - although there are no current examples of this in operation it is to be trialled in London.
Recommendations for next steps: x Continue to engage with key potential customers. During the next stages, it will be important that suitable strategic contacts are made and that customers commit to supporting further analysis and development of the proposals. x Obtain further information on new buildings. There is significant uncertainty in this feasibility study around the energy loads from the Grand Central development. This could be a major heat load on the scheme and there is a significant risk attached with the current level of uncertainty. x Require new buildings to be designed to be connection ready. Local planning powers could be used to ensure that new buildings identified (and any others not identified but immediately adjacent to the network route) are designed to be connection ready, such that they can connect to a DHN once operational. However further analysis will be required to demonstrate that this is viable – the relatively poor economic performance of the schemes identified in this study do not currently support this. x Achieving a good revenue value for electricity is vital to the economic success of the scheme. Further work is required to assess the technical potential of exporting electricity directly to the Civic Centre. Alongside this, Stockport Council, and AGMA more widely, should consider the emerging Licence Lite proposals including engagement with the Greater London Authority on their pilot scheme development.
7.3 Energy Supply A number of technology options have been assessed identifying gas fired CHP engines and biomass boilers as the potentially suitable technologies. This study identifies that a CHP capacity of around 0.8 MWe is required for the Phase 1 scheme made up of two engines allowing a degree of modular operation. The use of gas fired CHP offers better economic performance and the potential for increased revenue from electricity if direct sales can be made. A gas fired CHP scheme can also provide CO2 savings of around 30% on heat supply. The peak load of the Phase 1 scheme is estimated at 3.1 MWth. If the phase 1 scheme expands to connect with all sites (Phase 2 options A, C, D), the peak load increases to around 17MWth, and a CHP capacity of 2MWth – 3MWth is considered, again with two engines offering modular operation. An assessment of the biomass boiler option demonstrates that with a proposed RHI tariff of 2p/kWh, the scheme is uneconomic, and therefore unviable. The only benefit of biomass boilers over gas CHP is the higher CO2 savings with an estimated 85% reduction in CO2 on heat supply. Grant funding, and/or a high value placed on CO2 would therefore be required to justify the selection of biomass.
Recommendations for further work: x Internal consultation within the Council on the strategy for gas fired CHP. The selection of gas fired CHP will result in CO2 savings combined with reliable, and potentially economically viable performance. However a biomass boiler option could deliver larger CO2 savings and the Mottram Street scheme presents a precedent in Stockport for the use of biomass. It is understood that Stockport Council is also considering the development of a biomass supply chain. Engagement within the council is recommended to explore the two options further. AECOM Feasibility Study 59
Capabilities on project: Building Engineering
x Assessment of energy centre locations. The two sites identified (adjacent to the college, in Grand Central) need further examination and testing. With neither site in council ownership, there is a risk associated with these, and potential additional cost if land is to be purchased. x Refinement of the CHP capacity. There is considerable uncertainty over some of the heat loads, in particular the Grand Central development. Therefore further work is required once more detailed heat load information is made available to refine the sizing of the CHP systems.
7.4 Network Layout A potential phase 1 network route has been identified which is based around linking the Stockport council buildings and Archer house. Phase 2 network options have been developed which link the phase 1 scheme to the Grand Central development, Covent Garden Flats, and the College site. The A6 trunk road is located between the sites, and therefore whilst offering a route opportunity, also presents a potential barrier. Therefore network routes have been considered which also try to avoid the A6 (and the associated cost and disruption of installing a DH network in this road) and use alternative routes.
Recommendations for further work: x Consideration of land ownership. Consultation with the main landowners / operators will be required, in particular the highways department of the Council. Routing of the network through the Grand Central development will need careful consideration if this route also transmits heat to other areas. The college site may also offer potential for routing pipework, and again this will need consideration if these sections of the network feed areas other than the college. Variant routes identified may also need land ownership to be considered, for example when making a connection to the south of Grand Central through to the college site. x Assessment of impact on other utilities. This study has not considered existing utilities in detail and mapping of these is often of varying degrees of quality. However the next stage of work should engage with key utilities companies to confirm the acceptability of the current network route. x Detailed below ground services reviews and consideration of building connection issues will be required at a later stage.
7.5 Economic performance This feasibility study demonstrates that there is reasonable economic case for the development of a Phase 1 DHN linking the Council buildings and Archer House, if a good revenue can be obtained for the CHP electricity from direct sales to the Council. For this phase 1 scheme, the network extent is small and existing plant rooms are used, helping to limit capital investment. The resulting IRR is in the region of 9%, which should attract public sector investment by the Council. However if the electricity for the phase 1 scheme is sold at wholesale value, the IRR drops to 2%. If the college connects to the phase 1 scheme (Phase 2 option B) with a distributed boiler and CHP strategy, an IRR of around 9% can also be achieved. This is due to the ability sell electricity to the college as well as the council buildings. However this scheme may be more economic if the linkage between the two areas is not made (i.e a phase 1 scheme and a separate college scheme) and further analysis is required of this option. For the other phase 2 schemes (options A, C, D), the additional investment in the DHN, the requirements for a centralised energy centre, and the loss of electricity revenue through sales at wholesale, means that the IRRs are generally reduced to around 3%. Whilst this may attract council interest, it is not considered economic. AECOM Feasibility Study 60
Capabilities on project: Building Engineering
Recommendations for further work: x Conduct further analysis of the potential to export electricity directly to the Stockport Council buildings in Phase 1. This is critical to the success of the scheme. The current electricity prices provided by Stockport Council are reasonably high and therefore there is a large degree of risk associated with the IRRs. x Conduct analysis of a separate DH / CHP scheme at the college to see whether this is more viable than a combined scheme (as examined in Phase 2 option B). x Investigate the opportunities for grant funding, or alternative sources of funding. These may include locally generated funds from development activity such as the Community Infrastructure Levy (CIL). x Engage with the Council finance officers on the level of IRR which may be acceptable for investment by the Council (suitable information is provided in the accompanying Business Case report). Eamine whether this may support circa 9% IRR in the phase 1 scheme. x Consider opportunities for maximising the economic performance, in particular through direct electricity sales (see energy supply section above). This is important for the larger schemes with a central energy centre.
7.6 Governance and Delivery There are a large number of governance options open to the scheme, each of which has advantages and disadvantages. The most important factor when deciding on the governance approach is to determine the key drivers for the scheme, and keep these central to its operation. The governance structure also needs to take into account the types of customer who may be connected to the scheme, the level of control desired by Stockport Council, and how the scheme will operate financially in terms of the purchase and sales of energy, and the need to access finance and achieve an acceptable rate of return. A combination of factors for the Stockport Town Centre scheme suggests that the Council will need to be a key partner in the delivery of a town Centre Scheme. In particular, the low IRR offered by the scheme, the importance of council electricity purchase, and the level of risk around electricity sales, suggests that a commercial developer will not be found. Recommendations for further work: x Consider the implications of economic results for potential delivery options. Use discussions with potential customers, energy service companies, and investors to inform delivery and governance options. These options will be discussed in more detail in the Project Delivery Plan. x It will be important to establish a source of revenue funding to support further work on governance structures and design refinement. We understand that work is being conducted to examine funding sources from within the Council and public sector for this. x Additional work will be required to establish potential sources of capital funding from the public sector, the potential customers (who may wish to invest) and from commercial funding sources. The level of funding available may have an impact on the size of the first phase of the scheme. Again, MCC has commenced this work through exploring options with the Green Investment Bank and others. x A financial model is required to determine the cost implications of the different governance structures and procurement methods. x National policy and regulations are evolving in the area of sustainability and low carbon energy especially heat energy. It will therefore be important to constantly update the assumptions used in this report with the latest knowledge around current and future policy. In particular, if new ways of incentivising heat network and CHP are introduced or if the RHI increases for biomass boilers. AECOM Feasibility Study 61
Capabilities on project: Building Engineering
Appendices
Appendix 1: Site visits 62 Appendix 2: Energy demand estimates for Grand Central redevelopment provided by Hannan AssociatesError! Reference source not found. 67 Appendix 3: Stockport Academy heat and hot water demand 73 AECOM Feasibility Study 62
Capabilities on project: Building Engineering
Appendix 1: Site visits and questionnaires’ information
Introduction Site visits were made to all key buildings, on 16th May 2013. These site visits were undertaken by Darren Pegram of Stockport Metropolitan Borough Council, Peter Concannon and Chris Pountney of AECOM.
The following sites were visited: x Town Hall x Stopford House x Fred Perry House x Archer House x Covent Garden flats x Grand Central Pool x Stockport College x DWP24 Building x Police Station x War Memorial
The following sections discuss each site in more detail based on the site visit.
24 Department for Work and Pensions AECOM Feasibility Study 63
Capabilities on project: Building Engineering
Town Hall Edward Street, Stockport, SK1 3XE
Overview of heating system/plant and cooling systems: x The boiler room is in level 1 off the courtyard x There are 2 gas boilers with 500kW capacity which are less than 10 years old x There are also DHW generators in the plant room x Monitored/controlled through TREND BMS system x There are a few DX/Split systems with cooling local controls on the splits. x There are no upgrades planned to the building fabric or boiler plant, energy systems x This is a listed building
Location of plant room
Access to plant room for DH network Space x The plant room is relatively spacious with available floor area suitable for PHX installation. AECOM Feasibility Study 64
Capabilities on project: Building Engineering
Stopford House Piccadilly, Stockport, SK1 3XE
Overview of heating system/plant and cooling systems: x The boiler room is in the basement off the loading bay x There are 4 gas boilers with 420kW capacity which are about 3 years old and in good condition x Monitored/controlled through TREND BMS system x There are a few DX/Split systems with TRVs. x There are no upgrades planned to the building fabric or boiler plant, energy systems
Location of plant rooms AECOM Feasibility Study 65
Capabilities on project: Building Engineering
Fred Perry House Edward Street, Stockport, SK1 3XE
Overview of heating system/plant and cooling systems: x Heating is fed from Stopford House via heat meter x There are 4 pipe fan coils and AHUs x Monitored/controlled through TREND BMS system x There is a central chilled water system and the cooling controls are BMS managed x Local temperature controls are local SP adjust +-0.5 x There are no upgrades planned to the building fabric or boiler plant, energy systems
Archer House John Street Stockport SK1 3EF
Overview of heating system/plant and cooling systems: x It is a five floor office block with mezzanine plant room within the roof space comprising steel frame and brick cladding x There are 2 floors of plant room above 4th floor of building x There is a natural gas wet system with control of set points through PC / Control Panel x There are 5 Boilers with 88kW capacity per boiler which are 15 years old x There are thermostatic valves on radiators and proportional control valves per wing x There are 5 Zip hot water boilers x There are 6 Mr Slim Split AC units to cool server rooms and natural ventilation for cooling office areas with local thermostatic controls of area being cooled
Covent Garden Flats Hillgate, SK1 3AX
Overview of heating system/plant and cooling systems: x Systems are over 20 years old and in poor condition AECOM Feasibility Study 66
Capabilities on project: Building Engineering
Grand Central Pool
Overview of heating system/plant and cooling systems: x There are 6 new boiler burners installed in February 2013, with 6 additional new boiler burners to be installed later in 2013, and 2 new condensing boilers also to be installed in 2013
Stockport College There are 7 buildings in the college complex: Roland Hadlow Building, Reuel Harrison Building, George Wood Building, the University Centre, Greek Street Building, Sir Joseph Whitworth Building and the Joan Bakewell building.
Overview of heating system/plant and cooling systems: x One plant room is located in the Roland Hadlow building basement containing 8 boilers of 500 kw capacity, 2 of 286kw, and 2 of 590kw. These serve the Roland Hadlow, Reuel Harrison and George Wood buildings. x There are4 AC units, AHUs, 2 x 590kw DHW sets which serve Reuel Harrison, University Centre, Hexagon & George Wood buildings x There are BMS controlled time schedules x Limited temperature control in buildings not adjustable by end user x There are 2 boilers in the basement of the University Centre building of 165 kw capacity. There are also some AC units in this building x All above are subject to routine annual servicing and 6 monthly interim checks. The boilers are about 10 yrs old x The George Wood building may be subject to part demolition x Refurbishment of all building services at the University Centre is planned for summer 2014 x The Sir Joseph Whitworth and the Joan Bakewell buildings are served by 2 dual fuel (gas and rapeseed oil) 590kw systems and one gas boiler of 100kw capacity x These boilers are about 3 years old and subject to routine annual servicing and 6 monthly interim checks x In the Sir Joseph Whitworth building there is AC to server rooms & evaporative cooling to workshops x In the Joan Bakewell building there is AC to server rooms & some teaching areas with heat recovery wheel. AECOM Feasibility Study 67
Capabilities on project: Building Engineering
Appendix 2: Energy demand estimates for Grand Central redevelopment provided by Hannan Associates
The following range of estimated demand data was provided by Hannan Associates projecting building areas and comparing different benchmarks:
HOTEL
Benchmark: Hotel Energy Solutions (2011), Analysis on Energy Use by European Hotels: Online Survey and Desk Research, Hotel Energy Solutions project publications 2011.
Benchmark: TM46 2008
Benchmark: J.C. Wang / Energy and Buildings 49 (2012) 268–275
Benchmark: CIBSE Design Guide F - Holiday Hotel AECOM Feasibility Study 68
Capabilities on project: Building Engineering
Good Practice 2500–3500 hrs operation Typical Practice Table 20.1 Fossil and electric building benchmarks Good Practice
OFFICES
Benchmark: ECGO19
Types 1 & 2 AECOM Feasibility Study 69
Capabilities on project: Building Engineering
Types 3
Types 4 AECOM Feasibility Study 70
Capabilities on project: Building Engineering
Benchmark: TM46 2008
Benchmark: ECG087 Energy Consumption Guide. Air conditioned civic offices * Typical AECOM Feasibility Study 71
Capabilities on project: Building Engineering
Benchmark: ECG087 Energy Consumption Guide. Air conditioned civic offices * Good practice Energy Consumption
GIA Elec Total Fossil Total Active GIA m2 Area Elec Fossil Annual Annual Unit Ref Unit (GIA/1.25*1) (m2) kWh/m2 kWh/m2 Time? kWh kWh B Block B 4473.6 5,592 115 87 514464 389203.2 C Block C 4580.8 5,726 115 87 526792 398529.6 D Block D 4620.8 5,776 115 87 531392 402009.6 E Block E 3614.4 4,518 115 87 415656 314452.8 F Block F 5033.6 6,292 115 87 578864 437923.2 G Block G 6089.6 7,612 115 87 700304 529795.2 H Block H 3292 4,115 115 87 378580 286404 J Block J 4477.6 5,597 115 87 514924 389551.2 Average Sub- Total 520,122.00 393,484 Heating average (45% of total consumption) 234,054.90 175,141.44 Total Average Heating 321,625.62
Benchmark: Quadrant East - North Tyne Side Actual data AECOM Feasibility Study 72
Capabilities on project: Building Engineering
Benchmark: Quadrant West - North Tyne Side Actual data AECOM Feasibility Study 73
Capabilities on project: Building Engineering
Appendix 3: Stockport Academy heat and hot water demand
In order to estimate monthly heating demand for the College buildings, the actual data for the Stockport Academy was evaluated as available in CarbonBuzz25:
These figures show an actual consumption of 74 kWh/m2 and 10 kWh/m2 suggesting a 12% allocation of demand to hot water. This estimate has been used in the estimated allocation of monthly demand for the Stockport College buildings.
25 http://www.carbonbuzz.org/index.jsp