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Dw021112cab Combined Heat And CDW/12/30 Cabinet 14 November 2012 Combined Heat and Power Networks Including District Heating Report of Head of Capital Development and Waste Management Please note that the following recommendations are subject to considerati on and determination by the Cabinet (and confirmation under the provisions of the Council's Constitution) before taking effect. Recommendation: It is recommended that: (a) A District Heating Group comprising core stakeholders is formed to develop projects for the Exeter and East Devon Growth Point area; (b) Cabinet considers a future report on Energy Supply Company (ESCO) Models and agrees its involvement or support for ESCOs that help support the economy of Devon and bring forward development in the County; (c) Based on the outcomes of the current feasibility report for a district heating network for Exeter, soft market testing is carried out to establish the appetite for private sector funding of an Exeter District Heating Network (DH); and (d) DCC makes a site available for the construction of an energy centre to service the Monkerton District Heating Network in Exeter. 1. Summary This report provides the policy context for Combined Heat and Power Networks, including District Heating, in relation to promoting economic growth, improving energy security and showing leadership on environmental stewardship. The report provides information on existing schemes either in place or under development in the UK. It also identifies potential schemes for the Exeter and East Devon Growth Point area. The report identifies the role that the County Council could take to bring forward District Heating Schemes and considers the potential involvement of the County Council and other stakeholders as catalysis for schemes or as active partners in Energy Supply Companies. An immediate opportunity that the County Council could take to participate in and support the delivery of District Heating solutions in Monkerton, in support of the Exeter and East Devon Growth Point strategy is set out in the report. 2. Background Critical issues for the UK are delivering economic growth, increasing energy prices, energy security and the need to move away from reliance on fossil fuels and the transition to a low carbon energy economy. Local combined heat and power networks can contribute towards addressing these issues. The networks comprise energy centres where waste, fossil fuel or renewable fuels are burnt to produce energy in the form of electricity or heat. This is then distributed and sold to customers for consumption. The Confederation of British Industry argues that a low carbon economy could be a real engine for growth in the UK. It says “green is not just complementary to growth, but a vital driver of it” Combined Heat and Power and District Heating schemes deliver low carbon energy solutions for businesses in the public and private sector and to individual homes. They can generate, distribute and supply energy (electricity and heat) at lower prices when compared to conventional energy supply from national networks or individual heating systems. The viability of schemes needs to be established for each individual case and depends on energy generations costs, costs for new distribution network infrastructure and billing costs. For new developments District Heating schemes can save on building construction costs by delivering carbon efficiencies that reduce the need for other carbon cutting measures to comply with carbon emission standards imposed through the planning and building regulations processes. Predicted increases in energy costs and concerns over energy security can be mitigated by moving to decentralised energy alternatives, like local combined heat and power systems and district heating schemes. Discounted energy prices can be built into the local ESCO model and local sustainable fuel supply chains can be developed to meet the needs of decentralised energy networks. Environmental benefits can be delivered as local combined heat and power systems provide for energy efficiencies compared to heat generated in individual heating systems and electricity supplied by the National Grid. These efficiencies translate into lower carbon emissions and provide a more sustainable and environmentally friendly alternative for energy supply. Appendix I gives an overview of combined heat and power networks and district heating networks that are either in place or under development across the UK. The list includes schemes in Devon, including the Cranbrook district heating system which was promoted by the Exeter and East Devon Growth Point Board to meet its objective of low carbon development in the Growth Point and which the County Council contributed towards. Potential district heating schemes have been identified for the Exeter and East Devon Growth Point and these are illustrated in Appendix II. A feasibility Study is currently underway for the Exeter City Network. The study is due to report by the end of the month and will consider energy generation, distribution and supply. The report will carry out high level cost modelling, carbon saving calculations and options for Energy Supply Company delivery models. The options will include private and private/public hybrid ESCO models. At Monkerton in Exeter a district heating proposal is currently being considered. Heat would be generated at an Energy Centre within the development area and distributed by an underground pipe network to supply new homes, businesses and other buildings in the area. 3. Potential Economic Impact In July 2012 the CBI published its report “The Colour of Growth”. (http://www.cbi.org.uk/media/1552876/energy_climatechangerpt_web.pdf ) This report argues that low-carbon economy could be a real engine of growth in the UK. For example it says: “…. The business response is definitive and emphatic: green is not just complementary to growth, but a vital driver of it…in trying economic times the UK’s green business has continued to grow carving out £122bn share of a £3.3 trillion global market employing close to a million people.” “There are significant productivity gains being made throughout the economy as a result of resources being used more efficiently.” A RegenSW report showed a growth in the Renewable energy section in the South West of 40% in 2011. This could grow to 30,000 jobs by 2020 for the South West, enabling us to meet our target of 15% of energy from renewable sources by 2020. Meeting this target would create 400,000 jobs nationally. Active involvement by the County Council in facilitating or participating in the development and operation of Combined Heat and Power and District Heating schemes could help ensure that Devon attract its share of this potential growth in the energy sector. It would be an important factor in selling the Exeter and East Devon Growth Point as a low carbon area and in bringing knowledge based and new and innovative businesses in the energy sector to the Exeter Science Park. The energy cost reductions that would flow from connection to a Combined Heat and Power or District Heating network would improve the competitiveness of businesses and support private sector customers in responding to the challenge of reducing budgets. Typically a DH ESCO will offer between 5 to 10% energy costs reductions to customers. Combined Heat and Power and District Heating schemes provide direct opportunities for jobs to be created in both the construction sector in the building of district heating networks, and in the renewable fuel sector to supply materials to new schemes, thus strengthening the local economic base. 4. Policy Landscape There are renewable energy policy drivers at national and international levels. The Climate Change Act places legally binding obligations on the UK to reduce its CO2 emissions by 80% by 2050 over 1990 levels. The UK has also signed up to delivering 15% of its primary Energy from renewable energy sources by 2020 in line with the commitment to the European Directive. The Government’s Heat Strategy, published in March 2012 promotes the use of district heating as a means to meet our carbon reduction targets. Government is driving the growth of the Combined Heat and Power (CHP) and district heating sectors through subsidies, under the Renewable Obligation Certificates and Renewable Heat Incentive, depending on the type and size of system installed. On 18 October 2012 the government announced the Growth and Infrastructure Bill and referred to the forthcoming Energy Bill, both as a means to enable investment in low carbon energy projects. Planning legislation means that new residential developments need to conform to the Code for Sustainable Homes, with progressive reductions in carbon emissions from buildings with developments becoming “zero carbon” from 2016. The supply of heat from a district heating system is a cost-effective way for developers to meet the current and emerging carbon emission targets. The County Council’s Strategic Plan sets out principles and objectives for helping to develop a competitive economy and supporting local business. The County Council’s Environmental Policy includes policy objectives in relation to waste, to make best use of resources. It provides for the County Council to provide community leadership on environmental issues and to improve energy efficiency. Combined Heat and Power and District Heating schemes are compatible with these principles. National waste policy and the emerging Waste Local Plan recognise waste as a resource and energy recovery from residual waste as a key principle. This can take many forms including the generation of heat, electricity or biogas, which can be used as part of a Combined Heat and Power or District Heating scheme. The County Council has already acknowledged the potential for residual waste to play a significant role as an energy resource. The Exeter Energy from Waste plant promoted by the County Council includes an obligation on the project to make best endeavours to use and market energy from the plant. The plant is currently orientated towards generation of electricity which is exported to the National Grid.
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