Implementing CHP District Heating – Reducing Energy Costs and CO2 Emissions


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Michael Smith, Non-Executive Director, Cofely District Energy Limited

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Implementing CHP District Heating – Reducing Energy Costs and CO2 Emissions

  1. 1. District Energy & the WMCWG Study
  2. 2. What is CHP & District Energy ?
  3. 3. Centralised Power Generation with CHP gas fired boilers Transmission Power LossesCooling Towers Stack Heat Heat Rejection Rejection Space Heating and Hot Water from boilers
  4. 4. Decentralised Energy Generation CHPwith CHP Transmission Power Losses Electricity and waste heat used locally for space heating and hot water - instead of being rejected to atmosphere.
  5. 5. District EnergyPiping heating & potentially cooling to buildings – “Energy Linking”Heat Losses - 1°C per kmReliability ~ 100% (99.98% for Southampton)
  6. 6. National Context
  7. 7. District Energy in the UK today ? Lerwick Our Members supply over 600 GWh of low carbon heat each year 4% Newcastle Gas Fired CHP, Sheffield 42% Birmingham Nottingham Energy from Waste, 54% Leicester Milton Keynes London –Southampton • Olympics and Stratford City • Bloomsbury Heat & Power • WhitehallExeter Woking
  8. 8.  Owners and operators of the largest district energy schemes in the UK Key Facts We face the pains and successes of district energy on a daily basis Joining the organisation will ensure you gain the tools to develop your scheme Together the UKDEA Members represent  Over 100 MW of low carbon generation plant (CHP, biomass, EFW etc)  Supported by over 500 MW of conventional back up boiler plant  Delivering over 600,000,000 kWh of heat each year  across energy networks which, if combined, would extend for more than 200 km
  9. 9. Who are we ?
  10. 10. GDF SUEZ – The Business Lines Leading Global Energy Player Operating in over 40 countries 218,000 employees 6 Business Lines Turnover €89 billion ENERGY EUROPE GLOBAL GAS &ENERGY FRANCE & INFRASTRUCTURES ENERGY SERVICES ENVIRONMENT LNG INTERNATIONAL €14 Billion turnover 17% of the group’s turnover 80,000 employees 40% of total GDF SUEZ Staff 1,300 locations in Europe 11 30 Countries
  11. 11. GDF SUEZ: Financials 1st company in the “utilities” sector worldwide (Forbes Global 2000);Rank Company Sales (US$BIL) Profits (US$BIL) Assets (US$BIL) Market Value (US$BIL) 17 GDF Suez (incl. IP) 120.97 10.05 255.82 75.61 27 EDF Group 89.46 4.73 278.76 71.53 62 E.ON 120.74 1.76 215.15 47.44 129 National Grid 21.91 6.34 75.17 21.69 236 Scottish and Southern 30.27 1.73 27.69 14.34 282 Veolia Environment 50.39 0.56 66.17 10.3 579 Centrica (British Gas) 31.16 -0.21 25.93 19.69 660 United Utilities 4.69 1.8 20.54 4.93 €30 billion net invested over 2008-2010; 73 GW of installed power-production capacity;
  12. 12. Cofely’s UK District Energy Schemes £2.5bn revenue stream over the concessions 77,000 tonnes CO2 saved per annum 270 GWh energy sales per annumManchesterMediaCity UK Midlands Leicester District Energy Birmingham District EnergyLondon Berryfields Estate Coventry HeatlineOlympic Park & StratfordCityWhitehall South CoastBloomsbury Heat & Power Southampton GeothermalGreenwich Millenium Village EastleighEquinox, Hatfield
  13. 13. Cofely District Energy GDF SUEZ GDF SUEZ Energy Services LTDCofely Ltd Cofely District Energy Group Ltd Energy Companies SGHC Cofely District Energy Ltd External Clients BDEC ICE (UK) BHP LDEC Services to Energy Companies New ESCOs
  14. 14. Case Studies
  15. 15. City Wide DE Scheme Providing heat chilled water & 70,000,000 kWh energy electricity to generated p.a.11,000 tonnes CO2 saved p.a. 45+commercial consumers 800+ residential consumers Southampton Geothermal Heating Company, Southampton
  16. 16. Parkview Civic Centre RSH Hospital Southampton Energy Efficiency in Action Solent BBC TV Studio’s – Energy Efficiency in Action UniversityABP • Energy Efficiency in Action Skandia Life West Quay The Heat StationIKEA DeVere Hotel Carnival Quays
  17. 17. City Wide DE Scheme12,000 tonnes CO2 saved p.a.3 Core Partners Providing heat chilled water & electricity from 3 Energy Centres 6.1MWe CHP Birmingham District Energy Company, Birmingham
  18. 18. A Partnering Framework 25 year contracts with BCC, Aston and BCH Financial savings (developed on a whole life costing basis) maintained throughout the contract by indexing charges to national fuel prices, RPI etc. 100% risk transfer to Cofely District Energy As scheme expands profits are shared with these core consumers – number of potential connections in the pipeline
  19. 19. BDEC in Numbers 6.7 MWe of CHP 60,000 MWh of heat per annum 4,900 MWh of chilled water 4 energy centres distributing via a network of 4km buried pipework & cables £6 million per annum energy sales £7 million capital cost to date 12,000 tonnes of CO2 saved per annum
  20. 20. BDEC:The Commercial Framework 25 year agreements with BCC, Aston and BCH Financial savings (on a whole life cost basis) maintained throughout the contract by indexing charges to national fuel prices, RPI etc As the scheme expands profits are shared with these core consumers – number of potential connections in the pipeline 100% risk transfer to Cofely District Energy Scheme supplies heat, chilled water and electricity to agreed output specifications with penalties for non performance Savings to consumers >£0.5M p.a. Emission reductions of 12,000 tCO2 p.a. with target for 20,000 tCO2 through growth and low carbon supply
  21. 21. The Combined Schemes Eastside Scheme Energy Efficiency in Action – Energy Efficiency in Action Phases 1 and 2 • Energy Efficiency in ActionBroad Street Scheme Broad Street Scheme Eastside Eastside Regeneration Area Regeneration Area Westside Regeneration Area Potential future energy links
  22. 22. 16 km of energy network £100 million investment 2 energy centres 40 year concession (district heating & cooling) Energy price regulation Olympic Delivery Authority Energy Centres for London 2012
  23. 23. Olympic Delivery AuthorityEnergy Centres and network for London 2012
  24. 24. Olympic Park & Stratford City• £100M capex• 40 year Concession Agreement – longest district energy services concession agreement in the UK• Mandated Connections within Zone of Exclusivity – enabled by a price control formula - again a first in the UK• 16 km network, 2 energy centres• Up to 200 MW heating, 64 MW cooling and 30 MW electricity
  25. 25. Kings Yard Energy Centre Gas Fired CHPBiomass Boilers Chillers Gas Boilers
  26. 26. “The Olympic Park and Surrounding Areais London’s single most importantregeneration project for the next 25years” Boris Johnson Mayor of London
  27. 27. HeatingCooling
  28. 28. City Wide DE Scheme25 year contract with Leicester City Council£15 million investment CHP and large scale district networks - 3,000 Council Dwellings 15 Administration Buildings Leicester District Energy Scheme - Leicest
  29. 29. Unique “heat shipper” contractCity Wide DE Scheme Concession to purchase all heat from existing incinerator and25 year contract with supply into the City Coventry City Council1 mile “heatline” into the City Coventry District Energy Scheme - Coventry
  30. 30. Study Methodology
  31. 31. West Midlands CollaborativeWorking Group
  32. 32. Authorities Involved The following Authorities supplied data to take part in the study: Coventry Wolverhampton Dudley Walsall Solihull
  33. 33. Desktop Study MethodologyBuildings considered for each study were originally identified bytheir respective LA, who: a. Conducted site visits to each building to examine energy generation plant (boilers primarily); b. Inspected and measured plant spaces; c. Gathered actual energy consumption data: gas and electricity either metered or from invoices; and d. Determined potential third party consumers enthusiasm to being part of a wider district energy scheme.
  34. 34. Potential Networks andConnected BuildingsExamples....Coventry Wolverhampton
  35. 35. Desktop Study Methodology LoadBenchmarkAssessment Whole Life Operational Cycle Cost & financial Energy Analysis modelling & Solution (hourly CO2 Iteration Selection L/Z savings Carbon basis) Generation Plant Operational Strategy (Heat lead) Optimisation via User Feedback
  36. 36. Case Study –results for Walsall
  37. 37. What’s happening in Walsall? Base case o Five buildings were offered o Total GIFA 32,952 m2 100% Council Owned buildings (Mixed type) o Total heat demand circa 4,900,000 kWh p.a. o Total Electricity consumption circa 4,200,000 kWh p.a o £620,300 estimated energy costs p.a. o 3,070 Tonnes CO2 p.a.
  38. 38. Solutions developed2 modelled options considered are: 1. A DES to include all buildings identified by WMBC 2. A DES as per Option 1 with removal of one thermal branch corresponding to the Garage BuildingOption one delivers the greatest financial and environmental benefits to the coreconsumers
  39. 39. Option 1Walsall Option 1 Analysis
  40. 40. Walsall Operational Analysis (Option 1)>The Scheme will:1. Comprise all buildings offered by WMBC2. Based on single CHP: – 334KWe (installed at Civic Centre)3. Save 613 tonnes CO2 (20%) p.a4. This CHP will deliver: – 51% (2,551,426 kWh) of the scheme’s total heat consumption p.a. – 44% (1,898,473 kWh) of the Civic’s Centre electricity demand p.a.5. Export 4% (74,847 kWh) electricity to the national grid
  41. 41. Walsall Operational Analysis (Option 1) Walsall Town Centre Annual Heat Load Duration Curve 1,800 1,600 1,400 1,200 Heat Load (kW) 1,000 Boilers 800 CHP Load 600 400 200 0 1 1001 2001 3001 4001 5001 6001 7001 8001 Hours
  42. 42. Walsall Financial Analysis (Option 1) Option 2 Capex £Cost Total CAPEX £1,037,745 ESCO Finance £1,037,745 WMBC/External grant £ - ESCO operating profit £29,714 CRC EES Energy cost Consumer Revenue savings (p.a) (£/p.a.) Walsall Borough Council £31,016 £7,355
  43. 43. Walsall: Key BenefitsIt is recommended to proceed with Option 1: Zero financial contribution from WMBC; Greatest CO2 savings over base case achieved; Highest energy cost savings to consumers per annum on WLC basis; Largest volume of energy contribution from CHP; Further potential savings from the CRC EES to WMBC of approximately £7,356; and Opportunity to grow a district energy scheme to serve future 3rd party consumers and levied via connection charges.
  44. 44. Financial Summary for Whole Study Total CAPEX : £7.9M Total CO2 savings achieved: 5,300 Tonnes CO2 p.a. Total energy cost savings to consumers > £0.2M p.a. Total potential savings from the CRC EES >£60k
  45. 45. Next steps
  46. 46. Next Steps Deliver district energy schemes across the indentified areas as combined procurement process Include other authorities to deliver economies of scale for all Note - Coventry have fast tracked their procurement (due to specific HCA grant) and via open tender have selected Cofely District Energy to deliver their scheme using waste heat from the existing EFW plant – “Heatline”
  47. 47. Business Models
  48. 48. Option A - LA funding & ownership Theoretically more control over ESCO development (but the same can be achieved via joint cooperation); Not core business to LA (generating and selling energy) Exposure to financial risk (CAPEX cost overruns, etc.) Exposure to operational risk: • OPEX cost • Plant efficiencies • Plant and network replacement + cost (LTR) Not effective risk transfer
  49. 49. Option B - ESCO funding &ownership with Joint Co-operationThe engagement of an ESCO (Energy Services Company) can beutilised by each LA to: 1. Reduce risk exposure to the LA, from the delivery of the scheme. 2. Reduce the capital costs for development of the Scheme; 3. Bring certainty to the projected energy cost and carbon savings; 4. Achieve other key objectives (sustainability targets, etc)OJEU procurement will be required as Scheme will breach OJEUservices threshold (£156,442)
  50. 50. ESCO deliveryAn ESCO would generally: 1. Design, build, finance (or part finance) & operate the scheme; 2. Take all risk on energy supply and plant availability/efficiency; and 3. Provide Energy on an output specification basis with: i. Agreed energy costs savings; ii. Carbon savings;Each LA and other Public Sector bodies would: 1. Enter into a long term energy supply agreement with the ESCO (20+ years).
  51. 51. ESCO obligationsIn return for the long term energy revenues/contracts an ESCO would:1. Deliver energy to agreed standards – high quality, availability etc..2. Deliver energy to agreed prices – although annual charges are split into fixed and unit elements3. Set these total prices to give savings year 1 against alternative costs of heating, cooling and electricity supply4. Ensure on going savings by indexation in accordance with an agreed basket of indices;5. Purchase all fuels including all back up/top up fuel6. Take full risk on availability operation of CHP plant etc..7. Operate, maintain, repair and replace all plant in the Energy Centre and Distribution Systems8. Fund and install 100% Backup/Top-up conventional heating/cooling plant as well as the “sustainable” plant in the energy centre“the Key Terms”
  52. 52. The Birmingham Model Strategic Board Project Energy Board Governance Operational co-ordination Development co-ordinationOwnership & Joint Co-operationInvestment Risk Transfer Energy Services
  53. 53. Partnering Awards for theBirmingham Scheme
  54. 54. Useful guideA useful road map is GPG 377: Guidance on procuring energy services to deliver community heat and power schemes“Used by Birmingham City Council todeliver the BDEC scheme”
  55. 55. Future Expansion
  56. 56. Expanding the SchemesOnce a scheme is developed there is significant potential for the LA toencourage expansion: Planning obligations via PPS1 and other obligations via Section 106 Agreements can help to incentivise private business to connect to DE Schemes. LA can also develop a Joint Cooperation framework with an ESCO to connect buildings where WLC analysis demonstrates viability, thus providing an ESCO with a critical energy density to develop a wider DE scheme. Expansion to Third Parties should deliver a profit share to the core Local Authority partner, as well as delivering cost and carbon savings to consumers
  57. 57. Energy Offering to Third PartiesOnce Scheme is Developed• Capital cost savings – connection charge up to 20% less than conventional plant• Space savings – direct connections mean no plant space required• Planning gain – environmental benefits and no roof mounted cooling plant• Operating cost savings – up to 10% compared to alternative cost of heating/cooling• Savings guaranteed – prices linked to market levels to ensure savings maintained• Carbon Savings - Delivers on LA 21, Kyoto and CSR targets• Risk Transfer – with off site energy supplies
  58. 58. Why Take a Thermal/CoolingConnection ? • Capital cost savings – connection charge up to 20% less than conventional plant• Space savings – direct connections mean no plant space required – very valuable in urban areas• No roof mounted plant – planning gain• Operating cost savings – up to 10% when compared to the alternative cost of heating/cooling (Cofely Business Model)• Guaranteed savings – prices linked to basket of indices to ensure savings maintained throughout life of the contract• Delivers on carbon saving targets and indicators
  59. 59. CContact Mike D Smith Non-Executive Director and Public Sector Advisor, Cofely District Energy E-mail: Mobile: 07976 606858 Web: