Decentralised energy:
unlocking the benefits of
an integrated energy &
sustainability strategy
Mark Stokes
A Mitie business
Our business
Utilyx is a specialist consultancy that provides businesses with service-led solutions that help
reduce their...
ResilienceResilience
AffordabilityAffordability
DecarbonisationDecarbonisation
Our national energy challenge
Knowns
• 25% ...
Demanding environmental targets
4
…these targets will require £200bn of new investment.
So far, we’re seeing investment le...
From challenge into opportunity
5
The Danish way
Denmark’s progress over the past two decades
Large CHP (Combined Heat & Power)
Small CHP (Combined Heat & P...
What is decentralised energy?
7
The national importance of heat
Heat is our largest energy use ....and is responsible for
around a third of UK greenhouse ...
CHP v conventional generation
9
• Low overall system losses
• Minimise non-commodity charges
• Improved security of supply
• Minimise non-commodity charge...
Value and material impact
Reduced energy and fuel consumption Avoided future costs – carbon taxes etc.
Long term value loc...
Compelling global risks
Likelihood to occur in the next 10 years
Impactiftheriskwheretooccur
12
Putting a value on nature
“We use it
because it is
valuable, we
lose it
because it is
free”
Pavan Sukhdev
The Economics of...
The true value of our energy assets
Royal Free HospitalPlymouth Energy Centre Addenbrooke’s Hospital
14
• Diverts 40,000 t.p.a waste wood from landfill
• Environmental Profit & Loss Report
• 15.8gCO2e/KWh = 93.7% < DEFRA basel...
Energy Savings contract - 15 years
• High efficiency low carbon CHP - 36,000
MWh p.a.
• 4,624 tonnes of CO2 savings p.a.
•...
• 10% of household income on energy to keep warm.
Fuel poverty affects 2.7million households, forecast
to rise above 8.6 m...
EP&L cost savings c £65m over project
lifetime
• CHP/Biomass generating 50,000 MWhe
and 43,000 MWhth heat per annum
• 23,0...
At the heart of Policy
• Energy security of supply
• Stimulating investment in aging energy
infrastructure
• Avoiding mark...
• Societal needs often greatest in public sector - but funding/innovation is lacking
• Private sector expertise must step ...
• Development working capital
• Availability of capital
• Investor uncertainty of regulatory policy
• Board level sponsor
...
• Financial modelling assumptions
• Technology & Feedstock
• Government Policy/Incentives/carbon
• Off take – power/heat/c...
Exam question: Decentralised energy: How can we unlock the benefits of an integrated
energy & sustainability strategy
•Ove...
Thank you
@markelstead
@Utilyx
24
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Unlocking the benefits of an integrated energy and sustainability strategy

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The financial, social and environmental value of an integrated energy and sustainability strategy through on-site energy generation. Case studies highlight how businesses and organisations can adopt this model and reap the benefits of it. This was presented at University College London by Mark Stokes, Managing Director of Utilyx's Asset Management division.

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  • Use landfill tax as example
    Association of Chartered Certified Accountants
  • Unlocking the benefits of an integrated energy and sustainability strategy

    1. 1. Decentralised energy: unlocking the benefits of an integrated energy & sustainability strategy Mark Stokes A Mitie business
    2. 2. Our business Utilyx is a specialist consultancy that provides businesses with service-led solutions that help reduce their energy costs and manage their energy needs better We manage enough energy to power 10.5% of the UK Became part of the Mitie group in 2012 Top 3 energy consultancy for market share We were 1st In our sector to be FCA accredited in 2006 2
    3. 3. ResilienceResilience AffordabilityAffordability DecarbonisationDecarbonisation Our national energy challenge Knowns • 25% existing capacity to close by 2015/16 • £110bn investment in gen/trans systems alone • 2020 target: 15% renewable energy • 2050 target 80% reduction in carbon • Electricity Market Reform interventions Unknowns • Impact of capacity squeeze on prices • Technology winners and losers • Capital availability • Affordability • Future demand • International v UK policy 3
    4. 4. Demanding environmental targets 4 …these targets will require £200bn of new investment. So far, we’re seeing investment levels fall well short of what’s requiredSource: Green Investment Bank
    5. 5. From challenge into opportunity 5
    6. 6. The Danish way Denmark’s progress over the past two decades Large CHP (Combined Heat & Power) Small CHP (Combined Heat & Power) Wind Centralised system of the mid 1980’s More decentralised system of today Source: US Department of Energy 6
    7. 7. What is decentralised energy? 7
    8. 8. The national importance of heat Heat is our largest energy use ....and is responsible for around a third of UK greenhouse gas emissions 8
    9. 9. CHP v conventional generation 9
    10. 10. • Low overall system losses • Minimise non-commodity charges • Improved security of supply • Minimise non-commodity charges • Tailored energy resilience levels to suit • Grid becomes more the back up • Heat utilisation benefits to industry • Community based schemes – district heat • Renewable/low carbon options • Address jobs, competitive advantage & the circular economy Benefits of decentralised energy £0 £2 £4 £6 £8 £10 £12 £14 £16 £18 £20 2002 2012 2020Millions Indicative Electricity Costs (based on a 135GWh portfolio) Margin & Imbalance Elexon, HDC BSUOS Transmission & Distribution Losses TUOS DUOS FIT RO CCL Energy 10
    11. 11. Value and material impact Reduced energy and fuel consumption Avoided future costs – carbon taxes etc. Long term value lock in – up to 25 years Strong sustainability metrics Security of supply and enhanced resilience Efficient recovery and utilisation of heat Engaging local communities in the reduction of fuel poverty Reduced exposure to future price volatility Asset refresh without capital outlay Output based performance Economic value Triple bottom line Environmental Value Social Value 11
    12. 12. Compelling global risks Likelihood to occur in the next 10 years Impactiftheriskwheretooccur 12
    13. 13. Putting a value on nature “We use it because it is valuable, we lose it because it is free” Pavan Sukhdev The Economics of Ecosystems and Biodiversity (TEEB) • Volatile commodity and energy prices – constraint on profitability in next decade • Business requirement to Thrive and not just Sustain • Investors link sustainability to a lower cost of capital • Economic impact • Natural Capital is an increasingly material issue for organisations • Adoption by Investors, Corporates, UN, Banks, governments • Energy Efficiency & Decentralised Energy create net positive impact for organisations 13
    14. 14. The true value of our energy assets Royal Free HospitalPlymouth Energy Centre Addenbrooke’s Hospital 14
    15. 15. • Diverts 40,000 t.p.a waste wood from landfill • Environmental Profit & Loss Report • 15.8gCO2e/KWh = 93.7% < DEFRA baseline • Generating 26,000MWh of electricity & heat p.a • Reducing CO2 by 16,000 tpa / 320,000 t lifetime • Water conservation: harvesting & purifying • Circular economy for NHS • Creating over 20+ jobs-assisting 750 more • Driving competitive advantage for Plymouth Valuing Natural Capital: Over £800k net benefit to society every year Plymouth energy centre Diverting 40,000 tons of waste wood from landfill each year 15
    16. 16. Energy Savings contract - 15 years • High efficiency low carbon CHP - 36,000 MWh p.a. • 4,624 tonnes of CO2 savings p.a. • Part of NHS overall carbon reduction target • Surplus heat becomes displaced gas • District Heating scheme for 1500 Camden homes • Positive impact on fuel poverty in the community Royal Free Hospital 16
    17. 17. • 10% of household income on energy to keep warm. Fuel poverty affects 2.7million households, forecast to rise above 8.6 million by 2016. • PPP between NHS, Trust, Local Authority and private business, designed to reduce fuel poverty. • Deliver DH scheme through the streets of Camden to 1500 homes, using waste heat from the RFH CHP. • Community Energy Saving Programme (CESP) co- funded Displacing 2900 tonnes of CO2 London Borough of Camden 17
    18. 18. EP&L cost savings c £65m over project lifetime • CHP/Biomass generating 50,000 MWhe and 43,000 MWhth heat per annum • 23,000 tCO2e saving a year, reducing carbon emissions by 47% • Lifetime GHG savings > 500,000 tCO2e • Energy conversion from local medical waste & locally arising waste wood • EE measures reduce consumption by 10% • Energy savings of circa £30m over 25 years • Green Investment Bank - £18m funding Addenbrooke’s Hospital 18
    19. 19. At the heart of Policy • Energy security of supply • Stimulating investment in aging energy infrastructure • Avoiding market failure • Guiding a sustainable low carbon transition plan • Fuel poverty • Competitiveness of UK economy • Deciding who will pay for it! Decentralised energy’s material impact Cardenden Heat & Power scheme 19
    20. 20. • Societal needs often greatest in public sector - but funding/innovation is lacking • Private sector expertise must step up and play a pivotal role • Development capital options becoming available • GIB Green Loan • DECC – HNDU, Energy Efficiency Fund etc • EEEF • ERDF • Industry entering PublicPrivate agreements to utilise heat 2011 Low Carbon Communities challenge £10m across 22 communities but couldn’t deliver replication… • Replication at a scale – reduce transaction costs and timescales • Procurement approach must be sharpened to focus on benefits Stimulating decentralised developments 20
    21. 21. • Development working capital • Availability of capital • Investor uncertainty of regulatory policy • Board level sponsor • Internal payback requirements • Local competition for fuel in the future • Debt markets appetite for risk • Standardised contract suite • Biomass • Externalities not measured on P&L Challenges 21 • Local authority schemes stalling • Internal core capital or externally sourced • Government incentives - RO/CfD • Conversation to engagement • Short term v long term security • Disconnect between national / local • ESCo de-facto guarantor • Reduce transaction costs/time • Fuel: a commodity or a waste • Applying GRI / ESG / EP&L
    22. 22. • Financial modelling assumptions • Technology & Feedstock • Government Policy/Incentives/carbon • Off take – power/heat/cooling/CO2 • Planning/permits/JRs • Accounting/Balance Sheet/Tax, ECA’s • Creditworthiness of counterparties • Funding strategy • Environmental Social & Governance • Demand side energy efficiency • Inflation/RPI Due diligence – managing complexity • Risk & Sensitivity analysis • Interface management • Savings structure/baseline • Pricing mechanism – standing/unitary charges • Legal & financial close • Reporting KPI’s • Comp on Term & liability provisions • TUPE • Infrastructure interface/metering • Lease to occupy 22 Don’t underestimate the requirement to ‘conduct’ your team of experts They tend not to manage in concert!
    23. 23. Exam question: Decentralised energy: How can we unlock the benefits of an integrated energy & sustainability strategy •Overall Business sustainability – energy is sector and departmentally agnostic •Delivers Triple bottom line net positive impacts - People, Profit, Planet •Future proofs Business in an increasingly volatile world •Supports the very ‘essence’ of the Business - defining enduring legacy & purpose •Achieving improved business competitive advantage through the creation of shared value to society Summary 23
    24. 24. Thank you @markelstead @Utilyx 24

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