NCC Energy Masterplan May 2012 - Newcastle City Council · 2019-05-03 · Newcastle City Council...

Newcastle Energy Masterplan Newcastle City Council May 2012

Distributed Energy

Newcastle City Council

Energy Masterplan

May 2012

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Process

Name Date

Prepared by Allen Jones May 2012

Reviewed by Tom Bradley May 2012

Approved by Allen Jones May 2012

Contract Details

Reference ID

Project Reference 157


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CONFIDENTIALITY

The information in this document is the property of Narec and the specific client who commissioned

this work. It may not be copied, transmitted or communicated in any form whatsoever to a third

party or used for any purpose other than that for which it is supplied, without the express written

consent of Narec or our client.

LIABILITY DISCLAIMER

Whilst this information is given in good faith, no warranty or representation is given concerning such

information, which must not be taken as establishing any contractual or other commitment binding

upon Narec or any of its subsidiaries or associated companies.


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Contents

1. Executive Summary ............................................................................................................... 5

2. Introduction & Background ........................................................................................................ 7

3. Government Policy and Drivers .................................................................................................. 8

4. Masterplanner Role – Scope and key drivers ............................................................................ 15

4.1 Carbon Reduction ....................................................................................................................................... 17 4.2 Affordable Energy........................................................................................................................................ 18 4.3 Community Energy ...................................................................................................................................... 20 4.4 ESCo Development ...................................................................................................................................... 22 4.5 Renewable Energy Technologies ................................................................................................................. 23 4.6 Partnerships ................................................................................................................................................ 24 4.7 Financing ..................................................................................................................................................... 25

5. Key aspects of the Energy Masterplan ...................................................................................... 28

5.1 Reducing demand for energy by improving energy efficiency of buildings ............................................. 28 5.2 Renewable Technologies ......................................................................................................................... 29

5.2.1 Renewable Electricity Generation ................................................................................................. 30 5.2.2 Renewable Heat Generation ......................................................................................................... 31

5.3 Low Carbon Energy Production - District Heating/Cooling ..................................................................... 32 5.3.1 Heat Network Vision and Potential .............................................................................................. 32 5.3.2 Establishing Market Interest ......................................................................................................... 35 5.3.3 ESCo ............................................................................................................................................... 37

5.4 Regeneration ........................................................................................................................................... 39

6. Strategic Direction – The Next Steps ......................................................................................... 42

Appendices ................................................................................................................................. 48

Appendix 1 - Sustainable Energy Action Plan (SEAP) ..................................................................... 48

Appendix 2 - Market overview of energy sources and suppliers as they impact on Newcastle, and

sustainable energy availability & associated cost implications Oct 2010 ........................................ 49

Appendix 3 - Newcastle Civic Centre & Northumbria University Tri Gen Report Oct 2010 ............... 50

Appendix 4 - Financial drivers for low carbon energy schemes ...................................................... 51

Appendix 5 - NCC Wind Resource Report 2010 ............................................................................. 52

Appendix 6 - Zone of Planned District Energy 20/5/11 .................................................................. 53

Appendix 7 - Arup proposed Newcastle Heat Network Plan .......................................................... 54

Appendix 8 - Newcastle City Council “Newcastle Heat Network” – Soft Market Testing December

2011 ........................................................................................................................................... 55


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Tables

Table 1: Newcastle City Council, Energy Masterplan – Next Steps…………………………………………………………….41

Table 2: Newcastle City Council - Sustainable Energy Action Plan (SEAP) ........................................................ 48

Figures

Figure 1: Energy Masterplanning Workstreams .............................................................................................. 16


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1. Executive Summary

The New and Renewable Energy Centre (Narec) were appointed by Newcastle City Council in

August 2010 in the role of energy masterplanner for the city. The role was created by the

council to help drive forward the delivery of renewable/low carbon energy schemes and

affordable energy in the city. The Energy Masterplan is written against the background of

increasing concern regarding climate change, rising energy costs, uncertainty over security

of energy supplies and austere economic times.

The main objective of the role was to produce an energy masterplan document that sets out

the strategic direction and next steps that the council should take over the next 20 years and

to act as an overarching strategy for the delivery of the council’s objectives in this area

namely;

Carbon Reduction

Affordable Energy

Community Energy

ESCo Development

Renewable Energy Technologies

Partnerships

Finance

These objectives are explored in more detail within the masterplan and are set in context

with European, national and local policy drivers and targets.

The masterplan then focuses on the key aspects identified in achieving these objectives

which are;


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Reducing the demand for energy by improving the energy efficiency of buildings

Deployment of market ready renewable energy technologies

Low carbon energy production (District Heating/Cooling)

The impacts of regeneration and development in the city

Finally the masterplan sets the strategic direction and identifies next steps the council needs

to take to deliver the objectives in these areas. The types of interventions being

recommended are the potential for;

Large scale district heating & cooling

Shared energy schemes

Installation of renewable energy generation (in particular solar photovoltaic panels (PV),

solar thermal hot water systems, biomass heating and small scale wind),

Improved insulation and energy efficiency of all housing stock and buildings

Energy related behavioural change and awareness across the city.

The work already undertaken in this area has helped towards the city being awarded the

title of the UK’s most sustainable city in 2009 and 2010 and will also act as one of the key

drivers for the city’s bid to be European Green Capital in 2014.


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2. Introduction & Background

Narec were appointed by Newcastle City Council in August 2010 in the role of energy

Masterplanner for the city. The role was created by the Council to help drive forward the

delivery of renewable/low carbon energy schemes and affordable energy in the city whilst

co-ordinating activity across the Council and other city stakeholders. This assists the Council

drive forward it’s undertakings in terms of national and European carbon reduction targets.

The Council signed up to the EU Covenant of Mayors agreement in 2010 and has committed

the city to reduce its carbon emissions in excess of 20% by 2020 (Based upon a 2005

baseline). As part of the Covenant of Mayors agreement the council has developed and

agreed a Sustainable Energy Action Plan and a Citywide Climate Change Strategy and Action

Plan. The sustainable energy action plan is a scenario of possible carbon reduction projects

and interventions that will result in the city hitting its targets (Set out in Appendix 1). This

will be used as a framework to drive the carbon reduction projects in the city. The role of the

Masterplanner is to assist the Council in a technical capacity to deliver these interventions

and develop the Energy Masterplan over the two years of the engagement.

The type of interventions being considered are potential for district/community heating

schemes, shared energy schemes, installation of renewable energy generation (in particular

photovoltaic panels (PV), solar thermal hot water systems, biomass heating and small scale

wind), improved insulation and energy efficiency of all housing stock and behavioural

changes and training across the city. The work already undertaken in this area has helped

towards the city being awarded the title of the UK’s most sustainable city in 2009 and 2010

and will also act as a driver for the city’s bid to be European Green Capital in 2014.


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3. Government Policy and Drivers

The Energy Masterplan is written against the background of increasing concern regarding

climate change, rising energy costs, uncertainty over security of energy supplies and austere

economic times. Following the banking crisis in 2008 the UK (and many other world

economies) remains under severe economic pressure which has meant a continued

reduction in available lending and a slowdown in the economy. This could develop into a

further economic recession and this has led to the recent spending review by the

Government which has resulted in significant public sector spending cuts across the board.

The UK Government continues to be committed to being the “greenest Government ever”

but financial and economic pressures allied to the nature of a coalition Government have, as

some commentators have indicated, started to expose tensions which have led to mixed

messages coming from the Government. This is in terms of their commitment to the support

they can offer for the drive towards a low carbon future. This is largely related to the

availability of public funds for the financial incentives and the impact of low carbon policies

on energy bills for users both large and small.

The energy masterplan has been developed against an evolving set of National and

European policies, legislation and financial models/incentives. These policies are designed to

change our use of energy away from the current centralised generating system to a more

decentralised system of energy generation which will also include the increasing deployment

of renewable and low carbon energy sources. The effect of this is to, not only reduce our

carbon emissions and alleviate our impact on climate change from generating power and

heat, but also to increase our energy security in the light of reducing supplies of fossil fuels.

The Government has indicated that domestic Oil & Gas production reached its peak in 2001

and that to fill this gap the UK now has to import (the UK became a net importer in 2004) an

increasing quantity of energy, nearly all of which is fossil fuel derived. This means that the

UK energy market is increasingly subject to the volatile world of these price commodities,


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with the inherent risk of price spikes if supplies are disrupted.

The UK and the EU have led the way internationally in pushing forward the worldwide

adoption of binding climate change targets and were signatories to the Kyoto Protocol as far

back as 1990. The recent climate change summit in Durban seems to have paved the way for

a replacement for the Kyoto Protocol by 2020 which will include more of the world’s major

emitters in agreeing binding targets for the first time. This is set against increasing scientific

acceptance of the rapidly increasing climate change impacts and the need to act sooner

rather than later. (Some recent reports indicate that something major on a global scale must

happen in the next five years)

The Climate Change Act of 2008 set legally binding targets to reduce the UK’s greenhouse

gas emissions by at least 80% below base year levels by 2050. This is to be achieved by

action at home and abroad. To drive progress and set the UK on a pathway towards this

target the Act introduced a system of “Carbon Budgets” which provide legally binding limits

on the amount of emissions that may be produced in successive five year periods from 2008.

The first three carbon budgets were set in law in May 2009 and require emissions to be

reduced by at least 34% below base year levels in 2020. The fourth Carbon Budget for the

period 2023-2027 was set in law in June 2011

In its “Low Carbon Plan: Delivering our low carbon future, December 2011” the Government

indicates that emissions are down by a quarter since 1990 and current policies put the UK on

track to cut emissions by over a third, on 1990 levels, by 2020.

The aim is that by moving towards a more efficient, low carbon, sustainable economy the UK

will become less reliant on imported fossil fuels and less exposed to higher and more volatile

energy prices in the future.

However the Government, in the Low Carbon Plan, also accepts that if we are to cut

emissions by 80% by 2050 there needs to be major changes in how we all use and generate


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energy. Energy efficiency will have to increase dramatically across all sectors. The oil and gas

used to drive cars, heat buildings and power industry will, in large part, have to be replaced

by electricity, sustainable bioenergy or hydrogen. Electricity will need to be “decarbonised”

through the use of renewables and nuclear power, and the use of carbon capture and

storage. The electricity grid itself will need to be larger and smarter at balancing demand

and supply. The Government are currently consulting on reform of the Electricity Market to

enable investment in a range of low carbon technologies, through the introduction of a new

low carbon support mechanism and the introduction of a carbon floor price from 2014. It is

hoped that this will provide the market with the certainty to make the investments required

to develop and “smarten” the grid and increase the amount of low carbon and renewable

generation.

In terms of renewable energy production the Government has implemented the provisions

of the 2009 EU Renewable Directive that commits the UK to achieve 15% of its energy

production is to be from renewable sources (electricity/heat & transport) by 2020 from base

of 3% in 2009 and only 1.4% in 2005. In March 2011 the Government published its Carbon

Plan which estimated that 40-70GW of new low carbon electricity generating capacity will

be needed by 2030 and that renewables could provide 35-50GW of that capacity. The

Government then followed this up with a Renewable Energy Roadmap in July 2011 that lays

out the plan of action across the UK to further accelerate the deployment of renewables to

ensure value for money for the customer. In setting out this roadmap the Government

identified those technologies that have the greatest potential to help meet the 2020 target.

The eight technologies identified could provide 90% of the renewable energy we need by

2020 (These technologies are; Onshore/Offshore Wind, Marine Energy, Biomass Electricity,

Biomass Heat, Air/Ground Source Heat and Renewable Transport)

In December 2011 and in accordance with the directive (Article 22) the Government

published its first progress report on the promotion and use of energy from renewable

sources. The report indicates that over the course of 2009 and 2010 the introduction of a

series of measures (see below for further details of the various measures) has resulted in an


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increase in renewable energy generation of 27% over the two year period. In the third

quarter of 2011 renewable electricity generation stood at 9.0% of the total demand and is

rising steadily. The report indicates that the UK is on track to meet its first overall interim

target in 2011/12 of 4% but it also identifies the need to further accelerate deployment

towards the end of the decade. To put this into context the latest available figures for total

renewable energy production stood at 3.6% at the end of Q3 2011.

In real terms the Government has estimated that for the UK to meet its energy needs and to

reduce carbon emissions that an estimated £200 billion needs to be invested in the energy

infrastructure over the next decade. These investments include improving the energy

efficiency of homes and other users and new low carbon generating capacity to replace

ageing, inefficient and polluting power stations. The vast majority of the investment will

need to come from the private sector, but public bodies and especially local authorities will

need to play a leading role in identifying opportunities and providing incentives to the

market.

In order to translate the required changes in our energy generation and use the previous

and current Governments have enacted a series of Energy Acts (2008, 10 & 11) to provide

the legislative framework for the markets to change to incentivise deployment, increase

energy efficiency, provide a method for the energy suppliers to provide funding to make

some of these changes, develop supply chains and encourage innovation etc. The

Government realise that ultimately it is the end users that will fund the increased

infrastructure costs and pay for the various financial incentives. So they are keen to limit the

impact on the customer especially in the light of increasing wholesale energy prices,

increasing fuel poverty, rising inflation, spending cuts, weak economy etc. (Fuel costs have

risen significantly over the last four years in fact the Government’s own figures show that

between 2007 & 2011 Domestic Electricity prices have risen by 12.5% and Gas has risen by

almost 27%)

These Acts and other previous measures including the Climate Change Act 2008 & the


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Renewable Energy Directive 2009 have resulted in a raft of schemes and incentives. These

measures are designed to stimulate the market, increase deployment, develop supply chains

and provide certainty for public and private sector investments as well as encouraging

industry and large scale users embed energy efficiency into their organisations or face

increased costs either directly or through taxation.

These can be broken down into the following areas:

Energy Efficiency – Non Domestic

Various emissions related schemes on the non-domestic sectors through differing forms of

“taxation” or carbon trading to encourage users to improve energy efficiency and reduce

carbon emissions. (Polluter pays principle)

EU ETS – European Emissions Trading Scheme for large intensive energy users

CCA - Climate Change Agreements for certain larger industrial sectors (Climate Change Levy)

CRC – Carbon Reduction Commitment for public sector and other larger users

Energy Efficiency – Domestic

Green Deal – The Governments flagship domestic energy efficiency scheme currently under

development and out to consultation The Green Deal financial mechanism eliminates the

need to pay upfront for energy efficiency measures and instead provides reassurances that

the cost of the measures should be covered by savings on the electricity bill. (Warm up

North East)

ECO - A new Energy Company Obligation will integrate with the Green Deal, allowing

supplier subsidy and Green Deal Finance to come together into one seamless offer to the

consumer. This will replace both the existing CERT (Carbon Emission Reduction target) and

CESP (Community Energy Savings Programme) energy supplier obligations which are due to


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end in 2012.

Smart Meters – The rollout of smart meters will be a major national project. It will involve a

visit to every home and many businesses in the UK, and the replacement of around 53

million gas and electricity meters. Smart meters can pave the way for a transformation in the

way energy is supplied and used. They will provide consumers with near real-time

information about energy use, and more accurate bills.

Renewable Energy Deployment

Various financial incentive schemes

RO – Renewable Obligations Certificates for large scale renewable electricity generators.

There are new banding arrangements to further encourage investment in less developed

technologies due in 2013 with a managed transition to the low carbon support mechanism

being proposed as part of the Electricity Market Reforms.

FiT – Feed in Tariffs for smaller scale renewable electricity generators.

Currently subject to a review and consultation by the Government

RHI – Renewable Heat Incentive for all sizes of renewable heat generation.

The RHI commenced for non-domestic installations in November 2011 and is due to come

on stream for domestic installation as part of the Green Deal later in 2012.

The Government is also keen to promote district heating and cooling schemes both through

low carbon and renewable energy sources. They will be publishing a national heat strategy in

2012 and the 2012 Budget is expected to contain financial incentives for gas fired combined

heat and power (CHP) systems as well as a drive to promote the uptake of district heating


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and cooling projects in the major conurbations. A new EU Energy Efficiency Directive is also

due next year which will also focus on national heating and cooling plans and the large scale

deployment of district heating and cooling schemes. Both the EU and the Government see

the local authorities and public sector as being a vital component in the promotion and

delivery of these schemes. It will also provide a more efficient way to use our remaining gas

resources to provide more efficient and lower carbon heating and cooling in our major

towns and cities.

It is obvious that the road to a low carbon energy future is going to be difficult and being

able understand, appreciate and use the complex and varied Government schemes and

incentives is going to be crucial for the council to, not only, achieve its own targets but help

it to achieve the national and European targets, reduce fuel poverty, provide affordable

energy, improve energy efficiency etc within its own control and sphere of influence.

For these reasons the Council is being proactive and the energy masterplan initiative

demonstrates how it plans to take the lead in developing a low carbon energy solution for

the city.


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4. Masterplanner Role – Scope and key drivers

The Masterplanner role was initially defined by the specific points listed below:

• Develop an Energy Master Plan for the city to contribute to delivering the council’s

aims, objectives and targets and assisting the city’s ambitious drive towards

sustainability and carbon neutrality.

• To oversee and manage the transition of plans and strategy through to the delivery of

sustainable affordable energy to local communities.

• Lead on the evaluation and implementation of sustainable community energy

networks and the selection of Energy Service Companies (ESCos) and other delivery

vehicles.

• Advise on and support the design, procurement and implementation of sustainable

energy systems in each of the regeneration programme areas and ensure the

coordination of these within the Energy Master Plan.

• Develop appropriate policies and advice on sustainable energy for inclusion in the

Local Plan.

• To attract and develop appropriate relationships with external partners both in

respect of energy and the associated link with regeneration.

The scope identifies a number of key themes that must form the focus areas that have been

used in the development of the Energy Masterplan, these are:


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Figure 1: Energy Masterplanning Workstreams

The development of the Energy Masterplan is a key objective of the twenty four month

contract with Narec and is being developed over that period. This plan is a legacy reference

document that the city can use to drive forward the key aspects contained within the plan.

Whilst the plan is the main output of the Masterplanner contract there are many cross

cutting workstreams that have provided evidence for the Masterplan and assist the Council

drive forward delivery of projects and initiatives.

One of the first tasks for the Energy Masterplanner was to assess the potential and the

applicability of available technologies in the city for the provision of low carbon and

renewable energy. Narec produced a report “Market overview of energy sources and

suppliers as they impact on Newcastle, and sustainable energy availability & associated cost

implications Oct 2010” which is attached as Appendix 2. This report was also used to confirm

the accuracy of the Sustainable Energy Action Plan (SEAP) required by the Covenant of

Mayors which confirmed that using the scenario of interventions identified that the city

could indeed achieve its aim of reducing carbon emissions by more than 20% as it indicated

that 22% was possible by 2020. (See SEAP interventions listed in Appendix 1)

The key themes contained in the Masterplan are set out below:


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4.1 Carbon Reduction

Climate change is seen as one of the main societal and technological challenges of the

century, and in order to prevent runaway dangerous climate change action must be taken

sooner rather than later. This urgency is apparent nationally and internationally in the efforts

being undertaken to achieve a reduction in global greenhouse gas emissions, most

specifically CO2. The UK and Europe have taken the lead on Climate Change internationally

and have enshrined binding carbon reduction targets into UK and European legislation.

As part of these commitments and as mentioned in the introduction the Council has signed

up to the EU Covenant of Mayors and developed a Sustainable Energy Action Plan which

commits the city to a reduction in carbon emissions in excess of 20% by 2020 (On current

figures this represents a required saving of in excess of 380,000 Tonnes of CO2)

Carbon emissions can be reduced in a number of ways and the City Wide Climate Change

Strategy reflects this. This commitment aligns with national targets set out in the Climate

Change Act: 2008.

In a city environment the major emissions relate to the use of energy in the form of natural

gas and electricity and the carbon reduction targets mean that the city must significantly

reduce and replace its reliance on gas and electricity to achieve its targets. This could not be

achieved through a single route and a mix of solutions is required, both societal and

technological. This includes increasing energy awareness, better building and standards of

construction, the upgrading of existing property, the deployment of low carbon energy

schemes, and integration of renewable energy (heat/power) generation. No single solution

is capable of delivering the scale of reduction required. However it is now clear the future

needs to be less reliant upon inefficient centralised energy generation sources and needs to

focus more upon decentralised energy generation.


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In today’s harsh economic environment and in the face of the public sector spending cuts to

close the budget deficit, the increasingly difficult part of this challenge is to be able to attract

enough capital investment to schemes of a large enough scale. It is important that these

schemes can be implemented to achieve the required carbon reductions whilst providing

energy that is sustainable and affordable. Funding of schemes is a major issue and is dealt

with later in this report. The council must take the lead in this area.

4.2 Affordable Energy

The provision of affordable energy is vital for the economic prosperity and the reduction of

fuel poverty for the city and its residents. The pressure on energy prices is great with fossil

fuel costs rising, climate change adaptation costs and energy security concerns all

contributing to the cost of energy rising substantially over the last decade. This upward cost

pressure is predicted to continue long into the future as fossil fuel stocks decline and the

take up of alternative sources of energy gathers pace. Despite some reductions on fossil fuel

costs in the latter half of 2010 the retail price of gas and electricity has risen again in 2011a

(In the period 2007-11 Retail Gas prices have risen 27% and electricity by 12%). The

provision of low carbon energy is an increasing priority but we must work with the industry

and partners to ensure that the sources of low carbon energy that we take forward in the

city are also providing energy that is affordable, secure and can be guaranteed not to rise

dramatically in the future as circumstances change. An example of this is the use of biomass

for heating and for electricity generation which is becoming more popular and the

Renewable Heat Incentive (RHI) which will further incentivise the use of biomass technology.

This will put pressure on the biomass supply chain which could lead to increased raw

material costs and then delivered energy costs.

Fuel poverty is of increasing concern nationally and in the city. In the most recent

Government figures, published in 2011 for the year 2009, it is estimated that 5.5 million

people are living in fuel poverty in the UK. This is an upward trend and with increasing

a DECC have estimated that electricity prices will rise 7% year on year for instance which is higher than inflation

and in our opinion a conservative figure.


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energy costs, public sector spending cuts, benefit reform and increasing unemployment, the

trend is likely to remain upward. The Government has committed to the eradication of fuel

poverty as far as reasonably practical by 2016 and have commissioned the “Hills Fuel

Poverty Review” to review the target and definition of fuel poverty (Report is due in early

2012). Fuel poverty is currently based upon households who spend more than 10% of their

income on fuel.

The national figures also show that of the 5.5 million living in fuel poverty that 4.5 million

are regarded as vulnerable households (A vulnerable household is one that contains the

elderly, children or someone who is disabled or has a long term illness). The North East of

England has the highest proportion of fuel poor with 26% of households being in fuel

poverty. In September 2011 Newcastle Warm Zone estimated that the current figure for the

city was 34% of households.

As part of the city’s aim to be a “Fairer City” fuel poverty has been identified one of the main

themes within its “Financial Inclusion Plan”. The priorities linked to becoming a fairer city

are:

• Making Newcastle a working city

• Creating decent neighbourhoods

• Tackling inequalities that prevent people from achieving their potential

• Becoming a Council fit for purpose

This work ties in with the work that the WarmZone partnership have been doing in the city

for the past few years in improving the energy efficiency of domestic properties. This will

potentially carry forward through the Green Deal in 2012 through the Warm up North East

project, currently under development. It is vital that the energy efficiency of buildings

continues to be a priority and in order to reduce fuel poverty and meet the targets set in the

SEAPb. It is therefore a vital element that has a key role to play in supporting the energy

masterplan. Through improved building efficiency the associated reduction in energy

b The UK housing stock is among the most inefficient in the world and was responsible for 43% of total UK

emission in 2009


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demand means less fossil fuel generated energy is used and the overall load required by our

proposed decentralised, low carbon and renewable energy solution is also reduced.

4.3 Community Energy

The Government has indicated that the development of community energy projects is

complimentary to both the policies on climate reduction, localism and reduction in fuel

poverty and is actively promoting the adoption of such schemes. The community aspect also

sits within the “Big Society” policy being promoted by the Government. Both the

Government and the EU are keen to develop such schemes and a National Heat Strategy is

to be published in 2012 outlining how heating and cooling networks can be developed. It is a

key requirement that lower carbon sources of heating and cooling of buildings is developed

on a city wide scale. The Government are also looking at ways of incentivising such schemes

and removing barriers for development. At the same time the Government has also signalled

that it is looking to the Local Authorities to take the lead role by allowing the sale of

electricity from Local Authority generation projects (previously it was limited to CHP only).

The city council have been at the forefront of these types of developments going back many

years with the Byker heat scheme and are part of the Core Cities “Heat Network Group” and

are a Vanguard Council for “Heat in the City”. The council was also selected by the HCA to be

given funding for the biomass district heating scheme at Riverside Dene in 2010 which is

now held up by the HCA as a national exemplar project.

Community energy is not well developed in the UK generally and whilst the city has a

number of established community schemesc, there is still potential to provide further

affordable community low carbon energy in the city. This could be in the form of community

heating and electricity supply or a combination of both (Combined Heat Power & Cooling).

c Newcastle currently has two major district heating scheme based around Byker and Riverside Dene serving

Your Homes Newcastle (YHN) managed properties plus a further 47 smaller group and sheltered schemes.


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An example of a community district heating scheme in development can be currently seen in

Scotswood, whilst this is regeneration development led it is a good model for other areas in

the city to consider in the future.

Previous work commissioned by the Council has identified the potential use of district,

community and shared energy schemes in other areas of the city. The task is to match the

heat load potential with an ESCod that can establish a financially sound business case, and

also sell affordable heat that will make sound financial and business sense.

Taking into account the development of district heating by the Council across the city there

is still potential to look at the development of a larger district heating scheme by linking up

the developments in Byker and in the west of the city into the city centre as a long term

vision. However it should be noted that the cost of infrastructure is much higher when

developing schemes into an existing environment (retrofitting) as opposed to a new

development scenario. Further technical and financial appraisals may need to be undertaken

to establish which schemes have viability and could form part of a city wide scheme. (See

Chapter 5)

Other sources of energy are also being investigated in the city which could prove to be a

valuable source of low carbon energy. The potential for geothermal energye on the Science

Central site is exciting but it remains to be seen if the heat can be provided affordably. Test

drilling funded by DECCf was completed on the site by Professor Paul Younger of the

University of Newcastle in the summer of 2011. Further testing work needs to be funded

(approx. £100K) to establish the true geothermal potential but the initial signs are

encouraging and geothermal power can be cost effective, reliable, sustainable, and

environmentally friendly. Professor Younger has indicated that the exploration bore hole he

has drilled has established that the temperature of the water 2Km down is of a higher

temperature than was originally thought at around 80 Deg C. The bore has the potential to

d Energy Services Company

e The use of the earths stored energy as a heat source to generate power and heating/cooling for buildings

f Department of Energy & Climate Change


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provide not only heating and cooling to the site but to be expanded out and to form a

significant heat source for a citywide heat network.

It is our view that an incremental approach should be taken to the development of

community, district or shared energy schemes which must be carefully planned and

financially modelled to enable the scheme to be viable and to ensure that other schemes

can benefit in the longer term. This approach is likely to find favour with the main ESCo

providers and investors and is more likely to lead to the development of a larger city wide

scheme in the future.

As part of the Masterplanner work programme we have investigated a shared energy

scheme between the Council & Northumbria University using the Civic Centre and

Northumberland Buildings (A Narec case study “Newcastle Civic Centre & Northumbria

University Tri Gen Report Oct 2010” is attached as Appendix 3). This scheme is financially

attractive on a simple payback basis and in terms of carbon reduction to both parties, and

could act as the catalyst to establish a city centre district heating scheme that could be

expanded in the future. Further work is ongoing to develop a method of funding this project

which will establish the concept of a heating and cooling network in the heart of the city.

4.4 ESCo Development

The Council’s Climate Change Strategy contains a commitment to investigate the feasibility

of creating community energy schemes, possibly through an Energy Services Company

(ESCo) as a means of contributing to both carbon reduction and affordable warmth

priorities. ESCos can be formed in a number of ways (Public/Private Partnership, Community

Based etc) and can be a catalyst to provide financing and a delivery mechanism for low

carbon energy scheme provision on a project by project basis or on a city-wide basis by

linking together a number of existing schemes. The evaluation and selection of potential

ESCos is a key part the masterplanner role. Funding for the provision of low carbon

affordable energy provision in the city will rely upon the availability of significant capital

funding as most of the solutions being considered are by their very nature and scale very


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capital intensive from the outset. Initial ESCo procurement and start-up costs can also be

high as well. Financing options are discussed below and further information on ESCos is

provided in section 6, page 41 of the Narec produced “Market overview of energy sources

and suppliers as they impact on Newcastle, and sustainable energy availability & associated

cost implications Oct 2010” which is attached as Appendix 2.

A current example of a Design, Build, Finance and Operate (DBFO) ESCo can be seen in the

regeneration of Scotswood. The ESCo will be the vehicle to deliver low carbon affordable

heating and domestic hot water to the new community. This will be achieved with a private

sector partner delivering a community based centralised heating scheme commencing in

2012.

The shared energy scheme mentioned above in 3.3 is another potential small ESCo that

could be used to increase interest with the major users of energy in the city centre and is a

good opportunity for the Council to take a lead, whilst at the same time reducing its own

energy bills and carbon emissions.

4.5 Renewable Energy Technologies

As discussed earlier it is important that a mixture of solutions is necessary to achieve the

energy reductions required to enable the carbon emissions reduction targets to be met. One

of the key drivers will be the deployment of renewable energy (and heat) generating

technologies either individually or as part of a larger project such as a low carbon district

heating scheme, for instance. The deployment of these technologies is doubly valuable as it

not only reduces the reliance on heat and power generated from centrally generated

sources, but will also result in a revenue generating situation by exporting clean power back

to the grid (or offsetting the amount of power the user has to import or both) whilst also

gaining the available financial incentives from the Government. This can significantly

improve the financial viability of schemes and provide a good rate of return on investment.

Deployment of these technologies will also add to the achievement of the national target of

achieving 15% of renewable energy production by 2020. Renewable energy sources can be


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linked to or form part of wider decentralised networks and can link into low carbon schemes

to provide a valuable contribution on terms of overall carbon reduction and the availability

of financial incentives to assist the financial model and business case.

As indicated the Government incentivise the deployment of a range of established (though

currently expensive) renewable energy technologies through a series of financial and tax

incentives (Feed in Tariff/Renewable Heat Incentive etc). The interventions contained in the

SEAP reflect the range of established technologies that can be easily deployed and the

financial incentives currently available reflect these types of technologies also. Details of

these incentives can be found in the Narec report “Financial drivers for low carbon energy

schemes” in section 3, page 4, which is attached as Appendix 4. An update on the current

position in terms of the Feed in Tariff is set out below in section 3.7.

4.6 Partnerships

As has been previously eluded to earlier in the report the drive towards a low carbon city

can only be achieved with significant financial investment. It therefore follows that the

Council must engage with a number of partners and stakeholders to be able to take the lead

in terms of carbon reduction and project implementation. The city has a good opportunity to

work with the public sector, industry, commerce and retail sector by getting them involved in

the implementation of low carbon energy, the attraction of this being a good business

proposition for those sectors as well providing a significant carbon reduction potential to the

wider city.

Current initiatives relating to delivery of projects includes a “Climate Change Delivery

Partnership” with Narec, YHN and Warm Zone.

The Council also leads the “Newcastle Climate Change Partnership” which engages with a

range of stakeholders in the city from the public, private and academic sectors. This group is

also leading on the bid for the city to become European Green Capital in 2014.


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The key issue is that although the Council can and does take the lead on carbon reduction in

the city it is apparent that it cannot achieve a large enough impact on its own without the

support of city wide partners, investors, delivery partners and technology installers.

Key partnerships need to be established when undertaking redevelopment and regeneration

within the city. These aspects of development are the ideal opportunity to encourage (or

required by planning input) low carbon energy solutions (as in Scotswood) and a proportion

of embedded renewable energy generation (For instance 10% embedded generation -“The

Merton Rule”)

A strategic partnership will need to be established with a range of stakeholders in order for

the city to be able to fund and deploy enough low carbon energy solutions in order to

provide affordable energy and carbon reduction in the future.

4.7 Financing

The common thread running through the energy masterplan is the ability to raise finance for

the delivery of low carbon energy and renewable energy schemes. The council must look to

take advantage of public private partnerships and look to use the available current

Government incentives and tax breaks to stimulate a range of projects that can be delivered

in the city. This has to be in a way that can achieve affordable lower carbon energy provision

in such a way as is affordable or investable. This could be achieved either in partnership with

the private & public sectors, via an ESCo or funding schemes (such as PV) from council funds

(or prudential borrowing) that can deliver a good return on investment.

The requirement to maximise the returns currently available from the Feed in Tariff were

brought into focus by the fact that the maximum incentives are only available for the first

two years of the scheme (up to April 2012) and that Government announced a major review

of the Feed in Tariff in the summer of 2011 and all aspects of the scheme are currently still

under review.


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In fact the Government published an “urgent” consultation just related to the PV tariffs in

October 2011 with a closing date for responses of 23rd December. In the consultation the

Government identified the need to urgently cut the tariffs by half to prevent the scheme

exceeding its budget cap for this year and subsequent years. This was due to the system

installation costs reducing more rapidly than they had originally modelled when the scheme

was designed, this was leading to a much bigger return on investment than was originally

envisaged which was attracting more and more systems to be installed. This has sparked an

outcry in the industry and beyond and a number of other recommendations relating to an

eligibility date for the new tariffs to commence which is before the end of the consultation, a

linkage to building energy efficiency and a further (20%) reduced tariff for multiple

installations has led to debates in Parliament and Legal Cases. The review has resulted in a

huge amount of uncertainty for investors and everyone looking to deploy PV systems.

The Feed in Tariff was starting to act as catalyst for realistic investments to be made in the

deployment of PV across YHN stock and council buildings. For example initial indications,

back in the summer of 2011( pre FiT review), showed that if the Council were to roll out PV

on 1500 YHN managed properties across the city and 200 Council buildings (including

schools) the capital outlay would be in the region of £17M but over the 25 year lifetime of

the equipment and with Feed in Tariff payment this could “generate” £9M of revenue for the

council subject to the method and cost of financing and save in the order of 58,000 Tonnes

of CO2. Until the review is completed the council has taken the view to suspend scheme

development until the new tariff regime is certain and the numbers can be assessed again

based upon the new tariffs, the way they are implemented and the most up to date capital

costs.

It is hoped that after the review the rate of return will still be attractive enough to make the

large scale roll out of PV financially viable in the future however the urgent review of the PV

feed in tariffs has dealt a severe blow to local authorities by further penalising multiple

installation by proposing an even greater tariff reduction when more than one system is


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installed. Through the consultation process it is hoped that the Government will relax this

requirement or give exemptions to community use, social housing and local authorities but

only time will tell.

The harsh economic environment has led to the realisation that a number of previously

available grants are no longer available. Even with the availability of European loans and the

potential for the Green Investment Bank/Big Society Bank to provide funding it is still a loan

and must be repaid. The trick is to identify those projects that can attract incentives and so

become attractive to investors or that can absorb the loan element whilst remaining

sustainable and deliver other value added benefits (Job Safeguarding, Job Creation,

Economic Development, Regeneration, Skills development for example)

As part of the masterplanner role we have completed a detailed funding document

“Financial drivers for low carbon energy schemes” and it is attached as Appendix 4 for

reference and discussion. The document covers the numerous sources of funding that are

currently available and sets them in context. This document will be updated on a regular

basis to take into account the changes in funding.

The Energy Masterplan is taking shape and will continue to evolve over time. However the

energy solution for the city is emerging and with this in mind we have set out below the key

underpinning themes for the energy solution for the city as we currently see it.


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5. Key aspects of the Energy Masterplan

5.1 Reducing demand for energy by improving energy efficiency of buildings

When considering how energy consumption is reduced or replaced it is important to follow

the established energy hierarchy as it provides the most practical and cost effective

methodology to achieve a low carbon energy system. This is a five stage process as detailed

below:

Energy Reduction

Reduce the amount of energy used. In the simplest form this means turning off equipment

which is not needed. For instance looking at more efficient lighting control systems, timing

the heating and cooling systems for optimum operation, ensuring air conditioning does not

turn on at the same time as heating. This behavioural change is a vital first stage in reducing

demand.

Energy Efficiency

This relates to more energy efficient systems such as insulating buildings as far as

reasonably possible. Using “A” rated electrical appliances and additionally, it means looking

at passive design elements such as south facing windows and overhangs to capture solar

energy efficiently.

Renewable Energy

Having reduced the energy demand of a building as much as possible, then asses how the

remainder of power required is generated. This phase involves generating heat and

electricity from renewable generators. This includes, for example, photovoltaic panels and

wind turbines for electricity, solar thermal for water heating.

Low Carbon Energy

For the energy which cannot be generated through renewables, low carbon technologies

can be used. For example CHP/ District heating/ Heat Pumps etc.

Conventional Energy

With no other options left, the final part of a building’s energy demand will be achieved

through using conventional grid supplied options.


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Bearing the energy hierarchy in mind the reduction in the current use of energy and the

energy efficiency of buildings (both domestic and non-domestic) is a vital first step in

reducing the demand for heat and power.

The improvement in building energy efficiency and the focus on behavioural change, in

terms of the way we reduce the demand for heat and power, is already a key element of the

SEAP and significant improvements in these areas have been identified which will contribute

to the carbon reduction targets. The work in this area complements the energy masterplan

and the development of the Warm up North East project linked to the Green Deal/ECO

initiatives is a proactive way of taking forward the excellent work done in this area by the

city and its partner Warm Zone over the last few years. In order to hit the ambitious energy

efficiency targets set in the SEAP it is vital that this work continues.

5.2 Renewable Technologies

In terms of the established renewable technologies available the main emphasis will be

given to the installation of these market ready, incentivised technologies:

• Solar PV (Subject to FiT review)

• Small Scale Wind Turbines

• Air Source Heat Pumps (Subject to identification of a significant number of “off gas”

properties and careful study of potential & NB RHI payments not initially available)

• Domestic Scale Micro CHP (Combined Heat & Power – Incentive limited to 30K units

currently)

• Biomass Heating/Hot Water

• Solar Thermal Hot Water Generation

It is our belief that the only way that the required carbon reduction can be achieved is

through deployment of these technologies on the scale outlined within the SEAP whilst

being linked to the development of the low carbon heat network and the major opportunity

that could deliver (See 5.2 below). The issue is again one of finance and maximising the

availability of the financial incentives in order to make the return on investment attractive

for either the Council (with PV for instance) or private sector partners to provide capital.


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The deployment of these technologies must make financial sense as well as achieving a

significant carbon saving for the city. With this in mind projects should be subject to a test

relating to amount of carbon saved per pound of investment made, and thus meaning those

projects with the best financial return and carbon saving/£ should be given priority. This

means robust feasibility, financial modelling and business cases are vital.

The Council can show leadership in the city by deploying these technologies on their own

buildings this will make them more visible and act as a demonstration of potential of the

technology that could attract other public sector and commercial installations. This could be

driven by developing existing partnerships, public awareness campaigns and publicity etc.

5.2.1 Renewable Electricity Generation

2011 was the peak year for Feed in Tariff (FiT) revenue as next year the tariff will reduce

significantly in line with the review currently being undertaken by the government.

Although system costs are reducing rapidly it is still uncertain if the rates of return will be as

attractive, especially if the multi installation tariff is also introduced and the link to energy

efficiency is enforced. Having said this it is envisaged that roll out of PV could still be

financially viable on a cost neutral basis (once financing costs are taken into account)

because it has a number of other value added benefits that may still make it attractive such

as carbon reduction, reduction in fuel poverty, job creation/safeguarding and training

opportunities etc.

However with this in mind the council and YHN have delayed any further investment

decisions relating to further roll out of PV until the uncertainty surrounding the Feed in

Tariff is resolved.

NB in 2011 the council and YHN did manage to take advantage of the higher rate tariffs

and installed 102 systems totalling 430Kwp of PV.


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Current PV options still under consideration are:

300 Domestic PV Systems with Carillion Energy Services (Still under consideration)

Financial modelling of 1700 systems for council investment

Opportunities under “Warm Up North East” – Green Deal

There are a number of sites in the city suitable for small scale wind turbines to be installed

and these should be explored in more detail, see Narec Report “NCC Wind Resource Report

2010” for details attached as Appendix 5.

5.2.2 Renewable Heat Generation

Once again a mix of solutions is required but we need to deploy the technologies that

attract the best incentives from the outset to improve financial viability

The Renewable Heat Incentive (RHI) now has some clarity but the Government is linking

domestic scale renewable heat to the Green Deal in 2012. Payments for non-domestic

installations that were installed after the 15th

of July 2009 started to be able to receive RHI

payments on the 28th

of November 2011 and the first schemes nationally are starting to be

registered for the incentive payments. £15 million of the total fund has been allocated in

Renewable Heat Premium Payments for domestic users (Small grant towards purchasing a

system in return for some feedback) and £4 million was allocated to Social Housing

providers, Local Authorities to install domestic systems at the end of 2011 as part of a

competitive bidding process.

What is less clear is how the RHI will be implemented in terms of the domestic sector and

the tie in with Green Deal. The Green Deal is currently being consulted upon and it is too

early to say what the level of support from the RHI for domestic users will be.


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The council and YHN should begin to explore the opportunites for the installation of

renewable heat technologies on their own stock as a matter of urgency (Based upon what

has happened with the uncertainty over the Feed in Tariff’s). Identification of potential sites

and feasibility for technical and financial applicability should be undertaken.

Solutions funded by the council can be a good source of revenue (incentives and sale of

heat/power) and could provide a good source of supplementary revenue from investments

that also must have an attractive rate of return.

5.3 Low Carbon Energy Production - District Heating/Cooling

The development of a low carbon district heating and cooling network is the largest single

element identified within this energy masterplan and is the project that is likely to have the

greatest impact in delivering low carbon energy to the city. Based upon the work

undertaken for the energy masterplan the council should consider a political and financial

commitment to the promotion of a city wide district heating and cooling scheme.

5.3.1 Heat Network Vision and Potential

The heat network has the potential to provide low carbon affordable energy to large parts

of the city by 2020 and beyond. The development of a Newcastle Heat Network Zone has

been based upon an evidence base of studies and reports previously commissioned by the

council that has enabled the identification of the significant potential for the heat network

and the most likely route across the city. The route identified has the potential to eventually

link the existing schemes to the east and west of the city through the city centre to pick up

the key development sites identified in the Urban Core Area Action Plan (UCAAP) and also

the existing significant public sector and commercial heating and cooling loads that will

provide a commercial catalyst for the take up and deployment of district heating in the city.


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Planning policy is currently being aligned to this vision both in respect of Newcastle and

NewcastleGateshead

Existing Schemes:

Byker

Riverside Dene

Planned Schemes:

Scotswood

Civic Centre/Northumbria University

Key Development Sites (Which are sites within the Urban Core that form an important

element of delivering the vision for the Urban Core itself)

Science Central

East Pilgrim St

Stephenson Quarter

Other Development Sites

Forth Yards

As mentioned an extensive city wide evidence base to support the delivery of a district

heating network has been built up from a number of studies commissioned by the city,

NewcastleGateshead and 1NG over the last four years. These studies are:

1NG: Science Central Masterplan: Preliminary Energy Strategy: Feb 2011: Arup

1NG: Science Central Energy Strategy: Energy Strategy Report: Nov 2011: Mott MacDonald

NewcastleGateshead: Delivering Carbon Reductions Through Planning: July 2010: Entec

Newcastle City Council: Scotswood Regeneration: Energy Centre Study: June 2009: Arup

Newcastle City Council: Community Energy Feasibility Study: Western, Central and Eastern

Areas: May 2009: Arup


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Newcastle City Council: Scotswood: Energy Centre Feasibility Study – Initial Constraints: Jan

2009: Arup

Newcastle City Council: Community Energy Feasibility Study: Final Report: June 2008: Arup

Newcastle City Council: Scotswood Regeneration: Energy, Utility and Integrated

Procurement Strategy and Addendum: June 2008: Arup (Addendum Mar 2009)

Newcastle City Council: City Energy Capacity and Community Energy Opportunities: Final

Report: March 2007: Entec

Based upon this evidence and the policies contained in the Local Plan we have mapped out

the possible extents of the proposed heating and cooling network. (Please refer to map

“Zone of Planned District Energy 20/5/11” attached as Appendix 6) and this matches closely

the work done by Arup in 2008 (Please Refer to” Newcastle Heat Network Plan” attached as

Appendix 7)

The development of a citywide heat network is now a real possibility with the existing,

planned and potential schemes coming together as one large network at some point in the

future. The appearance of a heat network will then provide a viable alternative to existing

grid based energy in the city and produce revenue for a possible ESCo to be commercially

developed. The RHI and National Heat Strategy could also provide a timely boost to the

financial viability of such schemes if renewable heat is deployed as part of the network

infrastructure. Developing schemes in a phased way based on a number of smaller schemes

in the short to medium term is the way forward initially but ultimately the ambition must be

to link these schemes in a wider city wide heat network.

As well as understanding the potential to supply heating and cooling in the city we also have

the opportunity to take advantage of the geothermal potential being explored on the

Science Central site. If this proves to be a financially viable and a cost effective source of

usable heat then this could provide a significant low carbon heat contribution to the

network. The heat required by the network could of course be provided in a number of


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other ways which could be from a mixture of low carbon and renewable sources. The main

heat generation technologies that are most likely to be applicable to the heat network are:

Gas CHP

Renewable CHP (Biomethane/Biofuel)

Biomass

Biomass Gasification

Biomethane production from Anaerobic Digestion

Waste heat from industry

Other forms of Gasification

The heat network could be based on one or more of these technologies dependant on how

the network is developed and the city’s attitude to deploying some of these methods and

technologies.

5.3.2 Establishing Market Interest

Having established the vision and potential of the heat network it is key to understand

market interest in the project and with this in mind, Narec (through the Energy

Masterplanner Role) have conducted an independent soft market test to gauge market

interest in the Newcastle heat network vision. This is both from a delivery vehicle point of

view with potential project partners and with potential delivery partners working in the

energy services sector.

The aim of the work was to gauge interest and obtain market intelligence whilst trying to

understand the level of detail developers will require as the project develops.

The main aims of the work were to:

• Gauge market interest in the scheme based upon the potential overall scale

• Understand potential for market investment

• Test the approach the council have adopted to progress the scheme

• To identify the requirement for further information to subsequently enable the


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project to provide;

Technical Solution/Specification

Financial Model

Business Model

Delivery model

The results of this work have been positive with a good deal of market interest was

identified. (See Appendix 8 “Newcastle City Council “Newcastle Heat Network” – Soft

Market Testing December 2011” for further details)

The main outcomes of this work are designed to lead onto:

1.) Development of a prospectus for developers based on current knowledge

2.) Establish developer interest based on informal discussions.

3.) Start to formulate a citywide delivery vehicle and establish the council’s role,

governance etc.

4.) Establish which schemes are the most technically & financially viable.

5.) Start to establish procurement route for delivery based around type of delivery

vehicle chosen.

A prospectus is currently being developed that will help the council formulate a

procurement strategy that will be needed to get this ambitious project started. It is

currently felt that any procurement that is undertaken should be aimed at delivering a

partnership which would lead to the establishment of an ESCo that can develop the network

commercially, in line with the vision, over a long period of time. There is a significant

financial commitment required to take the scheme forward from the drawing board “vision”

to the procurement of an energy service partner and the development of an ESCo to

develop the heat network. This would involve things such as procurement costs, business

case development, technical and financial viability etc. With this in mind the city is exploring

the possibility of securing European fundingg that is designed to assist council’s in the

g IEE call 2012/13 Mobilising Local Energy Investments (MLEI) – This is the same call that the council used to

successfully bid for funding for the set up costs for Warm up North East in 2011.


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mobilisation of energy investments such as the development of a low carbon district heating

scheme and the development of an ESCo to run it. The call bids have to be submitted by 8th

May 2012 with the funding being allocated in 2013. The funding is reliant on actual

investments happening so with this in mind, the council are investigating the call in more

detail. If this funding proves to be the most appropriate way forward then some gap funding

in 2012 may be required to start the process in the initial stages.

5.3.3 ESCo

The heat network described above has great potential and all of the work done previously

has identified that the city has a considerable heating and cooling load that could be

supplied by a low carbon/renewable heating and cooling network. It is also apparent that

this presents an interesting investment opportunity for the energy services companies. In

our report “Market overview of energy sources and suppliers as they impact on

Newcastle, and sustainable energy availability & associated cost implications Oct 2010” at

section 6 (Page 41) which is attached as Appendix 2 we cover ESCo models in more detail

look at the advantages and disadvantages associated with ESCO’s. We also propose a

suggested delivery model.

The development of a public/private ESCo has proven to be an efficient method of

delivering lengthy, large, complex and capital intensive projects such as this. This model

provides the public sector part ownership of the ESCo (up to 19%) that provides private

sector flexibility whilst still giving the council a strong influence over decision making (for

instance a requirement to target fuel poor and not just large and attractive commercial or

public sector heat loads) whilst allowing the network to be designed, built, operated and

maintained by a specialist private sector partner. Through its own part share in the ESCo the

council can invest and return an income accordingly. This de-risks the investment for the

council significantly whilst still allowing governance and an investment route. This form of

ESCo does not initially require many directly employed NCC staff to operate and a

governance structure can easily be formulated in which existing functions within the council


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could cover, however having said that a full time NCC ESCO project manager may be

required from an early stage.

Depending on the council’s attitude to risk and borrowing over time it is of course possible

to develop a wholly owned Newcastle City Council ESCo to provide the capital investment

required to build out the network over time (As Gateshead are currently planning to do on a

smaller town centre only scheme). The network is likely to develop on a scheme by scheme

basis over the next twenty to thirty years and public sector heat loads usually form the

backbone of a network so it could be a good investment opportunity to start to develop our

own schemes over time and look to link the schemes at a later date. For each scheme the

council ESCo company would have to procure a design and build partner each time and we

would need to let out operation and maintenance contracts as well unless the ESCo itself is

developed with internal capacity and capability to do this type of work (City Build currently

has expertise in this area through the operation of the Byker heat scheme). An NCC ESCo

would also need to develop a sales function that could go out into the city market and sell

heat to other commercial, retail heat loads etc. The NCC ESCo is likely to require a number

of staff to be recruited to operate and develop the project.

A Newcastle heat network delivered through an ESCo (whether fully NCC funded or not)

should now be seen as a realistic target as it would act as a catalyst to attract investment in

larger low carbon energy schemes. Work should start to engage with potential ESCo

providers to establish interest from the sector and the soft market test has indicated

significant interest at a high level. The city (and the wider NewcastleGateshead partnership)

has built momentum towards a Newcastle Network through the existing and planned

schemes and the previous work it has commissioned. Now is the time to move the

Newcastle Network forward. If the city is serious there is a need to procure and then set up

a delivery vehicle that is council led (Like Leicester District Energy Company for instance)

that could also potentially link to the Byker scheme as well as well as developing and

integrating the Newcastle Network. The “Newcastle District Energy Company” could have

some or all of the following aims:


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� Promote a city wide energy scheme through one or more large scale energy centres

and linking sites

� Develop the heat network business and develop heat sales to expand the network

over a long period of time

� Facilitate provision of individual energy centres for specific developments linked to

UCAAP key sites & work with developers

� Deliver investment to open up the network. (ARUP indicated that £20M would be

needed over several years with £5M upfront and a further £7M for linking smaller

schemes together into a larger network. (NB these figures were estimated over two

years ago and Riverside Dene and Scotswood are in place or about to start)

• Work with the ESCo on technical feasibility, financial appraisal and business plan for

the Network

• Develop a range of loan funding models if required with part private sector/public

sector or via the EU Framework 7, Regional Growth Fund R3, EIB or Green

Investment Bank routes. These avenues need to be investigated as a potential source

of funding, especially for larger city wide schemes.

A number of other cities are in the process of establishing strategic partnerships with energy

service companies in order to establish delivery of similar schemes as to this.

5.4 Regeneration

Regeneration and redevelopment in the city must act as a major catalyst for the provision of

low carbon energy solutions and the use of embedded generation as it will be major

contributor to achieving the SEAP targets and relates directly to the development of a low

carbon district heating scheme. The energy masterplan links to the planning policies of the

Local Plan and will focus on provision of low carbon energy strategies for each development

site. This way the provision of low carbon district heating can be driven by development and

take advantage of reduced installation cost at the outset and provide potential for schemes

to be linked in the future to form a Newcastle Network.


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Key Sites (Sites within the Urban Core which are an important element of delivering the

vision for the Urban Core)

East Pilgrim Street

The East Pilgrim Street area represents one of the most strategically important City Centre

regeneration areas in the north of England and its development will provide a new retail-led

mixed use quarter. Newcastle City Council adopted Interim Planning Guidance (IPG) for the

area in 2009. Its purpose is to provide a clear strategic guidance on the potential of this key

part of the City Centre and to ensure that development is brought forward in a timely

comprehensive and coordinated manner. It is expected that the first phase of development

will be complete by 2018/19.

Science Central

In 2005 Newcastle was named as one of six science cities in the UK. Science cities are

regional development projects, based upon University, industry, and government

collaborations, that creatively synthesise local and natural resources to achieve science

based economic growth. The Science City initiative represents a major commercial

opportunity that will allow us to further our work in the fields of stem cell research, ageing

sciences, energy, environment and engineering technology. Science Central is the project

name for the development of the former brewery site adjacent to St James' Park. The

development of Science Central will provide a new science and research led mixed use

quarter where we can grow our knowledge industry sector. The site has a vision to become

an exemplar in terms of zero carbon buildings and sustainability the current energy strategy

includes the use of geothermal energy and inter-seasonal ground storage energy provision

for heating and cooling. This has not been tried before anywhere in the UK. The site has

outline approval for mixed use development and a full planning application for the first

phase is expected in 2012. The first phase will include the Gateway Building which is

expected to be completed in 2014.


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Stephenson Quarter

The Stephenson Quarter area has been regarded as a major development opportunity and

an important landmark site for many years. It is a highly accessible site next to the regional

transport hub with south facing views over the Tyne and is an ideal location for office-led

mixed use. The site has full planning approval for a mixed use development and the first

phase of works is due to start 2012.

Significant development areas

Forth Yards

The Forth Yards is a significant development area that is expected to come forward in the

longer term. The area includes various former industrial sites and the Metro Arena. This

major gateway into Newcastle and has significant redevelopment potential. The area is

close to main routes into the Urban Core and is only 10 minutes’ walk from Central Station.

It consists mainly of former industrial sites many of which have been progressively vacated

in recent years. The Forth Yards area has the potential to provide a mixed use area and the

principal uses which are considered to be acceptable are leisure, residential and commercial

uses. It is expected that development in this area will be in the longer term.

Recent funding announcements have led to the possibility of some of these key sites being

developed much sooner than was thought only six months ago. This is being driven through

the use of successful Regional Growth Fund bids and the establishment of the Accelerated

Development Zones (ADZ) linked to Tax Incremental Financing (TIF). This presents the city

with an opportunity to influence the development of these sites with a low carbon emphasis

from the outset. It is important for the energy masterplan and to achieve the targets within

the SEAP that we work to grasp this opportunity to influence these developments from the

outset.


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6. Strategic Direction – The Next Steps

The work carried out in developing the Sustainable Energy Action Plan and the energy

masterplanner role within the Council are vital to the development of a deliverable energy

masterplan for the city over the next 20 years. With the increasing pressure of carbon

reduction targets and the passage of time it is vital the city concentrates on those

interventions that can be more easily delivered attract the most financial incentives and

offer an investable opportunity to bring in capital to fund the required projects. None of this

can be achieved without development of key delivery partnerships within the city and by

engaging the key stakeholders and major users of energy. We know what we have to achieve

and we have a good idea of how it can be achieved by utilising the SEAP as a framework for

delivery of projects. The Energy Masterplan sets out those projects in context and will focus

attention on those projects that can practically be delivered, financed and maximise any

revenue potential for the council or investors.

It is vital that we capitalise on the availability of financial incentives offered by the

Government and industry to stimulate the installation of low carbon energy schemes.

With this in mind we intend to concentrate on improving the energy efficiency of buildings,

the roll out of market ready renewable energy & renewable heat generating technologies

that can attract the Feed in Tariff and Renewable Heat incentives and the development of a

major citywide heating and cooling network that will be delivered via an ESCo partner.

With regard to this and in light of the current funding constraints the council must decide on

a strategy and approach to prudential borrowing versus private investment (or combinations

of both) for low carbon energy schemes that can produce a good financial return. We have

set out below a reference table of next steps and a possible roll out plan for Renewable and

Low Carbon Energy for the period 2010 to 2030.


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Energy Masterplan: Next Steps Table 1: Newcastle City Council, Energy Masterplan – Next Steps

Intervention Target Sectors Next Steps Scale Benefits Financial Incentives

Reducing Energy Demand

& Improving Building

Energy Efficiency

NCC Buildings

Public Sector Buildings

Domestic Properties

(Social and Private)

Non Domestic Properties

(Eg. Retail, Commercial,

Industrial)

Maximise the remaining CERT &

CESP funding for domestic energy

efficiency via WarmZone prior to

Green Deal/Energy Company

Obligation (ECO)

Continue to develop Green

Deal/ECO offering to replace the

above with partners (Warm up

North East)

Develop market awareness as a

precursor to scheme delivery as

initial take up is vital if the scheme

is to be delivered at the required

scale

Citywide dependent

upon how well current

WarmZone scheme uses

current funding and on

the development and

take up of Warm up

North East.

SEAP Calls for domestic

stock to be improved at

significant scale 10K Solid

wall installations for

instance

Reduced energy

consumption across the

city.

Reduction in Carbon

Emissions.

Reduction in fuel poverty

and associated

improvements in health

and wellbeing.

Reduced energy demand

for proposed

decentralised energy

production.

NCC demonstrating

energy efficiency

leadership

Develop supply chain

opportunities, economic

development, job

creation and

safeguarding

Green Deal (Warm up

North East).

ECO.


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44

Large Scale Deployment

of Market Ready

Renewable Energy

Sources

NCC Buildings


Domestic Properties

(Social and Private)

Non Domestic Properties

(Eg. Retail, Commercial,

Industrial)

Await result of Feed in Tariff

consultation and financially re-

model large scale deployment of

PV systems when new tariffs are

confirmed

Work with YHN to roll out PV at

scale

Further feasibility work to identify

opportunities for smaller scale

wind turbines

Commence work to identify

opportunities to install renewable

heat technologies in NCC buildings

This should be linked to a citywide

awareness campaign and the

potential for NCC to develop the

market for itself and the wider

market

Citywide on NCC

buildings and Social

Housing 3000 PV systems

Small number of “smaller

scale” wind turbines on

suitable sites

Domestic Biomass

Boilers (several hundred)

Biomass Boilers non

Domestic upwards of

1MWth

Solar Thermal Hot Water

systems citywide 5000

Heat Pumps 500

Domestic Micro CHP

citywide (Several

hundred)

Substantial increase

citywide renewable

energy production

Reduce grid energy

reliance therefore

improving energy

security

Reduction in carbon

emissions


especially in Social

Housing

NCC demonstrating

leadership in deployment

of renewable energy

sources leading to

increased public sector,

private sector and

domestic uptake



development, job

creation and

safeguarding

Feed in Tariff

Renewable Heat

Incentive

Sale of Electricity


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Development of a Low

Carbon/Renewable

Heating and Cooling

Network

NCC Buildings


Retail & Commercial

Buildings

Domestic Properties

Develop a market prospectus for

the scheme

Develop approach to procuring

ESCo and level of NCC involvement

(Oversight/Regulation/Governance

or Financial Stakeholder as well?)

Secure funding for the

procurement of an ESCo to partner

with NCC to develop the scheme

Ensure Civic Centre/Northumbria

University Scheme proceeds to

establish first city centre

heating/cooling network (also

achieve financial and Carbon

Savings benefits for NCC)

Explore the potential of

geothermal energy as a heat

source for the network as well as

other opportunites to integrate a

range of different renewable and

low carbon sources of heat into

the scheme (Biomass, Gasification

etc)

Work with key developers to

establish heat network on new

development schemes (Science

Potential for a Citywide

Scheme linking up

existing and proposed

schemes on the east and

west of the city through

into the Urban Core. The

Urban core contains a

number of significant

public/private sector

heat loads that can be

exploited by the scheme.

Initial indications

estimate around

50MWth of untapped

potential

Substantial increase

citywide production and

use of decentralised low

carbon and renewable

energy for building

heating and cooling

Reduce grid energy

reliance therefore

improving energy

security

Reduction in carbon

emissions and reduction

in grid intensity


and provision of

affordable energy and a

potential to reduce fuel

poverty in vulnerable

household’s

NCC demonstrating

leadership in deployment

of low carbon and

renewable energy

sources leading to

increased public sector,

private sector and

domestic uptake

Renewable Obligations

Certificates

Feed in Tariff

Renewable Heat

Incentive

Low Carbon Support

Mechanism (Proposed)

Electricity Sales to grid

and possible “Private

Wire” connections


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Central for example) and to

provide affordable heat to social

and private housing in the future



development, job

creation and

safeguarding

Regeneration and

Development

All new Development &

Regeneration Schemes

(Public Sector, Industrial,

Retail, Commercial,

Housing etc)

Ensure a joined up approach

across the Council and that all

policies are aligned in support of

the Energy Masterplan and vice

versa

Work to ensure all key

development sites are network

ready or have a decentralised

energy option in place

Citywide based upon

developments coming

forward

Developers able to make

informed decisions with

NCC on how their

developments can take

advantage availability of

the low carbon heat

network or to be serious

about including other

decentralised energy

solutions and the

deployment of

renewable energy

sources.

Planning and

Development Policy

S106, Community

infrastructure Fund?

Knowledge and use of

applicable technology

incentives


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Appendices

Appendix 1 - Sustainable Energy Action Plan (SEAP)

INTERVENTION 2005-2010 2005-2020

Combined Heat and Power Biomass (CHP) 0 MWe 0 MWe

CHP Large Gas 0 MWe 0 MWe

CHP Buildings Gas 0 MWe 15 MWe

Heat from Power Station 0 MWth 0 MWth

Photo-Voltaic Domestic 50 homes 3,000 homes

PV Non Domestic 0 MWe 0 MWe

Wind Large 0 MWe 0 MWe

Wind Medium 0 MWe 3 MWe

Wind Domestic 0 homes 100 homes

Solar Thermal Domestic 100 homes 5,000 homes

Biomass Boilers Domestic 50 homes 500 homes

Biomass Boilers Non Domestic 0.1 MWth 1 MWth

Ground Source Heat Pump Domestic 10 homes 500 homes

Cavity Wall Insulation Domestic 17,000 homes 27,000 homes

Loft Insulation Domestic 26,000 homes 41,000 homes

Double Glazing Domestic 10,000 homes 20,000 homes

Solid Wall Insulation Domestic 20 homes 10,000 homes

Energy Efficient Lighting Commercial 0 (000’s m2) 0 (000’s m2)

Double Glazing Commercial 0 (000’s m2) 0 (000’s m2)

Street Lighting Efficient Lamps 0 lamps 0 lamps

Domestic gas use reduction by behavioural change 5% 10%

Domestic electricity use reduction by behavioural change 0% 10%

Non-domestic gas use reduction by behavioural change 5% 20%

Non-domestic electricity use reduction by behavioural change 0% 10%

Transport fuel use reduction by behavioural change 1% 4%

Road transport efficiency improvements 2% 12%

Replace road transport fuels with biofuels 3,000,000 litres 13,079,000 litres

Replace road transport fuels with electricity 0 (000’s litres) 4,844,000 litres

Greening Grid 0% 20%

Table 2: Newcastle City Council Sustainable Energy Action Plan (SEAP)


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Appendix 2 - Market overview of energy sources and

suppliers as they impact on Newcastle, and

sustainable energy availability & associated cost

implications Oct 2010


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Appendix 3 - Newcastle Civic Centre & Northumbria

University Tri Gen Report Oct 2010


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Appendix 4 - Financial drivers for low carbon energy

schemes


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Appendix 5 - NCC Wind Resource Report 2010


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Appendix 6 - Zone of Planned District Energy 20/5/11


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Appendix 7 - Arup proposed Newcastle Heat Network

Plan


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Appendix 8 - Newcastle City Council “Newcastle Heat

Network” – Soft Market Testing December 2011

Eddie Ferguson House, Ridley Street, Blyth, Northumberland, NE24 3AG

Tel: +44 (0)1670 359 555 Fax: +44 (0)1670 359 666 Email: [email protected]

NCC Energy Masterplan May 2012 - Newcastle City Council · 2019-05-03 · Newcastle City Council...

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