Sustainable Energy in Cities David Hawkey dave hawkey ed

Sustainable Energy in Cities David Hawkey dave. hawkey@ed. ac. uk www. heatandthecity. org. uk

Overview • • • What is district heating? Development of heat networks Organisational issues Examples UK context Heat map exercise

Cities’ contribution to GHG emissions • 75%– 80% of anthropogenic GHG emissions? – Stern review, Clinton Climate Initiative, GLA, etc. • What constitutes a city? – Production vs consumption – Location vs administration • Cities are sites in regional, national, international flows of resources and waste • Infrastructures enable various forms of circulation and metabolism

Electricity production Coal Electricity 35% Heat 65%

Building energy supply

District heating • Delivery of low grade heat from central sources for space and hot water • System of insulated pipe work (with leak detection) • Heat exchange unit or direct feed in buildings

District heating networks: Aberdeen

District heating networks: Copenhagen

District Heating – sources • • • Low carbon Low cost Renewable Waste heat and heat from waste Efficiency Local pollution Flexibility Energy security Community participation Electricity balancing …

Combined Heat and Power (CHP)

Energy system integration • c

Operational flexibility and balancing

Developing DH networks • High upfront costs for plant and network – Heat density – Heat diversity – Anchor loads • Long payback periods / modest returns • Strong mutual interdependencies – Uncertainty in subscriber behaviour – Monopoly supplier • Local delivery vehicle

From King, M. , Shaw, R. , 2010. Community energy: planning, development and delivery. http: //www. chpa. co. uk/media/28 c 4 e 605/Comm_Energy_Plan. Dev. Del. pdf

Objectives • Environmental – Reduced local and global pollution – Waste management • Energy system – Short and long term flexibility – Deployment of renewable sources • Consumer – Reduced energy bills / fuel poverty – Shielding subscribers from fluctuating energy prices • Economy – Revenue generation / localisation of energy payments – Area regeneration – Employment

Data gathering • Heat mapping – spatiotemporal demand patterns – E. g. energy bills, thermographic imaging, building surveys – Daily and seasonal patterns • Long term pattern of heat demand development • Existing heating systems and contractual commitments • Barriers and opportunities

Project definition • Stitch network into complex sociotechnical terrain • Subscriber perspectives – Connection to a monopoly supplier – Unfamiliar technology / uncertain performance – Domestic, commercial and public sector have different needs and capacities • Minimise early development risk – Phasing development of supply and demand – Reduce complexity • New development / existing buildings – Costs less, dependent on construction schedule, lower heat density

Source: AEA Technology

Financial feasibility Courtesy Regen SW via King, M. , Shaw, R. , 2010. Community energy: planning, development and delivery. http: //www. chpa. co. uk/media/28 c 4 e 605/Comm_Energy_Plan. Dev. Del. pdf

Financial viability Cost of capital Contingency / sinking fund Subscriber uncertainties CAPEX O&M Viability Price risks

Business model and organisational form • Revenue – Heat tariff structure and electricity sales model – Use of surplus revenues • Ownership/governance models balance risk and control between stakeholders – Large subscribers, local authority, utility company, specialist DH company, community representatives – Affects access to financial resources, in-house skills and experience – Affects balance between commercial and socioenvironmental goals • Division of activities: ESCo, Heat. Co, Gen. Co, etc.

Aberdeen Heat and Power Arms length, non-profit ESCo established by council Surplus reinvested and/or used to reduce bills Volunteer board (includes two councillors) Fuel poverty main driver Gas CHP, passive gas/electricity contracts Financed through council capital budgets, grant funding and commercial loan (council guarantee) • Supplies social housing and public buildings • Domestic heat not metered • Expanding to supply commercial users • • •

Birmingham District Energy Company • Wholly owned subsidiary of Cofely (GDF-Suez) • Partnership (and profit share) with city council and other large heat users • Council energy cost saving driver • Financed through grant funding and Cofely’s resources • 3 city centre gas CHP networks • Mix of large public commercial buildings • Procurement and contract challenges

Thameswey Energy Ltd • Public/private joint venture Woking Borough Council and Xergi • WBC’s share of dividends recycled into environmental projects • Cost saving and environmental entrepreneurialism • Finance (and refinance) complex mix of grants, commercial lending, WBC borrowing • Gas CHP, private wire and active energy trading • Public and commercial buildings

Key Stakeholders: Local Authority • Have strategic, long term view of area plus social responsibilities • Democratic oversight mitigates subscribers’ perceptions of monopoly risk • Planning policy can encourage connection and shape heat supply/demand patterns • Control large heat demand on own estate • Accept low (social) rates of return, but financially constrained • May adopt cross-subsidy model • DH cuts across traditional departmental divisions

Key stakeholders: Energy companies • Have in-house expertise and systems (e. g. retailing, energy markets, commercial and technical expertise) • Coordinate with existing asset portfolio • Large balance sheets / financial resources • Require higher rates of return • Global companies: global competition for investment opportunity • Economic rationality – unlikely to support crosssubsidy • DH may compete with incumbent interests

Other key stakeholders • Large heat subscribers and heat sources – May seek ownership/profit share in exchange for commitment and to mitigate own risk • Community organisations – Opportunity for urban community energy initiative – Enthusiasm, but limited financial, technical, commercial resources – Involvement in governance may aid legitimacy

International comparison

Denmark • Severe impacts of 1970 s oil crisis – Sunday driving bans • 1979 Heat Supply Law required LAs to map heat • Zones identified for DH in which – Electric heating banned – Gas network not developed – Connection made mandatory • Large networks: non-profit municipal DH companies – Competition in supply – Loan finance with municipal authority backing • Feed in tariff for CHP • Sharing expertise through District Heating Association

Heat sources in Denmark

Renewables in Denmark

Sweden • Handful of CHP based systems in 1940 s • Municipal authorities central to housebuilding in 1950 s and 1960 s – Unitary model of infrastructure provision • Oil crises led to national focus on DH – National loans and tax/subsidy schemes • Weaker powers to compel connection than Denmark – But control over electricity network via municipal companies • DH companies restricted to LA areas -> cooperation • Liberalisation of DH: private ownership and rising tariffs

Swedish DH sources Ericson, K. , 2009. Introduction and development of the Swedish district heating systems http: //www. res-hpolicy. eu/downloads/Swedish_district_heating_case-study_(D 5)_final. pdf

UK Historical context • Nationalised energy industries (1940 s) – No municipal involvement in energy provision – Electricity industry pursued increased electrical efficiency (i. e. larger centralised plant) • Energy production increased in response to resource constraints – National programme of conversion to natural gas • Poorly installed coal-based systems in 1960 s • “Lead cities” programme in 1980 s found raising private finance difficult

UK DH context • DH not specifically regulated – Subscriber and developer risks • Limited standardisation – Consumer charters, technical standards, appraisal methodologies • High proportion home ownership • Limited skills and supply chains – Unpredictable bursts of grant funding • Competing visions of low carbon heat future • Difficult to capture external benefits in business model

UK contemporary energy context • Retail dominated by six integrated utilities – Electricity generation and network operation – Subsidiaries of international companies / LSE listed • Some DH specialist companies (UK subsidiaries) • Low gas prices – UK net importer 2004 • • • Access to electricity markets hard for small generators CCGT: electricity prices follow gas Spark spread recently grew, envisaged to grow further Assumptions about consumer preference for switching Large penetration of inflexible generators planned

UK local government context • Growing number of LAs interested in DH • Uncertainties around constraints on private sector engagement • Fragmentation of local governance • Constraints on LA powers and freedoms recently relaxed – Power of well being, sale of electricity, prudential borrowing • Local planning policy encouraged but authorities fear development flight

UK/devolved governments • UK and Scottish govts increasingly positive – UK infrastructure plan – Scottish DH loan fund and expert commission • Rapidly developing energy policy – Changing energy tax regime – Capacity payments and demand side response? • Different heat mapping approaches Eng/Scot • English building standards driving some activity • History of unpredictable grant funding

Conclusions • DH offers significant contributions to urban sustainable development – Environmental, social, economic • Development is a complex heterogeneous engineering problem – Coordination challenges exacerbated by fragmentation of governance and liberalisation of energy • Opportunities shaped by range of factors – Physical, administrative, legal, commercial, financial