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London needs to be more like Copenhagen

London needs to be more like Copenhagen. Bob Fiddik Team Leader – Sustainable Development & Energy. 19 th March 2012. Why…Copenhagen?. 98% of city supplied via DH 40% carbon reduction against individual gas boilers 35% CHP heat from waste or biomass.

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London needs to be more like Copenhagen

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  1. London needs to be more like Copenhagen Bob Fiddik Team Leader – Sustainable Development & Energy 19th March 2012

  2. Why…Copenhagen? • 98% of city supplied via DH • 40% carbon reduction against individual gas boilers • 35% CHP heat from waste or biomass The 3 objectives of UK energy policy objectives :- low carbon • hot water - flexible energy carrier • plant – 36% gas, 31% multi-fuel, 21% coal/oil, 12% waste – all CHP secure, diverse • DH heat 44% below cost of individual gas boiler • Authority owned heat companies affordable

  3. A long, and frustrating tale Post oil-crises 1979 • Marshall reports on potential of district heating/CHP • 30% high density urban areas could be supplied via DH/CHP • Recommend heat strategy & set up of “heat board” to oversee development • Heat supply law passed • Local authorities to undertake heat planning • Authorities given power to oblige connections to DH or natural gas • Must demonstrate economic advantage to consumer • Ban on electric heating North sea gas, energy privatisation

  4. But district heating is costly...? Pay for CHP energy plant But have some ready...and have to build new plant anyway Need whole new infrastructure Pay for heat exchangers...but similar to individual boiler cost

  5. The “all electric” orthodox plan... Pay for these & untested CCS Pay for these to be there but not do much Upgrade these Install lots of these Do lots of this

  6. But getting started is tough... • Croydon drivers for town centre DH/CHP scheme • Council • Helping regeneration happen • Improve environmental standard of existing 70s stock • Developers • Meet council’s Code Level 4 & BREEAM “Excellent” at lower cost • Occupants • Lower heat costs • Low carbon, no CRC (for corporates)

  7. Commercial modelling Phase 1 new build + cluster of existing public buildings Full scheme all new build + 25% existing over 1,000 m2 IRR = 18% IRR = 10.8%

  8. Someone has to bear the risk Must be lower than meeting targets via onsite measures Constraint Initial oversizing of energy centre & heat pipes to supply full scheme Phase energy plant investment ESCo mitigation Recover capital investment via connection charges Construction phasing Occupancy : use of heat new build Heat revenues Occupancy : use of heat existing Operating costs follow heat demand • Funding gap circa £3- 4 m : ESCo would need a combination of ... • underwriting of income from phased development • Up-front capital contribution • access to low public sector borrowing rates Heat charges must be no more than having own system

  9. So what does the wish list look like...? • Policy, regulation & taxation • Danish example is long-term stability & rational energy planning (ministry still employs “experts”) • UK constantly re-invents energy policy, complex market with complex carbon “tweaks” – politically unstable (e.g FITs, “Zero-Carbon”) • For DH/CHP address the heat off-take risk • Danish obligation to connect is most cost effective – but in UK? • Anchors – oblige public sector connections (but estates are shrinking) • Existing buildings - new Building Regulation obligation on boiler replacement • Loan funds at public sector rates – help make connections attractive • Supply side – taxation + incentives for all thermal plant to operate in CHP mode

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