heat network feasibility study for hereford prepared for...

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Heat Network Feasibility

Heat network feasibility study for Hereford City centre DRAFT for comment

Prepared for Hereford County Council

Author Jim Lott

Date 15 March 2016

Reference P3122 Hereford

Heat Network Feasibility | Hereford County Council 2

Copyright © Encraft Ltd 2016 15 March 2016 Document reference: P3122 Hereford

Document History

Role Name Date

Author Jim Lott 4 April 2016

Checked Kate Ashworth 5 April 2016

Authorised Graham Eastwick 5 April 2016

Design recommendations and specifications provided in this report are based on the best professional endeavours of the authors. All calculations are based on the best information available to us at the time of report production. Where third party equipment is referred to we rely on manufacturer performance statements, guarantees and warranties. We are not liable for any errors in calculations or omissions resulting from data provided by the customer or third parties.

Encraft works to all relevant professional standards and is accredited to ISO9001 and ISO14001 by Lloyds Register. We hold professional indemnity insurance as consulting engineers for design to the sum of £5 million.



Contents Executive summary 4

1. Introduction 5

1.1 Project aims 5

1.2 Scope 5

2. Methodology 6

2.1 The red line boundary 6

2.2 Energy data input 6

2.3 Techno-economic Modelling 7

3. Project outputs 9

3.1 Redline Boundary 9

3.2 Initial Heat Mapping 9

3.3 Energy Masterplanning 11

4. Hereford Urban Village Modelling results 22

4.1 Modelled clusters 22

4.2 Modelling Results 25

5. Commercial vehicle review 31

5.1 Capital investment 31

5.2 Types of commercial vehicles 31

5.3 Project procurement and management 35

5.4 Business case for project 36

6. Implementation 38

6.1 Phasing 38

6.2 Recommended next steps 40

6.3 Issues and Risks 41

7. Conclusions 42

Appendix I Hereford Water Source Heat Pump Feasibility 43

Appendix II Modelling Assumptions 63

Appendix III Operational Characteristics 65

Appendix IV Pipework Specification for the link road 71



Executive summary

Encraft have been commissioned by Herefordshire Council to establish the feasibility of developing a low carbon heating, cooling and/or energy scheme at the proposed Urban Village, adjacent to the Old Market retail establishment.

The site is located within the ESG regeneration area in the centre of Hereford and comprises land to the north of Hereford Football Club, bounded by Edgar Street to the west and the railway line to the east. The site is split into three areas by the route of the proposed Link Road, which totals approximately 8 acres of developable land and will comprise up to 800 homes.

A wider area was considered in order to understand the implications for Hereford City centre on implementing a Heat network and ensure possible energy customers were not excluded.

A study area (redline area) was defined that included a range of potential heat and electricity demands, a heat mapping exercise was carried out that benchmarked all these loads and carried out analysis to discover whether they were suitable for connection to a future network.

A series of expanding clusters have been modelled, centred on the urban village area, with the largest including the Hospital, shopping area and the Heineken/ Cargill’s industrial area.

Scheme configurations were developed that allowed techno-economic modelling of a number of possible network routes and served loads. This allowed an understanding of potential business cases and commercial models.

Four of these clusters have a return on investment of 5-7% over 25 years using gas CHP technology. This is unlikely to be high enough to attract standalone private investment, but a scheme could proceed as part of a hybrid Public/Private partnership or if taken forward by a municipal entity.

It is recommended that the Council move forward with the scheme by commissioning a detailed feasibility study to further refine the business case on the preferred option. At the same time, maintain the stakeholder communication programme commenced during this study duration to keep potential heat customers engaged with the project.

A specific scheme using water source heat pump technology to heat the Hereford leisure pool and surrounding buildings has been identified as potentially viable as a standalone scheme. Installation of a 750kWth SWSHP provides the best compromise between economic return and CO2 savings, offering an 8% rate of return over 25 years. We therefore recommend taking forward a 750kWth SWSHP to detailed design stage and development of a full business case funding and business structures in order to implement the scheme. This study is appended as a separate report.



1. Introduction

1.1 Project aims

Encraft have been commissioned by Herefordshire Council to establish the feasibility of developing a low carbon heating, cooling and/or energy scheme at the proposed Urban Village, adjacent to the Old Market retail establishment.

The aims of this study are to:

Undertake an energy mapping study of the proposed project area to identify potentially useful heating, cooling and power demand loads and potentially useful heat supply opportunities for the purposes of District Heating development

Use the outputs of energy mapping to inform the development of an energy master plan for the proposed area identifying, evaluating and prioritising any identified potential District Heat scheme opportunities.

1.2 Scope

The site is located within the ESG regeneration area in the centre of Hereford and comprises land to the north of Hereford Football Club, bounded by Edgar Street to the west and the railway line to the east. The site is split into three areas by the route of the proposed Link Road, which totals approximately 8 acres of developable land and will comprise up to 800 homes.

The stakeholders intend to implement sustainable energy production (conversion) and usage, in accordance with Government’s aspirations and the proposal seeks to support and extend this through innovation, promotion, robust management and monitoring. The proposal is seen as a regional demonstrator where a range of partners can be actively engaged in what is anticipated to be a location that presents real opportunities.

The proposal is intended to evaluate the capital costs and the effectiveness of individual technologies and whether there are benefits in drawing them together in a local area such as this. It will also look into the difficulties that are to be anticipated in integrating these technologies into the established development and construction processes and timescales. The study should make recommendations of scheme options; provide appropriate technical, financial, sustainability and other relevant information to enable the Council to decide whether or not to proceed with full technical feasibility and financial modelling.

Biomass has been identified as a potential fuel source and will be considered in this study.



2. Methodology

2.1 The red line boundary

The first step was to establish the red line boundary for the study. This took place in discussion with the local authority considering a number of different criteria including:

Indicative area from tender specification

Initial view of total heat demand from energy benchmarks

Local strategic development plans

Inclusion of local authority buildings

Inclusion of large heat users identified by the local authority or Encraft

This was combined with data input from some preliminary heat demand analysis to come up with a red line boundary for the area.

2.2 Energy data input

The benchmarked heat demand data gives a good initial guide to energy usage; however it can be improved by the addition of more accurate data. Potential data sources were ranked by their utility.

1 Data supplied by building operator

2 Data supplied by Council

3 Display Energy Certificate (DEC) data

4 Benchmarked energy data

To this end, real data was pursued on key heat loads in the area.

Energy data from the council

Herefordshire council provided us with data on a number of properties, and contacts to follow up on others.

DEC data

In October 2008 a requirement was introduced for certain public buildings to show a Display Energy Certificate (DEC) detailing gas and electricity use. Since July 2015 a DEC and advisory report are required for buildings with a total useful floor area over 250m 2 that are occupied in whole or part by public authorities and frequently visited by the public.

These records are accessible online and provide a good check on benchmark figures for public buildings. These figures are typically degree day adjusted to provide a typical value, so can be significantly different from real data from previous years



Energy benchmarks

Using several data sources a series of energy demand benchmarks were created.

Chartered Institute of Building Services Engineers (CIBSE) Guide F was a source of the majority of energy benchmarks

To avoid over-estimating energy demand good practice (rather than typical) values were used where possible and calibrated against known values.

Heat mapping

This initial heat mapping took place using OS Address Base data to obtain a record and Unique Property Reference Number (UPRN) for each building in the study area. This was spatially linked to OS topographical data to associate a value for the total footprint area of the building with each address. These footprint areas were then adjusted by building type and using local knowledge to account for varying number of stories across the building stock to give a total area for each building.

An energy benchmark given in kWh/m2/annum was then associated with each address point and used to calculate the total annual usage of each building. Each of the building types was given a load profile to calculate the peak load associated with each building and the changes in load throughout each day.

Many commercial retail businesses share the same building code, from supermarkets to small shops to retail warehouses, and these cannot all be described by the same benchmarks and profiles so were then further broken down and benchmarks adjusted to cope with these.

Existing residential buildings were not included initially due to the typical difficulty of connecting these properties. Residential connections suffer the problems of requiring significant amounts of pipework to access small loads, while also potentially requiring overhauls of the current building heating system.

2.3 Techno-economic Modelling

In order to understanding whether any potential heat networks in the study area are technically and financially feasible and number of activities. These steps reduce the number of potential projects to those that are aligned with the requirements of the stakeholders and also exclude any obviously non-viable projects.

Project Prioritisation

A project prioritisation workshop was carried out with stakeholders to understand the outcomes required from the study for each stakeholder.

A number of priorities were identified and scored for each set of interested parties.

Fuel poverty reduction

Local economic growth

Carbon savings



Make money on an investment

Community engagement

Fuel/Energy security

Political Influence

Clustering

Based on the project prioritisation and heat mapping exercise, a number of potential projects are identified to be subjected to detailed analysis. These clusters are based around geographic groups of existing infrastructure, major loads, heat sources and strategic developments.

EnergyPro Modelling

For each identified cluster, detailed ½ hourly heat and electricity demand profiles are constructed. Where existing heat sources or infrastructure exist generation capacities, specifications and profiles are built.

Pipework runs for each cluster are developed which allows capital costs to be allocated depending on the complexity of the works required to install the heat network infrastructure. Capital expenditure (CAPEX) costs for the whole cluster are estimated using published information and experience of the sector.

The profile information, CAPEX costs, and details of fuel prices and payment incentives are entered into EnergyPro, which then allows an analysis of the financial implications of each cluster on a half hourly basis. This ensures that the benefits of selling heat and electricity, along with the potential for optimisation technologies such as thermal storage are captured.



3. Project outputs

3.1 Redline Boundary

The redline area for Hereford is focused on the city centre, and the urban village development. The boundary is aligned with the racecourse to the north, the river flood plain to the south and a distance beyond the initial identified major loads to the east and west.

The Railway line to the west of the central area is considered a hard boundary and the red line is routed to include an area of sufficient size to ensure no major loads would be missed. An area to the south of the river is included as it includes a wet leisure centre and facilities of this type are considered a good match with heat networks.

Figure 1 Red line boundary

3.2 Initial Heat Mapping

The initial pass of data (Figure 2) reveals that are a number of buildings with substantial heat demand. Residential loads are not shown as they have low demands as there is no high density housing appropriate for cost effective connection to a heat network.



The main density of heat demand is around the shopping centre in the city centre. There are a number of large outlying demands. These include the hospital, Leisure pool, Heineken and Cargills industrial areas.

Figure 2 Heat map

Initial runs modelled the connection of the town centre cluster to heat network with an energy centre in the urban village. A key metric of connectability to a district heat network is the figure of MWh/m, i.e. energy usage divided by length of pipework in metres to connect that load.

A rule of thumb indicates MWh/m figures of 1 or above are likely to be feasible for connection to a district heat network. With the energy centre assumed to be located at the New Fire and Police headquarters, a mapping of the MWh/m values can be seen below.

Figure 3 shows that the areas to the south of the river reduce in prominence with the high demand areas of the Hospital and the shopping centre being the strongest contenders for connection to a heat network.



Figure 3 Energy against distance from energy centre

3.3 Energy Masterplanning

The strategic plan for the city centre and the urban village provide a number of potential loads that may be appropriate for connection to a heat network.

An outline planning proposal by the Sanctuary Group has been accepted for 3.24 ha of the site comprising 192 units, including a 60 bed extra care home. Expressions of interest have also been received for the open market housing element of the site.

The proposal is to develop a low carbon heat network scheme at the Hereford Urban Village with potential to be expanded in line with further development as well as linking to the adjacent existing retail, education, care and leisure amenities.

As part of the regeneration of the area Herefordshire Council is also investing in delivering new infrastructure in the form of a Link Road running from Edgar Street to Commercial Road. Planning permission has been granted for the new road and the Council has committed to fund and deliver this with the following timescale proposed for construction:



Figure 4 Strategic development

Initial Pipework layouts are proposed that capture the main potential loads and allow development iterations to be carried out.

The pipework follows the course of the new road and soft dig areas.

Figure 5 Potential pipework routes

Show map overlaying potential pipework with heat mapping results and major buildings.



Project Prioritisation

In prioritising the potential network and loads a number of factors were taken into account.

Physical Constraints Railway crossings are very expensive and difficult to attain permission for, due to the critical infrastructure nature of the railway network. Unless there are very advantageous reasons or existing crossing points railways are not considered feasible to cross with a heat network.

Major roads are difficult for many of the same reasons as railways, although less so. Bridges or underpasses can be used if the locations are beneficial and structural conditions can be met.

Rivers can be difficult to cross, although often less of a constraint than rail. Crossing points tend to be defined by existing bridges, as it is rarely economic to build a crossing structure purely for a heat network.

Ease of connection Where large loads are available these are considered ‘easy to connect’ due to the availability of a central plant room and also the existing systems and fuel use.

Where there are a number of smaller loads, such as the high street and existing residential properties, these are considered ‘hard to connect’ due to the existing infrastructure, tenancy and ownership arrangements. Existing residential is particularly difficult to connect in large numbers, although not impossible in the right circumstance, for example social housing.

Pipe Routing (land with existing development)

Finding the most efficient routes for pipework will drive the project priorities as ‘hard dig’, along existing roadways and infrastructure, is more expensive and difficult to achieve than ‘soft dig’, along open land. The routing of pipework is a balance between cost and effectiveness.



Figure 6 Land by dig type

Using land under development

Where infrastructure works are planned to be carried out, it can advantageous to coordinate installation of a heat network as the cost of installation can be reduced substantially.

The city link road (CLR) is part of a larger scale inner city regeneration project including the Old Market, Widemarsh Street, Merton Meadow car park and other key areas within the city. This provides an excellent opportunity to use the infrastructure programme to consider how this may affect the routing of pipework.

Figure 6 Land by dig type shows that the majority of the development area is hard or intermediate dig with some areas being considered soft dig. Where the new link road is planned there is a potential for the equivalent of a soft dig where infrastructure. The area to the south of the centre mainly exists building which often while acting as loads create issues with routing of pipework to further locations.



Figure 7 Route of new link road

Anchor Loads

In order for a heat network to be considered feasible there needs to be anchor loads. These are large loads that allow the heat sources to run at optimal operating conditions while supplying heat across the network. These tend to be industrial loads that run 24/7 or large heat demands like hospitals or swimming pools. In Hereford we have identified a number of potential anchor loads within the constraint area.

Figure 8 Potential anchor loads



Organisation Gross Floor Internal Area (m2)

Annual Heat Demand (MWh)

Annual Electrical Demand (MWh)

Hereford County Hospital

50,661 1,029,181 2,432

H P Bulmer Ltd 23,199 49,514 1,229

Sun Valley Foods Ltd

12,737 14,925 675

Cargill Meats Europe

12,605 14,618 668

Old Market 5,520 5,911 1,308

The Courtyard Theatre

3,482 5,335 662

Table 1 Major Loads

Energy Supply Options

There are a number of heat sources that work well with heat networks. They are examined below.

Combined Heat and Power (CHP) Combined heat and power (CHP) integrates the production of usable heat and power (electricity), in one single, highly efficient process. CHP generates electricity whilst also capturing usable heat that is produced in this process.

CHP is particularly suited for heat networks as the electricity generated can sold at a good profit, and can cross subsidise the heat tariff to provide heat at a competitive rate.

In order to sell the electricity a private wire network connection directly to the customer may need to be installed. In the UK, the value of CHP electricity depends very much on the trading arrangement. Direct sales for surplus electricity exported to the National Grid yields rather low value for the electricity produced whereas utilising all electricity generated on the site that it is generated or selling it through a private wire network at a local level can fetch a price comparable to retail tariffs. Obviously the private wire network requires investment and entails other costs (e.g. operation and maintenance).

Biomass The Herefordshire Renewable Energy study (Wardell Armstrong, 2010) identifies large potential for biomass from multiple sources including forest residues (c200,000 MWh/yr), energy crops (c10,500,000 MWh/yr), waste wood (c400,000 MWh/yr) and



commercial and industrial waste streams including sewage and agricultural (animal) wastes.

The potential for these combined far exceeds total Herefordshire demand and is potentially a heat source for a network in the Urban Village.

Biomass can provide a very low carbon fuel, in the right situation. Commercial Scale biomass boilers can be fuelled using pellets or chip. Wood chip tends to cheaper, but requires better quality boilers to run efficiency and cleaning.

There are a number of concerns regarding using biomass in a built up area.

Biomass requires use a large space due to wood storage requirements this often conflicts with the value of land within urban areas, a 1MW biomass plant working 24/7 would require 500m3 of storage to store a 14 days ’ worth of wood chip at peak load. This is equivalent to 3 x 40ft shipping containers, in addition to space required for plant.

Biomass plants do have issues with air quality under Clean Air Act 1993 and this often acts as an obstacle to the implementation of biomass in heat networks as heat networks work best in dense urban areas, where air quality can already be an issue,

Delivery transport can also cause pollution issues due to increased traffic for fuel delivery,

Biomass boilers are more expensive and can be more expensive to maintain than an equivalent gas boiler or CHP unit,

Where biomass is considered financially viable this is often due to the renewable heat incentive (RHI), which is a government scheme that pays per unit of low carbon heat generated. The security of this as an income is currently under consultation and can’t currently be guaranteed.

Waste Process Heat We have been unable to obtain data on any waste process heat sources within the study area. It is possible that the large industrial heat users such as Heineken and Cargill’s will have waste heat available. Stronger engagement with the respective companies will need to be carried out if a project is identified to take the next level of feasibility.

Where process heat is identified it is often low grade heat, and so is a good match to heat networks acting as a base temperature injection.

Water Source Heat Pump The use of water source heat pumps has been identified as an option to the south of the river to provide low carbon energy to the Hereford Leisure Pool complex. This is provided as a separate study further on in this report.

The DECC national heat map provides data on the energy content of waterways.



Figure 9 Water source potential

DECC National Heat Map data

River Wye

Waterbody name Wye - Bredwardine Br to Hampton Bishop

EA waterbody reference ID GB109055037113

Heat capacity 63 MW

Constraints SAC, SSSI, Salmonid

Project prioritisation

A number of schemes were considered leading up to this stage. Initial models suggested that extensive hard dig pipework in the town centre was a cause of low rates of return from initial techno-economic modelling, and a more focussed network with shorter runs of pipework and fewer major loads would be more likely to pay back.

Biomass A more condensed network was subsequently modelled based on a biomass. Energy pro modelling of a biomass led district heating scheme in central Hereford indicated that it was uneconomic, and would be unable to pay back the capital cost over a 25 or 40 year period.



A scheme involving the central police and fire development, the hospital and Heineken was modelled based on biomass boilers with heat sales only and no private wire electricity (there is no electrical output from biomass boilers).

Table 2: Costs and returns of biomass

Item Value

Capital cost £8.04m

Operating surplus £4,000

CO2 saving 5,807 tonnes/year

Net Present Value (40 years) -£7.7m

IRR (40 years) -13%

The biomass option has very low operating surplus and is unable to pay back the capital cost of the scheme. While the CO2 savings are very high for a biomass based scheme, the poor economics of the project indicate that it is not a viable option for a central Hereford scheme.

Biomass is also heavily dependent on the Renewable Heat Incentive (RHI) for economic returns, the future level of which is also uncertain.

Project Prioritisation workshop

A project prioritisation workshop was held in January 2016 where feedback was obtained on the ongoing modelling from internal and external stakeholders, including those from the council, Cargill’s and Heineken. As part of this a number of identified drivers were ranked in order by each attendee (1 to 8). A lower ranked score means a higher priority for those surveyed.

The following results were seen.

2.4

3.5 3.6

4.0

4.9

5.55.7

6.1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

LocalEconomic

growth

MakingMoney on

Investment

Fuel andEnergy

Security

CarbonSavings

PoliticalEngagement

ReducingFuel Poverty

Use of LocalResources

CommunityEngagement

Ave

rage

ran

kin

g

Stakeholder feedback - Hereford



The most important drivers were economic, with local economic growth the clear leading priority, with a return on investment and energy security close behind. Community and political concerns were seen as less important.

Focussed areas of study

The preliminary study results along with the constraints identified allows us to reduce the number of possible schemes and connected buildings to a collection of 5 clusters.

Cluster Description Technology

Cluster 1 New Police/Fire and Urban Village development

CHP and Private Wire

Cluster 2 New Development and Hospital CHP and Private Wire

Cluster 3 New Development, Hospital and Heineken Plant


Cluster 4 New Development, Hospital, Heineken Plant and Shopping Centre


Cluster 5 New Development, Hospital, Heineken Plant, Shopping Centre and Cargills Plant


Table 3 Focused study areas

The clusters represent an expanding of the network, which will allow us to understand the potential financial implications of each scale of network, along with the effect of connecting more loads.

Each cluster retains the previous clusters loads, so the effect is cumulative.



Figure 10 Clustering loads



4. Hereford Urban Village Modelling results

4.1 Modelled clusters

Earlier rounds of high level clustering and modelling have indicated five main potential heat network clusters that warrant further investigation. We have therefore carried out more detailed modelling on these five most likely clusters.

Cluster 1

Figure 11: Cluster 1 (Police/Fire development) buildings with indicative pipework

Figure 11 shows the proposed new energy centre (green) and the indicative pipework (purple) connecting to existing buildings and some new developments. This cluster is built around the new link road.

Our analysis has assumed a reduced capital cost to install the district heating pipework as it could be built-in to the construction process of the new link road. This could be directly buried in the same construction process or could be based on including ductwork in the link road construction.



Cluster 2

Figure 12: Cluster 2 showing proposed link road and indicative pipework

Figure 13: Cluster 2 (addition of hospital) buildings with indicative pipework

Figure 13 shows the indicative pipework (turquoise) extension to reach the hospital to the south east.



Cluster 3

Figure 14: Cluster 3 (addition of Heineken) buildings with indicative pipework

Figure 14 shows the indicative pipework (green) extension to connect to the Heineken brewery to the west. The pipework follows an old disused railway track that provides a soft dig route.

Cluster 4

Figure 15: Cluster 4 buildings with indicative pipework



Cluster 5

Figure 15 shows the indicative pipework (blue) extension to reach large shops to the south of the energy centre.

Figure 16: Cluster 5 buildings with indicative pipework

Figure 16 shows the indicative pipework (red) extension to reach the two Cargills food processing factories to the west.

4.2 Modelling Results

Table 4: Summary of modelled solutions (25 years)

Hereford Simple payback (Years)

IRR (25 Years)

NPV (£ x 1000) (25 Years)

Operating Surplus 2016 (£ x 1000)

CO2 Saving (Tonnes/yr)

CAPEX (£ x 1000)

Cluster 1 - New Police/Fire development

16.6 3.44% -24 239 1,205 3,964

Cluster 2 - Police Devel + Hospital

11.7 6.98% 2,858 615 3,375 7,178

Cluster 3 - Police Devel + Hospital + Heineken

13.9 5.17% 2,040 804 4,722 11,140



Cluster 4 - Police Devel + Hospital + Heineken + Shops

13.4 5.53% 3,246 1,082 5,700 14,473

Cluster 5 - Police Devel + Hospital + Heineken + Shops + Cargills

13.2 5.65% 3,796 1,204 6,846 15,915

Table 4 shows that building cluster 2 has the highest Internal Rate of Return (IRR) over 25 years, while cluster 5 has the highest Net Present Value (NPV), operating surplus and CO2 savings. All these cluster models include private wire sale of electricity. The table above shows NPV and IRR for a 25 year life.

Modelling based on a 40 year life shows improving IRR but all clusters are still far from economic, as shown in Table 5 Summary of modelling solutions (40 years) We have not taken any plant replacement costs into account in the 40 year model that would clearly reduce the return on investment significantly.

Table 5 Summary of modelling solutions (40 years)

Hereford IRR (40 Years)

NPV (£ x 1000) (40 Years)

Cluster 1 - New Police/Fire development

5.25% 1,102

Cluster 2 - Police Devel + Hospital 8.20% 5,754

Cluster 3 - Police Devel + Hospital + Heineken

6.67% 5,826

Cluster 4 - Police Devel + Hospital + Heineken + Shops

6.97% 8,341

Cluster 5 - Police Devel + Hospital + Heineken + Shops + Cargills

7.07% 9,466

Net Present Value

Table 5 Summary of modelling solutions (40 years) shows the whole life cost Net Present Value (NPV) for the five modelled clusters with CHP plant supplying heat and private wire electricity directly to Hereford buildings.



Figure 17: Net Present Value (NPV) over 25 years

Figure 17 shows that cluster 5 provides the most favourable economic approach. This is the based on NPV over 25 years and using a discount rate of 3.5%.

Operating Surplus

Figure 18 shows the annual operating surplus (based on 2016 prices) inclusive of revenues, for the five modelled clusters with CHP plant supplying heat and private wire electricity directly to Hereford buildings.

-500

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5

Net Present Value (£ x 1000) (25 Years)



Figure 18: Operating surplus

Figure 18 shows that cluster 5 gives the most favourable operating surplus.

CO2 emissions

Figure 19 shows the site CO2 emissions (2016) for the five modelled clusters with CHP plant supplying heat and private wire electricity directly to Hereford buildings.

0

200

400

600

800

1,000

1,200

1,400





Figure 19: CO2 emissions

Figure 19 clearly shows all clusters provide significant reductions in carbon emissions, with cluster 5 providing the greatest reductions in emissions. The larger the scheme the greater the carbon savings.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000





Capital costs

Figure 20 shows the capital costs (CAPEX) for the five modelled clusters with CHP plant supplying heat and private wire electricity directly to Hereford buildings.

Figure 20: Capital costs

Figure 20 shows cluster 5 requires the highest capex as it has the longest pipework. The extra pipework involved in connecting all of the loads leads to a capital expenditure for this scheme of nearly £16m, however over a 25 year period we still see a return on this investment due to the £1.2m operating surplus.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000


CAPEX (£ x 1000)



5. Commercial vehicle review

This sections details the various business models which can be employed in order to successfully develop a heat network. These tend to be complex enterprises with multiple stakeholders; different models will suit different project requirements.

Key stakeholders may be involved in separate facets of the overall project including overall ownership, finance, operations and maintenance and providing key heat demands.

5.1 Capital investment

District heat networks are long term investments and are extremely capital intense. Installing the heat network pipes can cost in excess of £1000 per metre; costs can quickly build to multi-million pound projects. However, once installed returns are reliably recovered for the project duration. It is typical for projects to be financed over 25-40 year terms.

It is likely that a project will be constructed in a number of phases, thus requiring multiple funding rounds. Projecting these phases allowing for known risks around bringing on certain developments will be key to ensuring the business model is robust.

5.2 Types of commercial vehicles

There are multiple configuration of commercial vehicle which can be employed depending on the attitudes of the key stakeholders around risk and control. These broadly fall into the following categories;

Public – a municipal approach

Hybrid - usually a public/private joint venture or special purpose vehicle

Private – wholly owned and operated within the private sector



Figure 21 - Investment models (image courtesy of HNDU)

Public sector led heat networks This was a traditional model, it used to be very common for public authorities to supply local utilities and many older networks were set up in this way. Some more modern schemes also follow this model, such as the Bunhill Scheme in Islington, primarily driven by the requirement to maintain full control over the scheme and retain the generated income.

Advantages Disadvantages

Low cost of capital means financial marginal schemes can progress

Public sector lead must carry all the finance risk

Greater control is maintained within the public authority to maximise on its own objectives such as

Carbon savings

Fuel poverty reduction

Local economic growth

Public sector lead must resource the ongoing operation of the enterprise, may have limited expertise

It is likely that a separate internal department of the public sector lead organisation would be needed to both develop and then operate the scheme. The project risks would sit with this department but there would not necessarily be a legal structure to protect the wider organisation. Some project risks can be mitigated with legally binding contracts with contractors providing design and build services. Finance can be from the organisation’s cash reserves or from the Public Works Loan Board (PWLB).

Hybrid models Hybrid models are becoming more common as LA’s seek to facilitate the successful propagation of heat networks whilst sharing the risks and rewards with established market operators.



There are many different approaches; given a scheme is technically and economically viable, it is possible to flexibly configure a structure that incentivises all project partners to optimise the outcomes of the scheme.

Typically examples are;

Establishing a Special Purpose Vehicle (SPV), a new legal entity external to the public authority which may be wholly owned by it

Entering a Joint Venture (JV) with a private sector partner

A typical structure of an SPV to deliver heat network projects is given below. It shows the range of roles to deliver the scheme which could all be managed by separate parties according to expertise/willingness to finance/willingness to hold risk.


Sharing risk and rewards according to appetite; can be adapted to project requirements

Can be time-consuming to set up, a lot of thought and effort needs to be put in to ensure the structure is fit for purpose and all the necessary contracts are in place

Type of structure is very familiar to the market

Requires a minimum IRR to be commercially viable



Figure 22 - SPV typical structure - Image courtesy of GLA



Due to the complexity and range of different structures available, further advice should be sought each individual scheme to make sure the structure fits the particular circumstances. More general advice is given by HMRC in a guidance document for public bodies looking to enter joint ventures with the private sector: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/225321/06_joint_venture_guidance.pdf

Private sector led models Where a scheme projects a high rate of return, the private sector may seek to develop a scheme independently of the local authority. This may be encouraged if the local authority is particularly risk averse or there are political reasons as to why a legally binding collaboration with the private sector would not be acceptable.

Some of the downsides of a wholly private sector development can be mitigated by working in partnership with the local authority. Whilst the governance of this company will be down to the developer, they may invite key stakeholders such as local councillors to sit on the board in an advisory role to direct their efforts and identify areas of synergy where joint efforts could yield better results for both parties.

There have been some very successful examples of privately led models such as Birmingham District Energy. The separate company is owned and operated by Cofely with legally binding 25 year contracts with BCC to provide heat customers. BCC also sit within the corporate governance structure to influence decisions in key areas to ensure that their scheme requirements such as carbon targets are being met.

5.3 Project procurement and management

As shown in Figure 22, there are a number of functions that can be separated to be delivered by separate parties or contracted as a package. If these functions, such as development, design, build and operation are procure separately there may be some cost savings as a main contractor will take a management fee for the project, but there will need to be a lot more resource applied internally to manage the project.

Alternatively, it is possible to procure a full service package including design, build and operate. This will probably require a full OJEU compliant tender process but should require less internal resource to manage once secured.


Can be implemented relatively quickly as fewer stakeholders

The private sector developer will not necessarily have access to the facilitation assets of the local authority such as control over portfolio and regulatory powers

Requires a minimum IRR to be commercially viable

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/225321/06_joint_venture_guidance.pdf

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/225321/06_joint_venture_guidance.pdf



5.4 Business case for project

Hereford has a number of potentially viable schemes. The type of commercial vehicle used will affect the potential financial viability of the schemes.

All of the viable Clusters have an IRR of between 5 and 7%. This would be suitable to a municipal SPV owned and operated model where the requirement for high rate of return is reduced.

Table 6: Investable propositions


IRR (25 Years)

NPV (£ x 1000) (25 Years)



CAPEX (£ x 1000)

Cluster 2 – Service HQ + Hospital

11.7 6.98% 2,858 615 3,375 7,178

Cluster 3 - Service HQ + Hospital + Heineken

13.9 5.17% 2,040 804 4,722 11,140

Cluster 4 - Service HQ + Hospital + Heineken + Shops

13.4 5.53% 3,246 1,082 5,700 14,473

Cluster 5 - Service HQ + Hospital + Heineken + Shops + Cargills

13.2 5.65% 3,796 1,204 6,846 15,915

While a fully private sector controlled and invested scheme typically requires a high rate of return between 12 and 20%, social/public hybrid schemes have a lower hurdle rate with rates of return of 6-12% typical. This approach could involve an arms-length not-for-profit entity or a special purpose vehicle backed by the council.

As all of clusters 2 to 6 offer positive Net Present Values and similar rates of return, a scheme could be taken forward with a phased plan in mind, and a spread of the total capital investment for the project over a longer time period with a long term view on investment.

It may be possible make the scheme more attractive by applying for public grants or low-interest loans to support marginal schemes. It is likely that the next phase of the Heat Networks Delivery Unit (HNDU) remit will involve administering such financial



tools as £300 million has been set aside in the budget to support the next phase of heat network development. Other sources of funding such as European support schemes (ERDF/EEEF etc) should also be investigated for eligibility criteria.



6. Implementation

6.1 Phasing

Implementation of a heat network and its connected users is a major undertaking and as such requires delivery over a long period of time.

Phasing will be an important of ensuring the technical and commercial viability of any scheme. The pipework route would be built up over time as the connectable loads become available through construction or plant replacement.

In Hereford there a number of existing major loads that are well placed to be part of early phases these will drive the development shape of any network.

The clusters modelled provide a good indication of the financial implications of phasing that could be carried out, with the smaller cheaper sections of the network giving a lower return, but possibly enough for a not-for/low profit commercial vehicle to initiate.

The follow is a potential phasing approach that demonstrates the ability to build the network and establish loads before moving to expand.

Figure 23 Potential Development Phases

Phase 1 - West of Widemarsh Street

Phase 1 would install the energy centre and commence the main heat network spine, this would happen in line with the link road building and the construction of the



Combined service HQ and the Sanctuary extra care facility. It could provide a seed for the continued expansion of the network.

Infrastructure

Energy Centre

West end of network Spine

Connections

New fire and police Building

Robert Owen Academy

Court yard theatre

Hereford Football Club

Sanctuary Extra Care Facility

Phase 2 – East of Widemarsh Street

The extension of the network spine along the link road route would provide a direct connection to the large load at the hospital, while provide stubs and spurs for future connection to the residential developments within the urban village

Infrastructure

Extend Network Spine to East

Connections

Hospital

New Residential Development

University Residences

Phase 3 – West of Edgar Street

Extend the network to the large industrial loads and Heineken and Bulmers, picking up other smaller loads in the area. The large baseloads for the industrial processes add huge value to the network in terms of balance and operating efficiency.

Infrastructure

Extend Network Spine to West to industrial loads

Connections

Heineken

Cargills

Phase 4 – South of Blackfriars Street

Use the established network and loads to provide attractive financial package to retail area and businesses to the south of Newmarket street



Infrastructure

Extend Network Spine to south

Connections

Retail area (Old Market)

Southern City Centre area

6.2 Recommended next steps

We recommend the following steps be carried out

The wider clusters seem viable and further more detailed study needs to be carried out to assess the technical and economic potential in more detail. This would include

Technical

Pipework design including optimising routing including discussions with pipework contractors to confirm capital costs

Plant room design and energy centre location detailed piece including land ownership and fuel delivery implications

Thermal store design

Economic

Conduct sensitivity analysis (to try and optimise economics)

heat demands in the strategic developments

heat sales price

the buildings being supplied (using potentially smaller clusters and reduced pipework)

Investigate most effective phasing approach

Stakeholder engagement

Hold discussions with potential local heat customers to get detailed heat usage and potential price points and services

Work with Council planning to increase chance of developers taking up district heat.



6.3 Issues and Risks

Heat networks carry an inherent number of risks due to their nature. These have been documented and catalogued throughout the project duration. At a high level these can be broken into scheme development risks and scheme operational risks.

A full risk register has been developed throughout the project duration is available as part of the project deliverables package.

Specific project risks

The Hospital and Cargills push forward with their refurb programs and reduce the potential for selling heat/electricity

Appetite for digging up roads is low after major works on the link road

Pipework costs are greater due to ‘hard-dig’ rather than assumed ‘soft dig’

Cost of crossing the large roads is greater than assumed

Failure to connect all the buildings in each cluster reducing the heat demand

Urban village developments fail to connect to the network

The main risks in the Hereford projects are on cost security in terms of pipework and connection rate. All the potential heat customers need to be engaged and development timed to coincide with the need to upgrade their existing plant. These particular risks have also been discussed in greater detail in the risk register.

Key scheme development risks Key scheme operational risks

Collecting and modelling robust data

Engaging with stakeholders

Projecting demands of future strategic development

Scheme reliability including maintenance and redundancy of heat supply

Attracting anchor loads

Building a compelling proposition

Timing connection plans to align with customers need to invest/reinvest in heating plant

The ability to drive down the heat price to attract new connections

Securing finance Reduce carbon emissions to meet stakeholders requirements



7. Conclusions

The heat network feasibility study carried out shows that there are technically and financially viable heat network projects in the Hereford urban village development area.

There are number of major loads identified that would be able to act as base loads in a system, while a fair few smaller demands that could be connected to improve the financial case and offer low carbon heat and electricity to new customers. Customers such as the university and residential development may see low carbon energy as a premium product for their own clients.

The clusters that have been modelled show consistent financial returns that would suit some different types of commercial vehicle like a municipal or public ESCO, or a special purpose vehicle, however the returns are unlikely to be high enough to be attractive to wholly privately funded investment.

The planned development in the centre of Hereford, including the new link road could potentially be good intervention points for the construction of a heat network as new roads, services and utilities will be installed.

Both the hospital and Cargills sites have boiler plant that is near or at the end of life. Given the right financial incentive these strong base loads would be open to connecting to a heat network.

There is a strong case to develop the business case further and work with potential customers to engage and get buy in to the implementation of a scheme.



Appendix I Hereford Water Source Heat Pump Feasibility

A specific opportunity has been identified at Hereford leisure pool where there is easy access to the River Wye. A water source heat pump system may be feasible. Surveys and modelling has been carried out to this end.

Background

A wider heat mapping and heat network feasibility study has been carried out by Encraft supported by Phil Jones of Building Energy Solutions and Chris Dunham of Carbon Descent. This work resulted in techno-economic modelling of wider heat network opportunities in Hereford. As part of this work a small cluster of buildings close to the river Wye was identified as a large heat demand but located somewhat away from the other large heat demands coming out of heat mapping. This cluster around the Hereford Leisure Pool area comprised the Leisure Pool itself and a nearby Elderly Peoples Home (EPH).

Given the location near to the River Wye and high heat demands that this cluster provides it was decided to carry out a more detailed investigation around the possibility of installing a Surface Water Source Heat Pump (SWSHP).

Surface Water Source Heat Pumps (SWSHPs) are an under used technology in the UK. Harnessing renewable energy from the sea, rivers, canals and lakes represents a huge opportunity to provide low carbon heating/cooling to buildings. SWSHPs have the potential to provide heating and cooling on a large scale, especially in densely populated urban areas. This potential is shown in the recently published DECC water source heat map. However, there are currently very few large-scale SWSHP systems in the UK. A new Code of Practice (CP2) on SWSHPs has been produced by CIBSE)/HPA/GSHPA supported by DECC in order to encourage the use of SWSHPs.

This report sets out the findings of a more detailed feasibility study covering the opportunity to install SWSHP at the Hereford Leisure Pool cluster. The report assesses the heat demands, practicality of installing a SWSHP including abstraction and discharge from the River Wye and connection to nearby buildings. A brief site visit was undertaken on 16th March 2016 to assess the opportunity for installing a SWSHP system to recover heat from the Wye and supply low carbon heat to the Hereford Leisure Pool cluster buildings. The report also sets out results of techno-economic modelling using energy pro software to assess whole life economics across a range of SWSHP scenarios.

Scope and Objectives

The scope of this work is to assess the opportunity for SURFACE water source heat pumps only and does not include a comparison with other technologies.

This project has considered a small heat network scheme based around the buildings in the Hereford Leisure Pool cluster. This includes supplying the large ’anchor’ heat



load Hereford Leisure Pool and a nearby Elderly Peoples Home. However, the study does not cover a wider heat network as there is some considerable distance to other significant heat loads. The Hereford Leisure Pool cluster also offers space for a SWSHP energy centre with close proximity to the river.

The SWSHP technology

Heat pumps generally operate like a domestic refrigerator, using electricity they pump heat from one place to another. In a domestic refrigerator electricity drives the compressor on the back of the refrigerator that moves heat from (cools) the inside of the refrigerator and pumps it into the kitchen. In the case of SWSHPs renewable heat in the canal is pumped to the building. This ‘heat pump’ principle is the basis of most heat pumps and is ‘low carbon’ because each unit of electricity consumed moves around three units of heat giving an impression of being 300% efficient.

Heat pumps are therefore semi-renewable in that they consume electricity in moving renewable heat. They are generally categorised by the source of heat i.e. ground source, air source and water source. Whilst ground and air source heat pumps have become more common, water source heat pumps are less so.

Harnessing energy from the sea, rivers, canals, lakes and reservoirs is therefore a major opportunity. These surface bodies of water offer major heat sources and are often in cities and towns running throughout the built environment where heat is required for space heating and domestic hot water, also where cooling is required for process and comfort cooling.

The application of SWSHPs can be generally categorised around the following features:

Type of water source e.g. river, canal etc.

Heating/cooling output (MW)

Output temperature

Sizing approach (base load only?)

Building type/demand

Heating, cooling or both

Open or closed loop systems

Abstraction/discharge temperature difference

Environmental and regulatory requirements

Figure 24 shows a typical open loop arrangement with the heat pump itself in yellow. Abstraction/discharge pipework is shown at the bottom and supply pipework circuit to the building at the top.

Intermediate heat exchangers (normally Plate Heat Exchangers) can be used to provide a

Figure 24: Typical open loop SWSHP



separation between the heat pump and (either) the source or the load. However, this brings additional capital costs and a loss in efficiency but may be required to protect the heat pump internal heat exchangers. Some customers prefer the physical demand-side separation from the heat pump as they believe this offers reduced risk. Sometimes source-side heat exchangers are required to offer separation from canal/river water or to address practical location/pumping issues.

SWSHPs also face changing water temperatures across the seasons, changing from

~2C in winter to ~25C in summer and this changes the heat pump efficiency and economics significantly throughout the year. Abstracting and discharging water requires significant civil structure works and screening/filtration. Any SWSHPs then requires pipework to supply heat to a building. The capital costs of these civil works and pipework plays a major part in the economic feasibility of SWSHPs installations.

The UK Government currently offers an incentive for renewable heat technologies called the Renewable Heat Incentive (RHI) and SWSHPs are eligible. This heat based feed-in tariff currently plays a major part in making SWSHPs economic. The current RHI is guaranteed until April 2017 although its future beyond that is somewhat unsure. Our view is that the government will continue to support the nascent SWSHPs sector with RHI and any cuts will probably fall on the biomass sector. However, this is speculation rather than fact.

The SWSHP Opportunity

There is a very significant amount of renewable heat available in the river Wye.

The Hereford Leisure Pool cluster is close to the River Wye. Previous high-level heat mapping has identified this cluster of buildings as a large heat demand. It offers the possibility of a small heat network based on a SWSHP extracting low carbon heat from the river.

The proximity of the river (large heat source) and the Hereford Leisure Pool buildings (large heat demand) represents a very significant opportunity for a SWSHP to provide a low carbon heat supply to Leisure Pool itself and the Elderly Peoples Home.

River Heat Availability

Around the Hereford Leisure Pool area the River Wye is approximately 40-55m wide. The DECC heat map indicates 63 MW of heat available in this stretch of the Wye and our rough estimates concur with this. The capacity of the Wye at this point is well above the proposed level of renewable heat abstracted by a SWSHP. We do not see the river capacity as a restraint on a SWSHP project.

The river has a reasonably high flow in Hereford and the banks are relatively open in terms of adding structures or entry points. Visual inspection shows a good flow and the river is not tidal at this point. However, the river is shallow near the bank and this may need more careful design of abstraction arrangements.

River water temperatures vary from 2C in winter to 25C in summer. This changes the capacity of the heat source but alters the heat pump efficiency (Coefficient of Performance) very significantly and this changes the overall Seasonal Performance Factor. Our modelling has taken this variation in temperature and efficiency into account.



A site visit was carried out on the 16th March 2016 and this included an external appraisal of the buildings and their proximity to the river plus investigations around the river to identify opportunities for abstracting heat. A brief site visit was conducted to cover the Leisure Pool facilities and the main plant room. An external site visit was carried out to the EPH and a nearby supermarket but it was not possible to gain access to the existing building plant rooms.

This overall site visit confirmed that there is an opportunity to install a SWSHP here and that this is worth taking forward to outline design and techno-economic modelling. The remainder of the report sets out the results of these.

A closed loop SWSHP approach has not been considered as this would require a large heat exchanger in the river that would interrupt boating etc. and would be less efficient than an open loop system. Closed loop heat exchangers would probably also present a maintenance problem as it is likely they would clog with river debris.

Buildings

Wider building opportunities

Wider high-level heat mapping has shown there are some significant buildings in the centre of Hereford to the north of the River Wye. However, supplying heat to any/all of these from a SWSHP scheme south of the river would be a much more extensive and costly heat network and is not seen as a practical or viable option.

It will not be possible to run heat network pipes across the Wye Bridge to the North for planning and aesthetic reasons. This is an arched stone bridge and it would be practically difficult to install heat network pipes across this type of bridge. There are substantial residential blocks to the north of the river just across the bridge but the bridge itself is stone archways such that it is highly unlikely to be able to install heat network pipes. The buildings to the south of the main bridge are all small residential and present no opportunities for heat network.

The only place heat network pipes might be able to cross the river is a large concrete bridge carrying the A49 to the West of the Wye Bridge. This is a concrete structure and heat network pipes could be attached underneath the bridge. However, this is some considerable distance from the proposed SWSHP scheme and we have not identified any large heat loads immediately to the North of this bridge.

All the surrounding buildings to the west of the Leisure Pool are small houses, shops and restaurants that are unlikely to connect to a heat network. A residential block on St Martins Lane has individual dwelling gas boilers making it difficult to connect to a heat network.

A footpath underpass behind the EPH runs underneath the A49 and this provides a potential route around an allotment to Asda Hereford Super Centre to the west. However, we have obtained the energy consumption figures and the heat load is only 450MWh/yr. This building would require a further 425m of district heating pipework to connect and the relatively small heat load may not justify the extra cost of the pipework.



We do not believe, therefore, that there are any buildings nearby with sufficient heat loads to suggest potentially extending the heat network beyond the Leisure Pool and the Elderly Peoples Home.

Hereford Leisure Pool cluster

The Hereford Leisure Pool cluster is just outside the main centre of Hereford to the South of the Wye Bridge. The cluster is centred on the large anchor heat load of the Hereford Leisure Pool in St Martins Avenue. This has four swimming pools with a continuous heat load supplied by boilers and an existing CHP unit in the basement. The existing CHP is around 12 years old and is supplying up to 300kW of low carbon heat already and this has been taken into account in our modelling.

Drybridge House in St Martins Street is an Elderly Peoples Home operated by Anchor Housing. This provides day care and residential facilities. It is essentially a three storey brick building from the 1990’s with its own boiler house to the North making connection to a heat network possible.

The key buildings considered opportunities for a SWSHP base heat network are therefore the Hereford Leisure Pool and a nearby EPH as shown in Figure 25 below. The Asda supermarket to the west has been almost discounted as the heat load is relatively small and the distance considerable.

Figure 25: Buildings considered as heat loads

Each dot on the GIS map above has energy and building data behind it in GIS. This data has been used to model the SWSHP opportunity.



Given the high heat loads of the Hereford Leisure Pool the cluster amounts to some 5.8 GWh per year (4.6 GWh/yr Pool, 1.2 GWh/yr EPH). This cluster of buildings may present an economic case for SWSHP and a small heat network. These are all public sector buildings making them more likely to connect given that the authorities have carbon targets as well as running cost pressures.

Hereford Leisure Pool is located on the edge of King George V playing fields and close to Bishops Meadow. This large pool complex is managed by Halo Sport Foundation based in Leominster. The older section (now refurbished) is a stone structure and a modern extension was added around 4 years ago as shown in Figure 26. The older re-furbished part of the leisure centre is built in stone and the new extension is a modern design.

Both the playing fields and Bishops Meadow are on the banks of the River Wye. The leisure centre is some 265m from the River Wye to the North across open land and 350m to the East across King George V playing fields. This difference in distance has directed thinking to an abstraction pipework running directly North, see later.

The leisure centre has very substantial energy demands and provides a public sector anchor load. There is significant space for an external energy centre. Much of the area presents lower cost soft-dig opportunities for installing pipework. The route to the EPH to the west with its own central boiler plant presents soft to medium dig.

Figure 26: Hereford Leisure Pool

The Leisure Pool building is essentially all on one level but has a very large undercroft and basement. The main plant room is located to the northwest of the building. The undercroft has a relatively low ceiling and would not be a potential location for a SWSHP. The main plant room itself does have a high ceiling but is full of existing plant including boilers, CHP and air handling units. There is a small rudimentary office and store room constructed within this plant room that could be a potential location for a SWSHP. However, this would significantly disrupt the operational staff and a new store room/office would need to be reconstructed perhaps in the undercroft. A more likely opportunity is to locate the SWSHP outside to the northwest of the building just outside the main plant room.

The River Wye flows west to east and is around 50m wide in this general area. However, the river does appear to be only around less than 1m deep and that did seem to be apparent across the whole stretch of the river so this wide and shallow



river has a good flow but the depth may cause abstraction problems. The bank of the river is very steep and around 3 to 4m deep. The bank is all soft dig and is covered in small shrubbery and reeds.

The Hereford Leisure Pool was re-furbished and extended around four years ago. The modern extension has almost doubled the size of the building. The leisure pool complex provides swimming, diving, wave machine and slides, a health suite (sauna etc.), exercise classes, outdoor tennis and changing rooms for extensive outdoor football/cricket pitches. There are four pools of 25m, 20m (teaching), a 20m leisure pool (and wave machine) plus a 12m diving pool.

The leisure complex already has a gas fired Combined Heat & Power (CHP) unit supplying electricity and heat to the leisure centre. This Ener-G unit is understood to be around 12 years old and was operational at the time of our visit producing around 210kW of electricity. It is understood this CHP is around 12 years old, it has generated 8,576,424 kWh and has operated for 64,703 hours. The main boiler plant comprises 6 x 250 kW gas fired Hamworthy Wessex modular gas-fired boilers.

Outline Design

The overall scheme

An overall outline design is shown in Figure 27.

Figure 27: Overall outline SWSHP scheme design



Blue shows the abstraction pipework and purple shows the discharge pipework, both

at low temperature. Red shows the heat network at 80C running from the SWSHP energy Centre (green) to the Pool and Drybridge House boiler houses (red).

The river Wye flows from West to East and the proposed discharge outlet has been located some 180m downstream from the abstraction to avoid recirculation. We believe the outline design would meet the requirements of the Environment Agency;

in particular we have modelled the scheme around a T of 3C between abstraction and discharge that is a specification in the CIBSE Code of Practice.

Abstraction

The River Wye is 40-55m wide at this point and has a good flow from West to East. The banks of the Wye are accessible and present a soft dig nature. The banks are very steep (around 3-4m deep) and most are covered in reeds and small bushes. There is an ancient stone bridge (Wye Bridge) to the West and a concrete bridge (A49) further west.

An abstraction/discharge route across the playing fields running east would present an additional 2 x 100m of pipework and therefore the closer rout running North has been chosen through Bishops Meadow.

It may be possible to install a closed loop SWSHP however, this would require a significant heat exchanger structure installed in the river. We anticipate this would be a problem for the river authorities and is less likely to be agreed by the Environment Agency. It may also provide an obstruction to boating, wildlife and dredging. Indeed, with the flow and debris in the river we anticipate this could get clogged over a relatively short period of time. We do not therefore propose a closed loop approach. It is likely that a closed loop system would be slightly less efficient. An open loop system abstracting river water pumping it to an energy centre and finally discharging it back into the river is therefore proposed.

The proposed abstraction point would be directly opposite the cathedral and its grounds, as shown in Figure 28. The discharge point would be some 180m downstream of the abstraction point to avoid recirculation. The abstraction and discharge pipework would run across Bishops Meadow across the same trench to the bank of the river. The discharge pipework would then follow the bank of the river in soft dig some 180m downstream, although this could be shorter to minimise capital costs. There is already a low-level concrete structure filled with rocks at the proposed abstraction point. Constructing a concrete abstraction structure next to this is unlikely to give rise to any planning problems. The abstraction pump would be housed in a small stone structure on the bank but hidden with foliage. The shallow river at this point may present some practical difficulties and may require some small pipework into the river itself or digging a deeper structure to house the proposed inlet screen. We believe this can be overcome in careful detailed design.



Figure 28: Possible abstraction location

Abstraction should be reasonably straightforward by constructing a concrete structure to house a screen/filter by cutting a small inroad into the bank. We would propose an initial screen/filter to prevent eels and fish and other wildlife being affected. This would filter particulates down to 1.5mm. We propose using the same initial screen as Kingston Heights installation, as shown in Figure 29. This is accepted by the Environment Agency and appears to be working well.

We would house an abstraction pump in a very small brick-built plant room on the bank of the river as shown in Figure 30 but this would be semi-sub-merged into the earthen bank and hidden with undergrowth. This abstraction pump would be self-priming and would pump semi-filtered river water to an energy centre within the Hereford Leisure Pool cluster. We have identified a soft dig route back to a possible energy centre to the north west of the pool complex. The proposed route is shown in the figure above.



Figure 29: Proposed abstraction screen

The screen would be held in a steel frame within a concrete structure opening onto the river. A small backwash arrangement with a submersible pump would keep the screen clear on a continuous automatic basis, as shown in Figure 31.

Figure 30: Pump house abstraction outline design

PROPOSED ABSTRACTION SCREEN (as used at Kingston Heights)

2mm

filter/screen

Secondary 0.1mm filter in plant room



Figure 31: Abstraction screen arrangement

Discharge Discharge back into the River Wye should be reasonably straightforward. We propose a location some 180m down river (East) of the abstraction point. Discharge pipework would be run in the same trench as abstraction across Bishops Meadow and then run down the river bank to a discharge point all trenched in soft dig and standard plastic pipework. The proposed route is shown above.

We would propose a discharge arrangement based on a spare pipe arrangement i.e. a long header of large diameter pipework with a slot to ensure a low discharge velocity into the river. This will prevent harm to wildlife and fish and the environment. Discharge pipework would be 300mm carrying 80litres/s for a 1MWth SWSHP. The banks of the river are soft dig allowing discharge pipework to be extended further down the river if necessary at a relatively small cost.

A more aesthetic discharge arrangement might be similar to that at GSK, Brentford shown in Figure 32 but this would require additional capital cost. It could however bring attention to a new low carbon heat installation in Hereford.



Figure 32: Possible discharge arrangement (GSK Brentford)

Abstraction/Discharge Pipework

Abstraction/Discharge pipework would be relatively cheap as it is low temperature and can be in relatively inexpensive uninsulated plastic pipe. It would be roughly 300mm diameter and all of the installation across the river back would be soft dig, as shown in Figure 33.

Figure 33: Potential abstraction/discharge route (soft-dig)



Energy centre

We propose a new stone built energy centre to house the SWSHP at the North West end of the Hereford Leisure Pool just outside the main plant room as shown in Figure 34. There is a staircase and double door access to the plant room to the northwest of the building and immediately outside this there is a metal fenced area. Part of this houses a main electrical supply transformer; the other half of the fenced area has large industrial bins and houses the CHP intercooler heat rejection unit. There is a small stone-built structure within this area to act as a chlorine store. We believe this bin area is potentially a location for a SWSHP energy centre. This could be containerised but more acceptable to planning would be a stone extension to the main building. There is ample area to extend the fencing, move the bins and hence provide enough room for a SWSHP energy centre. The CHP intercooler may need to be moved but this is not a significant problem. Abstraction and discharge pipework would be run in plastic from this new energy centre through soft dig around the car park to the north of the building and then across and then soft dig across Bishops Meadow.

The plant room would be 10m x 10m x 4m high. There would be no flues or projections from the plant room. The external plant room could be sensitively constructed in stone to match the walls of the leisure pool centre and the electricity compound. We do not anticipate major planning issues around the structure in this location. There is a small existing structure already and a sensitively built plant room should present no great difficulties.

Figure 34: Potential energy centre location

The SWSHP would be based on ammonia as a refrigerant allowing the heat pump to deliver up to 85C in order to heat the tertiary system temperatures to 80C. Clearly the river water (source) temperature moves significantly across the season (between ~2C and ~25C) and CoP will also be a function of this. We believe that an average CoP of 3 would be possible at these temperatures. The heat pump itself would be 3m x 5m x 3m high.

The SWSHP would require a 300-500kW power supply depending upon the output of the SWSHP selected. We have included capital costs to provide a new separate electricity supply to the SWSHP energy centre but it is likely this might come via the main power supply to existing buildings. There is a power supply available for the SWSHP within the electricity compound and within the existing plant room.



The Energy centre would house the SWSHP secondary filtration, heat network pumps and pressurisation units. A secondary filter would be installed in the energy centre to filter particulates down to 0.1mm before entering the heat pump heat exchanger. This form of initial river screen and secondary filtration has been used successfully at an installation at Kingston-upon-Thames.

We would propose a 100-200m3 (depending on SWSHP output selected) insulated thermal store next to (external) the Energy centre at the northwest. This could be made into an architectural feature to address planning issues.

Building heat connections/pipework

A small heat network would be installed to supply heat around 85C to the Hereford Leisure Pool cluster buildings. We understand each of the five main buildings has their own boiler houses and the heat network would connect to each of these via small plate heat exchangers installed in existing boiler houses. The SWSHP would raise the

temperature to around 85C and this would be supplied to the Hereford Sixth Form College on the other side of Priory Road. The College has a large main Victorian building around four other buildings and an associated modern ‘Anytime’ gym.

Heat would also be supplied to the Hereford Leisure Pool plant room at the north-west end of the building. Pre-insulated heat network pipes would pass through the plant room itself and connect into the existing boiler/CHP headers via a plate heat exchanger.

There is a relatively soft to medium dig across St Martin’s Street to a three storey day centre and care home of some 36 flats operated by Anchor Housing. Pre-insulated heat network pipes would run in a trench into the existing boiler headers via a plate heat exchanger.

A medium dig tarmac underpass could carry heat network pipes through the underpass around an allotment to an Asda supermarket. However this has been almost discounted as the heat load is too small relative to the pipe lengths required.

We would propose pre-insulated steel pipework with an automatic leak detection system built-in. Capital costs could be reduced further by using flexible PEX plastic

pipework although PEX only has a 30-40 year life at the proposed 85C.

Land ownership Further investigations need to be undertaken to identify land ownership around the river bank and across the pipework routes. Rights of Way would need to be determined and there may be small costs associated with these. We assume that Hereford Council own the land required for the new energy centre so this should not present a problem.

Modelling results

Modelling has been carried mainly out on one cluster of buildings i.e. the Hereford Leisure Pool and Drybridge House. We have modelled three different sizes of SWSHP each with increasing amounts of thermal storage, scenarios 1-3. We have included one scenario of a SWSHP with the existing CHP unit (scenario 1a). We have also modelled a SWSHP supplying the main cluster with the addition of the ASDA heat demand (scenario 3a).





IRR (25 Years)

NPV (£ x 1,000) (25 Years)

Operating Surplus 2016 (£ x 1,000)


CAPEX (£ x 1,000)

Scenario 1 Hereford Pool cluster (500kWth SWSHP)

10.9 7.8% 634 117 334 1,272

Scenario 1a Hereford Pool cluster (500kWth SWSHP+210kWe CHP)

10.4 8.3% 713 122 438 1,272


10.7 8.0% 838 150 382 1,605

Scenario 3 Hereford Pool cluster (1,000kWth SWSHP)

11.5 7.2% 824 171 390 1,965

Scenario 3a Hereford Pool cluster + ASDA (1,000kWth SWSHP)

13.3 5.6% 558 180 423 2,389

Table 7 shows that scenario 1a (500 kWth SWSHP plus existing CHP) provides the most favourable economic approach on simple payback and IRR. However scenario 2 is slightly better on NPV and CO2. Scenario 3a (including Asda) is the best annual operating surplus but this is still not enough to pay back the capital costs of additional pipework as quickly as other options. Overall we believe that scenario 2 (750kWth SWSHP) presents the best compromise between return on investment and CO2 savings. This scenario assumes that the CHP will probably come to the end of its life in say 3 years and could be replaced with SWSHP. However, retaining the CHP and adding a SWSHP still provides very good 5 year strategy.

The table above shows NPV and IRR for a 25 year life. Modelling based on a 40 year life shows improving IRR as shown in Table 8. We have not taken any plant replacement costs into account in the 40 year model that would clearly reduce the return on investment significantly.


Hereford IRR (40 Years)

NPV (£ x 1,000) (40 Years)




8.9% 1,185

Scenario 1a Hereford Pool cluster (500kWth SWSHP+210kWe CHP)

9.3% 1,288


9.1% 1,544

Scenario 3 Hereford Pool cluster (1,000kWth SWSHP)

8.3% 1,629

Scenario 3a Hereford Pool cluster + ASDA (1,000kWth SWSHP)

7.0% 1,406

Net Present Value

Figure 35 shows the whole life cost Net Present Value (NPV) for the scenarios modelled with SWSHP plant supplying heat directly to the Hereford Leisure Pool cluster buildings. This indicates scenario 1a (including CHP) as the most economic approach. However, this does not take into account future costs to replace the existing 12 year old CHP.



Figure 35: Net Present Value

Figure 35 shows that Scenario 2 (750kWth SWSHP) provides the most favourable economic approach. This is the based on NPV over 25 years and using a discount rate of 3.5%.

Operating Surplus

Figure 36Error! Reference source not found. shows the annual operating surplus (based on 2016 prices) inclusive of revenues, for the modelled scenarios with SWSHP plant supplying heat directly to the Hereford Leisure Pool cluster buildings.

Figure 36: Operating surplus

Figure 36 shows that scenario 3a (including Asda) gives the most favourable annual operating surplus but this is still not enough to pay back the capital costs of additional pipework as quickly as other options.

CO2 Emissions

Figure 37 shows the site CO2 emissions (2016) for the modelled scenarios with SWSHP plant supplying heat directly to the Hereford Leisure Pool cluster buildings.



Figure 37: CO2 emissions

Figure 37 clearly shows all scenarios provide significant reductions in carbon emissions, with Scenario 1a (500kWth SWSHP+210kWe CHP) providing the greatest reductions in emissions.

Capital costs

Figure 20 shows the capital costs (CAPEX) for the modelled scenarios with SWSHP plant supplying heat directly to the Hereford Leisure Pool cluster buildings.

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Figure 38: Capital costs

Figure 20 shows scenario 3a requires the highest capex as it has the largest SWSHP plant and thermal store, mainly due to the additional cost of heat network to reach Asda.

Risks

Future of RHI – it is possible (although not probable) that RHI support could be removed (or reduced) in April 2017. This is a very significant risk as this has a major impact on the economics of SWSHPs. If the RHI were to be withdrawn or reduced in April 2017 then this will probably make SWSHP projects marginal or could stop projects going ahead altogether.

There may be unknown or unforeseeable practical problems in installing abstraction/discharge structures on the river bank but we do not see this as a major risk.

Drybridge House not signing up as a heat purchaser

Possible power supply issues in relation to the local supply network

Planning issues in relation to the energy centre or the thermal store

Possible regulatory issues from the EA – not seen as a major risk.

A significant change to energy prices.

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Conclusions & Recommendations

The Wye provides a good heat source with a strong flow, and has scope for the installation of a surface water source heat pump. Modelling indicates that a 750kWth SWSHP is approximately the optimum size with a 150m3 thermal store for installation to meet the demands here.

A possible location for the energy centre has been identified along with indicative pipework routes for abstraction, discharge and heat network to supply the Hereford Leisure Pool cluster. Practical outline solutions for abstraction and discharge have been identified to take this project further.

Scenario 2 (750kWth SWSHP) provides the best compromise between economic return and CO2 savings, offering an 8% rate of return over 25 years. Scenario 1a, a smaller scheme including the existing CHP is also economic. We therefore recommend taking forward a 750kWth SWSHP to detailed design stage and development of a full business case funding and business structures in order to implement the scheme.

Even if this project was ready for implementation by summer 2016 it would not be complete before the RHI deadline in April 2017 when RHI may or may not be changed or even removed altogether however, we believe that RHI will remain in place for SWSHP and we recommend taking forward the development of detailed design and a full business case.

If the SWSHP could also be used to provide cooling to the Leisure Pool then the economic case could improve significantly.

Next Steps

Detailed economic analysis on:

Heat demands

Heat sales price

Future electricity prices

Further optimising the SWSHP and thermal store sizes

Investigate opportunities to provide cooling as well as heating to the Leisure Pool

Hold discussions with Hereford Council and Anchor Housing to firm-up the opportunity to supply heat

Following the optimisation above, hold on-site discussions with pipework contractors to firm-up optimised routes and dig conditions to confirm capital costs

Develop a full business case and detailed design



Appendix II Modelling Assumptions

Hereford urban village development

Whole life costing A 25 year life has been assumed with a discount factor of 3.5%. While the 25 year life cycle is based around the larger items of equipment (CHP, pumps, storage vessels etc.) the pipework infrastructure is expected to last up to 50 years. We have therefore carried out additional modelling over a 40 year life but without any capital expenditure for major plant replacement.

District Heating We have assumed an 80°C/60°C DH system with 10% heat losses from the pipework but would hope that careful design and optimisation of existing heating systems could take this to 70°C/50°C with smaller pipework and even lower heat losses.

Carbon factors These are taken from the National Calculation Methodology 216g/kWh for gas and 519g/kWh for electricity.

Heat supply We have assumed a heat sales cost of 3.2p/kWh from the CHP plant. We believe this is reasonable for this kind of scenario. Any more than 3.2p/kWh is likely to discourage customers connecting, any less reduces the revenue and return on investment even further. This has been calculated on a gas price of 2.5p/kWh and assuming an 80% boiler efficiency. A small uplift of around 0.075p/kWh has been added for maintenance saving to the client.

Electrical Export Rates We have assumed variable export rates based on time of day on a standard Red, Amber, Green DUOS basis. These are £54.93/MWh for Red, £41.74/MWH for Amber and £40.51/MWh for Green.

Renewable Heat Incentive (RHI) We have assumed that RHI will be available for the biomass proportion of heat supplied at the current non-domestic RHI rate. Losses have been assumed to be 10%.

Hereford leisure pool WSHP

Whole life costing A 25 year life has been assumed with a discount factor of 3.5%. While the 25 year life cycle is based around the larger items of equipment (SWSHP, pumps, storage vessels etc.) the pipework infrastructure is expected to last up to 50 years. We have therefore carried out additional modelling over a 40 year life but without any capital expenditure for major plant replacement.

Heat network We have assumed an 80°C/70°C district heat network with 10% heat losses from the pipework but would hope that careful design and optimisation of existing heating



systems could take this to perhaps 75°C/60°C with smaller pipework and even lower heat losses.

Carbon factors These are taken from the National Calculation Methodology 216g/kWh for gas and 519g/kWh for electricity.

Heat supply These schemes have been modelled on a heat (only) sales basis via the heat network. We have assumed a heat sales cost of 3.2p/kWh from the SWSHP. We believe this is reasonable for this kind of scenario. Any more than 3.2p/kWh is likely to discourage customers connecting, any less reduces the revenue and return on investment even further. This has been calculated on a gas price of 2.7p/kWh and assuming an 80% boiler efficiency. A small uplift has been added for maintenance saving to the client.

Electricity supply Where necessary we have assumed and electricity cost of 7.2 p/kWh during the day and 4.2 p/kWh at night.

Renewable Heat Incentive We have assumed that current non-domestic RHI will be available beyond April 2017. This is at the current rates of heat supplied at the RHI rate. Current RHI rates are 8.84p/kWh up to 15% of full annual capacity of the SWSHP and then 2.64p/kWh beyond that.



Appendix III Operational Characteristics

The following is an example of the operational characteristics of the network. The operation of all the clusters is given in the data spreadsheets supplied as part of the deliveries of this project.

Urban Village development operation

Error! Reference source not found. shows the EnergyPro model of heat supply and demand for central Hereford cluster 5.

Figure 39: Hereford cluster 5 EnergyPro model

The following diagrams show the operational characteristics of the cluster 5 scheme during typical summer and winter weeks.

The top graph shows heat demand (blue) and heat supplied (dark green).

The middle graph shows electricity supply (dark green) and electricity demand (green). The bottom graph shows the thermal storage (green) being charged (upward curve) and discharged (downward curve).

These show how the CHP would operate in relation to the heat and power demands. They also show the value of thermal storage and how that helps address the fluctuating energy demands in the buildings being supplied.



Figure 40: Typical winter operation (cluster 5)

Figure 40 shows the CHP heat supply following the heat load (purple) and charging the thermal store during lower demand periods.

Figure 41: Typical summer operation (cluster 5)

Figure 41 shows the CHP heat supply following the heat load (blue) and charging the thermal store during lower demand periods.

The above shows the CHP heat supply operating for just a few hours per day in the summer to charge the thermal store. The much lower summer heat demand heat is then supplied by the thermal store.



Figure 42: Heat load duration curve (cluster 5)

Figure 42 shows the heat load duration curves for the CHP supplying cluster 5. This represents the operating time (hours/year) at each value of heat output (MWth) with high output for only a small number of hours on the left. It also shows that most of the year is spent at relatively low heat loads to the right of the graph. The green shows the heat supplied by the CHP and the remainder being supplied by gas boilers (red) located in the buildings.

The green portion above shows the majority of heat being supplied by the CHP with a smaller amount of heat from boilers (Red).

The difference between the demand and the heat supplied is provided via the thermal store charging and discharging.

The green portion above the demand (green) is charging the store and the gap (white) under the demand is being supplied from the thermal store (discharging).

Hereford Leisure Pool WSHP operation

Error! Reference source not found. shows the EnergyPro model of heat supply and demand for the Hereford Leisure Pool cluster buildings.



Figure 43: Hereford SWSHP Scenario 2 (750kWth SWSHP) EnergyPro model

The following diagrams show the operational characteristics of the Scenario 2 (750kWth SWSHP) scheme during typical summer and winter weeks. The top graph shows heat demand (purple) and heat supplied by the SWSHP (blue). The middle graph shows electricity consumed (green). The bottom graph shows the thermal storage (light green) being charged (upward curve) and discharged (downward curve). These show how the SWSHP would operate in relation to the heat and power demands. They also show the value of thermal storage and how that helps address the fluctuating energy demands in the buildings being supplied.

Figure 44: Typical winter operation (scenario 2)

Figure 44 shows the SWSHP heat supply following the heat load (purple) and charging the thermal store during lower demand periods. The heat pup operates at night in order to utilise cheaper electricity.



Figure 45: Typical summer operation (scenario 2)

Figure 45 shows the SWSHP heat supply (blue) following the heat load (purple) and charging the thermal store during lower demand periods.

The above shows the SWSHP heat supply operating for just a few hours per day in the summer to charge the thermal store. The much lower summer heat demand heat is then supplied by the thermal store.

Figure 46 shows the heat load duration curve (green) for the SWSHP supplying scenario 2. This represents the operating time (hours/year) at each value of heat output (MWth) with high output for only a small number of hours on the left. It also shows that most of the year is spent at relatively low heat loads to the right of the graph. The blue shows the heat supplied by the SWSHP and the small remainder being supplied by gas boilers (red) located in the buildings.

Figure 46: Heat load duration curve (scenario 2)



The difference between the demand (green) and the heat supplied is provided via the thermal store charging and discharging. The blue portion above the demand (green) is charging the store and the gap (white) under the demand is being supplied from the thermal store (discharging).



Appendix IV Pipework Specification for the link road

The proposed new link road through the Hereford Urban Village development area offers an opportunity to save money on the costs of heat network pipework installation.

heat network feasibility study for hereford prepared for...

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