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Newcastle Energy Masterplan Newcastle City Council May 2012
Distributed Energy
Newcastle City Council
Energy Masterplan
May 2012
i
Process
Name Date
Prepared by Allen Jones May 2012
Reviewed by Tom Bradley May 2012
Approved by Allen Jones May 2012
Contract Details
Reference ID
Project Reference 157
Newcastle City Council
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CONFIDENTIALITY
The information in this document is the property of Narec and the specific client who commissioned
this work. It may not be copied, transmitted or communicated in any form whatsoever to a third
party or used for any purpose other than that for which it is supplied, without the express written
consent of Narec or our client.
LIABILITY DISCLAIMER
Whilst this information is given in good faith, no warranty or representation is given concerning such
information, which must not be taken as establishing any contractual or other commitment binding
upon Narec or any of its subsidiaries or associated companies.
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Contents
1. Executive Summary ............................................................................................................... 5
2. Introduction & Background ........................................................................................................ 7
3. Government Policy and Drivers .................................................................................................. 8
4. Masterplanner Role – Scope and key drivers ............................................................................ 15
4.1 Carbon Reduction ....................................................................................................................................... 17 4.2 Affordable Energy........................................................................................................................................ 18 4.3 Community Energy ...................................................................................................................................... 20 4.4 ESCo Development ...................................................................................................................................... 22 4.5 Renewable Energy Technologies ................................................................................................................. 23 4.6 Partnerships ................................................................................................................................................ 24 4.7 Financing ..................................................................................................................................................... 25
5. Key aspects of the Energy Masterplan ...................................................................................... 28
5.1 Reducing demand for energy by improving energy efficiency of buildings ............................................. 28 5.2 Renewable Technologies ......................................................................................................................... 29
5.2.1 Renewable Electricity Generation ................................................................................................. 30 5.2.2 Renewable Heat Generation ......................................................................................................... 31
5.3 Low Carbon Energy Production - District Heating/Cooling ..................................................................... 32 5.3.1 Heat Network Vision and Potential .............................................................................................. 32 5.3.2 Establishing Market Interest ......................................................................................................... 35 5.3.3 ESCo ............................................................................................................................................... 37
5.4 Regeneration ........................................................................................................................................... 39
6. Strategic Direction – The Next Steps ......................................................................................... 42
Appendices ................................................................................................................................. 48
Appendix 1 - Sustainable Energy Action Plan (SEAP) ..................................................................... 48
Appendix 2 - Market overview of energy sources and suppliers as they impact on Newcastle, and
sustainable energy availability & associated cost implications Oct 2010 ........................................ 49
Appendix 3 - Newcastle Civic Centre & Northumbria University Tri Gen Report Oct 2010 ............... 50
Appendix 4 - Financial drivers for low carbon energy schemes ...................................................... 51
Appendix 5 - NCC Wind Resource Report 2010 ............................................................................. 52
Appendix 6 - Zone of Planned District Energy 20/5/11 .................................................................. 53
Appendix 7 - Arup proposed Newcastle Heat Network Plan .......................................................... 54
Appendix 8 - Newcastle City Council “Newcastle Heat Network” – Soft Market Testing December
2011 ........................................................................................................................................... 55
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Tables
Table 1: Newcastle City Council, Energy Masterplan – Next Steps…………………………………………………………….41
Table 2: Newcastle City Council - Sustainable Energy Action Plan (SEAP) ........................................................ 48
Figures
Figure 1: Energy Masterplanning Workstreams .............................................................................................. 16
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1. Executive Summary
The New and Renewable Energy Centre (Narec) were appointed by Newcastle City Council in
August 2010 in the role of energy masterplanner for the city. The role was created by the
council to help drive forward the delivery of renewable/low carbon energy schemes and
affordable energy in the city. The Energy Masterplan is written against the background of
increasing concern regarding climate change, rising energy costs, uncertainty over security
of energy supplies and austere economic times.
The main objective of the role was to produce an energy masterplan document that sets out
the strategic direction and next steps that the council should take over the next 20 years and
to act as an overarching strategy for the delivery of the council’s objectives in this area
namely;
Carbon Reduction
Affordable Energy
Community Energy
ESCo Development
Renewable Energy Technologies
Partnerships
Finance
These objectives are explored in more detail within the masterplan and are set in context
with European, national and local policy drivers and targets.
The masterplan then focuses on the key aspects identified in achieving these objectives
which are;
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Reducing the demand for energy by improving the energy efficiency of buildings
Deployment of market ready renewable energy technologies
Low carbon energy production (District Heating/Cooling)
The impacts of regeneration and development in the city
Finally the masterplan sets the strategic direction and identifies next steps the council needs
to take to deliver the objectives in these areas. The types of interventions being
recommended are the potential for;
Large scale district heating & cooling
Shared energy schemes
Installation of renewable energy generation (in particular solar photovoltaic panels (PV),
solar thermal hot water systems, biomass heating and small scale wind),
Improved insulation and energy efficiency of all housing stock and buildings
Energy related behavioural change and awareness across the city.
The work already undertaken in this area has helped towards the city being awarded the
title of the UK’s most sustainable city in 2009 and 2010 and will also act as one of the key
drivers for the city’s bid to be European Green Capital in 2014.
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2. Introduction & Background
Narec were appointed by Newcastle City Council in August 2010 in the role of energy
Masterplanner for the city. The role was created by the Council to help drive forward the
delivery of renewable/low carbon energy schemes and affordable energy in the city whilst
co-ordinating activity across the Council and other city stakeholders. This assists the Council
drive forward it’s undertakings in terms of national and European carbon reduction targets.
The Council signed up to the EU Covenant of Mayors agreement in 2010 and has committed
the city to reduce its carbon emissions in excess of 20% by 2020 (Based upon a 2005
baseline). As part of the Covenant of Mayors agreement the council has developed and
agreed a Sustainable Energy Action Plan and a Citywide Climate Change Strategy and Action
Plan. The sustainable energy action plan is a scenario of possible carbon reduction projects
and interventions that will result in the city hitting its targets (Set out in Appendix 1). This
will be used as a framework to drive the carbon reduction projects in the city. The role of the
Masterplanner is to assist the Council in a technical capacity to deliver these interventions
and develop the Energy Masterplan over the two years of the engagement.
The type of interventions being considered are potential for district/community heating
schemes, shared energy schemes, installation of renewable energy generation (in particular
photovoltaic panels (PV), solar thermal hot water systems, biomass heating and small scale
wind), improved insulation and energy efficiency of all housing stock and behavioural
changes and training across the city. The work already undertaken in this area has helped
towards the city being awarded the title of the UK’s most sustainable city in 2009 and 2010
and will also act as a driver for the city’s bid to be European Green Capital in 2014.
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3. Government Policy and Drivers
The Energy Masterplan is written against the background of increasing concern regarding
climate change, rising energy costs, uncertainty over security of energy supplies and austere
economic times. Following the banking crisis in 2008 the UK (and many other world
economies) remains under severe economic pressure which has meant a continued
reduction in available lending and a slowdown in the economy. This could develop into a
further economic recession and this has led to the recent spending review by the
Government which has resulted in significant public sector spending cuts across the board.
The UK Government continues to be committed to being the “greenest Government ever”
but financial and economic pressures allied to the nature of a coalition Government have, as
some commentators have indicated, started to expose tensions which have led to mixed
messages coming from the Government. This is in terms of their commitment to the support
they can offer for the drive towards a low carbon future. This is largely related to the
availability of public funds for the financial incentives and the impact of low carbon policies
on energy bills for users both large and small.
The energy masterplan has been developed against an evolving set of National and
European policies, legislation and financial models/incentives. These policies are designed to
change our use of energy away from the current centralised generating system to a more
decentralised system of energy generation which will also include the increasing deployment
of renewable and low carbon energy sources. The effect of this is to, not only reduce our
carbon emissions and alleviate our impact on climate change from generating power and
heat, but also to increase our energy security in the light of reducing supplies of fossil fuels.
The Government has indicated that domestic Oil & Gas production reached its peak in 2001
and that to fill this gap the UK now has to import (the UK became a net importer in 2004) an
increasing quantity of energy, nearly all of which is fossil fuel derived. This means that the
UK energy market is increasingly subject to the volatile world of these price commodities,
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with the inherent risk of price spikes if supplies are disrupted.
The UK and the EU have led the way internationally in pushing forward the worldwide
adoption of binding climate change targets and were signatories to the Kyoto Protocol as far
back as 1990. The recent climate change summit in Durban seems to have paved the way for
a replacement for the Kyoto Protocol by 2020 which will include more of the world’s major
emitters in agreeing binding targets for the first time. This is set against increasing scientific
acceptance of the rapidly increasing climate change impacts and the need to act sooner
rather than later. (Some recent reports indicate that something major on a global scale must
happen in the next five years)
The Climate Change Act of 2008 set legally binding targets to reduce the UK’s greenhouse
gas emissions by at least 80% below base year levels by 2050. This is to be achieved by
action at home and abroad. To drive progress and set the UK on a pathway towards this
target the Act introduced a system of “Carbon Budgets” which provide legally binding limits
on the amount of emissions that may be produced in successive five year periods from 2008.
The first three carbon budgets were set in law in May 2009 and require emissions to be
reduced by at least 34% below base year levels in 2020. The fourth Carbon Budget for the
period 2023-2027 was set in law in June 2011
In its “Low Carbon Plan: Delivering our low carbon future, December 2011” the Government
indicates that emissions are down by a quarter since 1990 and current policies put the UK on
track to cut emissions by over a third, on 1990 levels, by 2020.
The aim is that by moving towards a more efficient, low carbon, sustainable economy the UK
will become less reliant on imported fossil fuels and less exposed to higher and more volatile
energy prices in the future.
However the Government, in the Low Carbon Plan, also accepts that if we are to cut
emissions by 80% by 2050 there needs to be major changes in how we all use and generate
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energy. Energy efficiency will have to increase dramatically across all sectors. The oil and gas
used to drive cars, heat buildings and power industry will, in large part, have to be replaced
by electricity, sustainable bioenergy or hydrogen. Electricity will need to be “decarbonised”
through the use of renewables and nuclear power, and the use of carbon capture and
storage. The electricity grid itself will need to be larger and smarter at balancing demand
and supply. The Government are currently consulting on reform of the Electricity Market to
enable investment in a range of low carbon technologies, through the introduction of a new
low carbon support mechanism and the introduction of a carbon floor price from 2014. It is
hoped that this will provide the market with the certainty to make the investments required
to develop and “smarten” the grid and increase the amount of low carbon and renewable
generation.
In terms of renewable energy production the Government has implemented the provisions
of the 2009 EU Renewable Directive that commits the UK to achieve 15% of its energy
production is to be from renewable sources (electricity/heat & transport) by 2020 from base
of 3% in 2009 and only 1.4% in 2005. In March 2011 the Government published its Carbon
Plan which estimated that 40-70GW of new low carbon electricity generating capacity will
be needed by 2030 and that renewables could provide 35-50GW of that capacity. The
Government then followed this up with a Renewable Energy Roadmap in July 2011 that lays
out the plan of action across the UK to further accelerate the deployment of renewables to
ensure value for money for the customer. In setting out this roadmap the Government
identified those technologies that have the greatest potential to help meet the 2020 target.
The eight technologies identified could provide 90% of the renewable energy we need by
2020 (These technologies are; Onshore/Offshore Wind, Marine Energy, Biomass Electricity,
Biomass Heat, Air/Ground Source Heat and Renewable Transport)
In December 2011 and in accordance with the directive (Article 22) the Government
published its first progress report on the promotion and use of energy from renewable
sources. The report indicates that over the course of 2009 and 2010 the introduction of a
series of measures (see below for further details of the various measures) has resulted in an
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increase in renewable energy generation of 27% over the two year period. In the third
quarter of 2011 renewable electricity generation stood at 9.0% of the total demand and is
rising steadily. The report indicates that the UK is on track to meet its first overall interim
target in 2011/12 of 4% but it also identifies the need to further accelerate deployment
towards the end of the decade. To put this into context the latest available figures for total
renewable energy production stood at 3.6% at the end of Q3 2011.
In real terms the Government has estimated that for the UK to meet its energy needs and to
reduce carbon emissions that an estimated £200 billion needs to be invested in the energy
infrastructure over the next decade. These investments include improving the energy
efficiency of homes and other users and new low carbon generating capacity to replace
ageing, inefficient and polluting power stations. The vast majority of the investment will
need to come from the private sector, but public bodies and especially local authorities will
need to play a leading role in identifying opportunities and providing incentives to the
market.
In order to translate the required changes in our energy generation and use the previous
and current Governments have enacted a series of Energy Acts (2008, 10 & 11) to provide
the legislative framework for the markets to change to incentivise deployment, increase
energy efficiency, provide a method for the energy suppliers to provide funding to make
some of these changes, develop supply chains and encourage innovation etc. The
Government realise that ultimately it is the end users that will fund the increased
infrastructure costs and pay for the various financial incentives. So they are keen to limit the
impact on the customer especially in the light of increasing wholesale energy prices,
increasing fuel poverty, rising inflation, spending cuts, weak economy etc. (Fuel costs have
risen significantly over the last four years in fact the Government’s own figures show that
between 2007 & 2011 Domestic Electricity prices have risen by 12.5% and Gas has risen by
almost 27%)
These Acts and other previous measures including the Climate Change Act 2008 & the
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Renewable Energy Directive 2009 have resulted in a raft of schemes and incentives. These
measures are designed to stimulate the market, increase deployment, develop supply chains
and provide certainty for public and private sector investments as well as encouraging
industry and large scale users embed energy efficiency into their organisations or face
increased costs either directly or through taxation.
These can be broken down into the following areas:
Energy Efficiency – Non Domestic
Various emissions related schemes on the non-domestic sectors through differing forms of
“taxation” or carbon trading to encourage users to improve energy efficiency and reduce
carbon emissions. (Polluter pays principle)
EU ETS – European Emissions Trading Scheme for large intensive energy users
CCA - Climate Change Agreements for certain larger industrial sectors (Climate Change Levy)
CRC – Carbon Reduction Commitment for public sector and other larger users
Energy Efficiency – Domestic
Green Deal – The Governments flagship domestic energy efficiency scheme currently under
development and out to consultation The Green Deal financial mechanism eliminates the
need to pay upfront for energy efficiency measures and instead provides reassurances that
the cost of the measures should be covered by savings on the electricity bill. (Warm up
North East)
ECO - A new Energy Company Obligation will integrate with the Green Deal, allowing
supplier subsidy and Green Deal Finance to come together into one seamless offer to the
consumer. This will replace both the existing CERT (Carbon Emission Reduction target) and
CESP (Community Energy Savings Programme) energy supplier obligations which are due to
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end in 2012.
Smart Meters – The rollout of smart meters will be a major national project. It will involve a
visit to every home and many businesses in the UK, and the replacement of around 53
million gas and electricity meters. Smart meters can pave the way for a transformation in the
way energy is supplied and used. They will provide consumers with near real-time
information about energy use, and more accurate bills.
Renewable Energy Deployment
Various financial incentive schemes
RO – Renewable Obligations Certificates for large scale renewable electricity generators.
There are new banding arrangements to further encourage investment in less developed
technologies due in 2013 with a managed transition to the low carbon support mechanism
being proposed as part of the Electricity Market Reforms.
FiT – Feed in Tariffs for smaller scale renewable electricity generators.
Currently subject to a review and consultation by the Government
RHI – Renewable Heat Incentive for all sizes of renewable heat generation.
The RHI commenced for non-domestic installations in November 2011 and is due to come
on stream for domestic installation as part of the Green Deal later in 2012.
The Government is also keen to promote district heating and cooling schemes both through
low carbon and renewable energy sources. They will be publishing a national heat strategy in
2012 and the 2012 Budget is expected to contain financial incentives for gas fired combined
heat and power (CHP) systems as well as a drive to promote the uptake of district heating
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and cooling projects in the major conurbations. A new EU Energy Efficiency Directive is also
due next year which will also focus on national heating and cooling plans and the large scale
deployment of district heating and cooling schemes. Both the EU and the Government see
the local authorities and public sector as being a vital component in the promotion and
delivery of these schemes. It will also provide a more efficient way to use our remaining gas
resources to provide more efficient and lower carbon heating and cooling in our major
towns and cities.
It is obvious that the road to a low carbon energy future is going to be difficult and being
able understand, appreciate and use the complex and varied Government schemes and
incentives is going to be crucial for the council to, not only, achieve its own targets but help
it to achieve the national and European targets, reduce fuel poverty, provide affordable
energy, improve energy efficiency etc within its own control and sphere of influence.
For these reasons the Council is being proactive and the energy masterplan initiative
demonstrates how it plans to take the lead in developing a low carbon energy solution for
the city.
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4. Masterplanner Role – Scope and key drivers
The Masterplanner role was initially defined by the specific points listed below:
• Develop an Energy Master Plan for the city to contribute to delivering the council’s
aims, objectives and targets and assisting the city’s ambitious drive towards
sustainability and carbon neutrality.
• To oversee and manage the transition of plans and strategy through to the delivery of
sustainable affordable energy to local communities.
• Lead on the evaluation and implementation of sustainable community energy
networks and the selection of Energy Service Companies (ESCos) and other delivery
vehicles.
• Advise on and support the design, procurement and implementation of sustainable
energy systems in each of the regeneration programme areas and ensure the
coordination of these within the Energy Master Plan.
• Develop appropriate policies and advice on sustainable energy for inclusion in the
Local Plan.
• To attract and develop appropriate relationships with external partners both in
respect of energy and the associated link with regeneration.
The scope identifies a number of key themes that must form the focus areas that have been
used in the development of the Energy Masterplan, these are:
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Figure 1: Energy Masterplanning Workstreams
The development of the Energy Masterplan is a key objective of the twenty four month
contract with Narec and is being developed over that period. This plan is a legacy reference
document that the city can use to drive forward the key aspects contained within the plan.
Whilst the plan is the main output of the Masterplanner contract there are many cross
cutting workstreams that have provided evidence for the Masterplan and assist the Council
drive forward delivery of projects and initiatives.
One of the first tasks for the Energy Masterplanner was to assess the potential and the
applicability of available technologies in the city for the provision of low carbon and
renewable energy. Narec produced a report “Market overview of energy sources and
suppliers as they impact on Newcastle, and sustainable energy availability & associated cost
implications Oct 2010” which is attached as Appendix 2. This report was also used to confirm
the accuracy of the Sustainable Energy Action Plan (SEAP) required by the Covenant of
Mayors which confirmed that using the scenario of interventions identified that the city
could indeed achieve its aim of reducing carbon emissions by more than 20% as it indicated
that 22% was possible by 2020. (See SEAP interventions listed in Appendix 1)
The key themes contained in the Masterplan are set out below:
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4.1 Carbon Reduction
Climate change is seen as one of the main societal and technological challenges of the
century, and in order to prevent runaway dangerous climate change action must be taken
sooner rather than later. This urgency is apparent nationally and internationally in the efforts
being undertaken to achieve a reduction in global greenhouse gas emissions, most
specifically CO2. The UK and Europe have taken the lead on Climate Change internationally
and have enshrined binding carbon reduction targets into UK and European legislation.
As part of these commitments and as mentioned in the introduction the Council has signed
up to the EU Covenant of Mayors and developed a Sustainable Energy Action Plan which
commits the city to a reduction in carbon emissions in excess of 20% by 2020 (On current
figures this represents a required saving of in excess of 380,000 Tonnes of CO2)
Carbon emissions can be reduced in a number of ways and the City Wide Climate Change
Strategy reflects this. This commitment aligns with national targets set out in the Climate
Change Act: 2008.
In a city environment the major emissions relate to the use of energy in the form of natural
gas and electricity and the carbon reduction targets mean that the city must significantly
reduce and replace its reliance on gas and electricity to achieve its targets. This could not be
achieved through a single route and a mix of solutions is required, both societal and
technological. This includes increasing energy awareness, better building and standards of
construction, the upgrading of existing property, the deployment of low carbon energy
schemes, and integration of renewable energy (heat/power) generation. No single solution
is capable of delivering the scale of reduction required. However it is now clear the future
needs to be less reliant upon inefficient centralised energy generation sources and needs to
focus more upon decentralised energy generation.
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In today’s harsh economic environment and in the face of the public sector spending cuts to
close the budget deficit, the increasingly difficult part of this challenge is to be able to attract
enough capital investment to schemes of a large enough scale. It is important that these
schemes can be implemented to achieve the required carbon reductions whilst providing
energy that is sustainable and affordable. Funding of schemes is a major issue and is dealt
with later in this report. The council must take the lead in this area.
4.2 Affordable Energy
The provision of affordable energy is vital for the economic prosperity and the reduction of
fuel poverty for the city and its residents. The pressure on energy prices is great with fossil
fuel costs rising, climate change adaptation costs and energy security concerns all
contributing to the cost of energy rising substantially over the last decade. This upward cost
pressure is predicted to continue long into the future as fossil fuel stocks decline and the
take up of alternative sources of energy gathers pace. Despite some reductions on fossil fuel
costs in the latter half of 2010 the retail price of gas and electricity has risen again in 2011a
(In the period 2007-11 Retail Gas prices have risen 27% and electricity by 12%). The
provision of low carbon energy is an increasing priority but we must work with the industry
and partners to ensure that the sources of low carbon energy that we take forward in the
city are also providing energy that is affordable, secure and can be guaranteed not to rise
dramatically in the future as circumstances change. An example of this is the use of biomass
for heating and for electricity generation which is becoming more popular and the
Renewable Heat Incentive (RHI) which will further incentivise the use of biomass technology.
This will put pressure on the biomass supply chain which could lead to increased raw
material costs and then delivered energy costs.
Fuel poverty is of increasing concern nationally and in the city. In the most recent
Government figures, published in 2011 for the year 2009, it is estimated that 5.5 million
people are living in fuel poverty in the UK. This is an upward trend and with increasing
a DECC have estimated that electricity prices will rise 7% year on year for instance which is higher than inflation
and in our opinion a conservative figure.
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energy costs, public sector spending cuts, benefit reform and increasing unemployment, the
trend is likely to remain upward. The Government has committed to the eradication of fuel
poverty as far as reasonably practical by 2016 and have commissioned the “Hills Fuel
Poverty Review” to review the target and definition of fuel poverty (Report is due in early
2012). Fuel poverty is currently based upon households who spend more than 10% of their
income on fuel.
The national figures also show that of the 5.5 million living in fuel poverty that 4.5 million
are regarded as vulnerable households (A vulnerable household is one that contains the
elderly, children or someone who is disabled or has a long term illness). The North East of
England has the highest proportion of fuel poor with 26% of households being in fuel
poverty. In September 2011 Newcastle Warm Zone estimated that the current figure for the
city was 34% of households.
As part of the city’s aim to be a “Fairer City” fuel poverty has been identified one of the main
themes within its “Financial Inclusion Plan”. The priorities linked to becoming a fairer city
are:
• Making Newcastle a working city
• Creating decent neighbourhoods
• Tackling inequalities that prevent people from achieving their potential
• Becoming a Council fit for purpose
This work ties in with the work that the WarmZone partnership have been doing in the city
for the past few years in improving the energy efficiency of domestic properties. This will
potentially carry forward through the Green Deal in 2012 through the Warm up North East
project, currently under development. It is vital that the energy efficiency of buildings
continues to be a priority and in order to reduce fuel poverty and meet the targets set in the
SEAPb. It is therefore a vital element that has a key role to play in supporting the energy
masterplan. Through improved building efficiency the associated reduction in energy
b The UK housing stock is among the most inefficient in the world and was responsible for 43% of total UK
emission in 2009
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demand means less fossil fuel generated energy is used and the overall load required by our
proposed decentralised, low carbon and renewable energy solution is also reduced.
4.3 Community Energy
The Government has indicated that the development of community energy projects is
complimentary to both the policies on climate reduction, localism and reduction in fuel
poverty and is actively promoting the adoption of such schemes. The community aspect also
sits within the “Big Society” policy being promoted by the Government. Both the
Government and the EU are keen to develop such schemes and a National Heat Strategy is
to be published in 2012 outlining how heating and cooling networks can be developed. It is a
key requirement that lower carbon sources of heating and cooling of buildings is developed
on a city wide scale. The Government are also looking at ways of incentivising such schemes
and removing barriers for development. At the same time the Government has also signalled
that it is looking to the Local Authorities to take the lead role by allowing the sale of
electricity from Local Authority generation projects (previously it was limited to CHP only).
The city council have been at the forefront of these types of developments going back many
years with the Byker heat scheme and are part of the Core Cities “Heat Network Group” and
are a Vanguard Council for “Heat in the City”. The council was also selected by the HCA to be
given funding for the biomass district heating scheme at Riverside Dene in 2010 which is
now held up by the HCA as a national exemplar project.
Community energy is not well developed in the UK generally and whilst the city has a
number of established community schemesc, there is still potential to provide further
affordable community low carbon energy in the city. This could be in the form of community
heating and electricity supply or a combination of both (Combined Heat Power & Cooling).
c Newcastle currently has two major district heating scheme based around Byker and Riverside Dene serving
Your Homes Newcastle (YHN) managed properties plus a further 47 smaller group and sheltered schemes.
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An example of a community district heating scheme in development can be currently seen in
Scotswood, whilst this is regeneration development led it is a good model for other areas in
the city to consider in the future.
Previous work commissioned by the Council has identified the potential use of district,
community and shared energy schemes in other areas of the city. The task is to match the
heat load potential with an ESCod that can establish a financially sound business case, and
also sell affordable heat that will make sound financial and business sense.
Taking into account the development of district heating by the Council across the city there
is still potential to look at the development of a larger district heating scheme by linking up
the developments in Byker and in the west of the city into the city centre as a long term
vision. However it should be noted that the cost of infrastructure is much higher when
developing schemes into an existing environment (retrofitting) as opposed to a new
development scenario. Further technical and financial appraisals may need to be undertaken
to establish which schemes have viability and could form part of a city wide scheme. (See
Chapter 5)
Other sources of energy are also being investigated in the city which could prove to be a
valuable source of low carbon energy. The potential for geothermal energye on the Science
Central site is exciting but it remains to be seen if the heat can be provided affordably. Test
drilling funded by DECCf was completed on the site by Professor Paul Younger of the
University of Newcastle in the summer of 2011. Further testing work needs to be funded
(approx. £100K) to establish the true geothermal potential but the initial signs are
encouraging and geothermal power can be cost effective, reliable, sustainable, and
environmentally friendly. Professor Younger has indicated that the exploration bore hole he
has drilled has established that the temperature of the water 2Km down is of a higher
temperature than was originally thought at around 80 Deg C. The bore has the potential to
d Energy Services Company
e The use of the earths stored energy as a heat source to generate power and heating/cooling for buildings
f Department of Energy & Climate Change
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provide not only heating and cooling to the site but to be expanded out and to form a
significant heat source for a citywide heat network.
It is our view that an incremental approach should be taken to the development of
community, district or shared energy schemes which must be carefully planned and
financially modelled to enable the scheme to be viable and to ensure that other schemes
can benefit in the longer term. This approach is likely to find favour with the main ESCo
providers and investors and is more likely to lead to the development of a larger city wide
scheme in the future.
As part of the Masterplanner work programme we have investigated a shared energy
scheme between the Council & Northumbria University using the Civic Centre and
Northumberland Buildings (A Narec case study “Newcastle Civic Centre & Northumbria
University Tri Gen Report Oct 2010” is attached as Appendix 3). This scheme is financially
attractive on a simple payback basis and in terms of carbon reduction to both parties, and
could act as the catalyst to establish a city centre district heating scheme that could be
expanded in the future. Further work is ongoing to develop a method of funding this project
which will establish the concept of a heating and cooling network in the heart of the city.
4.4 ESCo Development
The Council’s Climate Change Strategy contains a commitment to investigate the feasibility
of creating community energy schemes, possibly through an Energy Services Company
(ESCo) as a means of contributing to both carbon reduction and affordable warmth
priorities. ESCos can be formed in a number of ways (Public/Private Partnership, Community
Based etc) and can be a catalyst to provide financing and a delivery mechanism for low
carbon energy scheme provision on a project by project basis or on a city-wide basis by
linking together a number of existing schemes. The evaluation and selection of potential
ESCos is a key part the masterplanner role. Funding for the provision of low carbon
affordable energy provision in the city will rely upon the availability of significant capital
funding as most of the solutions being considered are by their very nature and scale very
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capital intensive from the outset. Initial ESCo procurement and start-up costs can also be
high as well. Financing options are discussed below and further information on ESCos is
provided in section 6, page 41 of the Narec produced “Market overview of energy sources
and suppliers as they impact on Newcastle, and sustainable energy availability & associated
cost implications Oct 2010” which is attached as Appendix 2.
A current example of a Design, Build, Finance and Operate (DBFO) ESCo can be seen in the
regeneration of Scotswood. The ESCo will be the vehicle to deliver low carbon affordable
heating and domestic hot water to the new community. This will be achieved with a private
sector partner delivering a community based centralised heating scheme commencing in
2012.
The shared energy scheme mentioned above in 3.3 is another potential small ESCo that
could be used to increase interest with the major users of energy in the city centre and is a
good opportunity for the Council to take a lead, whilst at the same time reducing its own
energy bills and carbon emissions.
4.5 Renewable Energy Technologies
As discussed earlier it is important that a mixture of solutions is necessary to achieve the
energy reductions required to enable the carbon emissions reduction targets to be met. One
of the key drivers will be the deployment of renewable energy (and heat) generating
technologies either individually or as part of a larger project such as a low carbon district
heating scheme, for instance. The deployment of these technologies is doubly valuable as it
not only reduces the reliance on heat and power generated from centrally generated
sources, but will also result in a revenue generating situation by exporting clean power back
to the grid (or offsetting the amount of power the user has to import or both) whilst also
gaining the available financial incentives from the Government. This can significantly
improve the financial viability of schemes and provide a good rate of return on investment.
Deployment of these technologies will also add to the achievement of the national target of
achieving 15% of renewable energy production by 2020. Renewable energy sources can be
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linked to or form part of wider decentralised networks and can link into low carbon schemes
to provide a valuable contribution on terms of overall carbon reduction and the availability
of financial incentives to assist the financial model and business case.
As indicated the Government incentivise the deployment of a range of established (though
currently expensive) renewable energy technologies through a series of financial and tax
incentives (Feed in Tariff/Renewable Heat Incentive etc). The interventions contained in the
SEAP reflect the range of established technologies that can be easily deployed and the
financial incentives currently available reflect these types of technologies also. Details of
these incentives can be found in the Narec report “Financial drivers for low carbon energy
schemes” in section 3, page 4, which is attached as Appendix 4. An update on the current
position in terms of the Feed in Tariff is set out below in section 3.7.
4.6 Partnerships
As has been previously eluded to earlier in the report the drive towards a low carbon city
can only be achieved with significant financial investment. It therefore follows that the
Council must engage with a number of partners and stakeholders to be able to take the lead
in terms of carbon reduction and project implementation. The city has a good opportunity to
work with the public sector, industry, commerce and retail sector by getting them involved in
the implementation of low carbon energy, the attraction of this being a good business
proposition for those sectors as well providing a significant carbon reduction potential to the
wider city.
Current initiatives relating to delivery of projects includes a “Climate Change Delivery
Partnership” with Narec, YHN and Warm Zone.
The Council also leads the “Newcastle Climate Change Partnership” which engages with a
range of stakeholders in the city from the public, private and academic sectors. This group is
also leading on the bid for the city to become European Green Capital in 2014.
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The key issue is that although the Council can and does take the lead on carbon reduction in
the city it is apparent that it cannot achieve a large enough impact on its own without the
support of city wide partners, investors, delivery partners and technology installers.
Key partnerships need to be established when undertaking redevelopment and regeneration
within the city. These aspects of development are the ideal opportunity to encourage (or
required by planning input) low carbon energy solutions (as in Scotswood) and a proportion
of embedded renewable energy generation (For instance 10% embedded generation -“The
Merton Rule”)
A strategic partnership will need to be established with a range of stakeholders in order for
the city to be able to fund and deploy enough low carbon energy solutions in order to
provide affordable energy and carbon reduction in the future.
4.7 Financing
The common thread running through the energy masterplan is the ability to raise finance for
the delivery of low carbon energy and renewable energy schemes. The council must look to
take advantage of public private partnerships and look to use the available current
Government incentives and tax breaks to stimulate a range of projects that can be delivered
in the city. This has to be in a way that can achieve affordable lower carbon energy provision
in such a way as is affordable or investable. This could be achieved either in partnership with
the private & public sectors, via an ESCo or funding schemes (such as PV) from council funds
(or prudential borrowing) that can deliver a good return on investment.
The requirement to maximise the returns currently available from the Feed in Tariff were
brought into focus by the fact that the maximum incentives are only available for the first
two years of the scheme (up to April 2012) and that Government announced a major review
of the Feed in Tariff in the summer of 2011 and all aspects of the scheme are currently still
under review.
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In fact the Government published an “urgent” consultation just related to the PV tariffs in
October 2011 with a closing date for responses of 23rd December. In the consultation the
Government identified the need to urgently cut the tariffs by half to prevent the scheme
exceeding its budget cap for this year and subsequent years. This was due to the system
installation costs reducing more rapidly than they had originally modelled when the scheme
was designed, this was leading to a much bigger return on investment than was originally
envisaged which was attracting more and more systems to be installed. This has sparked an
outcry in the industry and beyond and a number of other recommendations relating to an
eligibility date for the new tariffs to commence which is before the end of the consultation, a
linkage to building energy efficiency and a further (20%) reduced tariff for multiple
installations has led to debates in Parliament and Legal Cases. The review has resulted in a
huge amount of uncertainty for investors and everyone looking to deploy PV systems.
The Feed in Tariff was starting to act as catalyst for realistic investments to be made in the
deployment of PV across YHN stock and council buildings. For example initial indications,
back in the summer of 2011( pre FiT review), showed that if the Council were to roll out PV
on 1500 YHN managed properties across the city and 200 Council buildings (including
schools) the capital outlay would be in the region of £17M but over the 25 year lifetime of
the equipment and with Feed in Tariff payment this could “generate” £9M of revenue for the
council subject to the method and cost of financing and save in the order of 58,000 Tonnes
of CO2. Until the review is completed the council has taken the view to suspend scheme
development until the new tariff regime is certain and the numbers can be assessed again
based upon the new tariffs, the way they are implemented and the most up to date capital
costs.
It is hoped that after the review the rate of return will still be attractive enough to make the
large scale roll out of PV financially viable in the future however the urgent review of the PV
feed in tariffs has dealt a severe blow to local authorities by further penalising multiple
installation by proposing an even greater tariff reduction when more than one system is
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installed. Through the consultation process it is hoped that the Government will relax this
requirement or give exemptions to community use, social housing and local authorities but
only time will tell.
The harsh economic environment has led to the realisation that a number of previously
available grants are no longer available. Even with the availability of European loans and the
potential for the Green Investment Bank/Big Society Bank to provide funding it is still a loan
and must be repaid. The trick is to identify those projects that can attract incentives and so
become attractive to investors or that can absorb the loan element whilst remaining
sustainable and deliver other value added benefits (Job Safeguarding, Job Creation,
Economic Development, Regeneration, Skills development for example)
As part of the masterplanner role we have completed a detailed funding document
“Financial drivers for low carbon energy schemes” and it is attached as Appendix 4 for
reference and discussion. The document covers the numerous sources of funding that are
currently available and sets them in context. This document will be updated on a regular
basis to take into account the changes in funding.
The Energy Masterplan is taking shape and will continue to evolve over time. However the
energy solution for the city is emerging and with this in mind we have set out below the key
underpinning themes for the energy solution for the city as we currently see it.
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5. Key aspects of the Energy Masterplan
5.1 Reducing demand for energy by improving energy efficiency of buildings
When considering how energy consumption is reduced or replaced it is important to follow
the established energy hierarchy as it provides the most practical and cost effective
methodology to achieve a low carbon energy system. This is a five stage process as detailed
below:
Energy Reduction
Reduce the amount of energy used. In the simplest form this means turning off equipment
which is not needed. For instance looking at more efficient lighting control systems, timing
the heating and cooling systems for optimum operation, ensuring air conditioning does not
turn on at the same time as heating. This behavioural change is a vital first stage in reducing
demand.
Energy Efficiency
This relates to more energy efficient systems such as insulating buildings as far as
reasonably possible. Using “A” rated electrical appliances and additionally, it means looking
at passive design elements such as south facing windows and overhangs to capture solar
energy efficiently.
Renewable Energy
Having reduced the energy demand of a building as much as possible, then asses how the
remainder of power required is generated. This phase involves generating heat and
electricity from renewable generators. This includes, for example, photovoltaic panels and
wind turbines for electricity, solar thermal for water heating.
Low Carbon Energy
For the energy which cannot be generated through renewables, low carbon technologies
can be used. For example CHP/ District heating/ Heat Pumps etc.
Conventional Energy
With no other options left, the final part of a building’s energy demand will be achieved
through using conventional grid supplied options.
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Bearing the energy hierarchy in mind the reduction in the current use of energy and the
energy efficiency of buildings (both domestic and non-domestic) is a vital first step in
reducing the demand for heat and power.
The improvement in building energy efficiency and the focus on behavioural change, in
terms of the way we reduce the demand for heat and power, is already a key element of the
SEAP and significant improvements in these areas have been identified which will contribute
to the carbon reduction targets. The work in this area complements the energy masterplan
and the development of the Warm up North East project linked to the Green Deal/ECO
initiatives is a proactive way of taking forward the excellent work done in this area by the
city and its partner Warm Zone over the last few years. In order to hit the ambitious energy
efficiency targets set in the SEAP it is vital that this work continues.
5.2 Renewable Technologies
In terms of the established renewable technologies available the main emphasis will be
given to the installation of these market ready, incentivised technologies:
• Solar PV (Subject to FiT review)
• Small Scale Wind Turbines
• Air Source Heat Pumps (Subject to identification of a significant number of “off gas”
properties and careful study of potential & NB RHI payments not initially available)
• Domestic Scale Micro CHP (Combined Heat & Power – Incentive limited to 30K units
currently)
• Biomass Heating/Hot Water
• Solar Thermal Hot Water Generation
It is our belief that the only way that the required carbon reduction can be achieved is
through deployment of these technologies on the scale outlined within the SEAP whilst
being linked to the development of the low carbon heat network and the major opportunity
that could deliver (See 5.2 below). The issue is again one of finance and maximising the
availability of the financial incentives in order to make the return on investment attractive
for either the Council (with PV for instance) or private sector partners to provide capital.
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The deployment of these technologies must make financial sense as well as achieving a
significant carbon saving for the city. With this in mind projects should be subject to a test
relating to amount of carbon saved per pound of investment made, and thus meaning those
projects with the best financial return and carbon saving/£ should be given priority. This
means robust feasibility, financial modelling and business cases are vital.
The Council can show leadership in the city by deploying these technologies on their own
buildings this will make them more visible and act as a demonstration of potential of the
technology that could attract other public sector and commercial installations. This could be
driven by developing existing partnerships, public awareness campaigns and publicity etc.
5.2.1 Renewable Electricity Generation
2011 was the peak year for Feed in Tariff (FiT) revenue as next year the tariff will reduce
significantly in line with the review currently being undertaken by the government.
Although system costs are reducing rapidly it is still uncertain if the rates of return will be as
attractive, especially if the multi installation tariff is also introduced and the link to energy
efficiency is enforced. Having said this it is envisaged that roll out of PV could still be
financially viable on a cost neutral basis (once financing costs are taken into account)
because it has a number of other value added benefits that may still make it attractive such
as carbon reduction, reduction in fuel poverty, job creation/safeguarding and training
opportunities etc.
However with this in mind the council and YHN have delayed any further investment
decisions relating to further roll out of PV until the uncertainty surrounding the Feed in
Tariff is resolved.
NB in 2011 the council and YHN did manage to take advantage of the higher rate tariffs
and installed 102 systems totalling 430Kwp of PV.
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Current PV options still under consideration are:
300 Domestic PV Systems with Carillion Energy Services (Still under consideration)
Financial modelling of 1700 systems for council investment
Opportunities under “Warm Up North East” – Green Deal
There are a number of sites in the city suitable for small scale wind turbines to be installed
and these should be explored in more detail, see Narec Report “NCC Wind Resource Report
2010” for details attached as Appendix 5.
5.2.2 Renewable Heat Generation
Once again a mix of solutions is required but we need to deploy the technologies that
attract the best incentives from the outset to improve financial viability
The Renewable Heat Incentive (RHI) now has some clarity but the Government is linking
domestic scale renewable heat to the Green Deal in 2012. Payments for non-domestic
installations that were installed after the 15th
of July 2009 started to be able to receive RHI
payments on the 28th
of November 2011 and the first schemes nationally are starting to be
registered for the incentive payments. £15 million of the total fund has been allocated in
Renewable Heat Premium Payments for domestic users (Small grant towards purchasing a
system in return for some feedback) and £4 million was allocated to Social Housing
providers, Local Authorities to install domestic systems at the end of 2011 as part of a
competitive bidding process.
What is less clear is how the RHI will be implemented in terms of the domestic sector and
the tie in with Green Deal. The Green Deal is currently being consulted upon and it is too
early to say what the level of support from the RHI for domestic users will be.
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The council and YHN should begin to explore the opportunites for the installation of
renewable heat technologies on their own stock as a matter of urgency (Based upon what
has happened with the uncertainty over the Feed in Tariff’s). Identification of potential sites
and feasibility for technical and financial applicability should be undertaken.
Solutions funded by the council can be a good source of revenue (incentives and sale of
heat/power) and could provide a good source of supplementary revenue from investments
that also must have an attractive rate of return.
5.3 Low Carbon Energy Production - District Heating/Cooling
The development of a low carbon district heating and cooling network is the largest single
element identified within this energy masterplan and is the project that is likely to have the
greatest impact in delivering low carbon energy to the city. Based upon the work
undertaken for the energy masterplan the council should consider a political and financial
commitment to the promotion of a city wide district heating and cooling scheme.
5.3.1 Heat Network Vision and Potential
The heat network has the potential to provide low carbon affordable energy to large parts
of the city by 2020 and beyond. The development of a Newcastle Heat Network Zone has
been based upon an evidence base of studies and reports previously commissioned by the
council that has enabled the identification of the significant potential for the heat network
and the most likely route across the city. The route identified has the potential to eventually
link the existing schemes to the east and west of the city through the city centre to pick up
the key development sites identified in the Urban Core Area Action Plan (UCAAP) and also
the existing significant public sector and commercial heating and cooling loads that will
provide a commercial catalyst for the take up and deployment of district heating in the city.
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Planning policy is currently being aligned to this vision both in respect of Newcastle and
NewcastleGateshead
Existing Schemes:
Byker
Riverside Dene
Planned Schemes:
Scotswood
Civic Centre/Northumbria University
Key Development Sites (Which are sites within the Urban Core that form an important
element of delivering the vision for the Urban Core itself)
Science Central
East Pilgrim St
Stephenson Quarter
Other Development Sites
Forth Yards
As mentioned an extensive city wide evidence base to support the delivery of a district
heating network has been built up from a number of studies commissioned by the city,
NewcastleGateshead and 1NG over the last four years. These studies are:
1NG: Science Central Masterplan: Preliminary Energy Strategy: Feb 2011: Arup
1NG: Science Central Energy Strategy: Energy Strategy Report: Nov 2011: Mott MacDonald
NewcastleGateshead: Delivering Carbon Reductions Through Planning: July 2010: Entec
Newcastle City Council: Scotswood Regeneration: Energy Centre Study: June 2009: Arup
Newcastle City Council: Community Energy Feasibility Study: Western, Central and Eastern
Areas: May 2009: Arup
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Newcastle City Council: Scotswood: Energy Centre Feasibility Study – Initial Constraints: Jan
2009: Arup
Newcastle City Council: Community Energy Feasibility Study: Final Report: June 2008: Arup
Newcastle City Council: Scotswood Regeneration: Energy, Utility and Integrated
Procurement Strategy and Addendum: June 2008: Arup (Addendum Mar 2009)
Newcastle City Council: City Energy Capacity and Community Energy Opportunities: Final
Report: March 2007: Entec
Based upon this evidence and the policies contained in the Local Plan we have mapped out
the possible extents of the proposed heating and cooling network. (Please refer to map
“Zone of Planned District Energy 20/5/11” attached as Appendix 6) and this matches closely
the work done by Arup in 2008 (Please Refer to” Newcastle Heat Network Plan” attached as
Appendix 7)
The development of a citywide heat network is now a real possibility with the existing,
planned and potential schemes coming together as one large network at some point in the
future. The appearance of a heat network will then provide a viable alternative to existing
grid based energy in the city and produce revenue for a possible ESCo to be commercially
developed. The RHI and National Heat Strategy could also provide a timely boost to the
financial viability of such schemes if renewable heat is deployed as part of the network
infrastructure. Developing schemes in a phased way based on a number of smaller schemes
in the short to medium term is the way forward initially but ultimately the ambition must be
to link these schemes in a wider city wide heat network.
As well as understanding the potential to supply heating and cooling in the city we also have
the opportunity to take advantage of the geothermal potential being explored on the
Science Central site. If this proves to be a financially viable and a cost effective source of
usable heat then this could provide a significant low carbon heat contribution to the
network. The heat required by the network could of course be provided in a number of
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other ways which could be from a mixture of low carbon and renewable sources. The main
heat generation technologies that are most likely to be applicable to the heat network are:
Gas CHP
Renewable CHP (Biomethane/Biofuel)
Biomass
Biomass Gasification
Biomethane production from Anaerobic Digestion
Waste heat from industry
Other forms of Gasification
The heat network could be based on one or more of these technologies dependant on how
the network is developed and the city’s attitude to deploying some of these methods and
technologies.
5.3.2 Establishing Market Interest
Having established the vision and potential of the heat network it is key to understand
market interest in the project and with this in mind, Narec (through the Energy
Masterplanner Role) have conducted an independent soft market test to gauge market
interest in the Newcastle heat network vision. This is both from a delivery vehicle point of
view with potential project partners and with potential delivery partners working in the
energy services sector.
The aim of the work was to gauge interest and obtain market intelligence whilst trying to
understand the level of detail developers will require as the project develops.
The main aims of the work were to:
• Gauge market interest in the scheme based upon the potential overall scale
• Understand potential for market investment
• Test the approach the council have adopted to progress the scheme
• To identify the requirement for further information to subsequently enable the
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project to provide;
Technical Solution/Specification
Financial Model
Business Model
Delivery model
The results of this work have been positive with a good deal of market interest was
identified. (See Appendix 8 “Newcastle City Council “Newcastle Heat Network” – Soft
Market Testing December 2011” for further details)
The main outcomes of this work are designed to lead onto:
1.) Development of a prospectus for developers based on current knowledge
2.) Establish developer interest based on informal discussions.
3.) Start to formulate a citywide delivery vehicle and establish the council’s role,
governance etc.
4.) Establish which schemes are the most technically & financially viable.
5.) Start to establish procurement route for delivery based around type of delivery
vehicle chosen.
A prospectus is currently being developed that will help the council formulate a
procurement strategy that will be needed to get this ambitious project started. It is
currently felt that any procurement that is undertaken should be aimed at delivering a
partnership which would lead to the establishment of an ESCo that can develop the network
commercially, in line with the vision, over a long period of time. There is a significant
financial commitment required to take the scheme forward from the drawing board “vision”
to the procurement of an energy service partner and the development of an ESCo to
develop the heat network. This would involve things such as procurement costs, business
case development, technical and financial viability etc. With this in mind the city is exploring
the possibility of securing European fundingg that is designed to assist council’s in the
g IEE call 2012/13 Mobilising Local Energy Investments (MLEI) – This is the same call that the council used to
successfully bid for funding for the set up costs for Warm up North East in 2011.
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mobilisation of energy investments such as the development of a low carbon district heating
scheme and the development of an ESCo to run it. The call bids have to be submitted by 8th
May 2012 with the funding being allocated in 2013. The funding is reliant on actual
investments happening so with this in mind, the council are investigating the call in more
detail. If this funding proves to be the most appropriate way forward then some gap funding
in 2012 may be required to start the process in the initial stages.
5.3.3 ESCo
The heat network described above has great potential and all of the work done previously
has identified that the city has a considerable heating and cooling load that could be
supplied by a low carbon/renewable heating and cooling network. It is also apparent that
this presents an interesting investment opportunity for the energy services companies. In
our report “Market overview of energy sources and suppliers as they impact on
Newcastle, and sustainable energy availability & associated cost implications Oct 2010” at
section 6 (Page 41) which is attached as Appendix 2 we cover ESCo models in more detail
look at the advantages and disadvantages associated with ESCO’s. We also propose a
suggested delivery model.
The development of a public/private ESCo has proven to be an efficient method of
delivering lengthy, large, complex and capital intensive projects such as this. This model
provides the public sector part ownership of the ESCo (up to 19%) that provides private
sector flexibility whilst still giving the council a strong influence over decision making (for
instance a requirement to target fuel poor and not just large and attractive commercial or
public sector heat loads) whilst allowing the network to be designed, built, operated and
maintained by a specialist private sector partner. Through its own part share in the ESCo the
council can invest and return an income accordingly. This de-risks the investment for the
council significantly whilst still allowing governance and an investment route. This form of
ESCo does not initially require many directly employed NCC staff to operate and a
governance structure can easily be formulated in which existing functions within the council
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could cover, however having said that a full time NCC ESCO project manager may be
required from an early stage.
Depending on the council’s attitude to risk and borrowing over time it is of course possible
to develop a wholly owned Newcastle City Council ESCo to provide the capital investment
required to build out the network over time (As Gateshead are currently planning to do on a
smaller town centre only scheme). The network is likely to develop on a scheme by scheme
basis over the next twenty to thirty years and public sector heat loads usually form the
backbone of a network so it could be a good investment opportunity to start to develop our
own schemes over time and look to link the schemes at a later date. For each scheme the
council ESCo company would have to procure a design and build partner each time and we
would need to let out operation and maintenance contracts as well unless the ESCo itself is
developed with internal capacity and capability to do this type of work (City Build currently
has expertise in this area through the operation of the Byker heat scheme). An NCC ESCo
would also need to develop a sales function that could go out into the city market and sell
heat to other commercial, retail heat loads etc. The NCC ESCo is likely to require a number
of staff to be recruited to operate and develop the project.
A Newcastle heat network delivered through an ESCo (whether fully NCC funded or not)
should now be seen as a realistic target as it would act as a catalyst to attract investment in
larger low carbon energy schemes. Work should start to engage with potential ESCo
providers to establish interest from the sector and the soft market test has indicated
significant interest at a high level. The city (and the wider NewcastleGateshead partnership)
has built momentum towards a Newcastle Network through the existing and planned
schemes and the previous work it has commissioned. Now is the time to move the
Newcastle Network forward. If the city is serious there is a need to procure and then set up
a delivery vehicle that is council led (Like Leicester District Energy Company for instance)
that could also potentially link to the Byker scheme as well as well as developing and
integrating the Newcastle Network. The “Newcastle District Energy Company” could have
some or all of the following aims:
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� Promote a city wide energy scheme through one or more large scale energy centres
and linking sites
� Develop the heat network business and develop heat sales to expand the network
over a long period of time
� Facilitate provision of individual energy centres for specific developments linked to
UCAAP key sites & work with developers
� Deliver investment to open up the network. (ARUP indicated that £20M would be
needed over several years with £5M upfront and a further £7M for linking smaller
schemes together into a larger network. (NB these figures were estimated over two
years ago and Riverside Dene and Scotswood are in place or about to start)
• Work with the ESCo on technical feasibility, financial appraisal and business plan for
the Network
• Develop a range of loan funding models if required with part private sector/public
sector or via the EU Framework 7, Regional Growth Fund R3, EIB or Green
Investment Bank routes. These avenues need to be investigated as a potential source
of funding, especially for larger city wide schemes.
A number of other cities are in the process of establishing strategic partnerships with energy
service companies in order to establish delivery of similar schemes as to this.
5.4 Regeneration
Regeneration and redevelopment in the city must act as a major catalyst for the provision of
low carbon energy solutions and the use of embedded generation as it will be major
contributor to achieving the SEAP targets and relates directly to the development of a low
carbon district heating scheme. The energy masterplan links to the planning policies of the
Local Plan and will focus on provision of low carbon energy strategies for each development
site. This way the provision of low carbon district heating can be driven by development and
take advantage of reduced installation cost at the outset and provide potential for schemes
to be linked in the future to form a Newcastle Network.
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Key Sites (Sites within the Urban Core which are an important element of delivering the
vision for the Urban Core)
East Pilgrim Street
The East Pilgrim Street area represents one of the most strategically important City Centre
regeneration areas in the north of England and its development will provide a new retail-led
mixed use quarter. Newcastle City Council adopted Interim Planning Guidance (IPG) for the
area in 2009. Its purpose is to provide a clear strategic guidance on the potential of this key
part of the City Centre and to ensure that development is brought forward in a timely
comprehensive and coordinated manner. It is expected that the first phase of development
will be complete by 2018/19.
Science Central
In 2005 Newcastle was named as one of six science cities in the UK. Science cities are
regional development projects, based upon University, industry, and government
collaborations, that creatively synthesise local and natural resources to achieve science
based economic growth. The Science City initiative represents a major commercial
opportunity that will allow us to further our work in the fields of stem cell research, ageing
sciences, energy, environment and engineering technology. Science Central is the project
name for the development of the former brewery site adjacent to St James' Park. The
development of Science Central will provide a new science and research led mixed use
quarter where we can grow our knowledge industry sector. The site has a vision to become
an exemplar in terms of zero carbon buildings and sustainability the current energy strategy
includes the use of geothermal energy and inter-seasonal ground storage energy provision
for heating and cooling. This has not been tried before anywhere in the UK. The site has
outline approval for mixed use development and a full planning application for the first
phase is expected in 2012. The first phase will include the Gateway Building which is
expected to be completed in 2014.
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Stephenson Quarter
The Stephenson Quarter area has been regarded as a major development opportunity and
an important landmark site for many years. It is a highly accessible site next to the regional
transport hub with south facing views over the Tyne and is an ideal location for office-led
mixed use. The site has full planning approval for a mixed use development and the first
phase of works is due to start 2012.
Significant development areas
Forth Yards
The Forth Yards is a significant development area that is expected to come forward in the
longer term. The area includes various former industrial sites and the Metro Arena. This
major gateway into Newcastle and has significant redevelopment potential. The area is
close to main routes into the Urban Core and is only 10 minutes’ walk from Central Station.
It consists mainly of former industrial sites many of which have been progressively vacated
in recent years. The Forth Yards area has the potential to provide a mixed use area and the
principal uses which are considered to be acceptable are leisure, residential and commercial
uses. It is expected that development in this area will be in the longer term.
Recent funding announcements have led to the possibility of some of these key sites being
developed much sooner than was thought only six months ago. This is being driven through
the use of successful Regional Growth Fund bids and the establishment of the Accelerated
Development Zones (ADZ) linked to Tax Incremental Financing (TIF). This presents the city
with an opportunity to influence the development of these sites with a low carbon emphasis
from the outset. It is important for the energy masterplan and to achieve the targets within
the SEAP that we work to grasp this opportunity to influence these developments from the
outset.
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6. Strategic Direction – The Next Steps
The work carried out in developing the Sustainable Energy Action Plan and the energy
masterplanner role within the Council are vital to the development of a deliverable energy
masterplan for the city over the next 20 years. With the increasing pressure of carbon
reduction targets and the passage of time it is vital the city concentrates on those
interventions that can be more easily delivered attract the most financial incentives and
offer an investable opportunity to bring in capital to fund the required projects. None of this
can be achieved without development of key delivery partnerships within the city and by
engaging the key stakeholders and major users of energy. We know what we have to achieve
and we have a good idea of how it can be achieved by utilising the SEAP as a framework for
delivery of projects. The Energy Masterplan sets out those projects in context and will focus
attention on those projects that can practically be delivered, financed and maximise any
revenue potential for the council or investors.
It is vital that we capitalise on the availability of financial incentives offered by the
Government and industry to stimulate the installation of low carbon energy schemes.
With this in mind we intend to concentrate on improving the energy efficiency of buildings,
the roll out of market ready renewable energy & renewable heat generating technologies
that can attract the Feed in Tariff and Renewable Heat incentives and the development of a
major citywide heating and cooling network that will be delivered via an ESCo partner.
With regard to this and in light of the current funding constraints the council must decide on
a strategy and approach to prudential borrowing versus private investment (or combinations
of both) for low carbon energy schemes that can produce a good financial return. We have
set out below a reference table of next steps and a possible roll out plan for Renewable and
Low Carbon Energy for the period 2010 to 2030.
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Energy Masterplan: Next Steps Table 1: Newcastle City Council, Energy Masterplan – Next Steps
Intervention Target Sectors Next Steps Scale Benefits Financial Incentives
Reducing Energy Demand
& Improving Building
Energy Efficiency
NCC Buildings
Public Sector Buildings
Domestic Properties
(Social and Private)
Non Domestic Properties
(Eg. Retail, Commercial,
Industrial)
Maximise the remaining CERT &
CESP funding for domestic energy
efficiency via WarmZone prior to
Green Deal/Energy Company
Obligation (ECO)
Continue to develop Green
Deal/ECO offering to replace the
above with partners (Warm up
North East)
Develop market awareness as a
precursor to scheme delivery as
initial take up is vital if the scheme
is to be delivered at the required
scale
Citywide dependent
upon how well current
WarmZone scheme uses
current funding and on
the development and
take up of Warm up
North East.
SEAP Calls for domestic
stock to be improved at
significant scale 10K Solid
wall installations for
instance
Reduced energy
consumption across the
city.
Reduction in Carbon
Emissions.
Reduction in fuel poverty
and associated
improvements in health
and wellbeing.
Reduced energy demand
for proposed
decentralised energy
production.
NCC demonstrating
energy efficiency
leadership
Develop supply chain
opportunities, economic
development, job
creation and
safeguarding
Green Deal (Warm up
North East).
ECO.
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Large Scale Deployment
of Market Ready
Renewable Energy
Sources
NCC Buildings
Public Sector Buildings
Domestic Properties
(Social and Private)
Non Domestic Properties
(Eg. Retail, Commercial,
Industrial)
Await result of Feed in Tariff
consultation and financially re-
model large scale deployment of
PV systems when new tariffs are
confirmed
Work with YHN to roll out PV at
scale
Further feasibility work to identify
opportunities for smaller scale
wind turbines
Commence work to identify
opportunities to install renewable
heat technologies in NCC buildings
This should be linked to a citywide
awareness campaign and the
potential for NCC to develop the
market for itself and the wider
market
Citywide on NCC
buildings and Social
Housing 3000 PV systems
Small number of “smaller
scale” wind turbines on
suitable sites
Domestic Biomass
Boilers (several hundred)
Biomass Boilers non
Domestic upwards of
1MWth
Solar Thermal Hot Water
systems citywide 5000
Heat Pumps 500
Domestic Micro CHP
citywide (Several
hundred)
Substantial increase
citywide renewable
energy production
Reduce grid energy
reliance therefore
improving energy
security
Reduction in carbon
emissions
Reduction in fuel poverty
especially in Social
Housing
NCC demonstrating
leadership in deployment
of renewable energy
sources leading to
increased public sector,
private sector and
domestic uptake
Develop supply chain
opportunities, economic
development, job
creation and
safeguarding
Feed in Tariff
Renewable Heat
Incentive
Sale of Electricity
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Development of a Low
Carbon/Renewable
Heating and Cooling
Network
NCC Buildings
Public Sector Buildings
Retail & Commercial
Buildings
Domestic Properties
Develop a market prospectus for
the scheme
Develop approach to procuring
ESCo and level of NCC involvement
(Oversight/Regulation/Governance
or Financial Stakeholder as well?)
Secure funding for the
procurement of an ESCo to partner
with NCC to develop the scheme
Ensure Civic Centre/Northumbria
University Scheme proceeds to
establish first city centre
heating/cooling network (also
achieve financial and Carbon
Savings benefits for NCC)
Explore the potential of
geothermal energy as a heat
source for the network as well as
other opportunites to integrate a
range of different renewable and
low carbon sources of heat into
the scheme (Biomass, Gasification
etc)
Work with key developers to
establish heat network on new
development schemes (Science
Potential for a Citywide
Scheme linking up
existing and proposed
schemes on the east and
west of the city through
into the Urban Core. The
Urban core contains a
number of significant
public/private sector
heat loads that can be
exploited by the scheme.
Initial indications
estimate around
50MWth of untapped
potential
Substantial increase
citywide production and
use of decentralised low
carbon and renewable
energy for building
heating and cooling
Reduce grid energy
reliance therefore
improving energy
security
Reduction in carbon
emissions and reduction
in grid intensity
Reduction in fuel poverty
and provision of
affordable energy and a
potential to reduce fuel
poverty in vulnerable
household’s
NCC demonstrating
leadership in deployment
of low carbon and
renewable energy
sources leading to
increased public sector,
private sector and
domestic uptake
Renewable Obligations
Certificates
Feed in Tariff
Renewable Heat
Incentive
Low Carbon Support
Mechanism (Proposed)
Electricity Sales to grid
and possible “Private
Wire” connections
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Central for example) and to
provide affordable heat to social
and private housing in the future
Develop supply chain
opportunities, economic
development, job
creation and
safeguarding
Regeneration and
Development
All new Development &
Regeneration Schemes
(Public Sector, Industrial,
Retail, Commercial,
Housing etc)
Ensure a joined up approach
across the Council and that all
policies are aligned in support of
the Energy Masterplan and vice
versa
Work to ensure all key
development sites are network
ready or have a decentralised
energy option in place
Citywide based upon
developments coming
forward
Developers able to make
informed decisions with
NCC on how their
developments can take
advantage availability of
the low carbon heat
network or to be serious
about including other
decentralised energy
solutions and the
deployment of
renewable energy
sources.
Planning and
Development Policy
S106, Community
infrastructure Fund?
Knowledge and use of
applicable technology
incentives
Newcastle City Council
Energy Masterplan
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Newcastle City Council
Energy Masterplan
May 2012
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Appendices
Appendix 1 - Sustainable Energy Action Plan (SEAP)
INTERVENTION 2005-2010 2005-2020
Combined Heat and Power Biomass (CHP) 0 MWe 0 MWe
CHP Large Gas 0 MWe 0 MWe
CHP Buildings Gas 0 MWe 15 MWe
Heat from Power Station 0 MWth 0 MWth
Photo-Voltaic Domestic 50 homes 3,000 homes
PV Non Domestic 0 MWe 0 MWe
Wind Large 0 MWe 0 MWe
Wind Medium 0 MWe 3 MWe
Wind Domestic 0 homes 100 homes
Solar Thermal Domestic 100 homes 5,000 homes
Biomass Boilers Domestic 50 homes 500 homes
Biomass Boilers Non Domestic 0.1 MWth 1 MWth
Ground Source Heat Pump Domestic 10 homes 500 homes
Cavity Wall Insulation Domestic 17,000 homes 27,000 homes
Loft Insulation Domestic 26,000 homes 41,000 homes
Double Glazing Domestic 10,000 homes 20,000 homes
Solid Wall Insulation Domestic 20 homes 10,000 homes
Energy Efficient Lighting Commercial 0 (000’s m2) 0 (000’s m2)
Double Glazing Commercial 0 (000’s m2) 0 (000’s m2)
Street Lighting Efficient Lamps 0 lamps 0 lamps
Domestic gas use reduction by behavioural change 5% 10%
Domestic electricity use reduction by behavioural change 0% 10%
Non-domestic gas use reduction by behavioural change 5% 20%
Non-domestic electricity use reduction by behavioural change 0% 10%
Transport fuel use reduction by behavioural change 1% 4%
Road transport efficiency improvements 2% 12%
Replace road transport fuels with biofuels 3,000,000 litres 13,079,000 litres
Replace road transport fuels with electricity 0 (000’s litres) 4,844,000 litres
Greening Grid 0% 20%
Table 2: Newcastle City Council Sustainable Energy Action Plan (SEAP)
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Appendix 2 - Market overview of energy sources and
suppliers as they impact on Newcastle, and
sustainable energy availability & associated cost
implications Oct 2010
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Appendix 3 - Newcastle Civic Centre & Northumbria
University Tri Gen Report Oct 2010
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Appendix 4 - Financial drivers for low carbon energy
schemes
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Appendix 5 - NCC Wind Resource Report 2010
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Appendix 6 - Zone of Planned District Energy 20/5/11
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Appendix 7 - Arup proposed Newcastle Heat Network
Plan
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Appendix 8 - Newcastle City Council “Newcastle Heat
Network” – Soft Market Testing December 2011
Eddie Ferguson House, Ridley Street, Blyth, Northumberland, NE24 3AG
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