Sustainable Energy in Cities

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

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

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

4. Electricity production Coal Electricity 35% Heat 65%

5. Building energy supply

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

7. District heating networks: Aberdeen

8. District heating networks: Copenhagen

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

10. Combined Heat and Power (CHP)

12. Energy system integration • c

13. Operational flexibility and balancing

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

15. From King, M., Shaw, R., 2010. Community energy: planning, development and delivery.http://www.chpa.co.uk/media/28c4e605/Comm_Energy_PlanDevDel.pdf

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

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

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

19. Source: AEA Technology

20. Financial feasibility Courtesy Regen SW via King, M., Shaw, R., 2010. Community energy: planning, development and delivery.http://www.chpa.co.uk/media/28c4e605/Comm_Energy_PlanDevDel.pdf

21. Financial viability

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

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

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

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

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

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

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

29. International comparison

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

31. Heat sources in Denmark

32. Renewables in Denmark

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

34. Swedish DH sources Ericson, K., 2009. Introduction and development of the Swedish district heating systemshttp://www.res-h-policy.eu/downloads/Swedish_district_heating_case-study_(D5)_final.pdf

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

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

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

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

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

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