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

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

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

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

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

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

Commercial modelling Phase 1new build + cluster of existing public buildings IRR = 10.8% Full schemeall new build + 25% existing over 1,000 m 2 IRR = 18%

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

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