UK Budget response from Andrew Eastwell, BSRIA Chief Executive

Andrew Eastwell, BSRIA CEO

Andrew Eastwell, BSRIA CEO

In a budget that is so close to an election there was never going to be pain inflicted that would upset the electorate and so measures required to compel anyone to spend money on energy saving was not going to feature in the Chancellor’s speech.   On the contrary, with Labour repeating their pledge to freeze energy prices the likelihood was that taxes on energy would be reduced – and with it the inevitable consequence that payback times on energy saving measures would become longer.

This is indeed what happened where the Chancellor quoted a figure for reduction of national energy costs of £7bn through a £1bn “special protection” aimed mainly at manufacturers with high energy intensity operations, steel mills, paper producers and chemical manufacturers. This package is intended to “protect… from the rising costs of the Renewable Obligation and Feed-in-Tariffs”.

A freezing of the Carbon Price Floor does also have a small benefit to householders – estimated at £15 per year.

One surprise however was a concession given to CHP which now has an exemption from the Carbon Price Floor for electricity generated.  It is aimed mainly at manufacturers using this technology but presumably will benefit other district schemes as well.

The Chancellor indicated that there would not be a reduction in renewable energy investment but since so much of that is driven by private investor money it remains to be seen how they will react to the plain intent to begin to offset the differential between UK energy prices and those in the USA.  Mr Osborne noted industrial energy costs were half the price in the USA compared to UK.

Elsewhere the statements regarding the efforts to increase house building were largely a restatement of previous announcements such as the proposed new garden city at Ebbsfleet and additional housing in Barking and Brent Cross.  What was intriguing was a proposal to give individuals a new “Right to Build” – backed with £150m of finance. The details of that will be interesting indeed as previous ministers with construction responsibilities have been keen to increase the volume of self-build homes.

Overall the budget did have a feel of being “Northern friendly” with reference to earlier consideration of HS2 construction beyond  its current plan, extension of enterprise zone tax breaks for a further three years and £270m to guarantee funding for the Mersey Gateway bridge.

Certainly the construction sector will welcome efforts to move the centre of effort further out from the London basin so that resources locked up in people, land and facilities can be fully exploited without the additional costs of working in the hothouse of the South but a budget designed for green development?  I don’t think so, that will have to wait until unpalatable policies can be applied with four years to go before a vote!

District heating is on the move

Last November at the BSRIA Briefing, I shared my thoughts about how CHP and Energy Supply Contracting models can possibly contribute to building a low carbon community. CHP is a low carbon technology but is only suitable for a larger scale site with a good base load to have better efficiency. ESCOs using the Energy Supply Contracting model can avoid a client’s upfront cost on implementation. However, no matter how good the solution and technology is, capital is always the barrier. Recently, I came across two pieces of news that I would like to share with you. It looks to me things are now moving.

First, the Scottish government announced in March a new £2.5 million District Heating Loan Fund. Registered social authorities, SMEs and ESCOs can apply for funding. The fund will offer loans of up to £400,000 to support low carbon and renewable district heating in Scotland.

Second, Leicester City Council is going to extend the current district heating network across the City of Leicester. The Council signed a 25-year contract with an ESCO to maintain and operate the plant. The ESCO will be responsible for part of the capital investment and there is additional funding from the Community Energy Saving Programme (CESP). It is predicted that the project will help the Council to reduce at least 10% of their carbon footprint.

It seems funding is coming and district heating is on the move. Are you aware of this move?

As an aside I noticed National Grid runs a program called Short Term Operating Reserve (STOR). Under this scheme, National Grid buys electricity power from privately owned generating facilities. The need for STOR is because at certain times of the day, the National Grid needs reserve power in the form of either generation or demand reduction to be able to deal with actual demand being greater than forecasted demand.

The question is, how will STOR influence large scale CHP in the future?…

Making CHP ‘do-able’

Front view of a CHP unit

The Government’s set a target for the UK to generate 15.5 GWe from combined heat and power (CHP) by 2020. Today, only 5.5 GWe is generated from CHP. So, how do we deal with this target shortfall in CHP?

The planning department has, in recent years, relaxed their policy on approving CHP plant projects. On the other hand, they try to insist on new building design incorporating CHP.  Of course, nobody likes to be coerced like this. But what is more important is that arguably this approach is not effective. For example, design engineers sometimes find it difficult to justify using CHP instead of the traditional boiler. It is seen to be too costly to build the CHP where the return on carbon reduction will be so little.

There is nothing inherently wrong with CHP, but rather in how we apply it. This large kit, even with better efficiency, is not suitable for a building-by-building application. We need to think at a community scale. It works perfectly well in district heating, or even a small community with several buildings. The key is to have more buildings where the load profile requires a constant energy demand.

CHP is more costly than traditional boilers. When it comes in a larger scale, the capital investment will probably be rejected by your finance director. But, does that really have to be the end of the story?

A happy ending with Energy Supply Contracting?

Perhaps, if you haven’t already done so, you should consider Energy Supply Contracting (which is also called Contract Energy Management in the UK). The service providers (ESCOs) provide low carbon energy to the clients, and the advantage of this business model is that it can allow the end user to enjoy low carbon energy without any upfront cost.

More thoughts on this particular model to follow – but what do you think? Can you tell me about any good or bad experiences with this?

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