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Capturing the value of community scale generation

The Royal Free Hospital in London, where a new CHP energy centre has been installed

Outsourcing and energy services company MITIE is installing CHP and trigeneration schemes in commercial applications in the UK that could bring decentralized energy closer to the heart of the UK’s energy mix, reports MITIE’s Mike Tivey.

The decentralized energy market is already an established and important part of the energy mix in Europe and the US. But as uncertainty grows over energy prices and security, forward-thinking private and public sector organisations are recognising more than ever the economic and social benefits decentralized energy can bring.

Our vision is to share the benefits of new/reconditioned energy assets so that surplus electricity and heat can be distributed to social housing or municipal buildings. This not only helps enhance the economic value of the development, but can also play a vital role in tackling the growing problem of fuel poverty.

In the longer term, this approach also provides benefits of energy security and resilience required to meet the challenge of a national grid under increasing pressure. This is a problem that can only escalate as more people move into our towns and cities.

While still a growing market, decentralized energy is by no means a new phenomenon. Indeed, the world’s very first power plant, in New York City in 1882, provided both electricity and heat to neighbouring buildings. Today, decentralized energy has an established base around the world, although the share of the market in the UK, at less than 10% of generation capacity, lags that in Europe and North America.

The business model behind decentralized energy has a proven track record. Energy services companies (ESCOs), or energy performance contracts, are routinely deployed to develop, fund and operate new or reconditioned energy assets. This approach relieves clients of any upfront costs while bringing them long-term economic benefits.

Contracts that are availability- and performance-based transfer the risks of owning and operating energy infrastructure to the provider, so users can redirect capital resources towards their core business. Users pay only for the output, on terms that can provide specific guarantees, such as heating or cooling parameters, or uptime for mission-critical operations. In this way, organisations can take control of their energy provision without financial risk.

GENERATING COMMUNITY BENEFITS

In addition to environmental and economic advantages, decentralized energy can offer important social benefits when the energy generation is shared. Locally generated energy could play an important role in helping to alleviate the growing problem of fuel poverty. In England, more than four million households are thought to be living in fuel poverty – a figure that has more than trebled since 2003.

Reducing our dependence on the traditional grid approach to energy provision is one way we could provide the fuel-poor with cheaper and more predictable energy prices. This not only has a direct impact on a household’s available disposable income, but also brings wider health and economic benefits.

Also, as utilities have a significant amount of bad debt related to fuel-poor homes, and as this cost will no doubt be recovered across their product lines, alleviating fuel poverty could help reduce energy bills generally.

Decentralized energy can play a key role. It is low-carbon, energy efficient and cost-effective, as you only use what you need locally and export any excess. Decentralized energy’s economic and social benefits are apparent in a collaboration between MITIE, a hospital and a local authority in London.

MITIE has recently revamped a combined heat and power plant at the Royal Free Hospital in London. The 4.6 MW energy centre uses an efficient gas turbine that produces 36 GWh of electricity and 36 GWh of heat per year. Heat from the plant is converted into high-grade steam and introduced into the Royal Free’s heating, hot water and chilled water system.

The decentralized energy strategy will save the hospital £13.7 million ($21 million) and reduce carbon emissions by 18%, or approximately 93,000 tonnes over 15 years. The project has been fully funded by the ESCO that evaluates, designs, constructs and operates the asset.

The value of sharing the benefits of decentralized energy have been maximised here by supplying surplus heat to a third party – Camden Council in London. In a three-way partnership, the surplus heat is going to be piped across to nearby housing estates in Camden, making hot water and heat more affordable to up to 1500 council tenants.

Councillor Sean Birch, cabinet member for sustainability and transport at Camden Council, said: ‘This is an innovative, win-win scheme which not only saves costs for those who need it most, but allows us to be more sustainable at the same time. I’m delighted to see the public and private sectors work together in such an effective way to help reduce our carbon emissions and benefit our community.’

Community energy generation can also provide further economic benefits through the creation of jobs and new commercial opportunities. MITIE is working with partners in Plymouth on the South coast on a new waste-to-energy plant that will provide 50 local jobs for contractors in the construction phase and a further 23 permanent jobs once the plant is up and running this coming summer.

COMMUNITY-SCALE RETAILING

In the UK, both the public and private sectors are increasingly taking advantage of the opportunities that decentralized energy brings. Within the retail sector, supermarkets are making significant in-roads to reducing their energy consumption, creating carbon and cost savings. As major energy users, occupying large buildings with a high demand for heating, chilling and lighting, often 24 hours a day, decentralized energy can offer considerable benefits to this sector.

 

A Stirling engine being used in Waitrose’s biomass trigeneration plant on the Isle of Wight

MITIE is working with Waitrose, a major UK supermarket chain, to help the retailer reduce carbon emissions by 15% by 2020/21 through the creation of on-site energy centres. The technology being deployed is biomass-fired trigeneration, which supplies stores and distribution centres with heating, chilled water and electricity.

The first of these off-grid trigeneration plants are shortly due to open at Waitrose’s stores at East Cowes on the Isle of Wight, and in Bracknell in Southeast England.

The trigeneration energy centres, which MITIE has developed and will operate, will reduce a 2000 m2 store’s typical consumption of grid electricity by 69% and gas by 84%. This will save Waitrose up to £1 million over the contract term and reduce carbon emissions by 1200 tonnes per annum, making a significant contribution to its sustainability commitments.

At the core of the energy centre is advanced technology created by MITIE that is fired by woodchip biomass fuel from sustainable local woodlands, providing valuable extra business to producers in the Waitrose supply chain.

The plants, which can provide 140 kW of electricity, 300 kW of cooling and 500 kW of heat, will qualify for support for the electricity generated under the UK government’s feed-in tariff, and will also receive support under the forthcoming Renewable Heat Incentive (RHI).

Under an energy services contract, Waitrose will purchase its store energy requirements from MITIE. The upfront costs have been funded by MITIE, so Waitrose has not had to draw down from its capital budget. In addition, the energy centre has been designed with extra capacity, giving the potential to supply surplus energy to up to 170 local homes.

The plant, together with other improvements such as HFC-free refrigeration, will make the new Waitrose store carbon-negative for its direct emissions, excluding transport.

The approach is now being rolled out to other Waitrose stores in the UK. It can also provide a model for the whole retail supply chain, from farming to factories, to enhance sustainability, and improve economic returns.

A RETURN TO THE LOCAL ENERGY ECONOMY?

While some sectors are making advances in their use of locally generated energy, the UK market still offers huge potential for growth. Across Europe, many funding initiatives have been established to encourage carbon reduction and economic growth. At a UK level, recent changes in government incentives risk creating a degree of instability for the decentralized energy sector. Recently we have seen a cut in feed-in tariffs for the solar PV industry and delays in the launch of the Renewable Heat Incentive.

In our experience, energy assets’ efficiency is the primary driver for clients but stability fosters a foundation for growth, as in any sector. Therefore if the decentralized energy market as a whole is to gain traction and fulfil its true potential, consistency in government support instruments is an important factor.

Decentralized energy clearly has the fundamentals to be at the heart of our energy mix. Although many communities are making their own progress towards local energy sustainability and resilience, the participation of larger organizations will accelerate the process, by creating a critical mass of demand that enables investment in decentralized infrastructure. Those organizations that contribute most to the solutions, by developing schemes that can be shared with local communities for mutual benefit, will find themselves best placed to thrive.

Mike Tivey is the Managing Director of MITIE Asset Management, UK.

www.mitie.com

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