Agenda Item No
The Vale of Glamorgan Council
Cabinet Meeting: 26 January, 2015
Report of the Leader
Energy Commission Re-investment Scheme
Purpose of the Report
1. To obtain approval from Cabinet to establish an Energy Fund for investment in energy and water efficiency projects in Council buildings.
1. That the Managing Director be granted delegated authority in consultation with the Leader to develop the detailed criteria and conditions for use of the Energy Fund in order to improve the energy and water efficiency of Council buildings.
2. That the report be forwarded to Corporate Resources Scrutiny Committee for information and that further details of the Fund and its use be included in the Sustainable Development progress reports presented to Corporate Resources Scrutiny Committee twice a year.
Reasons for the Recommendations
1&2. To enable the Council to improve the energy and water efficiency of Council buildings through the use of an Energy Fund and to facilitate monitoring of the Fund and its use.
2. The Council is obligated to participate in the Carbon Reduction Commitment (CRC) scheme. This scheme requires the Council to annually report on the energy consumption and associated carbon dioxide emissions within its non-domestic buildings and to pay for each year an associated amount. In 2013 - 14 the amount paid was £126K whereas in 2014 - 15 the amount will be around £240k as street lighting is included in Phase 2 of the CRC.
3. The Vale of Glamorgan Council has a carbon management strategy and implementation programme which is overseen by the Carbon Management Group which reports through the Operational Manager (Property) to the Sustainable Development Working Group. In addition the Council, with Local Service Board partners, has agreed to collectively reduce emissions from its buildings in the Vale by 3% per annum. This is in line with Welsh Government national targets for a 3% reduction in emissions per annum.
4. The Council satisfied the mandatory qualifying criteria for the CRC scheme and submitted its first CRC report in July 2011, covering the 2010-11 financial year. The scheme encouraged participants to take up voluntary Automatic Meter Reading (AMR) facilities in order to improve the accuracy of billing and to benefit via the 'early action metric' within the CRC scheme. The Council proceeded with the installation of AMR which has helped with the provision of more robust data concerning energy use. The cost of AMR for gas meters was (and still is) 50p per day whilst for electricity meters the cost varies depending on the profile class of the meter but the average cost is approximately £70 per annum.
5. To cover the cost of the AMR a small commission payment was added into the tariff of gas and non half hourly electricity contracts. Commission charges were not applied to street lighting or larger (mandatory half hourly) electricity supplies. An additional tariff of 0.2 p/kWh was applied to gas costs (typical tariff is currently 2.767 p/kWh) and 0.5 p/kWh (typical tariff is currently 12 p/kWh) to the cost of electricity for the supplies that had the voluntary AMR. The commission tariff was designed to provide a surplus, in order that any new supplies requiring AMR could be accommodated. The surplus has built up over three years and when added to income from other sources currently stands at £266,000 and is now sufficient to fund some investment in energy efficient technologies.
Relevant Issues and Options
6. Originally the CRC scheme was designed to reward the uptake of the AMR 'early action metric' by positioning an organisation higher in a league table of participants. Under the original scheme organisations at the top of the league table may have gained financial benefit from CRC as the overall scheme was designed to be 'cost neutral'. The Government review in October 2011 changed the scheme so that it was no longer 'cost' neutral, and became a source of Government revenue. The league table position was then only of reputational interest. However, the presence of AMR has been a great asset in the preparation of CRC reports.
7. It is only since AMR has been installed that enough quality data has been collected to produce reasonably accurate annual energy use figures. This has helped to inform a range of energy savings schemes funded through the Salix finance arrangement. The Council has participated in this arrangement since 2009 which provides interest free loans for qualifying energy efficiency projects for our buildings. Prior to this only a small number of monthly meter readings across the whole portfolio of buildings were taken. Having accurate consumption data has now enabled us to report meaningful figures in terms of performance indicators, savings made from Salix projects and to report accurate figures into the Carbon Reduction Commitment scheme.
8. Since June 2009 the Council has spent over £700k from the Salix fund with a further £110k of projects agreed and awaiting installation and a further £100k worth of projects considered viable and awaiting agreement from budget holders. The projects installed or awaiting installation are predicted to save the Council £195k per year in fuel costs and reduce emissions by 1,330 tonnes per annum. The lifetime savings for Salix match funded measures is predicted to be £4.2 million and 28.5 thousand tonnes of carbon dioxide emissions.
9. To date 94 energy efficiency improvement installations have been completed. This includes cavity wall insulation to 17 properties and loft insulation to 21 properties. Other projects include the installation of LED lighting (more efficient than fluorescent tubes), swimming pool covers (stop evaporation from the pool and amount of ventilation required to control it), new heating controls and motor inverters (motor inverters allow the motor speed to be controlled according to requirements making savings).
10. Experience in implementing and monitoring these projects has helped to develop a better understanding of how best to target funding to achieve the greatest savings in terms of energy as well as financial savings. The aim is to build on this experience through the creation of the Council's own Energy Fund incorporating the surplus generated from the AMR tarriffs and some examples of the type of project the fund could support are detailed below:
11. To date the Council has only invested in two projects using solar photovoltaics (PV). Panels generally mounted on the roof of buildings convert sunlight into electricity that is used by the building occupants or exported back onto the grid. The Civic Offices 25 kWe scheme was installed in 2012 and cost just under £50k to install and earns the Council over £6k each year until 2032 via the feed in tariff, export of electricity and by the savings made through using some of the electricity ourselves. More information on the feed in tariff can be found here http://www.fitariffs.co.uk/FITs/
. The feed in tariff (FIT) lasts for 20 years but PV panels have been reported to be operating well after 30 years. Recent offers under a 'rent a roof' type scheme showed that income from a 50 kWe PV project (twice as big as) would earn just under £2,000 per year via that scheme versus an average annual profit of just under £9,000 (profit) for a self-funded scheme. With a 7 year simple payback and guaranteed FIT income for 20 years the Council could look forward to 13 years (after the investment is paid off) annual returns of (circa 13%).
12. Solar thermal projects - The energy for hot water systems within a building can be provided via solar thermal installations where rooftop panels gather heat from the sun and deliver it to the buildings hot water system. There are currently two solar thermal installations within the Vale; Peterston Super Ely primary school and the Civic Offices. The aim is to take advantage of the Renewable Heat Premium, a scheme similar to the FIT for solar PV. More details on the RHI can be found here https://www.gov.uk/government/policies/increasing-the-use-of-low-carbon-technologies/supporting-pages/renewable-heat-incentive-rhi. The Civic Office installation came on line in late 2013 and the direct experience of its operation have provided invaluable experience for future installations.
13. Fuel Cell combined heat and power (Blue Gen Units) - Fuel cells convert hydrogen gas (or the hydrogen component of natural gas) into electricity and water with a small amount of waste heat that too can be utilised within a suitable building. They are very efficient. Rhondda Cynon Taff County Borough Council has installed a Blue Gen unit is one of its buildings. At the moment the unit is reported to be operating well. The unit produces a constant 1.5 kW of electricity and heat output of 0.6 kW. A unit of this type is ideal for sheltered accommodation units, or elderly persons' homes where the heat and electricity is required 24/7 throughout the year.
14. Water meter installation - The Council's Energy Section has recently run trials on two water AMR systems. Water AMR can help identify consumption at inappropriate times and in so doing help to put a stop to it. Whilst water AMR would help all buildings in this way the intention initially would be to install water AMR for buried meters where underground pipes travel a significant distance underground before entering the building. The possibility of leaks going undetected (in the absence of AMR) for extended periods with such installations is high. At the moment the minimum cost of installation is £300 with an ongoing annual charge of £30 per annum. There are over 270 non domestic water supplies charged to the Council and it is therefore intended to phase the installation of the water AMR, first installing at properties where accurate readings are infrequent, for instance for meters in awkward locations such as within roadways. The larger projects will be given priority with left over funds used to contribute to the water AMR.
15. It is intended that the monies currently available within the Energy Fund will be used to deliver some comparatively large installations, for example it is estimated that a 50 kW photovoltaic installation would cost in the region of £80k but might produce a 20 year saving of approximately £270k. It is therefore suggested that in order to be able to continue funding new schemes that a repayment arrangement is made on a scheme by scheme basis. For PV schemes the end user will get any generated electricity used on site free of charge, with FIT and export income being used to repay the loan. For other and possibly more complex projects it is suggested that a similar approach to the Salix fund is adopted where 25% of the savings are retained by the budget holder and 75% are used to repay the investment.
16. In some cases (such as the installation of new water metering) there will be no repayment as this in itself will not lead to a saving. It is only in the cases of unexpected consumption where action to reduce this use can be taken (such as fixing a leak) and that the saving to the end user could be identified. Once the metering is in place it is suggested that the modest annual maintenance charges would be paid by the building manager/budget holder. Agreement with the building manager will be sought before proceeding with any project.
17. A full list of the type of projects that the fund could be used for is attached as Appendix 1 to this report.
18. Appendix 2 contains budget figures and expected savings for an initial list of projects that on approval could be progressed as funds will allow. Completion of these schemes would result in a reduction of 1% per annum in carbon dioxide emissions for the authority and around a £26k annual reduction in electricity costs.
19. The fund could also be used to provide additional discretionary funding for projects not quite achieving the 5 year payback required to attract a Salix loan but still achieving an 8 year payback as dictated by the rules within the Salix scheme. This would allow more flexibility in the type of energy efficiency projects taken forward. Further details on how the Salix schemes operate can be found here http://salixfinance.co.uk/loans/welsh-loans. Note that there is the Salix recycling scheme (5 year payback) and the Salix loan scheme (8 year payback), they are not the same.
20. A key driver in determining which projects to fund will be to reduce energy consumption figures and meet the Council's targets for reducing carbon emissions. Another factor in determining which projects to fund will be to spread the benefits across a number of different buildings in recognition of the contributions made to the fund by a number of services.
Resource Implications (Financial and Employment)
21. It is anticipated that existing staff resources will be used to deliver any new projects that result from this proposal. Where possible local contractors will be used to deliver installations.
22. It is intended that the Energy Fund will be self-sustaining and therefore some repayment (smaller than the savings made by the end user) is made by the budget holder for the building. The repayments will vary from technology to technology but by adopting the recycling model it will allow the fund to provide energy saving technology to a greater proportion of Council buildings and enable lessons to be learnt which can be shared more widely.
23. If £195,000 were invested in the projects listed in appendix 2 (Initially Identified Projects) the saving to the Authority would be approximately £27,000 per annum. It would be intended that any new 'excess' AMR commission would be added to this income to allow at least one new project to be delivered each year.
Sustainability and Climate Change Implications
24. All projects delivered as a result of this proposal will be delivered with the intent of reducing greenhouse gas emissions and thereby making the Council's activities more sustainable. The main emphasis of the projects will be for environmental benefits but there will also be employment opportunities and the potential for financial savings to be used for other social benefits. The resulting improvements in the Council infrastructure will assist the Council in meeting approximately 1% of its 3% per annum carbon dioxide emission reduction target from public buildings. On 20th October 2014 the Council approved the main principles of a new street lighting strategy, which included a proposal for part night street lighting. Any reductions made by Street Lighting will contribute to the saving targets of the Carbon Management Strategy and Implementation plan, but it is not intended to use the Energy Fund for street lighting projects as contributions to the fund only come from energy supplies to buildings.
Legal Implications (to Include Human Rights Implications)
25. Corporate procurement procedures will be adhered to for individual projects
Crime and Disorder Implications
26. Not applicable
Equal Opportunities Implications (to include Welsh Language issues)
27. Not applicable
28. This proposal will assist in delivering the Corporate Plan outcome that 'current and future generations of Vale residents and visitors enjoy the built and natural environments of the Vale of Glamorgan and actively protect and maintain them. Within the Corporate Plan there is an objective under this outcome to 'Review and update the Council's Carbon Management Plan to reduce emissions from council buildings, street lighting and council vehicles. This proposal will assist in meeting that objective.
Policy Framework and Budget
29. This is a matter for Executive decision.
Consultation (including Ward Member Consultation)
30. Not applicable
Relevant Scrutiny Committee
31. Corporate Resources
Appendix 1 - Example technology list
Appendix 2 - Initially Identified Projects
David Powell - Energy Manager 01446 709576
Jane Wade -Operational Manager (Property) - 709270
Alan Jenkins - Head of Finance- 709254
Helen Moses - Strategy and Sustainability Manager - 450205
Mike Bumford - Senior Accounting Technician 709253
Jane Wade - Operational Manager (Property Services)