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The case for decentralised energy

28 January 2013

This week, I invite Helen Andrews Tipper of the Carbon Trust to explain how decentralised energy schemes might ease the cost of energy.

How we generate and consume energy is perhaps the most significant threat to economic and social wellbeing that we face today, writes Helen Andrews Tipper. Already high energy prices are only predicted to keep rising. Our current use of fossil fuels is unsustainable.

Politicians are in deadlock over the future of the country's energy infrastructure. This is a bleak and familiar picture, but local authorities across the UK are beginning to see an alternative. They are taking control of their own energy future and investing in decentralised networks that bring down prices, improve energy security, cut carbon and make communities more prosperous and resilient. 

Decentralised energy is not yet a widely understood term, but broadly refers to energy that is generated off the main grid, including micro-renewables, heating and cooling. It can refer to energy from waste plants, combined heat and power, district heating and cooling, as well as geothermal, biomass or solar energy. Schemes can serve a single building or a whole community, even being built out across entire cities.

The drivers behind this new energy revolution are clear. Energy insecurity carries a massive social and economic cost. The 2003 US - Canada blackout affected around 50 million people, and had an estimated economic cost of approximately $6.4 billion. The consequences of the lights going out in our towns and cities would clearly be disastrous.

But even before those consequences are felt, limited energy capacity will mean limited growth. Energy masterplans in cities like Manchester reveal that projected increases in demand far exceed current capacity. Decentralised energy is a rapidly-deployable and efficient way to meet that demand, whilst improving energy security and sustainability at the same time.

Then there's fuel poverty.  This is having a huge social impact in the UK, with 4.75 million households in the UK in fuel poverty in 2010, representing a staggering 19% of the total. According to Age UK, there are an average of 26,700 'excess winter deaths' every year in England and Wales, mostly occurring among the elderly.

This should be unthinkable in 21st century Britain. District heating in Aberdeen has cut energy bills by around 50%, giving residents  access to lower cost and lower carbon heat. It could do the same elsewhere.

The consequences of climate change, whilst they will affect us all, will largely be dealt with by the public sector - whether that's the NHS, emergency services or local authorities. The public sector, and therefore the taxpayer, will also have to pick up the bill and clean up the mess.

Following severe flooding earlier this year, the Local Government Association warned that council budgets will be hard-hit by urgent and unexpected repairs to infrastructure such as roads, bridges and pavements. And that's before we even start to look at the necessary investment to make our essential infrastructure resilient to more intense and more frequent extreme weather events.

According to a European Commission report into excess deaths during the heat wave of 2003, an extra 70,000 people died across Europe that summer, 45,000 of those in August alone. We've gone way beyond planting more shady trees in playgrounds.  

Finding the money
It's clear that we need radical reform to how we use and generate energy. With any infrastructure investment there is the question of where the money is going to come from. Undoubtedly one of the challenges to getting decentralised energy deployed at scale in the UK is to unlock private investment.

Creating a new regulated asset class will undoubtedly help to attract institutional investors. But it is also vital to create the right relationships between the public sector and those private investors. These are viable, often commercially highly-attractive projects that can not only create revenue but pay back in a relatively short time.

The public sector is the key to unlocking development - both as potential leaders and potential beneficiaries of a scheme. 

But perhaps the most exciting development in financing decentralised energy is the recognition in a number of public bodies that they can actually do it themselves. By wholly or partly financing projects, using capital reserves or cheap public borrowing, these organisations are looking to tap into a new revenue stream by generating and selling low-carbon energy. The public sector can bring in private partners on their own terms, but understandably there is currently only a handful that knows how.

At the Carbon Trust we're working with organisations including Bristol City Council to help them lead and manage their own projects to ensure that maximum public benefit is achieved. Bristol has secured £2.5m to develop sustainable energy projects in the city, including four district heating schemes, and the Carbon Trust will support them in navigating the district heating market and ensuring that their social, economic and financial goals are met.    

Making it happen
So why aren't more decentralised energy projects happening in the UK? The barriers to mass take-up are not technical.  Whilst the decentralised energy market in the UK is not huge, the expertise is available, including from companies active in the UK that have decades of experience in countries like Sweden and Denmark.

The barriers are not even primarily financial - there are tried and tested ways of getting projects financed, whether through public or private money, and the situation is improving. The major obstacle to mass take-up of decentralised energy is institutional - the lack of experience and expertise in the public sector.

Organisations do not yet understand the role that they can play in these developing and implementing these projects. But whilst there is a lack of experience, there is no lack of vision and enthusiasm to grasp the opportunity.

The most common form of decentralised energy is district heating. Whilst in Scandinavia district heating is the norm, it sometimes suffers from an undeservedly bad reputation in the UK. This is a legacy from 1940s and 1950s post-War schemes that were constructed using non-insulated pipes, leaky connections and poorly-performing engines.

These schemes also suffered from not being properly maintained, due to a lack of understanding of this kind of infrastructure. This scenario bears little relation to district heating today. Networks are now built with highly-insulated pipes and connections, and high-performance engines, making those problems a thing of the past.

Whilst district heating in the UK has improved immeasurably, we clearly have much to learn from achievements elsewhere in Europe. DECC's heat team recently visited Denmark to learn first-hand what mass take-up of district heating can achieve, and how it can be best designed to meet energy challenges in the UK.

Most major Danish cities have heat networks, and district heating accounts for around 60% of all space and water heating across the country. According to DECC, the figure for the UK is between 1 and 2%.

The scale of the challenge is huge, but so is the opportunity. The examples from Aberdeen, Islington and Bristol are just a snapshot of what local authorities are doing in the UK, but public bodies all around the country are looking into what decentralised energy can do for them.

If every local authority in the UK with a potentially viable decentralised energy scheme found a way to bring that project to market then we would trounce all current targets and predictions. There's clearly much to be done. Fortunately, in the words of Al Gore, "political will is a renewable resource."

To find out more about the Carbon Trust's activities and its support for decentralised energy, click here.

Les Hunt

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