LONDON RIVERSIDE OPPORTUNITY AREA ENERGY MASTERPLAN

Transcription

1 Intended for London Borough of Havering Document type Report Date 31 October 2013 LONDON RIVERSIDE OPPORTUNITY AREA ENERGY MASTERPLAN

2 LONDON RIVERSIDE OPPORTUNITY AREA Revision Final Version 4 Date 2013/10/31 Made by Anthony Riddle, Olof Jangsten, Mairead Kennedy Checked by Anthony Riddle Approved by Crispin Matson Description London Riverside Opportunity Area Energy Masterplan Ref Report Ramboll Hannemanns Allé 53 DK-2300 Copenhagen S Denmark T F Ramboll Energy 60 Newman Street London W1T 3DA T +44 (0)

3 CONTENTS EXECUTIVE SUMMARY 7 1. Introduction, Background and Methodology Introduction and Purpose Previous Work Undertaken Layout of Report Energy Demand Appraisal Existing and Planned Centres of Development Heat Mapping Assessment for Centres of Development Overall Demands in Energy Supply Appraisal East London Sustainable Energy Facility (ELSEF), Havering Riverside Employment Area Thames Gateway Energy Facility (Chinook) Dagenham Dock TEG Anaerobic Digestion Facility Sustainable Industries Park Barking Power station, Dagenham Dock Riverside Waste Water Treatment Plant Frog Island MBT Plant The Ford Motor Company works at Dagenham Sustainable Industries Park Plot Existing or Planned Small Scale Embedded CHP within the LROA Opportunities Beyond LROA But Within the Greater Vicinity of LROA Other Low Grade Waste Heat Opportunities within LROA Role of Accumulator Storage Summary of Supply Opportunities and Merit Order of production Heat Network Opportunity Appraisal Methodology Scenarios Modelled Summary of Business Case and Carbon Reduction Potential for modelled Scenarios Sensitivity Analysis Recommended Development Strategy and Outline Phasing Plan Heat Network Infrastructure Proposals Heat Network Control Concept Route Assessment and Viability Distribution Pumping Stations and Heat Network Primary Control Centre Heat Offtake Arrangement from ELSEF Condenser Heat Recovery from Steam Turbine Heat Recovery from Internal Combustion Engine CHP Heat Recovery Tertiary Treatment Tanks in Waste Water Treatment Facilities Heat Recovery from National Grid and UKPN Transformer stations 64

4 5.9 Back up Boilers to Main Heat Production Assets Accumulators Consumer Connections Safeguarding to Connect to the Royal Docks Heat Network in London Borough of Newham Outline of Possible Operational Structure of the Longer Term, Wide Area Opportunity Project Outline Risk Assessment Next Steps and Implementation Plan Progressing Opportunities to Secure Major Low Carbon Heat Sources Stakeholder Engagement Next Steps for London Boroughs of Havering and Barking & Dagenham References 81 APPENDICES APPENDIX 1 Summary of Heat Mapping Undertaken for LROA APPENDIX 2 Summary of Low Carbon Energy Supply Infrastructure within LROA APPENDIX 3 Investment and Carbon Appraisal Model Assumptions APPENDIX 4 Outline Risk Appraisal APPENDIX 5 Cost And Carbon Plans for Identified Strategic Opportunity TABLES Table 1 Rainham West Development Summary Table Table 2 Beam Reach Development Summary Table Table 3 Barking Riverside Initial Phasing Table 4 Barking Riverside Estimated Phasing Table 5 List of Identified Heat production assets within and in the vicinity of London Riverside Opportunity Area Table 6 Assumed Production Hierarchy in Modelling Table 7 List of Heat Network Scenarios Modelling Table 8 Summary of Modelling Results Table 9: Heat Exchanger Space Requirements Table 10 List of Identified Heat production assets within and in the vicinity of London Riverside Opportunity Area Table 11 Carbon intensity and cost of heat production for identified assets within and in the vicinity of London Riverside Opportunity Area Table 12 Breakdown of investment Costs for identified assets within and in the vicinity of London Riverside Opportunity Area Table 13: Heat Tariff Assumptions Table 14: Assumed unit cost of Heat Production from ELSEF Table 15: Heat Network Design Parameter Table 16 Cost and Carbon Plan for Scenario 1 ~ Area-Wide Strategic Network Scenario

5 Table 17 Cost and Carbon Plans for Scenario 1 ~ Initial Network local to ELSEF facility FIGURES Figure 1 Proposed Scheme Layout Figure 2 Existing and Planned Centres of Development Figure 3 Projected Growth in Heat Demand over a 40 year period Figure 4 Heat Map of London Riverside Opportunity Area Figure 5 Indicative Merit Order of Production Figure 6 Spatial Layout Plan for Identified Heat Supply Opportunities Figure 7 Indicative Outlines for Scenarios 1 & Figure 8 Summary Chart of Initial Network Modelling Scenarios Figure 9 Scenario 1 - Annual Heat Demand (average) profile Figure 10 Annual Supply Profile Scenario Figure 11 Summary Chart of Area-Wide Strategic Network Modelling Scenarios Figure 12 Scenario 2 -Annual Heat Demand Consumption Profile Figure 13 Annual Supply Profile Scenario Figure 14 Economic Sensitivity Analysis for Scenario Figure 15 Variation in IRR with Sensitivity Analysis for Scenario Figure 16 Scenario 1 Variation of NPV with Discount Rate Figure 17: Economic Sensitivity Analysis for Scenario Figure 18 Variation in IRR with Sensitivity Analysis for Scenario Figure 19 Scenario 2 Variation of NPV with Discount Rate Figure 20 Z factor - IRR Sensitivity for Scenario 2 (Area-Wide Strategic Network) Figure 21 Z-Factor - IRR Sensitivity for Scenario 1 (Initial Network). 52 Figure 22 Network Route Figure 23 Heat Network Development Timescales Figure 24 Typical pressure distance diagram for variable volume network Figure 25: Typical Flow and Return Temperature Characteristics (image courtesy GLA) Figure 26 Proposed Network Route Figure 27 Typical Distribution Pumping Station Schematic Arrangement Figure 28 Proposed Location options for Primary Control Centre and Main Distribution Pumping Station for Heat Network Figure 29: Indicative Heat Offtake proposals for ELSEF Figure 30 Distribution of Heat Demand under Initial Cluster Opportunity (Scenario 1) Figure 31 Distribution of Heat Demand under Fully Built Out Opportunity (Scenario 2) Figure 32 Indicative Arrangement for power plant condenser heat extraction Figure 33 Indicative Arrangement for Heat Recovery from Internal Combustion Engine CHP Figure 34: Indicative Arrangement for Heat Recovery from Waste Water Treatment Works Figure 35: Indicative Arrangement for Heat Recovery from National Grid and UKPN Transformer stations Figure 36: Indicative Accumulator Configuration... 66

6 Figure 37 Heat Exchanger Substation Figure 38 - Typical HIU without front cover Figure 39: Typical Substation Connection Arrangement (image courtesy of LDA/GLA) Figure 40: Indicative Organisational Structure for Wide Area Opportunity Figure 41 Assumed unit cost of Heat Production from ELSEF... 93

7 EXECUTIVE SUMMARY Objectives and Approach The London Borough of Havering, with the support of the Greater London Authority and in conjunction with a local renewable energy from waste (EfW) project Biossence (East London) Limited (BEL), have commissioned Ramboll to establish an Energy Master Plan (EMP) for the London Riverside Opportunity Area (LROA) based on a district energy network. The purpose of the Energy Masterplan has been to set out a framework to enable LROA to support the Mayor s low carbon aspirations for London Riverside and to identify opportunities for decentralised energy production and distribution to meet current and future energy needs of LROA. Specifically, the purpose has been to:- Focus on a district heating network serving the LROA, supplied initially from the East London Sustainable Energy Facility (ELSEF) being developed by Biossence East London Limited (BEL) and latterly from other possible heat sources both in and adjacent to the LROA. Establish the role of satellite district-heating networks across LROA that could interconnect over time to supply locally produced low to zero carbon and waste energy sources. This Energy Masterplan is intended to be appended to the LROA Planning Framework (PF) as a supporting document to inform the next stage of work that will address procurement and commercial issues around developing a heat network for LROA. The work has involved the following stages:- Carrying out an energy demand appraisal for LROA to 2055, focusing on heat demands suitable for supplying through a heat network; Identifying existing, planned and potential future low carbon supply sources within LROA and establishing associated costs and carbon content of heat production from these assets; Appraising a number of potential heat network opportunities and developing and assessing them in relation to economic and carbon saving potential; Developing heat network infrastructure proposals together with a route assessment and a possible operational structure to support the identified opportunity; and Conducting an outline risk assessment, developing a phasing plan and making recommendations for next steps to take forward the project opportunity. Summary Findings The projected long term demand within LROA, once all development has been fully built, out is estimated to be 117 GWh/a. Given the scale of demand and the abundance of low carbon supply assets within LROA and the strategic location of LROA in relation to large existing and planned centres of heat demand within London, there is considered to be a strong political and economic case for developing a district heating network to serve LROA. Practical delivery of a heat network would, however, be contingent on large scale planned redevelopment within LROA coming forward and the anticipated timescales for this indicate that a wide area heat network is not likely to be viable until around 2030, with investment taking place in The required scale of investment in 2029 would depend on the outcome of proposals to implement a series of cluster networks/community heat networks in the interim period. The Fairview Industrial Park, Beam Reach South and Barking Town Centre have been identified as locations for cluster networks connecting both existing anchor loads and new development opportunities whilst Barking Riverside, LSIP, South Dagenham and Rainham have been identified as locations for community heat networks constructed around major or individual redevelopment opportunities. Of these, the cluster network around Fairview industrial estate and Beam Reach South Estate is of particular interest given the opportunity to extract heat from the planned ELSEF plant. Page 7

8 The available capacity reserved by BEL and envisaged for the first stage of heat offtake is considered to be reasonable based on the modelling carried out in this report. It is noted that further optimisation could be carried out once detailed cost information is made available. The remaining cluster networks at Barking Riverside, South Dagenham, Rainham, LSIP and Barking Town Centre are envisaged as being a supplied via community heat networks with gas CHP or temporary gas boilers. The projected demand for a cluster network serving the Fairview Industrial Park and Beam Reach South is estimated to be 13 GWh/a and the majority of these loads are from existing buildings and could accept heat from ELSEF as soon as a network is in place. The initial cluster network serving Fairview Industrial Park and Beam Reach South could either be constructed as a local distribution network or as the first stage of a wider area network intended to supply the whole of LROA in the longer term. The latter option would require constructing the initial section of network so that it is capable of delivering sufficient capacity to Barking Riverside, South Dagenham, Rainham and Barking Town Centre in the future. Whilst this has clear strategic benefits, it also carries a risk in relation to heat off-take that may never materialise. Nevertheless, the scale of proposed regeneration suggests that the case for safeguarding is strong, as is the case for safeguarding for a future connection into the Royal Docks (given the projected scale of development in that area and the abundance of low carbon heat capacity within LROA that could supply it). The appropriate way forward depends on a number of factors which will need to be further evaluated at the next stage. Assuming that the cluster networks identified above do come forward in the interim period, the required investment in a wide area network in 2029 would need to cover:- Extension of the initial cluster network serving the Fairview industrial Park and Beam Reach South to form a wide area network; Connection via a series of substations to the initial cluster networks at Barking Town Centre, Barking Riverside, LSIP and new developments serving South Dagenham and Rainham; Investment in a second stage of heat off-take at ELSEF together with investment in a thermal store accumulator and additional gas boilers for peaking and back up purposes. The available capacity envisaged for this stage of heat off-take seems reasonable based on the modelling assumptions in this report, although further optimisation could be carried out once detailed cost information is made available. The abundance of low carbon supply infrastructure within LROA and the strategic opportunity to supply Royal Docks from the wide area heat network serving LROA may lead to additional investment in other third party heat off-takes at this time, although this has not been accounted for in the present cost plans. Key Economic and Carbon Indicators for Area-Wide Strategic Network The calculated 25 year internal rate of return for the Area-Wide Strategic Network, in which no development takes place until 2030 when over 60% of the heat demand is in place, is of the order of 9.4%. The total capital cost for the scheme would be 31.4 M, of which the heat offtake investment costs are 1.3M. The scheme would deliver 55% savings in CO 2 emissions relative to the business as usual case. In the event that the project could also supply heat to the Ford Motor plant, which has a very high heat demand over a short connection distance, the internal rate of return would increase to over 11%. Safeguarding for future connection into Newham Royal docks 1 would reduce the expected internal rate of return to around 8.5%. The cost of safeguarding for network capacity would be in the order of 1.3M relative to the cost of delivering the Area-Wide Strategic Network. The impact of no future connection (or safeguarding) to Barking Town Centre would be to reduce the expected internal rate of return to around 4.7%. The viability of a wide area network therefore appears to be highly contingent on future delivery of heat to Barking Town Centre. 1 On the assumption that the interconnection is not constructed. The potential IRR assuming heat sales into the Royal Docks has not been modelled. Page 8

9 Key Economic and Carbon Indicators for Initial Cluster Network serving Fairview Industrial Park and Beam Reach South A distribution network local to ELSEF and sized only for the loads that it can deliver up to 2030 represents a more attractive prospect in terms of IRR than an initial network sized and safeguarded for future connection into the Area-Wide Strategic Network for LROA. The internal rate of return for this option is approximately 11% and the total capital cost for the scheme would be 5.0M. The scheme would deliver 78% savings in CO 2 emissions relative to the business as usual case, due primarily to the fact that the existing customer base under the initial cluster scheme is predominantly off gas grid (and supplied by propane gas tanks). Safeguarding for an Area-Wide Strategic Network for LROA by constructing a transmission sized network from the outset (ie with safeguarding for new developments under scenario 1), could be expected to deliver an internal rate of return of around 8%. The total capital cost for the scheme would be 6.4M. The estimated cost of safeguarding the initial cluster network for the wider network opportunity would therefore be 1.4M. An additional connection to Ford would deliver an internal rate of return of 10.6% if this connection could be realised in the early years of the initial network coming online. A connection to Rainham would significantly reduce the potential returns from the scheme and is not recommended, given the effect on the business case for the project. Key Barriers and Opportunities to Development An outline risk assessment for the project is presented in Section 6 and Appendix 4. Key findings are presented below. The construction of an initial cluster network local to ELSEF without safeguarding for the wider strategic opportunity is not considered to serve the wider interests of LROA or be in the best interests of London as a whole, since there is a very real opportunity to access a much larger customer base and thereby deliver far greater carbon reduction to London. Future proofing for this opportunity would mean that, in order to unlock the future revenue potential of a larger network, additional investment in the network would be required in the initial phase. Left to the private sector to deliver, financing the initial cluster network on this basis will be a challenge if the wider area opportunity is to be safeguarded without any certainty of future heat sales. Delivering the wider strategic opportunity is therefore likely to require intervention from the public sector in the form of financial support or underwriting to avoid a private developer choosing to size the initial cluster network for the initial demands only. The Local Authority should work together with GLA and BEL to explore options for this. It is noted that the Mayor s Growth Fund may a suitable mechanism for providing this funding support. The future build out of the wider area network is highly dependent on regeneration taking place in London Riverside area. Whilst the initial cluster networks may be successfully delivered through the private sector, it is unlikely that the wide area opportunity will be realised without public sector involvement due to stakeholder complexity, the long and uncertain timescales for delivery and the associated long payback periods. This implies the need for high level individual and organisational commitment by the Local Authority and a degree of appetite to become a coinvestor/partner in a delivery vehicle for the project. In the absence of this, there is a risk that the project will fail to gain momentum and or to deliver to its true potential. Page 9

10 The connection of new developments is critical to the business case for the wider area network. These risk not being adequately safeguarded to connect to the future heat network if the appropriate requirements are not enforced through the planning system. The local authorities should implement appropriate safeguarding measures through the planning system and disseminate information to developers. A supply risk will arise if ELSEF becomes the primary/sole third party supplier to the future wide area network. Other potential heat suppliers should to be encouraged to participate in the future market and plants being developed in the vicinity should be required to be safeguarded for future connection to the network. In the absence of a regulated market, the commercial structures of the cluster networks and future wide area network project companies need to address issues of supply resilience, customer protection, perception about heat networks and monopoly of supply. Without this customers may be unwilling to sign up to the long term contracts needed to provide guaranteed heat sales against which investors will be prepared to lend. Key to this will be marketing the benefits of modern heat networks to customers, clear structuring of contracts with provisions to protect customers from being locked in to long term and unfair pricing mechanisms/tariff structures and the representation of customers through an independent body acting in a quasiregulatory role. The local authorities may have a facilitating role to play in all of these areas. New developments and existing large non-domestic heat and electricity users may choose to install combined heat and power units or alternative measures which may undermine the viability of the network by removing or reducing the heat demand from these customers. The local authorities involved in the project should use their powers to allow temporary solutions to be adopted in lieu of installing CHP or other compliance measures insofar as the building regulations will permit. Exiting buildings may require retrofitting work to internal heating systems to ensure compatibility with the proposed heat network system. Connection standards should be developed to outline the requirements for customers wishing to connect. The London Boroughs of Havering and Barking & Dagenham may choose to play a proactive role in bringing forward the identified opportunity. As a potential investor this could bring benefits in terms of income generation, contribution towards carbon reduction targets, reduced fuel costs, improved security of supply and alleviation of fuel poverty to local residents. A number of measures have been proposed to enable them to consider next steps in this respect Under the Government s Zero Carbon Homes proposals, London Boroughs of Havering and Barking & Dagenham can potentially raise capital for the project through contributions from Developers. In order to do this, they will need to establish themselves as potential Allowable Solutions providers. The proposed scheme is presented here in Figure 1 below; a full description of each of the individual elements is contained within the main body of the report. Page 10

11 Figure 1 Proposed Scheme Layout Page 11

12 1. INTRODUCTION, BACKGROUND AND METHODOLOGY 1.1 Introduction and Purpose The London Borough of Havering, with the support of the Greater London Authority and in conjunction with a local renewable energy from waste (EfW) project Biossence (East London) Limited (BEL), have commissioned Ramboll to establish an Energy Masterplan (EMP) for the London Riverside Opportunity Area (LROA) based on a district energy network. The LROA covers some 3,000 hectares and extends from Rainham Marshes in the south east to Barking town centre in the north-west and the edge of the Royal Docks, covering a total distance of 12km. It encompasses the southern parts of the London Boroughs of Barking and Dagenham, Havering and a corner of Newham. The LROA will undergo major redevelopment area over the coming decades, with a potential for 14,000 new jobs and around 25,000 new homes. As such LROA presents a significant opportunity to develop district heating infrastructure around an abundance of existing and planned low energy supply infrastructure within the area. The purpose of the Energy Masterplan has been to set out a framework to enable the LROA to support the Mayor s low carbon aspirations and identify opportunities for decentralised energy production and distribution to meet current and future energy needs of LROA. Specifically, the purpose has been to:- Focus on a district heating network serving the LROA, supplied initially from the East London Sustainable Energy Facility ELSEF and latterly from other possible heat sources both in and adjacent to the LROA. Establish the role of satellite district-heating networks across LROA that could interconnect over time to supply locally produced low to zero carbon and waste energy sources. This Energy Masterplan is intended to be appended to the LROA Planning Framework (PF) as a supporting document to inform the next stage of work that will address procurement and commercial issues around developing a heat network for the LROA. 1.2 Previous Work Undertaken The draft LROA Planning Framework 2 sets out the aspirations for a district energy/heating network within LROA. Existing or proposed heat sources within the LROA PF have been identified, including a number of EfW facilities and, at a larger scale, by-product heat from Barking Power Station (BPS) and its planned extension. The aspiration set out in the planning framework has been to develop satellite district heating networks across London Riverside that, over time, could interconnect to supply heat customers in the area with locally available low to zero carbon and waste energy sources. Previous heat off-take studies have already been completed for local areas within and around LROA, a number of which are proximate to the Biossence EfW project. These reports are referenced in Section 8 of this report and include:- The London Development Agency (now GLA) developed the London Thames Gateway Heat Network (LTGHN), a 160m project to take low cost, low carbon heat from Barking Power Station and Tate and Lyle sugar refinery and connect to over 100,000 homes in the London Thames Gateway. The project was suspended in 2011 following a failure to contract with potential heat suppliers. Data and reports are available from the GLA. The London Borough of Barking and Dagenham (LBBD) carried out a feasibility study in 1997 in regard to supplying heat to buildings in the town centre initially from local Combined Heat and Power (CHP) plants and latterly from a connection to Barking Power Station. 2 London Riverside Opportunity Area Planning Framework Public Consultation Draft, Greater London Authority, December 2011 Page 12

13 The London Borough of Newham (LBN) completed an infrastructure study of the Royal Docks in 2012 that included an energy supply study. The energy work built on the Royals phase of the LTGHN project that abuts the LROA. 1.3 Layout of Report The report is presented in nine main sections. Section 2 presents the results of an energy demand appraisal for LROA that has been carried out as part of this project. This has resulted in a heat map for LROA to Section 3 presents an energy supply appraisal for LROA. This identifies existing, planned and potential future low carbon supply sources within LROA and establishes associated costs and carbon content of heat production. An appraisal of the heat network opportunity has been carried out in Section 4. A number of potential scenarios have been developed, modelled and characterised in terms of key economic and carbon performance indicators. A sensitivity analysis of the identified opportunities and an outline phasing plan have been presented In Section 5, heat network infrastructure proposals together with a route assessment are presented and in Section 6 a brief description is given around a possible operational structure to support the identified opportunity. An outline risk assessment is presented in Section 7 of the report and recommended next steps and an implementation plan are presented in Section 8 Assumptions, energy demand, supply and heat network opportunity maps and cost and carbon plans for identified opportunity are presented in a series of Appendices. Page 13

14 2. ENERGY DEMAND APPRAISAL 2.1 Existing and Planned Centres of Development Development in the LROA can broadly be divided into seven main centres of development. As summarised below, five of these lie in the London Borough of Barking and Dagenham and two within the Borough of Havering:- London Borough of Havering Centres of Development Beam Reach South Rainham London Borough of Barking and Dagenham- Centres of Development Barking Town Centre South Dagenham Riverside and Creekmouth Ford and Barking Power Station Goresbrook The spatial arrangement of these Centres of Development is shown in Figure 2. Page 14

15 Figure 2 Existing and Planned Centres of Development Page 15

16 The annual heat demand in each of these areas is presented in the following sections. Heat demands are presented graphically to show the annual expected growth in in each of the project areas over the lifetime of the project. Assumptions made in the process of carrying out this analysis are briefly outlined and further detail around the basis, methodology and assumptions applied in developing the energy demand appraisal carried in this section of the report is presented in Appendix A. 2.2 Heat Mapping Assessment for Centres of Development Beam Reach South - Havering The area defined as Beam Reach South for the purposes of this report is all land south of the national rail line that runs east to west across the LROA within the Borough of Havering excluding the Ford Plant. Existing Industrial loads in Havering centre on the Fairview Industrial Park and Beam Reach 8. There is also a significant heat demand from the Centre for Engineering and Manufacturing Excellence (CEME) development. There is also expected to be a similar development to CEME on the Beam Reach 6 site to the West. The heat demand in Beam Reach South is exclusively industrial and commercial, for this reason there is a low baseload due to the low hot water demand from these businesses Rainham - Havering The project area designated Rainham encompasses the area of LROA within Havering and not contained in the Beam Reach South project area. There are plans in place for the regeneration of the Rainham area and much of this includes for the re-designation of industrial land for residential development. A number of these smaller developments are in the process of coming forward either at planning or post-planning stages. The larger more significant residential developments are constrained in their ability to some forward by the lack of appropriate transport links to the area. There are plans to extend transport links to the area however it is considered unlikely that these will be in place within the next few years. As such the growth in heat demand in the area is constrained by external factors and this has been taken into account in the analysis of potential demands. One of the most significant developments in LROA is that of Beam Park, a site which extends into two London Boroughs and project areas. Originally these were two sites (Beam Park in Havering and South Dagenham East in Barking Dagenham) with a capacity for just under 3,000 residential units. However in March 2012 the London Borough of Barking & Dagenham and the London Borough of Havering produced a joint planning prospectus for the Beam Park area (which was now considered to comprise the entire area of Beam Park (Havering) and South Dagenham East). This prospectus was produced in response to both the delay in progressing this area for the intended residential use and to a number of approaches from developers to the LDA expressing a wish to develop the land as a large scale leisure facility. The proposal put forward in the planning prospectus incorporates the following major elements:- Anchor development of a large scale visitor attraction of regional and national significance; Leisure and entertainment facilities in keeping with the central proposal, with potential for the provision of community leisure facilities; Retail floor space for specialist sports and leisure shopping commensurate with the use and style of the anticipated major development; and Possibility for residential and hotel development if compatible with the overall concept and design of the project; Page 16

17 The planning prospectus also places a number of conditions that should be met prior to such a development coming forward. These are primarily concerned with transport links to the area and are similar to those presented earlier. In addition, this document also anticipates that any major developer would be required to contribute towards a new railway station at Beam Park. Further constraints include improved links from Dagenham Dock station, bus service improvements to serve the development including services from Dagenham Heathway (LUL) station and road improvements and car parking to accommodate additional traffic coming to a major attraction. Some of these items (non-site specific) are included as part of East London Transit Phase 3. The updated planning prospectus is adopted and in place in order to allow a greater flexibility in developing the site and in bringing forward this significant area of regeneration in a shorter timescale than may be possible for residential only developments. In the absence of the any definite plans the original housing strategy takes precedence. In this report the portion of Beam Park that lies in Havering (and thus the Rainham project area) shall be referred to as Beam Park Havering. This site was originally identified in the 2008 Site Specific Allocations (SSA) document for Havering as an appropriate residential site. The allocation of residential units for this site is 922 over 11.6ha. The proposed development has not as yet come forward and there are no known existing planning applications associated with the site. The planning constraints as outlined above also apply to any residential development at this site. The annual monitoring report for Havering produced in 2011 (the most recent version that could be located) stated that the Beam Park SSA was expected to be developed in the period However given the fact that Beam Park station is unlikely to come forward within the next 5 years (there are no current proposals and should a planning application be forthcoming in the next year or so, under current planning regulations, construction would be required to begin within the next 5 years unless superseded by another planning application), it is unlikely given planning application periods and lead-in times that any residential development would take place at this site within the next 10 years. As such this report assumes that the earliest that development would begin in this area is The timeframe for completion presented in the 2011 monitoring report is also assumed. This gives a substantial completion date of 2029, assuming a completion rate of 230 houses per annum, similar to that for South Dagenham. Page 17

18 The redevelopment of Rainham also includes for the regeneration of an area known as Rainham West. This covers the area from Dover s Corner in the East to Marsh Way in the West. The entire Rainham West area is made up of a number of sub-areas under various land ownership and a various stages of development these are:- Phase Dover s Corner Carpet Right Site No.1 Climate Energy Homes Carpet Right Site No.2 New College Planning Framework Designation Residential Proposed Use 735 Residential Units & some mixed use development Residential 51 Passive House Homes 2018 Residential 11,800m 2 Educational College Mudlands Employment No Change to Existing NA Rainham Steel Employment No Change to Existing NA Suttons Industrial Park Residential Somerfields Depot Residential 497 homes No Current Applications, assume residential 210* homes Table 1 Rainham West Development Summary Table Phasing 90 units per annum from 2015 onwards, giving substantial completion in 2024 Planning granted 2012, est. completion 2018 No planning application, assumed to begin in 2018 and to complete by 2022 Planning Granted 2012, assumed to begin in 2017 and to complete by 2022 * Area-based pro-rata allocation of remainder of original housing allocation in the 2011 Havering annual monitoring report Rainham Steel and Mudlands are identified in the planning framework as areas dedicated to employment uses. In the absence of any more detailed plans, it has been assumed here that existing industry will remain in place for the foreseeable future with no significant impact on heat demand. The phasing for Dover s corner is taken from the annual monitoring report 2011 though set back a couple of years to allow for the fact that no work has begun on this site in the 2 years since the report was prepared (according to London Borough of Havering). Phasing for the new college, Somerfields depot and Climate Energy Homes developments are estimated based on the date of grant of planning permission with 5 years allowed for completion as per earlier assumptions. The Sutton site development phasing is based on assumptions made in the annual monitoring report plus 2 years to allow for the lack of progress in the intervening years. It should be noted that of these developments only the residential developments at Sutton s Industrial Park and Somerfield s Depot are considered suitable for connection as a number of the current proposed developments are likely to include individual gas boilers in the residential units which are unsuitable for connection to a district heating scheme. Page 18

19 Beam Reach 5 There are two elements to the current planning application submitted by TESCO for Beam Reach 5 which are:- Beam Reach 5 TESCO Planning Framework Designation Industrial Proposed Use Refrigerated distribution centre Vehicle Maintenance Unit Recycling Centre 2015 Phasing Beam Reach 5 Outline Industrial Various Industrial B1/B Table 2 Beam Reach Development Summary Table There are seven plots within the Beam Reach 5 site, the majority of which are the subject of outline planning applications. Indicative energy consumption and building use data was provided in the energy statement that accompanied the planning application. For the TESCO plots, only the Vehicle maintenance unit and the recycling centre have a heat demand. The other TESCO development is a very large refrigerated goods storage facility with minimal heat demand South Dagenham Barking Dagenham South Dagenham West South Dagenham West was originally identified as an SSA area capable of delivering 2,000 residential properties between 2013 and However, since the development of the Specific Allocations Development Plan Document, the owner of part of the site, AXA, has had a planning application accepted for an industrial estate on the site and construction is under way. A hotel and restaurant have also been built elsewhere on the site. It is assumed that the remainder of the site will be developed as per the original SSA and the remaining land has been assigned a pro-rata housing density based on the initial 2,000 homes allocation. There is an ASDA currently occupying part of the north western corner of the main site, though there are plans to re-locate this store to the regenerated Abbey retail park. This relocation would have to take place for the remainder of the SSA development to be realised. It is therefore assumed that work on the development will not begin for at least 5 years (in 2018) and that construction (at the original rate of development) would take 2.5 years with completion in This period of 5 years is the estimated time taken for the project to go from initial planning application to completion similar to the assumptions made above for the smaller planning applications. Beam Park - South Dagenham East Portion The SSA envisaged South Dagenham East delivering 2,000 homes over the period However, the development of this site is dependent upon the delivery of improved transport links into Central London. Consequently, LBBD s housing trajectory puts the capacity of this site at 500 homes from Given the uncertainty surrounding the extension of transport links to East London and the LBBD s own view of the limited potential for this site to deliver any homes in the next 15 years, development within the estimated time period is questionable and it is assumed in this report that the earliest the development can start is in 2028 (as per the housing strategy). A similar development timeline to that originally proposed has been applied, namely the development of 200 homes per year over 10 years with completion occurring in Page 19

20 2.2.4 Barking Town Centre Barking Dagenham Barking Town Centre has been the subject of a number of heat network studies in the past. As such, the heat demand from the area is relatively well documented and understood. Data from the London heat map has been supplemented with data provided to Ramboll from the GLA and from planning applications in the area. A full assessment of Barking Town Centre s network is outside the scope of this study and is not included within this EMP. Instead BTC has been considered as a point load on the system comprising primarily residential and commercial demand. The progression of the Gascoigne Estate development in particular will be critical in the next few years if the heat load is to be considered sufficient for a heat network. Data provided by the GLA is very comprehensive in respect of the annual heat demands and the phasing of these demands in the area. At the rate of development estimated by the GLA, BTC s heat demand should be in place by For the purposes of this study and for connection to a network, only the base load from BTC is considered suitable for connection. This has been modelled to be approximately 6MW, supplying over 36,500MWh per annum or 78% of the demand in BTC Riverside and Creekmouth Barking Dagenham Barking Riverside The development phasing plan set out in the initial planning application for Barking Riverside was as follows:- Phase Year No. Houses Barking Riverside Phase Barking Riverside Phase Barking Riverside Phase Barking Riverside Phase Table 3 Barking Riverside Initial Phasing Planning consent was subsequently awarded to the Barking Riverside Development but a number of stringent planning conditions relating to requirements for public transport improvements were imposed. In particular:- No more than 1,500 homes may be occupied before a Transport and Works Act authorising the construction and operation of the DLR is signed; No more than 4,000 homes can be occupied before the DLR extension is operational; and No more than 3,999 homes can be occupied before improvements to the A13/Renwick road junction are complete. Discussions between relevant parties are ongoing but no dates for commencement are available. According to London Borough of Barking and Dagenham, only 357 of the proposed residential units have been substantially completed to date. The housing trajectory prepared by the London Borough of Barking and Dagenham in 2011 estimates that by 2028, only 4,071 of the proposed 10,800 homes will have been completed at an average construction rate of 1300 homes every 5 years. The planning application had targeted over 8,300 homes to be complete at this stage. Page 20

21 In order to meet even the London Borough of Barking and Dagenham s phasing plan, construction of the development would have to accelerate considerably in the next few years. In the absence of any additional information, the following phasing plan has been assumed over the next 25 years based on the LBBD phasing plan and achieving the same build-out rate for the remainder of the development. Year No. Houses Table 4 Barking Riverside Estimated Phasing Dagenham Docks Dagenham Docks covers both the London Sustainable Industries Park (LSIP) and the Thames Gateway Business Park. The latter has a number of planning applications associated with it and part of the site has already been developed. Details set out in the planning application have been assumed to be correct and the phasing set out in that document is assumed to be correct. LSIP is an industrial development supported by the GLA and the LBBD as a location for the development of sustainable and green industry. Two sites have been granted planning permission in LSIP to date, both of which are for heat generating plant (TEG and TGEF) and further details of which are contained in Section 4 below. The rest of the plots are indicative plot sizes only and have been benchmarked on the basis of similar sites in LROA. The phasing of these sites development has been assumed to be of the order of one site coming forward every 2 years from 2015 onwards. Other There are a number of other smaller heat loads considered suitable for connection in the area around Barking Riverside, specifically in the Creekmouth industrial area and the area south of the national rail line. Incidental heat loads along this route that are considered capable of connecting and of suitable demand to connect are also included. These additional loads are not significant in comparison to the demands projected to come from the Riverside residential development Ford and Barking Power Station Barking Dagenham Barking Power Station BPS currently has quite a small heat load, used to pre-heat the incoming gas supply for the two first generation CCGT plants on site. BPS is currently used only as a top-up electrical supply for the national grid. It is understood that only the smaller of the two units is operational with the larger unit on long-term standby. At full-capacity, the estimated heat demand for the station is approximately 6MW. The smaller unit account for up to 2MW of this demand. Given the fact that the full-load run hours are very low (approximately 800hrs/annum) and that operation is of an intermittent nature the actual load factor for the smaller plant is most likely of the order of 10%. It is considered unlikely that the plant will return to full operation in the near future. Power generation costs from other facilities would need to increase sufficiently to allow the station to become competitive once more. Even under these more favourable conditions the age and efficiency of the CCGT engines are likely to limit the load factor for Barking Power station to less than 30%. Page 21

22 As the risk associated with predicting any return to full operation of the plant is unacceptably high, only the 2MW heat requirement of the smaller plant shall be considered and additional constraints shall be applied to this load in order to account for the uncertainties associated with it. There have been plans in the past for extending the generating capacity of the power station by installing new high efficiency F-class gas turbines. These turbines require the input gas to be first compressed to a much higher pressure than is used on-site at present. The process of compressing the gas via large scale compressors will also have the effect of pre-heating the gas and thus this new unit will have no associated heat load. Ford Site The estimated annual average heat demand at Ford was approximately 120GWh. The Stamping Plant however has now closed and this, together with a move towards more efficient space heating systems in line with the trend in many major industrial sites is likely to lead a reduction in the demand for heat. The reduced heating demand on-site is therefore now estimated to be approximately 50,000 MWh/annum with a projected peak heat demand on-site of the order of 20MW Goresbrook There are a number of small to medium development projects planned for the Goresbrook area in the next years. These are primarily residential developments with some industrial loads in the Ripple Road Industrial Estate. The total heat demand for this area is estimated to be comparatively low. Other factors which limit the potential for this area to connect to a heat network include a lack of concentrated heat loads resulting in low linear heat demand (MWh/m), physical constraints such as road and rail crossings and the overall distance of the loads from the proposed network route. Goresbrook is therefore excluded from further consideration in this report. 2.3 Overall Demands in 2055 The growth of the demands over the 40 year project period is shown in Figure 3. Initial Cluster Network Area-Wide Strategic Network Figure 3 Projected Growth in Heat Demand over a 40 year period As can be seen in Figure 3 above there is already quite a sizable demand in the LROA at present. However this existing demand is spread across the whole of the LROA area resulting in a low- Page 22

23 medium average heat demand density across the region which could not support an area-wide heat network. The majority of the existing demand is in the Barking Town Centre, Ford and Beam Reach South Areas. Previous work carried out in Barking Town centre has indicated that this network is contingent upon the redevelopment of a vast area of the town centre in the Gascoigne Estate and the network is not expected to progress until such time as this comes to pass. The load at Ford is quite large and is located close to the Beam Reach South Area, which itself is an area of relatively high demand density. For this reason the Beam Reach South area which comprises both the Beam Reach South and Fairview Industrial areas are considered as a candidate for the development of an initial cluster heat network in the LROA region. This is picked up in more detail in Section 4. The main areas of growth over the 40 year period to 2055 are the Riverside and Creekmouth, Rainham and South Dagenham Areas. These areas all contain key housing developments that need to come forward in order to encourage and justify the development of a heat network in the wider region. These demands are expected to reach a tipping point in the years 2028 to 2030 whereby individual developments will exceed 60% build out. As can be seen the heat-on date for the area-wide strategic heat network opportunity is estimated to be 2030 based on this assessment of the potential demands in the area. A map showing the relative size of demands in the area is shown in Figure 4 below. This represents point load data for heat demand, represented here as graduated circles. This map shows the anticipated heat demands in the area in The clustering of heat demands can be seen quite clearly in this image and it is possible to determine how the finished network may look just from observing the pattern of demands. Page 23

24 Figure 4 Heat Map of London Riverside Opportunity Area Page 24

25 3. ENERGY SUPPLY APPRAISAL This section of the report summaries the relevant heat network supply opportunities identified under this study. Information is presented within the following sub sections and is summarised in Table East London Sustainable Energy Facility (ELSEF), Havering Riverside Employment Area BEL has planning permission to construct an Advanced Gasification facility to generate electricity and heat from pre-processed waste derived solid recovered fuel (SRF). The project site lies within the Havering Riverside Employment Area, on land adjacent to the Fairview Industrial Park the Ford Motor Company Dagenham estate, and within a strategic industrial location (SIL). The energy facility will process SRF and generate a hydrocarbon-rich gas (syngas) which is then used to generate electricity. The process of electricity generation is based on the combustion of the syngas in a boiler plant to generate steam, which, in turn, will be used in a single stage condensing steam turbine to produce electrical power. The ELSEF facility will process 130,000 tonnes or SRF per annum and generate a gross electrical output of around 25MW e at a gross electrical efficiency of 28.9% 3. Heat offtake is a key feature of the project s precedent plant in Lahti, Finland and preliminary studies into the heat offtake opportunities available to the ELSEF plant have already been completed together with an early stage assessment of a the business case. The steam turbine will be a single cylinder unit. The proposed design includes a single passout at around 0.78 bar a and 0.56 bar a, with a capacity to deliver 4.8 MW of heat at around 90 0 C into a local heat network. Initial modelling by BEL indicates a Z factor of 12 at this offtake point. The design also includes a flange offtake to allow future off heat take of up to 38 MW at C (4.3 bar), together with an additional 4 MW to supply the plant s de-aerator system. Initial modelling by BEL indicates a Z factor of 7.25 at this offtake point. The plant is intended to operate continuously, targeting 7,800 hrs of operation per annum. Electricity generated by the plant will be exported to the grid under a Power Purchase Agreement. Refer to Appendix 3 for details of the calculated cost of heat production from this plant. 3.2 Thames Gateway Energy Facility (Chinook) Dagenham Dock Cyclamax secured planning consent for the Thames Gateway Energy Facility, located on the Sustainable Industries Park in Dagenham in March The consented scheme comprised a 16.1 MW gasification-type incinerator intended to treat C&I waste and capable of handling 120,000 tonne per annum of residual commercial and industrial waste in an advanced thermal treatment process. Cyclamax however did not progress with the development of this project and instead, the site together with the associated consent, was sold to Chinook Urban Mining, a developer of equivalent advanced thermal treatment facilities to the project consented facility. Additional information has recently come to light since the completion of the modelling aspect of this report. It is now thought that the scheme, whilst still a gasification plant, will now have a capacity for processing 180,000 tpa with an electricity generation capacity of 20MW e via a steam turbine. 3 based on Low Heating Value Page 25

26 It has not been possible to engage with Chinook during the course of this study and so detailed technical proposals of the revised project have not been made available. It is understood that TGEF is looking to deliver a similar type of thermal plant to both that originally proposed and the ELSEF project itself and as such it has been assumed that heat extraction would be available at a Z factor of 7. It is further assumed that the corresponding cost of heat production is similar to that for ELSEF as presented in Appendix 3. It is understood that a second phase is also planned which will involve reciprocating gas engines. Timescales for the development and the scale of this facility haven t been established at this stage. 3.3 TEG Anaerobic Digestion Facility Sustainable Industries Park The TEG Group (TEG) is developing an Anaerobic Digestion (AD) plant on a 4.7 acre site in the Sustainable Industries Park (LSIP). The plant will be capable of processing 49,000 tonnes per annum of food and green waste, of this, 30,000 tonnes per annum will supply an AD plant, with the remaining 19,000 tonnes per annum supplying an IVC plant. The AD plant will generate approximately 1.4MWe through an internal combustion gas engine CHP. The plant is due to be operational in Autumn The feedstock will come e from source segregated food waste and mixed food and green waste produced by local households, commercial and manufacturing enterprises. Discussions with TEG indicate that the plant has around 700 kw thermal of surplus heat to export from the site. Heat offtake infrastructure is already in place and there is a network connection to the site boundary under a planning obligation. The connection is rated at 1000 kw. There is no significant requirement for importing heat to the site, other than when the CHP is out for maintenance. TEG is in negotiations with a local company to supply around 200kW- 300 kw of heat under a private agreement although the deal hasn t been finalised. Up to 500kW of heat could potentially therefore be available to the heat network. Equally, if the existing offtake proposals don t materialise up to 700 kw could potentially be available for export. Heat would be available at 90 o C and continuously throughout the year, day and night and at weekends. Since heat is recovered from the engine jacket and exhaust system, the on-going cost of heat production into a heat network would be negligible, associated only with pumping energy and maintenance of the heat offtake. 3.4 Barking Power station, Dagenham Dock Barking Power station is a 1000 MWe combined cycle gas turbine CCGT based plant. There is currently no CHP heat recovery capability at the plant and although previous work carried out by Ramboll for the GLA (then the LDA) identified the opportunity to extract up to 170 MJ/s of heat from the plant, no plans are in place to convert the plant given its uncertain commercial future in the current market. The power station has moved down the merit order in recent years and rising gas prices have led to significantly reduced operating hours with the plant operating on a merchant basis, providing peaking capacity and generating most of its revenues through the balancing market. The plant is understood to have a low capacity factor, with one of the two units currently offline and the other achieving only around 800 hours of operation per annum 4. Whilst the situation may improve in the future, the outlook suggests continued operation as a peaking station at best. This, together with a number of major technical barriers associated with extracting heat from the facility, 4 These hours are also highly variable and intermittent and therefore unsuitable as a source of heat for any proposed heat network Page 26

27 suggest that it is unlikely to form sizable source of heat for the LROA in the near or medium term. Plans to extend or repower the existing power station have been under development for several years, and previous work by Ramboll Energy has identified the opportunity to extract up to 140 MJ/s of heat from the new generating block proposed for the facility. Discussions with ATCO Power indicate that any decision to go ahead would be market driven and the plant would need to operate as a baseload generator to justify the construction cost 5. Possible development timescales could see the new plant operational in 2017 with an option to install heat recovery as recommended in the Ramboll report at that time. There could be an opportunity for raising the temperature of the existing BPS condensing water using heat pumps and feeding the heat into a district heating network for distribution. The environmental benefit of adopting this approach would be affected by the carbon intensity of the electricity used to drive the heat pumps and therefore this represents a longer term opportunity that should be kept in mind, but not one on which any shorter term business case should be based on. It would also depend on the future of the plant as noted above. Work carried out by the GLA 6 has suggested that around 600 MW of heat could be recovered under this scenario. Regardless of the timing at which new capacity emerges, the area around BPS remains a strategically important site for electricity generation in London and the area contains many of the features that are necessary to accommodate a large scale thermal power plant. On this basis, the site is therefore key in the longer term strategic heat network aspirations for the LROA. 3.5 Riverside Waste Water Treatment Plant Anaerobic Digestion Plant Thames Water Utilities Ltd (Thames Water) operates a sludge treatment facility at the Riverside Sewage Treatment Works (STW) in Rainham. This includes an advanced sewage sludge digestion plant with a maximum handling capacity of 110 tonnes of dry solids per day. The sludge treatment process includes anaerobic digestion to produce biogas which is in turn used to generate electricity and heat in a Combined Heat and Power plant on the site. The CHP plant is capable of generating up to 4MWe through two gas engines run on the biogas produced by the Anaerobic Digestion process. The Riverside digestion plant requires 1.27MW of heat energy. Surplus heat energy is used to meet the wider requirements of the waste water treatment works. In the absence of information from Thames Water, we have assumed that around 90% of the heat generated from the CHP is reused onsite, with the remainder being potentially available for export to a heat network. This would be available at temperatures of approximately 90 o C Heat Recovery from Tertiary Treatment Tanks Work carried out by the GLA 7 suggests that additional heat could be recovered from the waste water treatment plant by capturing low grade heat released from the water treatment works as part of the biological activity associated with the sewage treatment process. The quantity of heat available would be dependent upon flow rate and the heat extraction rate, which itself depends on the difference between the extraction and reinjection water temperatures to the process. The study indicates an annual potential extraction capacity of 347,000 MWh/annum, with minimum and maximum continuous extraction capacities of 18MW (August) and 65MW (December) respectively. Assuming delivery into a heat network at 70 o C, heat could be delivered into the heat network at COP s of between 3.5 (December) and 4.18 (August), based on industrial (20MW scale) heat pump technology. This equates to delivered heat capacities of 24MW (August) and 91MW 5 with a minimum of 70% to 80% load factor and a power purchase agreement for 10 to 15 years to secure finance 6 London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January 2013 Page 27

28 (December) and an annual potential delivery capacity into a heat network of 475,120 MWh/annum. 3.6 Frog Island MBT Plant Shanks Waste Management has planning consent to construct an anaerobic waste treatment plant on land adjacent to its Frog Island Mechanical and Biological Treatment (MBT) facility. This will be capable of handling up to 100,000 tonnes of organic materials, including supermarket waste, food waste and food manufacturing waste, per annum. The BGP will generate biogas for conversion into renewable power and dewatered digestate. During the process heat will also be generated, which will be used by the BGP and by the adjacent Bio MRF. The process will operate continuously. The planning statement for the facility indicates that the opportunity exists in the future to inject biogas into the gas grid from this facility. The plant is being designed to maximise opportunities for Combined Heat and Power (CHP) and discussions with Shanks indicate that up to 9GWh per year of surplus heat may be available for export to other heat users. This equates to a continuous thermal output of around 11.5 MJ/s, assuming a 90% load factor for the plant. It is expected that heat would be available at a temperature of up to 95 o C. 3.7 The Ford Motor Company works at Dagenham The main Ford manufacturing facility located to the west of ELSEF and Fairview Industrial Estate contains three 60MW gas-fired steam generating boiler plant. There is no thermal store on site and this steam is used both in the manufacturing process and for space heating. The peak heating demand on site is estimated to be of the order of 20MW. 3.8 Sustainable Industries Park Plot 5 Since the completion of the initial stages of this project an additional potential energy supply has come to light. This is in the form of a 160,000 tpa Anaerobic Digestion Plant and Category 3 transfer station on Plot 5 of LSIP. The planning application for this site has recently been received by the planning department of the London Borough of Barking and Dagenham (13/00649/FUL) with a target determination date of 11 November This plant is to incorporate a gas to grid installation which indicates that, as it stands, there are no plans to use the gas on-site in a combined heat and power plant as a heat provider though of course, given the early stage of this scheme, this may be subject to change. 3.9 Existing or Planned Small Scale Embedded CHP within the LROA Beam Reach 5, Tesco Distribution Centre The Tesco Distribution centre within the Beam Reach 5 site incorporates a recycling and vehicle maintenance centre that will contain a biofuel CHP rated at 315 kwe. The distribution centre is complete but not yet operational. The plant is intended to operate for around 8000 hours per year generating renewable electricity and heat for use on site. This will deliver around 2,520 MWh and 3,981 MWh of electricity and heat respectively. The opportunity for exporting heat is considered to be negligible given that the CHP will have been sized for its onsite application and is unlikely to be operational during periods of low demand Orchard Village Orchard Village is a new development in the London Borough of Havering consisting of 550 new homes. Phase 1 which consists of around 170 homes is complete and is supplied via a community heating network with central gas fired boiler plant. Page 28

29 Phase 2 which is underway and substantially complete, will be supplied via a 210kWe/280kWth gas fired CHP. Biofuel boilers are also planned to replace the existing gas boilers installed under phase 1. Whilst the planning application isn t entirely clear, the opportunity for exporting heat is considered to be negligible, given that the CHP will have been sized based on the site demand. The site could potentially become a heat customer to a future heat network opportunity at the end of CHP plant s useful life Goresbrook Leisure Centre, Barking and Dagenham Goresbrook leisure centre houses a kwe gas fired CHP which supplies the leisure centre pool. The opportunity for exporting heat is considered to be negligible. The site could potentially become a heat customer to a future heat network opportunity at the end of CHP plant s useful life. Since the completion of the initial stages of this project, Goresbrook Leisure Centre has now closed and has been sold for development of a Free School. There is no additional information available as to the status of the plant Opportunities Beyond LROA But Within the Greater Vicinity of LROA OC Plant Gallions Reach, Beckton Gas Works 20C is constructing a power production facility at the site of the gas works in Beckton. Construction of the plant is nearly complete and the plant is due to be operational during the first quarter of The plant will extract energy from the gas pressure reduction process through a turbo expander coupled to a grid connected low speed 2-stroke static compression ignition engine powered by renewable bio liquid coupled. The gas pressure reduction process requires heat injection to pre heat the gas prior to expansion in order to prevent freezing of the pipework at the reduced gas pressure arising as a result of the expansion process. This heat is provided from the engine jacket of the bio-liquid generator, which simultaneously generates 13,800 kw e of electricity. The incoming gas is simultaneously expanded through turbo expanders, which produce a further 3,000kW of electricity. Waste heat from the bio-liquid generator will be recovered via the exhaust stack and fed through an Organic Rankine Cycle generator to generate additional electricity. This electricity, together with the electricity generated by the bioliquid generator and the turbo expander, will be sold to Thames Water via a private wire arrangement. Up to 1.2MJ/s of waste heat can potentially be recovered from the exhaust system of the bioliquid generator without incurring any loss of electricity production. The heat could be available at temperatures between 80 o C -100 o C. Additionally, heat could potentially be recovered at the expense of generation of electricity (from the organic rankine cycle generator). The heat available in this situation would be in the order of 4.4 MJ/s and would be available temperatures of up to 265 o C. A further 0.8 MJ/s of low grade heat could potentially be available downstream of the ORC heat exchanger as a by-product of the process. Lower grade heat from the condensing cycle of the ORC and the engine cooling circuits is also rejected via fan coolers. These heat streams would potentially be available at up to 70 o C but would vary in capacity during the year according to demand for gas preheating, which would be greatest in the winter months. The waste stream would therefore be mostly available for export in the spring and summer periods. Heat could potentially be extracted from this process and used in the heat network via heat pumps. Thames Water is also understood to have rights to the heat generated from the facility. The heat would be supplied to them at no cost, other than the marginal operating cost of delivering the heat and the investment costs in the network connection and heat offtake arrangement. Page 29

30 Thames Water currently has no immediate use for the heat available from the facility. If it chooses to invest in the connection and off take, it would do so on the basis of either using the heat on site for drying of sludge or for selling heat into a future heat network. The decision would be based on an economic appraisal of the options, and Thames Water has yet to investigate this in any detail. From the perspective of any heat network project opportunity, the cost of heat would need to be as good as or lower than Thames Water s alternative options of doing nothing and using the heat for on-site purposes. Discussions with local housing associations have been on-going with a view to supplying a proportion of the available heat to local residents in the area. This option would require investment in a heat off take, a connection to the site and also back up capacity to cover for plant maintenance downtime. The plant will operate 24 hours per day with a 95% availability factor. As the heat is generated by a single engine, the supply would either be fully available or not available, depending on outages. Expected plant downtime would be around one 8 hour per month preventative maintenance outage and a 1 week outage during summer period. The estimated infrastructure costs for a heat exchanger, pumps, valves, controls and bypass arrangement to allow variable heat off-take for the first 1 MJ/s of heat are 500, However, these would be borne by Thames Water rather than the project company for the heat network. The process is an OFGEM accredited renewable process. The carbon burden of the first 1 MJ/s heat extracted would be zero, since this represents recovered waste heat without an associated penalty in electricity operation. For the subsequent 4.8 MJ/s of heat extraction, there would be a carbon burden associated with forfeited electricity production from the ORC Thames Water Sludge Power Generator Facility Beckton Wastewater Treatment Works Thames Water Utilities Ltd (Thames Water) operates a Sludge Power Generator (SPG) facility at the Beckton site. Electricity is recovered as part of this process through a steam turbine connected to an electrical generator with an electrical capacity of 12 MWe. The electrical output of this process is 9MWe with around 35% supplying the parasitic load to the process and 65% being delivered to the site to supply process loads that would otherwise require imported electricity. No electricity is exported from the facility. The output from the SPG facility is continuous, except for a three week annual shutdown in May for preventative maintenance. The long term operation of the facility is uncertain and dependent on approval and funding from Ofwat under the upcoming AMP6 investment programme for 2015 to This will be determined in 2014/2015 and would take place during the period from 2015 to Providing that the on-going commercial viability of the operation can be assured, the facility is expected to receive approval and funding and can be expected to continue to operate at the site. For the purpose of this study, it has been assumed that heat could be made available by The steam turbine is configured as an extraction turbine. Based on discussions with Thames Water, we understand that Thames Water currently bleed low pressure steam from the turbine in order to feed parasitic heat loads as part of the treatment process. Steam from the outlet of the turbine enters the condenser at approximately 100 o C. This heat could potentially be recovered from the condensers (at a lower temperature) and supplied at around o C for the majority of the year with boosting through supplementary firing in peak periods to achieve 110 o C in the peak condition. Alternatively, heat could be extracted at low pressure from the turbine at the expense of electricity production. This could be used to boost the temperature of heat from the condenser in peak mode operation or to supply the site directly in extraction mode, which is what has been assumed for the present study. A third option could be to reconfigure the back end of the turbine 8, based on information provided by 2OC Page 30

31 to increase delivery temperature to the condenser. However this would result in a lower extraction efficiency, which would need to be compensated for financially over the operational life of the plant. Further work is required to analyse and evaluate the preferred option for extracting heat from the facility. The facility currently co fires with around 10% input from natural gas. Thames Water are in the process of modifying the design of the facility to reduce co firing requirement, which is expected to be virtually zero by the time the facility could supply heat to the network Thames Water Desalination Plant - Beckton Wastewater Treatment Works Thames Water operates a desalination plant adjacent to Sludge Power Generation facility. Until recently this was being powered by five 1.6MWe biofuel generators which, under a S106 agreement with Newham Council, were installed in order to deliver carbon neutral operation of the desalination facility over the operating life of the plant. However, as a result of its recent deal with 2 OC to import low carbon electricity for the desalination facility, the biofuel generators are no longer operated and are being retained instead as standby capacity running on mineral oil. Discussions with Thames Water suggest an uncertain future for the biofuel generators, largely as a result of the high cost of biofuel and difficulties in sourcing fuel that qualifies for ROCs. Whilst the situation may change in the future, there are no immediate plans for returning the generators into operation. It has been assumed for the present study that heat would not be recovered from the biofuel generators Thames Water Enhanced Sludge Digestion Facility - Beckton Wastewater Treatment Works Thames Water has an Enhanced Sludge Digestion Facility at their Beckton Sewage Treatment Works. This comprises new sludge treatment infrastructure, a Thermal Hydrolysis Plant (THP), a Sludge Cake Storage Building with associated plant and refurbishment of existing digesters. The scheme includes an on-site anaerobic digestion facility producing biogas to feed three 1.4MWe CHP engines. Power from the engines is used within the existing Thames Water site and heat from the CHP is used on site to raise steam for the Thermal Hydrolysis Plant (THP) and to maintain the temperature within the digestion tanks. The gas engines operate continuously, except for maintenance down time. Based on discussions with Thames Water, it is understood that high grade heat is not available from the generator sets as this will be recycled into the AD process. However, low grade heat could be recovered from the engine jackets at around o C and made available for supply into a heat network. Based on continuous operation of the plant, the quantity of heat available from the engine jackets would be of the order of 2.4 MJ/s in normal operation Heat Recovery from Tertiary Treatment Tanks ~ Beckon Wastewater Treatment Works Work carried out by the GLA 9 highlights the potential to recover heat from the waste water treatment plant by capturing low grade heat released from the water treatment works due to biological activity associated with the sewage treatment process. The quantity of heat available is dependent upon flow rate and the heat extraction rate, which itself depends on the difference between the extraction and reinjection water temperatures to the process. The study indicates an annual potential extraction capacity of 4,132,666 MWh/annum, with minimum and maximum continuous extraction capacities of 220 MW (July) and 778 MW (December) respectively. Assuming delivery into a heat network at 70 o C, heat could be delivered into the heat network at COP s of between 3.5 (December) and 4.15 (July), based on industrial (20MW scale) heat pump technology. This equates to delivered heat capacities of 289MW (July) and 1,089MW (December) and an annual potential delivery capacity into a heat network of 5,656,614 MWh/annum. 9 London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January 2013 Page 31

32 The Riverside Resource Recovery Energy from Waste Facility The Riverside Resource Recovery (RRR) Energy from Waste Facility is located in the London Borough of Bexley on the southern bank of the Thames, directly south of the Dagenham Ford Factory. The plant average capacity for waste incineration is 585,000tpa, with consented capacity of 670,000tpa at an hourly processing rate of 28t/h. The net electrical output from the plant is 65.5MW. At present the plant is electricity-only generation, though there is scope in the design for CHP operation. The plant produces high grade heat in the form of steam for electricity generation at 427 o C and 72bar Thames Water Sludge Power Generator (SPG) Facility Crossness Wastewater Treatment Works Thames Water Utilities Ltd (Thames Water) operates a Sludge Power Generator Facility at the Crossness site. The GLA s 10 report into London s Zero Carbon Resource Secondary Heat quantifies the opportunity for heat recovery at this site to be 6.6 MJ/s based on condenser heat recovery through heat pumps Heat Recovery from Tertiary Treatment Tanks ~ Crossness Wastewater Treatment Works Work carried out by the GLA 11 indicates an annual potential extraction capacity of 4,132,666 MWh/annum, with minimum and maximum continuous extraction capacities of 98 MJ/s (July) and 347 MJ/s (December) respectively. Assuming delivery into a heat network at 70 o C, heat could be delivered into the heat network at COP s of between 3.5 (December) and 4.15 (July), based on industrial (20 MJ/s scale) heat pump technology. This equates to delivered heat capacities of 129 MJ/s (July) and 486 MJ/s (December) and an annual potential delivery capacity into a heat network of 2,523,513 MWh/annum Other Low Grade Waste Heat Opportunities within LROA The GLA s 12 report into London s Zero Carbon Resource Secondary Heat quantifies the opportunity for low grade heat recovery in relation to the supplying heats networks from the following sources within the LROA. Heat rejection from power generation (including Barking, ELSEF, gas engine CHP) Waste water treatment plants Air source heat pumps Closed loop ground source abstraction Closed loop ground source abstraction Building Heat Rejection (offices, retail, gyms) Industrial Sources Commercial Building Sources - Non HVAC Sewer heat mining Transformer heat recovery from 132 KV National Grid Substations Transformer heat recovery from the 11 KV UK Power Networks Substations at Barking West Heat rejection from power generation and waste water treatment plants have already been considered in the previous section of this report. Of the remaining sources, closed loop ground source heat pumps, sewer heat mining and air source heat pumps are shown to be the most abundant within the LROA. However, the GLA report indicates that these methods have relatively high levelised costs of extraction when compared to rejection from power generation and waste water treatment plants and also when compared to transformer heat recovery, which although a small resource, is 10 London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January 2013 Page 32

33 concentrated in a few locations and is readily accessible to a potential future heat network within the LROA. Table 5 shows these identified low grade waste heat opportunities within and in the vicinity of the London Riverside Opportunity Area Role of Accumulator Storage Accumulator thermal storage can provide significant operational flexibility to extraction turbine plants. It can allow these plants to switch between maximum electricity production and maximum heat offtake (any anywhere in between) according to the market value of electricity generated at any given time. The use of accumulator storage would allow extraction plants connected to the network to respond optimally to seasonal time of day tariffs and maximise their revenues accordingly so that heat production is avoided during times of high value of electricity and heat production is maximised during times of low value of electricity. In Denmark this is common practice for extraction CHP plants where accumulator storage is used to maximise revenue from supply into the Nord Pool. We note that a Danish energy trading company has recently started operating in the UK market and is offering aggregation services to existing and potential CHP plant operators based on the concept of production shifting through accumulator storage. Such an approach should be considered for this project Summary of Supply Opportunities and Merit Order of production Table 5 and Figure 5 summarise the relevant supply opportunities identified under this study for the LROA. The associated carbon saving potential and cost of heat production for each identified asset are shown in Appendix 1. Costs of heat production are based on forfeited electricity production costs for extraction plants, and on electricity consumption for heat pump based technology options. Costs for extraction plants assume the same value for electricity generation for all plants, being factored only through the plant s z factor. Distribution pumping energy costs are ignored in each case and for gas engine technologies, the cost of heat production is taken to be zero since heat extraction will not affect electricity production. The exception to this is the second stage of heat extraction from the 2OC plant, where heat production would be accompanied by a loss in electricity production from an organic rankine cycle engine. RHI support is ignored in these comparisons in order to show only actual costs of heat production and thereby present a fair basis for comparison of the technologies 13. Added to these costs are non-discounted levelised costs of heat production associated with both the investment and on-going maintenance of the asset over 25 years, together with the establishment of associated balance of plant. The calculated cost assumes that each supply asset would deliver the full quantity of heat available from that asset (constrained by the capacity of the offtake) over a period of 25 years. Carbon emission factors for heat production from extraction turbines are calculated based on marginal grid electricity production, factored through the z factor of the turbine. Carbon emission factors for heat production from heat pump based technologies are calculated based on grid average electricity production, factored through the assumed seasonal COP of the heat pump. Carbon emission factors for heat production from for gas engine technologies are taken to be zero where the electricity generated by the engine is not counted within the business case for the 13 As explained in Appendix 3, the cost of heat production from ELSEF used in the business case analysis presented in Section 4 takes into account RHI support, thereby capturing the value of RHI in the business case for the heat network. Page 33

34 network. For dedicated new gas engine energy centres, Carbon emission factors for heat production are based on offsetting marginal grid electricity production. Carbon emissions are presented based on rolling grid emission factors for and on DECC s projected marginal and grid average forecasts to 2050, assuming central forecasts 15. The identified heat resource from power generation within the LROA is greatly in excess of projected demands in the area. The merit order of production could therefore be expected to be determined by a combination of the carbon intensity of heat production and the lifecycle cost of heat production from each of the assets. Figure 5 shows the relationship graphically indicating that free heat recovery from the AD facilities (and stage 1 of the 2 OC plant) represent the lowest cost of heat production and have zero carbon emissions associated with the delivery of heat. Of these, the TEG facility represents the most attractive opportunity due to its location and development status. However, it only has the capability to provide 700 kw of heat and therefore represents a secondary asset as opposed to the primary strategic asset for the LROA. Heat extraction from stage 2 of 2 0C also delivers very low cost heat but incurs a relatively large carbon penalty due to forfeited electricity production from the proposed organic rankine cycle engine. As noted above, this plant is outside of LROA, a long way from the proposed initial development phase for the network and provides only a small quantity of heat. It is not therefore considered to be a primary strategic asset for the LROA. ELSEF stage 1 heat offtake provides the next lowest cost and lowest carbon content of heat production and therefore provides a basis for being the highest merit order of production for the extraction or condenser heat recovery plants 16. This assumes the z factor of extraction quoted by BEL as noted in this report, which needs to be verified at the design stage. Beyond this plant, heat extraction from a future power station at Barking would provide the next lowest cost and lowest carbon content of heat production followed by ELSEF Stage 2, heat recovery from 132 KV National Grid Substation and the TGEF Gasification plant. Beckton SPG and Barking Power station provide heat at comparable costs but with higher carbon content than the other supplies listed above. It is noted that heat recovery from WWTW plants using industrial heat pumps is relatively less attractive than extraction through steam turbine plant (where higher Z factors can be achieved). Whilst Riverside Resource Recovery has been identified as a potential supply asset, it hasn t been shown here since its location south of the River Thames implies a high network investment cost meaning that it couldn t realistically deliver heat at competitive prices in relation to the opportunities identified in Figure 5. For comparison purposes (although not shown in Figure 5 due to the scale of the figure), the levelised cost and carbon content of heat production from gas boilers at a scale of 20 MW are calculated to be 2.82 p/kwh 17 and 0.22 kg/kwh respectively. 14 archive.defra.gov.uk/.../pdf/ guidelines-ghg-conversion-factors.xls the merit order relationship is not affected by the rate of reduction of grid carbon intensity and does not change between now and Assuming gas purchased at 2.5 p/kwh and 90% boiler efficiency. Page 34

35 Figure 5 Indicative Merit Order of Production Page 35

36 Generation Asset Method of Heat Extraction Thermal Extraction Potential Generation Asset Assumed Thermal Extraction to Heat Network Grade of Heat Generation Asset Assumed Load Factor Generation Asset Seasonal COP / Z factor Generation Asset Annual Supply Capability Date of Heat Availability MJ/s [MJ/s] [0C] [%] [-] [MWh/a] [-] Barking Thames Gateway Energy Facility / Chinook Gasification Plant/ Barking Riverside Phase 1 steam turbine - extraction ~unknown 90% ~7 157, TEG Anaerobic Digestion Facility Sustainable Industries Park IC engine jacket and exhaust heat recovery % n/a 5, Barking Power Station Option 1 steam turbine - extraction ~ 140 O C 9% ,000 existing Barking Power Station Option 2 steam turbine - heat recovery from condenser circuit ~ 35 O C (boosted to 70 O C through heat pumps) 9% ,000 existing Barking Power Station (Future) steam turbine - extraction ~105 75% ~ , * Goresbrook leisure centre IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a National Grid 132kV substation Oil cooled transformer - heat recovery from cooling circuit % ,271 existing UKPN 11kV substations Havering Oil cooled transformer - heat recovery from cooling circuit % ,622 existing ELSEF Gasification Plant ~ Stage 1 steam turbine - extraction ~90 90% 12 37, ELSEF Gasification Plant ~ Stage 2 steam turbine - extraction ~191 90% , Riverside Waste Water Treatment Works IC engine jacket and exhaust heat recovery ~90 90% n/a 3,260 existing Riverside Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~ ,120 existing Tesco distribution centre at Beam Reach 5 contains a biofuel CHP IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a Orchard Village IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a Frog Island Bexley IC engine jacket and exhaust heat recovery % 9,067 Planning Permission Granted Crossness STW Sludge Powered Generator steam turbine - condenser heat recovery through heat pumps ~ 35 O C (boosted to 70 O C through heat pumps) 90% ,684 existing Crossness Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~4.18 2,523,513 existing Newham 20C Plant stage 1 exhaust heat recovery from bioliquid generator ~ O C 95% n/a 9, C Plant stage 2 exhaust heat recovery from bioliquid generator ~265 O C 95% , Beckton STW Sludge Powered Generator stearm turbine - condenser heat recovery through heat pumps ~ 35 O C (boosted to 70 O C through heat pumps) 90% ,864 existing Beckton STW Sludge Powered Generator steam turbine - extraction ~ C 90% ~7 239, Bekton Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~4.18 5,656,614 existing Enhanced Sludge Digestion Facility - Bekton IC engine jacket ~90 90% [] 18,922 existing Table 5 List of Identified Heat production assets within and in the vicinity of London Riverside Opportunity Area. Page 36

37 Figure 6 Spatial Layout Plan for Identified Heat Supply Opportunities Page 37

38 4. HEAT NETWORK OPPORTUNITY APPRAISAL 4.1 Methodology The objectives of this section are to establish the economic viability of the proposed London Riverside Heat Network and to identify the expected construction phasing of the network based on the development phasing assumptions set out in Section 2. In order to determine the viability of the proposed scheme, a number of scenarios have been tested. These scenarios are set out in Table 7 below. An outline description for each of these scenarios is presented in the following sections. In overall terms, the analysis has been subdivided into an initial project phase centred around the immediate short term project opportunities in Havering and the wider long-term strategic network opportunity extending from the initial Havering project into Barking & Dagenham and the potential to connect into Newham Royal Docks and beyond. In all cases, ELSEF has been modelled as the main supply asset for project. In the initial project phase, a single heat production stage at ELSEF has been modelled as detailed in Section 3.1 and gas boilers are assumed for topping up purposes. Under the wider strategic network opportunity, two heat production stages at ELSEF have been modelled as detailed in Section 3.1 and gas boilers are also assumed for topping up purposes. However, it is recognised that the future merit order of heat production could also include other assets as shown in Table 5. Assumed Merit Order Initial Project Wider Strategic Network 1 ELSEF Stage 1 ELSEF Stage 1 2 top up boilers ELSEF Stage 2 3 top up boilers 4 (TEG AD) 5 (TGEF Gasification Plant) Table 6 Assumed Production Hierarchy in Modelling Accumulator thermal storage is not modelled in the initial project phase since there is unlikely to be sufficient demand to warrant the investment. Under the wider strategic network, accumulator thermal storage is modelled on the basis of providing sufficient capacity to displace daily demand on a winter day to allow maximum electricity production for up to 8 hours (to benefit from supplying electricity during peak pricing periods). Both assumptions need to be verified at the next stage. The key economic and carbon indicators have been identified. These are presented in Section 4.3. The scenarios have been assessed over a 25-year project life assuming heat on and construction dates as indicated in Table 7. These dates are dependent on the project phasing assumptions presented in Section 2. In the case of the wider strategic network, the first year of construction is assumed to take place once 60% of the critical loads in the respective project areas are in place. Until that time, existing buildings would retain their existing heating systems and new developments would be served by temporary energy centres. Construction and investment is assumed to take place a year ahead of the identified heat on dates presented in Table 7. The basis of the economic evaluation is presented in Appendix 6. Page 38

39 4.2 Scenarios Modelled Figure 7 summarises the scenarios modelled. The magenta outline shown in the image here represents the Scenario 1 boundary and the blue outline represents the Scenario 2 boundary. These two outlines represent the base scenarios which have been modelled for this energy masterplan. Optimisations of these two base scenarios have also been carried out and details of these are provided in the succeeding sections. Figure 7 Indicative Outlines for Scenarios 1 & 2 Page 39

40 Scenario 1a Initial Network Local to ELSEF, No future Safeguarding Scenario 1 Initial Network Local to ELSEF Scenario 1c Scenario 1b & Connection to Rainham Scenario 1b Scenario 1 & Connection to Ford Figure 8 Summary Chart of Initial Network Modelling Scenarios Scenario 1 - Initial Network local to ELSEF facility Primary Modelling Scenario This scenario assumes construction of an initial cluster network to supply Beam Reach South. The network is sized to deliver the entire capacity under the area-wide strategic network scenario (Scenario 2), with network construction only taking place as far as is necessary to pick up the initial cluster loads. The annual consumption for this scheme at full build out is 14,583MWh/annum with a peak of 8.5MW. In this scenario ELSEF Stage 1 off-take provides 96% of the annual demand with peaking boilers required for the additional demand and downtime in the system. Figure 9 Scenario 1 - Annual Heat Demand (average) profile Page 40

41 Figure 10 Annual Supply Profile Scenario Scenario 1a - Initial Network local to ELSEF facility, separate local network Variation on Scenario 1 This scenario assumes construction of an initial cluster network to supply Beam Reach South and the Fairview Industrial Park, sized only to deliver the initial cluster loads. It is assumed that a separate (local distribution) network would be installed for this scenario, with construction of the main transmission network happening at a later stage Scenario 1b - Initial Network local to ELSEF facility including Ford Variation on Scenario 1 This scenario replicates scenario 1 but includes the Ford Motor Company as a heat customer with the heat network sized to accommodate this additional load. A connection to Barking Power Station has not been modelled as the length of heat network required to connect via the planned network route is considered prohibitive to a project of the scale being considered Scenario 1c - Initial Network local to ELSEF facility connecting also Rainham via a new east road crossing Variation on Scenario 1 This scenario replicates scenario 1 but includes for connecting Rainham via a new east road crossing. The majority of the demands in Rainham, Fairview and Beam Reach South are already in place or are planned for development in the near future with additional developments coming online as they are constructed. Page 41

42 Scenario 2a Scenario 2 & Conenction to Ford Scenario 2d Scenario 2 With Uplift on Electricity Sales Scenario 2 Area-Wide Strategic Network Scenario 2b Scenario 2 & Safeguarding to Royal Docks Scenario 2c Scenario 2 without Barking Town Centre Figure 11 Summary Chart of Area-Wide Strategic Network Modelling Scenarios Scenario 2 Area-Wide Strategic Network Scenario Primary Modelling Scenario The Area-Wide Strategic Network scenario assumes construction of an area wide heat network to supply Barking Town Centre, Riverside and Creekmouth, Rainham, South Dagenham and Beam Reach South. The network is sized to deliver the entire capacity to these areas, except for the case of Barking Town Centre, where the connection is sized to deliver the baseload for that scheme (6 MW), with the remainder being met through local peaking plant. The construction timescales for this scenario are based on an assumption that the network in each area would be constructed in time to provide heat when 60% of the planned developments are built out and ready to connect. The development phasing of Barking Riverside is the key determinant in the network development timeline, as this represents the main regeneration opportunity. Barking Town centre located west of the regeneration scheme is forecast to be developed in advance of Barking Riverside and thus is not the critical phasing factor. Safeguarding for the connection to Royal Docks is not included in this scenario. The energy consumption profile for the fully built out scheme in this scenario is shown in Figure 12 Page 42

43 Figure 12 Scenario 2 -Annual Heat Demand Consumption Profile 2055 The peak hourly heat demand is 42MW with a total annual heat demand of 124,500 MWh/annum, Figure 12 above shows the monthly binned average peak for the scheme as. It is intended that ELSEF would supply the majority of the heat to the project in this scenario, with appropriately sized peaking plant provided to cover any planned or unplanned downtime of the ELSEF plant. Given the fact that ELSEF could cover 98% of the annual heat demand in this scenario a connection to an additional low-carbon supply has not been modelled in this case. In order to ensure that ELSEF could continue to optimise electricity production, a large-scale thermal store has also been included in this model. The intention is that this would be charged at night-time at times of low electricity value and would supply the network during the day when the value of electricity is high. The annual supply profile of the plants is shown in Figure 13 below. Figure 13 Annual Supply Profile Scenario 2 Page 43

44 4.2.6 Scenario 2a - Area-Wide Strategic Network with Connection to Ford Motor Company Optimisation of Scenario 2 This scenario replicates the Area-Wide Strategic Network with additional connections at Ford Motor Company and Barking Power Station. There are considerable uncertainties surrounding these loads with respect to their ability to connect and potential future changes to the heat supply requirements at these facilities. Nonetheless they represent an additional future opportunity for the project and as such, have been included in this scenario. The network capacity and pumping requirements for the entire scheme have been updated to reflect the increase in demand due to this additional load. Under this scenario the heat supply will be primarily from the ELSEF facility with top-up boilers. Similar to Scenario 2, ELSEF can supply the majority of the heat each year and given that backup boilers would be required to ensure security of supply in any scenario. An additional connection to a secondary low carbon plant for this demand is unlikely to improve the business case for the project at this stage Scenario 2b - Area-Wide Strategic Network with safeguarding to connect to Royal Docks - Optimisation of Scenario 2 This scenario replicates the Area-Wide Strategic Network with safeguarding for a connection into Newham Royal Docks included in the financial appraisal of the scheme. Revenues from heat sales to the Royal Docks have not been included in this scenario as the intention is that this scenario should reflect the possibility that the connection to the Royal Docks never materialises. Previous development proposals for the London Thames Gateway Heat Network have envisaged construction of a heat network linking Barking and Dagenham to the Royal Docks. Work carried out by Ramboll 18 identified the scale of opportunity and the strategic network opportunity in the Royal Docks and Canning Town, together with the opportunity for safeguarding to interconnect to the Olympic Park DE Scheme (OPDES). The indicative capital cost of safeguarding for this connection has been calculated, assuming 10MW of residual capacity in the network delivered at the boundary of the LROA. This equates to supplying the Royal Docks with the baseload capacity previously modelled in the Royal Docks and Canning Town Energy Infrastructure Report as being appropriate to deliver from the Thames Water sludge incinerator at East Beckton Scenario 2c - Area-Wide Strategic Network without Barking Town Centre Variation on Scenario 2 This scenario replicates scenario 2 but excludes Barking Town Centre from the analysis. This represents the scenario whereby the heat network is designed for the Riverside Area only with no safeguarding for connection to either Royal Docks or Barking Town Centre Scenario 2d - Area-Wide Strategic Network with uplift on electricity sales optimisation through Accumulator storage Variation on Scenario 1 As discussed in 3.12, accumulator thermal storage could potentially increase the value of electricity generation from ELSEF. The value of this potential opportunity is presented as a like for like benefit transferred to the heat network through a reduction in heat production costs from ELSEF. The value of the potential benefit has been modelled based on a 10% increase in the value of forfeited electricity generation, factored through the z factor of the plant. Refer to Section Royal Docks and Canning Town Energy Infrastructure Report, Ramboll Energy, 2012 Page 44

45 Projects Scenarios Modelled 1 1a 1b 1c 2 2a 2b 2c 2d Demand included. Barking Town Centre x x x x Goresbrook Riverside and Creekmouth x x x x x Ford x x BPS x Rainham x x x x x x South Dagenham x x x x x Beam Reach South x x x x x x x x x Royal Docks Network sized for: Barking Town Centre x x x x x x x Goresbrook Riverside and Creekmouth x x x x x x x x Ford x x x BPS x x x Rainham x x x x x x x x South Dagenham x x x x x x x x Beam Reach South x x x x x x x x x Royal Docks x Thermal Store x x x x x Network Design - No Safeguarding x x Network Design - Safeguarding for BTC only x x x x x x Network Design - Safeguarding for BTC and Royal Docks x scenario description Intial Network local to ELSEF facility Intial Network local to ELSEF facility, separate local network Intial Network local to ELSEF facility incl Ford Intial Network local to ELSEF facility connecting also Rainham via new east road crossing Area-Wide Strategic Network Area-Wide Strategic Network (incl Connection to Ford) Area-Wide Strategic Network with safeguarding to connect into Royal Docks Area-Wide Strategic Network without Barking Town Centre Area-Wide Strategic Network with uplift on electricity sales optimisation through Accumulator storage Table 7 List of Heat Network Scenarios Modelling Page 45

46 4.3 Summary of Business Case and Carbon Reduction Potential for modelled Scenarios Projects Scenarios Modelled 1 1a 1b 1c 2 2a 2b 2c 2d IRR % over 25 years [%] NPV at 6% discount factor [ K] 1,262 2,726 5,580-1,038 11,136 20,136 9,571-3,499 11,736 Carbon emissions savings against Business as Usual Carbon emissions savings against Business as Usual [%] [TCO2/pa] 59,963 60, , , , , , , ,395 78% 78% 73% 75% 55% 61% 54% 58% 55% Demand from Network [MWh/a] 13,266 13,266 63,227 27, , , ,298 80, ,298 Heat Supplied to Network from ELSEF Facility [MWh/a] 13,997 13,840 62,788 29, , , ,400 85, ,279 Heat Supplied to Network from Alternative Supply [MWh/a] Heat Supplied to Network from Top-Up Gas Boilers [MWh/a] , ,330 4,690 2,335 1,385 2,331 Network Investment Cost [ K] 4,280 2,917 7,021 6,978 23,202 23,946 24,599 19,216 23,202 Cost of Connection [ K] ,526 1,672 1,526 1,500 1,526 Heat Offtake Investment Costs (at ELSEF) [ K] ,114 1,114 1,324 1,324 1,324 1,324 1,324 Balance of Plant and Energy Centre Costs [ K] 1,290 1,257 3,335 3,129 5,299 5,261 5,333 5,158 5,298 Annual operating costs at full build out (including REPEX) Annual revenues to Project from heat sales at full build out [ K] [ K] Network Key Financial Indicators Carbon Savings Energy Demand Indicators Costs ,391 1,915 1,406 1,008 1,339 Revenues ,031 1,272 5,107 6,364 5,106 3,292 5,107 Additional Indicators Forfeitied electricity Sales from ELSEF Facility [ K] 1,166 1,153 7,157 2,744 15,541 21,976 15,557 10,817 15,541 Length of Network [km] Linear Heat Density MWh/m Year of Connection to Project Heat Network Barking Town Centre Goresbrook Riverside and Creekmouth Ford and BPS Rainham South Dagenham Beam Reach South Royal Docks scenario description Intial Network local to ELSEF facility Intial Network local to ELSEF facility, separate local network Intial Network local to ELSEF facility incl Ford Intial Network local to ELSEF facility connecting also Rainham via new east road crossing Area-Wide Strategic Network Area-Wide Strategic Network (incl Connection to Ford) Area-Wide Strategic Network with safeguarding to connect into Royal Docks Area-Wide Strategic Network without Barking Town Centre Area-Wide Strategic Network with uplift on electricity sales optimisation through Accumulator storage Table 8 Summary of Modelling Results A summary of key economic and carbon indicators for scenarios modelled presented in Table 8. Internal Rate of Return (IRR) 19, Net Present Value (NPV) 20 and CO 2 abatement 21 are shown for each scenario along with investment costs and operating revenues and costs. Nominal hurdle rates of 10 % and 6 % have been assumed in calculating NPVs. 19 IRR is the discount rate at which the present value of all project cashflows are zero 20 NPV is the difference of the present value of cash in and cash out throughout the project lifetime 21 CO2 abatement indicator is a measure of the CO2 emission reductions attributed to the scheme compared to the business as usual alternative case for the buildings connecting to the scheme. Page 46

47 4.3.1 Scenario 1 - Initial Cluster Project Table 8 presents the key indicators for each of the modelled scenarios and in so doing raises a number of key discussion points. As can be seen the rates of return for a small network local to ELSEF and sized only for the loads that it can deliver up to 2030 appears to be a more attractive prospect in terms of IRR that an initial network safeguarded for future connections. This implies constructing a local distribution network, with deferral of the main transmission network until sufficient new development comes forward to warrant its construction (in around 2030). The internal rate of return for this option is approximately 11% (for the initial network lifetime only). The total capital cost for the scheme would be 5.0M, of which the heat offtake investment costs are 0.5M. The scheme would deliver 78% savings in CO 2 emissions relative to the business as usual case. This relatively high reduction is due to the fact that the existing customer base under the initial cluster scheme is predominantly off gas grid (and supplied by propane gas tanks). If, on the other hand, the main transmission network were to be constructed from the outset (ie with safeguarding for new developments under scenario 1), an internal rate of return of around 8% could be expected. The total capital cost for the scheme would be 6.4M, of which the heat offtake investment costs are 0.5M. The scheme would still deliver 78% savings in CO 2 emissions relative to the business as usual case. The cost of safeguarding the initial cluster network for the wider network opportunity would be 1.4M. The cluster network would also incur higher operating losses in the form of heat loss from larger diameter pipework. It is apparent that, considering only these two options, investors would pursue the project with the higher rate of return. Choosing to build a local distribution main now without future proofing would mean that in order to unlock the additional revenue potential of a larger network in the future additional capital costs would be incurred in terms of network investment and construction costs and in the future for any investor looking to proceed on this basis. In this scenario, were the scheme not safeguarded, it may be that a competing heat producer in the area may be in a more favourable location to provide the additional heat to the wider redeveloped area, i.e. the cost of laying additional pipe to ELSEF could be avoided by a more centrally located heat producer. An additional connection to Ford would deliver an internal rate of return of 10.6% (scenario 1b) if this connection could be realised in the early years of the initial network coming online. This is entirely dependent on developments within the Ford facility and at this point no definite conclusion on the viability of this option can be reached one way or another. A connection to Rainham from the initial network (Scenario 1c) significantly reduces the potential returns from the scheme with an IRR of 5% and cannot be considered a realistic alternative option at this stage given the effect on the business case for the project. It is likely that the poor rates of return available for this scheme are a result of the fact that many of the heat loads for this particular area are not yet in place and are planned for a gradual build over the next decade or so to For this reason revenue from the operation of the network would not have had sufficient time to mature and add to the overall return on the initial investment Scenario 2 Area-Wide Strategic Network The projected long term demand within LROA once all development has been fully built out is estimated to be 117 GWh/a. The calculated 25 year internal rate of return for the Area-Wide Strategic Network, in which no development takes place until 2030 when over 60% of the heat demand is in place, is of the order of 9.4%. The total capital cost for the scheme would be 31.4 M, of which the heat offtake investment costs are 1.3M. The scheme would deliver 55% savings in CO 2 emissions relative to Page 47

48 the business as usual case. In the event that the project could also supply heat to the Ford Motor plant, which has a very high heat demand over a short connection distance, the internal rate of return would increase to over 11%. Safeguarding for future connection into Newham Royal docks 22 (Scenario 2b) would reduce the expected internal rate of return to around 8.5%. The cost of safeguarding for network capacity would be in the order of 1.3M relative to the cost of delivering the Area-Wide Strategic Network. The impact of no future connection (or safeguarding) to Barking Town Centre (Scenario 2c) would be to reduce the expected internal rate of return to around 4.7%. The loss of the heat sales to Barking Town Centre for the relatively short transmission connection has a significant effect on the viability of the scheme. The viability of a wide area network therefore appears to be contingent on future delivery of heat to Barking Town Centre. The impact of accumulator storage on potential additional revenue from enhanced electricity sales would an increase in internal rate of return of around 0.1% under the Area-Wide Strategic Network for the scenario modelled Key Barriers and Opportunities Identified as a Result of the Economic Modelling The temptation for an investor to pursue a small non-safeguarded network local to the ELSEF plant is a very real concern with regards to realising the larger re-wide strategic heat network in Financing this scheme will be a challenge if the wider area opportunity is to be safeguarded without any certainty of future heat sales. This is an area that is likely to require financial support or underwriting from the public sector to give certainty to the investors and to avoid a private developer choosing to size the initial cluster network for the initial demands only, which would miss a future opportunity to expand the network as described in this report. Scenario 1a is not therefore considered to serve the wider interests of LROA or of London in general as there is a very real opportunity here to catalyse a much larger heat network with interconnection to a number of other areas. The development of this heat network would do much in the way of encouraging similar developments in the surrounding boroughs and further afield. There is a danger that, should the wider network not be planned for now, this will be a missed opportunity to deliver the full scheme potential. In order to safeguard against this, it may be necessary for public sector intervention to support and cover the costs of the additional network capacity at the initial project stage. The Local Authority should work together with GLA and BEL to explore options for this. It is noted that the Mayors Growth Fund may a suitable mechanism for providing this funding support. The potential return on investment for both stages of the project that could be available should the Ford plant connect to the scheme is quite significant and would represent a double digit IRR. However as has been stated previously not enough is known at this time regarding the internal plans for this facility with regards heating and hot water to allow us to rule in in or out. Nonetheless it remains an exciting opportunity and engagement with the relevant stakeholders should be pursued as a matter of priority in the next phase of this development. The sensitivity of Scenario 2 to the development and connection of the Barking Town Centre Cluster network is a real concern. If this or a connection to Newham Royal Docks were not to come forward, the business case for the scheme would fall down. Further engagement with the stakeholders in this scheme is recommended in the next stage of this project. 4.4 Sensitivity Analysis A sensitivity analysis has been carried out for the key variables that influence the IRR for the project. The results of the sensitivity analysis are presented in Section for scenario 2 (Area- Wide Strategic Network) and Section for Scenario 1 (initial cluster network scenario). 22 On the assumption that the interconnection was never constructed. The potential IRR assuming heat sales into the Royal Docks has not been modelled. Page 48

49 The blue line shown in the graph represents the central estimate of the project IRR, based on the central assumptions for the listed variable along the x-axis which were used to produce the economic indicators. The bars in the graphs show the change in project IRR due to a change in a single variable, with all other variables being held constant. The magenta and green bars denote increases/decreases in the listed variables as described in Appendix Sensitivity Analysis for Initial Cluster Option involving ELSEF ~ Scenario 1 As can be seen from Figure 14, the variables with the greatest impact on IRR for this project are the initial capital cost and the operating margin for the project. This is similar to the Area-Wide Strategic Network, although these two variables have a relatively higher effect on the business case for Scenario 1 given the small scale of the project. The key conclusions are that:- 1. A 10% change in capital costs or operating margin is expected to result in a change in IRR of the order of 1.5%. 2. A reduction the in Z factor for the ELSEF stage 1 heat offtake will reduce the potential project return. The sensitivity is high and a reduction in Z factor from 12 to 6 is expected to reduce the IRR by around 2 percentage points. Figure 14 Economic Sensitivity Analysis for Scenario 1 Figure 15 Variation in IRR with Sensitivity Analysis for Scenario 1 Page 49

50 The relative variations in sensitivity indicate the extent to which the project is dependent upon each of these items individually and is achieved by holding all other assumptions constant and varying one aspect of the analysis. This is a good indicator of the extent to which the project can be influenced by certain factors and indeed whether or not the project business case can be positively influenced by investing in measures to affect these different items. Figure 16 Scenario 1 Variation of NPV with Discount Rate Sensitivity Analysis for Wide Area Opportunity ~ Scenario 2, Area-Wide Strategic Network As can be seen from Figure 17 below the variables with the greatest impact on IRR for this project are the initial capital cost and the operating margin for the project. The key conclusions are that:- 1. A 10% change in capital costs or operating margin is expected to result in a change in IRR of the order of 1.25%. 2. A reduction the in Z factor for the ELSEF stage 1 heat offtake will reduce the potential project return. However the sensitivity is quite low and a reduction in Z factor from 12 to 6 is expected to reduce the IRR by around 0.5 percentage points. 3. A 10% increase/reduction in the heat purchase price from the stage 2 heat offtake has very small effect on project IRR. Figure 17: Economic Sensitivity Analysis for Scenario 2 Page 50

51 Figure 18 Variation in IRR with Sensitivity Analysis for Scenario 2 Figure 19 Scenario 2 Variation of NPV with Discount Rate Effect of Varying the Stage 1 Z-Factor In order to determine the impact of a change in Z factor assumption for the Stage 1 offtake from ELSEF, a sensitivity analysis has been undertaken for a range of Z factors for this heat offtake for both the Area-Wide Strategic Network and the Initial Case. Curves demonstrating the sensitivity of the model to changes in the Stage 1 Z factor are shown in Figures Figure 20 and Figure 21. As can be seen a reduction in the Z factor by 50% (to 6) in the Area-Wide Strategic Network reduces the IRR of the scheme by 0.73%, whereas a Z-factor of 9 results in the loss of 0.2% IRR. The relatively small sensitivity is due to the fact that the majority of heat supplied under the Area-Wide Strategic Network involves extraction from ELSEF stage 2. Figure 20 Z factor - IRR Sensitivity for Scenario 2 (Area-Wide Strategic Network) Page 51

52 Figure 21 Z-Factor - IRR Sensitivity for Scenario 1 (Initial Network) The effect of the change in Z factor on the IRR of the Initial Network local to ELSEF facility is shown in Figure 21. The variation in IRR with Z factor is far more significant for scenario 1 than for Scenario 2. This is because a greater proportion of the heat is supplied by the ELSEF Stage 1 offtake. The IRR falls dramatically from 8% to 5.7% with the 50% reduction in the plant s Z factor. Put another way, where the majority of the scheme s demand is from ELSEF Stage 2, the effect of a reduced Z factor from Stage 1 is significantly reduced. 4.5 Recommended Development Strategy and Outline Phasing Plan The recommended development strategy and outline phasing plan is summarised in the paragraphs below. The associated cost and carbon plan are presented in Appendix 4. Figure 23 shows the estimated development centre build out timescales with the cluster network and proposed network connection dates highlighted Wide Area Network Given the scale of demand and the abundance of low carbon supply assets within LROA and the strategic location of the LROA in relation to large existing and planned centres of heat demand within London, there is considered to be a strong political and economic case for developing a district heating network to serve the LROA. The projected long term demand within the LROA, once all development has been fully built out, is estimated to be 117 GWh/a. Practical delivery of a heat network would, however, be contingent on large scale planned redevelopment within the LROA coming forward and the anticipated timescales for this indicate that a wide area heat network is not likely to be viable until around 2030, with investment taking place in The required scale of investment taking place at this time would depend on the outcome of proposals to implement a series of cluster and community heat networks prior to this time. Assuming that the proposed cluster and community heat networks (as described below) come forward in the interim period, investment in 2029 would include:- Extension of an initial cluster network serving Fairview Industrial Park and Beam Reach South to form a wide area network; Connection via a series of substations to initial cluster networks at Barking Town Centre, Barking Riverside, LSIP and new developments serving South Dagenham and Rainham; Investment in a second stage of heat offtake at ELSEF together with investment in a thermal store accumulator and additional gas boilers for peaking and back up purposes. The available capacity envisaged for this stage of heat offtake seems reasonable based on the modelling assumptions in this report, although further optimisation should be carried out once detailed cost information is made available. Additional investment in other third party heat offtake may also take place at this time, although this has not been accounted for in the present cost plans Initial Cluster Network and Community Heat Network Opportunities Page 52

53 The Fairview Industrial Park, Beam Reach South and Barking Town Centre have been identified as locations for cluster networks connecting both existing anchor loads and new development opportunities. Barking Riverside, LSIP, South Dagenham and Rainham have been identified as locations for community heat networks constructed around major or individual redevelopment opportunities. Of these, the cluster network around the Fairview Industrial Park and Beam Reach South is of particular interest given the opportunity to extract heat from the planned ELSEF plant. The remaining cluster and community heat networks at Barking Riverside, South Dagenham, Rainham, LSIP and Barking Town Centre are envisaged as being a supplied via gas CHP or temporary gas boilers. Network Served by ELSEF - Fairview industrial estate and the Beam Reach South Estate In light of the relatively long timescales for redevelopment in Barking Riverside, an interim cluster network could be developed in the vicinity of the ELSEF plant. This network could be supplied via a heat offtake arrangement at ELSEF in order to serve the Fairview Industrial Park and the Beam Reach South. The majority of these loads are from existing buildings and could accept heat from ELSEF as soon as a network is in place. The available capacity reserved by BEL and envisaged for the first stage of heat offtake is considered to be reasonable based on the modelling carried out in this report. It is noted that further optimisation could be carried out once detailed cost information is made available. The interim cluster network could either be constructed as a local distribution network or as the first stage of a wider area network intended to supply the whole of LROA in the longer term. The latter option would require constructing the initial section of network so that it is capable of delivering sufficient capacity to Barking Riverside, South Dagenham, Rainham and Barking Town Centre in the future. Whilst this has clear strategic benefits, it also carries a risk in relation to heat offtake that may never materialise. Nevertheless, the scale of proposed regeneration suggests that the case for safeguarding is strong, as is the case for safeguarding for a future connection into the Royal Docks (given the projected scale of development in that area and the abundance of low carbon heat capacity within LROA that could supply it). The appropriate way forward depends on a number of factors which will need to be further evaluated at the next stage. Barking Town Centre The expected timescales for the redevelopment of Barking Town Centre are such that a viable cluster network could come forward in this area prior to a wider area network being available to connect into. The latter would depend on the substantial redevelopment of Barking Riverside, which based on the modelling assumptions in this report, would not happen until The cluster network for Barking Town Centre would be served by dedicated gas CHP and gas boiler plant in the interim period. Given the expected phasing it is recommended that in due course when connection to the wide area network takes place, the boiler plant initially installed to serve the scheme as a cluster network should be retained as peaking plant for the wide area network. This peaking plant would pass into the ownership of the LROA District Heating Network at that time. Such a strategy would allow the connection to Barking Town Centre from the area wide network to be designed to meet the base load from Barking Town Centre as opposed to its peak demand. The analysis presented in this report is based on that presumption. Barking Riverside 60% of the heat demand for the Riverside and Creekmouth Area is expected to be in place by Build out of the wide area network into this area prior to this time is not likely to be economically feasible. The original planning application and development plan for the Barking Riverside development specified an initial local district heating network supplied by dedicated gas CHP plant, which was Page 53

54 then to be connected at a later date to a heat connection to Barking Power Station. Given that Barking Power Station was later deemed unlikely to be able to provide this heat, an additional proposal to supply the local cluster network from the new TGEF plant was investigated, though given the lack of immediate development in Barking Riverside, this plan was also put on hold. Based on work carried out in this report, it is recommended that the energy strategy for Barking Riverside should be to develop phased community heat networks as new development takes place with a view to longer term connection into a wide area network. Based on the modelling assumptions contained in this report, the timing for such a connection is likely to be around 2030, at which time sufficient demand would have come forward in Barking Riverside to justify the cost of constructing a network into this area from ELSEF. New development ahead of any heat network should be designed to be compatible with connection to a future district heating scheme and should be required under the planning system to have dedicated community heating networks and temporary heating plant installed until such time as connection can be made to the proposed scheme. The number and size of energy centres to serve this development should be determined through feasibility assessments carried out by the developer. Depending on development timescales, energy centre proposals should either include CHP or, subject to provisions under the building regulations, could be installed with heat only boilers. It is noted that where investment in CHP takes place, timescales for connection into the heat network are likely to be deferred until the need for substantial reinvestment in the CHP assets (circa 12 to 15 years). Equally, if installation of CHP can be deferred, there could be a case for requiring developers to contribute towards the network to the extent that they are able to avoid costs of compliance under building regulations, BREEAM and zero carbon homes policy. Guidance on recommendation around implementation of CHP at development level is provided in Section New development beyond 2030 when the heat network is in place should be required to be designed to be compatible with connection to the network. LSIP Plans for a cluster network at LSIP are moving forward with the intention of future connection into a wide area network. The intentions has been to supply the site from TGEF, via a local energy centre to be located as shown on the energy supply map in Figure 6. This proposal should be kept under review, subject to plans and timescales for taking forward the opportunity identified in this report. The opportunity to retain the proposed infrastructure for topping up or distribution pumping should form part of future feasibility stage work. South Dagenham and Rainham The South Dagenham and Rainham project areas are expected to reach 60% of full build out by The opportunity for a cluster network in the South Dagenham and Rainham areas has been considered as part of this project. However, given the relatively large number of sites and stakeholders and the significant uncertainties surrounding these areas it is considered unlikely that an integrated cluster network would develop between now and 2030, when the wide area network could be expected to come forward. Any such cluster network would require championing by the Local Authority and in the absence of this, the likely scenario is that individual heating schemes would be installed as each development comes forward. These should be designed to be compatible with connection to a future district heating scheme and should be required under the planning system to have dedicated community heating networks and temporary heating plant installed until such time as connection can be made to the proposed scheme. Depending on development timescales, energy centre proposals should either include CHP or, subject to provisions under the building regulations, could be installed with heat only boilers. It is noted that where investment in CHP takes place, timescales for connection into the heat network are likely to be deferred until the need for substantial reinvestment in the CHP assets (circa 12 to Page 54

55 15 years). Equally, if installation of CHP can be deferred, there could be a case for requiring developers to contribute towards the network to the extent that they are able to avoid costs of compliance under building regulations, BREEAM and zero carbon homes policy. Guidance on recommendation around implementation of CHP at development level is provided in Section New development beyond 2030 when the heat network is in place should be required to be designed to be compatible with connection to the network. Page 55

56 Figure 22 Network Route Page 56

57 Project Indicative Timescale Proposed LROA Heat Network Riverside and Creekmouth LSIP Barking Riverside X Rainham and South Dagenham Beam Park (Hav and B&D) Rainham West and Somerfield Beam Reach 5 X Barking Town Centre* Gascoigne Estate Demand Development Beam Reach South and Fairview Earliest Network Construction Network Operational Community Heat Networks within New Development Development Centre Demand Build-Out Critical Project Demand Build-Out 60% + of Development Centre Demand in Place X Figure 23 Heat Network Development Timescales Page 57

58 5. HEAT NETWORK INFRASTRUCTURE PROPOSALS 5.1 Heat Network Control Concept The operating concept of the strategic heat network is likely to be based on a variable flow, variable temperature design, in accordance with the design parameters set out in the Greater London Authority s District Heating Manual for London The working pressure will be controlled within the system to ensure the pressure and flow characteristics are met at critical locations in the network at all times. This will be achieved through distribution pumps operating to maintain a minimum pressure difference between flow and return at each customer and a minimum pressure difference across the index point of the circuit. This will guarantee the required flow of heat to customer substations and ensure that heat demand is met at all times. Heat flow into customer substations will be controlled by 2-port control motorised valves so that customers can take all the heat they need at any moment in time. A typical pressure distance diagram for such an arrangement is shown in Figure 24. Figure 24 Typical pressure distance diagram for variable volume network In addition to volume control, heat network delivery temperature will be controlled on the basis of ambient temperature in order to minimise heat losses throughout the year and maximise capacity at lowest investment cost. The delivery temperature from heat production units into the heat network will be controlled through local mixing circuits at the heat production plants. The primary flow temperate into the heat network will typically be controlled between C and 90 C when outdoor temperature exceeds +5 C. It will then typically be increased to a maximum of 110 C when the outdoor temperature reaches the design condition. 23 dependent on requirements of existing buildings connected to the heat network. Page 58

59 Figure 25: Typical Flow and Return Temperature Characteristics (image courtesy GLA) Appropriate temperatures for this project would depend on a number of factors including available capacity margins in the pipework as a function of design temperature, type of pipe system, design pressures, heat offtake pressure and certain other parameters. Whichever design temperatures are proposed, the operating temperatures across the year can be matched at the power plant through a mixing circuit (to reduce temperatures in part load) or by boosting supply temperatures at the design condition using gas boilers. In the medium to long term, it may be possible to reduce the supply temperature into the network to 65 or 70 C for outdoor temperature exceeding +5 C. This depends on the level of improvements made to the fabric of existing buildings connecting to the network and on the design of heating systems of new buildings constructed now and in the future. Work carried out by the GLA 24 suggests that supply temperatures of 70 C should be achievable without noticeably impairing internal comfort levels for residential and non-residential buildings. 5.2 Route Assessment and Viability The identified route for the district heating network has largely been based on the London Thames Gateway Heat Network (LTGHN) Route initially developed and subsequently re-assessed by the LDA. The work commissioned by the LDA 25 in planning the original LTGHN route has been used in assessing the heat network route for this project. The identified route is shown in Figure 26. Where the proposed route for the identified opportunity is in agreement with the route previously identified by LDA, the network is shown in light blue. Where there are deviations and additions to the network these are shown in dark blue. In general the network in Barking & Dagenham is as previously identified, with some additions to allow for branch connections from the transmission main to newly identified customers. New route sections are mainly concentrated in Havering. A detailed route assessment has not been carried out for these sections as this is outside the scope of this study. However BEL has previously conducted desktop investigations into potential utility supply routes and sections of the proposed route follow those for the facilities service connections towards Manor Way to the North of the ELSEF site (electrical grid connection) and towards the Ford Dagenham Estate to the West (gas connection). In addition to these discussions, GIS constraints layers indicating contaminated land, areas of archaeological significance and other likely obstacles have been requested from both the LBH and LBBD and this information has been used (where available) to plan the route. In Figure 26 below areas of light 24 London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January London Thames Gateway Heat Network Phase 1B Route Feasibility Study (Stages 1 and 2) Volumes 1 and 2, London Development Agency, 2009 Page 59

60 yellow indicate contaminated land, the contamination ratings being mostly medium with one or two areas demonstrating a rating of high. Major linear infrastructure barriers and opportunities have also been identified. Required major infrastructure crossings points are highlighted as red circles in Figure 26. It is intended that the route should follow existing roads and, in the case of major crossings, utilise existing underpasses where possible. Further work is necessary to plan the route in detail. The green lines in Figure 26 indicate existing hazardous gas pipelines (GIS layers provided by the London Borough of Havering). The network route will require crossing of these pipelines at numerous locations in the Beam Park Area. Route options in this area and in the London Borough of Havering in general are provisional at this stage and will require further planning and route proving at the next stage. Figure 26 Proposed Network Route 5.3 Distribution Pumping Stations and Heat Network Primary Control Centre Heat will be delivered into the heat network from each of the heat production facilities though distribution pumping stations. These will typically comprise inverter-driven distribution pumps, pressurisation equipment, water treatment plant, a supervisory control and data acquisition (SCADA) system and associated M&E systems. As described in section 5.9, back up boiler plant will also be co-located at these facilities in some cases. In the early years, when initial cluster networks are installed, each distribution pumping station serving a particular cluster network will be controlled automatically on the basis of the strategy described in Section 5.1. A typical distribution pumping station arrangement is shown in Figure 27. Page 60

61 Figure 27 Typical Distribution Pumping Station Schematic Arrangement In the longer term, when the cluster networks are interconnected, control of the overall network is likely to become centralised through a central control system located at a primary control centre somewhere within the network. This location will typically schedule the heating assets and pumps across the system and control and maintain pressurisation across the network. There are various ways of pressurising the network and the adopted strategy will ultimately be a result of a detailed design process. The heat network will typically be pressurised at a single point. This should be located at the primary substation within the heat network, the location of which will need to be determined once heat production assets have been committed to the scheme. The primary substation should also house the primary distribution pumps, water treatment and pressurisation and expansion systems for the heat network. The static pressure in the heat network can either be maintained at the mid-point between the flow and return lines or at the suction side of the network. The former approach will facilitate the connection and control of multiple heat production units to the heat network. Additional water treatment, pressurisation and expansion systems should also be provided at a second heat production unit for redundancy purposes. The location of the primary control centre will depend on how the network ultimately develops. It is currently envisaged that this would be located adjacent to ELSEF as shown at point B in Figure 28, since ELSEF represents the initial supply opportunity for this project. There may also be an opportunity to make use of some land at site A which belongs to the Ford Motor Company but which currently is being used by ELSEF for storage of plant and equipment. Figure 28 Proposed Location options for Primary Control Centre and Main Distribution Pumping Station for Heat Network Page 61

62 The primary control centre will communicate with each of the distributed pumping stations and thereby schedule operation of the various heat production assets across the system. 5.4 Heat Offtake Arrangement from ELSEF The design concept for the ELSEF is currently based on two extraction ports for heat offtake:- A medium pressure extraction port with the capacity to deliver up to 38 MJ/s of heat to a heat network, together with extraction of 4 MJ/s of heat to supply the plant s de-aerator system. This would be available at a temperature of C and a pressure of 4.3 bar a. Initial modelling by BEL indicates a Z factor of 7.25 at this extraction port. A low pressure extraction port at 0.78 bar a and 0.56 bar a with capacity to deliver 4.8 MJ/s of heat at a maximum of 90 0 C into a local heat network. Initial modelling by BEL indicates a Z factor of 12 at this offtake point. Each stage of extraction will comprise a steam-to-water shell and tube heat exchanger together with associated controls, instrumentation, valves, steam and condensate pipework and heat metering. A potential heat offtake arrangement is shown in Figure 29. Stage 2 Stage 1 Figure 29: Indicative Heat Offtake proposals for ELSEF A distribution pumping station will be required on the network side of the heat exchanger station to distribute the water into the heat network. Based on the reported space constraints at ELSEF, it is assumed that this distribution station would be located beyond the plant boundary (ie offsite). Heat would be transferred from the plant to the distribution pumping station either via a circulating pump located either at the main distribution pumping station or at the heat offtake point. Depending on the number of stages involved, the space requirements for the heat offtake is expected to occupy a space of around between 8m x 10m and 10m X 15 m Distribution of Heat Demands Figure 26 and Figure 27 provide an indication of the distribution of heat demand under the initial cluster opportunity and the fully built out, wide area network opportunity respectively. These figures provide a basis for refining the design of the heat offtake for the facility, although it is noted that they are based on indicative information only and do not take into account the detailed feasibility of connecting the identified demands to the network, which is something that will need to be identified at the next stage. Page 62

63 Heat Demand Distribution Scenario 1 Figure 30 Distribution of Heat Demand under Initial Cluster Opportunity (Scenario 1) Heat Demand Distribution Scenario 2 Figure 31 Distribution of Heat Demand under Fully Built Out Opportunity (Scenario 2) 5.5 Condenser Heat Recovery from Steam Turbine An indicative arrangement for condenser heat recovery from the power plants identified in Table 5 is shown in Figure 32. Figure 32 Indicative Arrangement for power plant condenser heat extraction Page 63

64 5.6 Heat Recovery from Internal Combustion Engine CHP An indicative arrangement for energy recovery from internal combustion engine CHP options identified in Table 5 is shown in Figure 33. The heat offtake arrangement will typically be through a water-to-water heat exchanger, recovering heat from the engine jacket and/or exhaust systems (and potentially, oil cooling circuit and intercooler) depending on the application. Figure 33 Indicative Arrangement for Heat Recovery from Internal Combustion Engine CHP 5.7 Heat Recovery Tertiary Treatment Tanks in Waste Water Treatment Facilities An indicative arrangement for energy recovery from the waste water treatment facilities identified in Table 5 is shown in Figure 34. Figure 34: Indicative Arrangement for Heat Recovery from Waste Water Treatment Works 5.8 Heat Recovery from National Grid and UKPN Transformer stations An indicative arrangement for energy recovery from the waste water treatment facilities identified in Table 5 is shown in Figure 35. Page 64

65 Figure 35: Indicative Arrangement for Heat Recovery from National Grid and UKPN Transformer stations 5.9 Back up Boilers to Main Heat Production Assets For resilience purposes, it is recommended that back up boiler plant should be provided at one or more of the main heat production assets connected to the network. These will either be colocated at the heat production facilities or located at the main distribution pumping station for the network. Based on the current Energy Masterplan proposals, it is envisaged that the peaking plant for ELSEF would be located at the main distribution pumping station identified in Figure Accumulators Heat accumulators can be integrated into heat networks for several reasons. The present study has considered the use of accumulators to store heat generated from ELSEF at off peak times when heat production costs are low and discharge this heat during peak demand conditions and when heat production costs would otherwise be high. Accumulators will generally be located at one or more heat production facilities. In the longer term, once the wider strategic opportunity materialises, accumulators are likely to be located wherever a gas engine CHP or an extraction CHP plant is located, so that each production plant s operation can be optimized for to deliver maximum electricity revenue. The current proposals envisage that accumulators for ELSEF would be located at the main distribution pumping station identified in Figure 28. The sizing and location of accumulators will depend on the trade-off between capital and operational costs. The modeling carried out at this stage suggests an approximate capacity of 4.8 MW for ELSEF in the initial cluster network, rising to 42.8 MW (maximum capacity) in the fully built out option under the Area-Wide Strategic Network. Further work will be required at the design phase to establish exact sizing and to verify location. Accumulators can be directly or indirectly connected to the heat network. For this scheme, it is envisaged that the accumulators would be hydraulically separated from the heat network to allow them to be designed to lower pressure ratings than the network (thereby significantly reducing construction cost). A design pressure of 3 bar a or below is expected. Pressure would be maintained during operation through steam generators located adjacent to each accumulator. They should be charged and discharged through a series of variable speed booster pumps and pressure reduction valves along with shut off valves. They should be sized to enable them to accommodate a subsequent expansion of the heat network. This will improve pressure control in the heat network and reduce the capacity requirement and cost of additional pressurization and expansion equipment. A typical such heat accumulator arrangement is shown in Figure 35. Page 65

66 Figure 36: Indicative Accumulator Configuration 5.11 Consumer Connections Local Heat Networks Serving New Developments Heat distribution to customers within new residential, mixed use or commercial developments will take place via local heat distribution networks. These will be supplied from newly constructed energy centres located on the site of each development. Residential customers within local heat distribution networks will either be connected directly to their local energy centres via individual plate heat exchanger stations at each dwelling or they will be connected via communal heat exchangers at block level, which will typically be located within plant rooms at basement or ground floor level for example. Non-residential customers will be connected via heat exchangers located in basement level or ground floor plant rooms (new developments) or, in the case of existing buildings, in existing plant rooms located at basement, ground or roof level Point of Connection to Strategic Heat Network The point of connection between the strategic heat network and the individual developments will generally be as follows:- Within newly constructed energy centres for new residential, mixed use or commercial developments; or Within basement level, ground floor level or roof level plant rooms for existing buildings and new single building developments. Connections to existing building will typically be connected at the point where the existing heating assets reside. In each case, heat sold will be metered at the point of connection through newly installed heat meters. Connection between local heat networks serving multiple customers and the network can be either direct or indirect. Direct connections offer some advantages in terms of avoiding temperature reductions across heat exchanger stations with consequent reductions in achievable temperatures differences across the network and increases in heat offtake efficiency from extraction plants (such as Page 66

67 ELSEF). However, this will require local distribution networks and energy centres to be designed for 16 bar conditions, which will potentially increase costs. It will also introduce risk in relation to leakages, water quality, demarcation for ownership and maintenance purposes. We would recommend a full options appraisal at the design stage of the, with reference to the principles set out in the Design Manual for London. Figure 37 Heat Exchanger Substation (photo courtesy of Danfoss) Figure 38 - Typical HIU without front cover (photo courtesy of Danfoss) Description of Heat Exchanger Interface Equipment The typical design connection for commercial and industrial customers will comprise a heat exchanger station containing two heat exchangers complete with all necessary pumps, controls, valves and heat metering. One heat exchanger will provide heating and one will provide centralised, instantaneous domestic hot water production. Indicative assembly and schematic arrangements for such a consumer substation are shown in Figure 39. Temperature Controllers TC1 KIS TC2 TE T out Primary Supply EIA Pump Controls EIA TI PI TE Heating DHW TI PI TE M M TE PI TI Recirc. M TI Primary Return TI PI QIQ TE PI City Water F TE TI M F F PIA + - PS Expansion Limits of Pre-fabricated Substation Figure 39: Typical Substation Connection Arrangement (image courtesy of LDA/GLA) Page 67

68 For residential developments, a range of connection options are possible. For example, residential blocks could be directly connected, with heat exchanger stations (HIUs) located at apartment level only, with a direct connection at the building interface and at the incoming supply to the energy centre. This would maximise temperature difference in the system, reduce internal heat gains and make use of the available pressure in the network thereby minimising additional circulation pumping at block level. Alternatively, a communal heat exchanger station could be located at block level to provide a hydraulic break and a clear commercial demarcation point between the network operator and the maintenance company responsible for the individual buildings. Individual developers will have their own preferences and may choose to adopt either strategy Size and Cost Considerations Heat exchanger station costs will typically be in the range 35k for a MW scale installation rising to 50k for a 5MW installation. Consumer substations are significantly smaller than conventional boiler plants and consequently, a lot of space can be saved in new developments or taken to other use when existing boilers are removed. A heat exchanger substation can take as little as 10% of the space required by conventional boiler plant. Heat exchanger sizes vary from building to building. Page 68

69 The following table provides a guide to the space requirements of a typical floor mounted heat exchanger. The space identified does not include for any equipment required for distribution, e.g. circulating pumps, pressurisation system. Heat Exchanger Size (kw) Packaged Brazed Plate Gasket type m x 2m 3.5m x 2m 500 3m x 2m 4m x 2m m x 2m 4m x 2m m x 2.5m 4.5m x 2.5m m x 2.5m 4.5m x 2.5m m x 3m 5m x 3m Table 9: Heat Exchanger Space Requirements Each heat exchanger space allocation allows for a minimum working space to all four sides of the unit. Heat exchanger stations for individual residences are comparable in size to wall mounted boilers Safeguarding to Connect to the Royal Docks Heat Network in London Borough of Newham Previous development proposals for the London Thames Gateway Heat Network have envisaged construction of a heat network linking Barking & Dagenham to the Royal Docks. Work carried out by Ramboll 26 identified the scale of opportunity and the strategic network opportunity in the Royal Docks and Canning Town, together with the opportunity for safeguarding to interconnect to the Olympic Park DE Scheme (OPDES). Consideration has been given to how this could be achieved, although it is noted that any form of design work has not been carried out as part of this study. On the basis of an initial overview it is envisaged that a pumping station is likely to be required to connect the identified network into the Royal Docks network and boost the supply into the Royal Docks. 26 Royal Docks and Canning Town Energy Infrastructure Report, Ramboll Energy, 2012 Page 69

70 5.13 Outline of Possible Operational Structure of the Longer Term, Wide Area Opportunity Determining the appropriate commercial structure for the identified heat network opportunities is beyond the scope of this report and the organisation taking this forward should undertake a feasibility stage assessment, including a detailed evaluation of procurement route, commercial structure of the organisation and governance options. However, the section below provides a brief outline of an organisational structure that could potentially support the longer term wide area network. Whilst the proposed structure would not be suitable for the initial cluster project, it is recommended that the structure of these projects consider, and reflect as appropriate, the future opportunity to divest interests (that for example may reside within the Local Authority) to a third party network operator who may choose to invest at that stage once the market for heat has grown sufficiently to warrant investment in extending the network to interconnect the clusters. The identified structure, which is shown in Figure 40, forms the basis of the approach taken in Copenhagen. It is based on a pool based market in which generators supply energy into the network under a pool based market. The network infrastructure is owned and operated by an independent network operator who manages the pool and purchases heat from the generators. Independent Generators Heat Network Company Customers (LA s, RSLs, other public sector, commercial and industrial etc, Figure 40: Indicative Organisational Structure for Wide Area Opportunity The heat network operator sells heat to third party customers or to local distribution companies who then sell this heat on to their own customers. In managing the pool, the network operator purchases heat according to a least cost principle and balances demand and supply through accumulator storage and back up and peaking boilers plant, which owns and maintains the rights to control. Alternative ownership structures are possible and these should be explored at the next stage, once the project is taken to feasibility stage. Page 70

71 6. PROJECT OUTLINE RISK ASSESSMENT An outline risk assessment for the project has been carried out. This is presented in Appendix 4.The key risks are discussed below. 1. The future build out of the wider area network is highly dependent on regeneration taking place in London Riverside area. Whilst the initial cluster networks may be successfully delivered through the private sector, it is unlikely that the wide area opportunity will be realised without public sector involvement due to stakeholder complexity, the long and uncertain timescales for delivery and the associated long payback periods. This implies the need for high level individual and organisational commitment by the Local Authority and a degree of appetite to become a co-investor/partner in a delivery vehicle for the project. In the absence of this, there is a risk that the project will fail to gain momentum and or to deliver to its true potential. Stakeholders may also be weary of engaging in the projects without the backing of the local authority and its support and commitment will also be important in this respect. 2. The connection of new developments is critical to the business case for the wider area network. These risk not being adequately safeguarded to connect to the future heat network if the appropriate requirements are not enforced through the planning system. The local authorities should implement appropriate safeguarding measures through the planning system and disseminate information to developers. 3. Financing the initial cluster scheme around ELSEF will be a challenge if the wider area opportunity is to be safeguarded without any certainty of future heat sales. This is an area that is likely to require financial support or underwriting from the public sector to give certainty to the investors and to avoid a private developer choosing to size the initial cluster network for the initial demands only, which would miss a future opportunity to expand the network as described in this report. 4. A supply risk will arise if ELSEF becomes the primary/sole third party supplier to the future wide area network. Equally, designing the plant s heat offtake now to meet a future wide area network that may never materialise may not be in ELSEF s short term interests and may represent too great a risk to the business and its lenders at this stage. The long term future of the plant cannot be guaranteed and the plant may not be operational throughout the life of the future wide area network. In order to mitigate these risks, other potential heat suppliers should to be encouraged to participate in the market and plants being developed in the vicinity should be required to be safeguarded for future connection to the network. The local authority should create the right conditions to facilitate ongoing investment this area. 5. Uncertainty around eligibility rules, tariff levels, operating costs etc under the Renewable Heat Incentive, Electricity Market Reform and Junior Supply Licence present a risk to all potential generators and their investors. 6. In the absence of a regulated market, the commercial structures of the cluster networks and future wide area network project companies also need to address issues of supply resilience, customer protection, perception about heat networks and monopoly of supply. Without this customers may be unwilling to sign up to the long term contracts needed to provide guaranteed heat sales against which investors will be prepared to lend. Key to this will be marketing the benefits of modern heat networks to customers, clear structuring of contracts with provisions to protect customers from being locked in to long term and unfair pricing mechanisms/tariff structures and the representation of customers through an independent body acting in a quasi-regulatory role. Clear technical standards should also be developed together with clear terms and conditions outlining how the tariffs will be set and escalated over time. The local authority may have a facilitating role to play in all of these areas and should work with GLA to disseminate information on heat contracts and tariff structures to make prospective connections more willing to engage. Page 71

72 7. In the absence of a regulated heat market the cluster schemes that may come forward in the period before 2029 are likely to have their own heat sales agreements with customers. The adoption of different standards may be detrimental to the aim of connecting the cluster schemes into a wider area network in the future. This risk could potentially be mitigated by adopting standard forms of heat sales agreements for residential and non-residential customers. The GLA is currently carrying out work in this area and consideration should be given to adopting the guidelines being produced. 8. New developments and existing large non-domestic heat and electricity users may install combined heat and power units or alternative measures which may undermine the viability of the network by removing or reducing the heat demand from these customers. The local authorities involved in the project should use their powers to allow temporary solutions to be adopted in lieu of installing CHP or other compliance measures insofar as the building regulations will permit. 9. Commercial and financial risks around managing bad debts in the residential sector needs to be managed through appropriate structuring of heat sales agreements. The Local Authority may be best able to manage this risk through its experience in this area. 10. Exiting buildings may require retrofitting work to internal heating systems to ensure compatibility with the proposed heat network system. A connection standards document should be developed to outline the requirements and highlight the benefits to customers and to the network operator. 11. In the absence of an adopted set of standards, there is a risk that the cluster networks are not designed in mind of future interconnection. This risks a sub optimal network solution in 2029, which will have on-going implications in terms of running costs and operating efficiencies. Central or regional government (GLA) has a role to play in ensuring that design standards are developed, adopted and implemented. 12. In the absence of regulation and an adopted set of standards for the industry, an area of ongoing concern for a network developer is that of construction risk associated with build quality. There may also be significant hidden costs associated with constructing the network which can only be determined at detailed route planning stage. Page 72

73 7. NEXT STEPS AND IMPLEMENTATION PLAN 7.1 Progressing Opportunities to Secure Major Low Carbon Heat Sources The LROA contains abundant amounts of surplus heat supply capacity, from both existing and planned power production facilities and from industrial waste heat sources. These include the planned waste to energy facility (ELSEF), which represents the main opportunity in the short term Progressing the Opportunity at ELSEF If the project is taken forward with ELSEF as the main generator supplying the network, our recommendation is that design feasibility work should be carried out to determine:- The implication for design of achieving the z factors of heat offtake assumed in the study The design of a system that optimises the benefits of the identified heat offtake opportunity; and The role for accumulator thermal storage as a means of increasing revenue from electricity production from ELSEF. Accumulator thermal storage could provide significant operational flexibility to ELSEF by allowing it to switch between maximum electricity production and maximum heat offtake (any anywhere in between) according to the market value of electricity generated at any given time. We understand that BEL has a draft Power Purchase Agreement (PPA) in place and we recommend that consideration is given to whether the tariff structure under this PPA could allow full benefit of accumulator storage to be realised by the project. If not, we would recommend consideration is given to negotiation around this possibility Secondary Opportunities involving Other Heat Production Assets There are a number of secondary opportunities that could potentially connect into the identified network opportunity. Of these the Thames Gateway Energy Facility and TEG Anaerobic Digestion Facility represent the most immediate and interesting options. Whilst the TEG anaerobic digestion facility has been built with a connection to a future heat network in mind, it isn t clear whether the same is true of the Thames Gateway Energy Facility. Discussions should be held with the developer of this site to confirm whether such a future connection is envisaged and this report used to demonstrate the viability of the heat offtake opportunity in the both the local and wider LROA areas. As grid decarbonisation occurs over the coming decades, energy capture from low grade waste industrial heat sources is likely to have an interesting role to play within the LROA. Applications could include heat recovery from waste water treatment works, power plant condenser heat recovery and recovery from UKPN and national grid power transformers. The present study has included an assessment of these facilities and has concluded that the cost and carbon content of heat production from them is likely to be higher than for heat available from the identified extraction plants in the area. Nevertheless, heat recovery from these facilities may be economically attractive in the longer term and it is recommended that there should be a strategic long term ambition to integrate these into the proposed heat network, according to the identified hierarchy of heat production and if the ultimate demand in the network requires this. Detailed feasibility work will be required to establish the technical and commercial viability of these opportunities in the context of the proposed heat network characteristics. Whilst the opportunity for heat extraction from the existing Barking Power station is limited, any future redevelopment of the power station would provide a major opportunity for capturing and supplying large quantities of low cost heat into LROA and potentially into Newham and beyond. The present study hasn t specifically evaluated the impact of safeguarding for the supply capacity from Barking Power station. Page 73

74 Whilst the existing and planned small scale embedded CHP plants within LROA will not have a major role to play as future supply assets, the potential for these to be adopted by a future network operator for use as topping up / back up plants should be kept in mind. 7.2 Stakeholder Engagement Engagement with only a small number of developments (and consequently stakeholders) would be necessary to develop an initial cluster project within the LROA and should therefore be relatively straightforward. The continued participation of these developments however will be critical to the success of such as smaller scheme. There are also uncertainties surrounding the timescales and size of some of these developments as many will subject to external influencing factors beyond the immediate control of the relevant stakeholders such as the wider national economic situation. As such it recommended that the next stage should be to engage with the identified parties to ascertain the level of interest in connecting to the network and the extent to which development plans/timescales may have changed. During the course of this study, some stakeholder consultation has taken place with businesses in the Fairview Industrial Park and Beam Reach South to gauge interest of in a heat network as a replacement to their existing off-gas grid heating supplies. This consultation was carried out by BEL and some positive feedback was received subject to the receipt of further details on the cost of such an alternative scheme. The key non-statutory stakeholders for this project have been identified as BEL, Bellway Homes (Barking Riverside), LSIP, Ford Motor Company, Tesco (Beam Reach 6), CEME and businesses resident in the Fairview Industrial Park and Beam Reach South. Moving forward the following are recommended:- Engaging with the commercial residents of the Fairview Industrial Park and Beam Reach South to present the results of this report in terms of the potential cost and carbon savings to these businesses as a result of the implementation of a district heating network. Hosting workshops with all of the key stakeholders identified above in order to present the findings of this report and to seek further information from these organisations that could serve to inform the next stage of the project process. Continued engagement with the preferred energy supplier BEL as many of the recommendations in this report directly affect the planned operation of this facility. Hosting further stakeholder open days whereby stakeholders not previously identified as key to the project s success are invited to meet with planners to determine the appetite for the scheme in the wider area and also potentially to identify additional opportunities with regards to developments that have not yet come to the notice of the local Boroughs planning departments. 7.3 Next Steps for London Boroughs of Havering and Barking & Dagenham Planning Related Recommendations The London Boroughs of Havering and Barking & Dagenham s Core Strategy documents should be updated to reflect the heat network opportunities identified in this report. The proposals should be disseminated to relevant departments within the Council to raise awareness of the planned infrastructure proposals. Recommendations set forward in the GLA s District Heating Manual for London (final draft to be published in October 2013) for recommended design principles of Secondary Side Heating Systems should be adopted. This manual has been used in this report and the recommendations set out for future safeguarding reflect those in the guide. Page 74

75 London Boroughs of Havering and Barking & Dagenham should consider adopting Local Development Orders (LDO) to facilitate deployment of a future heat network. This would allow the Councils to create a blanket planning permission to a future Project Company for constructing heat networks without the need for specific planning applications at each stage of development of the heat network Technical Safeguarding Measures The London Boroughs of Havering and Barking & Dagenham should use their planning powers to require identified developments to safeguard for future connection into a heat network by implementing a series of future proofing measures where feasible. Future proofing measures that should be included in planning policy where appropriate and/or planning conditions, where identified to be feasible, are as follows. Requiring wet heating systems to be installed and prohibiting electrical heating systems. Requiring the incorporation of communal heating systems instead of individual boilers. Communal heating systems should be fed from plant rooms producing low temperature hot water for space heating and domestic hot water. Future proofing should include for providing 'tees' and isolation valves to facilitate future connection of heat exchangers. Space should be reserved for heat exchangers, or it should be planned for heat exchangers to replace heat-only boilers at time of connecting to the heat network. Ensuring internal heating systems are designed so that they can be connected to supply a DE network with minimum retrofit. This should be achieved through measures such as built-in penetrations allowing pipes to be pushed through into plant rooms without structural alterations or significant works, designing heating systems to minimise return water temperatures and allowing provision in the building fabric to facilitate the installation of district heating pipework at a later time. External buried pipework routes should be safeguarded to the boundary of the plot where connection to the heat network will be made. Under current building regulations, developments can achieve compliance using gas only boilers. However, future updates of the building regulations are set to adopt the compliance targets set out under the government s zero carbon homes policy. This will require developments to install compliant technologies in order to meet the building regulations and may not include provision to defer installation of such technologies in lieu of connecting to a heat network in the future. There may be an opportunity for London Boroughs of Havering and Barking & Dagenham to allow developers to defer installation of alternative compliant technologies in lieu of making a provision to connect to a heat network. This will depend on provisions under future updates to the building regulations, which the London Boroughs of Havering and Barking & Dagenham will need to be mindful of in policy setting terms. In such circumstances, the London Boroughs of Havering and Barking & Dagenham could place a requirement on developments to retrofit compliant technologies within a fixed period, in the event that a heat network is not taken forward. The following requirements should be applied to developments of a scale where CHP would ordinarily be considered and that are planned to be developed within a 5 years the point in time when a local heat network is to be constructed. The development should be designed on the basis of its own CHP with standby boilers and 'future-proofed' to connect into the heat network in the future. Allowance should be made to defer investment (installation) in the CHP plant for five years to allow time for the heat network to be constructed and connected to the network. Once the network connection is made, the requirement to install CHP should fall away. Page 75

76 If the heat network connection is not made within five years and there is no reasonable prospect of doing so, then the development should be required to install a CHP plant. A section 106 obligation could be employed from the outset to ensure the CHP installation is carried out retrospectively. During the five year period, the development will be supplied with heat from its own heat-only boilers, noting that the environmental benefits will not accrue until either the heat network connection is made or CHP installed. The developer could be given a planning condition to allow any 'freed-up' plant space resulting from the heat network connection to be used for more profitable purposes. These recommendations are subject to acceptable provisions under future updates to the building regulations. For developments coming forward over a horizon of beyond 5 years from the date of construction of a heat network opportunity, provisions should be made for developments as follows:- For developments of a relevant scale 27 that are being planned with a horizon of 10 years to the point at which the heat network is intended to be constructed in the vicinity of the development, the development should be required to safeguard to connect to the heat network at the end of the economic life of the CHP plant. For developments of a relevant scale 28 that may in future be planned and at locations where they could connect into the heat network, these developments should be designed for a district heating connection from the outset. This would entail a smaller plant room to accommodate the interfacing district heating heat exchanger and displace the requirement for heat-only boiler and CHP plant Proactive Involvement in the Identified District Heating Opportunity If the London Boroughs of Havering and Barking & Dagenham choose to play a proactive role in bringing forward the identified opportunity they should consider the following measures:- Working with potential stakeholders to establish a Steering Group and a project delivery group to take forward the recommendations of this report. Key stakeholders include BEL, Bellway Homes (Barking Riverside), LSIP, Ford Motor Company, Tesco (Beam Reach 6), CEME, businesses resident in the Fairview Industrial Park and Beam Reach South. Conduct feasibility analysis to further evaluate the technical options identified and investigate its options for ownership in the infrastructure. Subject to the outcome of the above, engage with commercial ESCos around possible joint development opportunities for the heat network. A local delivery vehicle could potentially be established and led by the private sector but with London Boroughs of Havering and Barking & Dagenham having a stake in the project company. This will bring the advantages of opportunities for funding and low cost borrowing through PWLB, CIL/S106 Allowable Solutions (refer to Section 7.3.4) and the London Energy Efficiency Fund, which has recently opened to DE projects and is likely to be very interested in investing in publicly backed opportunities of this nature. It will also enable London Boroughs of Havering and Barking & Dagenham to establish a project vehicle on which to gain experience and form a platform for the delivery of other low carbon project opportunities over the longer term. Such an approach is also likely to be favourable to larger scale developers investing in the area, who will thereby avoid the need to procure an ESCo separately to deliver on their commitments. 27 where CHP would be considered 28 where CHP would be considered Page 76

77 Building internal political support and commitment, oversee the development of strategies and policies to develop the project opportunities and to obtain budget commitment to take forward the project through feasibility, planning, design and procurement. Carry out business planning, drawing on support from GLA through the Decentralised Energy Programme Delivery Unit (DEPDU), to establish the London Boroughs of Havering and Barking & Dagenham s role in the identified project opportunities and the commercial basis on which the future strategic opportunities could be delivered. Keep under review developments in the area of Licence Lite with a view to adopting the supply model for consideration in Barking Town Centre and Riverside schemes, if these are taken forward through a Local Authority route. Guarantee existing buildings within its control to connect to any heat network that comes forward and require new developments to safeguard for future connection through the planning process. Safeguard the most appropriate site(s) for Energy Centres. Establish the appetite amongst major stakeholders to engage in the project, confirm the technical viability of the propose scheme and establish the commercial basis on which this could be achieved. The steering group should work with stakeholders to commission feasibility studies to identify and de-risk technical and commercial barriers to implementation and establish a route to delivery Establishing London Borough of Havering as an Allowable Solutions Provider. The government s proposed Allowable Solutions framework will require developers of zero carbon homes to meet on-site requirements for Carbon Compliance whilst also accounting for the carbon emissions that are not achievable on site through Allowable Solutions. Under the proposals set out in the Zero Carbon Hub report dated July 2011 there are two routes that developers can take under the proposed Allowable Solutions framework. Under Delivery Route A, where approved Local authority policies are in place, developers will be able to pay into a local Community Energy Fund or via a Private contract with a third party supplier. Under Route B and in the absence of an established policy, developers will pay into a Private Energy Fund without any geographical constraint over where the carbon-savings are realised. The London Borough of Havering should therefore consider developing Allowable Solutions policies within its local plan in time for adoption by 2016 in order to be able to offer developers a local Community Energy Fund delivery route and thereby capture the benefit of Allowable solutions. Delivery Route A is a proposal for channelling investment into locally prescribed Allowable Solutions for the benefit of local communities. It provides the opportunity for Local Planning Authorities to position themselves so that they are able to specify the particular Allowable Solutions projects which best align with their strategic energy and climate change mitigation vision for their area, as determined within their local plan. Under proposed Route A, developers will be able to see a prescribed list of Allowable Solutions and a local guide price (in per tonne for carbon to be abated via the Local Planning Authority). Determination of this price may be informed by the price guide set for a possible National list of Allowable Solutions. The choice will then be either to contract with a Third Party provider who will deliver carbon savings from a list of Allowable Solutions projects prescribed by the Local Planning Authority (an Allowable Solutions provider or a specific project identified from the National Allowable Solutions Database) or to pay into a Community Energy Fund, giving responsibility to the Local Planning Authority to deliver carbon savings from its list of Allowable Solutions projects. Page 77

78 To achieve this position, Local Planning Authorities will need to have developed an Allowable Solutions policy, which should include: A mechanism for approving particular Allowable Solutions within the overall local plan; Evidence that Allowable Solutions included in the local plan represent the most cost effective ways of delivering carbon emissions reduction in the Local Planning Authority area; and A clearly stated pricing policy for Allowable Solutions (Local Planning Authorities should not be able to charge any more than the national price ceiling for carbon). It is noted that the proposals set out above are not yet adopted government policy. Therefore any local planning authority without a plan in place will receive no Allowable Solutions money. Developers will be able to contract with a private energy fund to deliver carbon savings. Allowable Solutions could be a future source of funding for the heat network and potentially for other projects in London Boroughs of Havering and Barking & Dagenham. London Boroughs of Havering and Barking & Dagenham should therefore consider becoming providers and forming a robust policy in the Development Management Policies DPD accordingly. 7.4 Ensuring Correct Design Standards are adopted The design of customer connections and internal heating systems for new developments will have a significant impact on the operational capacity and efficiency of the heat network. Developers should be required to implement appropriate internal heating system designs to ensure flow and return temperatures are compatible with the heat network. The London Boroughs of Havering and Barking & Dagenham, through their planning departments should ensure that systems are being designed, installed and commissioned appropriately. Recommendations contained in the GLA s technical standards for district heating should be adopted and disseminated to developers to ensure that heating systems are designed to a common standard, capable of future integration into the proposed heat network. The London Boroughs of Havering and Barking and Dagenham should require new developments involving office, retail and residential to examine and consider as part of any viability assessment opportunities for district energy balancing at development scale. 7.5 Role of Licence Lite in Catalysing Initial Cluster Networks Where initial gas fired CHP projects are planned for the cluster networks it is recommended that the business case for taking these forward includes consideration of the electricity retailing under Licence Lite, particularly where the Local Authority is involved in developing the scheme and/or where private wiring (for example to a new development) is not a viable option. This could increase the return on investment (IRR) significantly, potentially making otherwise unattractive schemes economically viable. In 2009, Ofgem introduced its Electricity Supply Licence Lite proposals, intended to make it easier for embedded generators, including CHP/district heating projects, to operate as licensed suppliers across the public electricity network. Under the Licence Lite proposals, small CHP based generators would be able to benefit from gaining direct access to the retail market rather than having to rely on the sale of their output as wholesale electricity to licensed suppliers. Page 78

79 The route to market for these generators would be through a Licence Lite holder who would enter into a supplier services agreement with a licensed third party supplier. The value to small generators of this approach lies in the fact that the Licence Lite holder would:- Avoid many of the cost overheads associated with setting up and operating a full electricity supply licence, including participation under the Balancing and Settlement Code, Meter Registration Agency arrangements and customer metering and support services); and Benefit from being able to aggregate production from many small generators with the effect of increasing the value of the electricity generated to the market (ie reducing financial impact of imbalance risk). The customer base for electricity supply would not necessarily need to be the same as the customer base receiving heat from the CHP projects and could therefore be matched to the electrical capacity of the project. The value of the retailed electricity could be expected to be comparable to (or slightly higher than) the alternative prices paid by customers, with an incentive applied to the heat supplied for customers under a dual fuel arrangement (this approach intending to attract and retain these customers). There are currently no Junior Electricity licences in place. The GLA has recently applied to Ofgem to set up the first such licence and it is understood that another public sector organisation has now also applied for a licence. The GLA intends to aggregate electricity production from a number of independently operated local authority and other public sector CHP schemes and sell the electricity generated to a single public sector organisation (we understand that TfL are the party involved in negotiations with GLA at this time) in the first instance. In due course proposals to retail to the residential sector will be developed once the current concept has been proven and the Licence is up and running. In principle, the portfolio of customers open to a Licence Lite holder could include residential, commercial, retail and other public sector organisations. Based on the economics of participation, the proviso appears to be that these customers are physically located within the same local distribution network at the generators supplying the electricity since retailing into the transmission network would incur unacceptably high Transmission Use of System (TUoS) charges. The successful outcome of the scheme will be contingent on the Junior Licence holder being able to enter into an agreement with a licensed third party supplier to provide the necessary market interface services to enable the Licence Lite holder to comply with the terms of the Electricity Supply Act. Once the GLA has received its licence approval from Ofgem, it will go out to tender to the licensed third party suppliers to find a project partner. Under current projections, the scheme is expected to be up and running by April 2014, subject to a positive response from the market to the provision of third party services. The main barriers yet to be overcome are the costs associated with the market interface services and the willingness of the market to provide them. There are also some regulatory issues still to be resolved although these are being addressed between GLA and Ofgem. The cost of administrating the Licence Lite is unclear at the present time, since there are no operational projects against which to benchmark (the economic modelling in this study does not take into account set-up costs for a Licence Lite, although it does include an estimation of ongoing administration costs). Whilst early adopters are likely to incur relatively high setting up and running costs, the intention is that the administrative burden of setting up and operating a Licence Lite would reduce once the approach has been established and tested. Equally, for each individual project participating in a Licence Lite agreement the administrative burden would be shared across a larger number of projects in due course (as the number of participants increases) so that the operating margins to each individual project would be acceptable to the individual balance sheet of that project. Page 79

80 The cost of acquiring the necessary market interface services will be known through the process of inviting tenders from fully licensed suppliers, which is due to take place in October Initial indications are that the net value to small generators under a Licence Lite would be in the order of a 20% uplift on the value of electricity, based on electricity sales to a non-residential customer base 29. In the longer term, it is intended that any public private organisations (including non for profit sector) will be able to operate as (or sell or buy power from) a Licence Lite provider. In the early phases of its development, access is likely to most easily achieved by partnering with a local authority and participating through the GLA s licence. It is anticipated that by 2015 the concept of Licence Lite will have been successfully proven (or disproven) and that local generators including Local Authorities and private commercial organisations would be able to operate under such licences at that time. On this basis, it is recommended that London Boroughs of Havering and Barking and Dagenham keep under review developments in the area of Licence Lite with a view to adopting the supply model for consideration in Barking Town Centre and Riverside Schemes, if these are taken forward through a Local Authority route. 29 based on verbal communications with GLA. Page 80

81 8. REFERENCES Barking Power Station, Heat Off-Take Study, Feasibility Report, November 2008, London Development Agency, Beam Reach Website: Biomass Energy Centre: Beam Park Planning Prospectus, London Borough of Barking and Dagenham and London Borough of Havering, 21 March 2012 District Heating Manual for London, Greater London Authority, Mayor of London, February 2013 Energy Masterplan for Wembley Regeneration Area, Ramboll Energy, 2013 Housing Trajectory London Borough of Barking and Dagenham Local Development Framework Annual Monitoring Report 2010/11, London Borough of Havering Local Development Framework Planning for the future of Barking and Dagenham - Site Specific Allocations Development Plan Document, London Borough of Barking and Dagenham, 2010 Local Development Framework Annual Monitoring Report 2010/11 London Borough of Havering, 2011 London Heat Map: London Riverside Opportunity Area Planning Framework Public Consultation Draft, Greater London Authority, December 2011 London Thames Gateway Heat Network Phase 1B Route Feasibility Study (Stages 1 and 2) Volumes 1 and 2, London Development Agency, 2009 London s Zero Carbon Resource Secondary Heat Report Phase 1 and 2, Greater London Authority January 2013 National Heat Map: Planning Application Documents London Borough of Havering Planning Application Documents London Borough of Barking and Dagenham Royal Docks and Canning Town Energy Infrastructure Report, WSP, Ramboll Energy, 2012 Site Specific Allocations Development Plan Document, London Borough of Havering 2008 Page 81

82 APPENDIX 1 SUMMARY OF HEAT MAPPING UNDERTAKEN FOR LROA Methodology and Data Sources Used In order to assess energy demands in the London Riverside Opportunity Area a variety of data sources have been consulted as follows:- a) Information regarding current and future planned heat demands and developments provided by stakeholders either through direct correspondence or submissions made to Local Authority or Government bodies b) Havering and Barking Dagenham Borough planning departments provided a list of recent mayoral-referred planning applications c) Energy statements for existing and proposed developments where available d) Heat Demand information for existing and proposed buildings in Barking Town Centre provided by the GLA e) The London Heat Map f) Benchmarking of buildings both existing and proposed where no energy consumption data is available g) National Heat Map The order in which these data sources are presented above relates to the order of precedence in which they have been applied, with the data sources considered the most reliable deemed a and the least reliable deemed g. The existing buildings in LROA are primarily located in Barking Town Centre or are medium to large industrial users lying to the south of the A13 Thames Gateway and the National Rail line which traverses the entire area. A large proportion of the non-industrial buildings (including those in Barking Town Centre) have been previously mapped as part of the GLA s London Heat Map. Data from this resource has been used extensively in this study. GIS data for significant planning applications (those referred to the Mayor s office) in both Havering and Barking Dagenham since 2003 were provided by the relevant Local Authorities. These applications were assessed with respect to their location and relevant size. Terraced and one-off residential developments have been excluded from consideration, given the relatively low number of such properties and their comparatively low energy consumption. Any outlier data; that is planning applications at a considerable distance from the LTGHN route and the Barking town centre proposed development were removed from consideration. These properties may be suitable for connection at a later date once the network is established and additional development takes place in the locality. Any planning application whose site area is less than 2,000m 2 has been removed in order to filter out smaller individual developments which would have no significant impact on the business case at masterplanning scale. For the smaller individual planning applications where no information is available on the progress of the developments it has been assumed that completion of the project would be achieved five years from initial planning permission application where there has been no subsequent associated planning application. This is considered reasonable since, in the event that the development has not in fact come forward, the contribution of the existing site load is captured to some degree and the same consideration can be made in the event that a different development comes forward in the meantime. Any developments and heat loads outside the boundary are also omitted from consideration. One such site is University of East London. This may represent an opportunity in the future but as it lies outside the boundary of LROA it has not been considered at this stage. All other developments falling within the LROA boundary were considered at this stage. A planning search was conducted in order to ascertain the proposed use of the developments and the associated gross internal floor areas. As part of this exercise, online planning documents were searched in order to locate the development s energy statement. These energy statements are required to be submitted with all planning applications in the Greater London Area and Page 82

83 provide detailed information about the proposed energy consumption of developments and of their intended energy systems. Not all online applications are complete, with some documents submitted after the original planning application being unavailable. In these cases requests were sent to each of the boroughs, however a significant number of energy statements for existing and proposed developments were not available. Energy benchmarking was carried out for developments where no other information was available. This was based on known building use, building floor areas and energy benchmarks developed by Ramboll under previous masterplanning studies in London. Each of the benchmarked buildings in the LROA have been assigned a building use class based on information taken from planning applications and Borough planning documents. An area of particular significance in the assessment of energy demands in the LROA is the large proportion of industrial buildings in the area. In analysing the existing industrial heat loads within LROA, the National heat map has been used to supplement the London heat map. Proposed industrial developments and existing developments not covered by either source have been benchmarked using a similar method to that described above. Details of the assumptions made in the assessment of industrial loads in LROA are contained in Appendix 1. When considering the National heat map data for industrial buildings, commercial and retail information was also analysed. These loads were discounted based on their relatively low average annual loads (~ MWh/annum). Existing Industrial loads in Havering centre on the Fairview and Beam Reach 8 Industrial Estates, there is also a significant heat demand from the CEME development and there is expected to be a similar development to CEME on the Beam Reach 6 site to the West. Questionnaires regarding heating demand and energy consumption were submitted by BEL to the business in the area in order to accurately estimate the heat demand in the immediate vicinity. There was only one respondent to the request for information, this was Hornett Brothers ltd who supplied detailed information as to their energy requirements and current energy systems and fuel prices. BEL also held a stakeholder meeting with the owner of the Fairview Estate, Fairview estates management team indicated that they would be interested in purchasing heat from a local heat network as the estate is currently off the gas grid and the majority of business use oil-fired boilers to produce heat and hot water. Due to the low level of response to the questionnaire assumptions have been made regarding the heat loads in BEAM Reach south as described herein. Approach to Development Phasing Assumptions A detailed phasing analysis of each of the identified heat loads within LROA has not been carried out. Whilst some indicative information was made available it was found to be inconsistent and out of date in places and no longer relevant to the proposals for LROA. The nature of some of the long-term plans for identified strategic housing areas such as South Dagenham and Beam Park have been found to be highly dependent on external factors (such as whether improved transport infrastructure comes forward linking the developments to London City Centre. As such, many of the phasing plans identified in the policy documents (such as Havering s Site Specific Allocations Development Plan Document are of the order of 5 to 14 years in estimation. In some cases the SSA s have been superseded by more recent planning applications, as is the case with South Dagenham West, where the land originally allocated for residential development has now been developed as an industrial estate and also houses a hotel and a separate restaurant. In other cases where detailed phasing plans have been submitted as part of planning applications construction is already far behind the original plans. For example in the Barking Riverside (Bellway) development only 14% of the homes that were originally to have been built by 2013 will be completed 30. Where reliable data hasn t been available, assumptions have been formulated around development phasing. 30 data regarding completed buildings was provided by LBBD Page 83

84 For the critical large scale developments such as those areas identified by the London Riverside Opportunity Area Planning Framework site-specific phasing decisions have been taken based on available evidence. These are dealt with in detail in the following sections. For smaller individual planning applications, where no development phasing information is available, it has been assumed that completion of the project would be achieved five years from initial planning permission application, where there has been no subsequent associated planning application. Page 84

85 APPENDIX 2 SUMMARY OF LOW CARBON ENERGY SUPPLY INFRASTRUCTURE WITHIN LROA Page 85

86 Generation Asset Method of Heat Extraction Thermal Extraction Potential Generation Asset Assumed Thermal Extraction to Heat Network Grade of Heat Generation Asset Assumed Load Factor Generation Asset Seasonal COP / Z factor Generation Asset Annual Supply Capability Date of Heat Availability MJ/s [MJ/s] [0C] [%] [-] [MWh/a] [-] Barking Thames Gateway Energy Facility / Chinook Gasification Plant/ Barking Riverside Phase 1 steam turbine - extraction ~unknown 90% ~7 157, TEG Anaerobic Digestion Facility Sustainable Industries Park IC engine jacket and exhaust heat recovery % n/a 5, Barking Power Station Option 1 steam turbine - extraction ~ 140 O C 9% ,000 existing Barking Power Station Option 2 steam turbine - heat recovery from condenser circuit ~ 35 O C (boosted to 70 O C through heat pumps) 9% ,000 existing Barking Power Station (Future) steam turbine - extraction ~105 75% ~ , * Goresbrook leisure centre IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a National Grid 132kV substation Oil cooled transformer - heat recovery from cooling circuit % ,271 existing UKPN 11kV substations Havering Oil cooled transformer - heat recovery from cooling circuit % ,622 existing ELSEF Gasification Plant ~ Stage 1 steam turbine - extraction ~90 90% 12 37, ELSEF Gasification Plant ~ Stage 2 steam turbine - extraction ~191 90% , Riverside Waste Water Treatment Works IC engine jacket and exhaust heat recovery ~90 90% n/a 3,260 existing Riverside Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~ ,120 existing Tesco distribution centre at Beam Reach 5 contains a biofuel CHP IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a Orchard Village IC engine jacket and exhaust heat recovery ~0 0.0 n/a n/a n/a n/a n/a Frog Island Bexley IC engine jacket and exhaust heat recovery % 9,067 Planning Permission Granted Crossness STW Sludge Powered Generator steam turbine - condenser heat recovery through heat pumps ~ 35 O C (boosted to 70 O C through heat pumps) 90% ,684 existing Crossness Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~4.18 2,523,513 existing Newham 20C Plant stage 1 exhaust heat recovery from bioliquid generator ~ O C 95% n/a 9, C Plant stage 2 exhaust heat recovery from bioliquid generator ~265 O C 95% , Beckton STW Sludge Powered Generator stearm turbine - condenser heat recovery through heat pumps ~ 35 O C (boosted to 70 O C through heat pumps) 90% ,864 existing Beckton STW Sludge Powered Generator steam turbine - extraction ~ C 90% ~7 239, Bekton Waste Water Treatment Works heat recovery from tertiary treatment tanks ~14-22 (boosted to 70 OC through heat pumps) 100% 3.5~4.18 5,656,614 existing Enhanced Sludge Digestion Facility - Bekton IC engine jacket ~90 90% [] 18,922 existing Table 10 List of Identified Heat production assets within and in the vicinity of London Riverside Opportunity Area. Page 86

87 Generation Asset Method of Heat Extraction Indicative Investment Cost Calculated Cost of Heat from supplier Total Calculated Cost of Heat Calculated Cost of Heat Asset Calculated Cost of Heat Asset (non discounted and ignoring repayment (non discounted) repayment discounted) pumping) Carbon Intensity of heat production 2010 Carbon Intensity of heat production 2050 K [p/kwh] [p/kwh] [p/kwh] [p/kwh] [kg/kwhr] [kg/kwhr] Barking Thames Gateway Energy Facility / Chinook Gasification Plant/ Barking Riverside Phase 1 steam turbine - extraction 1, TEG Anaerobic Digestion Facility Sustainable Industries Park IC engine jacket and exhaust heat recovery Barking Power Station Option 1 steam turbine - extraction 1, Barking Power Station Option 2 steam turbine - heat recovery from condenser circuit 7, Barking Power Station (Future) steam turbine - extraction 1, Goresbrook leisure centre IC engine jacket and exhaust heat recovery n/a n/a n/a n/a n/a National Grid 132kV substation Oil cooled transformer - heat recovery from cooling circuit 3, UKPN 11kV substations Havering Oil cooled transformer - heat recovery from cooling circuit 1, ELSEF Gasification Plant ~ Stage 1 steam turbine - extraction ELSEF Gasification Plant ~ Stage 2 steam turbine - extraction 2, Riverside Waste Water Treatment Works IC engine jacket and exhaust heat recovery Riverside Waste Water Treatment Works heat recovery from tertiary treatment tanks 7, Tesco distribution centre at Beam Reach 5 contains a biofuel CHP IC engine jacket and exhaust heat recovery n/a n/a n/a n/a n/a Orchard Village IC engine jacket and exhaust heat recovery n/a n/a n/a n/a n/a Frog Island Bexley Crossness STW Sludge Powered Generator IC engine jacket and exhaust heat recovery steam turbine - condenser heat recovery through heat pumps , Crossness Waste Water Treatment Works Newham 20C Plant stage 1 heat recovery from tertiary treatment tanks exhaust heat recovery from bioliquid generator 7, C Plant stage 2 exhaust heat recovery from bioliquid generator Beckton STW Sludge Powered Generator stearm turbine - condenser heat recovery through heat pumps 5, Beckton STW Sludge Powered Generator steam turbine - extraction 2, Bekton Waste Water Treatment Works heat recovery from tertiary treatment tanks 7, Enhanced Sludge Digestion Facility - Bekton IC engine jacket Table 11 Carbon intensity and cost of heat production for identified assets within and in the vicinity of London Riverside Opportunity Area. Page 87

88 Generation Asset Method of Heat Extraction Heat Exchanger Offtake heat pump (including heat Distribution pumping exchanger offtake) station and balance of plant Building Enclosure (total) building cost BOP building cost heating asset Total [ k] [ k] [ k] [ k] [ k] [ k] [ k] Barking Thames Gateway Energy Facility / Chinook Gasification Plant/ Barking Riverside Phase 1 steam turbine - extraction ,771 TEG Anaerobic Digestion Facility Sustainable Industries Park IC engine jacket and exhaust heat recovery Barking Power Station Option 1 steam turbine - extraction ,771 Barking Power Station Option 2 steam turbine - heat recovery from condenser circuit 6, ,736 Barking Power Station (Future) steam turbine - extraction ,771 Goresbrook leisure centre IC engine jacket and exhaust heat recovery National Grid 132kV substation Oil cooled transformer - heat recovery from cooling circuit 3, ,691 UKPN 11kV substations Havering Oil cooled transformer - heat recovery from cooling circuit ,015 ELSEF Gasification Plant ~ Stage 1 steam turbine - extraction ELSEF Gasification Plant ~ Stage 2 steam turbine - extraction ,420 Riverside Waste Water Treatment Works IC engine jacket and exhaust heat recovery Riverside Waste Water Treatment Works heat recovery from tertiary treatment tanks 6, ,736 Tesco distribution centre at Beam Reach 5 contains a biofuel CHP IC engine jacket and exhaust heat recovery Orchard Village IC engine jacket and exhaust heat recovery Frog Island IC engine jacket and exhaust heat recovery Crossness STW Sludge Powered Generator steam turbine - condenser heat recovery through heat pumps 3, ,580 Crossness Waste Water Treatment Works heat recovery from tertiary treatment tanks 6, ,736 20C Plant stage 1 exhaust heat recovery from bioliquid generator C Plant stage 2 exhaust heat recovery from bioliquid generator Beckton STW Sludge Powered Generator stearm turbine - condenser heat recovery through heat pumps 5, ,956 Beckton STW Sludge Powered Generator steam turbine - extraction ,168 Bekton Waste Water Treatment Works heat recovery from tertiary treatment tanks 6, ,736 Enhanced Sludge Digestion Facility - Bekton IC engine jacket Table 12 Breakdown of investment Costs for identified assets within and in the vicinity of London Riverside Opportunity Area. Page 88

89 APPENDIX 3 INVESTMENT AND CARBON APPRAISAL MODEL ASSUMPTIONS Page 89

90 Economic Modelling Assumptions Scheme economics have been calculated around required Internal Rates of Return of 10 %, 6 % and 3.5 % to reflect private sector, public sector led schemes and investment according to HM Treasury Green Book guidelines. Project Term The financial value of the project and the calculation period for Internal Rate of Return (IRR) and Net Present Value calculation (NPV) is taken to be 25 years on the basis of a scheme beginning operation in 2030 for the Area-Wide Strategic Network (2017 for the Initial Case) and with a nominal end date of 2055 and 2041 respectively. Initial investment is assumed to take place in 2029/2016. Project Investment Costs Construction cost estimates have been based on benchmarks from other projects. This includes reference to UK projects and Ramboll s experience of similar projects carried out in Denmark (translated to UK prices). Project specific evaluation and verification of costs data has not been carried out at this stage in the assessment process as this is outside the scope of this project. Heat network construction costs are based on previous quotations from district heating pipe system suppliers, corrected for 2013 prices based on inflation under the Retail Price Index. These costs cover the supply and installation of the pipe systems in both hard and soft dig. The proportion of hard to soft dig on this project has been assumed to be 70:30 due to the urban nature of the scheme. Costs of installing DH pipe systems in hard dig areas are taken to be 15% higher than for soft dig. The modelling presents the economic case for the heat network and the associated infrastructure assets, assuming that the cost of connection to the developments and the generation assets is borne by the project company owning and operating the heat network. In the case of ELSEF this includes the cost of the heat offtake arrangement but not investment in the facility itself which will be financed under a separate business case. It is recognised that in practice it may be more appropriate for ELSEF to invest in the heat exchanger station and the options should be further explored at the next stage. The current approach enables the costs to be accounted for in the model whilst avoiding the need for BEL to remodel their business case. It is also recognised that there will be an additional whole life cost implications associated with optimisation of the facility around operation as a CHP plant. This has not been captured at this stage, other than through the assumptions around the cost of heat production from the plant (refer to section XX). The business case for investing in the facility as a CHP plant as opposed to an electricity-only generation facility will need to be reviewed at the next stage based on the outcomes of this report. Project planning, development, design and commissioning costs have been taken to be 14% of construction costs (5.5% development, planning and legal costs, 6% engineering and architectural design and 2% testing and commissioning). An additional 2% of initial CAPEX costs is included for Contractor s Preliminaries. Reinvestment costs (REPEX) Reinvestment costs in the heating and cooling networks, including all associated network infrastructure assets, are based on assumed annual reinvestment and replacement rate of 0.25% of the cumulative network CAPEX costs. This figure is based on our previous experience on existing projects in Denmark and the UK. This has been included in the economic model as an annual set aside value. Page 90

91 Plant reinvestment costs have been calculated based on:- 20% reinvestment over a 15 year reinvestment cycle for the thermal store 20% reinvestment over a 15 year reinvestment cycle for the gas boilers 20% reinvestment over a 20 year reinvestment cycle for heat exchanger substations at ELSEF. 20% reinvestment over a 20 year reinvestment cycle for heat exchanger substations at ELSEF. Reinvestment for the balance of plant is taken to be zero and is assumed to be covered under the ongoing operation and maintenance costs. The cost of financing the project has not been modelled. Land values for the distribution pumping station have been based on land evaluations reported by BEL. Figures of 850,000 to 1,200,000 /acre have been quoted and a central estimate of this value has been assumed. Developer Contributions In order to test the worst case scenario for the district heating scheme it has been assumed that no developer contributions would be available to the project. That is, the project is assumed to bear the cost of the distribution heat network, the energy generation plant and cost of connection for existing and new developments to the scheme, including service pipes to individual buildings and heat exchanger stations. In reality, new developments could potentially meet the cost of service pipes and heat exchanger stations themselves. If /when the Zero Carbon Homes Policy is adopted they might also be in a position to contribute more through the Allowable Solutions mechanism. The impact of developer contributions to cover the cost of service pipes and heat exchanger stations has therefore been tested for the Area-Wide Strategic Network scheme and is reported in the main body of the report. The costs associated with the internal infrastructure for individual developments (i.e. internal building DH pipework) are assumed to be borne by developers. In order to ensure that new buildings are compatible with the proposed district heating network specific planning obligations will be required for all new planning applications within the scheme boundaries. The value associated with these networks is assumed to be realised by the developers through the selling and letting of the developments and is not therefore included in the project model. Operating Revenues Heat Sales In the following sections the assumptions made in relation to the available revenues from scheme heat sales are presented. These assumptions have been used to inform the economic model developed for the scheme and the IRR and NPV values presented in the main body of this report are based on the information below. As described previously, costs of connection to the heat network are modelled by assuming that these are borne by the Project, which would recover the costs through annual capacity charges and consumption charges. It is likely that any operator s connection model will involve the following elements: Connection charge a one-off payment for connection to the network for new customers, this is dependent on the cost to the scheme of providing connection assets and on the economic model pursued by the project developer. Capacity Charge - this is payable monthly and is dependent on the capacity of the connection. It is intended to cover fixed operating costs of the scheme (lifecycle replacement costs and fixed maintenance costs of the primary plant and heat network). Page 91

92 Consumption Charge - payable monthly for metered heat supplied to the customer, there is also the possibility that this charge could be linked to development return temperatures to incentivise customers to make the most efficient use of the supplied heat and thus to return water at low temperatures. For the purposes of this economic model, annual equivalent heat charges to consumers have been calculated on the basis of their avoided heat generation costs under the business as usual case. For new developments this is as calculated based on previous evidence base modelling for similar projects carried out by Ramboll for London Borough of Brent 31. For these customers, the avoided cost of heat generation is taken to comprise avoided investment costs in the LZC plant, avoided fuel costs, avoided operation and maintenance costs and avoided plant reinvestment costs (assuming a 15 year replacement cycle). The calculated heat prices assume these schemes would develop through energy companies who would invest and require a 10% rate of return on this investment. For existing customers, the avoided cost of heat generation is taken to comprise avoided fuel costs, avoided operation and maintenance costs and avoided plant reinvestment costs (assuming a 15 year replacement cycle) on the basis that existing assets would be in place. Customer heat prices for each customer type in the business as usual scenario is presented in Table 13. Also shown is the heat price to customers under the district heating scheme. This includes the variable tariff that would be paid to reflect avoided fuel costs along with a capacity charge to reflect avoided O&M costs and avoided annualised replacement/refurbishment costs. Effective Heat Price Customer Type p/kwh Medium Commercial - existing 4.95 Medium Commercial - planned 4.63 Hotel - Planned 5.26 Residential - planned 5.6 Residential - existing 6.2 Industrial Planned 2.95 Community use 3.8 Schools Existing 4.7 Schools Planned 4.63 Off gas grid 8.9 Table 13: Heat Tariff Assumptions The impact of incentivising existing customers to connect to the scheme has been modelled as a 5% reduction in business as usual heat price. This is reflected in Table 13. Where relevant it has been assumed that a proportion of the benefit of avoided CRC payments for existing customers would accrue to the project. A rate of 8 /tonne CO 2 saved has been applied. Operating Costs Cost of Purchasing Heat from ELSEF The cost of purchasing heat from ELSEF has been modelled using a financial model provided by BEL. 31 Energy Masterplan for Wembley Regeneration Area, Ramboll, 2013 Page 92

93 The cost has been calculated as a function of Z factor and represents the minimum selling price that would necessary to deliver the same internal rate of return to Biosssence as would be generated under the alternative non-chp operating case. The costs are based on 2012 prices. The price curve below informs the modelling work carried out in Section 4. As described in Section 5.4 of this report, the first 4.8 MW of heat are assumed to be recovered at a Z factor of 12 and the remaining heat supplied is assumed to be recovered at a Z Factor of Figure 41 and Table 14 identify the cost of extraction of the heat at each of these Z factors. Heat production costs don t include for repayment of the investment or for maintenance and periodic replacement costs associated with the heat offtake, which are covered in the modelling as described in previous sections of this Appendix. Heat production costs assume 1.8 ROCs generated on electricity produced from the biogenic fraction of the fuel input and RHI support of 10/MWh on heat produced from the biogenic fraction of the fuel input. Figure 41 Assumed unit cost of Heat Production from ELSEF Maximum Heat Offtake Z Factor Heat cost [MW] [-] [ /MWh] Stage Stage Table 14: Assumed unit cost of Heat Production from ELSEF Operation and Maintenance Overheads Operation and maintenance costs are modelled as variable running costs accruing on per kwh basis and as fixed administration costs associated with operational and staff overheads. Staffing overheads for the fully built out scheme assume an operating team consisting of a Plant Manager, 4 Plant Engineers, and Administrative Support, each with 0.4 FTE to the operation of the system. For the initial cluster scheme, 50% of this overhead is assumed. Variable costs include operation and maintenance of specific heat production units as well those associated with general energy centre operating overheads (e.g. water treatment, general repair, consumables etc.), taken at 2% of investment for all cases. Annual insurance cost are included at a rate of 30,000. Page 93

94 Network maintenance and replacement cost is modelled as 0.25% of total so far spent capex per year. Heat network pumping and heat loss costs are modelled from results of hydraulic calculations using System Rornet assuming variable volume, variable temperature operation. Heat losses are modelled in kw per unit length of network. Pumping losses assume a cubic relationship with demand. Carbon Emission Assumptions Carbon emission factors for primary fuels are as quoted in the SAP 2009 methodology. These are applied in calculating the business as usual for the project. The carbon intensity of the waste heat from ELSEF is taken to be equal to the carbon intensity of the marginal plant on the system divided by the Z factor of operation of the plant. The carbon intensity of the waste heat from gas engine CHP is taken to be equal to the sum of the carbon intensity of the fuel consumed and the carbon offset by displacing the marginal plant on the system. Sensitivity Analysis around Internal Rate of Return Calculations A sensitivity analysis has been carried out for each project opportunity around the key variables that influence the IRR for the project. The results of the sensitivity analysis are presented within the relevant sections of this report. The blue lines in the graphs represent the central estimate of the project IRR, based on the central estimates for the listed variable along the x-axis which were used to produce the economic indicators for the project. The bars in the graphs show the changes in project IRR due to changes in the relevant listed variable, with all other variables being held constant. Red bars generally denote a % increase in the listed variable whilst green bars generally denote a % reduction in the listed variable. Exceptions to this are variables such as the Carbon Price Support for CHP and connection costs, which are treated as half / removed variables. Further information on each variable is presented below. Project Total Capital: The uncertainty in project development costs has been modelled as +/- 10% around the central estimate. Uncertainties around development costs (design, planning, procurement), which are likely to be less significant than the CAPEX related costs, are included in this variation. Operating Margin: The impact of uncertainty for the operating margin modelled as a +/-10% variation on the central estimate. ELSEF Z Factor Stage 1: Variations in the stage 1 Z factor for ELSEF are taken at 9 and 6, with the base line assumption of 12. This also includes for analysis of variations in the cost of stage 1 heat purchased from ELSEF. ELSEF Heat Purchase Price Stage 2: Variations in the cost of stage 2 heat purchased from ELSEF are taken to be +/-10% variation on the central estimate Maintenance Costs: The uncertainty in project fixed and variable operating costs has been modelled as +/- 10% around the central estimate. This includes the variation in annual sinking funds for reinvestment in the heat network and energy centre. Connection Costs 100%/50%/Off: The default assumes that the project pays for the connection costs to developments. The impact of this assumption is tested by reducing simulating the scenario that developers meet 50% and 100% of the calculated substation and service pipe costs. Page 94

95 Incentive Offered on Heat Selling Price: The impact of incentive discounts on heat prices is modelled as 0%, 5% and 10% on the calculated heat price. Capital Contributions: The default assumes no capital contribution to the project. This is tested by assuming contributions of 0.5M and 1M. Network Sizing Methodology Heat Network The heat network has been designed broadly in accordance with the design parameters set out in the District Heating Manual for London, prepared by GLA and published in March Accordingly, the design parameters assumed in this report are as follows:- Design Parameter Maximum design pressure Design primary flow temperature Design primary return temperature new developments Design primary return temperature existing building connecting to the network 16 bar 110 C 55 C 75 C Table 15: Heat Network Design Parameter The necessary pipe dimensions are estimated using the software package SR developed by Ramboll Energy. SR is a simulation program developed by Ramboll Energy for the specific purpose of carrying out hydraulic and thermal analysis of district heating networks. This modelling package has been used successfully in Ramboll Energy for over 20 years and has a proven track record in accurately modelling both large and small scale district heating schemes. The benefits of this model are twofold, both enabling day-one modelling of DH networks and allowing interim changes to existing networks to be quickly assessed on an on-going basis for our clients, our SR model created by our Danish team for the city of Copenhagen is continuously updated as that network evolves. Pipe design parameters are taken from information provided by pipe manufacturers to ensure the most accurate information possible is incorporated into the design of the scheme. The pipe diameter calculations are based on analysis of temperature differential between flow and return system, pressure levels, costs for piping and pipe velocity constraints. Page 95

96 APPENDIX 4 OUTLINE RISK APPRAISAL Page 96

97 Description Description Risk Owner Suggested Mitigation Measures Insufficient internal resource, knowhow or political will to push project through Establish project champion to build internal support at Member Level, establish steering group, engage external stakeholders in this process. Lack of leadership and knowledge at a local level resulting in a failure in local authority to support the scheme Ensure all relevant internal stakeholders within LA (housing, education, health, waste) are engaged in process. Unable to procure technical, legal, procuremnt advice Establish steering group to take project forward. Involve cross borough support Planning / Development Phase project fails to get political support / is not taken forward for internal funding reasons Unable to make decisions on advice given and secure buy in at member level Unable to establish procurment route that suits LA risk profile and ensures delivery through market. Local Authority Secure funding from GLA (or HNDU) to carry out detailed feasibility and business case development. Refer below for greater detail) Obtain technical, financial, legal and commercial support through GLA or HNDU in developing project to next stage Unable to establish procurment route that suits LA risk profile and ensures delivery through market. Engage with ESCO's to find potential partners. Formulate project company. Set up heads of terms agreements. Unable to establish procurment route that suits LA risk profile and ensures delivery through market. initial costs too high ~ deters safeguarding strategy Ensure network design addressses requirements for safeguarding to allow multiple generators to be capable of supplying into network over long term. Planning / Development Phase Uncertainty in long term opportunity ~ deters safeguarding strategy Ensure business case captures the cost and benefit of safegurding and allocates this separately. Secure external funding for safeguarding for the wider area opportunity if apprpriate to protect the short term project opportnunity Project fails to deliver strategic opportunity/vision through design and procurment phase Need to obtain finance leads to value engineering which designs out stategic benefits Design incompatibility between cluster networks prevents efficient interconnection Project Company Ensure all phases designed to a common technical standard, Ensure new developments designed to a common standard to ensure compatibility for future interconnection to heat network. Disseminate information to developers through planning process. Refer to GLA District Heating Manual for London Heat network construction and extension inhibited due to unforeseen physical / technical, commercial constraints Engage with potential providers early and ensure scheme design philosophy reflects operational requirements. Ensure that commercial terms of agreements adequately reflect provider s obligation to maximise operating profitability with appropriate reporting structures and Page 97

98 Description Description Risk Owner Suggested Mitigation Measures Address through business planning phase identified above. Include for:- Too much residual risk ~ unacceptable cost of borrowing 1) detailed feasibility stage assessment 2) design development Business case doesn t stack up. Not enough margin for investors. 3) detailed route planning 4) developing financial investment model Capital costs too high 5 securing procurement and legal advice to supprt business case 6) stakeholder engagement including securing HOD agreements with generators and major existing heat customers Cannot secure access to land Establiish possible role for Electricity Licence Lite within cluster projects. Establish access route to Project Finance. Cost of routing network is higher than forecasted. Carry out market testing and engage with potential project partners and investors. Establish appetite for private sector to support development of network. Business Planning Phase Project unable to secure finance / fails to achieve financial close Business case for generators doesn t stack up ~ no buy in Project Company Consider owning a stake in the heat network, which could be divested later once the project is fully operational and generating positive incomes. Levage Low Cost borrowing through PWLB or direct injection of capital reserves. Consider providing a concession agreement in new development areas under which a specific energy company has a monopoly right for the supply of heat, or the installation and operation of the heat network. 3rd Party ESCOs in already constructed community networks are resistant to taking up DH supply - Consider using planning powers to require new developments above a certain size and in a particular location to safeguard to connect and to provide funding contributions (through Allowable Solutions, S106,CIL). Ensure Local Authority set up to access this source of funding. Consider using planning powers to secure funding contributions (through S106,CIL). Engage with developers to communicate benefits of DH network and establish basis for contributions to heat nework through Allowable Solutions. Develop through consultative approach. Heat customers wont sign up ~ no benefits to end consumer, percieved risk Ensure early engagement with landowners in relation to wayleaves, permits along identified heat network route. Engage early with major developers and commercial stakeholders, aiming to secure them as future heat customers and ensuring that their development plans are aligned with the strategic heat network opportunity. Where possible, establish Heads of Terms agreements. Require existing local authority buildings above a certain heat demand and within appropriate locations to conduct feasibility assessments and connect to heat network (or safeguard for future connection) as appropriate at time of refurbishment of heating system assets. Ensure all relevant stakeholders within LA (housing, education, health, waste etc) are engaged in process. Adopt transparent heat supply contracts with appropriate risk sharing and incentivisation clauses. Align these with Best Available practice within industry. Page 98

99 Description Description Risk Owner Suggested Mitigation Measures Local Development Framework documents fail to incorporate appropriate policies on promotion of and connection to the DH network. LA to implement Local Development Order to facilitate process for achieving planning approval for network. Planning / Development Phase Project difficult to deliver due to planning and permitting constraints (short and long term) Physical route for heat network unachievable or will cause major disruption to existing infrastructure corridors. Expensive and time consuming to deliver through planning Physical routing of heat network becomes more difficult in time due to utility expansion, new developments in the interim period. Individual developments unable to achive compliance under 2013 BR with temporary boilers. Disincentivies future connection until LZC assets have been paid off. Disrupts business case for heat network developer Local Authority / Project Company Local Authority, GLA to safeguard land for location of peaking plant, accumulators and safeguard routes for future heat network expansion. Project Company to carry out early de risking of project through consultation with planning department. Refusal or delay to planning permission for the DH network (new energy centres, heat supply assets /accumulators, pipes / groundworks, pumping stations, substation(s), heat off-take building/structures within power station complex) Local Authority to ensure design standards for new developments adopted through planning system and are adopted. Local Authority to ensure effective dissemination of information through Borough Policy documents. Lack of knowledge of the scheme at a planning officer level results in failure of new developments being designed to safeguard to connect properly. Construction overrun Development and Construction Phase Project fails to come in on budget Poor workmanship Project Company Manage through appropriate procurement structures. Project fails to deliver on design KPIs Page 99

100 Description Description Risk Owner Suggested Mitigation Measures Unacceptable project operating margin (heat production costs too high, operating overheads too high) Project unable to secure long term commitment from generators to provide heat./ Heat generators may not view this as core business and therefore lack of management attention / low priority/ Project to consider retaining ownership and operation of peaking plant and accumulators in order to reduce exposure to pricing risk and to optimize operating margins. Network to be designed to maximize operational flexibility and accommodate future heat generators. Rising fuel prices or reducing value of electricity makes economics of generation unacceptable Create commerical structure to enable multiple generators to compete to supply heat into network. Secure long term heat supply agreements with generators. Develop commercial terms that are favourable and that incentivise them to supply heat. Establish value of integrating accumulator storage to maximise electricty revenues through balancing markets (engage with energy aggregators opeating in the market). Long term viability of generators cannot be guaranteed. Electricity market requires short term approach to trading which may make generators unwilling to commit to providing heat. Even though return on investment may be possible risk averse heat generators may not be willing to engage. Managing supply risk. Establish diverse fuel supply to minimise exposure to gas price rises. Ensure borough waste policy aligned and favourable in order to secure and retain waste providers over the long term. Operational Phase project unable to retain a secure customer base for heat sales (customers being free to change supplier)/revenue losses through customer demand dropping. Project Company 3rd Party ESCOs in newly constructed community networks not sufficiently incentivised to connect to heat network Manage operational risks where they are best able to be managed. Consider outsourcing operational responsibility for the heat network to specialist organisations. Commercial terms of agreements should offer risk/reward sharing. Inappropriate delta T assumptions at design stage lead to lower than expected operational efficiency in business case Variation in energy prices impacts on business case for heat offtake. Changes to cost/market price for electricty increases heat price. Link heat supply contracts and heat puchase contracts to appropriate fuel,inflation indecies and secure through long term agreements. Agreements to allow transparent pricing structure to compensate for changing market conditions. Offer incentive on heat to retain customer loyalty (if possible dual fuel package). Incentivise customers to return low temperature heat (through appropriate tariff structure) High relative heat losses in early years impact on economics of production impact of the unregulated market becoming regulated Ensure feasibility and design phase work adequately address delta T issue. Secondary systems installed in new developments are incompatible with the main DH network Engagement with ESCOs at an early stage to establish barriers and opportunities. Revenue losses through generator non avaialability Page 100

101 Description Description Risk Owner Suggested Mitigation Measures Emerging national policy on incentives, zero carbon homes and allowable solutions disincentivises new developments to connect to the heat network Development projections on which strategic opportunity is founded do not materialise Conduct options appraisal at detailed feasibility/business planning stage. Planning / Development Phase Project fails to deliver strategic opportunity/vision through operational phase Developers won't sign up ~ no benefits in terms of avoided costs or compliance Safeguarding for future construction of future energy centre, etc pumping stations Project Company Ensure each phase of construction undertaken only when heat supply contracts in place to support investment. Safeguard land for future infrastructure proposals. Business case for future extension undermined due to policy or external economic factors Page 101

102 APPENDIX 5 COST AND CARBON PLANS FOR IDENTIFIED STRATEGIC OPPORTUNITY Page 102

103 Table 16 Cost and Carbon Plan for Scenario 1 ~ Area-Wide Strategic Network Scenario Year CAPEX/REPEX/O&M Total Capital [ ] - 29,166,563-1,483, , ,665-13,629-3, , ,148-7,323 0 Fuel subtotal [ ] 0-916, , , , , ,707-1,005,578-1,008,073-1,010,568-1,013,062-1,022,308-1,024,802-1,027,297-1,029,792-1,032,287-1,067,386-1,069,880 O&M excl fuel subtotal [ ] 0-217, , , , , , , , , , , , , , , , ,448 REVENUES Revenue subtotal [ ] 0 4,117,654 4,117,606 4,168,960 4,168,912 4,220,270 4,433,591 4,484,875 4,484,830 4,484,784 4,484,739 4,516,977 4,516,932 4,516,887 4,516,842 4,516,797 4,650,327 4,650,284 - Total cashflow [ ] 29,166,563 1,500,139 2,980,946 3,013,750 3,017,033 3,051,002 3,209,807 3,257,893 3,259,309 3,256,769 3,254,229 3,275,534 3,274,681 3,272,142 3,269,602 2,919,914 3,358,171 3,362,956 Operating margin [ ] 0 2,983,489 2,980,946 3,019,576 3,017,033 3,055,666 3,223,436 3,261,849 3,259,309 3,256,769 3,254,229 3,277,221 3,274,681 3,272,142 3,269,602 3,267,062 3,365,494 3,362,956 CARBON DIOXIDE Total Carbon dioxide emissions kg CO2 0 7,133,905 7,150,027 7,245,562 7,261,684 7,357,216 7,707,063 7,803,393 7,819,516 7,835,638 7,851,760 7,920,094 7,936,217 7,952,339 7,968,461 7,984,583 8,254,428 8,270,550 Network heat CO2 intensity kg CO2 / MWh Alternative CO2 emissions (BAU) kg CO2 0 16,578,553 16,578,553 16,700,556 16,700,556 16,822,558 17,334,592 17,456,595 17,456,595 17,456,595 17,456,595 17,536,901 17,536,901 17,536,901 17,536,901 17,536,901 17,928,629 17,928,629 CO2 savings from network including temporary emissions kg CO2 0 9,444,648 9,428,526 9,454,994 9,438,872 9,465,342 9,627,530 9,653,202 9,637,079 9,620,957 9,604,835 9,616,806 9,600,684 9,584,562 9,568,439 9,552,317 9,674,201 9,658,079 Year CAPEX/REPEX/O&M Total Capital [ ] ,420-11, ,028 Fuel subtotal [ ] -1,072,375-1,074,870-1,077,365-1,126,199-1,126,199-1,126,199-1,126,199-1,126,199-1,173,851 O&M excl fuel subtotal [ ] -217, , , , , , , , ,506 REVENUES Revenue subtotal [ ] 4,650,240 4,650,197 4,650,153 4,875,368 4,875,368 4,875,368 4,875,368 4,875,368 5,106,970 Total cashflow [ ] 3,360,417 3,357,879 3,083,921 3,519,725 3,531,721 3,531,721 3,531,721 3,531,721 3,682,585 Operating margin [ ] 3,360,417 3,357,879 3,355,341 3,531,721 3,531,721 3,531,721 3,531,721 3,531,721 3,715,613 CARBON DIOXIDE Total Carbon dioxide emissions kg CO2 8,286,672 8,302,795 8,318,917 8,693,271 8,693,271 8,693,271 8,693,271 8,693,271 9,061,181 Network heat CO2 intensity kg CO2 / MWh Alternative CO2 emissions (BAU) kg CO2 17,928,629 17,928,629 17,928,629 18,476,183 18,476,183 18,476,183 18,476,183 18,476,183 19,032,694 CO2 savings from network including temporary emissions kg CO2 9,641,957 9,625,835 9,609,713 9,782,912 9,782,912 9,782,912 9,782,912 9,782,912 9,971,513 Page 103

104 Table 17 Cost and Carbon Plans for Scenario 1 ~ Initial Network local to ELSEF facility Year OPEX/REPEX/O&M Total Capital [ ] - 5,855, , , , , Fuel subtotal [ ] 0-47,473-47,581-47,690-56,787-56,895-57,004-57,112-57,221-78,644-78,644-78,644-78,644-78,644-78,644-78,644-78,644-78,644-78,644-78,644 O&M excl fuel subtotal [ ] 0-81,196-81,196-81,196-81,234-81,234-81,234-81,234-81,234-81,275-81,275-81,275-81,275-81,275-81,275-81,275-81,275-81,275-81,275-81,275 REVENUES Revenue subtotal [ ] 0 584, , , , , , , , , , , , , , , , , , ,849 Total cashflow [ ] - 5,855, , , , , , , , , , , , , , , , , , , ,930 Operating margin [ ] 0 455, , , , , , , , , , , , , , , , , , ,930 TOTALS Total Carbon dioxide emissions kg CO , , , , , , , , , , , , , , , , , , ,351 Network heat CO2 intensity kg CO2 / MWh Alternative CO2 emissions (BAU) kg CO2 0 2,362,889 2,362,889 2,362,889 2,939,199 2,939,199 2,939,199 2,939,199 2,939,199 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 CO2 savings from network including temporary emissions kg CO2 0 1,893,244 1,892,543 1,891,842 2,381,445 2,380,744 2,380,043 2,379,342 2,378,641 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 Year OPEX/REPEX/O&M Total Capital [ ] -94, Fuel subtotal [ ] -78,644-78,644-78,644-78,644-78,644-78,644 O&M excl fuel subtotal [ ] -81,275-81,275-81,275-81,275-81,275-81,275 REVENUES Revenue subtotal [ ] 801, , , , , ,849 Total cashflow [ ] 547, , , , , ,930 Operating margin [ ] 641, , , , , ,930 TOTALS Total Carbon dioxide emissions kg CO2 749, , , , , ,351 Network heat CO2 intensity kg CO2 / MWh Alternative CO2 emissions (BAU) kg CO2 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 3,242,574 CO2 savings from network including temporary emissions kg CO2 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 2,493,224 Page 104