BRIDGEND COUNTY BOROUGH COUNCIL REPORT TO CABINET 3 FEBRUARY 2015 REPORT OF THE CORPORATE DIRECTOR COMMUNITIES

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1 BRIDGEND COUNTY BOROUGH COUNCIL REPORT TO CABINET 3 FEBRUARY 2015 REPORT OF THE CORPORATE DIRECTOR COMMUNITIES ENERGY TECHNOLOGIES INSTITUTE: SMART SYSTEM OF HEAT PROGRAMME 1. Purpose of Report 1.1 The purpose of the report is to brief Cabinet about the Energy Technologies Institute (ETI) led Smart System of Heat Programme (SSH) and secure Cabinet support to participate in the Programme going forward. 2. Connection to Corporate Improvement Objectives/Other Corporate Priorities 2.1 The Bridgend County Borough Council (BCBC) Corporate Plan covers a 5 year period from and even though the SSH Programme will run beyond this timeframe it will nonetheless address several current Corporate Improvement Objectives namely: Priority 1: Working together to develop the local economy Priority 5: Working together to tackle health issues and encourage healthy lifestyles Priority 6: Making best use of resources 3. Background 3.1 BCBC has been engaged with the SSH Programme since March 2013 when ETI contacted all local authorities within the UK detailing what the Programme set out to do was and encouraging them to complete a Pre-Qualifying Questionnaire (PQQ). Over 40 local authorities from across the UK duly responded to the June 2013 deadline (3 Welsh Councils submitted PQQs). The Questionnaires were scored by a panel and a shortlist of 11 local authorities was drawn up (Appendix 1) in September 2013 with BCBC being the only Welsh authority prioritised. Between autumn 2013 and summer 2014 BCBC attended a number of meetings and workshops with ETI which assessed the capability of the Authority to deliver the Programme, attract finance and partners, and engage with residents successfully. Through the engagement work undertaken, Welsh Government (WG) joined BCBC as its principal partner in the Programme and the support and resource that WG were able to provide enabled BCBC to progress with the project. 3.2 The next stage of the Programme required BCBC to submit a Request for Proposal (RfP) in June 2014 which was again scored and then used to select 3 local authorities from the prioritised 11. BCBC submitted an RfP and was selected as one of the three authorities to move into the final phase of the SSH Programme (Greater Manchester and Newcastle were the other selected authorities). 3.3 The SSH Programme will run in two phases with Phase 1 ( ) seeing the creation of the Energy Path model which will be used to create an area wide Energy Master Plan and design a small number of schemes for the local authority. Phase 2

2 (2018 onwards) will look to demonstrate schemes created within the area wide Energy Master Plan that will provide evidence for the model and approach which can be replicated across the UK. 3.4 Heat accounts for over 40% of the UK s energy demand with domestic heating contributing to nearly 20% of all UK CO 2 emissions. The vast majority of heating within the UK is currently delivered through gas boilers, however this technology is not considered compatible with the UK s energy and climate change goals and therefore its prominence is likely to be reduced over time (Appendix 2). New approaches to heat supply such as local heat networks and heat pumps and demand management techniques such as improved thermal efficiency of buildings could replace gas boilers as the dominant approaches to the provision of domestic heat in the UK. 3.5 There is a growing trend within the UK for energy to be generated and supplied locally. ETI (which is a UK public/private sector partnership) considers that in the future the most practical and cost effective heating solution in any one area will depend upon a number of factors that are specific to that location, so for example the solution for an urban area will be different to a rural area. 3.6 Over time the transition towards this new approach will best occur through a combination of consumer led technology within a framework of supporting policy. The SSH Programme aims to create and demonstrate tools that will provide practical, cost effective local solutions to the provision of heat within domestic properties. 4. Current Situation / Proposal 4.1 As one of the three prioritised local authorities BCBC is still very much in the early stages of project development. The SSH Programme will run in 2 phases: Phase and Phase 2 (the demonstration phase) post To be clear, progression and participation in Phase 2 of the Programme will be dependent on the successful development of the EnergyPath model in Phase 1 and securing the necessary funding and support to implement it. At this time there is no specific financial or contractual commitment by the Authority to Phase 2, but clearly by being chosen as one of the three UK Local Authorities to participate we are being offered a fairly unique opportunity to access industry leading expertise to develop sustainable energy solutions locally with significant backing from WG. It is the intention of WG that they would intend to rollout the good practice acquired from this Programme to the rest of Wales. At this stage the project can be viewed under the following headlines: 4.2 Project Structure The SSH Programme will have a national programme board comprised of representatives from each of the three local authorities, UK Government, WG and ETI. The national group will primarily be interested in shaping and delivering Phase 2 of the project. Below the national group will sit a local project group which will be composed of BCBC, WG, ETI and other key partners such as Cardiff University, Western Power Distribution and potential private sector investors. The local group will steer and

3 manage the delivery of the Phase 1 project and preparation for Phase 2 of the Programme. The local group is likely to create several sub-groups involving BCBC and its project partners. Examples of possible sub-groups could be aligned under the following themes: Community engagement Funding application preparation Data gathering Community benefits development 4.3 Phase 1 Phase 1 will be pre-dominantly concerned with the creation of an Energy Master Plan for Bridgend County Borough. The plan will be formulated using ETI tools (e.g. Energy Path model Appendix 3) and will require key tasks to be completed such as data gathering. Phase 1 will also cover preparation for Phase 2 which will include preparation of funding applications, community engagement activities and the assessment of appropriate community benefits that the Programme can generate for the area (numbers of jobs created for example). 4.4 Delivery of Phase 2 The delivery of Phase 2 of the project post 2017 will be a key discussion point for the Project Board. Initial discussions have considered the merits of creating a Special Purpose Vehicle for Phase 2 or the creation of a not for profit Energy Service Company (ESCO). These and other options will all need to be considered to determine the most suitable option for the delivery of Phase 2 of the project. 4.5 What does the SSH Programme bring to Bridgend? The SSH Programme brings a variety of strong benefits to BCBC and the wider area and these are summarised below: 4.6 Creation of Jobs and Training Opportunities The SSH Programme will likely involve the creation of new energy infrastructure within the County Borough, both at the distribution level and building fabric level, and this will generate employment as well as training opportunities and apprenticeships through both the construction and ongoing maintenance phases but also within the Programme supply chain. 4.7 Fuel Poverty BCBC and WG will be able to influence the areas selected for the demonstration of the SSH Programme and therefore can align these closely to areas where fuel poverty is considered to be a problem. The SSH Programme has the potential to play a significant role in reducing the effects of fuel poverty in the County Borough. 4.8 Health Homes that are cold and damp pose significant health risks in terms of physical health problems such as arthritis, respiratory problems such as asthma, and mental health issues such as anxiety and depression. The SSH Programme will help address these issues through building fabric improvements as well as potentially offering more affordable forms of heating. 4.9 Financial Savings to BCBC

4 District heating is almost certain to form a key component of the SSH Programme and where schemes encompass an area that contains BCBC properties there will be direct savings to those properties from joining the scheme through no boiler replacement costs, or ongoing boiler maintenance and repair costs. The Programme will offer direct savings and benefits to BCBC such as reduced or stabilised energy costs, as highlighted in previous sections of this report as well as significant community benefits. 5. Effect upon Policy Framework& Procedure Rules 5.1 There will be no effect upon policy framework or procedure rules. 6. Equality Impact Assessment 6.1 Bridgend Council s Equalities Impact Assessment Toolkit has been utilised, which indicates that the scheme will have no impact on specific equality groups and disability duties. 7. Financial Implications 7.1 The actual costs associated with delivering the SSH Programme have not yet been established and will largely depend upon the areas selected for demonstration and the recommended technologies within those areas. Phase 1 of the Programme will be concerned with the development of the area Master Plan which will focus upon area based solutions and decisions will be made with input from project partners regarding which areas are chosen for demonstration in Phase 2 of the Programme. 7.2 In terms of immediate financial implications Phase 1 will involve BCBC officer time which can be met from a combination of existing staff resources and from project support provided by WG which has created capacity for potentially 2 posts to be developed to move the project forward. WG has awarded BCBC a Revenue Grant of 38,720 under the Leveraging ECO into Wales Programme and a Capital Grant of 1,385, under the Leveraging ECO into Wales Programme which includes 31,000 to cover project management costs that can also be used to support a post. 7.3 BCBC is expected to source the finance for the delivery of Phase 2 of the Programme. It is not fully known at this stage what the actual costs will be, but it is not envisaged that BCBC capital funding will be required, unless a business case emerges in Phase 1 of the Programme that offers an attractive investment opportunity. In order to source funding for Phase 2 positive discussions have been held with WG (BCBC s principal partner on the Programme) to ascertain how this funding can be achieved with a joint bid to WEFO for EU Structural funding being proposed and discussions are being held with WEFO to progress this. Alongside EU funding, discussions have been held with several potential private sector investors (British Gas and Hitachi) who are keen to be involved in the project as well and therefore funding and investment for the Programme does not at this stage appear to be a significant risk to its success.

5 8. Recommendation 8.1 That Cabinet considers this report and authorises BCBC participation in the SSH Programme. Mark Shephard CORPORATE DIRECTOR COMMUNITIES February 2015 Contact Officer: Michael Jenkins Principal Sustainable Development Officer Telephone: (01656) Postal Address Bridgend County Borough Council, Civic Offices, Angel Street, Bridgend, CF31 4WB Background Documents 1. BCBC Request for Proposal - June ETI SSH Programme Local Authority Brochure 3. Equality Impact Assessment

6 Appendix 1 Prioritised Authorities for Phase 1 SSH Programme Bridgend, Greater Manchester and Newcastle have been selected from the 11 prioritised authorities.

7 Appendix 2 The columns show predictions for the UK electricity generation and heat production through to 2050 with the column on the left showing composition without carbon reduction targets and the column on the right with carbon reduction targets.

8 Appendix 3 SSH Programme Overview Source Energy Technologies Institute