Green New Deal for the North East ? Session 3: Planning for Social Change 11th November 2009

Green New Deal for the North East ?

Session 3: Planning for Social Change

11th November 2009

Towards the Low Carbon Economy in the Tees Valley

John Lowther, Director of the Tees Valley Joint Strategy Unit

Tees Valley Assets (1)

Tees Valley is the- largest integrated chemical complex in the UK- the third largest port in the UK- the largest hydrogen network in the UK- connected to a national pipeline network- world-class engineering industry- Centre for Process Innovation- land/planning expertise for major developments

Tees Valley Assets (2) Unique combination of infrastructure, skills, land, port and multi-

national companies.

World-class scale of the assets

- Ensus has built Europe’s largest bio-ethanol plant

- SABIC has built the world’s largest low density polyethylene plant

- Biofuels Corporation biodiesel plant is of a world scale

- BOC Hydrogen plant is the UK’s largest

- Teesside Power Station is the world’s largest combined cycle gas turbine power station

£4 billion pipeline of low carbon investments

A £1 billion CCS network which would generate electricity from coal, remove the CO2 and take CO2 from existing industrial plants, and then store the CO2 under the North Sea

£300 million Northern Gateway Container Terminal, with deep water jetties and import centres, will result in a net saving of up to 38.5 million tonnes of CO2 through reduction in road traffic from Southern ports to the North of England

Collective investment of £1 billion on two combined heat and power (CHP) plants

A £120 million expansion of the Energy from Waste plant including a CHP

£4 billion pipeline of low carbon investments (2)

Three new biomass power plants, one of which will be the UK’s second largest, with an investment over £904 million

A £50 million autoclave facility generating high quality recyclateA £80 million plant to recycle tyres, which would be the UK’s first full

scale commercial used tyre plant of its kindA further £100 million biofuels plantA £365 million paper recycling plant

These projects alone could create 2000 jobs, add £3.5 billion GVA tothe UK economy over the next 10 years, supply over 2200 MW ofsecure low carbon electricity to the national grid, almost doubling theamount of electricity currently installed in the North East, and re-usewaste

Challenge: How do we land the £4 billion pipeline of investment

North Tees/South Tees Study

- identify constraints on development e.g. infrastructure, land ownership

- propose a land use framework

- identify other opportunities e.g. wind farm fabrication, hydrogen economy

Challenge: How do we land the £4 billion pipeline of investment (2)

Problem

- Competitors are Port of Rotterdam, Port of Antwerp, Port of Singapore – all purpose municipal development

companies - one stop shop

- Tees Valley is fragmented land ownership, no responsibility for pipelines, infrastructure

- How can we deliver these projects in a partnership with the private sector

3. Solution – A Task Force with Government

- a series of propositions

Proposition 1: A Carbon Capture and Storage DemonstratorTackling climate change in Tees Valley…

Carbon reduction targets means cutting Tees Valley C02 emissions to 20% of the 1990 level by 2050.

Source: AEA, Carbon Trajectories Project

Proposition 1: A Carbon Capture and Storage Demonstrator (2)

18 of 21 major CO2 emitters in the Tees Valley

Emissions Trading Scheme in 2013 a major threat toenergy intensive industry

Pilot CCS could give Tees Valley a major competitiveadvantage safeguarding 12,000 jobs and reduce industrialCO2 emissions by 49%

Proposition 2: Producing Green Petrochemicals

Can we integrate proposals to ensure that we can produce syngas from waste and biomass?

From syngas can produce:- bionaptha for the SABIC cracker, reducing dependence on

oil/gas, and also price volatility of naptha - green hydrogen, biokerosene for aircraft fuel- Centre for Process Innovation at Wilton can help develop these commercial technologies

Proposition 2: Producing Green Petrochemicals (2)

Ineos – Bio feasibility study to convert biodegradable waste into road transport fuel and clean electricity. £2.2 million from ONE/DECC

Government reviews it regulatory framework to facilitate rather than prevent the use of waste and biological products in low carbon industries

Proposition 3: Delivery of Infrastructure

New Delivery Vehicles to:

Deal with connections to the national grid and local distribution networks, working on a strategic plan for connections with the national grid and NEDL, with technical support from DECC and the Department of Business Innovation and Skills

Provide a robust integrated pipeline network to enable future developments to take place

Make strategic land acquisitions where appropriate to safeguard pipeline corridors or key strategic sites for future development

Proposition 3: Delivery of Infrastructure (2)

Invest in an energy network that provides certainty of energy supply and uses excess heat and steam for industrial use to help resist global fluctuations in energy prices

Develop an energy supply company to use waste heat and steam to provide energy for CHP schemes in residential areas

Proposition 4: Acceleration of Planned Investments

Bringing forward the second nuclear power station for Hartlepool to the 2014 to 2019 period, thereby safeguarding the existing 700 jobs when the existing power station closes – high national grid connection user charges by OFGEM discriminate against a second nuclear power station at Hartlepool in the short term

Enhancement of the rail gauge from Teesport to Hartlepool and the East Coast Main Line to enable containers from the Northern Gateway terminal to use the rail network, rather than the road network

Proposition 5: Technical Experts Panel

A panel of technical experts from the Highways Agency,

Environment Agency, Natural England, NEDL, National

Grid and the Health and Safety Executive, working with

the local planning authorities to speed up the delivery of

projects of national importance and the infrastructure

connections.

Power Shift*

Can the public sector meet the carbon challenge?

November 2009

Dr Ruth Rule

pwc

*connectedthinking

PricewaterhouseCoopers LLPNovember 2009

Slide 20

Introduction

1. The Carbon Challenge

2. The Drivers

3. Intervention

4. Funding a Low Carbon Economy


Slide 21

Power Shift*

Carbon energy will become a significant issue for Local Authorities over the next 5 years; action is needed now

UK Greenhouse Gas Emissions

0

100

200

300

400

500

600

700

800

900

1990 1993 1996 1999 2002 2005 2013 2020 2028 2035 2043 2050

UK

gre

en

ho

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mt

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)

Interim 2020 target

Intended 2020 target (applies if global deal achieved)

Climate Change Act - 2050 target

Actual UK GHG emissions to date

• The UK benefitted from the switch from coal to gas in the 1980s and 90s.

• Emissions reductions have now tailed off in the UK.

• Government has set aggressive 2020 targets for carbon reduction.

• New policy programmes and regulations will apply to public sector organisations

The Carbon Challenge


Slide 22

Key drivers for carbon reduction

Power Shift*

RELEVANCE DRIVER IMPACT

High Carbon Reduction Commitment (CRC) will start in April 2010.

LAs must buy allowances in April 2011

Local Authorities currently spend in the region of £1.5 billion on energy per annum.

w/o action, LA energy costs are projected to increase by 2-3% by 2011 and ~25% by 2014 as a result of the CRC.

High Carbon Budgets: Government to give each Department responsibility for achieving a Carbon Budget.

TBD but financial penalties may be imposed by Departments (eg CLG, Defra etc) on LAs who fail to meet applicable reduction targets

Medium EU Emissions Trading Scheme: permits will be auctioned for electricity generators from 2012.

Increased generation costs.

Medium Energy prices. As the world economy emerges from recession, energy resource constraints are expected to re-emerge pushing up oil/gas prices.

Increased price volatility expected in next 5 years. Price trend is upward.

Low EU Renewable Energy Directive. UK must achieve 15% renewable energy target by 2020

Transition to renewable energy will lead to increases in power prices reflecting investment required and LRMC of new technologies.


Slide 23

Power Shift*Lo

w C

arbo

n E

cono

my

Compliance

Plan and implement actions to achieve compliance with

CRC

Strategy

Develop a strategic approach and optimise performance in

relation to CRC

Assurance

Undertake assurance / internal verification on CRC

submission

Carbon Reduction Commitment

Value at Risk

Assess the carbon and energy “value at risk” in a public sector

organisation

Cost Review

Review of carbon and energy cost (either stand alone or

integrated into full cost review)

Options Analysis

Options analysis to determine best available

solution

Options Development

Infrastructure

Develop decentralised energy systems or renewable

energy

Procurement

Change asset procurement process to ensure full energy

and carbon costs are considered.

Efficiency

Implement energy and carbon cost reduction programme

(either stand alone or integrated)

Intervention

Assurance

Assurance / internal verification of CRC

submission

Inve

stm

ent

Opp

ortu

nitie

sC

arbo

n B

udge

ting

Gov

ernm

ent

Reg

ulat

ion

Additional Drivers

Carbon Budgets Community Energy Saving Programme

Decent Homes

Carbon Emissions Reduction Targets

Renewable Heat Initiative

Feed in Tariffs

Zero carbon Homes

Warm Front & fuel poverty

Smart Metering

What can the public sector do to improve services and meet local policy objectives under this cost pressure?

Intervention


Slide 24

Key actions for Local Authorities

Power Shift*

DRIVER IMPACT

CRC Obligations Local Authorities can benefit from achieving “best in class” performance through bonus payments. Poor performance may result in penalties. Planning for the CRC needs to start now in advance of the April 2010 start date.

Alternative & decentralised energy

HMG is promoting wider use of decentralised energy, district heating and CHP with a Renewable Heat Incentive scheme to be introduced from 2011. Local Authorities have a key role to play in implementing this policy.

Opportunities also exist to develop renewable energy schemes either in association with district heating schemes or on a stand alone basis (eg on old landfill sites).

Housing & public buildings

New regulations will come into force from 2013 onwards, with all new homes [& schools] “zero carbon” from 2016; other non-domestic buildings zero carbon by 2018/19 (tbc). Without access to low carbon energy these targets will be unaffordable. A new “feed in tariff” scheme, to be introduced in 2010, will encourage dispersed micro-generation. Local Authorities have a key role to play in facilitating investment in low carbon improvements.

Procurement Local Authorities will need to reflect low carbon objectives in their procurement procedures. CRC obligations will impact on existing contracts including PFIs. New contracts should take account of new regulations now.


Slide 25

Is it possible for the public sector to make a step change in funding sustainable projects that often cannot be financed through traditional sources?

Power Shift*

Funding a Low Carbon Economy

Current barriers to funding a low carbon economy include:

• Different technologies, thus requiring new risk management approaches and new forms of capital

• Financing structure and scale, low carbon capital projects often carry higher upfront costs and lower operational costs, their requirement for external financing is high and due to scale (e.g. CHP) the transaction costs can be disproportionately high

• Limited track record• Private sector investment not focused on decentralised energy/retrofit to reduce carbon

outputs at the local level

How can the public sector in the region take the initiative to kick off investment in the North East aimed at financing the transformation to a

low carbon economy?


Slide 26

Toronto Atmospheric Fund finances initiatives in the city region that combat global climate change and improve air quality through a self-sustaining revolving fund

Power Shift*

A Case Study – Toronto Atmospheric Fund

Since its inception TAF has reduced CO2 emissions by 500,000 tons, its successes include:

• Canada’s first municipal combined heat, power, and cooling system (tri-generation); • its largest solar power plant; • an energy efficiency financing program that targets new condominium construction; • and a pilot test of outdoor LED white lighting.

TAF fund now $30m provides grants, makes loans, invests in projects, and creates partnerships with all sectors of the community, city departments and agencies to facilitate action on climate change.


Slide 27

The revolving fund model is a one that could be adapted to the regions circumstances

Power Shift*

A Green Fund for the North East?

• Investment yields energy cost savings or revenue

• Savings or revenue pay back financing

• Net savings or revenue placed in revolving fund

• New projects financed from revolving fund

Revolving Fund

European Funds, e.g. JESSICA

Accelerating Capital

Holding Fund

Private Finance

Investment Investment Investment

SPV

SEED FUNDING

GRANT / LOAN ROI/ SAVINGS

DEBT / EQUITY (Matched Funding)

GRANT /EQUITY /DEBT

EQUITY / DEBT ROI

ROI

GRANT /EQUITY /DEBT

DEBT / EQUITY ROI

DEBT / EQUITY ROI

ROI


Slide 28

Could a green energy fund similar to TAF, Woking and the proposed Energy for London Fund be created?

Power Shift*

A Green Energy Fund for the North East?

• Entities that are dedicated to climate mitigation can focus leadership, develop integrated strategies, and multiply resources in a way that is often challenging to accomplish in a diverse number of smaller organisations;

• Energy efficiency investments create revenue streams that can both service capital financing for projects as well as provide income for incubating new projects;

• The greater proportion of savings that can be recycled into new projects, the greater the acceleration of emissions reductions and the more rapid the expansion of capital available for climate mitigation over time;

• Revolving funds operate best as public private partnerships in order to be able to make strategic decisions and maintain their capital base in difficult budget times;

• Incubation funding to “get the ball rolling” and project financing to scale up pilots are strategies that go hand in hand and could be used in the North East to create a low carbon economy

PricewaterhouseCoopers LLP

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© 2009 PricewaterhouseCoopers LLP. All rights reserved. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms of the network, each of which is a separate and independent legal entity.

Green New Deal for the North East ? Panel Discussion

Chair: Professor John Tomaney, CURDS

Sarah Green, CBI

Professor Dermot Roddy, Sir Joseph Swan Institute

Kevin Rowan, Northern TUC

Documents

Green New Deal for the North East ? Session 3: Planning for Social Change 11th November 2009