Strategic Issues and Options - Sustainability West Midlands · BIRMINGHAM ENERGY STRATEGY – ISSUES AND OPTIONS 3 | P a g e EXECUTIVE SUMMARY This issues and options paper demonstrates

Birmingham Energy Strategy

Strategic Issues and Options DRAFT Version 2.1

November 2010

BIRMINGHAM ENERGY STRATEGY – ISSUES AND OPTIONS

2 | P a g e

Contents

Executive summary ....................................................................................................................................... 3

1 Introduction .......................................................................................................................................... 5

Overview ................................................................................................................................................... 6

2 Risks, Opportunities and Scenarios ....................................................................................................... 8

2.1 Energy risks .................................................................................................................................. 8

2.2 Energy opportunities ................................................................................................................. 10

2.3 Birmingham Scenarios ............................................................................................................... 12

City growth: changing patterns of energy demand ................................................................................ 12

Taking action: opportunities and limitations .......................................................................................... 13

Greening the supply: nationally or locally ............................................................................................... 13

The scenarios ........................................................................................................................................... 14

The Birmingham “Hybrid Scenario” Approach ........................................................................................ 14

3 Strategic Issues.................................................................................................................................... 18

3.1 The Strategic Energy Framework, Capacity and Timescale ....................................................... 18

3.2 Critical Areas to be Resolved .................................................................................................... 20

4 Strategic Options................................................................................................................................. 25

4.1 Approaches taken by other North European cities ................................................................... 25

4.2 New Partnership Relationships and Optional Delivery models ................................................. 26

5 Conclusions and Recommended Next Steps....................................................................................... 29

5.1 Conclusions ................................................................................................................................ 29

5.2 Overall strategy and Priorities for Action .................................................................................. 29

5.3 Long Term Commitment Principles ........................................................................................... 31


3 | P a g e

EXECUTIVE SUMMARY

This issues and options paper demonstrates that a comprehensive city-wide approach to the

management of, and the upgrading and investment in Birmingham’s energy infrastructure will deliver

significant benefits. Coupled with a significant acceleration in energy efficiency measures, major

improvements in quality of life, opportunities for economic development and achievement of carbon

emission reduction targets can be achieved.

The city is exposed to significant risks;

Consumers (business, public sector, residents, etc) spend over £1.3 billion on gas and electrical

energy every year. This is a major leakage from the city’s disposable income and affects fuel

poverty, and health outcomes; as well as affecting city investors and business competiveness.

The global energy sector is entering a period of unprecedented instability and unpredictability

(according to the latest outlook report from the International Energy Agency). As a minimum,

oil prices are expected to double in the next 20 years, and global demand will exceed supply

well within meaningful strategic horizons for city energy planning.

Birmingham’s current energy infrastructure was initially designed to supply the needs of a

manufacturing city. While adjustments have been made, it is clear that there are barriers to

providing a competitive sustainable energy solutions which are necessary for a modern 21st

Century “Smart City”.

This paper sets out the fundamental strategic questions facing Britain’s second largest city. It is clear

that Birmingham needs a new strategic approach towards its energy generation and use. This new

approach will need to be fully aligned with other city strategies for land use and spatial planning (the

Core Strategy), for Waste (the Total Waste Strategy) and for Transport. A comprehensive approach has

the potential to create major opportunities for the people and businesses of Birmingham.

This paper therefore identifies this is a new strategic are requiring clear city ownership. New forms of

relationships between energy infrastructure providers, energy generators and consumers and the City

Council will be required. Given the integral links between energy and the city’s future development

plans, It is vitally important that the City Council provide leadership in this area.

This document provides a draft framework for the development of this strategic leadership. It sets out

the key principles which should underpin any strategy, and identifies the key areas where new forms of

relationships and partnerships are necessary and essential.


4 | P a g e


5 | P a g e

1 INTRODUCTION

Birmingham City Council committed to develop an Energy Strategy for the City as a key strategic action

in the “Birmingham Climate Change Action Plan 2010” (March 2010). Energy is fundamental to the

continued wealth, health and economic development of the City. At a time of significant change in

national and global energy systems, this issues paper provides a strategic framework to set out a clear

direction of travel for Birmingham’s energy systems and those who depend on it.

A clear strategic framework on the city’s energy will make provide the context for organisations and

individuals investing, living and working in Birmingham (and the surrounding region) to develop their

own strategies and make their own plans to secure their energy supplies and optimise their carbon

emissions. The strategic framework will also provide greater assurance to attract investment and jobs

into the city, as well as securing low cost energy supplies for existing residents and businesses and

delivering Birmingham’s share of national carbon emission reductions in the coming, increasingly

challenging decades.

Birmingham’s energy systems, as with all cities, have developed over decades. Therefore the decisions

on city energy systems, which are taken now affect city lifestyles, transport systems and development

and locational systems well into the future. The evidence from other cities – mainly European (eg –

Stockholm, Copenhagen, Vienna, Nuremburg, etc) clearly indicates that the benefits (and costs) of

decisions taken over half a century ago still shape the nature of their energy futures and their economic

development. It is also clear that their long term strategic energy planning affects their reputation as

locations for sustainable investment, and as some of the most quoted exemplars of best practice in

energy and carbon management globally.

These positions were not achieved overnight. They required considerable political resilience and will,

and in many cases reflect the underlying character and history of the city concerned. Energy

investments are large, and require certainty of long term finance and contracts, and often involve

substantial infrastructure. They affect the attractiveness and shape of a city in many ways beyond how

much a unit of electricity costs. Examples like Stockholm and Copenhagen demonstrate the importance

of a long-term perspective in aligning public and private investment to a common cause.

The strategic framework proposed for Birmingham has a minimum of a forty year time horizon, looking

ahead to 2050. This date has further significance, because it aligns with UK national targets to reduce

carbon dioxide emissions by 80%. This gives us a useful target as well as sensible timeframe.

It is important that Birmingham sets out an ambitious approach. As will become clear, national and

international policy is increasingly looking to local cities and communities to take a lead in this area, not

only because natural energy resources vary so much from place to place (which makes efficient national


6 | P a g e

policymaking difficult) but also because buildings and transport account for well over 70%1 of global

energy use, and the way this energy is used is shaped in and around our cities.

Cities themselves are in the best position to design and implement energy strategies that save the most

money, reduce carbon emissions fastest, and create the biggest economic opportunities for their

citizens.

Those that are seen to take a lead on this agenda will gain the biggest investments fastest (as

Birmingham has already experienced with its Birmingham Energy Savers initiative). Doing nothing is not

an option, and no one else will do this for us.

Overview

While Birmingham is a major energy consumer, it produces a minuscule amount of its own energy. This

exposes Birmingham to potential major energy security risks.

More than 99% of the £1.3 billion Birmingham spends every year on energy flows out of the city,

and is spent on gas, electricity and oil. As a result, as the 21st century progresses, the city is likely

to be exposed to significant risks.

The only significant energy produced in Birmingham currently is from the Tyseley Energy from

Waste plant.

Therefore, Birmingham is subject to major risks:

The risk of fuel poverty

As fossil fuel prices rise, more people will find fuel bills dominating their spending. They could

become fuel poor, unable to afford to heat or light for their homes and trapped in a spiral of

economic deprivation, without the power needed to engage in modern society. This also can

have increase health problems and affect educational outcomes.

The risk of environmental degradation

Unacceptably high carbon emissions from continued over-consumption of fossil-based fuels will

place an increasing burden on the environment and economy, and the costs of escaping from

this vicious circle will rise.

The risks of economic disadvantage and the “legacy” of stranded energy assets

As businesses are increasingly assessed on their environmental credentials and major investors

seek locations where the environment and sustainability is highly regarded, the city’s current

non-competitive energy systems handicap industry and commerce, making it unattractive to

locate in Birmingham and harder for Birmingham businesses to compete. This is especially

1 ref


7 | P a g e

critical as businesses increasingly look to locate and be linked to “Smart Cities” which have the

most modern “smart” power systems in place.

The risk of insecure power supplies

Reliance on external power supplies exposes Birmingham to wider national and global changes

over which it has little control. A more efficient secure energy system with a much higher

proportion of local energy generation increases the attractiveness of the city as a place to live

and for industry and commerce to flourish.

At the same time, there are considerable opportunities from getting the local energy system right:

Several hundred million pounds of spending could be restored to the local economy

The retrofitting of existing buildings, construction of very high efficiency buildings and a much

higher proportion of local energy generation will release money currently spent on unnecessary

energy imports.

Many thousands of skilled sustainable jobs could be created

A long term direction of travel on retrofitting, local energy generation and energy infrastructure

upgrades will cerate jobs for the foreseeable future.

Birmingham could establish a position of leadership in specific energy technologies or

applications, attracting investment and jobs

A clear strategic framework will provide the foundation for active innovation, large scale

demonstration projects and market creation for energy applications. Working in partnership

with universities, colleges and the energy sector supply chains will provide clearer leadership

The city can enhance its reputation as a leader in tackling climate change

Birmingham is increasingly recognised as a city which is serious about addressing climate

change. The strategic framework on the city’s energy will provide additional support and

increase the level of interest in the city as a sustainable location.

There is therefore a clear need for a strategic energy framework which manages these risks and gives

the city the best chance to seize these opportunities.

This issues paper is one of two fundamental resources supporting development of the city energy

strategy and informed decision-making with relevant stakeholders. It sets out the strategic issues and

options identified in six months of stakeholder consultation, modelling and evidence gathering, and is

complemented by a separate Common Evidence Base (and supporting resources) which summarises the

underlying current situation in terms of energy supply, demand and potential in the city.


8 | P a g e

2 RISKS, OPPORTUNITIES AND SCENARIOS

As has been stated above, there is unprecedented uncertainty in the energy world2 , which is creating

significant risks and also opportunities for Birmingham. This section paints a picture of some possible

futures with the aim of bringing out the implications and challenges of possible future paths in more

detail. These scenarios have been developed using standard software by the Energy Saving Trust (EST)

and are aligned with national scenarios provided by the Department for Energy and Climate Change

(DECC).

It is important to note that all of these scenarios are illustrative. The objective is to stimulate and test

potential strategies against possible futures, and also to bring out the specific challenges of different

energy development paths for the city.

2.1 Energy risks

The fundamental risk is that if a city is caught with an inflexible energy asset infrastructure when fuel

prices change significantly or new technologies create new delivery mechanisms, then it can take

decades to fix the problem. In the meantime the inhabitants and local businesses may well suffer from

competitive disadvantage compared with other cities which have an adaptive energy infrastructure

which provides them with the ability to respond flexibly. The wider risks are summarised in diagram 1

below.

2 International Energy Agency (IEA) Outlook, November 9 2010, page 3.


9 | P a g e

Diagram 1. Potential energy risks for Birmingham

This project used a group of experts3 and consulted with city stakeholders to identify and prioritise 17

“game changers” which are potentially likely to impact the UK energy system in the next 40 years (see

diagrams 1 and 2). These were refined from over 300 initial potential technical, regulatory and economic

developments reviewed as part of the study.4 The risks these game changers highlight are as follows:

Economic disadvantage

The International Energy Agency (IEA) expect oil prices to double over the next 25 years and

peak oil5 to be passed sometime around 2020. This will have a significant impact on businesses

and cities relying on oil-based fuels and will put them at a competitive disadvantage compared

to those able to use cheaper alternatives. The IEA have also estimated that every year

economies delay, the shift to lower carbon energy systems will costs 1% more of GDP by 2030: it

gets harder to correct infrastructure and opportunities for leadership and competitive

advantage are lost.

Security of supply

Volatility and ‘unprecedented uncertainty’ are core themes of any global energy market analysis

3 Convened by Element Energy, September 2010.

4 For full details of this project and the analysis of each game changer, see the Element Energy presentation to the October 1

Stakeholder workshop available in the project resource base.

5 Peak oil is defined as the point at which global demand outstrips global supply, and supply begins to fall back.


10 | P a g e

at present. Relying on others to set and implement energy policy exposes Birmingham to the

risk of power outages and price spikes, particularly if other activities result in continued GDP and

population growth in the city, putting pressure on existing infrastructure and supplies.

Fuel poverty

Rising fuel prices will put more families in fuel poverty6, diminishing disposable incomes and

reducing quality of life.

Stranded assets and “legacy” infrastructure

If the city chooses to support the wrong technologies, it could be left with expensive long-term

infrastructure investments that must either be written off or which impose economic burdens

on those businesses and citizens which depend on them. This might include, for example, fuel

oil, coal, hydrogen, gas, biomass or district heating infrastructures if the fuels involved become

too expensive. And through innovation new alternative technologies may be created which offer

better returns.

Environmental degradation

Strong GDP and population growth coupled with continued high fossil fuel use and carbon

emissions will lead to environmental degradation and climate change, locally as well as globally.

The game changers identified also create significant opportunities for Birmingham, however, and these

are summarised below.

2.2 Energy opportunities

Over 99% of Birmingham’s expenditure on energy leaves the city7. If you add £1-2 billion spent on

energy infrastructure8 (buildings, boilers, electrical appliances etc) to the £1.3 billion spent on fuel, the

potential economic impact of strategic energy decisions (which might divert up to 80% of this

expenditure to other activities locally) is obvious.

The same game changers that create risks also create significant opportunities (see diagram 2).

6 Defined as spending more than 10% of income on fuel.

7 Common Evidence Base, Birmingham Energy Strategy Project, 2010.

8 Figure estimated by prorating national statistics by population to Birmingham. This is a conservative figure, largely ignoring

construction statistics and focused on household appliances, boilers etc.


11 | P a g e

Diagram 2. Potential energy opportunities for Birmingham

Economic competitiveness

A city with access to lower cost fuel supplies and energy generation can command a significant

competitive advantage in the national and global economy. Birmingham was built on its natural

resources as a central location close to emerging coal and iron/steel extraction and processing.

In the 21st century cities which can clearly demonstrate leading environmental and sustainability

behaviours and actions create their competitive advantage.

Global city leadership

Cities which create distinctively supportive positions towards specific technologies attract

investment and jobs. Hamburg has achieved this successfully with its emphasis on hydrogen-

fuelled transport, for example. Birmingham with an ongoing legacy of manufacturing innovation

and spatial development can position itself as a city which achieves a major successful retrofit of

its physical and energy infrastructures.

Wealth creation and quality of life

If Birmingham successfully diverts 40% of current expenditure on energy away from inefficient

fuel usage and towards the local economy, the city can potentially achieve multiple benefits. For

example, as the local economy saves £500 million or more a year in fuel costs and sees all or

most of this invested in local wealth creation and jobs: maybe 10000 jobs and a significant

reduction in fuel poverty.


12 | P a g e

Inward investment

Long-term markets for energy technologies make cities attractive for investors. Birmingham is

already demonstrating this with the interest generated through the Birmingham Energy Savers

project. The key is clear public sector leadership and demonstrated commitment (especially in

the form of infrastructure investment).

Environmental improvements

Leadership in low carbon energy systems reduces carbon emissions and supports delivery of

local, national and global climate change mitigation efforts. This in turn reduces the risks of

unexpected climate change.

2.3 Birmingham Scenarios

Birmingham’s future may take a number of different pathways towards the sustainable use of energy

and the reduction of carbon emissions. Several scenarios were created to test the scope and scale of the

activity that is needed.

Scenarios are necessary to assess the shape of the strategic framework which is needed for Birmingham.

This is because the provision of energy infrastructure nationally and in cities is significant, challenging

and long term. Investments in energy generation systems and infrastructure can and should last for

decades. And sometimes decisions (like building a nuclear power station or waste-to-energy plant) can

take a decade to turn from an agreed intention to physical reality.

At the same time, commodity fuel prices – like gas and oil – fluctuate daily and are influenced by

completely unpredictable geopolitical events, like distant wars and earthquakes. This can make it hard

for decision-makers to hold their nerve. Especially when researchers, innovators and business, including

those working in Birmingham’s own universities and businesses, are at working to develop new

technologies and approaches to change the rules altogether, and make existing approaches entirely

redundant. As the risks and opportunities listed above illustrate, energy decisions can affect people’s

lives and the future of local economies significantly.

City growth: changing patterns of energy demand

The changes that will take place to 2026 and 2020 were examined for energy and carbon impacts.

The construction of new homes and demolition of those no longer fit for modern day living (in

line with the proposals in the draft Core Strategy) have been accounted for. Offices, shops,

factories and warehouses will be replaced with new more energy efficient buildings, in line with

national plans for carbon neutral developments towards the end of the next decade. Some of

these changes are described in Birmingham’s Big City Plan.

The changes in demand for transport and whether public or private vehicles is another issue;

national trends suggest Birmingham may see a large increase in the number of vehicles and

distances travelled. These issues will be addressed by the forthcoming Intelligent Transport

proposals.


13 | P a g e

All of these changes have an impact on the way that energy is used, the scale of demand and the

associated carbon emissions. Our analysis suggests that housing growth and building

replacement will have a beneficial impact – because new buildings are far more energy efficient

than those they replace. The growth in transport clearly has a negative effect although this is

partly offset by improvements in vehicle efficiency and shifts to public transport.

The net effect is, surprisingly, a reduction in the use of energy and the associated carbon emissions. In

other words, a small part of Birmingham’s targets can be achieved by doing nothing although it must be

emphasised that this impact is only very small (just 1.5% of the overall reduction needed).

Taking action: opportunities and limitations

Doing nothing is not a real option; there are serious issues for Birmingham’s energy supplies and an

urgent need to improve the existing buildings which must be addressed. Significant changes are needed.

Changes in attitude and behaviour: A relatively low cost option but challenging to implement. The scenarios created looked at both behaviour changes at home and at work and in terms of heating and power

Energy efficiency measures: The scenarios modelled reduced energy demand through more efficient lighting and appliances; through improved insulation, boiler replacement, better glazing and heating controls. These touched on demand in homes, the commercial and industrial sectors, and street lighting.

District energy: Future pathways included varying scales of district energy, including combined heat and power within individual plant rooms and on a community basis. These took account of plans to expand the energy centres already in place at Broad Street and in Aston. The use of different fuels – gas, biomass or waste materials – could also varied, to generate power or to supply heat to communities, as separate energy supply streams or in tandem.

Renewable energy: Generating energy locally helps to offset the demands on the grid-linked infrastructure. The technologies considered included heat pumps (both air and ground source), wind, solar thermal and photovoltaic and use of biomass boilers. Again, these were considered for domestic and non-domestic applications and at different scales.

Transport Measures Changes in the mode of transport being used, improvements in vehicle efficiency as well the shift from fossil fuels to electricity and bio-fuels.

Greening the supply: nationally or locally

Should security of energy supply and carbon reduction be tackled locally or nationally? Decarbonising

the grid power supply through offshore wind, carbon capture and nuclear generation can only be

effective on a national scale but local measures will support matching supply and demand. National


14 | P a g e

measures will have consequences for the cost of energy to Birmingham and some local control over

supplies can help to peg prices and make the city a more attractive environment in which to live and

work. The scenarios include different degrees of national intervention, in terms of a ‘green grid’.

The scenarios

To build the Birmingham scenarios, the maximum extent of possible measures was taken into account.

Not all houses in Birmingham, for example, need cavity wall insulation or loft top-ups. Some (nearly two

thirds) have solid walls, of which some (very few) may already have been insulated. The changes in

lifestyle and working practices will also lie on a sliding scale from profligate to miserly and realistically

reductions in demand of 10-15% are likely. The opportunities for wind turbines in the city are clearly

restricted because urban landscapes slow the wind speed. There are limitations on the amount of

woody materials that can be accessed from areas around Birmingham. All of these limitations have been

considered and taken into account when looking at different pathways for Birmingham’s future.

With an understanding of the impacts of change and of the limits on the possible interventions, options

for Birmingham’s energy future could be investigated. Different scenarios were examined using the

Vantage Point modelling tool (developed by social enterprise trust Carbon Descent with support from

the Energy Saving Trust). Vantage Point allows different levels of intervention (e.g. the number of homes

insulated, the capacity of wind power installed, the commercial and industrial floor space that receives

improved lighting). Birmingham’s key target years, 2015 and 2026 and the national target year, 2050

(for an overall 80% reduction in carbon emissions) were selected as the markers in time for review.

These scenarios were developed to illustrate the range of possibilities as part of the engagement of

partners in the exercise. The results of the analysis are available separately. In reality only one scenario

met Birmingham’s carbon reduction targets and this is a hybrid approach that combines a wide range of

interventions at a realistic scale – including schemes that are already beginning to happen (such as the

expansion to Birmingham’s heat network) as well as those that are uncharted territory.

Above all the scenario includes some key measures that are known to be the important directions for

the city: district energy, retrofitting energy saving in existing homes and smarter use of power

(generation from renewables, load management and storage of energy)

The Birmingham “Hybrid Scenario” Approach

The “Hybrid Scenario” developed will form the basis for further debate and for the development of a

more detailed implementation plan, with the opportunity for creating new partnerships and ensuring

the scheme is properly resourced and financed such that Birmingham’s pathway to sustainability is

realised.

The “Hybrid Scenario” has been designed to achieve the long term carbon reduction targets defined for

2026 (60% reduction on a 1990 baseline) and the national target for 2050. The measures put in place in

the early years allow the city to maximise the early opportunities and to place the city in a leading role.


15 | P a g e

The scope and scale of the “Hybrid Scenario” approach can be described as follows:

District energy

continued expansion of city-centre heat and cooling network as well as expansion of energy

from waste provision, with an estimated 50MWe of power from the latter and similar from a

combination of energy centres/building-based combined heat and power, fuelled by mains gas.

A modest but realistic level of biomass-fuelled heat supply (5MWe) is included and an ambitious

scheme (burning a range of sustainable fuels) to generate additional local power supply.

District energy contributes 27% of the CO2 savings to 2015 but this falls off in later years as the

displacement of grid power supplies contributes a smaller CO2 saving.

Retrofit and energy efficiency improvements

The current proposals for Birmingham Energy Savers (BES), provides for 10,000 homes to benefit

from energy related measures installations. Further roll out of the scheme over the long term to

all households in the city. Assumes insulation of the vast majority of lofts and cavity walls by

2015, in line with current national policy. A modest 20,000 homes with solid walls would receive

internal or external wall insulation by 2026; the reality may that far more can be achieved.

Behaviour change would contribute an 8% saving on energy for both heating and power. Smart

metering is expected in all Birmingham households by 2020, through a national roll-out; better

feedback on energy use is known to drive reductions in demand.

Virtually all lighting, appliances and boilers are assumed to be energy efficient as traditional

designs are removed from the market through legislation and market transformation by 2026.

Minor improvements such as tank insulation, draught-proofing and heating controls are likely to

be adopted by virtually every home in the city through major campaigns and BES spin off.

Non-domestic buildings will be improved with around half the potential for better lighting. More

than half of the city’s street lamps are assumed to have replaced efficient units under the

contract with Amey.

Retrofit energy efficiency measures and behaviour change contribute a third of the CO2

reduction in the earlier period and a quarter to 2026.

Smart power and renewable energy

The Feed In Tariff (FIT) has reshaped the market for solar photovoltaic (PV) panels. The

Renewable Heat Incentive, expected in April ’11 may have a similar effect on take-up of heat

pumps and solar thermal. The future for such incentives remains unclear. Assumes modest use

of solar panels (24,000 homes benefit from solar PV or thermal) by 2026 and relatively low-

levels of adoption of heat pumps (1,100 homes installing either air or ground source units ) and

wood-fuelled boilers (1,000 homes). No micro wind turbines have been included.


16 | P a g e

Solar PV is assumed on non-domestic buildings – benefitting both from the FIT payments,

installed either as capital investment or on a roof-rental approach. 18MWth of ground and air

source heat pumps have been included – making use of Birmingham’s canals and sandstone

aquifer for heating and cooling.

Smart energy in the form of renewables contributes around 3%.

Road transport

A 15% shift from private transport to buses and trains by 2026 and improvements in vehicle

efficiency of 20% are included as ambitious but realistic possibilities. Around 5% of transport

fuels is assumed to have switched to bio-fuel and a quarter to electric vehicles. The latter would

be driven by Birmingham’s early involvement with national pilot programmes, such as CABLED,

which is investigating user attitudes during a demonstration project.

The impact of the assumed transport measures provides an estimated 17% saving.

National ‘Green grid’

The national programme for greening the grid supply is assumed to be in place and delivering

low-carbon electricity by 2026. This is a major component for carbon reduction in the city but

the local measures are important in achieving the overall targets and for providing local

influence on supply and price of energy.

The green grid delivers around 44% of the total annual CO2 savings in this scenario during 2015

to 2026. The contribution is half this in the earlier period to 2015, as the national programme

starts to build with offshore renewable energy.


17 | P a g e

This “Hybrid Scenario” indicates the possibilities and illustrates that a mix of interventions at both local

and national level can achieve the CO2 reduction targets. This scenario needs to be developed and

honed, taking the opportunities for action to the level of a more detailed implementation plan.


18 | P a g e

3 STRATEGIC ISSUES

In the context of the risks and opportunities and the “Hybrid Scenario” set out above, it is evident that

Birmingham is in a unique position to embrace key fundamental decisions on planning its future energy

infrastructure provision, significantly improving its energy efficiency and becoming a truly “green

energy” generation major urban location. It is also evident that decisions need to be taken imminently,

because other cities – like Stockholm, Hamburg, and Copenhagen and London are already establishing

clear positions on their strategic energy position, and energy is currently top of the agenda for national

and international governments: the economic and political opportunity is now.

Diagram 3 below summarises the key strategic issues for the city.

Diagram 3. Strategic issues

3.1 The Strategic Energy Framework, Capacity and Timescale

Birmingham has successfully achieved major urban change in recent decades in the absence of a

strategic approach towards its energy demand and supply. This is no longer a tenable position to take

for the reasons already discussed.

The dialogue with stakeholders has also demonstrated that achieving global carbon emission targets,

energy efficiency measures and increased local energy generation require local strategic energy

relationships to be developed.


19 | P a g e

Since this is a major new field of strategic planning, creation of new delivery relationships and

partnerships, and with the need for relative long term stability to secure investment, benefits and

reputation, it is important that certain questions are addressed. .

To what extent does the city need to take up a distinctive position on energy?

The evidence base has demonstrated that the city’s energy consumption has not been made

transparent. This has led to inefficiencies in consumption, an under-invested energy

infrastructure in respect of best practice compared with other cities, and inflexibility in

absorbing emerging and new renewable energy sources.

This is not a matter solely for national policy determination. While there will be a clear national

effort to de-carbonise the electrical power grid, Birmingham has a very strong and powerful to

play in shaping its own energy future

Birmingham as a major city in the UK and Europe has to adopt a clear strategic energy

framework to address its current and future energy security.

How can we take sensibly informed decisions on this topic?

The provision of energy to urban areas is of national and international importance. There are

major global energy generators and providers. There are also major energy infrastructure

facilities management operations.

Birmingham as a major urban authority has significant planning and development powers and

the City Council is also a major asset holder in the city with significant latent interest and

involvement in energy provision and consumption.

Since the energy market is complex and is indeed changing rapidly, new forms of relationships

are required between the Council and the energy sector. Specific technical, economic and

political judgements will be required in the this relationship landscape to address for example,

the shift away from centralised fossil fuel power generation towards more localised “green

energy” generation approaches.

Birmingham will therefore enter into dialogue on the form of the new landscape of energy

relationships which will provide the joint capacity for the city to achieve the objectives in a

new “strategic energy framework”

What timescales are we looking at?

The City has set itself an ambitious CO2 reduction target of 60% by 2026, and national targets on

2050 (80%). In the “Birmingham Climate Change Action Plan” a key priority has been attached to

putting in place new energy planning arrangements as a high priority.


20 | P a g e

These set the longer term goals. It is also evident that major energy infrastructure investment

decisions will need to be taken within the next 24 months so that they can have medium and

longer term impact. These will be reinforced by the approval of the new Core Strategy during

2011 and also by the Council’s response to the Total Waste Strategy.

it is therefore an essential requirement that the city’s energy framework adopts a long term

timeframe with clear milestones towards the achievement of significant reduction in local

energy consumption and demand and a major increase in local “green energy” generation.

The strategic timescale for any energy strategy for Birmingham should therefore sensibly be

40 years and take Birmingham to 2050, with clear milestones.

3.2 Critical Areas to be Resolved

The development of a strategic energy framework for Birmingham based on the “Hybrid Scenario”

challenges the city to be clear about how it will measure success, how the new relationships will be

developed, the energy technology choices for Birmingham, the ability to secure the necessary

commitment and finance in the long term.

What are the major success criteria for an energy strategy?

Because energy affects so many aspects of the city’s economic and social life, the strategy can

be judged against many

different criteria. These need to

be transparent to all parties so

that an energy framework is put

in place which does not focus

too heavily on one criteria at

the expense of others (for

example carbon reduction at

the expense of economic

development, or wealth

creation at the expense of

quality of life). The initial

analysis ands stakeholder

feedback has identified nine

provisional success criteria for Birmingham’s energy strategy, listed in diagram 4.

These criteria build on the City’s refreshed Community Strategy 2026 objectives, illustrated in

diagram 5 below. They emphasise quality of life and economic success, underpinned by

environmental quality and health.


21 | P a g e

Overall Employment rate

SucceedEconomically

Stay Safe in a Clean Green City

Be Healthy

Enjoy a High Quality of Life

Making a Contribution

(Big Society)

Personal wealth is increased and relative poverty within the city is reduced.

Employment and economic activity is increased and people have better education and skills .

Crime and ASB are reduced and Birmingham is a place where our residents feel safe.

Health inequalities and mortality will be reduced across Birmingham, resulting in people LIVING LONGER

Enable people to choose healthy lifestyles, enjoying rich cultural experiences and improve their wellbeing. Resulting in people LIVING WELL

Public Service

Excellence

Flourishing Enterprise

Average wage levels

QALY/Survey

Life Expectancy

Perceptions of Crime/Safety Actual crime levels

Environment Quality Survey

Cleaner, greener, sustainable neighbourhoods are secured and citizens are empowered to take greater responsibility for their environment

Through the best use of environmental technologies, a vibrant low carbon, low waste economy is created which ensures Birmingham is prepared for the impact of climate change.

CO2 equivalent emissions

The most vulnerable people within the community – in particular children - are protected

Quality, choice and affordability of housing increased

Inspection ratingsOfsted (Children)

Care Quality Commission (Adults)

New Homes Completed

Diagram 5. Birmingham 2026 objectives

Resilience is an important criteria for long-term energy strategy, and reflects the ability of any

strategy to withstand unexpected changes in the external environment, such as the game

changers identified in section 2.

Is there any basis for adopting any specific technology preferences?

The preferred “Hybrid Scenario” approach identifies that Birmingham can successfully deliver a

portfolio approach towards energy efficiency, local “green energy” generation and smarter

energy distribution, assuming a significant degree of decarbonisation of the national electricity

grid. There is therefore a perfectly coherent argument for avoiding any technology preference

within the energy strategy and instead encouraging a diversified approach.

It should be recognised in this approach that

i. Birmingham has a “legacy” of existing energy infrastructures. These are not necessarily

technology-neutral. So there is no “level playing field” for new and emerging technologies

such as electric or hydrogen vehicles, or district heating solutions because competing

technologies (petrol cars, gas boilers) benefit from past investments in infrastructure that

has already been paid for. However, it is inherent in the “Hybrid Scenario” that “legacy”


22 | P a g e

infrastructures should not act as barriers to entry of new energy sources or new forms of

energy distribution.

ii. While there may be no rationale from a pure energy perspective to favour a specific

technology. Birmingham has an excellent research led university capability and is an

innovating city with a strong manufacturing base. These provide the foundations to utilise

the “Hybrid Scenario” to capitalise on market creation locally and also new and emerging

technologies. Energy policy can be used very effectively to promote local economic

development and develop distinctive industrial positions.

What would we expect any delivery mechanism to look like?

The “Hybrid Scenario” indicates that a new energy landscape for Birmingham must emerge. This will

require new relationships between the City Council and the energy sector to be developed. The level

of investment and risk involved in energy projects will be substantial (for example, Birmingham

Energy Savers could easily exceed £100 million per year within five years and still take a decade or

more to influence carbon emissions from housing across the city substantially) so new partnership

models are needed supported by strengthened planning policy in the Core Strategy. Diagram 6 lists

some of the levers open to the Council using its existing powers.

Through these powers, its existing asset base, trusted brand and long-term perspective, the Council

can contribute considerably to effective delivery mechanisms to accelerate energy efficiency, energy

infrastructure investments and upgrades, and “green energy” generation.


23 | P a g e

Diagram 6. Council levers to support energy strategy delivery


24 | P a g e

How will delivery be financed?

The scale of investment to reduce Birmingham’s total energy bill of £1.3bn per annum may

appear substantial. It could be estimated as some £4bn for building retrofits and up to £2bn for

district energy over the long term. This has to be seen in context of the aggregate city energy bill

(if no action was taken in line with the “Hybrid Scenario”) over the next 10 year period will be of

the order of £15bn, at current prices.

The key areas requiring investment will be building retrofits, “green energy” generation, district

energy infrastructures and “smart grid” power upgrades.

The UK energy sector has been subject to numerous uncertainties with regards to energy

efficiency incentives, renewable incentives, regulatory incentives (through OfGem), etc. but

within this framework there are substantial programmes – CERT, CESP, Low carbon networks

Fund – which coupled with available European funds especially for innovative energy schemes,

which will be delivered in any case.

The challenge and the opportunity of the “Hybrid Scenario” is to guide the available funds, and

secure new funds, through the development of new relationships between the city and the

energy sector to invest in targeted and programmed schemes. This is already taking place ,

albeit on a lesser scale than needed, through the discussions on “Birmingham Energy Savers”

and also the creation of the BDEC (Birmingham District Energy Company) district energy capacity

in the City Centre.


25 | P a g e

4 STRATEGIC OPTIONS

4.1 Approaches taken by other North European cities

The approaches taken by other cities which already have established energy strategies and delivery

models have been examined. Several leading north European examples have been reviewed . Diagram 7

summarises the common elements in the energy strategies of Hamburg, Copenhagen and Stockholm9.

Diagram 7. Key features of other city energy strategies

Long-term public commitment

Hamburg started to emphasise the Hydrogen economy in 1990, Copenhagen began to invest in

district heating infrastructure over 80 years ago, and Stockholm set out on towards a coherent

masterplan based on biogas, district heating and waste to energy infrastructure in the 1990s.

Proactive and imaginative approaches to partnership

Stockholm used financial incentives in the form of reduced price land sales effectively in return

for energy efficiency and infrastructure investments providing long-term benefit to the City.

9 Research by Element Energy for Birmingham City Council, 2010 – full details available in the Evidence Base.


26 | P a g e

Hamburg made use of EU funds, which are typically more accessible when supported by a local

authority commitment to a strategy.

In house technical expertise and willingness to engage in technical detail

Copenhagen owns the District Heating Company and Stockholm’s city architects have been

prime movers over 20 years in development of the Hammarsby suburb.

Selective support for specific technologies

Hamburg is seeking to lead on hydrogen-fuelled public transport, and has attracted over 600

low carbon private enterprises to the city. Copenhagen has emphasised District Heating, and

Stockholm has supported biogas and innovative new-build housing technologies.

In none of these cases does the city energy strategy inhibit other technologies also being developed and

supported locally in the city. It is in the nature of small scale energy technologies and energy efficiency

measures that there is no one size fits all answer - this creates opportunity to support local skills and

local enterprise.

In all these cities achieving target reductions of 80% by 2050 from 2000 baselines is eminently

achievable and credible, and they are already well on the way.

In terms of gaps in the field, from Birmingham’s perspective it is worth noting that none of these cities is

majoring on either effective use of IT infrastructure (such as smart meters) to enable and facilitate local

energy efficiency schemes, nor so much on housing retrofit of insulation and microgeneration

technologies. In Stockholm, Hammarsby is essentially a large scale new build project, albeit with

integrated waste collection facilities, district energy and integrated public transport provisions in

advance of building occupation. And in all three cases District Heating has been incorporated in new

buildings over decades to achieve the 80-90% penetrations now enjoyed.

4.2 New Partnership Relationships and Optional Delivery models

Based on the experiences of these other cities and additional research, it is possible to propose five

generic options for the development of new relationship models for Birmingham so that the “Hybrid

Scenario” is developed into a clear plan of action and agreed responsibilities between the City Council

and the energy sector.

In practice, it is likely multiple delivery models may be required. This could include a strategic capability

working through various partnerships and special purpose vehicles (SPV) with different structures as

already exist in the Birmingham District Energy Company (BDEC), and Birmingham Energy Savers, for

instance.


27 | P a g e

Table 1. Possible Options for an energy strategy delivery model

Model 100% BCC

owned and led

Independent

partnership with

other public

bodies

Public/private

partnership with

BCC control

Public/private

partnership with

private control

100% private

control

Advantages Simple

Fully controlled

Engages wider

partnership

Wider asset base

and access to

finance

Spreads risk

Access to

selected skills

More flexible

access to finance

Access to

selected skills

More flexible

access to finance

Motivated

private partner

Clear

accountability

Flexible

Can be very

focused

Disadvantages

Limits access to

skills

Limited flexibility

Risks loss of

operational

delivery focus

Limited access to

skills

Loss of focus

Need to

accommodate

private interests

Procurement

complex

Can be harder to

engage local

firms

Significant

benefits for

private partners

Procurement

complex

Loss of control

Harder to

monitor and

control

More expensive

access to finance

Procurement can

be complex

Can lose public

support

Comments

Phases 1 and 2

of Birmingham

Energy Savers

delivered this

way

Urban Living and

other projects

show this can

work well

Used for PFI-type

projects

Successfully used

by Woking

Council with

Thameswey

Energy

Company10

Used extensively

at national level

but requires

strong and

expensive

regulation

1. The technical scope of energy strategy and policy, which must by definition cover:

10 Thameswey is owned 20% by Woking Council and 80% by a Danish private company that specialises in combined heat and

power and district heating projects. It is partly funded through a special fund that recycles savings from energy projects, giving the joint venture an incentive to maximise local benefits.


28 | P a g e

a. Decisions on energy generation. To what degree should this be done locally;

which technologies are most appropriate to the specific context; who should own

and manage the facilities?

b. Decisions on energy infrastructure. How much storage should be available in the

City; what distribution networks are required; who should pay for these given that

they benefit both the public and specific technology and service providers?

c. Decisions on energy efficiency and demand management. How to optimise energy

demand and minimise waste; how to make sure information on energy usage

reaches those most able to use this and act on it; what incentives to optimise

energy use can be used to motivate the public?


29 | P a g e

5 CONCLUSIONS AND RECOMMENDED NEXT STEPS

5.1 Conclusions

The conclusions from this review of issues and options are that

Birmingham should pursue a “Hybrid Scenario” for its energy framework

Birmingham should develop a new landscape of energy relationships with the energy sector to

deliver its priorities for action

Birmingham should urgently put in place additional capacity to develop and support this new

approach.

5.2 Overall strategy and Priorities for Action

The broad framework for the “Hybrid Scenario” strategy is clear from the discussion in this paper, and is

illustrated in diagram 8 below.

Diagram 8. Proposed Birmingham Energy Strategy Framework

The proposition that the strategy should start from the city’s strengths and capabilities and focus on

delivery of agreed targets is straightforward. What is not shown in the diagram but taken as read is that

the energy strategy should fit alongside complementary city strategies, specifically:


30 | P a g e

Birmingham Community Strategy (refresh)

The Core Strategy (to be consulted on in December 2010)

The Big City Plan (launched October 2010)

The Total Waste Strategy (prepared November 2010)

The Intelligent Transport Strategy (to be launched December 2010)

Further development of the “Hybrid Scenario” energy strategy needs to be aligned with these and

proper mechanisms and resources in place to ensure this alignment happens.

The four pillars of the “Hybrid Scenario” energy strategy are broad principles that express core

characteristics or foundations of any successful strategy in the Birmingham context. These are designed

to encourage partner engagement and wide support for the approach.

The key areas for action around which dialogue on the new energy relationships landscape need to take

place are shown in diagram 9.

Diagram 9

“Hybrid Scenario”

Framework area

Local Energy generation

in the city

Efficient grid

infrastructure Optimised Consumption

Example options

Waste to energy

Solar

Biomass

Gas-fired CHP11

District heat mains

Smart electricity grid

Local electricity (or

heat) storage

Whole house retrofit12

Demand management

Insulation

District heating

These three technology areas provide a structure for the development of new relationships with

focussed implementation plans and detailed short- and medium-term actions. The development in these

areas will need to embrace:

Local energy generation. To what degree should this be done locally; which technologies are

most appropriate to the specific context; who should own and manage the facilities?

Efficient Grid infrastructure. How much storage should be available in the City; what

distribution networks are required; who should pay for these given that they benefit both the

public and specific technology and service providers?

11 CHP stands for combined heat and power

12 Whole house retrofit refers to major interventions in housing including insulation, microgeneration and improved building

controls


31 | P a g e

Optimised Consumption. How to optimise energy demand and minimise waste; how to make

sure information on energy usage reaches those most able to use this and act on it; what

incentives to optimise energy use can be used to motivate the public?

5.3 Long Term Commitment Principles

The “Hybrid Scenario” provides a framework by which the new landscape of energy relationship

between the City Council and the energy sector can be developed. A set of 4 key principles are

proposed.

Long-term public commitment

The “Hybrid Scenario” will require a long term commitment. To maintain relevance and

flexibility in a changing national and international context this commitment needs to be jointly

agreed. Key principles of agreement should include:

i. Engaging all relevant partners, including attracting new investment to the city

ii. Monitoring game changers and ensuring the strategy remains robust and relevant

iii. Co-ordinating and supervising delivery bodies and mechanisms (such as any special

purpose vehicles or district energy companies created for specific initiatives)

iv. Monitoring progress towards 2026 and 2050 targets, and setting and monitoring annual

energy and carbon budgets for the city

This will require additional capacity and appropriate resources to be put in place including

recognition of the need for the right levels of ability and skills necessary to make the technical

judgements necessary to maintain and progress the strategy.

Partnership

The Birmingham “Hybrid Scenario” energy strategy must be a collaborative effort involving all

relevant stakeholders from the public and private sectors across the city. These stakeholders

include emerging new energy businesses, seeking to create wealth in the low carbon emerging

economy. Birmingham will make a particular effort to engage a broad range of interest groups

in its energy strategy and in particular to build bridges and partnerships between established

and emerging energy and technology companies, and between the public and private sector.

The City will use its planning powers and other influences to prioritise infrastructure

investments in support of this strategy.

Creating local opportunities and wealth

The “Hybrid Scenario” is an opportunity to actively engage in securing clear local economic,

employment and prosperity benefits through developing and supporting local energy actions


32 | P a g e

with the optimum benefits to businesses and citizens in the city. The three key areas for action

(see above) offer differential opportunities for local employment and supply chain

development. For example the building retrofit programme relationship can provide long term

employment opportunities and local market creation opportunities.

The focus on “green energy” generation should also provide innovation and technological

opportunities working with local SMEs and also with larger international investors in the city.

The “Hybrid Scenario” framework recognises that energy efficiency (including in transport)

micro-generation and demand management, and more efficient use of waste heat and power

through district heating and waste to energy schemes are all valuable elements in the future

development of the city. It will consistently encourage these measures where they are

economic, particularly where the City can use its branding and procurement strength to help

make the economic case by supporting projects at a scale which makes investments more

attractive to individual households and businesses. This builds on the already nationally leading

work being pursued by the City and partners through the Birmingham Energy Savers Project

and the Birmingham District Energy Company respectively.

Innovation and leadership

Birmingham recognises the important role of financial innovation in supporting long-term,

multi-stakeholder investment represented by most local energy schemes. These investments

may require new financial institutions and mechanisms at local level and Birmingham will aim

to be in the vanguard of creating and supporting such institutions.

The City particularly recognises the importance of responsible, individual citizen action to

provide effective and efficient delivery of local energy strategy, at both household and

community level. For this reason Birmingham will adopt a distinctive position with active

engagement in local energy issues, and systematic structures to provide the public with direct

access to energy decision making.

Documents

Strategic Issues and Options - Sustainability West Midlands · BIRMINGHAM ENERGY STRATEGY – ISSUES AND OPTIONS 3 | P a g e EXECUTIVE SUMMARY This issues and options paper demonstrates