BOROUGH OF POOLE

ENVIRONMENT OVERVIEW SCRUTINY COMMITTEE

24 MARCH 2011

EXCESS ENERGY SALE TO THE NATIONAL GRID

1.PURPOSE OF REPORT

1.1For Members to consider the opportunities, key principles, financial implications and the risks to the Council following the Government's announcement of its intention to allow local authorities to sell excess energy that they generate back to the National Grid.

2.DECISION REQUIRED

2.1Members are asked tonote the recommendation in section 9.1 to support the allocation of staff resources to the Asset Management & Property Services Unitin order to undertake a solar PV asset review on the Councils property land & building property portfolio.

3.EXECUTIVE SUMMARY

3.1This report has been produced in response to a Council motion of 26 October 2010 that “Council RESOLVES to explore the potential to expand its renewable energy generation, and to task officers with reporting back to the Environment Overview and Scrutiny Committee within six months.”Signed: Councillors Eades, Brooke, Mrs Moore, Maiden, Mrs Deas and Meachin.

3.2Recent legislation has opened up significant new opportunities for local authorities to generate revenue from renewable energy. Chris Huhne, Secretary of State at the Dept of Energy and Climate Change, introduced legislation in August 2010 to grant powers to local authorities to sell renewable electricity to the grid. In an accompanying press release he said that English local authorities could benefit from up to £100m per year through sales of renewable electricity based on the guaranteed income from feed-in tariffs (FITs), which were introduced in April 2010.

3.3In the past Council’s were not permitted to make money from renewable electricity schemes for fear of upsetting the energy market. But as part of the Government’s pledge to be the greenest government ever solar panels, wind turbines and other methods of green energy generation could be installed on all hospitals, schools and other public buildings.In addition, the Localism Bill was laid before Parliament for its first reading on 13 December 2010. The government’s stated aim is to decentralise power to local authorities and, where possible, to pass it to local communities. The General Power of Competence section of the Localism Bill has been designed to give councils confidence to set up banks, develop property, run new services and own assets. This General Power of Competence will reinforce local authorities’ ability to play a role in the development, co-development or funding of sustainable energy schemes.

3.4Councils are being encouraged to save on their energy costs by employing a host of measures. Solar panels are the most practical for most Council’s, although they are not without detractors in some areas, particularly from those concerned about the affect they will have on listed buildings. Wind turbines are more practical for rural councils or out-of-town developments such as leisure centre’s, while coastal councils could investigate wave power. Anaerobic digestion of household waste previously destined for landfill could also be an option in many areas. Other types of technologies include biomass and heat pumps.

3.5Solar photovoltaic panels (PV) present the best low-risk investment opportunity for the Borough Poole to generate a guaranteed income for a period of 25 years. Due to geographical location, Poole has almost the best solar energy resource in the UK. Approximately half of local authorities and public sector organisations in the south west are currently seeking to develop similar income generation and job creation opportunities from solar PV. A list of Local Authorities that are currently actively developing solar PV programmes based upon the FIT can be found at Appendix A.

4.0BACKGROUND INFORMATION

4.1The Borough of Poole has a responsibility for tackling the causes of climate change within our own estate and as part of our community leadership role. There are many benefits from demonstrating leadership in this sector. In addition to the wider environmental benefits, there are rapidly expanding opportunities to create new skilled jobs in the green knowledge economy. Equally important are the benefits from developing local energy supplies which are future-proofed against rising fossil fuel energy costs. Currently some £800m per year is spent in Dorset on fossil fuels, including road transport fuels, and virtually all of this expenditure leaves the local economy. According to Ofgem, energy costs are likely to rise 60% by 2016, partly due to increasing demand from India and China.

4.2Whilst there are several renewable technologies that the Council could benefit from this report will focus on the income generation opportunities from the installation of Solar Photo Voltaic panels. Photovoltaic refers to a technology which uses a device (usually a solar panel) which, when exposed to sunlight, converts the suns rays into an electrical current. Solar PV is the common term for this technology.

4.3On 1 April 2010 the Government introduced the Feed-in Tariffs (FITs)scheme to encourage the uptake of renewable energy projects in the UK. The scheme pays solar panel generators a guaranteed price for the electricity they produce over a 25 year period. Return on investment of between 7% and 10% is expected for a typical small-scale systems. The financial benefits of the scheme are skewed to benefit early adopters. The FIT for projects installed between April 2012 and March 2013 will be 9% lower than those installed between April 2011 and March 2012. The tariff will then be revised, or possibly removed, for projects installed after March 2013 dependant upon the uptake of solar panels at that time. Hence it is critical that the Council moves quickly to maximise its financial gains and energy benefits.

4.4The FIT has stimulated the market and the Council has a number installation options available. A number of suppliers are offering to install the panels for free in exchange for the FIT income over a 25 year period. Whilst the Council would benefit from annual roof rental payments valuable long term revenue streams would be handed over to third parties. The alternative option is for the Council to invest its own funding (or via prudential borrowing) in Solar Panels to maximise the long term benefits taking advantage of the both the guaranteed future revenue streams and reduced energy bills.

4.5There are currently approximately a dozen companies offering variations on PV for free offers. They are usually based on the contracting company installing and maintaining the PV systems and claiming the FiT for electricity generated and exported for 25 years, whilst the site owner benefits from free use of the electricity generated and used on-site. Electricity is always used on site first before being exported, providing there is an electrical demand within the building. Once the demand is met surplus electricity is automatically exported to the grid. Office premises, schools and leisure centres are very likely to use all generation on site, except perhaps on weekends in summer or for very large PV installations.

4.6Companies making these PV for free offers are approaching local authorities and Schools individually to seek suitable installation sites, therefore it is difficult to compare like-with-like or understand the subtle differences in offers. To enable Council officers to better understand and compare these offers to install PV systems for free on the roofs of local authority buildings, a seminar was hosted by the Borough of Poole in September 2010 and 5 companies were shortlisted to present their offers.

4.7Following the hosting of a ‘PV for free’ seminar in the conference room last year there was positive interest from several Service Units to investigate the financial opportunities available to the Council from leasing corporate roof spaces or land.A steering group with representatives from Leisure, PHP, AM&PS, Planning, CYPSQI, Financial, and Transportation services was convened to confirm interest and to consider next steps. The direct result of this meeting was an indicative list of corporate buildings/schools and car parks that would be suitable for Solar PV installation i.e. south facing orientation and being unaffected by shading from adjacent buildings or trees. There was also an interest as to whether the Council could provide the financial and staff resources to undertake the supply and installation of Solar PV in its own right and hence benefit directly from the FIT. A draft list of properties with indicative Solar PV free revenue estimates can be found at Appendix B.

4.8The next step in the process is to carry out a top-level asset review of the Councils corporate estate (non social housing)to confirm whether the existing corporate property portfolio would support the installation of solar PV without impairing the Councils long term property strategy i.e. identify and confirm suitability of Council buildings with a roof of south facing orientation and constraints of signing over roof or land for 25 years (PV for free option) or for a 12 year period (anticipated payback from an in-house installation). A project brief was submitted to the Council’s Project Management Group (PMG) with the aim of securing Asset Management & Property Services resources to undertake an asset review.

5.0FINANCIAL/RESOURCELEGAL IMPLICATIONS

5.1Subject to suitable buildings and/or land being identified from the asset review for solar pv installations then there would be a number of implications dependant upon whether the Solar PV for free or in-house installation option was chosen. These implications will be detailed within any future report.

5.2At this stage no resources have been set aside as part of the Council Medium Term Financial Plan or Budget for 2011/12 to implement any solar pv schemes. Careful consideration will be required of any financing options for any scheme that eventually comes forward.

6.0RISK MANAGEMENT IMPLICATIONS

6.1Solar PV is intrinsically a low-risk investment based on the 25-year government guaranteed income from feed-in tariffs. The technology is reliable with very low maintenance requirements and well proven having been in use since the 1960’s. All manufacturers provide a 20- 25 year guarantee on electrical output. In addition, the solar energy resource and annual energy production from solar PV panels is well known and varies only a few percent from year to year due to variations in the weather. Poole has almost the best solar energy resource in the UK.

6.2Subject to suitable buildings and/or land being identified from the asset review for solar pv installations then there would be a number of risk implications dependant upon whether the Solar PV for free or in-house installation option was chosen. At the current stage of this report the greatest risks are considered to be:

  1. That unless solar PV installations are in place prior to April 2012 the opportunity to benefit from the maximum FIT revenue will be lost and,
  2. From the uncoordinated solar PV installations that may take place from the direct contact by Solar PV suppliers to schools.

7.0EQUALITY IMPLICATIONS

There are no equality implications

8.0CONCLUSION

8.1It is self evident that to fully realise the benefits of green power, will take time and investment but this has the potential to cut energy bills, reduce emissions and raise millions of pounds in much-needed income to maintain services and keep council tax down.

8.2In addition to the revenue generation, demonstrating leadership in this rapidly expanding renewable energy sector opens further opportunities to raise the profile of the Borough of Poole, share information through co-operation with other local authorities and to secure national and European funding. For example, Bournemouth, Dorset and Poole were recently jointly awarded £250,000 funding in 2010 from the Department of Energy and Climate Change (DECC) to pilot Local Carbon Frameworks (or carbon reduction action plans).

8.3Solar PV installations on schools and Borough of Poole buildings and car parks will be high profile and demonstrate leadership in moving to a low carbon economy. The Bournemouth, Dorset and Poole Multi Area Agreement (MAA) has identified the Green Knowledge Economy as a potential high growth sector. Solar PV installations on schools and public buildings can directly generate local employment and act as a showcase for householders considering investment in solar PV on their own homes. The current domestic solar PV market in Dorset is worth approximately £5m p.a. and growing rapidly, with 20 accredited solar PV installation companies now based in Bournemouth, Dorset and Poole.

8.4With organisations in both the public and private sectors facing substantial financial and legislative pressures regarding energy and carbon over the coming years, there has never been a more appropriate time to invest in long term energy efficiency measures, processes and carbon reduction technologies - Solar PV being the most opportunistic at this time.

9.0RECOMMENDATIONS

9.1It is recommended that the Environment OverviewScrutiny Committee supports the Portfolio Holder with responsibility for the Environment in exploring the options to provide the necessary resources for the Asset Management & Property Services Unit to undertake a Solar PV asset review.

10.0 APPENDICES

  • Appendix A: A list of Local Authorities that are currently actively developing solar PV programmes based upon the FIT
  • Appendix B: Draft list of Borough of Poole with indicative Solar PV free revenue estimates

PAUL COOLING

Carbon Reduction Manager

OnBehalf ofCarbon Management Programme Board

Telephone: (01202) 633719

Email:

Date: March 2011

Appendix A

OTHER LOCAL AUTHORITIES CURRENTLY ACTIVELY DEVELOPING SOLAR PV PROGRAMMES BASED UPON FEED-IN TARIFFS INCOME

West Dorset District Council / PV on new WDDC offices in the Charles Street development / Up to £250,000 / Based on self funding and receipt of FIT income for 25 years
Borough of Poole / PV on schools and public buildings including car parks / Not yet confirmed
Purbeck District Council / PV on a leisure centre roof / Up to £50,000
Christchurch Borough Council / PV on CBC offices and leisure centre / Not yet finalised
Bournemouth Churches Housing Association / PV on up to 100 social housing unit / £500,000 / Will train own direct works team to install
Bournemouth Borough Council / PV on civic buildings and schools / Not yet confirmed
Poole Housing Partnership / PV on up to 1000 social housing units / £4m - £6m / May seek commercial outside investment – seeking benefit of free electricity to tenants
Bristol City Council / PV on schools and civic buildings / £1m / Budget approved Nov 2010 by Bristol City Council’s Cabinet.
Cornwall County Council / PV on own buildings plus ground mounted solar parks / £10m- £20m / OJEU tender already issued
Swindon Borough Council / PV on schools, civic buildings and social housing / £5m / Will use own 100% owned direct works company to install PV – already MCS accredited
Birmingham City Council / Currently recently issued OJEU tender for 2000 solar PV installations on social housing / £13m already approved.
Larger £100m phase 3 PV project planned from Jan 2012 / Commitment for 50% of electricity used by the City Council to be generated from renewable energy by 2015