Cambridgeshire Energy Performance Contracting: Portfolio Analysis Version 3

Transcription

1 Cambridgeshire Energy Performance Contracting: Portfolio Analysis Version 3 Presenter s name: Presented to: Duncan Price and Daniel Jones Cambridgeshire County Council Date: 17/02/2014 Energy and carbon advisory services

2 What is Energy Performance Contracting? Energy Performance Contracting (EnPC) is a model for identifying and delivering energy efficiency improvements to buildings A contractor will identify opportunities, deliver the works and provide an energy savings guarantee that can be used to underpin a business case for investment by the LA or to secure third party bank finance

3 Verco desktop opportunity analysis Purpose is to identify investment potential to inform MLEI business case Used building portfolio data provided by Cambridgeshire: Building type Floor areas Annual gas and electricity consumption Energy costs Removed buildings/properties out of scope (e.g. housing) or with anomalous data Compared energy consumption per unit floor area against benchmark figures Assumed lifetime cost of typical energy efficiency measures is 120/tonne CO 2 Energy efficiency package selected to give 7 year simple payback (approximately 25% energy saving) Typical measures include: Controls adjustments Pipework insulation Variable speed drives on motors Also modelled potential for solar PV and biomass boilers

4 What is the breakdown of energy consumption in Cambridgeshire? Electricity and gas consumption (2012/13 data) Electricity Gas 25,000,000 Energy consumption, kwh/yr 20,000,000 15,000,000 10,000,000 5,000,000 Schools are the highest consumers by a significant margin. Offices and cultural activities (libraries and museums) also make up a significant portion of the total 0 General office Schools and seasonal public buildings Cultural activities Long term residential Restaurant Storage facility Workshop Public buildings with light usage

5 What is the energy saving potential in Cambridgeshire under EnPC? Electricity and gas saving potential (2012/13 consumption) Electricity Gas 4,000,000 3,500,000 Energy saving potential, kwh/yr 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 Schools, offices and libraries offer greatest energy saving potential. Electricity saving potential is greater than gas. 500,000 0 General office Schools and seasonal public buildings Cultural activities Long term residential Restaurant Storage facility Workshop Public buildings with light usage

6 Top 20 electricity saving opportunities Rank Building name Elec consumption (kwh/yr) Potential saving (kwh/yr) Percentage Shire Hall Site (Shire Hall including the 1 Octagon) 2,378,178 1,382,354 58% 2 Comberton Village College 1,236, ,232 60% 3 Neale Wade Community College 1,010, ,093 52% 4 Impington Village College 1,038, ,951 48% 5 Longsands Community College 1,023, ,190 48% 6 St Neots Community College 565, ,920 85% 7 Linton Village College 645, ,924 74% 8 Cottenham Village College 760, ,689 59% 9 Thomas Clarkson Community College 973, ,155 45% 10 Manor Community College 728, ,261 57% 11 Cambridge Catering Centre 485, ,076 86% 12 Chesterton Community College 808, ,860 46% 13 Sawston Village College 852, ,026 43% 14 Hinchingbrooke School 1,054, ,401 32% 15 Bottisham Village College 717, ,870 44% 16 Sir Harry Smith Community College 686, ,397 41% 17 Coleridge Community College 466, ,173 51% 18 Cambridge Central Library 584, ,081 40% 19 Meadowgate School 325, ,782 71% 20 City of Ely Community College 669, ,456 34%

7 Top 20 gas saving opportunities Rank Building name Gas consumption (kwh/yr) Potential saving (kwh/yr) Percentage 1 St Neots Community College 1,440,598 1,117,498 78% 2 Impington Village College 2,906, ,440 30% 3 Bottisham Village College 2,274, ,632 34% 4 Sir Harry Smith Community College 2,216, ,990 32% 5 Meadowgate School 955, ,936 63% 6 Sawston Village College 2,257, ,748 19% 7 Melbourn Village College 1,558, ,476 27% 8 Spring Common School 1,033, ,594 39% 9 Castle School 936, ,813 42% 10 Hinchingbrooke School 3,058, ,684 12% 11 Linton Village College 985, ,749 35% 12 Mayfield Primary School 447, ,343 77% 13 Horizon Resource Centre 524, ,679 62% 14 St Peter's School 2,285, ,787 14% 15 Manor Community College 1,480, ,148 21% 16 Chesterton Community College 1,939, ,714 15% 17 Longsands Community College 2,273, ,319 13% 18 Parkside Community College 989, ,136 29% 19 Clarkson Infant School 461, ,303 60% 20 Roger Ascham Site 336, ,762 78%

8 Typical energy efficiency measures below threshold cost

9 Overview of the potential Energy efficiency Renewables Investment potential NPV to project owner (4% discount rate) Scenario number Academies, special schools, schools with a pool 100% 50% 25% 25% 10% Other schools 100% 10% 10% 10% 10% Public buildings 100% 50% 50% 25% 10% Solar PV 100% 28% 18% 17% 10% Biomass 100% 47% 24% 24% 10% Academies, special schools, schools with a pool 5,527,033 2,763,517 1,381,758 1,381, ,703 Other schools 2,310, , , , ,007 Public buildings 1,524, , , , ,456 Energy efficiency total 9,361,666 3,756,804 2,375,045 1,993, ,167 Solar PV 17,146,805 4,800,684 3,028,814 2,871,932 1,714,681 Biomass 2,174,276 1,027, , , ,428 Total (incl. renewables) 28,682,747 9,584,901 5,925,032 5,387,010 2,868,275 Project IRR 8% 8% 9% Self fund (4% interest rate) 10,103,981 2,180,164 1,137,163 Third party investment (8% interest rate) 1,835, , ,346 County fund (6% interest rate) 1,344, ,729 NPV to project owner (6% discount rate) County fund (6% interest rate) 1,039, ,835

10 Funding options Public sector finance direct to project owner e.g. via Public Works Loan Board Low cost of finance (4%) over a longer term (15 year loan term assumed) Transfer of installation/delivery risk to ESCO supports Prudential Code requirements (prudent, affordable, sustainable) Possible re-investment of capital receipts e.g. property transformation programmes ESCO finance For BSP procurement, Honeywell has identified several finance providers Finance contract would be between Honeywell and the finance provider Higher cost of finance (8%) over shorter term (10 year loan term assumed) No capital investment required from LA except establishing and running a contract Expert opinion required as to whether funding would be on or off balance sheet but BSP have tried to maximise the chances of this through the structure of the framework

11 Funding options County fund County Council borrows from PWLB at 4% interest rate and on-lends to project at 6% interest rate, including margin for risk and development unit 15 year loan terms assumed Transfer of installation/delivery risk to ESCO supports Prudential Code requirements (prudent, affordable, sustainable)

12 Scenario 3: Cumulative cash flow if self-funded through reserves 4,000,000 Pre-financing NPV i.e. self-funded from reserves 3,000,000 2,000,000 Net Present Value ( ) 1,000,000 - (1,000,000) (2,000,000) (3,000,000) (4,000,000) (5,000,000) (6,000,000) (7,000,000) Investment by project owner of 6m in year 0 Energy savings start to repay investment Discounted payback of 9 years NPV is 2.18m

13 Scenario 3: Cumulative cash flow if borrowing from PWLB Post-financing NPV i.e. funded from PWLB borrowing 2,500,000 Net Present Value ( ) 2,000,000 1,500,000 1,000, , PWLB advances funding for the project at 4% interest rate Project generates an 8% internal rate of return so net surplus savings accumulate Energy savings are guaranteed for first 10 years but assumed to decline after contract finish (years 11-15) as a worst case scenario PV revenue guaranteed for 20 years NPV is 2.18m Year

14 Cumulative cash flow if borrowing from ESCO Post-financing NPV i.e. funded from PWLB borrowing Net Present Value ( ) 1,500,000 1,000, ,000 - (500,000) (1,000,000) (1,500,000) (2,000,000) Year Project owner makes no capital investment but incurs cost of managing contract ESCO secures finance (8% interest rate) and repays loan over first 10 years from unitary charge levied on the authority or building user Energy savings are insufficient to cover annual loan repayments in early years so would need to lengthen loan term or reduce target payback period to avoid negative cashflow NPV is 975k

15 Cumulative cash flow if borrowing from County fund County advances funding for the project at 6% interest rate Project generates an 8% internal rate of return so net surplus savings accumulate Energy savings are guaranteed for first 10 years but assumed to decline after contract finish (years 11-15) as a worst case scenario PV revenue guaranteed for 20 years NPV is 1.34m

16 Business case summary Portfolio analysis suggests there is significant capital investment potential of 29m Central deployment potential (Scenario 3) is 6m Annual savings / revenue start at 700k, rising with inflation Simple payback of 7 years for energy efficiency measures Discounted payback of 9 years using 4% discount rate Self-fund NPV to project owners is 2.18m PWLB funded NPV to project owners is 2.18m ESCO funded NPV to project owners is 975k County funded NPV to project owners is 1.34m Energy efficiency, solar PV and biomass boilers included Based on measures which cost 120/tonnes CO 2 saved over the lifetime of the measure Schools and offices offer greatest energy saving potential Electricity saving potential appears to be greater than gas

17 Business case summary OJEU compliant procurement process available to use by local authorities Access fee included in modelling and justified by savings Reduces emissions, reduces exposure to rising energy prices, improves building management, protects asset values, reduces regulatory risk

18 Key risks and mitigation Securing sufficient buy-in from schools modelled in scenarios Contractual complexity mitigated by use of standard frameworks Data quality and availability offset by input from ESCO at early stage Establishing energy consumption baseline use standard protocols Agreeing project scope and savings requires collaboration and dialogue with ESCO Concluding commercial negotiations need expert support to review opportunity assessment and investment grade proposals Monitoring and verification need to manage contracts effectively