PAPER B
REPORT TO COUNCIL
DATE : 15 September 2004
SUBJECT : Sustainable Energy for the Island
REPORT OF : Portfolio
Holder for Sustainable Development, Environment &
Planning Policy.
SUMMARY
To outline the principle issues of the Energy White Paper (February 2003) and indicate how the Isle of Wight Council can promote the development of sustainable energy on the Island.
1.
Introduction.
1.1 Energy is fundamental to our economy and way of life. However, the production of energy is also responsible for much of our greenhouse gas emissions and consequent global warming.
1.2 The Island’s Agenda 21 Strategy makes a commitment to sustainable development, which makes prudent use of our natural resources and protects the natural environment. This, together with the need to maintain safe and reliable supplies of has led to a growing interest in energy issues at a national, regional and local level.
1.3 The Energy White Paper, published in February 2003, is the first national energy strategy for a generation. Titled “Our energy future – creating a low carbon economy”, the white paper outlines a sustainable energy policy which has four goals:
- To put ourselves on a path to cut the UK’s CO² emissions by some 60% by about 2050, with real progress by 2020
- To maintain the reliability of energy supplies
- To promote competitive markets in the UK and beyond
- To ensure that every home is adequately and affordably heated
1.4 Local authorities make decisions that are vital for energy policy, for example on planning, regeneration, procurement, housing and transport and are therefore seen as pivotal in delivering national energy objectives. The costs of inaction are potentially greater than the costs of action.
2. Current situation
2.1 Total Island annual energy demand for heat, electricity and transport is in the region of 3,264 GWh per year (data collected 2002). Electricity demand is 545GWh (at a cost of some £27million per annum) and gas demand is 1,828GWh (at a cost of £36million per annum). Petrol and diesel inputs are some 770GWh with smaller demands for wood, coal, fuel oil and LPG.
2.2 Energy outputs are currently small by comparison. A gas-fired Combined Heat & Power (CHP) plant at Arreton Valley Nursery is rated at 18MW and a much smaller CHP plant has been installed at Medina Leisure Centre. A 13.8kWpeak photovoltaic roof has recently been commissioned at Medina High School. The oil-fired power station in Cowes is only brought into operation occasionally to service high peaks in electricity demand and the Refuse Derived Fuel plant at Forest Road, which previously produced 13.26 GWh of electricity, is currently mothballed.
2.3 Island emissions from its energy use run at 1,406,655 tonnes of CO² per annum and its ecological footprint is some 2.5 times the sustainable average “earthshare”.
2.4 The Isle of Wight Council has shown a commitment to sustainable energy through Agenda 21 and specific strategies for renewable energy, energy efficiency and fuel poverty.
2.5 The Renewable Energy Strategy for the Island reflects the view of local people that the Island should contribute fully to the Government target of at least 10% of electricity generated from renewable sources by 2010. The Strategy indicates how this could be achieved using commercially viable technologies. The installation of 18MW of renewable capacity will meet the 10% target, although there is the possibility of an accelerated rate of deployment to 28MW (18%) of renewable capacity. Sub-regional targets have been considered for inclusion in Regional Planning Guidance and have been set for Hampshire and the Isle of Wight at 115MW by 2010. Considering the current rate of deployment in the South East is 0.05% and less than this on the Island, rapid progress is required.
3. 2020 Scenario
3.1 Over the next 10-15 years an energy system is likely to emerge which is more diverse than the one we have today and may look something like this:
4. Role of local Authorities
4.1 Local authorities will be expected to develop new initiatives to promote national objectives.
4.2 Local responses should address the key issues identified in Energy White Paper:
4.3 The challenges are great, but so too are the rewards. Below are some suggestions as to how the Council can implement sustainable energy practice:
5.
Promoting Community
Ownership of Renewable Energy Sources (“Isle of Wight Low Carbon Company”)
5.1 The Island’s Renewable Energy Strategy clearly indicates a desire to encourage renewable energy developments and for these to provide lasting benefit to local communities. To date, private investment has not been forthcoming.
5.2 In order to facilitate development, a study has been commissioned by SEEDA, with some funding from GOSE, to investigate the possibility of developing a community renewable energy company on the Isle of Wight. The study has been carried out by consultants Whitbybird and Element Energy and is now complete. It recommends the establishment of a self-catalysing company (Isle of Wight Low Carbon Company, IOWLCC) which uses the profits from renewables development to foster further renewable energy sources, helping to meet the renewables target of 10% by 2010, maximising the benefit to local communities and improving the economic prospects of the Island through job creation.
5.3 The IOWLCC will only develop projects which have a positive net present value and are therefore viable in the short-term. Projects requiring minimal capital expenditure will be developed and operated by the Company providing a revenue stream. Projects requiring high capital expenditure will be developed into a viable company and then sold with a margin paid to the IOWLCC to recover the development costs. Local residents will have the opportunity to become shareholders in these new companies once the risks are minimised. Surplus profits from the IOWLCC will be returned to the community for environmental improvements.
5.4 Two viable projects have been identified for immediate development:
Small scale development for wind energy may also be a possibility subject to planning approval.
Technologies which are not likely to deliver economic returns in the short-term e.g. tidal stream, microCHP, photovoltaics and wave power, will be regularly reviewed by the IOWLCC.
5.5 The study also highlighted the potential for significant energy efficiency improvements to Council stock, amounting to 25-40% of fuel costs or £187,000 to £300,000 each year. A proportion of these savings could be ringfenced to provide seed finance for the IOWLCC, following a successful model developed by Woking Borough Council.
5.6 Detailed cashflows indicate that a Company based on the projects outlined above could break even within 5 years and then go on to make substantial profits. Seed finance of £450,000 over 3 years (£150,000 per year) is required to employ a highly motivated Director to run the Company. Part of this could be provided by the Council which could also take a stake in the Company, either as investor or lender.
5.7 It is suggested that IOWLCC is constituted as a not-for-profit company, limited by guarantee. Options for the Council’s role in the Company are outlined below:
Option 1: Not to support the
development of IOWLCC.
Option 2: Invest to take ownership of the IOWLCC as
a new ‘trading vehicle’. The powers contained in the Local Government Act 2003
could open up useful opportunities here.
Option 3: Support the formation of the IOWLCC as an arms-length organisation, providing seed finance and ongoing finance through ringfencing a proportion of the savings from energy efficiency improvements.
6. Conclusion
6.1 Local authorities are now charged with delivering sustainable communities. The move away from our high demand for fossil fuels to a more sustainable energy system is a blueprint for sustainability, helping to meet social, economic and environmental objectives.
6.2 The role of local authorities in delivering sustainable energy goes beyond current statutory functions but can be seen to improve the well-being of local people. As well as developing cleaner energy and more reliable and affordable supplies there are potential benefits in terms of economic regeneration and job creation.
6.3 The formation of a not-for-profit renewable energy development company (IOWLCC) is considered to be the most effective way for the Council to achieve its renewable energy targets and to ensure that the benefits of renewable energy development remain on the Island.
Jim Fawcett, Principal Policy Officer (Health & Sustainable Development)
T: 823204
Terry Butchers
Portfolio Holder for
Sustainable Development,
Environment & Planning Policy