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What role for decentralised energy in addressing London’s energy challenges?

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We’re delighted that Matthew Pencharz, Senior Advisor on Environment and Energy to Mayor of London Boris Johnson, will be joining us at Heat 2014. We took some time to catch up with him ahead of the event:

How did London go about placing heat as a specific issue in the energy policy debate?

London’s high use of public transport means that a great proportion of our CO2 emissions come from buildings; nearly 80 per cent, in fact. With expected decarbonisation of the electricity grid, the greatest impact in CO2 emissions is to be found in addressing buildings’ energy efficiency and the use of fossil fuels in heating.

Retrofitting these buildings is a priority for London. To maximise CO2 emissions reductions in the most cost-effective ways, the Mayor’s approach is to retrofit these buildings with energy efficiency and energy supply measures through programmes such as RE:NEW, RE:FIT and the decentralised energy programme of work.

Increasing concerns over the affordability and security of London’s energy supply have focussed attention on delivering an energy future for London with a triple bottom line: to be more secure, more affordable and lower carbon. Our research shows that placing heat at the centre will deliver the greatest benefits.

London has 32 Boroughs and the Corporation of London, a lot of stakeholders and Westminster watching on. How do you manage the dynamics between citywide policy and delivery, the national policy landscape and local delivery?

A major concern is the fall in national electricity generating capacity; we have an alarming lack of energy capacity headroom and therefore an unacceptably high risk of brownouts. This capacity crunch has been further exacerbated by the unplanned outages of a number of power stations and the intended closure of others.

The Mayor is doing all he can to increase the level of local generation that will take the stress off upstream generation, including initiatives such as Licence Lite (LL). LL is a junior electricity supply licence aimed at overcoming the cost and market barriers to distributed generators wanting to sell their power output at rates reflecting its true retail value. With Ofgem’s oversight, we intend to pilot the new licence that will allow local generators a better price for their electricity, which should help decentralised generators proliferate, further reducing stress on the national power system. He is also working hard to deliver smart systems in London to manage demand better and incentivise consumers – both commercial and domestic – to avoid the hours of peak demand.

London’s electricity distribution infrastructure has served the capital well. However, electricity demand is now increasing 1-4 per cent a year and a large number of the capital’s substations are, at times, at or near their maximum capacity. The current regulations severely limit strategic investment in electricity distribution infrastructure ahead of an immediate request for a connection. The Mayor is working with developers, the Government and Ofgem to investigate how the current regulations could be reformed to allow a much more strategic approach to investment in electricity distribution infrastructure while protecting consumers from any risk.

A lot has happened to deliver efficient, affordable, sustainable heat in London over recent years. How’s the market looking? 

The Mayor has a small development team that directs consultancy support to help others develop and deliver their larger-scale decentralised energy projects. The team has developed a DE project pipeline valued at over £300m, almost a third of which is expected to be brought to market by summer next year. The projects are characterised by their technical variety and disparate stakeholders. This points to the important role of the specialist energy development team in helping identify and structure projects with the stakeholders. Examples include

  • Supporting the London Borough of Camden to capture 2 MWth of unused heat from a new gas-turbine CHP installation at the Royal Free Hospital to heat their housing stock at Gospel Oak utilising a new heat network.
  • Supporting the London Boroughs of Enfield, Haringey and Waltham Forest establish a North London area-wide heat network. Enfield has established the Lee Valley Heat Network company that will initiate the start of the project based on heat from the Edmonton energy from waste project.
  • Supporting developers in the Vauxhall Nine Elms Battersea Opportunity Area to approach the ESCO market to invest in interconnecting heat network and provide heat supply services centred on the New US Embassy.

There’s some great work under way, but what are the ongoing challenges for London in terms of heat?

If London is to achieve its target of supplying a quarter of London’s energy from decentralised sources by 2025, then the supply of heat from CHP, waste heat and natural sources by means of heat networks will have an important role to play.

London’s complicated governance structure and the multiplicity of stakeholders mean that it is challenging for an individual private sector player to drive forward large-scale DE projects. We intend to use the planning, convening and influencing power of London’s public authorities, combined with expert support from the GLA, to drive forward market competitive projects, resulting in an energy supply for London which is more affordable, secure and lower carbon.

Finally, what are the key plans for the future? What should the heat industry know about what’s coming in London?

London is set to exceed its record level of population within months and risks losing its premier position unless a major programme of infrastructure investment is put in place.

The London Infrastructure Plan 2050 is the first attempt to set out the full range of infrastructure requirements for the capital over the next half century, during which time the population of London is forecast to increase by 37 per cent to more than 11 million people.

The plan builds on the Mayor’s campaign for greater fiscal devolution to cities allowing for investment in much-needed local infrastructure and boosting the whole of the UK’s economy. The Mayor believes that the model for investment set out in the plan could also be suitable for all of these cities, and others, providing a blueprint for how they might invest in locally-decided priority infrastructure needs.

Thanks to Matthew Pencharz for his contribution here. You can hear more from Matthew – particularly about the dynamics of cities operating in a national and local landscape – at Heat 2014 on Wednesday 5 November. To book your place now, visit www.heatconference.co.uk

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