Realising Value
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DISTRICT ENERGY
District Energy is becoming a familiar term in the UK and describes the delivery of heat, in the form of hot water, around a defined network of pipes, from a centralised energy centre.
The significant carbon benefits to be derived from these networks means that Property developers are increasingly including them in their development plans in order to comply with planning and/or achieve CO2 targets.
Whilst there is a growing body of expertise focused on the design and build of these assets far less attention is paid to the commercial value, future governance, the manner in which they will be owned and operated and the partners with whom a developer might work in order to maximise the benefits both to themselves and to the future occupiers.
With regulation on the horizon and technological solutions constantly evolving it is critical that the strategy for the development of these assets is properly considered and commercialised.
ELECTRICITY NETWORKS
The UK’s electricity distribution network is divided into six areas controlled by 6 different Groups owning 14 different Distribution Network Operators (DNO’s).
In its role to ensure fair and competitive pricing OFGEM created the right for other regulated entities to own and operate local electricity distribution infrastructure within the DNO areas.
These are called Independent Distribution Network Operators (IDNO’s) and are licensed to own and operate extensions to the DNO networks on new developments and pay the developer an asset value. This has no impact on consumer choice or price.
Approximately 50% of UK developments work with IDNO’s with the other 50% working with the incumbent DNO's and receiving no asset value. Most developers leave the appointment of the IDNO to their main contractor.
The contractor will appoint an Independent Connection Provider (ICP) to carry out the design and build of the electrical infrastructure and the ICP will appoint an IDNO, often a sister company, to adopt the network. The asset value payable by the IDNO will go to the ICP, or the main contractor who will reduce the overall contract price.
Whether the full asset value is recognised and passed onto the developer is usually unknown as the asset value is not stated as a separate figure.
Separating the IDNO procurement from the main contract and procuring it separately creates transparency and usually leads to higher asset values and reduced reinforcement costs.
EV CHARGING
More recently we have applied our skills and capabilities to helping our clients understand and exploit the expansion of electric vehicle charging.
The provision of EV charging infrastructure is inherently attractive because it not only future proofs the asset in which it is installed, it also offers the potential for significant additional revenue streams.
However, for all property owners, it is not just the case of installing EV chargers, what is critical is the long-term business model supporting the provision and the evolution of EV charging services, and how it fits within their overall energy strategy.
BATTERY STORAGE
The local storage of electricity is becoming a fundamental element in the delivery of low carbon energy strategies but its success depends on its proper integration into the whole gamut of utility and energy solutions deployed on a site or regeneration project.
Understanding how these assets can be strategically utilised to add value not only in their own right but to other assets such as district energy, EV charging etc. is fundamental to maximising both the carbon benefits and value for money.
With the right strategy on-site Battery Storage can significantly enhance the performance of other assets within the overall energy envelop as well as becoming a significant revenue generator in its own right.
SOLAR/P.V.
PV is often required as part of low carbon planning conditions for developments, but it should always be considered in order to maximise the energy efficiencies for a development.
There is increasing energy demands on properties for heating, general use, and electric vehicle charging, and maximising the benefits of a renewable energy source in combination with considerations like battery storage will help future proof the energy strategy for property developments.
HEAT PUMPS
Increasingly there is a move away from gas driven, or biomass driven CHP for district heat networks, instead heat pumps are being considered as the engine for district heat networks.
Typically, air source heat pumps (ASHP) as they have the benefit of offering low carbon heating at a reasonable capital cost.
However, it should be considered that ASHP’s require power for operation and may need to be positioned on the outside of buildings.
This last point is mitigated by centralising the system (district heat network) which allows it to benefit from the diversity of heat demand across the development which decreases the peak heat loads with more connections. This will decrease the required capacity of the heat pumps, with a significant impact on the capital cost and replacement cost in the future.
Often ground source heat pumps (GSHP) are overlooked in district heat networks, and yet ground source heat pumps achieve higher performance than air source heat pumps due to stable ground temperatures.
Whilst in summer the COP (ratio of useful heating or cooling provided to energy input required) of the ASHP might still be competitive, the COP in winter drops to roughly half of the COP of the GSHP, at a time when the heat demand is at its peak.
