healthier, happier and richer

Local government and community organisations should play a greater role in energy efficiency and energy supply.

Municipal energy organisations are widespread in the US and European countries such as Denmark, Sweden, Germany and Austria. Some UK local authorities have made some progress – Aberdeen and Southampton on district heating (DH), Kirklees, Braintree and Sheffield on energy efficiency. However, under the previous UK government, they were not permitted to sell renewable electricity, which restricted the role they could directly play in decentralised energy.

Local government cannot be left to do everything. National programmes are essential. A good example is Danish Heat Law, which has led to 40% of Danish heat being supplied through DH. Strong EU policies are also needed. The Energy Performance of Buildings Directive should be strengthened to require building regulations to be met whenever a property is renovated, sold or rented out (as is done in Sweden). The CHP directive should make combined heat and power (CHP) mandatory whenever fuel is combusted.

This paper summarises the experience of some leading local councils, regions and states in Europe (outside UK) and the USA.

District heating in Copenhagen

Since the 1979 Heat Law, Denmark has reduced its CO₂ emissions from heating by 40%. The DH network has been expanded to 50,000km, transporting heat up to 100km and delivering over 40% of national heat demand. 82% of heat in DH is from CHP. In 2002, waste and biomass accounted for 36% of fuel inputs used for heating. DH is 30% cheaper for consumers than heating with individual boilers.

DH in Copenhagen commenced in the 1920s. There are now 104 km of “high capacity” pipes, operated by heat companies. These take heat from heat sources to the local heat distribution system, owned by the municipalities, which takes the heat the last few kilometres to homes. The heat sources include:

• Large CHP plants such as Avedore (840MWe), which uses gas, coal, oil, wood and straw. Heat is stored on site for up ten hours, in vast heat tanks, then piped to Copenhagen, providing heat for 300,000 people (the electricity is enough for 1.2 million people).
• Community scale CHP plants such as the 60MWe Kara waste plant. Waste and biomass provide about a third of the heat in the Copenhagen DH system

One challenge for Copenhagen is improving the quality of insulation in its older pipelines. These are in the heart of the city and very expensive to excavate.

Energy efficiency in Sacramento, California

Sacramento’s public utility, SMUD, serves 1.1 million people, the second biggest public utility in California after LA Department of Water and Power. Unlike LADWP, SMUD is operated as a community-owned, free-standing agency instead of a department of a local government. It is free to use its surpluses to re-invest as it sees fit, rather than paying these back to municipal coffers. It is overseen by a Board of directors, who are elected and represent wards within the city.

SMUD’s electricity tariff is around 30% lower than that of the privately owned PG&E, which supplies northern California. Its percentage of renewables is around double that of the California renewable portfolio standard (like UK’s Renewable Obligation target).

Sacramento is carrying out work to reduce demand through substantial energy efficiency work, peak load shifting (“Peak corps”) asking customers to accept devices to reduce air conditioning power demand at peak times, encourage photovoltaic panels (the only renewable electricity suited to the city) and develop skills in the installer base.

One of its most popular demand reduction programs has been ‘shade trees’, which provides small trees for free for residents to plant near their homes, to reduce the need for air conditioning. The policy is also good for community morale and has resulted in the greening of green spaces adjacent to buildings. Such is the popularity of the SMUD that adjoining counties like Yola have sought to join the SMUD service area. Such moves have been resisted by PG&E, which currently supplies electricity to Yola.

Energy efficiency in Babylon, NY

This community on Long Island has provided $2.5 million-worth of 3% interest loans for energy retrofits to private homes. The council controls the retrofits though its own construction arm. Local unemployed youth do the work.

Applicants have to have a $250 audit, but this amount is deducted from total financing costs if applicants go on to participate. When launched, the average home improvement effort was expected to reduce energy bills by over $1,000/year, and funds of up to $12,000 a home were available.

A pilot program provided evidence on costs and returns:

• Average cost of improvements was just over $8,000.
• Average annual savings to homeowners on heating and cooling bills were almost $1,000.
• A resulting average payback period of just over eight years.

Efficiency Vermont

Vermont has no coal, oil or gas of its own and has to spend $2bn a year on out-of-state energy imports. Fuel poverty levels are amongst the worst in the country, as a result of high energy prices and famously bitter winters. The energy industry is highly fragmented. Its 600,000 population is served by 20 electric utilities, four of which are investor owned, 14 owned by municipalities and two farmer-owned co-operatives.

Efficiency Vermont (EVT) was established to reduce electricity use, taking over a CERT-like function performed by the electric utility in many other states. It has to ensure that a third of savings are made in homes, commercial and industrial locations respectively. EVT also has the political mandate, but no resources, to reduce the gas and liquid fuels used by homes to keep warm.

Savings of electricity from energy efficiency were 1.8% in 2007, the highest rate of efficiency gain in any state. Paying for EVT adds $35 to each customer’s bill – again the highest in the country. However, the payback is less than two years. EVT has also secured funding from auctioning permits in the north east’s emissions trading programme (RGGI). This money is used to target projects such as multifamily apartment blocks, which need more upfront co-ordination, but yield greater carbon savings.

Vermont isn’t the only state where energy efficiency is being undertaken by a free standing agency rather than by utilities: Maine, Wisconsin and Oregon have also appointed not-for-profit organisations; New Jersey and New York states have assumed responsibility for a part of their states themselves.

In 2009/2010, voluntary organisations in Vermont also received economic stimulus money, which has increased the volume of draught proofing and insulation work by 40%. Local not-for-profits have hired and trained local staff to undertake the work. Across the country Obama’s administration has made $5 billion available for this programme in 2009.

Renewable heat and ESCOs in Upper Austria

Upper Austria introduced grants for solar thermal installations in 1981. They have been has been available without interruption ever since. It has since added subsidies for biomass and heat pumps. In 2007 it spent €14 million on these subsidies, leading to the installation of 3,800 small biomass installations, 3,500 solar thermal systems, 2,800 heat pumps and 680 connections to district heating. In 2008, this increased to €18 million, with 5,000 solar thermal systems and 3,900 heat pumps.

In 2007, 32% of total energy used in Upper Austria was renewable (14% hydro, 13.5% biomass, and 4.5% wind and solar). 45% of heat came from renewables. Over 40% of municipalities used biomass for heating, with over 35,000 biomass heating installations. Most of these were small scale wood pellet heating systems, mostly in single-family homes. Many public buildings, particularly hospitals, nursing homes, sports centres and schools, are equipped with a solar thermal system. The regional government had installed 26 systems, including one solar cooling system, on its own buildings. There are more than 30,000 heat pumps installed in Upper Austria.

The main focus has been on biomass, partly to support agriculture, which in mountainous areas like Upper Austria is not particularly profitable. Subsidies of up to 30% of the costs of biomass installations are available from the federal government. On top of this, Upper Austria set up a biomass fund of €3.6 million in 1993, to provide low interest loans. Farmers or farmers’ cooperatives have been able to get a higher percentage of installation costs than have private companies. This has led to some energy companies seeking to enter the heat market to set up co-operatives with farmers.

Programmes to extend district heating using biomass are managed and planned by the regions, but the national ministry of agriculture provides around half of the money. In 1999, €11 million was provided by the ministry, €7.3 million from the regions and €5.1 million from EU regional funds.

In 1998, Upper Austria launched the Energy Contracting Programme. This offers financial support to energy efficiency and renewables, with work carried out by an ESCO. So there is no investment by the building owner. The ESCO guarantees that it will reduce energy costs by a certain percentage every year. It is in charge of financing, installing and, where necessary, operating and maintaining energy saving measures and systems. The money saved by lower energy use is initially shared between the ESCO and the building owner. Once the cost of installation is recouped – which takes 10 to 15 years – the saving goes entirely to the building owner (unless there is an ongoing cost of operation and maintenance).

At first the Energy Contracting Programme was restricted to public buildings, and to energy efficiency rather than renewables. It was expanded to businesses and to renewables in 2002. The programme offers financial support up to 13.5% of the investment costs for renewable heat (up to a maximum of €100,000).

Since the start of the Energy Contracting Programme, more than 100 projects have been implemented, with a total investment of about €35 million. The projects include:

• Freistadt. Seven municipality buildings were retrofitted, including school buildings, the kindergarten and sports facilities. Street lighting was improved and made more efficient. Almost a quarter of the former energy costs for heating and electricity are now saved, resulting in lower energy costs of €66,205 annually.
• Bad Goisern. €188,000 was invested by an ESCO in new street lamps. Electricity consumption has been reduced by over a third. The municipality now pays €21,000 a year public street lighting instead of €36,000.

In 2002, the regional building law was amended to require all buildings used for public purposes being constructed or renovated to install solar thermal or other renewable energy systems. Electrical heating is banned in new buildings. This has been strongly enforced by the regional government. In 2008, as part of its implementation of the EU Energy Performance of Buildings Directive, the requirement was extended to all buildings larger than 1,000m², irrespective of their use.

Upper Austria hosts the Oekoenergie-Cluster (eco-energy cluster) – a network of green energy companies with more than 4,500 employees and an annual turnover of more than €1.5 billion. The regional government has maximised public support for energy efficiency and renewables by presenting its programmes not only as ‘green’ initiatives’, but also as social and economic ones.

Energy efficiency and district heating in Berlin

The KfW bank, owned jointly by the federal German government and the regions, has offered low-interest loans for refurbishment since 1990. Local banks carry out the KfW’s retail lending by offering loans to owner-occupiers, landlords, housing companies, housing cooperatives and local government, for energy efficiency, CHP and renewables. €1.5 billion in loans has been available annually in recent years. Since 2007, direct grants for non-profit organisations and local authorities were offered alongside the loans.

Where more than a fifth of a property by area is renovated, new building standards have to be applied to the entire building. Other than this, participation in energy efficiency programmes is voluntary in Germany.

Berlin city council has financed a modernisation programme for old buildings and flats using the ESCO approach, in partnership with KfW and energy companies. The Gesobau redevelopment, the largest redevelopment project in the German housing sector, involved adding an extra layer of cladding to the outside of tower blocks. More than 13,000 flats have benefited from this, cutting energy use by 70%. They have also been connected to a DH network.

The city also promotes biomass district heating. Since 2003, 12,000 tenants have been supplied with energy from the wood-fired cogeneration plant located in Berlin Gropiusstadt.

Energy efficiency in Rotterdam.

The City of Rotterdam set up the Rotterdam Climate Initiative (RCI) in 2006. RCI is 80% owned by the City and 20% by the national government. Its Board is chaired by former PM Ruud Lubbers. It works extensively on energy retrofitting of existing buildings, green roofs, biomass and wind energy, district heating and carbon capture and storage (CCS).

RCI initially received €50 million from the city council, which WAS raised by selling waste incinerators. This was not enough to make RCI a major financial institution, so the focus has always been on partnerships. €30 million has been spent on mitigation and €20 million on adaptation. A new budget of €30 million has been agreed for the next four years, over the whole sustainability agenda, not just RCI.

The city council owns 4,000 homes, as well as shops and offices. Half of the homes in Rotterdam are housing corporations (and three-quarters of these are apartments). RCI has been trying to get housing corporations to sign up to agreements to retrofit existing buildings, and half have now done so. The average efficiency of Rotterdam’s buildings is improving by 2.5% a year

RCI regards district heating as a priority. DH is not currently widespread in Rotterdam, (or in Holland generally). The City is planning to extend it through an infrastructure company, owned by the city, and an operating company, owned by the City and E.On Benelux. A waste incinerator provides the heat. The City council will provide equity of €38 million, and provides surety for a mortgage loan, up to €149.5 million. New biomass DH plants are also being planned. (In 2009, the Dutch government adopted criteria for which biomass is sustainable and which not. The EU has yet to do this.) Rotterdam has a local law that any building constructed has to be connected to a DH system if one exists.

Recommendations

• Policy should foster the development of organisations whose principal purpose is to the deliver community energy and energy efficiency.
• Local government should be given primary responsibility for planning and then implementing community energy and energy efficiency.
• Broad reforms need to be made to the electricity market to allow the evolution of community energy service companies.
• National government must ensure that low cost capital is available to community energy developments.
• Local government must ensure that there are sufficient trained and accredited local workers to manage and install energy efficiency.
• District heating should be substantially expanded in the UK.
• Building regulations to be met whenever a property is renovated, sold or rented out (as is done in Sweden).