Socio-Economic and Policy Analysis for Newcastle City Council. Tony Dicicco Senior Policy and Regulatory Specialist

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1 Socio-Economic and Policy Analysis for Newcastle City Council Tony Dicicco Senior Policy and Regulatory Specialist

2 ETI s Smart Systems and Heat Programme Creating future-proof and economic local heating solutions for the UK Connecting together the understanding of consumer needs and behaviour with the development and integration of technologies and new business models into Delivering enhanced knowledge amongst industry and public sector ETI members Resulting in industry and investor confidence to implement from 2020 which enables a UK heat transition The Energy Systems Catapult will deliver Phase One of the SSH programme as a supplier to the ETI following the transition of the SSH programme team to the Catapult. From 2017 the Catapult will be responsible for delivery of Phase Two of the programme independently of the ETI.

3 Evaluating the Socio-Economic Analysis for NCC Costs of the interventions made as part of the energy transition in Newcastle will be offset by a number of socio-economic benefits. These benefits include: 2017 Energy Systems Catapult Direct Benefits Reductions in carbon emissions Improved energy efficiency Improved comfort Improvements in air quality Wider Benefits Improvements in health Employment benefits Reduction in fuel poverty (for some households). A methodology has been developed to assess these economic costs and benefits. Private and public first up and running This methodology takes output data directly from EnergyPath Networks (EPN) and calculates indicative costs and benefits using HM Treasury (HMT) Green Book guidance Note: these results have been generated from a range of different EPN solutions to give an indication of the range of benefits - not a definitive answer

4 Average Energy Savings (MWh/Year) for the Local Area Energy Strategy Relative to BAU* Reference Case first up and running Notes: i) * BAU is a model run out to 2050 without the carbon target; ii) The calculated metrics from the Target run are subtracted from the BAU run: therefore, positiveprivate results are and savings public and negative values are increases On average, the Strategy will see a net energy saving of c.19twh due to a reduction in gas usage of c.32twh offset by an increase in electricity usage of c.12.5twh plus a small increase in biomass.

5 Average Carbon Savings (tonnes CO2/Year) for the Local Area Energy Strategy relative to BAU Reference Case first up and running Private and public

6 Present Value Average Direct Benefits ( m/year) as a result of Local Area Energy Strategy Private and public On average, the Strategy delivers net positive energy savings of c. 19TWh compared to Business-As-Usual reference case - however, when these are monetised this results in a cost to society of 340 million (as gas is being displaced by more expensive fuels) On average, more than 5.5 million tonnes of CO 2 are saved as a result of the Strategy this equates to a benefit of more than 350 million when valued with a carbon price.

7 Net Present Value of the Local Area Energy Strategy ( m) Private and public The Average Discounted Cost of the Strategy (over and above a BAU scenario) is approximately 200 million: Combining this with the direct benefits gives a Net Present Value of transition of approximately million (+/- 160 million)

8 Wider Benefits Average Full Time Equivalent (FTE) jobs created by the Local Area Energy Strategy Average, Discounted, Annual Health Benefits from implementation of the Local Area Energy Strategy Estimated peak of c. 5,500 jobs created in period this is when most of the buildings expected to start transitioning to low carbon heating systems. This is predicted to fall to a baseline of c. 4,000 jobs by 2050 which, due to the nature of the calculation, are expected to span out past this time point. The average net health benefit, as a result of energy savings from the Strategy, are valued at 12 million (+/- 2 million). Fuel Poverty Across a range of scenarios analysed, between 9,000 and 21,000 homes are expected to receive a reduction in the cost of delivering energy to their homes - this should be reflected in their fuel bills.

9 Identifying and mapping Prospective Policy Measures Measure Category 1 Improve the Planning Approvals Process for District Heat Networks Category 2 Market Structure, Liquidity and Pricing Electricity Demand Reduction/ Demand Side Response Reform ECO - focus on vulnerable consumers Introduce Variable Stamp Duty or Council Tax Rebate Address Split Incentives between landlords and tenants Extend the Warm Homes Discount Social Housing Category 3 Replace the Green Deal with a Home Improvement Fund Reduce/Offset high District Heating Development Costs Propose/support a regulatory regime for District Heating Extend the Renewable Heat Incentive (RHI) Introduce a Carbon Intensity Threshold (CIT) Key: Some impact Large impact Rented Homeowner Low Income/ Vulnerable Homeowner Able to Pay Category 1 Policy in place with good evidence on adequate performance, or policy in place with solid understanding of the issues either in the ESC/ETI or elsewhere. Category 2 No policy in place, or a policy in place with little evidence to suggest it is working, but work underway within the ESC/ETI or elsewhere to create a solid way forward. Category 3 No policy in place, little evidence and no apparent work going on.