1. Good Practice Example: Milton Keynes Combined Heat and Power (CHP) Plant (District Heating)

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1 1. Good Practice Example: Milton Keynes Combined Heat and Power (CHP) Plant (District Heating) Overview Milton Keynes Combined Heat and Power (CHP) Plant Thameswey Ltd. (Private company owned by Woking Borough Council, operates across whole of the UK, main activities in the towns of Woking and Milton Keynes) Thameswey was set up in 1999 by Woking Borough Council as a Special Purpose Vehicle (SPV), initially to provide low carbon energy within the Borough of Woking in Surrey (30 miles south west of London), and subsequently to provide a wider range of sustainable development objectives through its own commercial activities and joint ventures. Thameswey has assets of over 70m spread across its energy and property companies. It has been structured specifically to enable joint ventures and Private Public Partnerships. Thameswey Energy Ltd. (TEL) was formed as an Energy Services Company (ESCo) in 2000 and in the same year completed its community-scale district energy scheme comprising a tri-generation network of heat, cooling and private wire electricity using 1.3MWe gas CCHP in Woking town centre. Subsidiary company in Milton Keynes: Thameswey Central Milton Keynes Ltd. (TCMK) TCMK was set up in 2005 as a subsidiary of TEL to further the council s carbon mitigation objectives through investment in low carbon energy infrastructure in Milton Keynes under contract to English Partnerships (EP). TEL/TCMK was awarded a long term contract with English Partnerships (now the Homes and Communities Agency), the UK government s regeneration agency to build and operate a series of energy stations to supply low carbon heat and power to the phased redevelopment of central Milton Keynes. Keywords CHP, Heat Supply, District Heating, Community Energy System, Re-communalisation Background Background, objectives, implementation measures and financing Milton Keynes is the largest New Town in the UK. It is located approximately 45 miles (70 km)

2 north west of London and is well connected by major road and rail services. The creation of approximately 20 designated New Towns throughout the UK during the period was the principal component of the UK Government s reconstruction programme following the war and aimed to provide major new urban settlements. Special powers to oversee the planning, construction and civic management of the New Towns were passed to Development Corporations. Milton Keynes was designated a New Town in 1967 with the intention that it should grow to the scale of a city. It now has a population of approximately 225,000 - although it has never received formal city status. Plans for further significant growth over the next 20 years MK has a higher than average proportion of the population of young people and has plans for further significant growth over the next 20 years, including intensification of uses and new homes in central Milton Keynes. Central MK is characterised by a grid-iron pattern of wide roads ( boulevards ) enclosing regular building plots, a morphology which is practically unique in the UK. English Partnerships was appointed by the UK Government in 2004 to take forward the development and expansion of Milton Keynes and given the planning powers to develop and execute its plans. Milton Keynes Council is committed to reducing its eco-footprint. This means taking immediate and long-term measures to improve energy efficiency and reduce resource use and waste. The council aims to achieve this through a strategy of smart growth ; encouraging large-scale development that meets the above aims, and by regularly monitoring the area s changing eco-footprint and adapting its environmental strategy. In addition to delivering regeneration and provision of new housing (especially affordable social ) housing for the, English Partnerships was tasked by government to lead in the development of sustainable with an emphasis on energy and carbon efficiency. In its strategy for the regeneration of Milton Keynes English Partnerships recognised the opportunity to invest in low carbon community energy infrastructure to serve its developments. The widely spaced building blocks and broad street pattern, combined with the medium-high density of mixed use development that characterises the centre of Milton Keynes provides a favourable urban morphology for the creation of district energy networks. Woking Borough Council s pioneering work in community energy led to the appointment of Thameswey by English Partnerships to provide and operate this infrastructure. In 2006, English Partnerships and Thameswey set up a special purpose company, Thameswey Central Milton Keynes Ltd (TCMKL), to develop CHP on a larger scale in partnership with the Homes and Communities Agency. Milton Keynes Combined Heat and Power (CHP) Plant is located on Avebury Boulevard/Midsummer Boulevard, Central Business Exchange (CBX II). At the heart of the scheme is a GE Jenbacher CHP unit with a 20-cylinder engine. It is fuelled by natural gas and

3 has an electrical output of 3.2 MW. Project capital has been provided primarily through Woking Borough Council a combination of share capital and debt, combined with minor commercial borrowing and contributions from developers towards connection costs (e.g. cost of connection by Network Rail paid by NR). TCMK is operating a 25 year business plan with a target ROI of 12%. Investment structure: Shareholder capital and loans 16.3m 10 year commercial loans (8%) Shareholder lending (6% PWLB plus margin) Developers contributions 5.57m EP/HCA Payments 2.81m Cost benefit, effects and results achieved (max characters) Operational business plan of 32 years IRR 6.5% Sales revenue 2.5m (2012) Operating costs 2.1m EBITDA 297,000 Planning procedures, involvement of stakeholders and possible participation structures The role of local planning policies in Milton Keynes in securing district energy has, to date, been minimal, as TCMK has been driven through the adoption of exemplar standards by English Partnerships. Outside London, where the London Plan has set high levels of expectation for the use of low carbon energy networks, and a handful of other cities in the UK which have adopted policies seeking the development and expansion of local low carbon energy networks, many local authorities have used planning policies to focus attention on building-scale improvements in energy efficiency above the minimum national standard, and the use of small/micro scale renewable energy generation. Milton Keynes has been a fore-runner in requiring high levels of energy and carbon efficiency through use of a locally set tariff to hypothecate funds collected from developers for use in retro-fitting improved thermal insulation into the local housing stock. However, a commitment to promoting the use of low community energy is now set out in the submission draft Core Strategy for Milton Keynes (October 2010). Policy CS 15 (Community Energy Networks and Large Scale Renewable Energy Schemes) establishes a clear presumption that developments will be expected to connect to existing local energy networks. Whilst the Core Strategy is not yet adopted, the draft policy now has weight and Thameswey is seeking to work with Milton Keynes council to create a common understanding of how this policy will work in practice. A number of local planning authorities are now responding to encouragement by government departments to include low carbon energy generation and distribution infrastructure in their plans for new and existing urban areas. The Department of Climate Change and Energy (which has no executive powers in respect of local planning policy) is now adding its influence through the adoption of a national strategy and new policies aimed at encouraging the establishment of new national and local low carbon energy infrastructure. However, a major challenge is creating the right market conditions for local energy generation and distribution networks to

4 stimulate the level of capital investment required. Planning has an important role in prioritising this alongside other local infrastructure requirements and sending a clear signal that it expects new development to play a lead role in decarbonising energy supply. Media Innovations Praesent euismod egestas nulla malesuada porttitor. Suspendisse potenti. Nunc fermentum bibendum congue. Integer porta, sem et ullamcorper commodo, turpis orci cursus sem, sed rutrum nibh tortor non mi. Vivamus vel ipsum vel lectus cursus consequat. Nulla ac lectus vitae tellus pharetra consectetur eu non neque. Praesent mauris nunc, auctor vitae tristique tincidunt, tempus nec urna. Quisque ultrices lacinia nisi, at ultricies est mattis vitae.

5 Praesent metus enim, luctus auctor ullamcorper at, placerat vitae purus. Duis ullamcorper consectetur urna in tristique. Sed diam enim, gravida sit amet lobortis sit amet, sagittis eu erat. Quisque eu lorem dolor, et bibendum orci. Maecenas tortor est, gravida sit amet commodo quis, viverra eu quam. Learnings Praesent euismod egestas nulla malesuada porttitor: Nulla ac lectus vitae tellus pharetra Praesent mauris nunc Quisque eu lorem dolor Contact possibilities Name(s): Sean Rendall Organisation(s): Thameswey Ltd. Phone: Web: