Carbon in the public sector

Delivering and financing a carbon reduction programme

Wednesday 25 June 2014

Tim Pryce, Head of Public Sector, Carbon Trust

We have a mission to accelerate the move to a sustainable, low carbon economy

Why set up a carbon and resource efficiency programme?

Intergovernmental Panel on Climate Change Confirms global warming trends & that human action is the dominant cause of climate change

› The IPCC is an international body created by the UN in 1988 to collect and synthetize the latest science on climate change

› The 2013 report confirms that scientists are now all but certain that climate change is caused by human action, and that it is already leading to changes in weather patterns, with extreme events on the increase

› The 2013 report also confirms the expected negative impacts of current emission pathways on the economy and society

Financial and regulatory business case

1. UK Climate Change Act – it’s the law!2. Supporting legislation and strategies such as building regulations,

DECs, NHS SDU strategy, mandatory carbon reporting3. Fast increasing international action on climate change4. Good potential to cut ongoing costs5. Stakeholder reputation and local area leadership

How to set up a carbon programme

Build a team

Nominate an empowered carbon and resource efficiency lead. And support them with:

Visible senior engagement

Necessary Estates personnel (e.g. covering different sites or buildings)

Project leads to deliver specific projects in their remit

Engagement of wider community, e.g. students (good work experience), councillors, relevant academics

Using the GHG protocol to set a baseline

Scope 2:Utilities - indirect

Scope 3:Other indirect

Scope 1:Direct

Wider influence- teaching and research

Transport - commuting

Production of purchased materials

Transport – business

Purchased electricity*,

heat and steam

Transport – purchased product**

Fuels Combustion

Owned Transport

Process Emissions

Fugitive Emissions

Franchises and outsourcing

Waste disposal

Use of products

* Green tariffs are treated using average grid emissions factors** From/to point of ownership transfer

Covered by CRC/ EU ETSLikely to be covered by legislation soon ==

Setting carbon reduction targets

Average 5 year CO2 reduction target – 25%

Aggregate projects into a roadmap to meet targets

10%

20%

30%

40%

Yr 5 Yr 10Yr 0

10% after 5yrs from Good Housekeeping, eg: M&T, Awareness, Training, Regular inspection & Audit, DEC compliance

20% after 10yrs from Invest to Save, eg: Insulation, Lighting, Controls, Heat recovery, CHP, Fuel policy, Plant replacement, New technology

Cumulative effect

10% in 10yrs from Design & Asset Management, eg: Low CO2 new build, Property rationalisation, Procurement changes, Targets for refurb’

Build business case and get senior sign off

Build a business caseo Quantify carbon and financial savingso Clearly state all savings and payback periodso Use discounted cashflow analysis for larger projects

Board level sign offo At the highest possible levelo With financing, responsibilities, monitoring all in

place

Monitor and communicate progress

Advanced metering- in time and spaceMonitor progress against targetsCommunicate savings and outcomesCarbon Trust Standard

Carbon Trust Carbon Management programme

Building the team & setting the scope

Measuring baseline and goals

Identifying the risks & prioritising actions

Designing a cost effective strategy

Embedding carbon reduction into daily business

Mobilise1

Baseline & forecast

2Identify & quantify

3Approve

Plan

4Implement

the Plan

5

Financial business caseTechnical and project management support

Proven tools and templates

Going further - scope 3 reporting

Financing a carbon reduction programme

Options for financing your projects

In simple terms, for a public body expenditure is financed:– through your own money (cash)– though grants/ incentives– through public and private debt

But you may be able to explore other options by setting up a SPV (special purpose vehicle)

External finance- public money

Generation support:– FITs for electricity generation– RHI for heat generation

UK Government debt and loans:– NLF and PWLB– Salix– Green Investment Bank (private money too)

EU funds:– Horizon 2020 funds– European Investment Bank money

External finance- private money

Private debt financeCarbon Trust/ Siemens scheme, RBS, Aviva…

Use external ESCo supplier:– CEF framework provides contracts, suppliers and

(optionally) funding– REFIT framework is suppliers and contracts only– New Essentia framework too

SPVs or JVs make possible:– Equity finance (issuing shares)– (possibly) off balance sheet loans

Case study - Addenbrookes Cambridge

Part of Cambridge University Hospitals NHSFTNew energy centre for existing and expanded hospital siteTotal cost of £36m, funded by Aviva and GIBUsed NHS CEF framework to secure an ESCO contractorPlan owned and operated by the ESCO (Mitie) via an SPVExpected to save c. 25,000 tCO2 per year (almost 50%) and a net lifetime saving to the hospital of c. £25m

www.carbontrust.co.uk

tim.pryce@carbontrust.co.uk

020 7832 4662