Energy remains central to UK cities' development
There are few topics more politically-charged than energy, and fewer still where minor changes in government subsidy arrangements can change the whole complexion of a market.
Access to energy is one of the basic life-needs, and yet the consumer cannot choose between different qualities of product, simply different pricing arrangements, which makes the way that heat and power are generated vitally important.
Developers in the UK have not, traditionally, chosen to focus on the role of energy, but as Chris Paul, energy and infrastructure partner at Trowers & Hamlins and specialist in district heating/cooling schemes, explains, many projects now include a significant energy component.
“Planning policies often drive the energy solution – pushing low carbon sources, on-site CHP (Combined Heat and Power) or connection to existing (or future) heat networks, but there is little real incentive to consider the wider issues beyond the boundaries of your site,” he adds.
“Early consideration of energy strategy is important,” says Paul. “While the media has got very excited about what seem like radical changes in the incentives available for certain renewables, the general upward trend of energy prices will continue to drive interest in energy efficiency and renewables.”
Rob Beiley, a partner in the firm’s regeneration practice who advises local authorities and housing providers in the sector, agrees. “Some developers are starting to realise that the economics of certain renewables are coming close to standing on their own two feet, and using energy generation to mitigate the costs of running their buildings or at least provide a hedge against variability in energy prices.
“There are problems with the tariff regime, it’s true, but the UK remains a country where the opportunities for energy are often missed or under-exploited,” he says.
Beiley and Paul point to examples of best practice across Europe – including energy cooperatives and decentralised energy. Denmark shows what can be achieved when local authorities take a more strategic role in developing heat networks, linking heat sources with demand and enabling properly joined-up city-scale installations.
“Things are beginning to change here,” says Paul. “The government has announced £300m of targeted funding to support heat networks, which is likely to focus on local authorities. This will hopefully result in some more joinedup thinking.”
“Communal heating got a bad name here in the 1960s,” adds Beiley, “when some councils attempted – badly – to implement the idea in the big-slab estates. But times have changed, technology has moved on, and energy needs to be high on the agenda for developers and local authorities.”
Trowers took a leading role at the outset of the Feed-In Tariff regime, designing documentation for the solar market which has become industry standard for housing providers in the social and affordable market.
But it is not just developers who need to focus on the potential of technology to unlock value in their real estate.
“Major institutional investors and many large tenants could be missing a trick,” says Paul. “If you think about an investment fund, say, with large commercial holdings, that’s thousands of square meterage of roofspace which could host solar PV. That can generate electricity which can either be sold to tenants, bundled as part of a rental package to boost yields or sold to the grid.”
Just 400 of the UK’s 1.8m commercial properties play host to commercial scale (100kWp) solar PV installations according to 2014 figures from commercial solar provider SolarCentury, although there are some big names – including IKEA, Sainsbury’s, Wal-Mart, Greggs and storage company Big Yellow – on the early adopter list.
At Big Yellow, where 16 solar PVs provide up to 20% of the company’s electricity, solar is part of an energy strategy including underground heat pumps and energy conservation measures, which has won the company awards and which it uses as a marketing and recruitment tool.
"The government is very keen on breaking the dominance of the Big Six [energy companies],” says Paul, “but even with innovations like Licence Lite [the junior electricity licence regime], the pace of change is glacial. It remains a challenging market for new entrants.
“It would be nice to see more joinedup thinking, both between government departments and among the various stakeholders in the market. There is so much potential, but so much ends up in the ‘too difficult’ box because of the complexities.”