NORTH LEWISHAM HEAT NETWORK · DN Nominal diameter EfW Energy from Waste EHV Extra High Voltage GPR Ground Penetrating Radar GW Gigawatt GWh Gigawatt-hour …

NORTH LEWISHAM HEATNETWORKELEMENT C – DELIVERY OPTIONS

Confidential APRIL 2017

Second issueConfidential

Project no: 70022123Date: April 2017

–WSP | Parsons Brinckerhoff70 Chancery LaneLondonWC2A 1AF

Tel: +44 207 406 7267

www.wsp-pb.com

NORTH LEWISHAM HEATNETWORKELEMENT C – DELIVERY OPTIONSLondon Borough of Lewisham

Q U A L I T Y M A N A G E M E N TISSUE/REVISION FIRST ISSUE REVISION 1 REVISION 2 REVISION 3

Remarks

Date 01.03.2017 03.04.2017

Prepared by Tom Mills Tom Mills

Signature

Checked by James Eland James Eland

Signature

Authorised by Dominic Bowers Dominic Bowers

Signature

Project number 70022123 70022123

Report number 1 2

File reference

ii

NORTH LEWISHAM HEAT NETWORK WSP | Parsons BrinckerhoffLondon Borough of LewishamConfidential

P R O D U C T I O N T E A MCLIENT

Sustainability Manager Sarah Fletcher

Asset Management Planning Martin O’Brien

WSP | PARSONS BRINCKERHOFF

Graduate Engineer Nicholas Mundy

Project Manager Tom Mills

Project Director Dominic Bowers

iii


CONTENTSNORTH LEWISHAM HEAT NETWORK......................................................1

CONFIDENTIAL MARCH 2017 ..............................................................1

1 EXECUTIVE SUMMARY ..............................................................1

2 INTRODUCTION ...........................................................................7

2.1 PROJECT BACKGROUND............................................................................. 7

2.2 SCOPE ........................................................................................................... 7

3 HEAT LOADS ...............................................................................9

3.1 CONNECTIONS .............................................................................................. 9

3.2 ANNUAL LOADS .......................................................................................... 11

3.3 LOAD PROFILING ........................................................................................ 13

3.4 PHASING...................................................................................................... 15

3.5 ALTERNATIVE MODEL RUNS ..................................................................... 17

4 ENERGY BALANCE MODELLING ............................................19

4.1 INPUTS ......................................................................................................... 194.1.1 ENERGY FROM WASTE ................................................................ 194.1.2 BOILERS ........................................................................................ 194.1.3 THERMAL STORAGE .................................................................... 204.1.4 CARBON FACTORS ...................................................................... 214.1.5 PARASITIC LOADS ....................................................................... 224.1.6 PIPEWORK LOSSES ..................................................................... 22

4.2 METHODOLOGY .......................................................................................... 23

4.3 RESULTS ..................................................................................................... 24

4.4 CARBON REDUCTION................................................................................. 264.4.1 CARBON REDUCTION USING DBEIS GRID CARBONINTENSITY CHANGES OVER TIME ............................................................. 29

5 ECONOMIC ANALYSIS .............................................................33

5.1 CALCULATION METHODOLOGY ................................................................ 33

iv


5.2 INPUTS ......................................................................................................... 335.2.1 CAPITAL COST .............................................................................. 335.2.2 GAS COST ..................................................................................... 355.2.3 ELECTRICITY COST ...................................................................... 355.2.4 COST OF HEAT FROM SELCHP ................................................... 365.2.5 MAINTENANCE .............................................................................. 375.2.6 REPLACEMENT ............................................................................. 385.2.7 HEAT SALES ................................................................................. 385.2.8 DEVELOPER CONTRIBUTIONS .................................................... 42

5.3 RESULTS ..................................................................................................... 43

5.4 SENSITIVITY TO CHANGES IN COST OF HEAT FROM SELCHP ............... 45

6 NETWORK OPTIMISATION ANALYSIS ....................................46

6.1 OPERATING TEMPERATURE ..................................................................... 46

6.2 INSULATION SPECIFICATION .................................................................... 48

6.3 OPTIMISED NETWORK ECONOMIC RESULTS .......................................... 49

6.4 IMPACT OF DELAYED SCHEME DEVELOPMENT...................................... 50

6.5 REDUCED SCHEME ASSESSMENT............................................................ 50

6.6 UTILITY PRICE PROJECTIONS VARIATION ............................................... 52

7 CONCLUSIONS ..........................................................................54

T A B L E STABLE 3-1: NORTH LEWISHAM CONNECTIONS ASSESSED ......................................9TABLE 3-2: NEW CROSS CONNECTIONS ASSESSED............................................... 10TABLE 3-3: EXTENDED NEW CROSS HEAT NETWORK KEY CONNECTION

INFORMATION ............................................................................ 12TABLE 3-4: CONNECTED HEAT LOAD THROUGH TIME FOR NEW CROSS AND

NORTH LEWISHAM EXTENSION CONNECTIONS ..................... 17TABLE 3-5: CONNECTED HEAT LOAD THROUGH TIME FOR NEW CROSS AND

NORTH LEWISHAM EXTENSION CONNECTIONS – ALL BASELOAD CONNECTIONS ................................................................ 18

TABLE 4-1: MODELLED PHASED INTRODUCTION OF PEAKING BOILER PLANT ATSELCHP ...................................................................................... 20

TABLE 4-2: KEY ENERGY BALANCE RESULTS FOR TESTED CONFIGURATIONS –FULL BUILD-OUT ........................................................................ 25

TABLE 4-3: CARBON CONTENT OF HEAT UNDER CHP HEAT SUPPLY SCENARIOFOR NEW DEVELOPMENTS ...................................................... 27

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TABLE 4-4: BOILER EFFICIENCIES ASSUMED FOR EXISTING CONNECTIONS ...... 28TABLE 4-5: BASE CASE CARBON EMISSIONS .......................................................... 28TABLE 4-6: EMISSIONS SAVINGS FOR ASSESSED DH NETWORK OPTIONS – FULL

BUILD-OUT USING SAP 2012 EMISSIONS FACTORS ............... 29TABLE 5-1: CAPITAL COST BY OPTION AND COST AREA ........................................ 34TABLE 5-2: BOILER EFFICIENCY USED IN MODELLING ........................................... 39TABLE 5-3: 2016 COST OF CHP HEAT FOR DIFFERENT SCALE UNITS ................... 40TABLE 5-4: 2019 HEAT PRICES USED IN ECONOMIC ANALYSIS ............................. 41TABLE 5-5: DEVELOPER CONTRIBUTION CALCULATION - PEAK LOAD

CONNECTIONS ........................................................................... 43TABLE 5-6: ECONOMIC RESULTS .............................................................................. 43TABLE 5-7: NPV OF BASE LOAD CONNECTIONS SCENARIO AT DIFFERENT

PRICES OF HEAT FROM SELCHP ............................................. 45TABLE 6-1: OPERATING COST ASSOCIATED WITH DIFFERENT FLOW

TEMPERATURE SCENARIOS ..................................................... 47TABLE 6-2: ECONOMIC PERFORMANCE OF DIFFERENT PIPE INSULATION SERIES48TABLE 6-3: SERIES 2 AND 3 PIPE SYSTEM SIMPLE PAYBACK OVER SERIES 1

SYSTEM AT 3P/KWH COST OF HEAT ........................................ 49TABLE 6-4: PREFERRED OPTION NET PRESENT VALUE AND IRR .......................... 49TABLE 6-5: PREFERRED SCHEME WITH START DELAYED UNTIL 2025 – NET

PRESENT VALUE AND IRR ........................................................ 50TABLE 6-6: REDUCED SCHEME OPTION NET PRESENT VALUE AND IRR .............. 52TABLE 6-7: IMPACT OF DIFFERENT UTILITY PRICE PROJECTION SCENARIOS ON

ECONOMIC PERFORMANCE OF PREFERRED SCHEME ......... 53

F I G U R E SFIGURE 2-1: MAP OF NEW CROSS HEAT NETWORK SHOWING NEW CROSS (BLUE

POLYGON) AND NORTH LEWISHAM (YELLOW POLYGON)AREAS ...........................................................................................8

FIGURE 3-1: NORTH LEWISHAM EXTENSION LOAD POSITIONS ............................. 10FIGURE 3-2: LOAD DURATION CURVES FOR NEW CROSS HEAT NETWORK,

INCLUDING NORTH LEWISHAM EXTENSION ........................... 13FIGURE 3-3: LOAD DURATION CURVES FOR NEW CROSS HEAT NETWORK,

INCLUDING NORTH LEWISHAM EXTENSION – CONVOYSWHARF WITH 6.5MW BASE LOAD CONNECTION ..................... 14

FIGURE 3-4: PROFILE OF HEAT LOAD CONNECTED TO NEW CROSS HEATNETWORK & NORTH LEWISHAM EXTENSION – THREE PEAKLOAD CONNECTIONS ................................................................ 14

FIGURE 3-5: PROFILE OF HEAT LOAD CONNECTED TO NEW CROSS HEATNETWORK & NORTH LEWISHAM EXTENSION – BASE LOADONLY CONNECTIONS ................................................................ 15

FIGURE 3-6: PHASED HEAT LOAD FOR NORTH LEWISHAM EXTENSIONCONNECTIONS (EXCLUDES NEW CROSS CONNECTIONS) .... 16

FIGURE 3-7: CONNECTED HEAT LOAD THROUGH TIME FOR NEW CROSS ANDNORTH LEWISHAM EXTENSION CONNECTIONS ..................... 16

vi


FIGURE 4-1: GRID ELECTRICITY CARBON INTENSITY PROJECTIONS THROUGHTIME ............................................................................................ 22

FIGURE 4-2: ENERGY BALANCE THROUGH TIME – PEAK CONNECTIONS ATCONVOYS WHARF, YEOMAN ST, FORMER DEPTFORD PARKSCHOOL SITE ............................................................................. 25

FIGURE 4-3: ENERGY BALANCE THROUGH TIME - ALL BASE LOAD CONNECTIONS26FIGURE 4-4: EMISSIONS CHANGE THROUGH TIME WITH PROJECTED GRID

CARBON INTENSITY CHANGE ................................................... 30FIGURE 4-5: EMISSIONS CHANGE THROUGH TIME WITH PROJECTED GRID

CARBON INTENSITY CHANGE – SELCHP HEAT EMISSIONSFACTOR LINKED TO GRID ELECTRICITY EMISSIONS FACTOR31

FIGURE 5-1: CAPITAL COST SUMMARY BY OPTION AND COST AREA ................... 34FIGURE 5-2: DBEIS 2015 UTILITY PRICE PROJECTIONS SERVICES GAS PRICE -

CENTRAL SCENARIO ................................................................. 35FIGURE 5-3: DBEIS 2015 UTILITY PRICE PROJECTIONS RETAIL ELECTRICITY

PRICE – CENTRAL SCENARIO ................................................... 36FIGURE 5-4: COST OF HEAT FROM SELCHP USED IN MODELLING ........................ 37FIGURE 5-5: UNIT HEAT SALES PRICE FOR NEW DEVELOPMENT THROUGH TIME41FIGURE 5-6: NPV OR TESTED OPTIONS OVER 25 YEARS AT DIFFERENT

DISCOUNT RATES ...................................................................... 44FIGURE 5-7: NPV OR TESTED OPTIONS OVER 40 YEARS AT DIFFERENT

DISCOUNT RATES ...................................................................... 44FIGURE 6-1: NEW CROSS HN BASE LOAD SCENARIO LOAD HISTOGRAM............. 46FIGURE 6-2: REDUCED SCHEME OPTION ................................................................. 51

A P P E N D I C E SA P P E N D I X A CAPITAL COST BREAKDOWN

1


Abbreviations

°C degrees celsius

ADE Association of Decentralised Energy

BAPA Basic Asset Protection Agreement

BEIS Department for Business, Energy & Industrial Strategy

CHP Combined Heat and Power (engine)

COP UK Heat Networks Code of Practice

DHW Domestic Hot Water

DH District Heating

DN Nominal diameter

EfW Energy from Waste

EHV Extra High Voltage

GPR Ground Penetrating Radar

GW Gigawatt

GWh Gigawatt-hour

HIU Heat Interface Unit

HV High Voltage

IP Intermediate Pressure

kW Kilowatt

kWh Kilowatt-hour

kWth Kilowatt of thermal energy

LBL London Borough of Lewisham

LP Low Pressure

LV Low Voltage

m metres

m2 Square metre

m/s metres per second

mm millimetres

M&E Mechanical and Electrical (design)

MPa Megapascals

MW Megawatts

MWh Megawatt-hour

NJUG National Joint Utilities Group

NLHN North Lewisham Heat Network

NRSWA New Road and Street Works Act

SCR Surrey Canal Road

SELCHP South East London Combined Heat and Power

SROH Specification for the Reinstatement of Highway

p/kWh pence per Kilowatt-hour

SH Space Heating

SL Street Lighting

SINC Site of Nature Conservation

SSA Strategic Site Allocation

TfL Transport for London

TRA Tenants and Residents Association

UKPN UK Power Networks

UXO Unexploded Ordnance

WRC Waste Reception Centre

WSP | PB WSP | Parsons Brinckerhoff

1


1 EXECUTIVE SUMMARY

Introduction

This is the third of a three part feasibility assessment for a north Lewisham extension to theproposed New Cross Heat Network. The New Cross network was the subject of a previous WSP |PB feasibility assessment, issued in 20151.

The preceding parts of this feasibility study were: Element A –a route optimisation study in whicha preferred route for the north Lewisham extension was identified on the basis of site surveys,existing services mapping and several site condition assessments (contaminated land, ecology,archaeological heritage and transport impact); and Element B – a design study for the preferredroute identified in Element A. The main outputs of this Element C design study are therefore to:

· Provide a capital cost for the proposed network

· Assess the likely operating costs and benefits of the proposed network

· Undertake a whole life cost analysis of the proposed network

· Calculate the carbon emissions reduction from the proposed network

Network configuration options

The Element B report identified three new developments where the current early stage of designmeans there may be an opportunity to avoid the provision of on-site heat plant with a connectionto the heat network. This would give rise to developer contributions as they are not required toprovide any of the heat plant on these sites. The three connections – Convoys Wharf, YeomanStreet and the Former Deptford Green School site – are therefore modelled as peak supply loadsin our initial assessment. All other connections are modelled as base load supplies only, as theyalready have on-site peaking boiler plant. In this scenario, back-up boiler plant would be installedat the SELCHP district heating hall to provide resilience for the three peak supply connectionswhen the energy from waste plant is not operating.

We also present a second scenario in which it is assumed all connections have their own peakingboiler plant and the heat network supplies base load only. In this scenario, boilers are not requiredat the SELCHP facility.

1 http://www.lewisham.gov.uk/inmyarea/regeneration/deptford/Pages/New-Cross-heat-network-feasibility-study.aspx

2


Load assessment

Annual heat loads for the proposed connections were sourced from information provided bydevelopers or from published energy strategies for new developments. For existing loads, LBLprovided annual boiler gas consumption data, to which we applied an assumption of boilerefficiency, following the Element B site surveys, in order to calculate annual heat demand.

Annual loads were then distributed hourly across the year using in-house load profiling software.This process applies user-defined daily space heating and hot water demand profiles for differentbuilding usage types to the annual heat load in order to generate an hourly heat load profile forthe full year. The connected annual heat loads calculated using this process and used in ouranalysis are as follows. Note that the all base load connections scenario have a connected annualload that is only a 5 percent smaller than the three peak connections scenario, but there is a 50percent reduction in the maximum instantaneous load.

Loads are varied through time in line with development phasing schedules. The load developmentthrough time for the three peak connections scenario is shown below.

Pipe sizing

Pipework was sized in the Element B report; however we have revisited the exercise to calculatepipe sizes for the base load connections only scenario. In this scenario we have retained a250mm diameter pipe heading east towards Convoys Wharf, despite this being oversized for themodelled load. We have done this so as to retain the ability for SELCHP to supply the full 23MWthat is available from the facility in the event that more loads become available in the future.

ScenarioConnectedannual load

(MWh)

Maximuminstantaneous

load (MW)

Three peak connections 52,498 26.4All base load connections 49,718 13.3

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

2017 2018 2019 2020 2021 2022 2023 2024 2025

Load

(MW

h)

Year

Goodwood Road

Bond House

Childeric Primary

Batavia Rd

Goldsmiths - 1 St James'

Goldsmiths - Education Bldg

Deptford Green school site

Sayes Court

Sir Francis Drake primary

Deptford Park primary

Grinling Gibbons primary

Neptune Wharf

Yeoman Street

Deptford Wharves

Cannon Wharf

Marine Wharf West

Marine Wharf East

Arklow Road

Convoys Wharf

3


Energy balance modelling

We have modelled the energy balance of the two scenarios using in-house software. The modelsproduce an hourly operating profile for plant items against the hourly load profile developedthrough the load profiling exercise described above. Key inputs to this exercise include: plant runhour limitations and annual availability, plant outputs (heat) and inputs (fuel); back-up boiler plantefficiency; carbon intensity of different energy inputs (gas and heat from EfW); parasitic energyconsumption.

The model produces an annual energy balance, phased through time in line with the load phasingdescribed above. A summary of the built-out (i.e. all developments complete) energy balance ispresented below. Note that a third scenario is included in which a 100m3 thermal store is added tothe network in order to maximise the use of energy from waste heat in the peak load connectionsscenario. The heat losses are based on Series 3 pipe insulation. Alternative insulationthicknesses are presented later.

Capital costing

In order to assess the whole life cost of the scheme options, we have developed capital costsusing recent build project experience, indicative supplier quotations and Spons Engineering PriceBook. The key difference between the scenarios is that the base load-only supply option does notinclude the cost of back-up boilers and associated infrastructure (e.g. gas supply, gas meter etc)at SELCHP. A summary of the capital costs is presented below.

Item UnitsMain option -

three peak loadconnections

Main optionwith 100m3

thermal storage

All base loadconnections

Peak load connection demand MWh 32,328 32,328 0Base load connection demand MWh 20,170 20,170 49,718

Netw ork losses MWh 1,610 1,610 1,568Total netw ork load MWh 54,108 54,108 51,286

EfW output MWh 52,560 52,603 49,789Proportion of load met by EfW heat % 97.1% 97.2% 97.1%Centralised (SELCHP) boiler output MWh 870 888 0

Total netw ork supply MWh 53,430 53,491 49,789Heat sold (excludes losses) MWh 51,820 51,881 48,221Centralised boiler fuel input MWh 1,012 1,032 0

Shortfall (connected load met by customer boilers) MWh 677 616 1,495

Parasitic load MWh 1,069 1,070 996

Cost element

Three peakload

connections(£k)

Including100m3

thermalstorage

(£k)

All baseload

connections(£k)

SELCHP £1,955 £2,085 £735DH netw ork incl. substations and fibre £6,858 £6,858 £6,468

Fees £533 £555 £309Contingency £1,869 £1,900 £1,502

Total £11,216 £11,398 £9,014

4


Heat purchase from SELCHP

Veolia advise that for every 5kWh of heat supplied to the network, they lose 1kWh of electricalgeneration and that the cost of heat should therefore be determined by the value of that lostelectrical generation. We have used a wholesale electricity price of 5p/kWh to determine a 2017heat price from SELCHP of 1p/kWh. It is noted that wholesale electricity prices are lower than5p/kWh and have been for some time; however we have conservatively used this value as itbuilds in some contingency as we do not know the exact price that SELCHP would offer. It alsoallows some margin for Veolia to maintain the heat interface at SELCHP.

Heat prices through time have been varied using the percentage changes implicit in BEIS’ utilityprice projections for wholesale electricity, central scenario. This approach takes account ofprojected changes in the value of electricity, to which the heat price is linked, as described above.

Network heat sales

We have assumed heat is sold in bulk at a single point of interface within each customer plantroom. Heat sales prices to network customers have therefore been determined by calculating thealternative cost of heat, i.e. the price that the customer system facilities management teams ateach connection would otherwise pay to generate heat.

For new developments, this alternative heat supply would come from a mix of CHP and gasboilers, as each development has included CHP in order to meet their Building Regulations Part Lcarbon reduction requirements. We have calculated the cost of CHP heat using a range of scalesto account for the difference in operating performance of engines of different sizes. The cost ofboiler heat has then been calculated using gas cost and assumed boiler efficiency. The weightedaverage alternative cost of heat is then based on the assumption that 70 percent of heat wouldcome from CHP and the remaining the 30 percent from boilers.

For existing heat loads, i.e. the three schools and Sayes Court, we have used the cost of boilerheat only to calculate the heat price.

A discount of ten percent has been applied to the alternative cost of heat as an in incentive topotential customers to connect to the scheme.

Fixed price elements have also been included a cost per kW of heat supply (as determined by theheat interface size). For private customers we have used a rate of £15/kW and for local authoritycustomers we have used a rate of £10/kW. These rates are based on our experience of otherheat networks in London.

Developer contributions have also been calculated for each scenario according to the avoidedcosts of supplying CHP back-up boiler plant to the three peak load supply connections – ConvoysWharf, Yeoman Street and the Former Deptford Green School site. For the base load supplyscenario, we have still allowed developer contributions from these three sites as the low carbonheat from the SELCHP connection would negate the requirement for them supply a CHP to meettheir Part L carbon reduction requirement.

5


Whole life cost results

We assessed the IRR and NPV of the options. Project lifecycles of 25 and 40 years were usedand we tested the NPV at a range of discount rates. The results of the analysis are presentedbelow.

The results show that:

· All scheme options offer a positive NPV at discount rates of 9 percent and lower

· Thermal storage offers no benefit to the scheme

· The base load supply only scenario performs better than the three peak load connectionsoption, with an IRR of more than 12 percent over both 25 and 40 years

We also tested the sensitivity of the results to increases in the SELCHP heat price and found thatthe NPV remained positive over 25 years at a six percent discount rate up to a heat price of1.7p/kWh.

Further analysis

We tested the economic performance of different pipe insulation thicknesses and found that, dueto the expected low cost of heat from SELCHP, the simple payback on series 3 insulation overseries 1 is 45 years. The simple payback on series 2 over series 1 is 35 years. We concluded thatseries 2 insulation is preferable. Although the payback is reasonably lengthy at the current cost ofheat, a higher series insulation protects against future increases in heat price. Also, a wellmaintained pipe system can remain in the ground for up to 50 years before it needs replacing.

We also tested the performance of a system where flow temperature is reduced from 110°C to90°C outside peak heating season. We found that the increased cost of pumping energyoutweighs the reduced heat losses through these periods. Again, this is due to the low cost ofheat from SELCHP, which negates the benefit of reducing heat losses. As such, we conclude thatthe preferred network operating regime is to run at 110°C throughout the year.

Finally, we tested a reduced network extent option, wherein the four loads to the east of ConvoysWharf (Sayes Court, Deptford Foundry, Grinling Gibbons and the Former Deptford Green Schoolsite) are excluded from the network on the basis that they require an additional 1.5km of DHtrench but only add 2,444MWh of additional heat load. The analysis showed that the schemeeconomics improve when these loads are removed.

Main option -three peak

loadconnections

- NPV (£k)


thermalstorage (£k)


(£k)


loadconnections

- NPV (£k)




(£k)

3.5% £7,772 £7,594 £9,415 £13,447 £13,273 £15,1546% £3,927 £3,748 £5,488 £6,579 £6,401 £8,1539% £894 £713 £2,399 £1,996 £1,815 £3,500

12% -£1,102 -£1,284 £374 -£627 -£809 £846IRR 10.2% 9.9% 12.7% 11.1% 10.9% 13.3%

Discountrate

25 years 40 years

6


Preferred system economics

The economic performance of the preferred system – i.e. all base load connections with series 2pipe insulation and excluding loads to the east of Convoys Wharf is as follows.

The preferred network capital cost is £7,676k.

Carbon reduction

The carbon saving attributable to the preferred heat network configuration is calculated as 1,431tonnes CO2e/year. The saving is based on a carbon base case in which heat is supplied to newdevelopments by a combination of CHP and gas boilers; and to existing buildings by gas boilersonly.

This carbon saving is lower than the saving from the three peak load connections scenario (1,940tonnes), which is due to the lower volume of heat supplied by the heat network in the base loadconnection scenario.

Overall conclusion

The north Lewisham area offers a significant heat network opportunity, both economically and interms of carbon reduction. The availability of a low cost, low carbon heat source in close proximityto an area of high heat load density makes it very attractive. Design and construction constraintsare present, but can be overcome with early engagement of key stakeholders (as identified in theElement B report) and good design.

We would also recommend that the pipe system extending east towards north Lewisham shouldbe sized for the inclusion of the New Cross section. The New Cross network (i.e. the sectionconnecting Goldsmiths, Batavia Road etc) was determined in the 2015 feasibility study to be lesseconomically attractive than the north Lewisham extension. However Goldsmiths Universityprovides a significant anchor load from which further network development in the New Cross areacan develop. Furthermore, Goldsmiths are planning significant development and, while theprevious study sought to take account of likely changes in their heat load, we now know there isadditional planned development that was not included. This analysis should therefore be revisitedas Goldsmiths’ development plans emerge with more certainty. Furthermore, the level ofdevelopment and regeneration in the Lewisham area more generally supports the argument forretaining a potential extension into the New Cross area.

25 years 40 years3.5% £9,837 £15,2996% £6,102 £8,6389% £3,165 £4,213

12% £1,240 £1,689IRR 14.8% 15.3%

Discountrate

NPV of reduced scheme -no loads to east of ConvoysWharf - series 2 insulation

and base load only (£k)

7


2 INTRODUCTION2.1 PROJECT BACKGROUND

This report is the Element C design study for a North Lewisham Heat Network (NLHN). It is thethird of a three part feasibility assessment produced by WSP | PB for LB Lewisham. The full list ofdocumentation produced in the delivery of this assessment is as follows:

· Element A – Route optimisation study:

o Overall route optimisation report

o Preliminary ecological appraisal report

o Contaminated land report

o Archaeological constraints report

o Transport infrastructure impact assessment

· Element B – Design study

· Element C – Delivery study (this report)

This study is preceded by a WSP | PB feasibility assessment for a New Cross Heat Networklinking the SELCHP energy from waste facility on Landmann Way with the Goldsmiths UniversityLondon site on New Cross Road. The study1 concluded that a heat network linking only SELCHPwith Goldsmiths and a small number of adjacent loads would not be economically attractive;however, if the network is expanded to the area east of Surrey Canal Road, multiple Strategic SiteAllocation (SSA) development sites would be available for connection. This would add significanteconomic potential to the network.

2.2 SCOPE

This Element C report assesses the economic performance of the heat network identified in theElement A and B reports. Capital and operating costs are calculated and a preferred networkconfiguration is identified based on the results. We also test the economic performance ofdifferent pipe system insulation thicknesses.

In addition to the economic analysis, we have undertaken a carbon analysis on the testedconfigurations.

This study continues from the point of interface with the original New Cross Heat Networkassessment, which is the junction of Surrey Canal Road and Grinstead Road. The pipeworkrunning between SELCHP and this interface point (i.e. down Surrey Canal Road) was assessedin the previous feasibility study and the pipe sizing included an allowance for the loads included inthis North Lewisham extension study.

8


Note that, although there have been two separate studies – one for New Cross and one for northLewisham (this study) – they focus on two areas of what would be the same heat network. This isillustrated by Figure 2-1, where the New Cross section of the network is highlighted in blue andthe north Lewisham extension area is highlighted in yellow. As such, economic analysis of thisnorth Lewisham extension to the New Cross Heat Network should, by necessity, include thecapital and operating costs and benefits of the whole system, including the loads assessed in theprevious study.

Figure 2-1: Map of New Cross Heat Network showing New Cross (blue polygon) and north Lewisham(yellow polygon) areas

9


3 HEAT LOADS3.1 CONNECTIONS

The Element A and B studies identified the following potential connections for the north Lewishamextension to the New Cross Heat Network.

Table 3-1: North Lewisham connections assessed

A map showing the position of the north Lewisham loads and the preferred pipework routeidentified in the Element A and B reports is presented in Figure 3-1.

Connection Type of load

Convoys Wharf New devlt - private mixed, mainly residentialArklow Road (Deptford Foundry) New devlt - private mixed, mainly residential

Marine Wharf East New devlt - private mixed, mainly residentialMarine Wharf West New devlt - private mixed, mainly residential

Cannon Wharf New devlt - private mixed, mainly residentialDeptford Wharves New devlt - private mixed, mainly residential

Yeoman Street New devlt - private mixed, mainly residentialNeptune Wharf New devlt - private mixed, mainly residentialGrinling Gibbons Existing - public sector, non-domesticDeptford Park Existing - public sector, non-domestic

SFD Existing - public sector, non-domesticSayes Court Existing - public sector, residential

Deptford Green school site New devlt - private residential

10


Figure 3-1: North Lewisham extension load positions

As explained in Section 2.2, the economic analysis for this study will assess the performance ofthe whole New Cross Heat Network, consisting of the preferred configuration of the New Crosssection of the network that was assessed in the previous feasibility study, and options around thenorth Lewisham extension. Therefore the following loads are included from the New Cross study.

Table 3-2: New Cross connections assessed

Connection Type of load

Goldsmiths - Education Building Existing - public sector, non-domesticGoldsmiths - 1 St James' Existing - public sector, non-domestic

Batavia Road housing Existing - private residentialBond House New devlt - private mixed, mainly residential

Goodw ood Road New devlt - private mixed, mainly residentialChilderic Primary school Existing - public sector, non-domestic

11


3.2 ANNUAL LOADS

We concluded in the Element B assessment that the network may be able to maximise economicopportunities by supplying all heat to new connections where the provision of on-site heat plantcan be avoided. Where a connection already has on-site heat plant and there is no immediateintention to replace it, there is little benefit in sizing the network and providing centralised boilercapacity to provide peak heat to these customers – indeed this can be detrimental to theoperation of the heat network (see Element B report for a more detailed explanation). As such, wehave sized connections with pre-existing or soon-to-be installed on-site heat plant for a base loadsupply of low carbon heat from the SELCHP energy from waste heat source. Back-up and top-upheat will be supplied to these connections from their own on-site heat plant2.

For connections where the heat network can potentially negate the requirement for on-site heatplant, for example at Convoys Wharf, we have sized the interface for peak heat supply from theSELCHP energy from waste heat source or, where the SELCHP facility is unavailable or unableto meet the full demand at those connections, from back-up boiler plant located within theSELCHP district heating hall (DHH). We will assume that the avoided cost of on-site heat plant atthese connections can be captured as developer contributions to the heat network (see Section5.2.8).

A summary of the key connection information included in this analysis is presented in Table 3-3. Itis highlighted that the Convoys Wharf connection represents 60 percent of the connected annualload on this network. The Convoys Wharf peak load has been taken from calculations provided byto us by the developer; therefore we have used a fixed load and mixed return temperature ratherthan modelling individual space heating and hot water demands for each dwelling to calculate ourown peak load.

2 Alternative structures are available, for example the heat network operator may adopt or purchaseadditional assets (e.g. boiler plant) at the customer connection sites and manage the onward distributionof heat to end users. We have adopted the least complex contractual approach for testing economicviability; however commercial negotiations may expand the scheme boundary if preferred by keystakeholders.

12


Table 3-3: Extended New Cross Heat Network key connection information

Note that the return temperatures in this table are based on the followinginformation/assumptions:

· Existing building systems can be rebalanced to operate at 80/60°C secondary systemtemperatures – leading to a 63°C primary heat network return temperature (assuming a3°C heat loss across the heat substation interface)

· Development sites that are currently in construction or the latter stages of (heatingsystem) design are treated in the same way as existing buildings with regard to returntemperatures and connected as base load customers

· Development sites for which design information provided to WSP includes systemtemperature information have been modelled as such

· Development sites that are less advanced in the design process can be engaged in timeto ensure secondary heating systems are designed to achieve return temperatures of50°C (53°C primary return temperature with a 3°C loss across the heat interface) and areconnected as peak load customers

· Peak load connections are modelled on the basis of separate space heating and hotwater interfaces (within a single, indirect HIU) for each dwelling, using Danish diversitycurves for instantaneous hot water consumption, as recommended by CP1

· Base load connections are modelled on the basis of a single heat interface with a mixedreturn temperature

Connection

Is this partof the

originalNew Crossnetwork orthe north

Lew ishamextension?

Type ofconnectionassumedin analysis

Networkconnectionsize (kW)

Annualheat load

(MWh)

Availableheat loadbased on

connectionsize (MWh)

Modelledprimary return

temps (°C)*

Goldsmiths - Education Building Base load 500 1,935 1,849 63 (mixed)Goldsmiths - 1 St James' Base load 500 1,935 1,849 63 (mixed)

Batavia Road housing Base load 150 627 537 63 (mixed)Bond House Base load 100 416 362 53 (mixed)

Goodw ood Road Base load 150 635 550 53 (mixed)Childeric Primary school Base load 50 218 194 63 (mixed)

Convoys Wharf Peak load 20,000 31,589 31,589 53 (mixed)Arklow Road (Deptford Foundry) Base load 500 2,164 1,922 63 (mixed)

Marine Wharf East Base load 500 2,416 2,047 58 (mixed)Marine Wharf West Base load 700 3,570 3,010 63 (mixed)

Cannon Wharf Base load 600 2,642 2,334 63 (mixed)Deptford Wharves Base load 1,000 4,895 4,203 63 (mixed)

Yeoman Street Peak load 500 218 218 53 / 28 (SH / DHW)Neptune Wharf Base load 200 782 714 63 (mixed)Grinling Gibbons Base load 50 184 168 63 (mixed)

Deptford Park Base load 50 269 214 63 (mixed)SFD Base load 50 120 118 63 (mixed)

Sayes Court Base load 50 98 98 63 (mixed)Deptford Green school site Peak load 750 521 521 53 / 28 (SH / DHW)

26,400 55,233 52,498* Assumes approach temperature of 3°C across the heat exchanger

New CrossHN study

NorthLew ishamextension

study

TOTALS

13


3.3 LOAD PROFILING

In assessing annual heat loads, we have used the data sourced from developer information in thecase of new build sites, or annual boiler gas consumption data provided by LBL in the case of theexisting sites. However, no half hourly or hourly profiled load information exists for the proposedconnections, so it was necessary to artificially profile the annual loads (i.e. distribute them acrossthe 8760 hours in a year) in order to model the energy balance, and consequently the economicperformance, of the proposed network configuration.

We have used in-house load profiling software, containing typical daily hot water and spaceheating profiles for different building usage types, to distribute annual consumption hourly acrossthe year. Where new development comprises of a mix of residential and non-residential uses, wehave applied different load profiles to the appropriate proportions of the overall annual heat load.A degree day series based on a 15.5°C base temperature has been used to distribute the spaceheating load.

The result of this process is a load profile for each connection based on the total annual heatconsumption; however, in order to determine the load that is available to the heat network, theproposed connection size must be taken into account. For example, where a heat interface issized to deliver a maximum of 800kW of heat, any demand above 800kW must be modelled tohave been supplied from on-site gas boilers and excluded from the heat network operating costsand benefits in the economic analysis. This approach is only required for base load connections.

The connection size calculation process was described in the Element B report; and theconnection sizes presented in Table 3-3 of this study. A load duration curve is generated byrearranging the 8760 hourly loads across a year in descending order. Figure 3-2 presents theload duration curves for the full annual demand as well as the connected heat demand, based onthe interface (heat exchanger) size at each connected load.

Figure 3-2: Load duration curves for New Cross Heat Network, including north Lewisham extension

Observe that the duration curves – notably the peak demands to the left of the curve – are quitesimilar for connected load (red line) and for total annual load across all connections (blue line).

0

5000

10000

15000

20000

25000

30000

35000

124

548

973

397

712

2114

6517

0919

5321

9724

4126

8529

2931

7334

1736

6139

0541

4943

9346

3748

8151

2553

6956

1358

5761

0163

4565

8968

3370

7773

2175

6578

0980

5382

9785

41

Load

(kW

)

Duration (hours)

Combined peak load [kW]

Connected load [kW]

14


The primary reason for this is because the biggest load is Convoys Wharf – accounting for 60percent of the total annual load and >50 percent of the total peak load across all connections –and this is included as a peak load connection. If the connection for Convoys Wharf was sized forbase load – i.e. assuming that back-up boiler plant was installed at Convoys Wharf and only a lowcarbon supply was required from SELCHP – the connected load duration curve would changesignificantly, as shown in Figure 3-3

Figure 3-3: Load duration curves for New Cross Heat Network, including north Lewisham extension –Convoys Wharf with 6.5MW base load connection

The annual distribution of load connected to the proposed network, assuming peak loadconnections at Convoys Wharf, Yeoman Street and the former Deptford Green School site, ispresented in Figure 3-4. This is the heat load that will be used in the energy balance modellingand subsequent economic analysis.

Figure 3-4: Profile of heat load connected to New Cross Heat Network & north Lewisham extension –three peak load connections

0

5000

10000

15000

20000

25000

30000

35000

124

548

973

397

712

2114

6517

0919

5321

9724

4126

8529

2931

7334

1736

6139

0541

4943

9346

3748

8151

2553

6956

1358

5761

0163

4565

8968

3370

7773

2175

6578

0980

5382

9785

41

Load

(kW

)

Duration (hours)

Combined peak load [kW]

Connected load [kW]

0

5000

10000

15000

20000

25000

30000

118

436

755

073

391

610

9912

8214

6516

4818

3120

1421

9723

8025

6327

4629

2931

1232

9534

7836

6138

4440

2742

1043

9345

7647

5949

4251

2553

0854

9156

7458

5760

4062

2364

0665

8967

7269

5571

3873

2175

0476

8778

7080

5382

3684

1986

02

Load

(kW

)

Hour in year

15


We will also test a base load only connections scenario, in which Convoys Wharf, Yeoman Streetand the former Deptford Green School site are modelled as base load connections. The profiledheat load for this scenario is presented in Figure 3-5.

Figure 3-5: Profile of heat load connected to New Cross Heat Network & north Lewisham extension –base load only connections

3.4 PHASING

Most of the proposed network connections are development sites, some of which are nearingcompletion and some of which are still in the planning stages. In modelling the heat network, itwas therefore important to consider the phasing of development and the impact this has onoperation and economic performance.

The phased completion of the various development sites is informed by a (December 2016)Lewisham Housing Trajectory document provided by LBL. This document summarises thecompletion of new-build housing across the Borough between 2016/17 and 2031/32. Wherephasing information was provided by the developer, we have used it; otherwise we have used theHousing Trajectory document.

Using this methodology, we have developed a phased load for the proposed network, aspresented in Figure 3-6.

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

113

827

541

254

968

682

396

010

9712

3413

7115

0816

4517

8219

1920

5621

9323

3024

6726

0427

4128

7830

1531

5232

8934

2635

6337

0038

3739

7441

1142

4843

8545

2246

5947

9649

3350

7052

0753

4454

8156

1857

5558

9260

2961

6663

0364

4065

7767

1468

5169

8871

2572

6273

9975

3676

7378

1079

4780

8482

2183

5884

9586

32

Load

(kW

)

Hour in year

16


Figure 3-6: Phased heat load for north Lewisham extension connections (excludes New Crossconnections)

We have applied the connection sizes to the load profile to generate profiles through time for theconnected heat load, including for the New Cross connections. The results of this analysis arepresented in Figure 3-7 and Table 3-4.

Figure 3-7: Connected heat load through time for New Cross and north Lewisham extensionconnections

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2017 2018 2019 2020 2021 2022 2023 2024 2025

Load

(MW

h)

Year


Sayes Court




Neptune Wharf

Yeoman Street

Deptford Wharves

Cannon Wharf

Marine Wharf West

Marine Wharf East

Arklow Road

Convoys Wharf

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

2017 2018 2019 2020 2021 2022 2023 2024 2025

Load

(MW

h)

Year

Goodwood Road

Bond House

Childeric Primary

Batavia Rd

Goldsmiths - 1 St James'

Goldsmiths - Education Bldg


Sayes Court




Neptune Wharf

Yeoman Street

Deptford Wharves

Cannon Wharf

Marine Wharf West

Marine Wharf East

Arklow Road

Convoys Wharf

17


Table 3-4: Connected heat load through time for New Cross and north Lewisham extensionconnections

3.5 ALTERNATIVE MODEL RUNS

In the preceding sections we have described a scenario wherein peaking boiler plant is introducedat SELCHP to provide full heat supply to the three connections where we believe there is anopportunity to avoid the provision of on-site heat plant and secure a developer contribution –Convoys Wharf, Yeoman Street and the former Deptford Green School site. In addition to this, wehave modelled an alternative scenario in which we assume those three developments providetheir own peaking plant and their heat network connections are reduced to base load connections.

In this alternative scenario, we have assumed that the DH pipe system is sized to retain thecapacity to deliver the full 23MW of available heat from SELCHP, so that future connectionopportunities are not lost.

The base load connection sizes assumed for Convoys Wharf, Yeoman Street and the formerDeptford Green School site are:

· Convoys Wharf: 8,000kW

· Yeoman Street: 80kW

· Former Deptford Green School site: 100kW

A summary of the load development through time for this alternative scenario is presented inTable 3-5. It shows how the total connected annual heat demand under this scenario is 49.7GWh,compared to 52.5GWh in the other scenario. This equates to a 35 percent (9MW) reduction in themaximum connected load for a 5 percent reduction in annual connected load.

2017 2018 2019 2020 2021 2022 2023 2024 2025Convoys Wharf 1,832 3,663 8,485 13,307 19,624 24,110 28,596 30,093 31,589

Arklow Road 0 0 724 1,403 1,922 1,922 1,922 1,922 1,922Marine Wharf East 0 1,758 2,047 2,047 2,047 2,047 2,047 2,047 2,047Marine Wharf West 3,010 3,010 3,010 3,010 3,010 3,010 3,010 3,010 3,010

Cannon Wharf 2,334 2,334 2,334 2,334 2,334 2,334 2,334 2,334 2,334Deptford Wharves 0 672 1,631 2,547 3,472 4,203 4,203 4,203 4,203

Yeoman Street 0 0 218 218 218 218 218 218 218Neptune Wharf 0 714 714 714 714 714 714 714 714

Grinling Gibbons primary 168 168 168 168 168 168 168 168 168Deptford Park primary 214 214 214 214 214 214 214 214 214

Sir Francis Drake primary 118 118 118 118 118 118 118 118 118Sayes Court 98 98 98 98 98 98 98 98 98

Deptford Green school site 0 0 261 521 521 521 521 521 521Goldsmiths - Education Bldg 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849

Goldsmiths - 1 St James' 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849Batavia Rd 537 537 537 537 537 537 537 537 537

Childeric Primary 194 194 194 194 194 194 194 194 194Bond House 0 362 362 362 362 362 362 362 362

Goodw ood Road 0 550 550 550 550 550 550 550 550TOTAL 12,203 18,091 25,364 32,041 39,803 45,019 49,506 51,002 52,498

Connection Load development through time (MWh/yr)

18


Table 3-5: Connected heat load through time for New Cross and north Lewisham extensionconnections – all base load connections

2017 2018 2019 2020 2021 2022 2023 2024 2025Convoys Wharf 1,832 3,663 8,485 13,304 19,373 23,320 26,838 27,908 28,929

Arklow Road 0 0 724 1,403 1,922 1,922 1,922 1,922 1,922Marine Wharf East 0 1,758 2,047 2,047 2,047 2,047 2,047 2,047 2,047Marine Wharf West 3,010 3,010 3,010 3,010 3,010 3,010 3,010 3,010 3,010

Cannon Wharf 2,334 2,334 2,334 2,334 2,334 2,334 2,334 2,334 2,334Deptford Wharves 0 672 1,631 2,547 3,472 4,203 4,203 4,203 4,203

Yeoman Street 0 0 198 198 198 198 198 198 198Neptune Wharf 0 714 714 714 714 714 714 714 714

Grinling Gibbons primary 168 168 168 168 168 168 168 168 168Deptford Park primary 214 214 214 214 214 214 214 214 214

Sir Francis Drake primary 118 118 118 118 118 118 118 118 118Sayes Court 98 98 98 98 98 98 98 98 98

Deptford Green school site 0 0 254 420 420 420 420 420 420Goldsmiths - Education Bldg 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849

Goldsmiths - 1 St James' 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849 1,849Batavia Rd 537 537 537 537 537 537 537 537 537

Childeric Primary 194 194 194 194 194 194 194 194 194Bond House 0 362 362 362 362 362 362 362 362

Goodw ood Road 0 550 550 550 550 550 550 550 550TOTAL 12,203 18,091 25,338 31,919 39,431 44,109 47,627 48,697 49,718

Connection Load development through time (MWh/yr)

19


4 ENERGY BALANCE MODELLING4.1 INPUTS

In addition to the heat load profile presented in Section 3.3, we have used the following inputs inmodelling the energy balance.

4.1.1 Energy from Waste

As described in the Element A and B reports, there is currently up to 23MWth of heat availablefrom SELCHP. Veolia advise that the plant runs continuously with the exception of a plannedmaintenance period, which can last up to two weeks between May and June each year.

We have confirmed with Veolia that there is no minimum supply to the heat network interface,meaning the energy from waste supply can meet the full range of demand up to 23MWth.

We have therefore modelled the energy from waste facility on the basis of a 23MWth heat supply,with a two week summer shut down and no minimum turndown.

4.1.2 Boilers

We have assumed back-up boiler plant is installed at the SELCHP district heating hall (DHH) tosupply full load, as and when required, to loads identified for a peak connection. Thoseconnections are identified in Table 3-3 – Convoys Wharf, Yeoman Street and the Former DeptfordGreen School Site.

We have calculated the combined maximum demand across the three peak connections to beapproximately 21.5MW. In determining the correct configuration of boiler plant for back-up heatsupply, several things should be taken into consideration:

· The reliability and expected level of operation of the primary heat source (in this case theSELCHP energy from waste facility)

· The required level of control over time, i.e. for systems with a phased increase of heatload, it may be better to introduce smaller boilers at first, adding larger boilers as theannual load grows

· The ease of maintenance, i.e. it is easier to retain spare parts and maintain all the boilersand burners under a single maintenance contract if they are all of the same type

In the case of the New Cross network, the expected reliability and level of operation of SELCHP ishigh. Veolia have advised us that the energy from waste plant is down for routine maintenance forup to two weeks a year, usually in May to June. They also have unexpected shutdowns, althoughthese are rare. Otherwise the plant operates continuously.

Given the reliability of the heat supply from SELCHP, and the fact that planned outages are in thesummer months, there may be an argument for installing a smaller capacity of back-up boilerplant to supply heat to the peak load connections. The risk of requiring 20MW plus of boiler heat

20


is, we would suggest, remote. Nevertheless, we believe developers would be unwilling to connectto a heat network if they were not confident that there is sufficient resilience plant to meet all oftheir demand at any point in the year. As such, we will assume that back-up boiler plant must besized to meet all of the peak load connections’ demand.

The phased development of load does promote the phased introduction of back-up boiler plant.One of the key considerations here is when the heat network would be completed, as it may benecessary for some of these peak connections to use temporary boiler plant until the heatnetwork is complete. We believe it would take a minimum of two years to develop a heat networkfrom this point – probably more. Even if the network was available from 2019, the HousingTrajectory provided by LBL shows that dwellings will start completing on Convoys Wharf in 2017and 2018. Yeoman Street and the former Deptford Green School Site are expected to havedwellings complete in 2019. As such, some form of temporary heating arrangement will benecessary on these sites if it is determined that their full heat supply should come from the NewCross Heat Network.

In modelling the network, we will assume that 3 x 8MW boilers are sited in the SELCHP DHH inthe following sequence, which meets with the expected progression of demand at peak loadconnections, as informed by the LBL 2016 Housing Trajectory.

Table 4-1: Modelled phased introduction of peaking boiler plant at SELCHP

4.1.3 Thermal storage

The benefit of thermal storage is that it allows an operator to maximise the operation of lowcarbon plant. For example, where heat load is below the minimum turndown of a CHP engine,charging a thermal store can provide a heat load against which the CHP engine can operate. Thestore can then discharge when the network demand exceeds the maximum output of the lowcarbon plant, providing top-up heat supply and reducing the requirement for supplemental gasboiler heat.

In the case of the proposed New Cross network and north Lewisham extension, the majority ofthe benefit that a thermal store traditionally offers is negated by the fact that the low carbon plantdoes not have a minimum turndown, has no run hour restrictions and has sufficient capacity tomeet almost all of the heat demand. Also, the network is sized for base load heat supply for all butthree of the connections. As such, we believe it is unlikely that a thermal store would add anybenefit to the network; however, we have modelled a scenario with a 100m3 thermal storeincluded to confirm whether this is the case.

Localised thermal storage may provide an opportunity to reduce pipe sizes across the network,for example by installing a thermal store at Convoys Wharf. The store can be charged with heatfrom SELCHP through the night and discharged to meet the morning peak, meaning the pipesystem is not required to supply the peak instantaneous load. This approach is unlikely to beacceptable to the developer as a resilience option, i.e. they would still require back-up boilers on

Boilersize andnumber

Yearintrroduced

Approx. loadat peak

connections(MW)

8MW 2019 62 x 8MW 2021 133 X 8MW 2023 19

21


site for periods when SELCHP is not operating; however it does have the potential to reduce pipesizes and, therefore, the capital cost of the network.

The issue with this approach is that, as described previously, Veolia want to retain the capacitywithin the pipe system to supply the full 23MW that is available from SELCHP. As such, it offerslittle benefit to the scheme and has therefore been discounted.

4.1.4 Carbon factors

We will assess the carbon emissions from the proposed heat network using the emissions factorspresented in the Building Research Establishment (BRE) Standard Assessment Procedure forEnergy Rating of Dwellings3 (SAP) 2012. They are:

· Natural gas: 0.216 kgCO2e/kWh

· Electricity: 0.519 kgCO2e/kWh

· Communal heating systems supplied with heat from a steam power station:0.058kgCO2e/kWh4

Although the SAP 2012 electricity carbon factor is appropriate for calculating emissions for currentBuilding Regulations compliance, the next version of SAP is out for consultation and will have alower emissions factor for grid electricity as a result of the on-going decarbonisation of the UKelectricity grid. This trend is expected to continue into the future as the UK works towards itsnational carbon reduction target5.

DBEIS has published grid electricity carbon factor projections, which can be used in the analysisof future changes in carbon savings from DH networks. The only direct electrical consumption inthe energy balance is for parasitic electricity, which is a very small proportion of the overall energyconsumption. We will include analysis of changes in emissions through time as a result of this gridcarbon factor reduction in Section 4.4.1.

The Government projections for grid carbon intensity are presented in the Green Booksupplementary guidance: valuation of energy use and greenhouse gas emissions for appraisal6.Of the various carbon intensity projections in this data set, we have used the consumption-based,grid average emissions factors for the commercial/public sector, as is appropriate for delivered(rather than centrally generated) electricity.

Note that the 2016 value in the Government’s carbon intensity projections (0.376kgCO2e/kWh) issignificantly lower than the SAP 2012 emissions factor (0.519 kgCO2e/kWh).

We have therefore calculated carbon emissions using two separate analyses: one with the SAP2012 grid carbon emissions factor; and one with the grid carbon intensity projections through time

3 http://www.bre.co.uk/sap2012/page.jsp?id=27594 There is no specific emission s factor for heat from an EfW plant5 The Climate Change Act requires a reduction of 80 percent by 20506 https://www.gov.uk/government/publications/valuation-of-energy-use-and-greenhouse-gas-emissions-for-

appraisal

22


in line with Government projections. Figure 4-1 shows the Government’s grid electricity carbonintensity projections used in our analysis.

Figure 4-1: Grid electricity carbon intensity projections through time

It is noted that future changes in grid carbon intensity has the potential to further impact thescheme if you consider that the carbon intensity of the heat from SELCHP can be linked to theelectricity generation it displaces. At SELCHP, heat is diverted as steam from an electricalgeneration process that feeds the grid. Therefore the carbon content of the heat purchased fromSELCHP is linked to the carbon intensity of the grid. One way of thinking about it is that, as gridcarbon intensity decreases, so does the carbon intensity of the heat supplied by SELCHP. It is notclear whether this change would be captured in the formal emissions factors for heat supplied byan EfW plant, but as emissions reductions targets for new-build become increasingly onerous,this potential benefit may be an important factor in developers’ decision-making.

4.1.5 Parasitic loads

Parasitic load is defined as the energy (electricity) consumed in the operation of a heat network.Items such as pumps, fans, control cabinets etc all require power to operate, so this energystream must be included in the overall energy balance and operating cost of the system.

The UK Heat Networks Code of Practice (COP) states that at feasibility stage, a parasitic load of2 percent of the total heat supplied by the network should be used. This is the value we haveadopted in our analysis.

4.1.6 Pipework losses

Included in the energy balance assessment are the network heat losses, i.e. the heat that is lostto the surrounding environment (soil) between the heat source (SELCHP) and the end user. Theextent of the heat loss is a product of several factors. They are:

0.000

0.050

0.100

0.150

0.200

0.250

0.300

0.350

0.40020

16

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

kgCO

2e/k

Wh

Year

23


· The temperature of the water in the pipe

· The temperature of the surrounding environment – the soil7

· The size of the pipe

· The pipe insulation thickness (and quality)

It is therefore necessary to assess the impact on energy balance of using higher levels ofinsulation to minimise heat losses. Over time, thicker insulation can lead to significantly reducedheat losses – particularly in higher temperature systems. The capital cost of the better insulatedpipework is higher, so analysis should consider the whole life cost impact of different insulationthicknesses for a given pipe system.

DH pipes are typically produced with three levels of insulation thickness – Series 1 to 3 – thelatter of which has the thickest insulation and is therefore the most expensive. In our analysis, wewill compare the performance of the New Cross system with different insulation thickness to seewhich offers the best performance on a whole life cost basis.

Our analysis also considers the impact of phased heat load growth on project economics. On anetwork where developments are constructed in phases, the load connected to the networkincreases through time, even though the pipe network connecting each development may beinstalled in year 1 to serve that early phase load. In this scenario the losses in the pipe system inthese early years would represent a greater fraction of overall heat production because the lossesare a product of the pipe system size and extent, rather than the connected load.

Pipe systems should, if possible, be developed and extended in line with the load they are servingto minimise unnecessary losses as development progresses. As stated previously, however, inpractice the pipework is often required to serve early phase loads8, so the option of delaying theinstallation of sections of the pipe system may not be available.

In the case of the north Lewisham extension, although many of the development sites areundergoing phased construction, they are all anticipated to be more than 25 percent complete by2019 according to the Lewisham Housing Trajectory, which means that all of the pipe systemwould be required in year 1. We will therefore assume that the full pipe system is developed inyear 1 (assumed to be 2019) and model the heat losses accordingly.

4.2 METHODOLOGY

Our in-house software models the operation of heat plant against the 8760 load profiles presentedin Section 3. The model assesses the availability and capacity of heat plant to meet the demandat each hour of the year, taking account of:

· Availability profile for each plant item, e.g. we have included a two week maintenanceshutdown for the SELCHP heat source in May

7 Average UK soil temperature varies seasonally between 8 and 11°C up to a depth of approximately 15m.8 Temporary boilers can be used to serve the first few houses on a development for a short period of time

24


· Capacity (maximum heat output) of each plant item, e.g. 23MW for the SELCHP energyfrom waste plant

· Minimum turndown for each plant item

· Any run hour restrictions that may apply. This is not the case for SELCHP

The model then assesses the fuel input and energy output for each plant item in meeting thedemand. Where a thermal store is used, the model calculates the charge and discharge of thestore on a diurnal basis through the year. It runs annual iterations, modelling plant performance inline with a changing heat demand profile, for example where there is a phased increase of loadthrough time, as is the case with the proposed New Cross network and north Lewishamextension.

The output of the model is a total annual figure for each energy stream through time. This formsthe basis of the operating cost analysis that is used in the whole life costing.

4.3 RESULTS

Based on the inputs described in the preceding sections, we have modelled the energy balance ofthe proposed heat network in three configurations:

1. Peak connections at Convoys Wharf, Yeoman St and the Former Deptford GreenSchool site

2. As above but with 100m3 of thermal storage included on the network

3. All base load connections

The energy balance results of the three configurations are compared for a single year at full build-out in Table 4-2. Figure 4-2 and Figure 4-3 show a graphical representation of the results foroptions 1 and 3 above through time. Note that these results include losses for series 3 insulation.Analysis of series 2 insulation performance is presented in Section 6.2.

25


Table 4-2: Key energy balance results for tested configurations – full build-out

Figure 4-2: Energy balance through time – peak connections at Convoys Wharf, Yeoman St, FormerDeptford Park School site

Item UnitsMain option -

three peak loadconnections


thermal storage


Peak load connection demand MWh 32,328 32,328 0Base load connection demand MWh 20,170 20,170 49,718

Netw ork losses MWh 1,610 1,610 1,568Total netw ork load MWh 54,108 54,108 51,286

EfW output MWh 52,560 52,603 49,789Proportion of load met by EfW heat % 97.1% 97.2% 97.1%Centralised (SELCHP) boiler output MWh 870 888 0

Total netw ork supply MWh 53,430 53,491 49,789Heat sold (excludes losses) MWh 51,820 51,881 48,221Centralised boiler fuel input MWh 1,012 1,032 0

Shortfall (connected load met by customer boilers) MWh 677 616 1,495

Parasitic load MWh 1,069 1,070 996

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26


Figure 4-3: Energy balance through time - all base load connections

The energy balance results show the following things:

· 97 percent of the connected annual heat load is met by the SELCHP EfW plant

· Adding 100m3 of thermal storage increases the annual volume of heat supplied from theEfW plant by 47MWh – a utilisation increase of 0.1 percent

· Option 3 – all base load connections shows an increase in connected load met bycustomer boilers because there is no centralised boiler plant at SELCHP (the connectionis not sized to meet peak, so centralised boilers are not required); however this is stillonly 3 percent of the total connected load

4.4 CARBON REDUCTION

To calculate the carbon reduction attributable to each option, a base case is required to calculatethe carbon from the alternative heat supply for each connected load. In the case of some of thenew development connections, this alternative heat supply includes CHP plant, so it is notappropriate to model a boiler-only base case scenario for these connections.

In order to calculate the carbon content of alternative heat supply at these new developments, wehave modelled four scales of development, as determined by their annual heat load. Our foursample developments are:

· Former Deptford Green School site -

· Cannon Wharf

· Marine Wharf West

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· Convoys Wharf

The operational performance of CHP engines – particularly the balance between heat and powergeneration – varies according to the size of the unit. This in turn affects the carbon content of theheat supply, so it is important in our base case carbon analysis to use an ‘own-supply’ carboncontent of heat that is appropriate for the scale of a particular development.

We therefore assessed the CHP engine size that would be appropriate for each of the foursample developments using a rule of thumb calculation9, unless the actual CHP selection for asample development had been advised by the developer. Operating information (fuel input, heatand power output) was sourced from data sheets for the selected CHP units and this was used inour models to determine the base case operating energy balance at each of the sampledevelopments.

In the modelling, we have used typical performance criteria for CHP operation, including:

· Availability – 92%

· Minimum turndown – 50%

· Maximum daily number of starts – 2

The carbon content of heat has been calculated using SAP 2012 emissions factors, as presentedin Section 4.1.4. Note that the carbon reduction potential of CHP plant is expected to degrade inthe future as grid carbon intensity reduces. See Section 4.4.1 for further description.

Details of the banding, developments used in the model, and the results of the base case carbonanalysis are presented in Table 4-3. Note that band D is specific to Convoys Wharf.

Table 4-3: Carbon content of heat under CHP heat supply scenario for new developments

Each development site has then been attributed a base case carbon content of heat according towhich band/load range it falls into (see column 2 of Table 4-5).

For existing connections such as the three school sites, where current heat supply is from gasboilers, we have calculated the alternative carbon content of heat supply using the natural gasemissions factor divided by the assumed boiler efficiency for each connection, as presented inTable 4-4.

9 Rule of thumb: CHP will serve 70 percent of annual load over 6,000 hours, i.e. total load * 0.7 / 6000

Band Load range(MWh)

Development used in model Developmentload (MWh)

SampleCHP size

used(kWth)

CHPHeat:Power

ratio

Modelledthermal

store size(m3)

Carbon contentof heat

(kgCO2e/kWh)

A 100 - 1,750 Former Deptford Green school site 521 76 1.27 10 0.181B 1,751 - 3,250 Cannon Wharf 2,642 280 1.51 40 0.149C 3,251 - 5,000 Marine Wharf West 3,570 427 1.07 50 0.085D 31,500 Convoys Wharf 31,500 3 x 1568 1.00 150 0.095

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Table 4-4: Boiler efficiencies assumed for existing connections

Using the SAP 2012 emissions factors presented in Section 4.1.4 and the base case carboncontents of heat described above, we have calculated the emissions that would occur if all theconnections were supplied with heat through on-site measures (CHP and boilers for newdevelopments and boilers only for existing loads). The base case carbon emissions for eachconnection are presented in Table 4-5. The total base case carbon emissions are 6,623 tonnesCO2e per year.

Note that neither this calculation nor the heat network energy balance analysis presented in thisreport includes losses from onward distribution in the customer systems. This is because thecommercial boundary for the heat network is expected to be at the heat interface within eachconnection plant room, so losses in onward distribution should not be factored into this analysis.

Table 4-5: Base case carbon emissions

LoadAssumed

boilerefficiency

Grinling Gibbons primary 80%Sir Francis Drake primary 86%

Deptford Park primary 80%Sayes Court 75%

Goldsmiths - Education Bldg 80%Goldsmiths - 1 St James' 86%

Childeric Primary 80%

Convoys Wharf D 3001Arklow Road B 322

Marine Wharf East B 360Marine Wharf West C 303

Cannon Wharf B 394Deptford Wharves C 416

Yeoman Street A 39Neptune Wharf A 142

Grinling Gibbons primary N/A 50Deptford Park primary N/A 73

Sir Francis Drake primary N/A 30Sayes Court N/A 28

Deptford Green school site A 94Goldsmiths - Education Bldg N/A 522

Goldsmiths - 1 St James' N/A 486Batavia Rd A 113

Childeric Primary School N/A 59Bond House A 75

Goodw ood Road A 115TOTAL 6,623

ConnectionCarbonfactorband

Carbonemissionsfrom base

case supply(tCO2e/yr)

29


This can be compared to the emissions calculations for the three tested network configurations. Asummary of the results is presented in Table 4-6. Note that this analysis includes carbonemissions from the following sources and takes account of losses in the DH pipework.

· Heat from SELCHP EfW

· Gas consumed by centralised (i.e. located at SELCHP) boiler plant supplied to the threepeak load connections for option 1

· Gas consumed by customer on-site boilers

· Parasitic electrical consumption for the DH network

Table 4-6: Emissions savings for assessed DH network options – full build-out using SAP 2012emissions factors

The results show that, based on SAP 2012 emissions factors, all of the options offer a significantreduction in annual carbon emissions – 22 percent reduction for the base load scenario (option 3)and 29 percent reduction for the three peak connections scenarios (options 1 and 2). The reasonthe base case scenario offers less of a carbon reduction is because more of the heat demand atConvoys Wharf, Yeoman Street and the former Deptford Green School site is met by on-siteboilers.

4.4.1 Carbon reduction using DBEIS grid carbon intensity changes over time

We have also assessed the carbon emissions through time taking account of changes in gridelectricity carbon intensity. Note that the emissions factor for the fixed grid carbon intensityscenario (blue line in Figure 4-4) is from SAP 2012, whereas the factors in the carbon intensitychange through time is from BEIS projections. The starting emissions factor for grid electricity aredifferent, hence the different 2019 starting point in the chart. See Section 4.1.4 for more detailedexplanation.

Due to the relatively small amount of electricity consumed by the scheme (and the fact that noneis produced, unlike with CHP installations), the impact of these projected changes is minimal, asshown in Figure 4-4.

Option Description

Annualbuilt-outload met

by DHnetwork(MWh)

Base caseemissions(tCO2e/yr)

EquivalentDH

networkemissions(tCO2e/yr)

Emissionssaving

(tCO2e/yr)

1 3 x peak connections 51,820 6,623 4,684 1,9402 As option 1 w ith 100m3 thermal storage 51,881 6,623 4,676 1,9483 All base load connections 48,221 6,623 5,172 1,451

30


Figure 4-4: Emissions change through time with projected grid carbon intensity change – three peakload connections scenario

The chart shows how emissions reduce through time as the grid decarbonises (red linedescending); however the low grid electricity consumption in the scheme means the impact isminimal. It equates to an annual emissions reduction of 160 tonnes between 2025 and 2050.

As noted at the end of Section 4.1.4 however, future changes in grid carbon intensity has thepotential to further impact the scheme if you consider that the carbon intensity of the heat fromSELCHP can be linked to the electricity generation it displaces. If the displaced electricity has a2016 emission factor of 0.376 kgCO2e/kWh from the BEIS projections and a SELCHP Z factor10 of5, the implied emissions factor of the SELCHP heat supply is 0.075 kgCO2e/kWh. Although thisdiffers from the SAP 2012 emissions factor for heat from a steam power station (0.058kgCO2e/kWh), it is a simple and justifiable means of calculating the carbon intensity of a heatsupply from SELCHP based on the avoided power generation.

As the grid carbon emissions factor reduces through time, the resulting carbon content of heatfrom SELCHP reduces too. Analysing carbon emissions from the New Cross system this way, theheat network emissions through time change significantly, as shown in Figure 4-5.

10 Z factor is the ratio of heat offtake to foregone electricity generation

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Figure 4-5: Emissions change through time with projected grid carbon intensity change – SELCHPheat emissions factor linked to grid electricity emissions factor - three peak load connectionsscenario

Furthermore, the scheme’s carbon reduction potential increases further in comparison to thecarbon base case, where gas engine CHP is used in the development sites. This is because thecarbon reduction performance of gas engine CHP degrades over time as grid electricity, which issupplemented by CHP power generation, becomes cleaner.

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5 ECONOMIC ANALYSIS5.1 CALCULATION METHODOLOGY

We have developed a whole life cost model to assess the economic performance of options. Themodel works by applying unit costs to each energy stream, as calculated in the energy balancemodelling described in the preceding sections, and calculating the net present value (NPV) atdefined discount rates.

The unit cost of different utilities is varied through time in line with DBEIS utility price projections –the most recent of which were published in 2015. This approach therefore takes account ofpredicted future changes in energy markets.

A capital cost assessment has been developed for the scheme, taking account of phasing of theexpenditure. We have then determined the NPV of the scheme over project lifecycles of 25 and40 years at varying discount rates.

In our analysis, we have assumed that the scheme will start operating in 2019, with the capitalexpenditure taking place in 2018. It would not, in our opinion, be possible to complete thenecessary commercialisation, design and construction in advance of this timeframe.

5.2 INPUTS

5.2.1 Capital cost

We have developed capital costs for each network option using various sources of information,including previous build project costs, contractor budget quotations and Spons Mechanical andElectrical Services Price Book.

Costs include all items required for the distribution of heat from SELCHP with the exception of theheat exchangers at SELCHP, which are already installed. Three no. 7.5MW gas boilers areincluded at SELCHP for the peak supply options, as well as all items for onward distribution ofheat up to and including the heat interface substations at each connection are included, as arepreliminary costs, design and project management fees and contingency at 20 percent.

A full capital cost breakdown is presented in Appendix A. A summary of the costs by area isshown in Figure 5-1 and Table 5-1. We assign a 70 percent cost accuracy estimate to thisassessment.

34


.

Figure 5-1: Capital cost summary by option and cost area

Table 5-1: Capital cost by option and cost area

Note that the pipe cost for the base load connection-only option is not greatly reduced comparedto the options with the peak load connections. This is because we have retained the 250mmrunning east from SELCHP towards Convoys Wharf for this base load only option, as it retainssome capacity for additional connections. The bulk of the cost reduction in this option comes fromthe omission of boiler plant and associated gas supply, flues etc at SELCHP as it assumes allconnections have their own boiler plant.

We have also retained a 300mm pipe diameter out of SELCHP and onto Surrey Canal Road incase there is a future option to connect the Surrey Canal Triangle development, which is excludedfrom this study but is immediately to the west of SELCHP and is likely to be of interest to Veoliaas a potential heat customer. The energy strategy for this development states that allowance willbe made for connection to a heat network, should one be available, so it is important to safeguardthis opportunity.

£1,955 £2,085£735

£6,858 £6,858

£6,468

£533 £555

£309

£1,869 £1,900

£1,502

£0

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£4,000

£6,000

£8,000

£10,000

£12,000

Three peak loadconnections

Including 100m3thermal storage


Cost

(£k)

Scenario

Contingency

Fees

DH network incl.substations and fibre

SELCHP

Cost element

Three peakload

connections(£k)

Including100m3

thermalstorage

(£k)

All baseload

connections(£k)

SELCHP £1,955 £2,085 £735DH netw ork incl. substations and fibre £6,858 £6,858 £6,468

Fees £533 £555 £309Contingency £1,869 £1,900 £1,502

Total £11,216 £11,398 £9,014

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5.2.2 Gas cost

Gas consumption is included in our analysis for back-up boilers located at SELCHP’s districtheating hall and supplying the peak load connections at Convoy’s Wharf, Yeoman Street and theformer Deptford Green School site.

The gas price used in the analysis is taken from the DBEIS utility price projections centralscenario (2015). The 2019 gas price in this analysis is 2.75p/kWh, which includes the ClimateChange Levy. The range of gas prices through time used in the analysis is presented in Figure5-2.

Figure 5-2: DBEIS 2015 utility price projections services gas price - central scenario

5.2.3 Electricity cost

We have included costs for electricity consumed by equipment related to the DH network (pumps,control panels etc) in our analysis. As with gas consumption, we have used costs from DBEIS’sutility price projection central scenario for retail electricity. It is noted that SELCHP may choosenot to charge for the small amounts of power involved given their site generation capacity;however, we have modelled it as import electricity.

The electricity prices through time used in the modelling are as shown in Figure 5-3.

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Figure 5-3: DBEIS 2015 utility price projections retail electricity price – central scenario

5.2.4 Cost of heat from SELCHP

We are advised by SELCHP that for every 5 kWh of heat supplied to the network, they lose 1kWh of electricity generation (a Z factor of 5) and that the cost of heat to the network should belinked to this lost value of electricity. Using a baseload average value for wholesale electricity of4p/kWh11, the assumed cost of heat from SELCHP at the moment is 0.8p/kWh; however, we haveused 1p/kWh as the year 1 price in our analysis as we assume Veolia would want to includeallowance for maintenance of plant on their side of the commercial boundary, for example steamturbine off-take and the steam to hot water heat exchangers.

As the value of electricity will change over time, we have used DECC’s utility price projections upto 2050 to vary the cost of heat from SELCHP. DECC’s numbers project the change in energyprices through time based on three energy industry development scenarios – low, central andhigh. We have applied the annual percentage change implicit in the central scenario to the1p/kWh 2017 price. The change in SELCHP heat price through time, generated using thisprocess, is shown in Figure 5-4. Note that the scheme is assumed to commence in 2019 so thecost of heat is presented from then.

11 https://www.ofgem.gov.uk/monitoring-market/wholesale-market-indicators

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Figure 5-4: Cost of heat from SELCHP used in modelling

SELCHP should also be able to claim RHI on the biogenic content of the heat delivered tobuildings connected to the heat network (i.e. not including heat losses). Biogenic content istypically assumed to be 50 percent of municipal solid waste. The RHI rate for ‘large biomass’(>600kW) from January 2017 is 2.05p/kWh. As such, it is assumed that RHI is paid at 2.05p/kWhon 50 percent of the heat delivered to customers connected to the heat network, or 1.025p/kWhfor every kWh of heat consumed by connected loads. Veolia would effectively be covering thecost of lost power generation through the cost of heat to the network operator (1p/kWh variable)and gaining the additional value of RHI payments.

It should be noted, however, that RHI can be difficult to claim for this type of project and that thevalues for incentives such as RHI are subject to Government adjustment at any time - as hasbeen seen with the Feed in Tariff for solar PV recently. RHI benefit to Veolia has therefore notbeen included in the base case economic analysis that follows.

We have assessed the sensitivity of the economic results to changes in SELCHP’s heat price inSection 5.4.

Note also that RHI can only be paid to the ‘Authorised Signatory’ who has exclusive rights anliabilities for the installation i.e. the owner. There are circumstances where more than one partyowns the installation e.g. a joint venture. In order to pay a member of the joint venture, Ofgemwould require evidence that they are a joint owner e.g. contract agreement.

5.2.5 Maintenance

We have allowed for maintenance of the heat network and of the back-up boiler plant at SELCHPat the following rates:

· Heat network including sub-stations: 1 percent of network capital cost per annum

· Back-up boilers: £6k based on £2k per boiler, as recently advised to WSP | PB by aleading boiler supplier

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The heat network maintenance rate is based on our experience of typical heat networkmaintenance guaranteed performance type operation and maintenance (O&M) contract.

The boiler maintenance rates are based on information provided by a boiler manufacturer for anannual maintenance agreement.

Any maintenance costs for SELCHP facility itself are assumed to be outside of the DH scheme’scommercial boundary.

5.2.6 Replacement

We have allowed for replacement of the gas boilers in the SELCHP DH Hall in the peak supplyscenario. We have assumed replacement at 20 year intervals at 100 percent of the initial capitalcost. This may be conservative as the EfW heat means the level of boiler utilisation is likely to below in comparison to a boiler-only heat supply system.

Any replacement costs for SELCHP facility itself are assumed to be outside of the DH scheme’scommercial boundary.

5.2.7 Heat sales

It is assumed that the heat network scheme operator would sell bulk heat to each connection at asingle point of interface in each customer plant room. Each connection’s facilities managementteam would then take control for the onward distribution of heat to the end user, as well as themaintenance of the secondary and tertiary systems and the metering and billing of each enduser2.

In determining the heat sales value to each customer, we have therefore assessed the alternativecost of heat generation at the customer’s plant room, assuming the heat is supplied by gas boilersin the case of existing buildings, and by a mix of CHP and gas boilers in the case of newdevelopment.

The 2019 gas price from the BEIS utility price projections is 2.75p/kWh (see Section 5.2.2). Tocalculate the cost of boiler heat, we have used the BEIS utility price projections divided by anassumed boiler capacity for each customer, as presented in Table 5-2.

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Table 5-2: Boiler efficiency used in modelling

To calculate the cost of CHP heat at new developments, we have used the same four CHP scalebandings we used to calculate the carbon base case (see Section 4.4 and Table 4-3) and theassociated CHP performance characteristics to calculate the cost of heat generated by the CHP.In this analysis we have allowed for the cost of CHP maintenance, the exemption in ClimateChange Levy on input gas that the CHP would be entitled to, and the electricity export value fromCHP power generation. The cost of heat generation from CHP therefore varies according to theoperating characteristics of the engine and the cost of CHP maintenance.

Generally in engines with a lower heat to power ratio (which occurs in mid to large scale units),the cost of heat generation is lower. This is because of the value of export electricity, so enginesgenerating more power per unit of heat generation are more economical. The other importantfactor is the maintenance cost, which is higher on a p/kWhe basis for smaller engines12. Table5-3, shows the cost of CHP heat calculation for each of the four CHP scale bands. It is based onthe following calculation:

Cost of heat from CHP:(Gas cost excl. CCL / CHP thermal efficiency) + CHP maintenance rate – (wholesale electricity rate / CHPheat:power ratio)

12 Annual CHP maintenance rates are often quoted by suppliers as a rate per kWh of power generation. Assuch, unit costs (i.e. p/kWh of electricity generation) are higher for smaller engines because fixed costitems such as man hours are distributed across a lower volume of energy production.

Convoys Wharf 86%Arklow Road 86%

Marine Wharf East 86%Marine Wharf West 86%

Cannon Wharf 86%Deptford Wharves 86%

Yeoman Street 86%Neptune Wharf 86%

Grinling Gibbons primary 80%Deptford Park primary 80%

Sir Francis Drake primary 86%Sayes Court 75%

Deptford Green school site 86%Goldsmiths - Education Bldg 80%

Goldsmiths - 1 St James' 86%Batavia Rd 86%

Childeric Primary School 80%Bond House 86%

Goodw ood Road 86%

Assumedboiler

efficiencyConnection

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Table 5-3: 2016 cost of CHP heat for different scale units

Note that the cost of CHP heat generation for smaller units exceeds the cost of boiler heatgeneration for a new (86 percent efficient) gas boiler – 3.2p/kWh based on the DBEIS utility priceprojections 2019 services gas price of 2.75p/kWh. This is a product of the way CHP economicschange as the scale of the engines increases. Note, however, that new developments install CHPas a means of achieving their Building Regulations Part L carbon reduction compliance ratherthan for the economic benefit.

We have assumed for new developments that 70 percent of their heat supply would come fromCHP in the alternative cost of heat scenario. This is based on typical expectations of engine heatdelivery if it is correctly sized and maintained. The weighted cost of heat is therefore calculated forthe four CHP scale bandings using the cost of CHP heat for 70 percent of the load and the cost ofboiler heat for the remaining 30 percent.

We have also included a 10 percent discount to the network heat sales price as an incentive tocustomers to connect. This discount and the final cost of heat to each connection would besubject to negotiation; however this approach provides a justifiable methodology for calculatingheat prices to each customer.

A summary of the 2019 heat prices used for each customer used in our analysis is presented inTable 5-4.

Band Load range(MWh)

SampleCHP size

used(kWth)

CHPHeat:Pow er

ratio

CHPmaintenancerate (p/kWhe)

CHPthermal

efficiency(GCV)

Cost ofCHP heatin 2019(p/kWh)

A 100 - 1,750 76 1.27 1.5 42% 3.63B 1,751 - 3,250 280 1.51 1.4 48% 3.20C 3,251 - 5,000 427 1.07 1.2 41% 3.03D 31,500 3 x 1568 1.00 1 39% 2.95

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Table 5-4: 2019 heat prices used in economic analysis

The weighted average heat price across the network, based on the connected load of eachcustomer and the heat price, is 2.77p/kWh. The variable rate will be increased through time in themodelling in line with the DBEIS utility price projections central scenario for gas (boilers and CHP)and export electricity (CHP). A chart showing the changing weighted average heat price throughtime, starting in 2019, is presented in Figure 5-5.

Figure 5-5: Unit heat sales price for new development through time

In addition to the unit cost of heat, a standing charge is applied as with other domestic gassupplies. For private loads, we have used a rate of £15 per installed kilowatt (i.e. heat exchanger

ConnectionAssumed

boilerefficiency

2019 heatprice used

inmodelling

(p/kWh)Convoys Wharf 86% 2.72

Arklow Road 86% 2.88Marine Wharf East 86% 2.88Marine Wharf West 86% 2.78

Cannon Wharf 86% 2.88Deptford Wharves 86% 2.78

Yeoman Street 86% 3.15Neptune Wharf 86% 3.15

Grinling Gibbons primary 80% 3.10Deptford Park primary 80% 3.10

Sir Francis Drake primary 86% 2.88Sayes Court 75% 3.30

Deptford Green school site 86% 3.15Goldsmiths - Education Bldg 80% 2.46

Goldsmiths - 1 St James' 86% 2.29Batavia Rd 86% 3.21

Childeric Primary school 80% 3.10Bond House 86% 3.15

Goodw ood Road 86% 3.15

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/kW

h)

Year

42


size) and for public sector loads we have used £10 per installed kilowatt. These rates are basedon fixed rate charges we have seen recently for an existing heat network in London.

The total annual standing charge used in the modelling is £395k.

5.2.8 Developer contributions

For developments where the heat network connection negates the requirement for their own on-site heat plant, there is a significant saving to the developer. If a SELCHP connection was notavailable, the developer would be required to install boiler plant to supply heat and CHP to meettheir carbon reduction requirements under Building Regulations Part L. As such, it is reasonableto assume that a developer contribution could be sought from connections not requiring on-siteplant in lieu of their requirement to do so.

In addition to savings in on-site heat plant, further cost savings may arise for developersconnecting to the scheme if, for example, the requirement for on-site gas infrastructure isnegated. In the event that the scheme operator takes responsibility for the delivery of the wholeheating system, up to the end user’s interface (HIU), then the developer contribution should takeaccount of this additional infrastructure.

Most of the new developments being connected to the scheme will have their own heat plant, asthey are too far progressed for the heat network to negate the requirement. In the Element Breport, we identified three developments where there may be an opportunity to supply heat solelyfrom the heat network, with no on-site plant. They are:

· Convoys Wharf

· Yeoman Street

· Former Deptford Green School site

We have therefore calculated the value to these developers of a peak load, resilient heat supplyconnection from the heat network, wherein back-up boiler plant is installed in the SELCHP DHhall. A summary of that calculation is presented in Table 5-5. It assumes that the developercontribution is made up of:

· CHP cost plus 10 percent for general project costs

· Back-up boiler cost at £36/kW13 plus 10 percent for general project costs

In sizing the CHP, we have used an industry rule of thumb guide for calculating CHP size, whichis that it should supply 70 percent of the annual heat load over 6,000 hours (i.e. annual load x 0.7/ 6000).

13 £40/kW is a general rule of thumb cost for boiler installation from Spons

43


Table 5-5: Developer contribution calculation - peak load connections

The end column of this table shows the developer contribution per end user. The range in thesevalues is a product of economies of scale that come with increased system capacities. Based onour experience of approaches to developer contributions in projects reaching commercialisation,these values are reasonable. Note that the developer is still required to provide ancillary plant(pumps, pressurisation etc), distribution pipework and heat interface units (HIUs), otherwise thedeveloper contribution would take account of these avoided costs too.

For modelling option 3, wherein all connections are assumed to be base load only, we have takenthe CHP engine cost only as the developer contribution from these three connections, as theywould still be required to provide back-up boiler plant.

5.3 RESULTS

Using the methodology and inputs described in Sections 5.1 and 5.2, we have calculated theeconomic performance of the three options assessed. We have used a range of discount ratesand two project lifecycles – 25 and 40 years – to compare economic performance at differentcommercial terms. We have also assessed the internal rate of return (IRR) at 25 and 40 yearproject lifecycles. The results of this analysis are presented in Table 5-6 and Figure 5-6.

Table 5-6: Economic results

Peak load connections No. endusers

Peak(kWth)

Annual(MWh)

Approximateengine size

required(kWth)

Engineselectionbased onrequired

engine size

Enginecost

Installedboiler costat £36/kW

x peakheat

demand

Developercontribution

Contributionper end user

Convoys Wharf 4,127 20,000 31,589 3,685 2 x 2MW Edina £1,980,000 £720,000 £2,700,000 £654Yeoman Street 72 500 218 25 EnerG E11R £55,000 £18,000 £73,000 £1,014

Deptford Green School site 120 750 521 61 EnerG E50 £115,000 £27,000 £142,000 £1,183


loadconnections

- NPV (£k)




(£k)


loadconnections

- NPV (£k)




(£k)

3.5% £7,772 £7,594 £9,415 £13,447 £13,273 £15,1546% £3,927 £3,748 £5,488 £6,579 £6,401 £8,1539% £894 £713 £2,399 £1,996 £1,815 £3,500

12% -£1,102 -£1,284 £374 -£627 -£809 £846IRR 10.2% 9.9% 12.7% 11.1% 10.9% 13.3%

Discountrate

25 years 40 years

44


Figure 5-6: NPV or tested options over 25 years at different discount rates

Figure 5-7: NPV or tested options over 40 years at different discount rates

The results show the following:

· All scheme options have a positive NPV at discount rates of 9 percent and lower.

· The addition of thermal storage offers no technical or economic benefit to the scheme.This is due to the 24 hour operation at SELCHP and the scale of the available heatsupply. Thermal storage benefits heat networks by maximising the supply from the lowcarbon heat source; however in this instance, 97 percent of the heat supply comes fromthe SELCHP energy from waste plant without the use of thermal storage.

-£2,000

£0

£2,000

£4,000

£6,000

£8,000

£10,000

3.5% 6% 9% 12%

NPV

(£k)

Discount rate

Main option - three peak loadconnections - NPV (£k)

Main option with 100m3 thermalstorage (£k)

All base load connections (£k)

-£2,000

£0

£2,000

£4,000

£6,000

£8,000

£10,000

£12,000

£14,000

£16,000

3.5% 6% 9% 12%

Main option - three peak loadconnections - NPV (£k)

Main option with 100m3 thermalstorage (£k)

All base load connections (£k)

45


· The base load scenario outperforms the options with three peak load connections, withan IRR of 12.1 percent over 25 years and 12.8 percent over 40 years. This is becausethe capital cost of the base load system is significantly lower (see Section 5.2.1). Thepeak load scenario does attract a higher developer contribution, as the three peak loadconnections are not required to provide their own boiler plant; however, a sizeabledeveloper contribution would still available from Convoys Wharf, Yeoman Street and theFormer Deptford Green School site in the base load scenario because they would not berequired to install low carbon heat plant to achieve Building Regulations compliance.

As a result of this analysis, we conclude that a New Cross heat network with all connections sizedfor base load is economically attractive at a range of discount rates.

5.4 SENSITIVITY TO CHANGES IN COST OF HEAT FROM SELCHP

In order to assess the robustness of the scheme, we have tested the impact of an increased heatprice from SELCHP.

We have tested the NPV performance of the preferred option from Section 5.3 – base loadconnections only – over 25 years at a discount rate of 6 percent with increasing heat prices fromSELCHP. We have also assessed the IRR over 25 years.

Table 5-7: NPV of base load connections scenario at different prices of heat from SELCHP

The results show that the whole life cost of the scenario remains positive at a discount rate of 6percent even if the year one heat price from SELCHP is increased by 60 percent or more14.

14 The NPV is zero at 1.7p/kWh

2017 heatprice from

SELCHP(p/kWh)

NPV at 6%discount

rate over 25years (£k)

IRR

1 £4,862 12.1%1.2 £3,466 10.5%1.4 £2,069 8.8%1.6 £673 6.9%1.8 -£724 4.9%2 -£2,120 2.7%

46


6 NETWORK OPTIMISATION ANALYSIS6.1 OPERATING TEMPERATURE

The preceding analysis is based on a supply temperature of 110°C from SELCHP. It would bepossible, however, to reduce the flow temperature in the network, resulting in lower heat lossesbut greater pumping energy15, assuming no change in pipe diameters from the 110°C network. Inpractice, however, reducing the temperature differential on the network (i.e. by reducing the flowtemperature) leads to an increase in pipe sizing as more volume is delivered to meet the end userdemands.

When pipe sizes are increased, heat losses go up and pumping energy goes down. The key is,therefore, to find the right balance of supply temperature and pipe size. It is also important toremember that pipes are sized for periods of maximum demand; however these periods onlyaccount for a small proportion of the operating profile on a network. Figure 6-1 shows how, for themodelled all-base load connections network, the demand is less than half of the maximum loadfor approximately 60 percent of the time. Periods of maximum demand (i.e. 12MW and above)occur for less than 15 percent of the time. It is therefore important to consider operatingconditions outside of these maximum demand periods.

Figure 6-1: New Cross HN base load scenario load histogram

One option is to vary the supply temperature according to load. In the case of the New Crosssystem, this could be done by supplying at 110°C during periods of maximum heat load, butreducing the supply temperature to 90°C, or lower, for the rest of the time. This approach meanspipes are kept at the smallest possible diameter, by sizing them for 110°C flow at maximum

15 A lower flow temperature means reduced heat transfer per unit of water delivered, such that a greatervolume of water is required to deliver the required heat. The increased water volume means increasedpumping energy is required.

0%

5%

10%

15%

20%

25%

30%

0

500

1,000

1,500

2,000

2,500

12+

10-1

1.99

8-9

.99

6-7

.99

4-5

.99

2-3

.99

0-1

.99

Perc

enta

geof

time

Freq

uenc

y(h

ours

/yea

r)

Load range (MW)

Percentage oftime

Frequency

47


demand, but reduces heat losses outside those periods by reducing the flow temperature.Pumping energy will be higher when the operating temperature is lower, so we have alsocalculated this for comparison.

The following analysis compares two scenarios:

· 110°C supply temperature all year round

· 110°C supply temperature when load is 12MW or greater; 90°C supply temperaturewhen load is below 12MW

Pipes are sized in this scenario for the maximum load condition with a supply temperature of110°. This ensures the capital cost of the network is the lowest it can be but tests the balancebetween heat losses and pumping energy with varying flow temperature. We have used thefollowing heat prices in this analysis:

· Electricity for pumping energy – 10p/kWh16

· Heat from SELCHP to cover pipework losses – 1p/kWh

The results of the analysis are presented in Table 6-1.

Table 6-1: Operating cost associated with different flow temperature scenarios

The results show that the variable flow temperature scenario is more expensive than the fixedflow temperature scenario. This is because, in this instance, the cost of heat from SELCHP is verylow, so the increased heat losses from running a constant flow temperature of 110°C is more thanoffset by the saving in pumping energy cost. It is therefore concluded that a fixed flowtemperature scenario is preferable in this instance.

If the power used for pumping energy was supplied from the SELCHP facility at 2p/kWh or less,and the heat sales price from SELCHP was still 1p/kWh, it would be cheaper to reduce the flowtemperature to 90°C outside of peak heating demand periods. We would therefore recommendthat the optimum flow temperature is assessed intermittently during operation, according to thecost of heat and power to the network.

16 This power could be supplied from the SELCHP facility at a reduced or no cost, particularly if Veolia areinvolved with the heat network operation. We have assumed the power is purchased separately at retailcost in this instance.

Netw orkprimary flow

temp

Annualheat

losses(MWh)

Annualpumpingenergy(MWh)

Associatedannual

operatingcost

110°C 1,571 86.4 £24,350110°/90°C 1,330 201.4 £33,440

48


6.2 INSULATION SPECIFICATION

Our analysis outlined above has been on the basis of Series 3 pipework insulation, which is themost expensive and incurs the lowest heat losses. We have therefore also tested theperformance of lower specification insulation to see whether the capital cost reduction is offset byincreases in heat losses.

Capital costs have been developed for the different insulation series using costs supplied by a DHcontractor and supported by recent London construction project experience. We have modelledthe heat losses using insulation properties (thickness and thermal conductivity) for one of theleading DH pipe systems; however, it is noted that these values are very similar across the otherleading pre-insulated DH pipe systems.

A summary of the analysis is presented in Table 6-2. In calculating the operating cost of the heatlosses, we have used the following assumptions:

· Electricity for pumping energy equates to 5 percent of heat losses by volume17

· Electricity cost for pumping energy – 10p/kWh

· Heat price from SELCHP to cover pipework losses – 1p/kWh

Note that these calculations are on the basis of a constant 110°C flow temperature on the baseload connections network sizing.

Table 6-2: Economic performance of different pipe insulation series

The results show that the simple payback for series 2 and 3 pipework over series 1 is 35 and 45years respectively. The long payback periods are due to the relatively low cost of heat fromSELCHP, which devalues the heat losses on the network somewhat. By way of illustration, Table6-3 presents the same analysis but with a cost of heat from SELCHP of 3p/kWh. In this scenario,the higher specification insulation is a lot more competitive.

17 This is based on the calculations presented in Table 6-1 for network heat losses and pumping energyassuming a fixed 110°C flow temperature

Insulationseries

Capitalcost (£k)

Annualheat

losses(MWh)

Annualoperating

cost ofheat

losses (£k)

Capexvariation

overseries 1

(£k)

Annualopex

savingover

series 1(£k)

Simplepaybackagainstseries 1(years)

1 £5,497 2,271 £31.42 £5,728 1,835 £27.0 £231 £4.4 533 £5,968 1,571 £24.4 £471 £7.0 67

49


Table 6-3: Series 2 and 3 pipe system simple payback over series 1 system at 3p/kWh cost of heat

Note also that these results are not affected if we assume that pumping power is supplied at lowor no cost from the SELCHP facility. This is because the variation in heat losses with differentinsulation series significantly outweighs the change in pumping energy, so the changing heat lossand its associated cost is the determining factor.

Based on this analysis, we conclude that series 2 insulation offers a good balance between pipesystem capital cost and heat losses. Pipe system manufacturers state that their pre-insulatedsteel systems have a design life in excess of thirty years, so the economic argument for selectingseries 2 over series 1 is not clear cut; however on the basis that the SELCHP heat price is likelyto increase over time (see Section 5.2.4), we consider series 2 insulation to be more appropriate.This approach also protects the scheme in the event that additional heat sources with a higherheat price/cost of generation are added to the network in the future.

6.3 OPTIMISED NETWORK ECONOMIC RESULTS

We have concluded in the preceding analysis that the network should supply at 110°C; should bebase load supply only; and the pipe system should have series 2 insulation. We have thereforerun the whole life cost analysis taking account of the revised capital cost and heat lossesassociated with the series 2 insulation. The results of that analysis are presented in Table 6-4.

Table 6-4: Preferred option net present value and IRR

The results show that the preferred network solution exceeds an internal rate of return of 12percent over 25 and 40 years. We consider this to be a very strong economic performance for aUK heat network.

Insulationseries

Annualopex

savingover

series 1(£k)

Simplepaybackagainstseries 1(years)

12 £15.3 153 £24.5 19

25 years 40 years3.5% £9,628 £15,3606% £5,706 £8,3689% £2,622 £3,72112% £600 £1,071IRR 13.2% 13.8%

Discountrate

Preferred option -series 2 insulation,

base loadconnections only (£k)

50


6.4 IMPACT OF DELAYED SCHEME DEVELOPMENT

Given the level of new development connected to the proposed scheme and the incrementaladdition of load through time as development phases are complete, we have assessed the impacton the scheme of delaying the heat network until the developments are completed. This optionworks with the base load-only scheme as it requires on-site heat sources to be available at allconnections until the heat network connection is made.

We have assessed the performance of the base load-only scheme, assuming the network isconnected in 2025 with the capital spend in 2024. The results of this analysis are presented inTable 6-5 and show how delaying the scheme delivers a further economic benefit compared tothe scheme starting in 2019.

Table 6-5: Preferred scheme with start delayed until 2025 – net present value and IRR

It should be noted, however, that there is a lot of activity in the DH market at the moment, withgovernment support potentially available for scheme development over the next five years in theform of HNIP funding. External capital contributions have not been included in this analysis;however we would suggest that, in order to take advantage of it, the scheme would need to comeforward over the next few years.

6.5 REDUCED SCHEME ASSESSMENT

Given the proportion of the overall heat demand supplied to Convoys Wharf, the mosteconomically attractive scheme may not include all of the loads included in this analysis. We havetherefore assessed a reduced scheme option, which excludes load to the east of Convoys Wharf– specifically:

· Sayes Court

· Grinling Gibbons school

· Arklow Road development (Deptford Foundry)

· Former Deptford Green school site

Figure 6-2 shows the area of the scheme that has been excluded. We have chosen this areabecause a review of the distances and heat loads involved suggests the economics of this sectionmay not be as attractive as the rest of the scheme. The four loads require an additional 1.5km ofDH trench to connect an additional 2,444MWh of load.

25 years 40 years3.5% £11,046 £16,7786% £6,868 £9,5299% £3,556 £4,65612% £1,369 £1,841IRR 14.7% 15.2%

Discountrate

NPV of schemestarting in 2025 - base

load only (£k)

51


Figure 6-2: Reduced scheme option

The economic results of this analysis are as presented in Table 6-6.

Excludedloads

52


Table 6-6: Reduced scheme option net present value and IRR

When compared to the economic results for the preferred scheme with all loads connected (seeTable 6-4), the reduced network option is more economically attractive, with IRRs of 14 percentand 14.6 percent over 25 and 40 years respectively, compared to 12.4 percent and 13.1 percentfor the preferred scheme with all loads connected. We can therefore conclude that the mosteconomically attractive scheme excludes the four loads to the east of Convoys Wharf.

Note that the economics of these loads may improve if more development comes forward to theeast of Convoys Wharf. Our analysis includes a fixed 250mm pipe size up to the junction ofEvelyn Street and Dragoon Road (see Element B report), so we have future-proofed the networkto accommodate further expansion options.

It is also noted that the section of network extending south towards New Cross (i.e. the sectionconnecting Goldsmiths, Batavia Road etc) was determined in the 2015 New Cross feasibilitystudy to be less economically attractive than the north Lewisham extension. While this section ofnetwork, as it was assessed in 2015, does not enhance the economic performance of thescheme, Goldsmiths University provides a significant anchor load from which further networkdevelopment in the New Cross area can develop.

We would therefore recommend at this stage that the New Cross section of the proposed networkremains an option and the pipe system extending east towards north Lewisham should be sizedfor the inclusion of the New Cross section. Goldsmiths University themselves are planningsignificant development and, while the previous study sought to take account of likely changes intheir heat load, we now know there is additional planned development at Goldsmiths that was notincluded. A 500-600 bedroom halls of residence is going to be developed next to the new 1 StJames’ building. This analysis should therefore be revisited as Goldsmiths’ development plansemerge with more certainty. Furthermore, the level of development and regeneration in theLewisham area more generally supports the argument for retaining a potential extension into theNew Cross area.

6.6 UTILITY PRICE PROJECTIONS VARIATION

As discussed in Section 5.2 we have used the percentage changes implicit in the DBEIS utilityprice projections central scenario in our economic analysis. We have therefore tested thesensitivity of the results to different patterns of utility price development over time, as projected inthe DBEIS low and high scenarios. The results are presented in Table 6-7 and show that,although the economic performance is affected by the utility price scenario used, the scheme stillperforms well at all discount rates and provides a rate of return above 12 percent. We thereforeconclude that the scheme’s viability is not sensitive to predicted utility price variations.

25 years 40 years3.5% £9,837 £15,2996% £6,102 £8,6389% £3,165 £4,213

12% £1,240 £1,689IRR 14.8% 15.3%

Discountrate

NPV of reduced scheme -no loads to east of ConvoysWharf - series 2 insulation

and base load only (£k)

53


Table 6-7: Impact of different utility price projection scenarios on economic performance of preferredscheme

Low Central High3.5% £8,202 £9,837 £12,3896% £4,905 £6,102 £7,9849% £2,308 £3,165 £4,52512% £601 £1,240 £2,263IRR 13.4% 14.8% 16.9%

Discountrate

NPV of preferred option withdifferent utility price projections

(£k)

54


7 CONCLUSIONSWe have undertaken modelling analysis of the New Cross Heat Network and north Lewishamextension.

· Load profiling was used to distribute annual loads across the 8760 hours in the year

· Hydraulic analysis was used to size the pipework for the connected loads. Threeconnections – Convoys Wharf, Yeoman Street and the Former Deptford Green Schoolsite – were assessed as both peak and base load connections

· Energy balance analysis was used to model the operation of the heat network, includinga scenario in which back-up boilers located at SELCHP supply resilience to the threepeak load connections; and another scenario in which all connections are base load only.The energy balance analysis also includes heat losses from the hydraulic analysis

· Capital cost assessment for each operating scenario

· Whole life cost analysis for each operating scenario

· Further optimisation of supply temperature and pipe system insulation thickness

· Carbon emissions analysis for each operating scenario

The results of this analysis demonstrate the following:

· Overall, the proposed heat network is economically attractive at a range of thresholdrates. This is a product of the high heat load density and the low cost of heat fromSELCHP

· There is no economic benefit to including thermal storage on the network due to thereliability, scale and heat supply range of the SELCHP plant

· There is no economic benefit to sizing the network for peak heat supply to ConvoysWharf, Yeoman Street and the Former Deptford Green School site

· The network should be operated at 110°C throughout the whole year. Reduced heatlosses through seasonal operating temperature reductions are outweighed by theincreased cost of pumping energy to circulate higher volumes of water. This is a productof the low heat price from SELCHP

· The pipe system should be series 2 insulation

· The preferred scenario reduces carbon emissions by 22 percent (1,431 tonnesCO2e/year) compared to the alternative of gas boilers and, for new development sites, on-site CHP

55


· The area to the east of Convoys Wharf comprised of Deptford Foundry, Grinling Gibbonsschool, Sayes Court and the Former Deptford Green School site degrades the economicperformance of the scheme and should not be included unless additional load can beconnected in this vicinity

· The capital cost of the preferred network, i.e. excluding Deptford Foundry, GrinlingGibbons and the Former Deptford Green School site, is £7,676k.

Appendix ACAPITAL COST BREAKDOWN

Location Item Main runMain run

100TS All base load

3 x 7.5 MW gas boilers £810,000 £810,000 £0Boiler pumps £15,000 £15,000 £0

Flues £75,000 £75,000 £0Ventilation N/A N/A N/A

Distribution pump set £50,000 £50,000 £50,000Reverse Osmosis plant £20,000 £20,000 £20,000

Degasser £25,000 £25,000 £25,000Duplex filter £50,000 £50,000 £50,000

Sidestream filter £20,000 £20,000 £20,000Water softener unit £10,000 £10,000 £10,000

Pressurisation and expansion £75,000 £75,000 £75,000Pipew ork, f ittings, valves, strainers etc £200,000 £200,000 £200,000

Heat meters £20,000 £20,000 £20,000System insulation £20,000 £20,000 £20,000

100m3 thermal store £0 £130,000 £0Gas meter enclosure £5,000 £5,000 £0

Gas meter £20,000 £20,000 £0Connection to local gas netw ork £250,000 £250,000 £0

Internal gas pipew ork £20,000 £20,000 £0

Alarm system (f ire and gas) £10,000 £10,000 £10,000New PCS control system £200,000 £200,000 £200,000System commissioning £30,000 £30,000 £30,000

Builders w ork £30,000 £30,000 £5,000

DH substations £569,048 £569,048 £470,941DH netw ork £6,256,224 £6,256,224 £5,963,700

Fibre netw ork £33,200 £33,200 £33,200

Energy centre design fees @ 5% £97,750 £104,250 £36,750Substation design fees @ 5% £28,452 £28,452 £23,547

Project management £100,000 £100,000 £100,000Prelims @ 12% £306,870 £322,470 £148,697

Contingency @ 20% £1,869,309 £1,899,729 £1,502,367

£11,215,853 £11,398,373 £9,014,202

SELCHP DHH

Netw ork

Fees

TOTAL

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