Agenda item

Update on District Heating Scheme

Report of Strategic Director, Economy Innovation and Growth


The Committee received a report and presentation on the Gateshead District Energy Scheme and Gateshead Energy management.


The Committee previously received an update on the Gateshead District Energy Scheme in June 2021, specifically reviewing operational and financial performance, and progress against its 5 year business plan.  Gateshead Energy Company (GEC) was incorporated in October 2015, specifically to manager and operate the Gateshead District Energy Scheme.  In April 2016, GEC and the Council signed a 40-year concession contract, which sets out the terms of operation, in which the GEC leases assets from the Council and take sole responsibility of operating and managing all technical and commercial activities.


In addition to the operation of the energy scheme the Company has the following objectives which include policy priority outcomes for residents:


·        Attracting economic growth

·        Cost savings for commercial customers in the borough

·        Reductions in fuel poverty for residents

·        Carbon reduction in the borough

·        Income generation for the Council

·        Improving Air Quality and Sustainable Transport


A members advisory panel was established to advise the Board, and meets the week prior to all board meetings, to consider Board business and make recommendations.  The Panel comprise Deputy Leader and three members from Transport and Environment portfolio.  GEC Board meets quarterly with arrangements in place where decisions are needed between Board meetings.  These are followed up by decision records presented at the subsequent board meeting.


New connections are a key part of GEC’s business model and since June 2021, GEC has agreed several new connections with the Council as follows:


·        In March 2022, Northern Design Centre and Boules Café were connected to the private wire network

·        In July 2022 a power connection for the new Multi Storey Care Park being constructed for Gateshead Quays was made live, ahead of the required Aug 22 go live date

·        In August 22 Gateshead Stadium and Gateshead Academy of Sport were connected to the private wire network

·        In October 22 GEC is due to complete 4 more heat connections for Park Road, Shearlegs Road, Gateshead Stadium and Gateshead Academy of Sport

·        The Council will add St Joseph’s Primary School to their secondary network in October 22, required additional heat from GEC to supply that site as well


Other significant connections have been agreed with commercial customers:


·        Vistry Developments have agreed a heat connection for the 271 unit on the Freight Dept site, and GEC have commenced extension of its heat network along St James Road to the site entrance.

·        GB Lubricants on Albany Road, requested a heat and power connection, having observed the works to construct the minewater heat pump opposite and wanting to connect to a low carbon, low cost energy source to meet company objectives.

·        GEC is contractually obliged to provide all of the heat and power connections for Gateshead Quays Arena, Conference Centre and Hotel, once construction gets underway.


In line with its business plan GEC continues to work towards becoming a Zero Carbon energy network by 2030.  Progress on two major investments is as follows:


Minewater Heat Pump


Supported by a £5.9m government grant, GEC is close to completing the construction of a 6MW minewater heat pump, based at Shearlegs Road depot. Costing £9m to date, the heat pump is undergoing final testing, awaiting operation permits from the Environment Agency and Coal Authority before coming into operation this winter.


Urban Solar Parks


The Council has constructed two urban solar parks to provide 3.7MW of power into the network.  GEC has supported the Council by providing the solar parks with power connections to the network, and allowing the Council to supply power through GEC’s network to 11 Council buildings.  Whilst the Council directly benefits, these will allow GEC to further reduce gas-fired generation during the summer months decreasing emissions further.


Other Zero Carbon Options


GEC continues to explore further opportunities to reach Zero Carbon, to reduce reliance on its gas engines for heat and power generation, currently feasibility work is in a few areas:


·        Opportunities for deep geothermal energy, working in partnership with Gateshead and Newcastle Councils, the North East Local Enterprise Partnership, Durham and Newcastle universities

·        Opportunities for using hydrogen as a zero carbon fuel, which is being piloted by Northern Gas Networks at its Integrel site in Low Thornley


GEC continues to explore strategic expansion opportunities to grow its customer base further, as follows:


·        Gateshead Quays

·        Old Fold/Nest House Estate

·        Chandless Estate

·        Town Centre Public Buildings


Since June 2021, the energy markets have seen immense increases and volatility, due to international issues.  However, throughout and thanks to its robust business model, and diverse energy generation and storage assets, GEC has maintained its business objectives of delivering lower cost energy to customers, whilst remaining financially viable.


The cashflow position of GE has changed significantly since June 2021.  The operating model of the company remains financially sound, as increases in costs can generally be accommodated by increases in revenue. 


Since 2010, the Council has been delivering its Carbon Management Plan, to reduce energy consumption, costs and carbon emissions.  Recently, this has been replaced by the Climate Emergency Action Plan, which now seeks to reduce Council emissions to net zero by 2030, from all its operations and assets.


To date progress has been significant thanks to many initiatives which have been previously reported.  Notable progress from 2007/08 to 2021/22 is as follows:


·        Building electricity  consumption cut by 45%

·        Building gas consumption cut by 48%

·        Streetlight energy consumption cut by 75%

·        Council carbon emissions – reduced by 63.6%, due to the following main reasons

o   The council uses less energy, as above

o   UK power now has 54% less carbon emissions than a decade ago

o   The council generating and supplying low carbon energy to its own building – from PV panels, and Gateshead District Energy Scheme


Since Autumn 2021, global events have driven prices of gas and wholesale power to record highs.  The Council started to experience significant energy prices increases from Autumn 2021, and cost have increased into 2022/23, and are forecast to increase further into 2023/24.


There are three main ways the Council is limiting the cost impact of increased energy tariffs.


·        Flexible energy purchasing through NEPO

·        Energy Bill Relief Scheme

·        Purchasing heat and power from Gateshead Energy Company (GEC).


Fortunately the Council have continued to develop major energy schemes over recent years, some of which are completing around now, to start delivering cost saving and carbon savings ahead of the price rise this winter and beyond, as follows:


·        Heat Network Extensions

·        Urban Solar Parks

·        Building Solar PV System

·        Schools Energy Measures

·        SALIX Invest to save programme


We still have £150K/yr in the capital progamme to invest in energy savings measures and current projects are focusing on improving the efficiency of domestic heat networks which the Council operates across 7 multi-storey blocks.


RESOLVED -             (i)         That the information contained within the report be noted.

                                   (ii)         That the answers to questions raised be circulated to the committee following the meeting



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