(source)
Geographical location: London, UK
Introduction
The London Borough of Lewisham (population 241,500; area 3,600 hectares) has used a well thought through tendering process to make large savings from one of its electricity supply contracts, whilst at the same time converting to renewable electricity, which on 1 April 2001 became exempt from the Climate Change Levy (CCL). Following this initial tender, a further three tenders have been undertaken and the borough is now using 100% renewable electricity, although with a smaller nancial saving due to the strong demand for renewable electricity.
Aims & objectives
The London Borough of Lewisham aims to use as much ‘green’ electricity as is practicable and in December 2000 agreed an energy policy with a target of 100% green electricity supply. The aim of the Energy Management team was to purchase as high a percentage of their electricity from renewable sources at as low a price as possible, while meeting all the Council’s other needs from its power supplier.
Who was involved
The Energy Manager (Richard Hurford) was the lead ofcer on the electricity contract described below and undertook the majority of the work personally. Some further contract work was undertaken by Mike Sackett, the Deputy Energy Manager. However, there are various departments that a motivated project manager might come from. It was also important to get councillors on board so that a strategic statement on green purchasing (described below) could be passed.
The approach
In December 1998 the Energy Manager put forward an energy purchasing contract, which engendered debate and resulted in councillors requesting that a post-deregulation energy purchasing strategy be written. This provided an opportunity for a strategic statement on green purchasing to be included.
The energy purchasing strategy stated that, “Tenders for ‘green’ electricity may be accepted preferentially over and above ‘brown’ electricity and will be considered when tenders are evaluated. This is designed to encourage sustainability of supply of electricity in the 21st century.” Green electricity is dened by the Council as electricity generated from renewable sources (i.e. non-fossil fuel) other than nuclear energy (waste to heat, wind, wave, solar, hydro, bio, landll gas, geo-thermal, etc) whereas brown electricity is generated from fossil fuels or nuclear energy.
Councillors were very interested in the statement at the committee stage of the strategy. Now that the strategy has been accepted by committee, members are generally supportive of the corporate commitment to buy green electricity.
After obtaining this commitment to green energy the Energy Manager undertook the tendering process. The tender pack was prepared and an advert encouraging requests for the information was submitted to the Ofcial Journal of the European Community. A fax was sent to all electricity suppliers advising them of this tender (a list can be obtained from Ofgem) and this was followed up with a telephone call, reminding them to respond to the advert. The tender document included a paragraph making it clear that the borough prefers renewable electricity and that green electricity is part of its specication. All suppliers were requested to submit two prices, one for brown and one for green electricity, but the borough did not commit itself to accepting green tenders only. The tender pack included all data on disc and clearly listed the criteria by which the tender would be judged. The contract is for an estimated 11,409,891 kWh or 20.8% of the borough’s total supply.
Prices were evaluated using a specially constructed spreadsheet model (but commercial evaluation software may be used). The Climate Change Levy was not considered in the evaluation because the rst year of the contract ends before the Levy was applied. However, under this contract the borough has negotiated with the supplier to maintain the contract price for the second year of the contract. It is hoped that the contract will run in total for the maximum three years allowed under contract terms. The contract was initially placed with the Renewable Energy Company; after a re-tender in April 2003, it switched to Scottish and Southern Energy, at a reduced price.
Achievements/results
This tender process, which can take up to 6 months, resulted in Lewisham’s new contract saving the borough an estimated £62,500 (this represents an 11% saving) on the previous contract. In the second nancial year of the contract the saving increased by a further £47,000 per year as 100% of the electricity supplied under this contract is green CCL exempt electricity.
The borough has three further electricity contracts, all of which have been through the above tendering process and are now 100% green. In total these three additional contracts have made a further small saving of approximately £15,000 in 2001/02. (This gure excludes savings made from not having to pay the CCL). The three contracts are:
Ø All major buildings that are not on the above contract have been supplied with 100% renewable electricity by Scottish & Southern since November 2000. However, this is not CCL exempt because it is large-scale hydro. The contract is for an estimated 7,719,495 kWh or 14.1% of borough supply.
Ø The largest contract is with London Electricity for supply to the council’s housing, which being the domestic sector is excluded from the Levy. The electricity source is the local energy from waste plant, which is considered to be a maximum of 65% renewable energy. However, the borough agreed with London Electricity that the proportion taken would all be renewable. Thus if it were being supplied for non-domestic purposes the CCL would still not be applied. The contract, which began in December 2000, is for an estimated 27,751,540 kWh or 50.6% of borough supply.
Ø The nal contract is for street lighting electricity. A two year green 100% CCL exempt contract was signed, again for energy from waste. The contract, which started in October 2000, is for an estimated 7,982,604 kWh or 14.5% of borough supply. This was re-tendered in October 2002, resulting in a reduced price (still with London Electricity).
Next steps
By July 2003, all Council sites are still 100% green electricity and councillors continue to support this. It is planned that all contracts will be moved over to electronic billing by March 2004.
Lewisham is keen to further ensure sustainable energy supplies by developing the renewable energy market. It is investigating options for long term contracts with energy suppliers linked to particular renewable energy generators, to ensure direct investment. This includes looking at the viability of signing a long-term contract with a renewable energy supplier under which, for instance, a new wind turbine would meet part of the borough’s need and would be ‘badged’ with the Lewisham logo. Similar concepts are also being looked at in partnership with a consortium of interested local authorities.
Lessons learned
Ø The local authority ofcer organising the contract should be a completer-nisher with the ability to attend to detail.
Ø It is crucially important to get key councillors to agree to an energy strategy/policy/ commitment and to get them on board generally, in order to have the power needed to push for green electricity.
Further information
Ø Richard Hurford, Energy Manager, E-mail: richard.hurford@lewisham.gov.uk Ø A toolkit on purchasing green power is available by contacting the Practical help ofce (see below for details).
Practical help also offers a free enquiries service – the team will undertake to answer any query regarding sustainable energy or sustainable road transport within a maximum of 3 working days.
Abbreviations used
CCL Climate Change Levy kWh kiloWatt hours
At the time of publication and to the best of our knowledge, the information contained in this case study was correct. This case study was rst published in October 2000.
Practical help cannot vouch for any of the organisations involved.
Practical help
T: 0870 241 2089, F: 0870 130 8831, W: www.practicalhelp.org.uk, E: info@practicalhelp.org.uk
Keywords: Energy, London, London Energy