Decision details

SCC to act as Accountable Body for Grant for the Connection of the E.ON District Energy Network to the SCC District Energy Network, with Associated Funding Agreements and Heat Purchase Agreement.

Decision Maker: Co-operative Executive

Decision status: For Determination

Is Key decision?: Yes

Purpose:

SCC to act as Accountable Body for grant for the connection of the E.ON district energy network to the SCC district energy network, with associated funding agreements and heat purchase agreement.

Decision:

13.1

The Executive Director, Place submitted a report requesting approval for the City Council to act as Accountable Body for grant for the connection of the E.ON district energy network to the SCC district energy network, with associated funding agreements and heat purchase agreement.

 

 

13.2

RESOLVED: That Cabinet:-

 

 

 

(a)

approves the drawdown of the grant funding, totalling £2,231,250 (via a commercialisation grant for £417,500 and a construction grant for £1,813,750) from the Department for Business, Energy and Industrial Strategy (BEIS), via Salix (its agent), for commercialisation and construction of the connection between the E.ON Lower Don Valley (LDV) Heat Network and the SCC District Energy Network (DEN);

 

 

 

 

(b)

delegates authority to the Executive Director, Place, in consultation with the Director of Finance and Commercial Services and Director of Legal and Governance, to negotiate final terms and approve entry into:

 

(i)  back to back funding agreements for the commercialisation grant for £417,500 and for the construction grant for £1,813,750 with E.ON, with SCC acting as the Accountable Body for the funding; and

 

(ii) a Heat Supply Agreement with E.ON for the purchase of a minimum of 7.5GWh of heat from E.ON’s LDV Heat Network with the possibility for both the purchase of further heat beyond the initial 7.5GWh and the sale of heat from the Sheffield DEN to the E.ON LDV Heat Network; and

 

 

 

 

(c)

subject to the terms of any agreements with E.ON being approved by the Executive Director, Place in accordance with the delegation above, authorises the Head of Waste Management, to administer the grant agreements with BEIS and the agreements with E.ON in accordance with their terms.

 

 

 

13.3

Reasons for Decision

 

 

13.3.1

The grant funding through the Heat Networks Investment Project (HNIP) pilot is the only means of attracting the funding necessary to make the connection between the E.ON LDV Heat Network and the SCC DEN viable at this time.

 

 

13.3.2

This is a unique opportunity to use the grant funding that SCC has applied for to deliver a project with significant opportunities for Sheffield, and at minimal risk and cost to the Council.  All funding agreements with E.ON seek to ‘back off’ and ‘flow down’ most risks, obligations and liabilities to E.ON.  SCC will only draw down funding from HNIP when requested by E.ON and based on agreed milestones.  The risk of any clawback is therefore minimal, but in any case that risk is also backed off to E.ON.  SCC’s only costs will be in administering the ‘Accountable Body’ role to pass HNIP funding through to E.ON who will deliver the project, but these costs will be covered by E.ON through a direct annual payment.

 

 

13.4

Alternatives Considered and Rejected

 

 

13.4.1

The Business Case attached to the report show that the alternatives investigated involved either SCC funding the scheme’s gap or E.ON fully funding the scheme, neither being commercially viable.

 

 

13.4.2

In the situation that the project was not funded, the SCC DEN would continue to rely on gas and oil boilers to provide back-up and top-up heat into the network at times of peak demand and during the Energy Recovery Facility (ERF) shut-down periods. 

 

 

13.4.3

The opportunities for carbon savings and air quality improvement would be lost and the SCC DEN would remain unable to achieve significant development and expansion.

 

 

13.5

Any Interest Declared or Dispensation Granted

 

 

 

None

 

 

13.6

Reason for Exemption if Public/Press Excluded During Consideration

 

 

 

None

 

 

13.7

Respective Director Responsible for Implementation

 

 

 

Laraine Manley, Executive Director, Place.

 

 

13.8

Relevant Scrutiny and Policy Development Committee If Decision Called In

 

 

 

Economic and Environmental Wellbeing

 

Report author: Gillian Charters

Publication date: 26/09/2017

Date of decision: 20/09/2017

Decided at meeting: 20/09/2017 - Co-operative Executive

Effective from: 03/10/2017

Accompanying Documents: