Decision details

Approval of a single preferred West Bromwich Heat Network business model was sought.

The government was targeting just under 20% of heat demand by 2050 and was supporting delivery by providing financial support and introducing new regulation. The Energy Security Bill which was moving through Parliament was expected to introduce obligations on councils to plan and support the implementation of heat networks.  It would also place obligations on owners and developers of large buildings to actively consider connection to existing or developing heat networks.

Following a Heat Mapping and Master Planning exercise during 2017, West Bromwich was identified as the focus for a feasibility study which looked at potential for a heat network. The Council also recognised an opportunity for future expansion to the Cape Hill area of Smethwick, with connection to the Midland Metropolitan University Hospital and proposed new housing development sites.

Reasons for decision

A heat network was a system of pipes that takes heat from a central source and delivers it to multiple buildings. These systems were a cost-effective way of reducing carbon emissions related to heating as they could be used to exploit low carbon energy sources, including recovered heat from industrial processes. Heat networks could also incorporate energy storage potential, which was important given the highly variable nature of demand for heat across a typical year.  It may also have been plausible to integrate cooling and power supply into the heat network project.

At a local level, the development of heat networks would provide various benefits including substantial inward investment, job creation and reduced energy costs for businesses and residents. In addition, heat networks could demonstrate a firm commitment towards achieving carbon reduction targets and climate change initiatives.

Alternative options considered

All options had been considered for decision. There were no other known alternatives.

Resolved:-

(1)   that approval be given to  the following preferred West Bromwich Heat Network business model:

Joint Venture ESCO (50/50) at an estimated capital cost of £18.1m (or £15.5m if GHNF grant is successful)

(2)   that approval be given to:

a)        give retrospective approval for submission of a Green Heat Network Fund (GHNF) grant application as agreed with the Cabinet Member for Regeneration and WMCA;

b)        fund the associated revenue implications as reflected in Appendix 1 from earmarked reserves for 2023/24 and future years be considered as part of the budget setting cycle and the medium-term financial plan;

c)         create a capital budget for 2023/24 (per Appendix 2) for the cost of equity (plus up to £940k of commercialisation costs in the event that the application for GHNF funding be unsuccessful) and to be fully funded through prudential borrowing:

Joint Venture ESCO – Capital Budget £6.41m (max’ requirement).

d)        commission an external contractor to deliver the Commercialisation stage of work in accordance with Contract Procedure Rules;

e)        establish and resource appropriate governance arrangements and a project management team within the Council;

f)          connect relevant Council buildings, including high-rise blocks, to a heat network, subject to consultation and feasibility;

g)        include plans for network connection within the redevelopment proposals for West Bromwich Town Centre;

(3)   that the Director of Regeneration and Growth, in consultation with the Cabinet Member for Regeneration and WMCA and the Director of Law and Governance and Monitoring Officer, be authorised to:

a)        sign any contractual arrangements associated with a successful GHNF application to ensure receipt of funding;

b)        procure and appoint a contractor to undertake Commercialisation in accordance with Contract Procedure Rules;

c)         establish internal governance and project management arrangements;

(4)   that the Director of Regeneration and Growth submit a further report to Cabinet in due course to set out the detail of the preferred option and any relevant funding strategy and procurement arrangements.