Phase I: 2007 – 2010
Client: London Development Agency
The London Thames Gateway Heat Network (LTGHN) is a vision of a region wide low carbon network which would connect low carbon heat sources and heat consumers. The 67km hot water transmission and distribution system would transmit heat from new and existing heat sources to commercial, industrial and residential properties. This supports the Mayor’s aim of achieving 25 % of London’s power and heat from decentralized energy by 2025 and his planning aspirations. The LTGHN was divided in two geographically separate phases, Phase 1 and 2.
The Phase 1 was anticipated to tap heat from Barking Power Station (BPS), an existing 1000MWe combined cycle power plant, and initially the main heat off-taker would be the nearby industry.
The investments would include converting the BPS to CHP use and constructing the required back-up, pumping and other DH systems as well as the heat distribution network.
Greenfield participated the concept design, feasibility assessment and financial analysis. The first stage of the work was to survey the current state of heat production at the nearby industrial plants, including assessing the feasibility of converting the existing steam heating system to hot water. After the heat load assessment, the preliminary design and costing of the Phase 1 heat network was carried out, including pipeline dimensioning and routing as well as pumping, heat exchangers, water treatment, control and automation etc. Furthermore, investment estimates for the necessary CHP conversion and back-up boiler station were compiled.
The annual energy demand, investment and operation cost estimates together with the tariff assumption, formed the basis for the financial analysis.
Greenfield carried out the detailed financial analysis for Phase 1 using a PwC Financial Model, a bespoke software tool developed in cooperation with the LDA. In financial modeling, it was assumed that the investments would be financed through capitalizing a Special Purpose Vehicle (SPV) owning and operating the LTGHN and that the revenue stream would support a conservative equity/debt-ratio of 50/50. The results of financial analysis comprised the NPV and IRR for equity as well as the overall project IRR and NPV.
In addition, the financial model has been used to assess the level and structure of the proposed heat sales tariff, and for analyzing the cost structure of supplied heat for risk assessment.
Phase II: Royal Docks CHP DH Scheme (London, UK)
2007 – 2010
Client: London Development Agency
Royal Docks remained underdeveloped for decades after the harbor and industrial activities lost importance. During the past two decades, new landmarks such as the City Airport, East London University and ExCel exhibition centre have shown the way for the upgrading of the area and followed by a good number of new residential and commercial developments. These are expected to deliver 16,000 new housing units (about 1.3 million m2) as well as 420,000 m2 of public/commercial space. Low carbon planning requirements imply energy efficient building designs and efficient energy supply from CHP DH and renewable energy (Lean – Clean – Green).
The concept design and project development work was carried out by Greenfield as part of the Decentralized Energy Delivery Team at the LDA with the purpose to evaluate the technical, environmental and financial feasibility of a region wide heat distribution network with low carbon heat supplied from the local sugar factory, Tate & Lyle Co. Ltd (T&L).
The first stage of the work was to review the building development plans and to assess the heat and electricity demand, taking into account the anticipated energy efficiency requirements. Based on the heat load mapping, a preliminary design was carried out for the heat distribution network, including pipe dimensioning, routing and cost estimates.
Excess heat from the T&L sugar factory was identified to be a key element in reducing CO2 emissions and contributing to the financial feasibility. For this purpose, a number of technical options for heat off-take were identified and analyzed, including waste heat recovery, heat pumps and CHP. The work was carried out in close cooperation between the LDA and T&L. Taken the complex industrial process and a good number of options, two supporting assignments were commissioned from outside consultants (RH-Energy, JP Energy Ltd) to ensure reliable analysis and to carry out on-site process measurements.
The annual energy production was calculated using a bespoke simulation software and based on the capacity mix available at T&L. The annual energy figures were further used to assess the CO2 emissions in one hand and as an input for financial analysis on the other hand.
The financial analysis comprised the simplified cash flow, IRR and NPV calculations to assess the viability of available technical options. The sensitivity analysis covered the main market inputs and other variables such as energy prices and investment costs. The conclusions included an investment recommendation and an implementation plan.
Subsequently, Greenfield carried out a more detailed financial analysis for Phase 2 / Royal Docks development project using a PwC Financial Model. In financial modeling, it was assumed that the investments would be financed through capitalizing a Special Purpose Vehicle (SPV) owning and operating the LTGHN and that the revenue stream would support a conservative equity/debt-ratio of 50/50. The result of financial analysis comprised the NPV and IRR for equity as well as the overall project IRR and NPV.
Based on the positive conclusions on the overall Phase 2 viability, Greenfield formulated an implementation strategy including three alternative start-up schemes and two subsequent expansion steps.
Besides the technical concept work and viability analysis, Greenfield contributed to the commercial structuring, document drafting and negotiations with potential customers within the area.