The financial, social and environmental value of an integrated energy and sustainability strategy through on-site energy generation. Case studies highlight how businesses and organisations can adopt this model and reap the benefits of it. This was presented at University College London by Mark Stokes, Managing Director of Utilyx's Asset Management division.

1. Decentralised energy:
unlocking the benefits of
an integrated energy &
sustainability strategy
Mark Stokes
A Mitie business

2. Our business
Utilyx is a specialist consultancy that provides businesses with service-led solutions that help
reduce their energy costs and manage their energy needs better
We manage
enough energy
to power 10.5%
of the UK
Became part
of the Mitie
group in 2012
Top 3 energy
consultancy for
market share
We were 1st
In our sector
to be FCA
accredited
in 2006
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3. ResilienceResilience
AffordabilityAffordability
DecarbonisationDecarbonisation
Our national energy challenge
Knowns
• 25% existing capacity to close by 2015/16
• £110bn investment in gen/trans systems alone
• 2020 target: 15% renewable energy
• 2050 target 80% reduction in carbon
• Electricity Market Reform interventions
Unknowns
• Impact of capacity squeeze on prices
• Technology winners and losers
• Capital availability
• Affordability
• Future demand
• International v UK policy
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4. Demanding environmental targets
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…these targets will require £200bn of new investment.
So far, we’re seeing investment levels fall well short of
what’s requiredSource: Green Investment Bank

5. From challenge into opportunity
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6. The Danish way
Denmark’s progress over the past two decades
Large CHP (Combined Heat & Power)
Small CHP (Combined Heat & Power)
Wind
Centralised system of the mid 1980’s More decentralised system of today
Source: US Department of Energy
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7. What is decentralised energy?
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8. The national importance of heat
Heat is our largest energy use ....and is responsible for
around a third of UK greenhouse gas emissions
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9. CHP v conventional generation
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10. • Low overall system losses
• Minimise non-commodity charges
• Improved security of supply
• Minimise non-commodity charges
• Tailored energy resilience levels to suit
• Grid becomes more the back up
• Heat utilisation benefits to industry
• Community based schemes – district heat
• Renewable/low carbon options
• Address jobs, competitive advantage & the
circular economy
Benefits of decentralised energy
£0
£2
£4
£6
£8
£10
£12
£14
£16
£18
£20
2002 2012 2020Millions
Indicative Electricity Costs
(based on a 135GWh portfolio)
Margin & Imbalance
Elexon, HDC
BSUOS
Transmission &
Distribution Losses
TUOS
DUOS
FIT
RO
CCL
Energy
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11. Value and material impact
Reduced energy and fuel consumption Avoided future costs – carbon taxes etc.
Long term value lock in – up
to 25 years
Strong sustainability
metrics
Security of supply and
enhanced resilience
Efficient recovery and
utilisation of heat
Engaging local communities in the
reduction of fuel poverty
Reduced exposure to
future price volatility
Asset refresh without
capital outlay
Output based
performance
Economic
value
Triple
bottom line
Environmental
Value
Social
Value
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12. Compelling global risks
Likelihood to occur in the next 10 years
Impactiftheriskwheretooccur
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13. Putting a value on nature
“We use it
because it is
valuable, we
lose it
because it is
free”
Pavan Sukhdev
The Economics of
Ecosystems and
Biodiversity (TEEB)
• Volatile commodity and energy prices – constraint
on profitability in next decade
• Business requirement to Thrive and not just Sustain
• Investors link sustainability to a lower cost of capital
• Economic impact
• Natural Capital is an increasingly material issue for
organisations
• Adoption by Investors, Corporates, UN, Banks,
governments
• Energy Efficiency & Decentralised Energy create
net positive impact for organisations
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14. The true value of our energy assets
Royal Free HospitalPlymouth Energy Centre Addenbrooke’s Hospital
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15. • Diverts 40,000 t.p.a waste wood from landfill
• Environmental Profit & Loss Report
• 15.8gCO2e/KWh = 93.7% < DEFRA baseline
• Generating 26,000MWh of electricity & heat p.a
• Reducing CO2 by 16,000 tpa / 320,000 t lifetime
• Water conservation: harvesting & purifying
• Circular economy for NHS
• Creating over 20+ jobs-assisting 750 more
• Driving competitive advantage for Plymouth
Valuing Natural Capital:
Over £800k net benefit to society every year
Plymouth energy centre
Diverting 40,000 tons of waste wood from landfill each year
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16. Energy Savings contract - 15 years
• High efficiency low carbon CHP - 36,000
MWh p.a.
• 4,624 tonnes of CO2 savings p.a.
• Part of NHS overall carbon reduction
target
• Surplus heat becomes displaced gas
• District Heating scheme for 1500 Camden
homes
• Positive impact on fuel poverty in the
community
Royal Free Hospital
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17. • 10% of household income on energy to keep warm.
Fuel poverty affects 2.7million households, forecast
to rise above 8.6 million by 2016.
• PPP between NHS, Trust, Local Authority and private
business, designed to reduce fuel poverty.
• Deliver DH scheme through the streets of Camden to
1500 homes, using waste heat from the RFH CHP.
• Community Energy Saving Programme (CESP) co-
funded
Displacing 2900 tonnes of CO2
London Borough of Camden
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18. EP&L cost savings c £65m over project
lifetime
• CHP/Biomass generating 50,000 MWhe
and 43,000 MWhth heat per annum
• 23,000 tCO2e saving a year, reducing
carbon emissions by 47%
• Lifetime GHG savings > 500,000 tCO2e
• Energy conversion from local medical
waste & locally arising waste wood
• EE measures reduce consumption by 10%
• Energy savings of circa £30m over 25
years
• Green Investment Bank - £18m funding
Addenbrooke’s Hospital
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19. At the heart of Policy
• Energy security of supply
• Stimulating investment in aging energy
infrastructure
• Avoiding market failure
• Guiding a sustainable low carbon transition
plan
• Fuel poverty
• Competitiveness of UK economy
• Deciding who will pay for it!
Decentralised energy’s material impact
Cardenden Heat & Power scheme
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20. • Societal needs often greatest in public sector - but funding/innovation is lacking
• Private sector expertise must step up and play a pivotal role
• Development capital options becoming available
• GIB Green Loan
• DECC – HNDU, Energy Efficiency Fund etc
• EEEF
• ERDF
• Industry entering PublicPrivate agreements to utilise heat 2011 Low Carbon
Communities challenge £10m across 22 communities but couldn’t deliver
replication…
• Replication at a scale – reduce transaction costs and timescales
• Procurement approach must be sharpened to focus on benefits
Stimulating decentralised developments
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21. • Development working capital
• Availability of capital
• Investor uncertainty of regulatory policy
• Board level sponsor
• Internal payback requirements
• Local competition for fuel in the future
• Debt markets appetite for risk
• Standardised contract suite
• Biomass
• Externalities not measured on P&L
Challenges
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• Local authority schemes stalling
• Internal core capital or externally
sourced
• Government incentives - RO/CfD
• Conversation to engagement
• Short term v long term security
• Disconnect between national / local
• ESCo de-facto guarantor
• Reduce transaction costs/time
• Fuel: a commodity or a waste
• Applying GRI / ESG / EP&L

22. • Financial modelling assumptions
• Technology & Feedstock
• Government Policy/Incentives/carbon
• Off take – power/heat/cooling/CO2
• Planning/permits/JRs
• Accounting/Balance Sheet/Tax, ECA’s
• Creditworthiness of counterparties
• Funding strategy
• Environmental Social & Governance
• Demand side energy efficiency
• Inflation/RPI
Due diligence – managing complexity
• Risk & Sensitivity analysis
• Interface management
• Savings structure/baseline
• Pricing mechanism – standing/unitary charges
• Legal & financial close
• Reporting KPI’s
• Comp on Term & liability provisions
• TUPE
• Infrastructure interface/metering
• Lease to occupy
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Don’t underestimate the requirement to ‘conduct’ your team of experts
They tend not to manage in concert!

23. Exam question: Decentralised energy: How can we unlock the benefits of an integrated
energy & sustainability strategy
•Overall Business sustainability – energy is sector and departmentally agnostic
•Delivers Triple bottom line net positive impacts - People, Profit, Planet
•Future proofs Business in an increasingly volatile world
•Supports the very ‘essence’ of the Business - defining enduring legacy & purpose
•Achieving improved business competitive advantage through the creation of shared
value to society
Summary
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24. Thank you
@markelstead
@Utilyx
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