Memorandum submitted by Boris Johnson,
Mayor of London
INTRODUCTION
1. The Mayor of London welcomes the opportunity
to provide a written submission to the Environmental Audit Committee.
The Mayor, along with his Director of Environment—Isabel
Dedring, has an ambitious environment agenda to meet challenging
targets including the reduction of CO2 emissions from buildings
across the Capital.
2. The Mayor believes progress on reducing
buildings emissions across the public sector has been underwhelming
so far. This has been exacerbated by the lack of national solutions
to deliver improvements at a large scale.
3. The Greater London Authority (GLA) is
eager to tackle the problem of building emissions and have developed
and piloted an innovative commercial model to retrofit buildings.
This uses guaranteed energy savings from energy services companies
to enable the funding of initial improvement costs at effectively
zero net cost.
4. The GLA is currently working to rollout
this approach across London and will make it open to all public
sector organisations.
VIEWS ON
CURRENT PERFORMANCE
& AMBITION
5. A good way to view the current poor performance
of government buildings is through the Operational Rating on a
building's Display Energy Certificate. The Sustainable Procurement
& Operations on the Government Estate Delivery Plan Update—December
2008, showed nearly 40% of buildings across the public sector
received the lowest possible rating of G.
6. The GLA have undertaken significant engagement
across London in developing a programme to help tackle emissions
from non-residential buildings. We found little evidence of public
sector organisations being under any notable central government
pressure to improve or having clear programmes in place to drive
significant improvements. Where drivers did exist these appeared
to be internally created.
7. Numerous projects, often supported through
Carbon Trust work, are happening but these tend to be extremely
small-scale compared to the organisations overall property portfolio
and often only cover one or two measures in a single building.
The overall impact against total energy consumption was likewise
extremely small.
8. The seventh annual Sustainable Development
in Government assessment (SDiG) stated encouraging improvements.
However, given large savings have been driven from estate rationalisation,
this could show a significant lack of ambition regarding energy
on retained building stock given the possible emissions savings
of over 25% that have been demonstrated by GLA in its pilot phase
of the London Buildings Energy Efficiency Programme.
9. The GLA Group have undertaken considerable
work in this area, including engaging numerous public and private
sector organisations in London and beyond. Common problems stated
regarding retrofitting buildings with energy efficient measures
to reduce emissions are:
— Significant upfront investment is required
to improve building energy efficiency;
— Many energy conservation measures have
significant payback periods making them unaffordable;
— Uncertain returns as some emissions/energy
saving projects fail to deliver;
— Contracting energy services can be costly
and complex;
— Piecemeal changes require significant
procurement activity and are inefficient.
10. These views are demonstrated in a brief
survey of public sector organisations in London that suggests
the major challenges in delivering large-scale reductions are
constraints on capital and internal capacity to mange such changes.
Figure 1
BARRIERS TO IMPROVING ENERGY EFFICIENCY
VIEWS ON
POTENTIAL IMPROVEMENTS
AND SOLUTIONS
Position of current solutions
11. The Mayor believes that a major programme
to retrofit buildings with energy efficiency measures is required
to deliver substantial savings on CO2 emissions and energy
costs. This is however, a new and developing market and therefore
limited knowledge and the lack of standard approaches make organisations
reluctant to undertake the activities.
12. The lack of a clear, cost effective
and easy to implement Government led solutions to enable the significant
reduction in emissions across the Government buildings portfolio
is a concern and major block to delivery.
13. Some work is being undertaken by the
likes of OGC on specific technologies, but piecemeal change is
intensive on scarce internal resources and inefficient for buyers
and suppliers when compared to a more complete building retrofit.
The GLA Buildings Energy Efficiency Programme
14. The Greater London Authority Group have
undertaken extensive work to develop the Buildings Energy Efficiency
Programme (BEEP). This work, in conjunction with the Clinton Climate
Initiative (CCI), is part of a flagship international initiative
to reduce the carbon footprint of cities globally. The CCI brings
together the world's most significant cities to tackle climate
change and the London BEEP is the first project to be delivered
through the Initiative. It provides a mechanism to make it financially
feasible for cities to radically cut emissions from their buildings.
15. The Buildings Energy Efficiency Programme
is a cost neutral means to reduce energy bills and carbon footprint
of buildings. An energy services company guarantees a set level
of energy savings—therefore financial saving—over
a period of years. This guarantees a future savings/income stream
to fund investment for retrofitting buildings with energy efficiency
improvements.
16. Improvements to buildings will typically
include a range of around twenty measures including new building
control systems, lighting upgrades and improved insulation. Through
using a blended payback across the improvements it has been possible
to include other more progressive measures such combined heat
and power units and solar/photo voltaic technology.
17. 100 GLA buildings have been committed
to the BEEP model. A pilot covering a wide range of buildings
including operational police stations, fire stations and listed
properties has so far seen 42 buildings generate energy savings
guarantees of 25% over an average six-year simple payback. The
pilot phase alone will result in annual savings of over 6,000 tonnes
of CO2 and over £1 million on energy bills.
18. We believe that the BEEP model creates
a highly scalable solution through directly tackling the two major
problems identified by public sector organisations:
— Access to capital - guaranteed savings
through the BEEP model reduces risk and enables easier internal
or third party funding solutions;
— Internal capacity - using a standard
approach with pre-tendered capable suppliers allows high resource
efficiency.
Delivering value for money investment in public
sector buildings
19. Significant funding is required to reduce
carbon emissions from public sector buildings. Work undertaken
by Ernst & Young[13]
shows that the BEEP model could deliver, with a positive business
case, over £400 million of investment in the physical infrastructure
of public sector buildings in London alone. This would generate
a reduction in CO2 emissions of over 300,000 tonnes
per annum, whilst enabling significant green-collar job creation
and large reductions in energy bills.
20. Central to the BEEP proposition is the
establishment of a framework of approved energy services companies
with pre-agreed contracts and defined deliverables. This allows
public sector organisations to avoid lengthy and complex procurement
processes, whilst securing value for money from strong pre-agreed
commercial terms. It also provides users the option to add their
own bespoke requirements.
21. To further enhance value for money,
the GLA are working with the CCI and major world cities in a procurement
alliance to reduce the costs of individual energy efficient technologies
and also help progress cost-effective production of newer technologies.
A scalable solution to deliver across the public
sector
22. Work to date with both public sector
organisations and private sector providers has shown that BEEP
is highly scalable and can provide significant benefits including:
— Reducing emissions and energy use—it
is possible to retrofit London's commercial buildings with energy
efficiency measures to reduce energy consumption by at least 25%
and costs by millions of pounds;
— Guaranteeing savings—the performance
based contract provides guaranteed energy savings across the portfolio
of buildings supported by stringent monitoring processes to provide
verifiable reductions;
— Allowing cost neutral improvements—effectively
cost neutral using guaranteed savings to pay back investment over
a defined period;
— Low disruption—approach fits with
existing facilities management provisions;
— Fast procurement—BEEP is compliant
with EU public procurement rules and pre-agreed suppliers and
contracts enable a simplified procurement process;
— Greater buying power and standardising
approach—commonality allows improved procurement collaboration
to reduce costs for buyers and suppliers whilst making improvements
more efficient and effective.
23. There has been significant interest
across London's boroughs, universities and NHS Trusts and a major
tender programme is due to be completed in late 2009 that
will help enable this important market to grow rapidly and cost
effectively deliver millions of pounds of investment in London's
buildings. This Framework will be open for use by all UK public
sector organisations.
24. Work on the BEEP pilot and development
of the model has also demonstrated a low disruption approach that
provides a payback within 12-18 months. Savings of 10%-20%
are anticipated from a combination of energy management, green
IT and improved control systems. This light-touch method would
quickly enable organisations to reduce emissions and build confidence
in the benefits of energy reduction. This approach could also
be highly applicable to areas such as schools where budget and
capacity constraints are combined with a limited time period for
making improvements to buildings.
RECOMMENDATIONS
25. BEEP shows that innovative procurement
can deliver a solution to reduce emissions and save money through
retrofitting buildings with energy efficient technologies. This
cost effectively delivers millions of pounds of investment in
London's public sector buildings that will produce significant
job creation. The Mayor believes that this approach should be
utilised across the public sector to reduce emissions and develop
a strong UK retrofit market.
26. The BEEP pilot shows that the public
sector can be more ambitious in reducing emissions. The Mayor
has committed to achieving significant emissions reductions and
believes that the Government should set higher and clearer targets
across public sector buildings.
27. To support achievement of higher emissions
reductions the Mayor believes central Government should help support
the development and use of wide scale solutions, such as BEEP,
that can deliver value for money improvements to generate significant
emission reductions and energy savings from buildings.
April 2009
13 Prospectus for London, the Low Carbon Capital. March
2009. Back
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