Iterating towards a tailored neighbourhood retrofit solution in partnership with Northern PowerGrid
Place based decarbonisation needs to happen at scale. But as 3Ci’s research has demonstrated, the sums of money involved are eye watering.
Treating each property in an area as an individual unit to be optimised is unlikely to result in the most cost-effective set of interventions. Instead, examining options at a neighbourhood scale will allow for a more efficient use of resources, as well as supporting better planning for local low voltage network reinforcement – that is, ensuring the right infrastructure is in place to supply the necessary grid power to the neighbourhood.
Newcastle City Council (NCC) is developing a Low Carbon Neighbourhood model to discover how to achieve this aim. The project looks initially at a low rise mixed-tenure residential neighbourhood of 228 homes, with 156 being council owned (and managed by Your Homes Newcastle). As the pilot evolves, a generalisable process is being developed for replication elsewhere as well as providing a springboard for unlocking additional inward investment to the city.
Challenge – balancing specificity with a need to scale
To date, attempts at establishing neighbourhood scale guidance for residential decarbonisation have struggled to provide sufficiently accurate and complete recommendations. A lack of accurate data alongside challenges getting all relevant stakeholders to collaborate have hampered efforts to move from theoretical estimations to the more fully fleshed out details necessary to provide the confidence to invest.
Examples of complexities to be resolved include:
- Differences in the characteristics of housing typologies (eg flats, townhouses, terraces) and age imply different solutions in terms of fabric insulation, heating, renewable generation etc
- Older properties in particular often lack detailed floorplans and BIM data needed to design the best interventions
- Power and heat demand varies significantly by time of day, with implications for the optimal solution design
- Mixed tenure neighbourhoods exacerbate the complexity of achieving agreement between residents
- Distribution Network Operators (DNOs) have their own regulatory compliance requirements which aren’t always considered alongside local authority priorities
Solution – building a robust techno-economic model from ground up
Newcastle City Council are in the process of building a replicable model for neighbourhood scale decarbonisation.
The first pilot neighbourhood, St Paul’s Place, was selected because:
- ‘Fabric’ retrofit improvements were already in place allowing better optimisation of heating systems
- Gas boilers in the social housing units were nearing the end of their service life; an ideal opportunity for change
Working closely in partnership with Northern Powergrid (NPg), NCC initially pooled available neighbourhood level data including NPg low voltage network data, calculations on roof solar potential and housing stock data to establish a baseline set of characteristics.
Next, a selection of buildings from the neighbourhood were chosen (to be representative of the diversity of housing stock) and more detailed surveys were carried out:
- An exterior 3D laser scan using a drone
- An interior laser scan using Matterport technology
These enabled the creation of a more de tailed BIM model of each property and provided the basis for an energy retrofit assessment to (and beyond) PAS 2035 standard.
Approximate models are being ‘cloned’ across the whole estate to enable exploration of the best combination of low carbon technologies to ‘de-gasify’ heating supply (for example communal air or ground source heatpumps), as well as incorporating local renewable electricity supply and storage.
NCC have fortnightly calls with NPg to align their activities and ensure that the implications of design choices are considered in the context of local network reinforcement and flexibility requirements – this is about a full city-wide approach and one that can be replicated by all local authorities in their licenced area. The aim is to model energy demand and usage on a half hourly basis to help understand the distribution network load implications and potential role for solar photovoltaic, battery installation and smart dynamic optimisation.
Once complete, NCC expect to be able to identify the best local combination of technologies and build out the financing model which will enable deployment (likely a combination of grant and investment), but the goal is to use this level of modelling to de-risk projects, move away from grant funds and attract investment.
Impact – social housing as a market maker
While the pilot is still ongoing, NCC anticipate the outcome of this work to provide the confidence to invest in the right mix of low carbon technologies in St Paul’s Place. With >150 properties owned by the council in the neighbourhood, and over 25K across the city, they provide sufficient scale to help ‘make a market’.
The robust nature of the survey work will provide confidence to landlords and owner occupiers to invest in the upgrades, and there is potential for NPg to join an investment ‘alliance’ here given the potential reinforcement savings and flexibility gains the scheme could unlock.
What next? – legal and commercial arrangements
As NCC zero in on the most feasible technical options for the first Low Carbon Neighbourhood, they will work on which are the most feasible, and how to deliver them, both in terms of financing and legal / contractual terms (including any potential need to modify tenancy agreements).
Fortuitously, Ofgem has recently awarded funding to NPg to develop a ‘community DSO’ (distribution system operator – ie the more active future of DNOs) model. This 5 year project aims to deliver a proof of concept for a new replicable local energy market framework – perhaps the solution to the financing of Newcastle’s LCNs.
Find out more
 Targeted to be complete by end of 2023
Local authorities in the UK face significant challenges in funding the net zero transition. In response, 3Ci proposes the Net Zero Neighbourhoods model, an innovative concept that packages net zero projects together – such as residential retrofit and waste management – to attract private sector investment.
29.06.23, LONDON, 3Ci – the Cities Commission for Climate Investment – has published today its new report advocating the case for a National Net Zero Neighbourhoods programme.
Developed by 3Ci with support from the Department for Energy Security and Net Zero, and the public and private sectors, this comprehensive report provides an outline business case for the delivery of Net Zero Neighbourhoods across the UK.
3Ci is a partnership between Connected Places Catapult, Core Cities UK, London Councils, Key Cities, Scottish Cities Alliance and supported by Department for Energy Security and Net Zero and the Local Government Association.
Net Zero Neighbourhoods is a new concept that integrates local net zero projects into attractive investment propositions by creating scale and long-term certainty for investors, thereby joining up the different types of assets that are important to decarbonisation. This includes transforming transportation, energy, housing and waste services in a coordinated way, using a blended finance model capable of attracting capital from banks, pension funds and other institutional investors. Importantly, 3Ci’s proposals include a programme of technical assistance and capacity building to ensure projects are of investment grade.
3Ci’s Net Zero Neighbourhood model has a special focus on residential retrofit, one of the biggest sources of emissions in the UK. Here, a core problem is that every neighbourhood has a different mix of housing types and tenures, which makes collective investments needed to decarbonise neighbouring homes difficult. Evidence shows it is also unlikely that most homeowners will pay toward retrofit, increasing the need for public subsidy.
But the new approach can address residential retrofit at no cost to the homeowner or tenant and reduce the need for public subsidy from around 70-80% to 35%. It does this by creating a revenue stream from energy savings over the long-term which is attractive to capital investors, blending their contributions with smaller amounts of public subsidy in an investment vehicle. The model also allows for a saving to be passed to the householder, or used to target fuel poverty, helping a just transition to net zero.
3Ci has calculated the cost of achieving local net zero at over £200 billion just for London and the 11 UK Core Cities – for the whole of the UK that figure is closer to £1 trillion, a figure way beyond the ability of public finances to address. Without bringing private capital into local net zero projects the UK will fail to meet its decarbonisation targets, and it is exactly this gap which 3Ci is designed to fill. 3Ci’s model aims to turn the cost of net zero into an opportunity, to bring significant additional investment, jobs and green growth to UK plc, delivering local environmental and health benefits, alongside community wealth-building.
Local authorities have projects which can deliver net zero and the investment community has demonstrated a growing interest in financing them, but too often these projects are not of investment grade. 3Ci’s approach therefore also offers technical assistance and capacity building to improve the standard of projects, alongside a platform to bring investors and project owners together.
Recognising these needs, opportunities and challenges, 3Ci’s new report makes the case for a multi-asset approach that avoids only cherry-picking projects that make the biggest returns, reduces the need for public subsidy and has no cost for the householder, improving the chances of community buy-in.
The report recommends a national programme of Net Zero Neighbourhood demonstrators to provide proof of concept, creating market and investor confidence.
Prof Greg Clark CBE, Chair of 3Ci and Connected Places Catapult, said: “The Net Zero Neighbourhood has several advantages over other methods of decarbonising places. It creates scale, certainty and an investable revenue stream, whilst building capacity for local authorities and enabling community buy in. Without the approach that 3Ci has developed, both within this model and its wider work, the UK will be far less likely to attract the capital needed to achieve its net zero ambitions.”
He adds that 3Ci has set up a Net Zero Investment Task Force of private investors, is creating a Net Zero Neighbourhood Community of Practice, and developing a ‘pitch-book’ of projects, bringing together places and projects that are either developing schemes which have some of the features of a Net Zero Neighbourhood, or have the ambition to do so.
“Nowhere yet has the ability to undertake a full Net Zero Neighbourhood project however, so our goal is to also set up full demonstrators capable of testing this model. The prize will be a major shift in investor appetite for net zero, shifting the market fundamentally toward this type of model, mitigating the existential threat of climate change whilst creating local jobs and other benefits. This is an area where the UK can be truly world leading, and we must now focus together on realising this opportunity.”
As a next step, 3Ci is seeking local authorities that are interested in working with them to develop demonstrators of the Net Zero Neighbourhoods concept. Local authorities have until 5th July to register their interest.
Local authorities seeking private sector funding for net zero schemes are invited to put forward their proposals to 3Ci – the Cities Commission for Climate Investment.
3Ci is looking for projects to be included in a new National Net Zero Neighbourhoods Programme, which will support and raise the profile of pilot schemes looking for local investment. This is a non-competitive process.
Net Zero Neighbourhoods is a place-based concept developed by 3Ci which aims to increase local prosperity through enhanced growth in green businesses and access to associated jobs. It also looks to create vibrant and cohesive communities through engagement and collaborative design, and enhance the attractiveness and quality of neighbourhoods.
Further information regarding submitting proposals for a Net Zero Neighbourhood will be provided in a workshop on Wednesday 5 July at 9.30am
Proposals accepted will be incorporated into a UK Net Zero Neighbourhood ‘pitchbook’ to be shared across Government departments and potential investors forming the basis of a potential first wave of a national programme, subject to funding being secured.
Successful schemes are set to be profiled and presented at COP28 in Dubai, as well as other national and international investment focused events. They will also be shared with the private finance community including institutional investors, investment banks and pension and sovereign wealth funds.
Proposals should form part of an existing or planned redevelopment scheme and local authorities are invited to submit single proposals that will contribute towards proving the concept of the Net Zero Neighbourhood model.
- Demonstrate understanding of the place-based Net Zero Neighbourhood model and how it could be applied within the proposal
- Include a description and identification of location, including information on building type and mix (e.g. residential, office, leisure), physical infrastructure (including mobility and energy), diversity of the neighbourhood, green and blue space.
- Provide evidence of political support at a senior level
- Identify any secured or potential funding which might contribute towards the design or delivery of the programme.
- Describe the diversity and socio-economic mix of the communities within the proposed neighbourhood
Registration of Interest
Please register your interest by submitting the name of the local authority and a contact person to Helena.Downey@cp.catapult.org.uk
You will then receive a confirmation email, an invitation to join the webinar and a copy of the Executive Summary of our Outline Business Case for Net Zero Neighbourhoods.
Interested authorities will then be invited to submit a short application by 8 September 2023.