Building Smarter Cities
In 2008, Peterborough City Council (PCC) adopted an ambitious target to make Peterborough the UK’s Environment Capital. It was a bold aim, and the council recognised that to achieve this it would need to do things differently – and use advisers for whom innovation is second nature. Enter Pinsent Masons.
Working with the council, and combining its experience of working with public sector bodies with extensive knowledge and contacts within the energy sector worldwide, the firm has helped the Council work with private sector backers to develop and deliver a comprehensive package of changes benefiting both the citizens of Peterborough, and the environment.
Breaking new ground
No part of this project has ever been done in the public sector before. The scale and scope of the change programme has been unprecedented.
To date the programme has comprised the following five core components:
At the heart of the programme was a first-of-its-kind collective switching scheme aimed at leveraging the purchasing power of local authorities to get a better deal for constituents. The scheme, ‘Ready to Switch’, allowed residents and SMEs from across the city to join together collectively as a single unit to negotiate cheaper energy bills.
Participants were invited to visit a purpose-built website to register their details free of charge, giving their current energy usage figures for gas and electricity. Energy suppliers were then offered the opportunity to participate in a reverse auction. The supplier with the lowest tariff was the successful bidder.
The scheme has attracted over 50,000 participants (and anticipated savings of over a £1m) – making it the largest of its kind in the UK.
Crucially, Pinsent Masons designed a legal framework that allowed other local authorities to join and promote the scheme – and in so doing leverage greater collective bargaining power. Eleven did so. This was ground-breaking and demonstrated the power of local authorities working together to deliver a national strategy to deliver energy savings and alleviate fuel poverty.
“I welcome this initiative by Peterborough and its partner Local Authorities [and] encourage councils across the country to follow their lead”.
– Secretary of State for Energy and Climate Change Edward Davey (speaking at the launch)
Retrofitting public buildings
Many public sector buildings are energy inefficient and waste significant amounts of heat and power. Pinsent Masons has developed the UK pathfinder project for allowing third party investment to buildings operated by public sector in association with the Green Investment Bank.
The project, which was developed through Energy Performance Contracting (EnPC), was structured to allow the retrofit to be funded entirely by private sector investors. The investors receive repayment of the capital cost through the guaranteed savings in energy bills (provided by the installer) as a result of fitting the measures. This innovate structure is the first of its kind in the UK and, again, can be adopted by other local authorities.
The scheme will take Peterborough and seven other authorities who have adopted it out of the carbon reduction commitments in two years.
“It’s great to see councils, such as Peterborough, taking action to cut energy use and upgrade inefficient buildings. Not only will this help cut the city’s carbon emissions, it will also help the council save money on energy bills and drive forward green growth in the local area…I wish Peterborough City Council every success with their innovative project.”
– Greg Barker MP, Minister for Department of Energy and Climate Change commented on the scheme
Strategic partnership with British Gas
Pinsent Masons helped to not just negotiate, but broker a deal between PCC and British Gas that will see the latter roll out subsidised energy efficiency measures to thousands of homes, creating hundreds of new jobs in the process. The strategic partnership will ultimately see British Gas plough some £20m, funded through the Energy Company Obligation scheme
(which places a legal requirement on energy suppliers to fund improvements in energy efficiency to alleviate fuel poverty). The scheme will ultimately allow some 7000 homes to be improved, and in so doing create 600 local jobs for young people who are unemployed or in education or training.
‘Grow your own’ energy
Last year PCC completed on a £200m Residual Waste Energy-from-Waste Project with Viridor, one of the UK’s leading recycling, renewable energy and waste management companies. Under the deal Viridor will develop a facility with the capacity to process up to 85,000 tonnes of residual waste per annum, diverting waste from landfill and generating net electrical power of 7.25MW per year.
Pinsent Masons incorporated into the contract structure a unique provision for PCC to purchase the electricity heat created from the plant. This was the first time ever a deal of this nature had been struck. When the plant is commissioned it shall allow PCC to obtain all its energy requirements for municipal and civic buildings – including 180 schools – from a renewable and carbon neutral source.
The Council has also established its own energy supply business now with OVO Energy meaning it can supply electricity which Council Tax payers have paid for back to the community. Given the Council owns the generating facility it can freeze prices in the long term helping the vulnerable and fuel poor. This is one of the first of its kind schemes in the UK and is helping break down the monopoly on energy supply of the ‘Big 6’.
A ground breaking Chinese partnership
In the coup de grace, Pinsent Masons this year helped broker a strategic partnership between PCC and AVIC, a Chinese state-owned company with significant experience and expertise in renewable energy and energy efficiency.
The agreement is expected to deliver new jobs and training, support for the development of an enhanced university/ higher education offering, and the development of a final fabrication facility for smart meters, solar panels and street lighting in Peterborough. AVID will in turn explore potential commercial opportunities linked to the installation of solar PV canopies in Peterborough’s car parks, LED street lighting, municipal Wi-Fi, and the development of an integrated transport platform bringing together CCTV, live passenger and other data to create a smarter transit system.
The Pinsent Masons approach to helping Peterborough deliver on its ambitious strategy was built around genuine insight into government policy, budgetary pressure and commercial drivers for energy sector players.
Pinsent Masons recognised that PCC could not deliver on its ambitious plans without private sector knowhow and resources. Pinsent Masons worked with the client to understand what would be acceptable from a legal and political perspective. It then married this to a detailed knowledge of policies and vehicles coming from central government – such as the Green Deal and Energy Company Obligation – and the commercial drivers of organisation such as British Gas and the Green Investment Bank. In so doing Pinsent Masons was able to deliver legal and commercial insight, plus the contacts to bring its strategy to life.
It is not overstating matters to say that the changes already delivered as part of this programme have save millions of pounds for the citizens of Peterborough, and will continue to do so as the investments mature. To take one example, ‘Ready to Switch’ has attracted in excess of 50,000 members with some participants reporting annual savings of up to £400.
What we have done is generate the Council £5.2m per annum – which means that cuts in Council spending are mitigated and the impact on front line services much-reduced.
At a time when the development of ‘Smart Cities’ – environmentally friendly, technologically integrated municipalities – is a priority in and around government, Pinsent Masons has also developed a framework which is flexible enough to allow other governmental authorities to join the schemes and reap the same benefits for their citizens. Over 750,000 individuals and 10,000 businesses have been able to get a better deal on their energy bills as a result of schemes developed by Pinsent Masons around the UK. The completion of the ECO deal with British Gas – which was a success in itself – is now understood to be under examination by councils in Bristol, Birmingham and Northamptonshire keen to emulate the success of Peterborough scheme.
This is perhaps where the most significant innovation lies: Pinsent Masons has broken new ground in developing flexible, scale-able structures and the strategies to help cities throughout the UK improve lives while delivering positive environmental change.
“The establishment of the UK’s first inter-council collective switching framework was down in no small part to Pinsent Masons’ excellent team and will save local households hundreds of pounds on their soaring energy bills.
– John Harrison, Executive Director of Strategic Resources for Peterborough City Council
For further information please contact: