Innovative Strategic Partnerships

Resetting the economy on net-zero at pace and scale

In the past eighteen months more than 70% of councils across the UK have declared a climate emergency – with many setting stretching targets to achieve net zero by 2030, well before the UK’s legally binding target of 2050 comes into play.

So how are they faring? Some are in the very earliest stages of that journey, discovering what it might mean to their borough or city or getting to grips with their baseline data as a starting point. Others are further along and, in dialogue with their local community, are moving the dial away from political declaration towards robust action planning. Common to many seems to be an understanding that:

a)  net zero is difficult – and difficult to explain, the journey is long, complex and expensive

b)  net zero is worth the effort, bringing social, economic and environmental benefits to communities, including to the most vulnerable.

Even in the most progressive cities, where leaders have personally committed to the climate emergency agenda, years of austerity coupled with the bow wave of financial strain emerging from the COVID-19 crisis, mean the resources required to deliver net zero, in terms of people, expertise and investment, are scarce at best.

It is through strong partnerships with the private sector that these holes can be plugged and net zero aspirations kept on track. At the core of any proposition must be the need to create a sustainable and commercially viable approach to energy services for the communities served. If nothing else, the COVID crisis has demonstrated that collaboration and cooperation across government, industry and society can transform how our economy operates, working together to implement a green economic reset, demonstrating that the rapid transition to a low-carbon economy is not only possible but also makes economic sense.

By developing new and innovative, long-term public/private partnership models, councils can equip themselves to respond to their climate emergency declarations and deliver at the pace and scale required to meet their ambitious timelines.

E.ON has been partnering with cities and regions across the UK and Europe for more than thirty years to support them in their sustainable energy and net-zero targets. During that time we have tried and tested a wide range of partnership models, including:

  • A 50:50 joint venture (JV) partnership with the local municipal utility company in Berlin to deliver a circular energy system on the site of the former Tegel airport (Berlin Urban Tech Republic);
  • A 30-year agreement with the City of London Corporation to deliver local, decentralised heat and power in the heart of the Capital;
  • An ambitious climate collaboration contract with the city of Malmö and VA SYD (the municipal water company) in support of the city’s vision to make Hyllie the world’s most sustainable city development by 2020; and
  • A JV partnership with four tenant-owner housing co-operatives representing over 6,300 residents in Stockholm, to enable community ownership of a new, local energy centre.

We are also in the process of initiating a long term JV partnership with a major UK city that will be the first of its kind and set out to transform its energy infrastructure to deliver the goal of becoming carbon neutral by 2050. This all-encompassing objective envisages the development of solutions including decarbonised heat networks, smart energy systems, energy efficiency (both domestic and commercial), renewable energy generation, electrified transport, housing and digital services. These solutions will be leveraged to bring incremental social value to the community through targeted activity focused on education, green skills and apprenticeships, job creation, innovation, inward investment and fuel poverty alleviation.

By learning from those partners with extensive, practical experience of helping cities across Europe it is possible to avoid many of the pitfalls on a long-term city energy transformation programme:

1. Align purpose and objectives

Right at the beginning, the purpose and basis upon which the energy partner and council intend to work together in order to bring forward key objectives should be established. These could include:

a)  a transformative step change in infrastructure in terms of heat and transport decarbonisation, energy storage and flexibility;

b)  air quality improvement;

c)  fuel poverty alleviation;

d)  creation of social value and real community engagement; and

e)   an improvement to health within the local authority.

2. Prioritise areas where citizen need is greatest

At the core of the proposition is the need to create a sustainable and commercially viable approach to energy services for the community. This is best achieved by working in partnership to:

a)  share data on where social need and the requirement for intervention is greatest; and

b)  create solutions which have the citizens at their heart,

thereby fulfilling the joint objectives and providing a legacy of sustainable, socio-economic growth in the community.

The central proposition of a long-term relationship is to provide certainty in local energy policy and, in turn, create a platform which enables future investment based on clear long-term goals and objectives with the community at its core.

3. Choose the right model and structure

We have achieved most when collaborating with partners in the long term and when both (or all) parties are working towards a shared vision with aligned views on aims, risk and reward. The ideal model for achieving this is the coming together of equals through a 50:50 JV partnership.

Key to the model are robust governance and transparency to give the council, its citizens and the energy partner confidence that objectives will be met in a timely and cost-effective way.

Moving at scale and pace are key to any transformative, city-wide net zero journey. Based on feedback from local authority partners, traditional models which break down major infrastructure projects into complex, lengthy and expensive procurement processes to appoint multiple works, services and supply contracts are a barrier to the agility and speed required to make net zero happen. Strategic JV partnerships bring considerable benefits to councils looking to innovate and drive social value at pace. 

4. Innovation, collaboration and community engagement

Any working agreement should be structured to make sure it is flexible enough to adapt to a changing landscape and political environment, and to allow additional partners - such as technology/digital services and telecommunications partners, other utilities and funding partners - to come on board at the appropriate time.

Real social value is only created by the inclusion of broader public and third sector organisations across health, education and industry. Appropriate consultation with third sector organisations and representative community groups will undoubtedly improve the level of decision-making, long-term success and legacy of the partnership.

5. What each party brings

The role of the council is to:

a)  leverage the policy landscape to encourage uptake in support of the aims of the partnership;

b)  promote the JV partnership and relevant projects in the community; and

c)  actively pursue opportunities of grant funding available to support relevant projects.

 

The role of the energy partner is to:

a)  identify, originate and bring forward projects which are in accordance with the objectives and pre-determined investment criteria;

b)  source long term asset-backed sources of funding into projects; and

c)  provide operational and management of de-centralised low carbon energy projects expertise.

 

The focus of this model is to use as much of the council’s existing structures and assets as possible to ensure it retains significant levels of involvement, governance and asset ownership.

6. Project delivery

Projects can be developed through a series of special purpose vehicles. These vehicles may be partly- or fully-owned by the JV partnership. The council and energy partner can work together to establish the most appropriate market facing structure and delivery vehicles, taking into account potential collaboration with additional partners and the type of assets to be developed.

 

In the UK, alongside 200 other major organisations, E.ON is calling for a fair and just Green Economic Recovery that is firmly rooted in net zero. With the majority of councils having declared climate emergencies and the Green Economic Recovery narrative emerging from the COVID crisis, it is now incumbent on city councils and local authorities to shift their focus from political declaration to action. Together, we can do this through developing strong relationships that will unlock investment across the UK and create essential new green jobs. Getting the right partners on board; choosing the best, most robust yet flexible partnership model and driving forward transformative projects at scale and pace will create a leadership position for those councils in the race to net zero.

In the words of E.ON’s CEO, Johannes Teyssen, “we must have the courage to pursue bold ideas, harness innovative thinking and win together”. 

For more information contact E.ON’s City Energy Transformation team at tomorrowscities@eonenergy.com