Agenda item

Report of Corporate Director for Communities, Environment and Resident Services

Reshma Michael, Senior Energy Projects Officer, presented together this report and the urgent item and stated the following:

a)  Harvey Hadden Sports Village is a very high user of energy and uses on average 2,960 units of electricity per day, imports approximately 1,080,566kWh of electricity per year. and accounts for 4.8% of the Council’s energy budget;

b)  by installing an additional 304.3KWp solar PV system into the building's design, the system is expected to generate 254,730kWh in year 1, contributing a 20.84% reduction in the building's current energy import;

c)  the utilisation of solar power will further help reduce greenhouse gas emissions associated with conventional energy sources and contribute to Nottingham City's commitment to net zero;

d)  the anticipated Return on Investment for the project is 12.5% over a 6-year period, meeting the criteria of the Salix fund. This alignment with the financial objectives of the project makes it a robust and viable investment;

e)  the positive carbon value of the initiative has significantly enhanced the overall net benefit, and the improvement is reflected in an increased NPV of £2,087,915 Internal Rate of Return of 24.6% and a reduced payback period of 3 years. The reduction of carbon emissions by 53.1 tons annually, coupled with an overall +10 score in the Carbon Impact Assessment, aligns positively with Nottingham’s Carbon Neutral Action Plan, and the favourable environmental impact positions the organisation as a frontrunner in sustainability.

Following a request from the Deputy S151 Officer, the urgent item being considered in conjunction with this report contained the following additional clarifying information:

f)  SALIX is a revolving Capital Fund whereby the Council is able to drawdown funding for energy improvement / efficiency projects. The funding drawn down has to be repaid interest free from the revenue savings generated from the project. Once the funding is repaid the Council keeps the ongoing savings;

g)  SALIX Funding is repayable funding and is in accordance with both the Capital and Treasury Strategy;

h)  the financial models assume that the repayments are made from the revenue energy savings generated from the solar panels and return a surplus to the Council over the life of the asset. The revenue impact of this scheme will be included within the 2025/26 budget process;

i)  if the savings, as set out in the body of the report and the exempt appendix, do not materialise as planned, this scheme could generate a revenue pressure if the actual savings are less than forecast. If this occurs, any pressure would need to be contained within Energy Services or, if this is not achievable, declared within the budget process as a growth item.

Resolved to

(1)   approve spend of up to £419,750 of Salix funds on solar PV at Harvey Hadden Sports Village;

(2)  approve seeking competitive tenders for a design and build contract, in conjunction with procurement colleagues for value for money and compliance with Contract Procedure Rules, and award the contract to the most economically advantageous tender received;

(3)  delegate authority to the Corporate Director of Communities, Environment and Resident Services to enter into a contract with the successful tenderer;

(4)  delegate authority to the Corporate Director of Communities, Environment and Resident Services, in consultation with the Corporate Director of Finance and Resources, for the signing of the SALIX funding agreement;

(5)  approve the anticipated revenue savings and repayment of capital funding as set out within the reports and exempt appendix, noting that the identified net saving will be incorporated in the 2025/26 Budget and Medium Term Financial Plan process.

Reasons for recommendations

a)  Our high degree of confidence in the installation/operation of the solar PV system and certainty in the longevity of the facility, coupled with the unavoidable high energy demand totalling over 1 million kWh per annum and representing nearly 5% of the council’s total energy consumption each year, the benefits of approving this project far outweigh the risks.

b)  Return on Investment (ROI) - The anticipated Return on Investment (ROI) for the Solar PV project is 12.5% over a 6-year period, meeting the criteria of the Salix fund. This alignment with the financial objectives of the project makes it a robust and viable investment.

c)  Energy Independence - The project expects to generate a 20.84% of Harvey Hadden’s remaining grid energy demand, thereby offsetting a substantial portion of imported electricity and gas with renewable sources.

d)  Social Value - The positive carbon value of this initiative has significantly enhanced the overall net benefit. This improvement is reflected in an increased NPV of £2,087,915 Internal Rate of Return (IRR) of 24.6% and a reduced payback period of 3 years.

e)  Environmental Sustainability - The reduction of carbon emissions by 53.1 tons annually, coupled with an overall +10 score in the Carbon Impact Assessment, aligns positively with Nottingham’s Carbon Neutral Action Plan. The favourable environmental impact positions the organisation as a frontrunner in sustainability.

f)  Long-Term Viability - The project is structured for enduring feasibility, aiming for a 6-year payback period while sustaining profitability for up to 30 years. Moreover, this project initiative is centred on scalability and adaptability to incorporate upcoming technological advancements.

g)  Following a Capital Board meeting, the project received approval, but Finance requested two additional recommendations (resolutions 4 and 5 above) to provide further clarity on key financial aspects and gave further advice (as detailed in section 7 of the urgent report item).

h)  These amendments include detailed guidance on the Salix repayable funding, confirming that repayments will be made from the revenue energy savings generated by the solar panels and ensuring the Council benefits from a long-term surplus. Additionally, Finance highlighted Salix funding risks, emphasising the need to monitor potential revenue pressure if actual savings fall below forecasts.

i)  Despite these updates, the project’s total value, anticipated bill savings and carbon reduction targets remain unchanged.

Other options considered

a)  Do nothing - The alternative is to not proceed with the third phase of solar PV installations at the Sports Village. This would neither contribute to the Council's CN28 agenda, nor result in a 20.84% reduction in the building’s current energy import. Consequently, it would fail to offset a substantial portion of imported electricity and gas with renewable sources.