Southwark Heat Services Contract Agreed

April 2013: Southwark has recently agreed and signed a ‘Head of Terms’ agreement on a heat services contract with Veolia for “the provision of low carbon heat from the South East London Combined Heat and Power (SELCHP)”. As set out in a 2012 press release from the council, the project is to to create a district energy network which will transport heat – that is currently wasted – from Veolia’s  South East London Combined Heat and Power (SELCHP) Energy from Waste plant in Lewisham, to serve six housing estate in Southwark. Further information on the project can be seen in an earlier post here.

Following a period of consultation last year with leaseholders setting out the proposals and projected reductions in heating costs (see documents heresee the ‘Statement of Case’ document in particular to the proposed reduction in heat prices to tenants), the council has now completed negotiations with Veolia. A new Southwark report sets out some of the key requirements of the agreement. These include that:

  • The cost of heat could be no more than the cost of heating using the current gas boilers. This has been agreed.
  • There could be no capital investment required from the Council. This has been agreed.
  • The full operational risk of the system should be taken by the contractor. This has been agreed.
  • A price indexation mechanism should ensure that the cost of the heat rises less than the expected rise in energy prices. This has been agreed
  • There should be significant environmental benefits including a reduction in CO2 emissions and local pollution. This has been agreed.
  • The Council should share in the benefits of any expansion of the heat network.

The contract will expire in April 2033 at the same time as the boroughs waste PFI contract with Veolia. This project has clearly taken considerable time and effort by all concerned, but particularly Southwark officers, and they should be congratulated on seeing this project through. Getting heat output from the SELCHP plant after such a long time  (the plant is some 20 years old now)  is a considerable ‘win’ and should hopefully provide energy cost reductions to Southwark residents and broader environmental benefits in terms of carbon reduction.

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