Derby City Council

Williamson’s under-performing Hydro-Electric Plant project won’t pay back now until 2037.

In 2007, when the Sinfin Incinerator was considered an important part of Derby City Council’s “Climate Change Action Programme”, another initiative was gaining Cabinet approval, the Longbridge Weir Hydro Electric Power Station ( located on the River Derwent adjacent to the Riverside Gardens). Whereas, in 2018, the Sinfin Incinerator remains a source of great notoriety – the Hydro plant has been quietly forgotten!

Background

The Plant essentially had 2 objectives:

  • save 1000 tonnes of carbon dioxide being pumped into the atmosphere each year
  • provide a net return to the Council after 20 years.

The original plan was to borrow £1.5m of “new money” (interest bearing) that would create a facility to produce 1.3 million kwH of electricity per annum. This would cover all of the Council House’s power needs, and feed a healthy surplus into the National Grid. Additionally there would be annual payments from the Government to encourage such “Green energy” projects. The whole scheme would pay back in 20 years. It was sold on the basis that Derby City Council would be a net-exporter of electricity.

By 2011, the costs had escalated, and the Cabinet had to approve an additional £600,000 worth of borrowing. Fortunately the Government had changed its scheme to a more lucrative FITS ( Feed-In Tariff scheme). This meant that the additional borrowing could be covered easily ; in fact it resulted in a much quicker pay back – just 16 years. By 20 years there would be a cash surplus of £750,000.

What went wrong?

The plant started producing power in 2013.

In the 5 full years since then it has averaged 770,000kwH pa ; only 60% of the planned output.

The electricity cost of running the Council House was planned at £65,000 pa; it is now nearer to £200,000pa

As a consequence of the above, there has been no surplus electricity for sale. The plan was £60,000 pa  – it has averaged at just £250 pa.

This has been offset by the FITS rate being higher.

Payback

In year 16, when it was supposed to have fully paid itself back, the business case will actually be cash negative by nearly £900,000. By year 20, when there was due to be a surplus of £750,000, it will be cash negative by around £600,000 – an impact on the business case of £1.35m.

Comment

The fundamental problem was that the Council was extremely optimistic ( or its advisors were) with the the plants planned power output.  In the 2007 Cabinet meeting it was agreed that normal contract procedures would not need to be followed, and so the special consultant, Derwent Hydro, was appointed to continue with the technical aspects of the project – with no competition.

In the original recommendations, it was stated:

“Building this power station would be a significant statement to the people of Derby and others that the Council means business on tackling climate change.”

“It is intended that the hydro power station becomes a tourist and educational venue.”

This is an example of where Senior Officers failed to confirm that the plant could deliver to specification before paying the contractor resulting in a long term drain on the Council’s planned finances.

In Chris Williamson’s 2007/8 Annual report ( then Leader of the Council) he promoted his green agenda which included this Hydro Electric Plant as well as  the, now, infamous, Sinfin Incinerator. The plant does generate electricity, and does save carbon emissions – but it will be a burden on the Council’s finances until 2037.

 

Categories: Derby City Council

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4 replies »

  1. In late 2013 the feed-in tariff for 100-500 kW hydros was 18p/kWh. Due to central government changes to the tariff it is now 6.46 p/kWh. Did you consider this in your analysis? It seems not.

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