'Green' energy boost for UK public sector

The UK public sector will have access to green electricity at no premium, thanks to an innovative new deal signed this week.

The deal, worth around £1 billion over the next four years, guarantees central and local government customers one terrawatt hour of electricity from renewable sources - equivalent to 33% of current volumes - until at least 2011.

Sustainability targets call for central government departments to be sourcing at least 10% of their electricity from renewable sources by March 2008.

Best of all, going greener won't cost departments any extra cash. Unlike previous arrangements, under this deal buying green energy will be no more expensive than buying "brown" (non-renewable) energy and paying the associated climate change levy.

In a market where demand for renewable electricity is outstripping supply, the new framework has secured these volumes and prices for four years.

The contract also includes a programme of site assessments for suitable renewable onsite generation, and toolkits for energy efficiency programmes for departments to meet the challenge of reducing carbon emissions by saving energy.

There will also be an innovative carbon off-setting option which allows customers to buy certified emissions reduction certificates. These certificates fund climate change reduction schemes, for example projects providing energy efficient stoves to families in developing nations.

Other new innovative aspects of the deal include options for day ahead purchasing direct from the wholesale markets, physical netting off agreements and transparent margins and cost structures. Significant overall value-for-money gains have been achieved from the new contract, including a 40% reduction in controllable supplier costs.

Over the last two years, average day ahead pricing has delivered savings of over 8% against the month ahead prices. For the first time central government will have access to the day ahead markets and sell-back options which can deliver significant savings and price management in a volatile energy market.

EdF Energy will supply the electricity under the deal, which was implemented by OGCbuying.solutions with technical support and energy expertise from the Office of Government Commerce and advice on sustainability from the Department for the Environment, Food and Rural Affairs.

The majority of central government's electricity requirement and significant local government energy needs are supplied under current arrangements managed by OGCbuying.solutions, which will continue until delivery under the new contract which commences on 1st October 2007.

Over the life of the current contract, OGCbuying.solutions has achieved consistently competitive prices for public sector customers, at around 3-5% below the average forward market price for electricity.

Derek Rothwell, Director of Procurement Buying Solutions at Buying Solutions said: "This new procurement model ticks all the boxes - it will reduce costs, improve prices and provide an environmentally-friendly energy resource.

"This impressive outcome was achieved through collaboration with our public sector customers and full engagement with the supply market to negotiate the best deal.

"Pooling expertise and resource with our colleagues in OGC has proved fruitful and will pave the way for other government procurements to be conducted in a similar way."

Claire Manning, Energy Category manager at the Office of Government Commerce said: "The collaborative approach used to develop this new electricity deal, which is unique for the public sector, clearly shows the benefit of sharing expertise across government.

"We will continue to look for future opportunities under the Transforming Government Procurement agenda to deliver value for money and innovative solutions in energy procurement for the public sector."

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