Issue details

21/00109 - Kings Hill Solar Park

Proposed decision:

 

As Cabinet Member for Environment, I agree to:

 

1. The deployment of grant funding from the Public Sector Decarbonisation Scheme (decision 21/00034) for the procurement and management of works for the construction of the Kings Hill Solar Park;

 

2. Approve the policy determining appropriate use of the electricity produced by the solar park, in line with the requirement to reduce KCC’s carbon emissions;

 

3. Delegate authority to the Corporate Director of Growth, Environment and Transport to take relevant actions, including, but not limited to, entering into contract and other legal agreements as required to arrange and deliver the ongoing management of the solar park once operational; and

 

4. Delegate authority to the Director of Infrastructure, in consultation with the Deputy Leader and Cabinet Member for Finance, Corporate and Traded Services, and the Cabinet Member for Environment, to enter into all necessary legal agreements for the delivery and the construction of the project, including purchase of the site.

 

Reason for the decision

 

Effective use of the Decarbonisation Funding to deliver carbon reduction initiatives. The scheme is seeking to offset over 633 tonnes of carbon a year from KCC’s energy requirement and will contribute significantly to the de-carbonisation of KCC energy supplies and in meeting its carbon neutrality 2030 target.

 

The report is going for a decision outside of the Cabinet Committee process because of the complexity of the project and associated risks in several areas including rapidly changing market conditions. Officers in liaison with the Cabinet Member needed time to develop a comprehensive risk mitigation plan which delayed confirmation that the project could be delivered. Now that these risks have been satisfactorily mitigated, the decision needs to be rapidly implemented so that work could start on site from January and the time limited grant funding from BEIS secured.

 

Background – Kent County Council has been awarded via a Section 31 agreement some time limited grant funding from Salix towards the delivery of a number of low carbon energy projects including two solar parks (see decision 21/00034). This decision sees the delivery of a c2.98MW solar park in Kings Hill within close proximity to the Kent Scientific Services building. The funding was initially allocated to the North Farm waste site which KCC own however over a year’s worth of environmental improvements were required on the site before the solar park project could start. Instead of losing the funds, officers have sought to develop the Kings Hill site instead which is owned by the Liberty KCC joint venture.

 

Options:

 

  • Do nothing – seek alternative carbon reduction solutions, switch funding around, if possible, to other scheme(s) and or hand back the full PSDS grant funding of up to £3.5m. KCC would also incur £200k of abortive costs on the project to date and not benefit from approximately £140k per annum cost offsetting.

 

  • Construct Kings Hill Solar Park – complete all Royal Institute of British Architects stages to deliver the project and keep as much of the allocated grant as possible, secure a further increase in grant allocation and an extension to completion deadline from Salix/BEIS and seek to limit the financial risk to KCC. The purchase of the land will remain at KCC’s cost. (PREFERRED OPTION)

 

  • Purchase a solar park project with Planning consent and seek agreement to the change of scope with Salix. This is not guaranteed as the purpose of the Decarbonisation Grant was to fund new carbon reduction schemes and relies on interpretation of whether new to KCC as opposed to new outright is acceptable. This also relies on finding a suitable solar park and a willing seller and significant timeline and project risks leading to potential loss of grant funding. This option is a consideration as the carbon reduction that Kings Hill would deliver will still have to be delivered to meet KCC carbon reduction targets as outlined in the Net Zero 2030/2050 plans.

 

  • Purchase a completed solar park with KCC funding – loss of up to £3.5M of grant funding to KCC as Salix grant does not support purchase of existing facilities.

 

How the proposed decision meets the priority actions of Setting the Course: Kent County Council’s Interim Strategic Plan (December 2020)

 

The decision meets the following priority actions within KCC’s Interim Strategic Plan:

 

·       Deliver carbon neutrality for KCC’s estate and operations by 2030 and influence others; and

·       Champion the rural and green economy; and

·       Bring forward infrastructure projects to stimulate economic growth.

 

Financial Implications:

 

-       KCC is funding the cost of acquisition of the land for the site at Kings Hill as these costs sit outside of Salix grant funding allowances.

-       The cost of acquisition excludes VAT, legal costs, SDLT and due diligence which is accounted for in the total project costs. KCC is funding this through the Climate Change Fund and expenditure was agreed in principle via the Environment Board. The Climate Change Fund was established to enable actions that contributed to the achievement of Net Zero 2030 and as such it is an appropriate use of the fund to acquire the land for the solar park.

-       Project build cost is anticipated to be c£3.5M (excluding VAT and land purchase but including client costs).

-       Based on consultant reports, input from Laser and KCC Finance assessments of the project, the cost offset from the solar park is anticipated to be upwards of £90k per annum, based on year 1 forecasts, although the cost offset is likely to be higher once inflation is applied to the resale value of the electricity. The scheme will therefore deliver an estimated cost offset over the life of the project (assumes 30 years) of a of at least c£2.7M and potentially up to c.£4.2M;

-       Salix grant funding will currently contribute a minimum of £3.1M to the project;

-       Further Salix grant funding of £385k has been applied for as funds are still available within the overall Salix budget allocation and despite the increase in total costs to £3.5M (excluding land), this new cost still complies with the Salix long term carbon saving terms and conditions for the programme. While this has been verbally approved, the technical review to allow Salix to make this decision has been submitted and awaits formal approval. If this is not successful, based on current project cost projections the financial risk to KCC is £385k

-       KCC will need to fund any shortfall on the project if the March 2022 deadline is passed and no extension of time is given. This could be in addition to the current £385k shortfall if Salix funds cannot be used. Based on the current programme the cashflow anticipates that 80% of the total scheme costs (c£2.8M) will be used by the current deadline and grant funding retained leaving a potential c£685k to be funded by KCC if no extension is given and the grant funding for the remaining 20% of the total scheme costs has to be returned.

-       Worst case scenario if neither the additional Salix funding nor the funding extension deadline are agreed the financial risk to KCC is c£685k plus costs associated with land acquisition. (£300k to fund the difference between the £2.8M spend by March 22 and the £3.1M grant allocation that will have to be returned plus the £385k capital shortfall to meet the full scheme costs).

-        

Scenario 1 - Both additional funding and deadline extension agreed (Best Case)

Scenario 2 - Additional Salix funding agreed, deadline extension refused

Scenario 2 - Additional Salix funding refused, deadline extension agreed

Scenario 4 - Neither additional funding nor deadline extension agreed (Worst Case)

Full Scheme Costs

£3,485,000

£3,485,000

£3,485,000

£3,485,000

Current Salix Funding Allocation

£3,100,000

£3,100,000

£3,100,000

£3,100,000

Additional Salix funding to meet full scheme costs

£385,000

£385,000

£0

£0

Deadline extension

£300,000

£0

£300,000

£0

Financial Risk to KCC

£0

£300,000

£385,000

£685,000

 

-       If the scheme does not progress and the grant funding of up to c£3.5M is returned to Salix there will not be the opportunity to bid for future government funds to support the construction of a solar park. Future Government decarbonisation grant allocations will not provide 100% funding and will be focused on heat decarbonisation and therefore the opportunity for KCC to construct a fully funded / 80% match funded solar park will be lost.

 

Decision type: Key

Reason Key: Expenditure or savings of more than £1m;

Decision status: Recommendations Approved

Division affected: Malling Rural East;

Notice of proposed decision first published: 26/11/2021

This decision will be taken under urgency procedures.

Reason for urgency:
The report is going for a decision outside of the Cabinet Committee process because of the complexity of the project and associated risks in several areas including rapidly changing market conditions. Officers in liaison with the Cabinet Member needed time to develop a comprehensive risk mitigation plan which delayed confirmation that the project could be delivered. Now that these risks have been satisfactorily mitigated, the decision needs to be rapidly implemented so that work could start on site from January and the time limited grant funding from BEIS secured.

Anticipated restriction: Part exempt  - View reasons

Decision due: Not before 6th Dec 2021 by Cabinet Member for Environment

Lead member: Cabinet Member for Environment

Lead director: Stephanie Holt-Castle

Contact: Jonathan White, Southborough Project Manager 07988 375 334 Email: jonathan.white@kent.gov.uk Tel: 01622 696904.

Financial implications: -

Legal implications: - Terms and conditions of the Salix grant funding mean that the energy produced by the solar park must directly benefit KCC through lower carbon emissions; - KCC will enter into contract with Kier for the construction of the development; - KCC will enter into contract(s) with private and or Latco companies for the running of the solar park including both operations and management and the sale and purchase of electricity. - KCC will enter into a conditional contract with a subsidiary company of Liberty in relation to the site acquisition.

Equalities implications: An EqIA screening has been undertaken and no impacts were identified as the site is a static power generation project.

Decisions