Government energy deal to save £84 million

12 April 2013

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14 April 2013 | Anna Reynolds

The UK government expects a 20-year contract with Air Products, worth 2 per cent of the government’s total energy spend, will deliver £84 million in savings, according to Cabinet Office minister Francis Maude.

As part of the contract, announced by the Cabinet Office, Air Products will invest £300 million to build a new ‘energy from waste’ plant in the Tees Valley in North East England. It will be the second facility of its kind in the area and will create jobs in construction for local people. The 2 per cent of energy spend is worth £25 million a year.

Under the agreement, the government will buy a portion of its energy directly from the Teesside generator at a low fixed price via a power purchase agreement, rather than buying through short-term wholesale markets that are subject to unpredictable price fluctuations.

Maude said in a statement: “This is the beginning of a pioneering approach to how government uses its collective buying power and long term demand to buy energy. Our aspiration is to develop world-leading, exportable technology, and the new state-of-the-art site in Teesside will help the UK become a centre of renewable technology. This is about changing the way we work to not only get the best out of our suppliers, but the best out of the UK.”

Lisa Jordan, Air Products’ business manager for Bio-Energy Europe, added: “By buying the electricity we produce, the Cabinet Office will help Air Products divert up to 350,000 tonnes of non-recyclable waste from landfill every year, which we will turn into reliable, controllable, renewable energy.”

The new plant is subject to planning and approval later this year and it is hoped this approach will lead to government engaging with the energy industry to identify opportunities for further energy procurements over the next five years.

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