SE7: Develop policies to support sustainable energy infrastructure fund

Description and rationale for policy objective

In order to provide flexibility for developers in meeting planning policy requirements and targets, policy could be supported by allowing (or requiring) developers to pay into a Carbon Buyout Fund where a developer has demonstrated that meeting targets or requirements on-site is unviable. This may be in ‘energy constrained’ sites such as small, overshadowed infill or other small sites, or, if there is a requirement to connect to a heat network, where this is not feasible or viable (For example, there may be physical constraints, such as buried services, or transport infrastructure that may mean connection is not viable).

Development will need to comply with the prevailing Building Regulations regarding on-site CO2 emissions. This policy option is relevant to you only if other policy requirements you may set will require CO2 savings in excess of those required by Building Regulations, or other specific requirements beyond the Regulations, such as connection to an existing district heating network.

You may want to consider this policy in order to:

  • raise funds to improve the existing building stock or facilitate the deployment of other low / zero carbon measures in the area;
  • raise funds to assist in providing low carbon infrastructure, such as heating networks or a district energy centre;
  • have in place in good time a mechanism that, after 2016, will act as an Allowable Solutions fund that developers can pay into to meet their zero carbon requirements

The premise of this policy objective is that a developer would pay into a fund a sum of money proportional to the predicted CO2 emissions from the proposed development that cannot be dealt with on-site. The principle is that a development through increasing the CO2 emissions of an area should fund mitigation measures elsewhere in the same way that it might pay, for example, to avoid related traffic congestion under a S106 agreement. This fund would then be used by the local authority to reduce CO2 emissions, for example through the creation/extension of district energy schemes.

This approach has been proposed as one of the possible ‘allowable solutions’ which would form the Government’s definition of zero carbon.

Some Councils have sought to implement such a fund through use of Section 106 agreements. In order to be legally compliant the scheme would need to adhere to the requirements of ODPM Circular 05/2005 Office of the Deputy Prime. Annex A paragraph A2 states that:

“Such obligations may restrict development or use of the land; require operations or activities to be carried out in, on, under or over the land; require the land to be used in any specified way; or require payments to be made to the authority either in a single sum or periodically”.

In setting a S.106 it must be demonstrated that it is directly related to the proposed development; necessary to make the proposed development acceptable in planning terms; fairly and reasonably related in scale and kind to the proposed development.

The proximity restriction could mean that a significant number of otherwise desirable energy projects could not be funded. Also, there are many calls on S106, such as affordable housing, meaning that the available funding ‘pot’ for energy is likely to be limited. However, the precedent set by a number of local authorities, such as Milton Keynes, demonstrates that this can be a viable policy option.

The alternative funding option that may present itself is the Community Infrastructure Levy (CIL) which was introduced by the Planning Act 2008. Section 205 of the Act details that the overall purpose of CIL is to ensure that costs incurred in providing infrastructure to support the development of an area can be funded (wholly or partly) by owners or developers therefore providing significant opportunity for delivering decentralised low carbon energy. Regulations are currently being consulted on by government. The CIL is due to come into effect in April 2010.

A possible justification for such a fund, albeit it only in general terms, is given in paragraph 28, which states: “When specifying requirements for new development to secure energy from decentralised and renewable or low-carbon energy sources, planning authorities can set specific requirements to facilitate connection. Any requirement must be fair and reasonable and, in particular, not restrict those with responsibility for providing energy to new development, or the occupiers, to any one energy provider in perpetuity.” An infrastructure fund could potentially fall under this as it would facilitate connection of new development to heat networks.

However, perhaps firmer justification for this policy objective is given by:

  • the guidance and use of planning obligations and section 106 agreements to mitigate the impact of development, and the forthcoming introduction of the Community Infrastructure Levy;
  • the emergence of the concept of Allowable Solutions as a mechanism for enabling developments to meet zero carbon requirements, and the potential role of local authorities in administering this.

For information on the Community Infrastructure levy, see the Planning advisory service website

The Ashford Core Strategy, (adopted July 2008), sets out as part of its Policy CS10 a requirement for any shortfall in meeting carbon reduction targets to be met by financial contributions to enable carbon emissions to be offset elsewhere in the borough. See here

Milton Keynes policy D4 in the local plan, and the accompanying Sustainable Construction SPD, sets out a requirement for developers to pay into a buyout fund to deal with any residual carbon emissions to achieve carbon neutrality. See here

The key task, whether the buyout fund is to support a district heating requirement (policy option SE8) or a more general policy for carbon reduction (policy options SE1, or SE2), will be to develop an evidence base for the level at which the buyout payments should be set, in terms of £/tonne of residual carbon to be saved.

Essentially, this will be the same evidence as that which you would commission to set the above policies (SE8, SE1 or SE2). The level of the buyout payment should be set at a level which means the additional cost to the developer, over and above Building Regulations, is the same or less than that which they would have incurred if they had met the target or requirement without the buyout.


  • Option a) for a buyout fund in combination with an area wide requirement, refer to task 2 for policy option SE1 to inform an evidence base
  • Option c) for use of a buyout fund in combination with a requirement to connect to a district heat network, to assess the optimum level of buyout payment, see task 5 of policy option SE8


Model brief B

Title File type Download
Part A: Download model brief B to help with this task DOC Download


Model brief E

Title File type Download
Part B: Download model brief E to help with this task DOC Download


Model brief O

Title File type Download
Part C: Download model brief O to help with this task DOC Download