Carillion Energy Services has been named preferred bidder for the £600 million Birmingham Energy Savers contract.
The contractor beat npower to the contract to roll out a Green Deal initiative to thousands of West Midlands homes and businesses, Birmingham City Council said this afternoon.
It comes after Carillion also prequalified for a similar £200m Green Deal initiative in Newcastle, where there are understood to be eight bidders in the running.
Speaking to CN last week, Carillion’s chief executive Richard Howson said the contract is a milestone for the Green Deal, regardless of the result.
“Birmingham Energy Savers is £600m over four to five years – that’s a big contract,” he said.
“That contract, whether we win it or come second, for the Green Deal is a really good boost I think because it will demonstrate that it is capable of being delivered on a larger scale, which will raise some eyebrows.”
It is estimated the overall scheme, which stretches across dozens of local authorities, could eventually be worth up to £1.5 billion.
Birmingham City Council is expected to provide up to £75m for an initial pilot, the Pathfinder Programme.
Another £25m is expected to support hard-to-treat and vulnerable households.
The first phase will run until autumn 2015. The council’s investment will be repaid repaid over an expected 25-year period under the Green Deal scheme, the Feed-in Tariff, Renewable Heat Incentive and other funds, grants, tariff or incentive arrangements.
The council is then expected to extend the contract to another £500m over five years for private and social homes and non-domestic buildings.
Mr Howson told CN that Carillion was “delighted” to have prequalified for a similar type of scheme in Newcastle, called Warm up North, to deliver energy efficiency measures to between 10,000 and 15,000 homes in the first three years, starting in 2013.
He said it is a “target market for us” after the acquisition of Eaga in April last year, which has since become Carillion Energy Services and hit the headlines for 1,400 job cuts on the back of the Feed-in Tariff cuts in March this year.
The Birmingham deal will include inititaives such as the FiT, where the council can pay for solar panels upfront, and then earn back the money over time.
“This is going to be a very large market over the next five to eight years,” said Mr Howson.
However, he also said more could be done to explain the intricacies of the Green Deal.
“I don’t think it’s been communicated properly yet; it’s quite complicated and it does take a bit of understanding,” he told CN.
CN understands several other councils are looking to follow the example of Birmingham and Newcastle.
It was also reported this week that a group of councils, led by Southampton, are considering the first major local government bond issue since the 1980s as part of proposals to back a range of green energy projects.
Ten councils would form an investment vehicle to borrow at least £100m from the bond market.
The Birmingham scheme was first revealed by CN last year, when the council was set to launch a tender that could lead to £1.3 billion of green retrofit work for 200,000 local homes and commercial buildings.