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DECC Government Major Project Portfolio data, September 2013

Updated 23 May 2014
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Project name Green Deal Magnox & Research Sites Restoration Ltd Parent Body Organisations Competition New Nuclear Programme Renewable Heat Incentive Smart Meters Implementation Programme FID Enabling for Hinkley Point C FID Enabling for Renewables Carbon Capture & Storage Commercialisation Programme Dounreay Parent Body Organisation (PBO) - Delivery Phase Electricity Market Reform Programme Geological Disposal Facility Programme (GDF)
Department DECC DECC DECC DECC DECC DECC DECC DECC DECC DECC DECC
MPA RAG rating (A Delivery Confidence Assessment of the project at a fixed point in time, using a five-point scale, Red – Amber/Red – Amber – Amber/Green – Green; definitions in the MPA Annual Report) Data exempt under Section 35 of the Freedom of Information Act (2000) Amber/Green Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) Amber Amber Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) Amber Green Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) Amber
Description / Aims The Green Deal programme aims to promote a step change in the delivery of energy efficiency measures, supported by private capital. The new market framework and Energy Company Obligation will help to meet legally binding carbon budgets, support seasonal energy security, tackle fuel poverty and help consumers reduce energy bills over the long term. The programme is designed to remove financial and quality assurance barriers for consumers, stimulate demand and encourage companies to energy the market for energy efficiency in buildings. In terms of the objective of the procurement, this has been established to be the delivery of a series of outputs largely based on the extant baselines of Magnox and RSRL and currently defined as outcomes of the Magnox Optimised Decommissioning Plan (MODP). This is subject to minor variations, mostly in terms of the timing of some of the key deliverables, some being drawn forward in time, while others are moved back to prevent foreclosure of potential strategic options for the NDA. The performance obligations associated with delivery of this objective are being embodied within a Client Specification which will ultimately form the basis of the contracts which are placed. Via the application of competitive tension, it is anticipated that a target cost incentivised pricing arrangement will be put in place for delivery of the performance obligations of the contract at lower cost than is currently planned. A key enabler to achieving this will be NDA's ability with the concurrence of HMG, to put in place a quantum of planned assured funding which will support competition. The New Nuclear Programme aims to ensure that the framework is in place to enable operators to build and operate new nuclear power stations in England and Wales from the earliest possible date. There are four main elements to the programme: 1. Delivering the "facilitative actions" to which Government committed in the 2008 Nuclear White Paper. 2. Ensuring that all necessary actions are taken to enable the construction of the first new nuclear power station at Hinkley Point C, by working with and through others (within DECC and externally) to help secure for example generic design approval, planning permission, CfD negotiation, state aid, helping current investors secure additional equity and direct negotiation of the arrangements for decommissioning and waste management. 3. Creating the environment in which nuclear operators can finance and successfully deliver a significant nuclear programme in the UK of around 16GW by 2030. 4. Creating the environment in which the UK supply chain can compete effectively to secure a significant proportion of the new build work in the UK and export into the world nuclear market. The rationale for the RHI is to help meet the Government’s renewables target which requires 15% of energy to be sourced from renewable sources by 2020 in a cost-effective way and to help lower carbon emissions. The Renewable Energy Strategy published in 2009 suggests that a 12% contribution to achieving the target could come from the heat sector. The Renewable Heat Incentive provides financial support to renewable heat generators and producers of biomethane that is designed to help address the additional cost associated with renewable technologies, in order to incentivise their take up. For more information, see: https://www.gov.uk/government/policies/increasing-the-use-of-low-carbon-technologies/supporting-pages/renewable-heat-incentive-rhi The Government's vision is for every home in Great Britain to have smart electricity and gas meters by 2020. Smart Meters will give consumers up-to-date information about how much gas and/or electricity they have used in pounds and pence, as well as units of energy. Smart meters will have benefits for consumers, suppliers and energy networks. Consumers will have near real-time information about their energy use, enabling them to monitor and manage their energy consumption, save money and reduce carbon emissions. Switching between suppliers will also be made simpler. Energy suppliers will have access to accurate data for billing and will be able to offer a wider range of services and tariffs. Energy networks will have better information to manage and plan current activities and support the move towards the development of a smart grid. The Electricity Market Reform White Paper set out the Government’s commitment “to work actively with relevant parties to enable early investment decisions to progress to timetable wherever possible, including those required ahead of implementation of the Feed-in Tariff with Contracts for Difference (FiT CfD)”. To deliver this commitment, DECC will enter into discussions with relevant developers with a view to considering what form of comfort might be given to support the taking of such investment decisions. The FID Enabling project gives effect to this commitment. By providing an appropriate form of comfort in advance of the implementation of EMR reforms, we are likely to encourage final investment decisions to come forward that would otherwise have been delayed until all necessary legislation had been enacted and new institutional arrangements put in place; or possibly cancelled altogether. This supports the Government’s decarbonisation and security of supply objectives as well as stimulating investment which creates jobs and growth. The first developer to seek assurance through the FID Enabling project, and whom we have accepted meet the criteria, is New Nuclear Build Generation (NNBG), a subsidiary created by EDF Energy to build a new nuclear plant at Hinkley Point C. NNBG will not move to a final decision to proceed with construction in the absence of additional certainty on expected revenue in the reformed market. A delay until the enduring regime is in place could substantially increase costs (ultimately principally borne by the consumer) or result in EDF abandoning the project. Either of these outcomes risks setting back the rollout of new nuclear generation as a whole, because the other developers are waiting for EDF to bear the first-mover risks. The Electricity Market Reform White Paper set out the Government’s commitment “to work actively with relevant parties to enable early investment decisions to progress to timetable wherever possible, including those required ahead of implementation of the Feed-in Tariff with Contracts for Difference (FiT CfD)”. To deliver this commitment, DECC will enter into discussions with relevant developers with a view to considering what form of comfort might be given to support the taking of such investment decisions. The FID Enabling project gives effect to this commitment. The aim of FID Enabling for Renewables is to avert an investment hiatus in the deployment of renewable electricity generation caused by the announced reform of the electricity market, in the period between the publication of the EMR White Paper and the full implementation of the EMR CfD, expected in Autumn 2014. In particular it seeks to enable developers to take final investment decisions, or other critical investment decisions directly impacting on the time to commission the project, which would otherwise be delayed by the uncertainty caused by the transition to the enduring CfD regime. The project aims are as for the EMR CfD: to ensure that the UK can attract the investment in renewable electricity generation needed to meet its renewable and carbon emission reduction targets in the most cost-effective way as well as to have a secure, affordable, supply of electricity towards the end of this decade and in the longer-term. Supporting investment decisions through the project will contribute to two of DECC’s priorities: • Deliver secure energy on the way to a low carbon energy future • Drive ambitious action on climate change at home and abroad It will also contribute to wider Government objectives on jobs and economic growth. The CCS Commercialisation Programme aims to build confidence and drive down costs of developing a cost competitive CCS industry, by supporting practical experience in the design, construction and operation of commercial scale CCS with £1bn Government capital funding and support under Electricity Market Reform. As a result of the CCS Programme existing fossil fuel supplies (gas & coal) will be used more cleanly, maintaining the diversity of our fuel mix; emissions from electricity generation will be reduced; in addition to providing a flexible and predictable supply of low carbon electricity generation, that can respond to changes in demand. For more information, see: https://www.gov.uk/uk-carbon-capture-and-storage-government-funding-and-support#ccs-commercialisation-competition The objective of the procurement was to secure a reduction in the cost and time to take Dounreay site to its interim end state by securing a new PBO for the Site Licence Company (SLC) at Dounreay, Dounreay Site Restoration Limited (DSRL). Associated with this was to be replacement of the cost re-imbursible Management and Operations contract with a Target Cost/Incentivised Fee contract which transferred elements of risk currently held by NDA/HMG to the private sector. The then plan reflected the cost at £3.5BN and being achieved by 2038. The terms of the contract notice required achievement of the interim end state by 2032 with a maximum annual cost of £150m. The successful bid (by BDP (Babcock Dounreay Partnership)) reduced the cost by circa £ 1 billion and brought the interim end state date forward to 2023-2025 although developments during the bidding process which the tenderers could not allow for due to their maturity are yet to be factored in via approved change control. The aim of the programme is to undertake the necessary reform to the electricity market to ensure the UK can attract the investment in electricity generation needed to have a secure, affordable supply of electricity towards the end of this decade and in the longer-term and to meet its renewable and carbon emission reduction targets in the most cost-effective way. The key elements of the programme which will deliver this are: • The creation of a Contract for Difference Mechanism which incentivises low carbon technology and generation (renewables, nuclear and CCS) in a cost-effective way; • The creation of the Capacity Market Mechanism to ensure that the market has sufficient capacity to ensure security of supply in a cost-effective way and • Putting in place an institutional framework with sufficient credibility to administer the reforms efficiently and effectively. To deliver a solution for the safe and secure long-term disposal of higher activity radioactive waste for legacy and future nuclear waste. The 2008 Managing Radioactive Waste Safely (MRWS) White Paper set out geological disposal as Government's favoured policy solution. The Geological Disposal Facility (GDF) programme is designed to implement that policy. Key parts of the programme include gaining community agreement to investigating the potential for hosting a GDF; completing site identification and assessments; securing legal and regulatory approvals and underground construction and testing to achieve the first waste emplacement by around 2040. Voting by local authorities in west Cumbria on 30 January 2013, on whether to participate further in the siting process for a GDF, did not result in the positive vote at both Borough and County levels required for the process to continue in west Cumbria. Therefore, the current MRWS process has been brought to a close there. DECC Ministers have agreed that the department will conduct a review of the MRWS siting process, including lessons learnt from how the MRWS process operated in west Cumbria. Following the review, when any changes required to the siting process are agreed, the GDF programme will be re-baselined and planning assumptions will be reviewed. The information presented in this return in respect of the new siting programme - particularly the milestones - is indicative and therefore subject to revision and confirmation. The GDF programme is a key dependency for the new nuclear programme, due to the need for Government to be satisfied that effective arrangements will exist to manage waste from new nuclear reactors. While not a key dependency for the Plutonium Management programme, options for future management of plutonium are dependent on the availability of a GDF to provide a final disposal solution.
Departmental commentary on actions planned or taken on the MPA RAG rating. Data exempt under Section 35 of the Freedom of Information Act (2000) The RAG rating reflects the delivery confidence in the competition based on a number of factors which existed at the point the rating was assigned and which were entirely to be expected at that point in the process. These issues have diminished in importance as the competition has progressed. Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) The Amber rating reflects the publication of domestic RHI policy in July 2013 and good progress made on improving the project management of the project. The Amber delivery confidence rating reflected the view that, although good progress had been made to date, there were still a number of complex areas to tackle. The programme remained on track to deliver the appointment of the preferred bidders in the Data and Communications Company (DCC) and service provider competitions as planned. The competitions were viewed as well managed and quality assured throughout, with a strong culture of commercial leadership and programme control driving an experienced team towards clear goals. Stakeholder engagement was also noted as commendable. In September 2013, following the DECC-led procurement, the Data and Communications Company (DCC) licence was awarded to Capita. The DCC then contracted with the successful data and communications service provider bidders to establish the shared infrastructure linking smart meters with service users. Governance arrangements are in place to track progress across the industry. Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) The [Amber] RAG rating reflects the good progress that has been made in the Programme since its official launch in March 2012. As one of the Government’s Top 40 Infrastructure Projects, there is a significant programme of work ahead to take forward the first CCS Projects as part of the broader initiative to commercialise CCS in the UK. At the current stage of the programme (i.e. planning and design), no better than an Amber RAG rating would normally be expected. The review made some recommendations with respect to the contract management processes for the FEED contracts ahead of contract signature, which were implemented; DECC subsequently signed two FEED contracts in Dec 2013 and Feb 2014 for the White Rose and Peterhead CCS projects respectively. Following completion of the first contract year, all contract milestones were met. During the second year again all contract milestones were met and progress continued in integrating scope not included in original tender. Data exempt under Section 43 and Section 35 of the Freedom of Information Act (2000) The Amber RAG rating reflects the early stages of a long-term project that involves working in partnership with communities. In January 2013 the siting process in west Cumbria came to a close. Since then DECC has been developing a revised siting process, including a lessons learned exercise from the previous process, a Call for Evidence and subsequent public consultation. The revised siting process will be set out by Government in a revised White Paper later this year.
Project - Start Date (Latest approved start date) 20/05/2010 03/04/2012 31/01/2008 30/11/2008 02/12/2009 01/09/2011 17/12/2012 25/10/2011 21/09/2009 10/12/2010 30/06/2008
Project - End Date (Latest approved end date) 31/12/2030 01/09/2028 31/03/2019 10/09/2014 30/09/2020 01/02/2015 31/12/2013 31/03/2050 31/12/2025 31/12/2030 31/12/2040
Departmental narrative on schedule, including any deviation from planned schedule (if necessary) The start date reflects the Coalition agreement. Green Deal was launched on time on 28 January 2013. Consumers were able to access Green Deal Finance from June 2013. No departmental narrative Start date represents the 2008 Nuclear White Paper. The facilitative actions set out in the 2008 White Paper have largely been completed, establishing the policy and regulatory framework to enable the deployment of nuclear power. Schedule has been extended for reasons including the on-going negotiations with EDF Energy around the Hinkley Point C Investment Contract. The start date reflects Royal Assent to the Energy Act 2008, which includes the legal powers that underpin the RHI. DECC expects to open the domestic RHI for applications and implement the extensions to the non-domestic scheme in Spring 2014. The project end date allows for a post-implementation phase and will be reviewed in mid-2014. Start date represents publication of "Towards a smarter future: Government response to the consultation on smart metering for gas and electricity" in December 2009. Initial Live Operations are expected to be available in Q4 2015 and roll-out completed by end-2020. Start date represents start of project following the EMR White Paper of July 2011. End date represents the expected conclusion of the project following award of contract and transition of contract management to the Counterparty body. Start date represents the start of the project following the publication of the EMR Operational Framework in November 2012. End date represents the award of Investment Contracts to successful applicants. In Q2 2013/14 the FID Enabling for Renewables project was expected to end by December 2013. Since then the timetable for the final CfD contract (EMR Programme) has been extended and Ministers agreed that the FID Enabling for Renewables investment contracts should be based on final strike prices published in December 2013. This has resulted in a revised timetable for FID Enabling for Renewables, with contracts signed in April 2014. The start date represents the approval of Strategic Outline Business Case (SOC) for the CCS Commercialisation Programme. The end date represents the decommissioning of CO2 store. The on-going Front End Engineering Design work will further mature the timetable for detailed design, construction, operation and decommissioning. The Start Date represents when engagement with the market began with industry days and pre-qualification. The End Date represents when the site’s Interim End State will be reached which is a predefined condition of the site and ground The programme has met a number of key milestones and we remain on track for delivery of EMR in 2014. The programme commenced following publication of the Managing Radioactive Waste Safely (MRWS) White Paper in June 2008. Under original plans, first waste deposited on site was expected by 2040. However, on 30 January 2013, three local councils in west Cumbria (the only communities engaged at that time in the MRWS process) voted on further participation in the siting process for a GDF. In the absence of a positive vote at both Borough and County level - an agreed pre-requisite for the process to continue in west Cumbria - the process in west Cumbria has been brought to a close. The department is learning lessons from the experience in west Cumbria and is engaged in developing a new siting process including a public consultation which ran between 12 October - 5 December 2013. The Department has published the responses along with a summary which highlighted key themes. Launch of White Paper on a new siting process is expected later in 2014.
2013/2014 Budget (£million) 200 0 1.38 219 15.609 3.971 1.858 36.6 150 20.41 24
2013/2014 Forecast (£million) 200 0 1.38 80.1 18.609 6.7278 2.839 36.56 158.3 20.41 23.74
2013/2014 Variance (£million) 0 0 0 -138.9 3 2.7568 0.981 -0.04 8.3 0 -0.26
2013/2014 Variance %age 0.00% 0.00% 0.00% -63.42% 19.22% 69.42% 52.80% -0.11% 5.53% 0.00% -1.08%
Total budgeted whole life costs (£million) (including non-government costs) 10311.92 5716 31.292 48261.8 17184.647 13.6898 3.6919 Data exempt under Section 43(2) of the Freedom of Information Act (2000) 1578 66.15 11626.4
Departmental narrative on budget/forecast variance for 2013/14 (if variance is more than 5%) Not applicable as no difference Not applicable as no difference Not applicable as no difference Current deployment is lower than budgeted for as a result of low deployment of some technologies, delays to the development of the scheme and over-estimates in initial modelling that informed budget profiles before scheme launch. Expenditure estimates for this year are based on current stock and expected flow for the remaining 6 months, using market intelligence forecasts. This represents funding for the central government programme. The variance has been driven mainly by: additional activity to complete the technical specifications work; additional activity to complete the competition awards and contract finalisation; and, DECC taking on a new industry stewardship and coordination role. The additional funding requirement for 2013/14 was secured from within DECC. Project costs relate to the project team and external advisers. Project timelines have changed and in Q2 2013/14 it was forecast that there is insufficient budget for external adviser costs. Additional budget has since been sought in DECC's mid year review and 2014/15 business planning. Project costs relate to the project team and external technical, legal and financial advisers. In Q2 2013/14 an overspend was forecast against the 20013/14 budget due to changes to the project timetable. Additional budget was sought in DECC's mid year review. The 2013-14 budget includes costs for managing the Programme (which are not drawn from the £1bn budget) and HMG’s contribution towards the Developers’ costs of conducting Front End Engineering Design (FEED) studies, which are expected to complete towards the end of 2015. Variance is due to change controls for scope not included in the tender now being brought into contract. Not applicable as no difference Not applicable as within stated tolerance
Departmental narrative on budgeted whole life costs Whole life cost represents £10 billion (discounted) anticipated total capital spend via private sector investment on energy efficiency measures over the life of Green Deal and the Energy Company Obligation, plus £200 million of Government-provided incentives, with a small balance comprising scheme administration and advice services. The whole life costs will need to be reviewed as DECC establishes a new Household Energy Efficiency Programme from 2014-15, following additional capital funding announced in the Autumn Statement 2013. WLC cover the costs of decommissioning the 10 Magnox and 2 RSRL sites and taking them into their Care and Maintenance States. They also cover the costs of processing and managing the resultant radioactive and non radioactive wastes arising from decommissioning activities. Finally the WLC address the establishment of a "hub" facility to carry out surveillance, and if required maintenance ops on the sites after they enter their C & M states. Whole life cost represents costs for delivery of the facilitative/regulatory framework. Stations will be built, operated and decommissioned by the private sector. The Electricity Market Reform programme will provide the market framework including contracts for difference for the operators. RHI budgets are only set up to 2015/16 so whole lifetime costs (which run to 2040) are illustrative only and assume 30% annual deployment growth up to 2020. This reflects: the introduction of a domestic scheme; increases in tariffs for poor performing non-domestic technologies; and several additional technologies being added to the non-domestic scheme. As RHI cost estimates run to 2040 inflation estimates have a very large impact. Whole life costs for installing and operating smart meters as well as the data and communications infrastructure will fall to industry; primarily energy suppliers. This figure is undiscounted. The forecast above is whole life costs for the policy/delivery team only and excludes costs associated with the CfD/investment contract. The cost to EDF of building, operating and decommissioning the nuclear plant are also excluded. The forecast above is whole life costs for the policy/delivery team only and excludes costs of CfD/investment contracts. The costs to successful applicants of building, operating and decommissioning their projects are also excluded. Data exempt under Section 43(2) of the Freedom of Information Act (2000) The successful bid significantly reduced the whole life cost forecasted for Dounreay.  However, as previously identified, developments during the bidding process, which the tenderers could not allow for, will impact the whole life costs and these should be factored in over the next 18 months The WLC covers the cost of policy development, implementation and delivery of the Electricity Market Reform Programme. Whole life cost figures represent the estimated undiscounted cost of designing, constructing and operating the GDF out to 2130. The undiscounted cost of designing and constructing the first stages of a GDF (to first emplacement of waste in 2040) is estimated to be £4bn.