Information

Energy Efficient Scotland programme: analysis of delivery mechanism

Report exploring how best to oversee the delivery of our programme to improve energy efficiency and promote low carbon heating in Scotland's homes and buildings.


Part 2

Preferred Way Forward

8 Potential models for delivery

8.1 Key points

This chapter introduces the long list of options as a potential mechanism for the new EES delivery architecture. A first pass review is then applied of these mechanisms, to identify if they have the ability to fulfil the 10 Roles identified in Chapter 7 as being important to the NDM.

7 mechanisms have been identified that could potentially fit and deliver the strategic roles. These mechanisms are:

  • Steering Group & Scottish Government Delivery;
  • Creation of EES Directorate;
  • Scottish Government Local Collaborative Structure;
  • Executive Agency;
  • Non-Ministerial Office;
  • Executive NDPB; and
  • Public Corporation.

Other models were also considered but discarded due to a lack of perceived fit with EES requirements.

8.2 Introduction

Chapter 7 outlined how a set of 10 Roles are likely required to enable the successful delivery of EES. It was explained how it might be expected to lead to a higher likelihood of success. It would be expected that these roles are delivered at either a national or local level (or a mixture of both).

This chapter presents an outline of the different available options for the structure and architecture of the proposed NDM, in order to enable the delivery of these 10 Roles. This chapter includes:

  • A potential long list of options for different delivery architectures;
  • A high level summary of the potential structures and frameworks of these different options and an outline of the key differences between these models; and
  • A “first pass” assessment of the long list of mechanisms, looking to identify which of these options could potentially be used to deliver the required roles outlined in Chapter 7, and conversely, which options may appear to be structurally suitable for delivery and will not be considered for further review.

8.3 Identification of potential models (the long list)

“The long list” is outlined below, the set of delivery models identified as potentially able to support the delivery of EES.

This list has been identified through: desk based research from the policy team constructing this report; from specific input from the Scottish Governments’ internal stakeholders and from the learnings of previous work completed on the subject of delivery models to support EES, including the learnings from the SFT. These options are broadly split across three distinct groups:

  • Internal government delivery – Whereby responsibility for delivery would sit within current frameworks of the Scottish Government.
  • Amendment of existing bodies – Whereby responsibility for delivery would sit within an existing body suitable for taking on the required roles, either within or outside of Scottish Governmental control.
  • New bespoke body –Development of a new bespoke body, tasked with and accountable for the delivery of the 10 Roles in support of the EES agenda.

Table 12: The long list of options

Delivery Options

Overview

Internal government delivery

1

Steering Group

  • Development of a specialist Steering Group formed of representatives from within relevant directorates of the Scottish Government. In isolation, the group would be responsible for managing all potential roles of the new EES architecture, such as monitoring progress and providing advice and assistance to those organisations currently involved in deliver EES initiatives, i.e. Local Authorities. The group would have a formal enduring remit of ensuring the successful delivery of EES and would be staffed by civil servants and representatives of relevant groups.

2

Steering Group & Scottish Government delivery

  • Development of a specialist Steering Group formed of representatives from within relevant directorates of the Scottish Government, as above. This is in addition to large scale resourcing and investment in additional functions within the Scottish Government Directorates and Local Authorities to enable delivery.
  • This would include, delivery of the required functions outlined in the strategic case such as enforcement, engagement, funding, monitoring etc. However, here the delivery function of the Steering Group would be limited, as actual role delivery would be carried out by staff within the relevant directorates. The Steering Group would likely function as an overarching co-ordination body.

3

Scottish Government Local Collaborative Structure

  • A Strategic Board made up of Ministers and local government leaders, which provides and adapts the strategic direction to the Programme, as needed. This board would oversee an EES Delivery Board which would bring a range of stakeholders together (Inc. senior SG and local government officials). This body would look to provide direction and resourcing to; workstreams (or similar) involved in policy and/or on-the-ground delivery of the Programme, co-led by SG, COSLA, local authority and/or other officials, as needed. The EES Delivery Board could be rebranded to be the single-point-of-access.

4

Steering Group & Development of new directorate

  • Development of a specialist Steering Group formed of representatives from within relevant directorates of the Scottish Government, alongside the creation of a bespoke new directorate tasked with the delivery of EES. The entire new directorate would be accountable for the delivery of the required functions to deliver EES, working with other directorates where appropriate. Both Steering Group and Directorate would be staffed by civil servants. This new body could be created by either lateral transfers of existing Civil Service staff, new hires or a mixture of the two.

Table 12 (cont): The long list of options

Delivery Options

Overview

Amendments of existing body

5

Amendments of existing bodies within Scottish Government control

  • Allocation of one or more of the expected functions of the new EES programme to either an individual or multiple bodies currently in control of the Scottish Government. With additional funding, and with one of these organisations acting as a focal point, delivery of the overarching programme could be done through these existing organisations with sole accountability for individual workstreams place within either the same, or multiple existing bodies. Funding would likely have to come directly from the Scottish Government.

6

Amendments of existing bodies outside Scottish Government control

  • Allocation of one or more of the expected functions of EES to either individual or multiple bodies currently not in control of the Scottish Government, but with a remit and working to deliver relatable policy in Scotland. Additional funding would be required directly from government. One of these organisations would act as the focal point for the programme, or alternatively a central area (Steering Group) could be tasked to deliver this role within the Scottish Government. Delivery of the overarching EES agenda (this individual roles) could be done through these either one or multiple of these existing organisations.

New bespoke body

7

Executive Agency

  • A newly developed independent body separated from any government department. This body would be responsible for all delivery aspects of EES, and would work with other government directorates and bodies where appropriate. This body would not necessarily be mandated to itself deliver EES functions, but would at a minimum manage their delivery with the possibility of outsourcing work to other organisations.
  • This body would be staffed by civil servants including the Chief Executive, who would be directly accountable to Ministers of the Scottish Government (likely Housing or Energy). The agency would not be a statutory body but would operate in accordance with a Framework Document which is approved by Ministers.

8

Non-Ministerial Office

  • Would function in a similar manner as an Executive Agency as an agent to ensure delivery of all aspects of EES, with the potential for outsourcing of individual projects where appropriate. However an NMO would be a statutory body headed by a board or statutory officeholders appointed by Ministers. An NMO would not be part of the Scottish Government but part of the Scottish Administration in their own right.
  • Funded by Parliament and required to publish their own annual report and accounts in the same way as the Scottish Government is required to do. Directly accountable to the Scottish Parliament for the discharge of their statutory functions, but may carry out statutory duties for Ministers.

Table 12 (cont): The long list of options

Delivery Options

Overview

New bespoke body

9

Executive NDPB

  • An Executive NDPB set up to provide both independent advice, but to also function in a delivery role. The body would manage the overall delivery of all aspects of EES (with potential for outsourcing), and function as an arm’s length department. As an example, this could involve the body either directly taking on, or managing the delivery of enforcement, educational or data infrastructure driven roles within EES, as well as other roles.
  • The body would be accountable to the Scottish Government through their key performance measures and established in statue. The body would be set up through legislation, employ its own staff and prepare their own accounts for presentation to Parliament. The body could also potentially raise revenue independently of government where commercial activities fit within the remit of delivery of EES.

10

Public Corporation

  • Creation of a Public Corporation, this model functions as above, as the overall delivery agent responsible for the delivery of all aspects of EES. A Public Corporation is a commercial enterprise under Government control, employing its own staff, who are not civil servants, managing their own budgets and reporting to a Board whose members are appointed by Ministers.
  • This could be established either as a statutory body E.G. Scottish Water, or as a company regulated by company law. As a commercial organisation this body would need a revenue generating role outside of simply government funding (at least 50% of revenues), these could potentially be based on areas such as consultancy services, energy efficiency installations, accreditation provision, licencing or potentially the role of a Public Energy Supplier (a POEC).

11

Trading Fund

  • A trading fund focussed on delivery of EES. This body would handle all delivery aspects of EES, while also handling its own revenues and expenses separately from overall government finances. A Trading Fund would function more like a business, as opposed to having to obtain funding from the government's legislature and feeding income back into its treasury.
  • As a trading fund model, a significant proportion of operational funding would be required to fund from commercial sources. Similar to a Public Corporation, this body would need a revenue generating role outside of simply government funding. It is noted that there has been a tendency to not set up new trading funds by the Scottish Government, and that this body is primarily suited towards operations which are all commercially orientated.

12

Charitable Trust

  • A charitable trust established for charitable purposes while also working as a delivery agent for EES. This body would enjoy a varying degree of tax benefits, however due to government charity law would be severely restricted on the potential roles it could fulfil.

8.4 Option feasibility

Several of these options have been initially discounted as unviable, given constraints and limitations on them as mechanisms. These options have not been taken forward for any further consideration, but outline them and the reasons for discarding them below:

Publicly energy company

The Scottish Government has stated its ambition to develop a public energy company with the aim of tackling fuel poverty. Options for the delivery model of the energy company are being tested through the outline business case that is being developed between November 2018 and early 2019. The aim is for a model that is co-designed with Local Authorities to maximise local benefits, supplying energy through a not-for profit, white label approach. The public energy company will operate on a level playing field with other commercial suppliers but will have a public sector ethos at its heart which will determine the product it offers and the way it operates.

There is potential scope to align the delivery of the energy company with that of EES, but as a commercially acting organisation the energy company might raise potential conflicts of interest if it formed part of a NDM for EES. In addition, the differing scope of the energy company, i.e. energy supply, to that of EES as well as ongoing development of the energy company model to be implemented means that the public energy company has not been included as part of the analysis in this SOC.

For these reasons a public energy company has not been considered as a potential delivery mechanism. However, the public energy company is a long-term ambitious project which is likely to move over time from an initial focus on White label supply to generation and supplying energy directly. As the scope of the energy company increases so will cross-overs in desired outcomes and opportunities to align delivery with EES, and the Scottish Government will need to assess options to make the most of these opportunities as they arise.

Trading Funds

Generally Trading Funds are only involved in commercial facing or business activities, as they are structured to enable the relevant department to handle its own revenues and expenses separately from overall government finances. Trading funds have similar characteristics to Public Corporations but without the advantages of a corporate status. Moreover the Trading Fund model has been used increasingly sparingly in recent years and is a model which is now very rarely (if at all) deployed.

Charities and Trusts

There is little scope for Charities and Trusts to act as the delivery mechanism for EES. Charity legislation imposes strict requirements on the purposes and potential roles which Charities may undertake and restricts the relationships between Government and any entity designated as a charity (e.g. with regard to levels of Ministerial influence or control). There is a general presumption against new public bodies holding charitable status. Charities and Trusts have therefore not been considered further as a sole delivery body.

8.5 Assessment against potential roles

The potential for any new delivery architecture to fulfil the 10 Roles outlined in Chapter 7 has then been reviewed. Based on a set of individual feasibility criteria, each of these options have been assessed against the outlined roles, taking an overall view on their ability to deliver.

  • Resource – Whether the proposed option currently, or could potentially, possess the required resources to deliver each of the required roles.
  • Skillset – Whether the proposed option currently, or could potentially, have the technical, commercial and legal expertise required to feasibly deliver the required roles.
  • Co-ordinator – Whether the proposed option currently, or could potentially, act as a central co-ordination point within the programme, providing a strong brand and sense of continuity throughout delivery.

Weightings to the most important of these roles has also been provided. It is expected that certain roles would require an additional priority weighting on their importance compared to others. Five critical roles from the set of 10 Roles identified in Chapter 7 above, have been identified for the delivery of the programme. These include:

  • Role 1: Provide capacity, support and expert advice to Local Authorities.
  • Role 5: Provide a central EES focal point and coordination service.
  • Role 3: Provide clear quality assurance guidelines and effective, consistent customer protection processes.
  • Role 6: Provide a national-scale marketing, communication and education service.
  • Role 8: Facilitate access to project funding and finance.

8.5.1 Individual assessments

Within Annex 1, a detailed assessment has been included of each of the options against those strategic roles outlined within Chapter 7. Below, the potential performance of each of the models based on their performance in this assessment has been summarised.

Table 13: Summary of assessment against roles

Delivery Options

Overview

Taken forward to detailed assessment?

1

Steering Group

  • Broadly, the Steering Group option, in isolation, lacks the required resource available for the delivery of a number of key roles, and would only be able to provide a limited overview role.

No

This option is unlikely to sufficiently resource delivery.

2

Steering Group & Scottish Government delivery

  • Supplementing a Steering Group with additional delivery support from a number of different Scottish Government Directorates does allow a significant increase in the breadth of delivery roles available.
  • However, this option would face difficulties as functioning as a central point of reference, and still faces restrictions on delivery as placed within central government.
  • For instance, central government has limited experience in delivering enforcement activities.

Yes

This option is taken forward as the “do minimum” counterfactual.

3

Steering Group & Development of new Directorate

  • A delivery mechanism which involved the creation of a new Scottish Directorate is able to improve on the performance of the counterfactual.
  • This body, similarly to the counterfactual, would be able to draw on the machinery of government to support delivery, while also acting as a single point of reference.
  • However it would still face constraints on the delivery of certain roles not suited to government.

Yes

4

Scottish Government Local Collaborative Structure

  • A delivery mechanism which involved the creation of a new development group with a local level delivery is able to improve on the performance of the counterfactual.
  • This model would benefit from being closer to the on the ground work being delivered, such as supporting the supply chain and local enforcement.
  • However developing and managing an effective Collaborative Structure could be novel and challenging across a large number of Local Authorities, potentially with differing levels of resource and expertise to contribute.

Yes

5

Bodies currently in Scottish Government control

  • Broadly speaking, there is little scope for the 10 roles and 5 key roles to be delivered solely by existing bodies.
  • Despite some relevant expertise across the required roles, such as providing technical advice and support, without the significant amendment to the powers and potentially resourcing of these bodies, they would lack the authority, breadth of capability or capacity, including to act as a central point of reference, due size constraints.

No

Unlikely to deliver at scale due to capability and size constraints.

Table 13 (cont): Summary of assessment against roles

Delivery Options

Overview

Taken forward to detailed assessment?

6

Bodies outside of Scottish Government control

  • Bodies outside of Scottish Government control are unlikely to have resources or scale to support delivery, for the majority of the required roles.

No

Unlikely to deliver at scale due to capability and size constraints.

7

Executive Agency

  • An Executive Agency has the ability to establish a clear central brand and focal point, while also potentially allowing for development of scale and expertise required across the different roles.
  • This model performs well compared to the counterfactual, it has greater coherence and with suitable resource allocated, greater scope to develop the delivery capacity to fulfil the majority of the required roles.
  • However, regulatory, enforcement and quality assurance activities might not sit well with a body while under direct Ministerial control.

Yes

8

Non-Ministerial Office

  • Similarly to any arm’s length body, NMOs have the capacity and autonomy to enable and deliver the majority of the required roles.
  • Potentially greater scope for regulatory, enforcement and quality assurance roles given the high degree of separation from direct Ministerial and government control.

Yes

9

Executive NDPB

  • The Executive NDPB is the highest performing model regarding role delivery. This model is able to utilise all of the above benefits of being an arm’s length, central delivery agency.
  • This model is also potentially better able to develop, acquire and retain varies specialist technical resource given its greater freedoms regarding employment terms.

Yes

10

Public Corporate

  • Public Corporations are also able to leverage many of the prospective benefits above, and could in principle perform well across all roles.
  • However, a Public corporation is required to generate at least 50 percent of its revenue from commercial sources and the commercial models that would support this are not yet developed.
  • A commercial vehicle could also be seen to have a potential conflict of interest between such commercial activities and any regulatory, enforcement or quality assurance role.

Yes

Contact

Email: james.hemphill@gov.scot

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