DECC Stakeholder Bulletin: Business Planning Special

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In summary

We have settled our budgets for the 2011/12 financial year. This special edition of our e-bulletin sets out how DECC is matching resources to our top priorities and how we will change the way we organise our work.   DECC is a relatively small department but it has one of government’s widest remits: to lead efforts in tackling climate change while at the same time securing clean, safe and affordable energy to heat and power the UK’s homes and businesses.   The decisions we have taken reflect the delivery responsibilities arising from the Coalition Agreement; the Spending Review - which requires all departments to reduce administrative costs; and what our stakeholders and staff have been telling us about how we can change.  

Matching resources to our top priorities within DECC complements the announcements we have made on the Reviews of Ofgem and on delivery. The Ofgem Review proposes new legislation for Government to set high level strategic goals which the energy regulator will play a part in meeting. DECC’s Delivery Review will result in increased accountability and help maximise value for money for the delivery of DECC programmes. 

 
DECC’s vision, purpose and approach
DECC’s purpose and vision are central to this government which has promised to be the greenest ever. It is a department for change whose task is to head off the twin risks of catastrophic climate change and a shortfall in UK energy supplies. Our vision is long term.

As Chris Huhne has said, we are leading a new industrial revolution that will drive the UK’s market economy and secure the transition to low carbon electricity, low carbon homes and buildings and low carbon transport and industry. We need to do this at least cost to the UK’s economy, and to act as part of a global transition to low carbon.

 
DECC’s role in this transition is to mobilise investment from citizens, companies and countries in low carbon infrastructure by creating the right conditions and building a broad coalition for change.

 

DECC’s strategic objectives are to:

• Save energy with the Green Deal and support vulnerable consumers.
• Deliver secure energy on the way to a low carbon energy future.
• Drive ambitious action on climate change at home and abroad.
• Manage our energy legacy responsibly and cost-effectively.

 In October’s Spending Review DECC achieved a settlement that gives us the resources to carry through our new priorities. Having secured the resource to deliver our core mission we have had to keep a clear focus on what really matters, on what is really important; and to move with pace.

 

What are we changing?

Delivering within our budget will require greater prioritisation, so we won’t be able to afford to do all the things that we might have liked to do. All along we have been guided by the need to deliver on the key policies that will drive the change we need.

 
Savings

The savings outlined in our Spending Review settlement, including reducing running costs and pay by a third, have been spread across the Department and arms length bodies. We began making these savings in the last financial year by reducing consultancy spend and halting planned staff increases. We will make additional savings by:

• Consolidating overlapping areas: for example domestic and international energy security; and carbon budgets and strategy.
•  Concentrating efforts on where we can add most value: for example, reducing resource on Low Carbon Economy (where BIS has the lead role) and Public Sector Energy Efficiency (where Cabinet Office has the oversight role). We will instead put more weight on other government departments to meet their responsibilities with less oversight from us.
•  Bearing down on non-pay costs: such as travel, consultancy and the costs of shared services
•  Realigning to our new priorities the activities we fund our arms length bodies to deliver
•  Managing programmes tightly and reallocating resource when programmes finish.

 

Changing the way we work  

DECC’s values – aim high, reach out and pull together – continue to be central to our way of doing things. We will underpin these by being more:

• Focussed – with a better ability to prioritise, concentrating on key projects and programmes.
•  Project based – Groups will adopt a more project-based approach to ensure work is properly planned, with the ability to move resource to reflect peaks and troughs and changing priorities.
•  Skilled – we need more staff in DECC with specialist delivery skills, in addition to the important core skills that we already have. This will reduce our reliance on consultants and ensure that we are able to make rapid progress towards achieving our delivery objectives.
•  Joined up – a Department which pulls together with more multidisciplinary working, better sharing of knowledge and a more joined up approach to working with the outside world.

 

Resourcing our priorities

In the biggest redirection of resource since DECC was formed in 2008, we have decided to focus resource on the following areas:

The Green Deal:  Green Deal will revolutionise the way households and business can pay for energy efficiency improvements.  It will draw in new providers and significant investment to the sector.  It will take us away from the complete reliance on regulating energy companies.  The work through to a successful launch in 2012 is priority for DECC and a Coalition agreement.  There is now confirmed funding to commission the key functions in the Green Deal framework.

Smart Meters: A key element in the transition to a low carbon economy, smart meters will provide consumers with near real-time information about their energy use, enabling them to monitor and manage their energy consumption and have the potential to pave the way for a transformation in the way in which energy is supplied and used. Phase 2 of the Programme, the Foundation Stage, commenced in April 2011. By delivering a positive consumer experience and ensuring that industry is ready, it will build a solid platform for the mass rollout. We are establishing a dedicated delivery team headed at Director level.

Renewables and low carbon heat: The Committee on Climate Change has said (in its report on the Fourth Carbon Budget) that the Government’s credibility rests crucially on its ability to find the right policies to decarbonise heat. More specifically, the Renewables Delivery Plan sets a target for low carbon heat of 12% by 2020 (from a starting point of less than 1%). DECC will increase resource so that there are dedicated teams to take forward the transition to – and promotion of – low carbon heat for domestic and industrial customers under a new Director of Heat & Industry.

Electricity Market Reform: Electricity market reform is key to unlocking investment and is the biggest market change since privatisation. DECC will work to deliver a new market framework that will enable the cost effective delivery of secure supplies of low-carbon energy.

Nuclear: DECC will bring together its dealings with the Nuclear Decommissioning Authority (NDA) under one clear policy lead in Nuclear Decommissioning and Security Directorate with continued help from the Shareholder Executive.  Nuclear safety and security issues will benefit from more staff resource, with the Decommissioning and Security directorate reporting to the new Chief Operating Officer.  The Office for Nuclear Development will continue its work on wider nuclear waste and legacy issues and look to progress new nuclear power stations, as long as they can be built without public subsidy and take into account the outcome of the independent Weightman Review following the Fukushima incident. 

Carbon Capture and Storage: Even with growth in renewable energy, the UK will remain reliant on coal and gas for years to come. Carbon Capture and Storage technologies will be an essential part of our energy mix, reducing the climate impact of fossil fuel power generation. A cutting edge major technological infrastructure project, bringing with it the chance to open up many new opportunities if successfully delivered. The Spending Review, which allocated £1 billion capital funding for the first demo, and our new prioritisation gives the resources to ensure successful delivery of this key Coalition commitment. 
 

Our new structure and governance

As a result of our realigned priorities, over the coming months DECC will move to a new structure. Whilst some of the changes have already happened, we hope that the restructuring process will be completed by the end of summer 2011. You can keep up to date with the latest version of DECC’s Organogram on our website. 

Key elements of structural change include:

• Overall, a reduction from five Directors General to four (one being a new Chief Operating Officer post).
• Responsibility for the Renewable Heat Incentive (primarily domestic) will move into an enlarged heat team in International Climate Change and Energy Efficiency (ICCEE) - formerly National Climate Change and Consumer Support (NCCCS) to sit alongside other customer-facing programmes.
• Responsibility for Carbon Budgets will move to Strategy Directorate, reflecting its link with the 2050 pathways work, and the importance of carbon budgets as a strategic driver in DECC and across Government.
• A new Office of National Energy Efficiency is being set up in International Climate Change and Energy Efficiency (ICCEE) formerly National Climate Change and Consumer Support (NCCCS) to plan and manage a step jump in energy efficiency. It will provide a wider energy efficiency strategy based on evidence and analysis, strong programme management and a joined up view of the customer.
•  Responsibility for DECC Communications has moved to the Operations Group, where it now sits with other cross-departmental services.
• Strategy, Science and Innovation, Economics and Statistics will work together more closely and form a Strategy and Evidence Group.
• Energy Security, domestic and international, was brought together in a single team in Energy Markets & Infrastructure (EMI) with effect from mid April 2011.

New Departmental Board
Under new arrangements for the governance of departments introduced by the Coalition, DECC has a new Departmental Board chaired by the Secretary of State and including additional non executive directors. The new Board, which had its first meeting on 31 March, will meet six times a year. In line with a new cross-government Code of governance, it will be supported by sub-committees on Audit and Risk chaired by non executive director Rob Whiteman; and on Talent, Succession and Remuneration chaired at Permanent Secretary level. Read more about corporate governance and transparency at DECC

This marks a new phase in the story of DECC.  We are confident that these changes mean that DECC will have the people, skills and resources – organised in the right way – to continue to achieve in the months and years to come. 

 

Ofgem and Delivery Review

As part of our strategy to support the delivery of our energy and climate change goals, DECC has also published the conclusions of two Reviews which were announced in the July 2010 Annual Energy Statement. The Reviews will strengthen the way regulation is carried out in the gas and electricity markets, and improve delivery of DECC programmes. Access the announcement and full reports

The next edition of the Stakeholder Bulletin will issue next month.