DD2690 Zero Carbon Accelerator – programme expenditure plans 2024-26

1.1.    The Mayor has declared a climate emergency and set a target for London to be net zero carbon by 2030. To support this ambition and his wider environmental goals, the Mayor is making finance available, through his Green Finance Fund (GFF), to accelerate investment into green projects for the GLA Group and strategic partners across London. This forms part of his London Climate Finance Facility (which also includes the Mayor’s Energy Efficiency Fund).
1.2.    The Mayor approved expenditure of up to £13.7m until 31 March 2026 for the delivery of a new zero carbon project development facility, now named the ZCA, and delegated authority to the Executive Director of Good Growth to approve detailed expenditure plans within this budget including detailed design and implementation of the zero-carbon project development facility along with any additional procurements required (including potentially of a new framework of service providers) via Director’s Decisions (MD3133).
 
1.3.    The ZCA will be the GLA’s main programme to create the pipeline of net zero projects needed to meet the Mayor’s net zero target by 2030. The key groups in London the new programme will support are:

•    local authorities
•    Functional Bodies (GLA Group)
•    wider London public sector including anchor institutions (e.g. NHS, education)
•    social housing providers
•    community groups and cultural institutions.

1.4.    The majority of the £13.7m budget, around £9m, is being used to procure a Service Provider who will deliver the core objectives of the ZCA – predominantly to develop projects to the point at which they are ready for investment. In order to be successful, however, alongside the procured ZCA support, further resources are required: strong GLA management through the Energy Unit; grant funding to support projects that align strategically in the meeting of London’s net zero aims but whose scale is beyond the scope of the core support package; and frameworks that will enable beneficiaries of the ZCA to deliver effectively and achieve carbon savings from the capital projects for which they are seeking investment.
1.5.    This Decision form seeks approval to allocate the remaining funds (c. £4.7m) from the £13.7m budget to five key areas that will enable the effective implementation and operation of the ZCA to support organisations in London to decarbonise.
Enabling delivery of decarbonisation measures on the ground – reprocuring the RE:FIT framework
1.6.    The GLA has assessed, and regularly reviewed over time, the public sector retrofit challenge, and identified the barriers that prevent it from happening at the rate and scale necessary. These are primarily:
•    a lack of capacity/expertise within public sector organisations to identify and implement projects 
•    protracted and complex procurement processes
•    a lack of capital funding and risks associated with investing money with long-term paybacks and no savings guarantee.

1.7.    To help overcome these barriers, in 2009 the GLA launched the RE:FIT programme for London. The programme included a framework of service providers to deliver retrofit works, the “National Energy Performance Contract Framework (RE:FIT)”. The framework has been re-procured four times. Its fourth, current, iteration began in April 2020 and runs until 30 April 2024.
1.8.    The RE:FIT framework is a unique design and build framework whereby the service providers can guarantee the level of energy savings through Energy Performance Contracting (EPC). EPCs are a commonly used and low risk route to delivering carbon reduction and energy efficient projects. They are signed between an organisation and service provider, guaranteeing the performance of improvements and subsequent savings. Therefore, this approach could offer a secure financial saving for RE:FIT users over the period of the agreement.
1.9.    The current framework has 16 service providers, appointed following a Public Contract Regulations 2015 compliant procurement process. Of these around half are very active on the Framework, regularly bidding for decarbonisation works through mini-competitions.  Based on surveys with previous, current and potential users of the RE:FIT, some the Framework’s strengths included: 
•    brand value, heritage, longevity and market credibility;
•    endorsement of the Framework at a national level by Local Partnerships, the Welsh Government and the GLA, and; 
•    a track record of successful Public Sector Decarbonisation Scheme grant applications totalling £272m through the Framework in London alone. 
1.10.    The re-procurement of the framework would build upon its existing reputation, encouraging new stakeholders to pursue retrofit through its support in London and nationally.  Otherwise, a broad range of public sector partners will lose access to a well-understood and well-utilised tool for the delivery of zero carbon projects in the capital. The re-procured framework would be available to users of the ZCA as a potential delivery route for decarbonisation measures.
1.11.    To date RE:FIT has predominantly been used to deliver non-domestic energy efficiency and decarbonisation projects. However, it can also be used for projects on the domestic estate (such as social housing projects) and by the commercial sector. The RE:FIT Framework expires in April 2024, and although this will not impact contracts between Service Providers and Contracting Authorities (e.g. London boroughs) signed before April, it will prevent new capital projects being procured through Framework mini-competitions. Extending the framework is no longer an option as it cannot be extended for more than four years. The framework was procured following publication of a contract notice in 2019 stating that its duration would be 48 months and not subject to renewal. 
1.12.    Therefore, this Decision form seeks approval of the re-procurement of the RE:FIT Framework, to run for four years (2024-2028). The estimated cost of £400,000 to procure the framework is a maximum expected cost based on the costs of re-procuring RE:FIT 4 (c. £340,000) in 2019-20, plus inflation. If the GLA is able to undertake the majority of re-procurement in-house (via TfL Procurement) then the costs would be substantially lower. The structure of the fifth RE:FIT Framework will retain a similar structure and framework documentation to the current framework, which may also help reduce costs.
1.13.    Stakeholder engagement in 2023 with Framework users and suppliers demonstrated the value in continuing the Framework, with very few like-for-like competing frameworks available to contracting authorities.  The long running success of the Framework (which has secured >£200m investment in public sector projects that save over 46,000 tCO2) and contracting authorities’ familiarity with it indicated a strong case for re-procurement, with improvements suggested to make the Framework more fit-for-purpose following market and policy developments since 2020. The proposed re-procurement would ensure the RE:FIT framework is flexible enough to be compatible with a broad range of current and future public sector funding options for energy saving measures. The fifth iteration will also include an approach to allow procurement of projects that do not require EPC. 
Extending the Local Energy Accelerator Programme Delivery Unit
1.14.    Until the ZCA is in place, the Mayor’s current Low Carbon Accelerators (‘the Accelerators’) will remain the GLA’s main technical support mechanism to facilitate the development of net zero carbon building projects in London into investable propositions. The Mayor approved the extension of Retrofit Accelerator-Workplaces, Retrofit Accelerator-Homes and the Local Energy Accelerator until 31 March 2024 (MD3133). 
1.15.    The Local Energy Accelerator (LEA) has funded projects which are currently forecast to deliver over 100,000 tCO2 savings per annum and over 100MW renewable energy capacity at full build-out by 2030. LEA has helped to leverage in about £50m in capital grant investment for decarbonisation projects, including heat networks in London to date. It primarily does this by providing grant funding to help recipients undertake detailed planning and feasibility work for complex, higher risk (in terms of suitability for investment) and often large-scale renewable projects or heat network systems. LEA also provides support from a free-of-charge external Programme Delivery Unit (PDU) to assist grant recipients. 
1.16.    Under MD3133 the Mayor also approved the award of £2,180,000 in grant funding directly to beneficiaries to support project development through the Local Energy Accelerator. About £2m of this amount has been allocated to 21 projects to date – with signed grant agreements in place.
1.17.    The LEA PDU is due to end in March 2024 and an extension to 30 June 2024 (estimated to cost up to £270,000) is needed to ensure that projects ongoing after end March 2024 and completing by end June 2024 have access to continued technical and project management support. This is needed to keep them on track and check the quality of their deliverables. An extension would exercise the GLA’s option to extend the current PDU contract (GLA 80814 / Task 17 – LEA Programme Delivery Unit Services) which was procured competitively (with the option to extend). Without an extension there will be a gap between the end of March 2024 and the ZCA being up and running in May 2024 and so funded projects are likely to slip even beyond end June 2024 or may even fail, with deliverables which have not been technically scrutinised. Extending the PDU will also help with the development of a pipeline of projects for future Green Finance Fund applications.
ZCA grant funding – to support large, complex and strategically important projects
1.18.    Grant funding can play an important role in de-risking medium to large projects – particularly for heat networks using waste heat, renewable heat or from energy from waste plants. These are highly complex projects, innovative in the UK and often requiring bespoke solutions (particularly as Heat Zoning regulations come into force).
1.19.    There is a lack of capacity and capability within London boroughs and other organisations wishing to develop these projects to the point of applying for capital funding. The expertise needed also goes beyond what can be provided through the core ZCA, with skilled consultants and bespoke support needed for feasibility studies, detailed design, draft business cases and even help public sector organisations apply for capital funding.
1.20.    Grant funding of at least £3.6m over two years will complement the core ZCA support by funding 30 to 40 highly strategic and focused development projects, across two or three funding windows/phases. We would envisage £3.6m as a minimum pot of grant funding over the next two years, potentially topped up by underspend from the overall ZCA budget approved under cover of MD3133. The grant funding would enable recipients (typically larger public sector organisations) to use expertise from consultancies already engaged with the GLA or other partner organisations or procured from specialist frameworks, such as the Local Energy Framework (a GLA-owned framework of expert local energy, energy efficiency and heat network consultancies), to develop relevant projects. 
1.21.    It is envisaged that a proportion of the grant funding will be made available to complex projects that require large, estate-wide heat decarbonisation plans to cover multiple domestic and/or non-domestic buildings. Some funding has been provided by central Government through the Low Carbon Skills Fund (LCSF) to support such projects and allow them to develop bids for the Public Sector Decarbonisation Scheme. However, this first-come first-served fund has been substantially oversubscribed in the last three rounds resulting in the majority of London-based applications being rejected based solely on time of application. Furthermore the future of the LCSF is currently unknown beyond spring 2024.
1.22.    These grants are additional to the project development support and technical advice that will be provided through the ZCA and do not duplicate that support. The level of technical expertise needed (such as preparing complex technical and economic modelling) cannot be met by a single service provider. For such projects it is important to be able to access a diverse range of expertise and spread the demand for services amongst multiple providers. Also the large costs of these projects would quickly exhaust the ZCA budget and significantly reduce the resource available across a range of other vital areas. 
External independent consultancy support including programme evaluation.
1.23.    We propose to set aside up to £100,000 of the programme budget to procure additional consultancy support, including the procurement of external evaluation(s) during the operation of the ZCA and as the programme concludes. Lessons learned evaluation(s), including thorough engagement with ZCA users, will help the GLA to consider changes needed during the life of the ZCA to make it more effective. Furthermore the findings would inform any GLA decision on whether to extend ZCA services beyond the current timelines approved under cover of MD3133 (to end of March 2026).
 GLA staffing – management of the ZCA  
1.24.    The GLA’s Energy Unit will manage the ZCA, working alongside key stakeholders in the Environment Unit and other teams in the GLA. To effectively manage the ZCA the Energy Unit will require two additional members of staff, estimated to cost up to £330,000 over two years.
1.25.    This budget would be allocated to fund new posts, primarily to undertake the key roles of framework and contract management, and grant management. These posts will also be approved in parallel through Establishment Control processes. This follows the model used for the previous, successful energy accelerators, with European Regional Development Fund programme funds having been used to cover direct staffing costs, although the streamlining of support into a single accelerator reduces the level of funding required for this purpose.
1.26.    The GLA energy team will be responsible for making strategic decisions in relation to the London RE:FIT framework (which would be available to users of the ZCA as a potential route to procure capital works) with a full time GLA Framework Manager paid for from this budget to oversee the overall operation, delivery and reporting of the RE:FIT, ZCA and Local Energy Frameworks. Their duties will include but not be limited to:
•    managing service providers at framework level, responding to queries about the three frameworks, hosting meetings with service providers to track overarching framework performance;
•    specifying and receiving performance reports, requesting relevant information from the service providers and acting as a key contract contact point for questions, proposals or requests from the ZCA PDU and service providers;
•    overseeing and quality assuring the ZCA service providers delivery of contractual KPIs;
•    overseeing the overarching promotion, communication and publicity of the framework;
•    providing escalation support to the ZCA PDU;
•    working with the ZCA to oversee and where necessary, support, procurement and delivery of projects;
•    providing guidance to organisations on partnering with their service provider as a means of relationship management;
•    maintaining the Briefing Pack and procurement templates to procure from the Local Energy Framework, and;
•    responding to queries from organisations wishing to procure from the Local Energy Framework – as well as logging use of the Framework.
1.27.    The second role paid for from this budget will be a grant manager to develop and manage complex grant agreements between the GLA and beneficiaries. Their duties will include but not be limited to:
•    drafting grant application content, eligibility and EDI targets;
•    managing grant applications, organising webinars ahead of the application deadline and leading evaluation of grant bids;
•    preparing grant agreements, including relevant reporting and spend conditions;
•    managing fund schedules, overseeing timeframes and release of grants to grantees;
•    tracking grantee results, reporting against targets outlined in both the grant agreement and wider programme targets, and;
•    troubleshooting and resolving grant issues. 
 

Reprocuring the RE:FIT framework
2.1.    The RE:FIT framework will facilitate and accelerate the delivery of carbon and energy savings in the public sector by providing a framework of service providers offering energy performance contracts (EPCs).
2.2.    Since June 2020, the current RE:FIT framework has been used to procure 20 contracts in London to a total value of £103 million. These contracts will deliver carbon and energy savings across 242 of London’s building saving an estimated £2.3 million in annual energy bills and 15,400 tCO2e per year. It is expected that the reprocured framework will facilitate a comparable number of contracts during its first two years.
2.3.    Based on feedback from users of the current RE:FIT framework, we would design the fifth framework to offer additional features to attract utilisation by more contracting authorities and a broader selection of suppliers with Increased focus on domestic retrofit. Key new features of a re-procured RE:FIT would include:
•    options to procure contracts without EPC guarantees– whilst EPCs are a strong selling point for the RE:FIT framework, contracting authorities may wish to procure contracts without EPCs to reduce costs in order to put in more competitive bids for central government funding
•    greater visibility during project development and operations for the Framework owners
•    defining a minimum performance threshold to provide greater assurance of supplier quality. 

Extending the Local Energy Accelerator PDU
2.4.    The extension of the Local Energy Accelerator PDU will allow Local Energy projects in the current pipeline to be supported to a stage where they are closer to being funded and to delivery.  Of the 21 LEA grant funded projects most will need to continue after end March, completing by end June. The extension will ensure these will have access to continued technical and project management support. In total the 21 projects could potentially deliver over 100,000 tCO2 savings per annum and over 150MW renewable energy capacity at full build-out by 2030.
ZCA grant funding – support for large, complex and strategically important projects
2.5.    The criteria for grant funding will be developed via a prospectus for potential grant recipients. Essentially the grant support will allow an estimated 30-40 large and complex projects to be supported to a stage where they are closer to being funded and then constructed.  This should add to the installed energy capacity and greenhouse gas savings achieved through previous rounds of Low Carbon Accelerator grant funding. Key performance indicators will include:

•    annual energy savings in kWh/MWh; 
•    annual GHG emissions reduced/avoided in tonnes of CO2 e/annum, and;
•    installed renewable energy capacity (kW/MW).
 

3.1.    Under section 149 of the Equality Act 2010, as a public authority, the GLA is subject to the public sector equality duty and must have due regard to the need to: 
•    eliminate unlawful discrimination, harassment and victimisation 
•    advance equality of opportunity between people who share a relevant protected characteristic and those who do not 
•    foster good relations between people who share a relevant protected characteristic and those who do not. 
3.2.    Protected characteristics under section 4 of the Equality Act are age, disability, gender reassignment, pregnancy and maternity, race, religion or belief, sex, sex orientation, and marriage or civil partnership status (all except the last being “relevant” protected characteristics).

3.3.    The GLA will take appropriate steps to ensure that there are no potential negative impacts for those with protected characteristics from this programme. Those with protected characteristics will gain from the positive benefits of the current accelerators as well as the ZCA in equal measure should their organisations be selected for support, and there will be equality of access to participate in the delivery and benefit from the programme, without discrimination. The ZCA will measure impact of projects on local communities and people with protected characteristics across health, fuel poverty, quality of life, energy costs. It is not anticipated that certain groups face barriers or unequal outcomes directly relevant to this programme since it will not contract with individuals directly.

3.4.    Appointed contractors will have a duty to ensure they comply with the GLA’s Equality, Diversity and Inclusion Strategy and enables the GLA’s fulfilment of its duties under section 149 of the Equality Act 2010. The procurement process for contractors (and potentially service providers on a new framework) will include relevant EDI requirements and submission of policies. This will include an assessment of how they will target different ethnic groups and those with other protected characteristics as beneficiaries or as part of the supply chain. This process will be undertaken as part of the programme mobilisation phase and will include establishing the monitoring and reporting processes and metrics. 
 

4.1.    Key risks and issues are outlined in the table below:

Links to mayoral strategies and priorities
4.2.    The ZCA programme directly supports the priorities of the London Partnership Board, and specifically its Green New Deal mission, which aims to tackle the climate and ecological emergencies and improve air quality, while doubling the size of London’s green economy.

4.3.    The development of a strong pipeline of projects for the Mayor’s London Green Finance Facility, and potentially for other funding and financing mechanisms, will play an important role in setting London on track to meet his ambition to become net zero carbon by 2030. As such, the programme will contribute towards a broad range of objectives, policy and proposals in the London Environment Strategy and the Mayor’s Pathways to Net Zero by 2030, as set out below:

•    Objective 6.1 - reduce emissions of London’s homes and workplaces while protecting the most vulnerable by tackling fuel poverty
•    Proposal 6.1.1a - contribute to helping Londoners improve the energy-efficiency of their homes, where appropriate, by providing technical assistance, support and funding  
•    Proposal 6.1.1b - pilot innovative methods to implement the stronger energy-efficiency retrofitting needed 
•    Policy 6.1.3 - improve the energy efficiency of London’s workplaces and support the transition to low carbon heating and power
•    Proposal 6.1.3.a - provide direct technical support and assistance to help reduce CO2 emissions and energy within the public sector, including leading by example in the GLA group estate objective
•    Proposal 6.1.3.b - support the reduction of emissions and energy use within the commercial sector, including through improved building management, energy efficiency and reporting
•    Policy 6.2.1 - delivering more decentralised energy in London
•    Proposal 6.2.1b - increase the amount of solar generation in London including through community energy projects and on GLA group buildings
•    Objective 10.1: enable the transition to a low-carbon circular economy, including:
o    Policy 10.1.1 – to build on London’s strengths and grow the low-carbon and environmental goods and services sector
o    Policy 10.1.2 – to build on London’s strengths and enable London’s businesses, academia and citizens to actively compete in and contribute to the low-carbon circular economy.

4.4.    The programme also assists the delivery of the Mayor’s Solar Action Plan to “…encourage public sector organisations and providers of social housing to retrofit solar energy technologies on buildings by promoting the use of technical assistance programmes….”

4.5.    Achieving Net Zero is a cross-cutting theme in the five pillars of the Economic Framework (2022) jointly published by the Mayor and London Councils. It is also an opportunity to grow key sectors in London’s economy. The green economy sector will be central to driving the UK’s future growth and productivity. London’s world-leading green finance sector will also play a key role in supporting growth and achieving net-zero ambitions. An accelerated and ambitious pan-London retrofit programme, combined with driving up skills and developing new businesses in this area, presents opportunities to deliver economic benefits while also addressing fuel poverty. Investment in climate adaptation measures is also essential, as is undertaking these efforts in a coordinated, strategic manner and drawing on commercial finance.

4.6.    The Mayor’s employment and skills commitments include supporting skills development in retrofit and energy efficiency and the wider green sector. The Mayor's priorities include building partnerships between employers and training providers to meet skills needs and support Londoners into good jobs, including apprenticeships. The Mayor's Adult Education Budget (AEB) funds a range of green skills - from landscaping to construction, digital and wider Science, Technology, Engineering and Maths (STEM) – with a majority of those supported being Black, Asian and minority ethnic Londoners. A successful ZCA and the decarbonisation works it enables will indirectly benefit:

•    the Mayor's Skills Academy programme (MSA), which delivers training for Londoners under-represented in key sectors, including the green economy; the programme is delivering training in green construction and has developed retrofit and energy efficiency courses, including the use of low carbon technologies such as battery storage and heat pumps
•    the GLA’s Skills Bootcamps for Londoners programme, which funds short, higher-level training in green skills, including include upskilling current trades people in heat pump, solar, battery storage, Electric Vehicle (EV) charging point and insulation installation, along with training for retrofit assessor and coordinator roles. 
 

5.1.    Approval is requested for expenditure of:
a)    up to £400,000 to fund the re-procurement of the RE:FIT Framework;
b)    up to £270,000 to extend the Local Energy Accelerator Programme Delivery Unit services; 
c)    up to £3,600,000 + any potential underspend from a, b, d, e in grant funding to support complex/large project development between 23-24 and 25-26; 
d)    up to £100,000 for external independent consultancy support, to include undertaking an impartial evaluation(s) of the ZCA programme, and; 
e)    up to £330,000 in GLA staff costs between 24-25 and 25-26 to manage the ZCA programme and GLA Frameworks used by the ZCA (including the re-procured RE:FIT Framework).
5.2.    This expenditure will be funded from within the Environment and Energy Unit’s budget as included within the Mayor’s draft budget for 2024-25 and the indicative plan for 2025-26. This is subject to formal approval and as such to mitigate any risk of the programme not being sufficiently resourced in future years to cover costs following the budget-setting process, any contractual agreements will include the usual break clauses that could potentially be exercised if required.
5.3.    The exact profile of the expenditure between financial years on each part of the programme is still to be confirmed but the indicative profile is shown below.

5.4.    This will require a reallocation of £165,000 budget per year from a programme budget into a staffing budget. It is expected that this will fund one grade 10 and one grade 8 staff member to manage elements of the ZCA.
5.5.    All relevant budget adjustments will be made. 
 

6.1.    The foregoing sections of this report indicate that:

•    the decisions requested of the Executive Director of Good Growth concern the exercise of the GLA’s general powers, falling within the GLA’s statutory powers to do such things considered to further or which are facilitative of, conducive or incidental to the promotion of the improvement of the environment in Greater London
•    in formulating the proposals in respect of which a decision is sought, officers have complied with the GLA’s related statutory duties to: 
o    pay due regard to the principle that there should be equality of opportunity for all people;
o    consider how the proposals will promote the improvement of health of persons, health inequalities between persons and to contribute towards the achievement of sustainable development in the United Kingdom, and;
o    consult with appropriate bodies.

6.2.    In taking any decisions sought, the Executive Director of Good Growth must have due regard to the Public Sector Equality Duty - namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010 and to advance equality of opportunity and foster good relations between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion) and persons who do not (section 149 of the Equality Act 2010). To this end, the Executive Director of Good Growth should have particular regard to section 5 (above) of this report.

6.3.    When exercising its section 30 general power the GLA may charge third parties for discretionary services under section 93 of the Local Government Act 2003 provided that the charges levied do not exceed the costs of provision.

6.4.    If the Executive Director of Good Growth makes the decisions sought, officers must ensure that:

a)    all services, supplies or works required are procured in liaison with TfL Procurement and in accordance with the GLA’s Contracts and Funding Code and contracts are put in place between and executed by the GLA and contractors before commencement of such services

b)    the proposed award of grant funding is made fairly, transparently, in accordance with the GLA’s equalities requirements and with the requirements of GLA’S Contracts and Funding Code and funding agreements are put in place between and executed by the GLA and recipients before any commitment to fund is made

c)    the extension of the Local Energy Accelerator PDU services is documented in accordance with the current contract

d)    arrangements are implemented and maintained to facilitate the clear separation of ZCA pipeline development activity and the evaluation of applications for the Mayor’s London Green Finance Facility, including (without limitation) information barriers between GLA personnel working on ZCA pipeline development and Green Finance Facility evaluation and awards

e)    to the extent that the decisions concern staffing matters all applicable GLA HR and related governance protocols are followed and approvals obtained. 

6.5.    In addition, to the extent that the proposals in respect of which decisions are sought involve the making of commitments which extend beyond the current Mayoral term, officers must ensure that the terms of all agreements entered into in respect of the expenditure do not have the effect of fettering the discretion of any successor administration, considering in particular the London elections taking place in May 2024. Accordingly, Officers must ensure that all agreements which involve making such commitments include a GLA right to terminate at any point for convenience (at no cost to the GLA) and all such agreements are managed in such a manner, and any deliverables, milestones and/or output requirements are structured so as to mitigate risks of the GLA incurring abortive expenditure (which might be reasonably be taken to fetter, practically, the exercise of such discretion).