The Department of Energy and Climate Change
TECHNICAL SPECIFICATION
Title: Appraisal of policy options for domestic carbon efficiency 2011
Tender for the supply of services to model the take up and impacts of energy
efficiency measures, for use in design of Green Deal policies
Date: 21st December 2010
The Department of Energy and Climate Change
3 Whitehall Place
London
SW1A 2AW
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Contents
INTRODUCTION
The Department of Energy and Climate Change (DECC) was created in October 2008, to
bring together:

energy policy (previously with BERR, which is now BIS - the Department for
Business, Innovation and Skills), and

climate change mitigation policy (previously with Defra - the Department for
Environment, Food and Rural Affairs).
Climate change is not only a massive threat to the global environment, it is also perhaps
the greatest economic challenge facing us in the twenty-first century. It demands an
urgent and radical response across the developed and developing world.
At the same time, the UK needs to secure clean, safe, affordable energy to heat and
power our homes and businesses. Creating a low carbon and resource efficient world
means making major structural changes to the way we work and live, including how we
source, manage and use our energy.
DECC exists to take the lead in tackling these challenges.
To find out more about our work visit our "What we do" pages.
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TENDER SPECIFICATION
BACKGROUND
The requirement is to provide a model that DECC can use to bring together data,
evidence, assumptions and variable policy parameters from a range of sources, to
provide estimates of the impacts of policy scenarios on the take up of household energy
efficiency measures, energy usage and carbon emissions. DECC needs to understand
the sensitivity of those impact estimates to uncertainty surrounding the input data and
assumptions. This model will be used to support the design of policies that further
specify the details of the Green Deal and future Energy Company obligation.
Green Deal finance
Put simply, the Government is establishing a framework to enable private firms to offer
consumers energy efficiency improvements to their homes, community spaces and
businesses at no upfront cost, and recoup payments through a charge in instalments on
the energy bill. For more details see:
http://www.decc.gov.uk/en/content/cms/what_we_do/consumers/green_deal/green_d
eal.aspx
A future Energy Company Obligation
Energy company obligations1 work by obliging the big energy companies (for example
the ‘big six’ suppliers of domestic gas and electricity) to achieve a target through
incentivising the installation of energy efficiency and heating measures in homes. Each
measure that is installed with support from an energy company will deliver a points
score to that energy company and each company will have an overall points target to
meet by a specified date. Energy companies deliver measures by providing a subsidy to
households: reducing the cost to the household of installing an improvement. Since
energy companies try to deliver their obligations at least cost, they balance the level of
subsidy they offer for a particular improvement against the points they will be awarded,
and consumer responsiveness to subsidy.
The future ECO will support the delivery of measures which have higher up-front costs
and so cannot be fully funded through Green Deal finance, and measures for
households on low incomes, or for households particularly vulnerable to high fuel prices.
This may involve additional measures (e.g. heating improvements) that might not be
contained in a green deal finance package. Additional constraints and incentives may be
placed on ECO delivery to provide more certainty that energy companies deliver the
policy intensions.
Overview of Requirement
Design of Green Deal finance and ECO policies requires data and a model to simulate
consumer take up of energy efficiency measures Figure 1 illustrates the various inputs
and outputs required from the model.
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Such as the Energy Efficiency Commitment, the Carbon Emissions Reduction Target and the
Community Energy Savings Programme.
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Figure 1 : Stylised representation of inputs and outputs to the model
Inputs
Outputs
House and
household
characteristics
Measures
opportunities,
combinations costs
Predicted take up
trajectories of
energy efficiency
measures
Temperature
assumptions
Consumer
preferences
Green Deal
Model
Predicted trajectory
of energy efficiency
measures delivered
under ECO
Predicted costs and
benefits associated
with take up
trajectories
Take up / required
subsidies
Impact of measures
Δ C02, Δ£bill, ΔEPC,
quality standards
Green Deal
finance and
advice
parameters
ECO points
system and
constraints
Policy levers
Table 1 specifies the inputs to the model in more detail. This table should not be seen as
definitive since we expect to have to trade off the complexity of the model with
tractability and timeliness of delivery.
Input
Projected number of
households in Great
Britain
The characteristics
of homes (size,
bedrooms, energy
efficiency,
Wall construction
etc.)
Characteristics of
households (family
size, income, age,
benefit receipt etc. )
Units
Number of
households
Source
ONS data and
projections
Varies over . . .
Time
Number of homes
English Housing
Survey, Scottish
Housing Survey,
Living in Wales
Survey
Time, Housing
stock segments
Number of
households
English Housing
Survey, Scottish
Housing Survey,
Living in Wales
Survey , Family
resources survey
Time, Housing
stock segments
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Input
Opportunities for
energy efficiency
measures
Units
% of housing stock
segments / number
of homes
Source
English Housing
Survey, Scottish
Housing Survey,
Living in Wales
Survey
Assumptions to be
varied
Varies over . . .
Time, Housing
stock segments
Heating behaviour
of households –
living area
temperature before
improvements
Physical impacts of
energy efficiency
and heating
measures
On energy use
On energy bills
On CO2 emissions
(desirable) On
energy efficiency of
home
Behavioural impacts
of energy efficiency
measures
Comfort taking /
rebound
Interest rate
oC
DECC assumptions
Time, Housing
stock segments,
measures
% of energy saving
Assumptions to be
varied
Housing stock
segments
% per year
Assumptions to be
varied
Assumptions to be
varied
Assumptions to be
varied
Fixed
Period of repayment
Year
Type of advice/
assessment/
regulation
Consumer response
to advice /
assessment /
regulation
Consumer response
to subsidy
Consumer response
to cost/period of
repayment
Energy company
obligation points
scores
Energy company
points requirements
Categories
Stated Preference
Survey
Housing stock
segments – as
informed by survey
points
Policy assumptions
to be varied
Measures, Housing
stock segments
points
Policy assumptions
to be varied
Time
Housing stock
segments
KwH
£
Tonnes
EPC score
% change to take
up
Fixed
Fixed
% change to take
up
% change to take
up
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Input
ECO constraints
Costs of delivering
measures
Supply chain
constraints
Capacity to deliver
measures
Maximum rate of
expansions
Baseline uptake of
measures
Hidden costs to
households
Units
% of points score,
or restriction on
delivery
£
Source
Policy assumptions
to be varied
Varies over . . .
Measures, housing
stock segments
DECC assumptions
to be updated
Time, housing stock
segments,
measures,
(option total
capacity/delivery)
Number of
measures
Number of
additional
measures per year
Number of
measures
£
DECC assumptions
Measures
DECC assumptions
Measures
DECC assumptions
Measures, time
DECC assumptions
/ ECOfys report
Measures, housing
stock segments
The factors above represent required inputs for the model that will be specified by
DECC either by evidence or assumption. The model must simulate the level of subsidies
offered by suppliers according to an appropriate modelling assumption (i.e. costminimisation) and this subsidy level will then form an additional input to the modelling
of take up.
This model will take the inputs and provide a range of outputs so that DECC can design
the detail of the Green Deal and ECO policies, these are outlined in the table below:
Output
Units
Varies over . . .
Number of additional
Number of measures
Time, measures
measures installed
Energy savings
Kwh
Fuel type, measures, time
Energy savings
£
Fuel type, measures, time
2
Carbon emissions savings
Tonnes of CO
measures, time
Air quality improvements
£
Time
Total value of comfort
£
Time
taken
We have separately invited tenders for the National Household Model (NHM) which we
expect to provide these capabilities in the future. The specification for the NHM is
available on request. We anticipate that we will be able to model Green Deal policy
options using the Phase 1 NHM in the second half of 2011. However analysis of initial
Green Deal policy options is required in April 2011. Bidders should therefore consider
how the analysis required for development of the Green Deal model can be co6
ordinated with and utilised in development of the Phase 1 NHM. Phase 2 of the NHM is
scheduled for delivery in 2012 and will incorporate more detailed analysis of behavioural
impacts of energy efficiency and carbon reduction measures, changes in stock and
distributional impacts.
DESCRIPTION OF REQUIREMENTS
Preamble
The impacts of the various outputs that must also be generated by the model, using the
input data and assumptions, must be assessed against a no-policy baseline
DECC anticipates that data will be provided from a range of sources (detailed below)
and the model will require the ability to easily incorporate updated data and
assumptions (converting to a compatible structure). Where data is currently available
(i.e. from the EHCS, SAP or BRE) contractors will be expected to work with DECC in
loading data into the model.
Where data or assumptions are not yet available or agreed, the contractors will be
expected to work with DECC in loading dummy data or assumptions into the model.
Description of required components of model
The model must have a range of capabilities described by the following 5 components.
Component 1: Housing stock segmentation
The model is expected to operate by simulating energy consumption for heating and
cooling in UK homes, segmented according to physical, economic and social
characteristics of homes and households, and the segments’ evolution over time on an
annual basis. The model must have the capability to accept several sets of input data
(described below) that may each vary across some or all segments.
Details on the characteristics of the housing stock should be drawn from the housing
condition survey (HCS) data (comprising three existing databases including the English
Housing Survey, the Living in Wales Survey and the Scottish Housing Condition Survey
).
The optimal segmentation for the model is not yet clear as for some inputs some
segmenting dimensions will be more or less relevant. There is a need to trade off detail
(i.e. number of segments) with the tractability of the model and timescales for the
project. DECC requires the input details that are most relevant with respect to policy
design, and the costs and benefits to society, to be preserved in the segmentation. The
appointed contractors must discuss this trade-off with DECC and with the parties that
will be responsible for input data and assumptions (discussed below) at an early stage of
the project.
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The model will have the capacity to set out the counterfactual baseline (that is to say,
the evolution of energy use within the housing stock in the absence of policy).
Component 2: Energy efficiency and heating measures
DECC requires the model to have the ability to simulate the costs and impact of
installing a range of energy efficiency and heating measures, in isolation or in
combination, on the housing stock by segment. Impacts should be quantified in terms
of the housing stock’s thermal efficiency (EPC rating), energy consumption, carbon
emissions and also the benefits of increased comfort for households. DECC also wishes
to be able to adjust assumptions about heating behaviour to model energy bill savings
for households that heat their home differently (this might be dealt with either by
including categories of households heating behaviour as a dimension by which the
housing stock is segmented, or by adjusting the estimated energy saving according to
the thermal behaviour scenario).
Assumptions about the installation and hidden costs2 the impact of measures on energy
consumption, and the heating behaviour of households will be provided by DECC, either
based on existing data/assumptions, or concurrent work to improve the evidence base.
DECC requires the ability to adjust all assumptions in order to understand the sensitivity
of the modelled outputs to those assumptions.
DECC will provide a list of measures that must be included in the model, but the model
must have the flexibility to allow DECC analysts to readily add or remove measures or
adjust their availability as part of the Green Deal for individual scenarios.
Component 3: Consumer behaviour
A stated preference survey is being commissioned by DECC on potential consumer
demand for the Green Deal. The survey design will commence in late December with a
first draft questionnaire available in early January 2011. The successful contractor for
this modelling would be expected to ensure that the data collected can be used for the
model.
Assumptions and evidence drawn from that survey will be provided as an input to this
model. These inputs (in combination with additional assumptions agreed with DECC as
necessary) will provide a capacity for the model to simulate consumer uptake of
measures, dependent on the amount of finance available (see component 4), and the
modelled level of subsidy expected to be offered by suppliers to meet their share of the
Energy Company Obligation (see component 5).
Component 4: Financial terms and conditions
The annual fuel bill saving is the source of repayment of Green Deal Finance. The model
needs to derive the amount of finance available from the expected bill savings and the
interest rate.
Such as make good costs and time spent researching, preparing and organising
installation work.
2
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Scenarios for interest rates will be determined by DECC
Component 5: Optimisation of Energy Companies (EC) behaviour
The model must include a representation of EC behaviour based on the assumption that
ECs will deliver a mix of measures that delivers their obligation at least cost.
The model will use information about the available opportunities, costs of installation,
and consumers likely response to subsidies (taking the Green Deal Finance parameters
as fixed) to establish the set of subsidies that deliver the ECO target (subject to
constraints placed on ECO scores, and supply chain capacity) at least cost.
Point scores might be based fundamentally on the expected carbon savings delivered
by measures, or their expected contribution to thermal efficiency [as assumed under
component 2]. Therefore the ECO target could be expressed in as a points total with
each measure installed delivering a fixed number of points, or as a SAP improvement
target (i.e. a company might be required to improve homes by a total of 1 million SAP
points).
Peer Review
The model will be subject to a peer review exercise of their work. The peer reviewers’
assessment will be made available to the work stream developing the National
Household Model.
DECC will advise on the experts to be invited, in due course. Expenses for peer reviewers
will be absorbed by DECC.
Supporting documentation
We expect to be provided with a user’s manual, documentation concerning input
assumptions, and training sessions.
Input data and underlying assumptions
DECC research and data will be able to provide a default set of input assumptions
however as further information is collected this input data will need to be updated.
Therefore it will be crucial for the model to incorporate a simple system for updating
input data.
The consumer behaviour data (curves showing uptake at different subsidy levels for
each housing stock segment) may well be under-specified for a large number of housing
stock segments and so a tool to generate realistic uptake curves from a limited dataset
is required.
Contractors will need to share their work with the contractors for the NHM project and
with our contractors for concurrent consumer behaviour research in order to ensure
that, where appropriate, data used in the Green Deal model can also feed into the NHM
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project. The NHM model project is expected to take over from the Green Deal model in
the second half of 2011. Information on the NHM will be made available by DECC.
Working Arrangements
The successful supplier will be expected to identify one named point of contract
through whom all enquiries can be filtered.
If a consortium is awarded the contract, DECC may require it to form a separate legal
entity as a condition of the contract.
Suppliers must provide details as to how they will manage sub-contractors and what
percentage of the tendered activity (in terms of monetary value) will be sub-contracted.
A project manager and lead economist at DECC will provide the main points of contact
with DECC, and will ensure two way communication with relevant officials in the
department and the transfer of necessary knowledge.
Regular contact and meetings/conference calls will be held with the project team to
discuss progress. Further updates to a wider group of officials will be required at key
milestones. We would also reserve the right to arrange for the project to be validated
independently.
DECC will provide meeting rooms, but the successful bidder will not be expected to
work on a day to day basis on DECC premises.
Period of Contract
The contract shall run from the date of the contract award to the end of March 2011.
DECC will retain an option to extend the contract for a further 1year beyond the original
completion date.
Quotations
Tenders should be submitted on a fixed price basis and must be inclusive of all costs and
overheads, including travel and expenses. Each individual requirement and subrequirement listed above must be costed separately.
In submitting full tenders, suppliers confirm in writing that the price offered will be held
for a minimum of 60 calendar days from the date of submission. Any payment
conditions applicable to the prime contractor must also be replicated with subcontractors.
DECC’s target is to pay all approved invoices within a maximum period of 10 days.
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Evaluation of tenders
Suppliers are invited to submit full tenders. Tenders will be evaluated by at least three
DECC staff.
In the case of a consortium tender, only one submission covering all of the partners is
required but consortia are advised to make clear the proposed role that each partner
will play in performing the contract as per the requirements of the technical
specification.
Suppliers are strongly advised to structure their tender submissions in the following
way:
Section 1 – Understanding requirements and adding value (25%)
Suppliers must provide the following information:
 Evidence of their understanding of the tender requirements
 How they will add value in delivering against the requirements
 How risks will be identified, assessed, managed and monitored throughout
performance of the contract
Section 2 – Delivery plan (30%)
With specific reference to the description of the requirement/s, working arrangements
and expected outputs as stated above, suppliers must submit a detailed contract
delivery plan containing the following information:
 A project plan detailing:
o The tasks to be undertaken and suggested milestones for reporting
o The personnel resources to be employed (including where specific tasks are
to be undertaken by partners and/or sub-contractors)
Section 3 – Skills and knowledge (10%)
Suppliers must set out in detail how the relevant skills and knowledge of the delivery
team members will be utilised in the performance of the contract; and/or outline job
descriptions for posts not currently filled. Please do not submit CVs, as they will not be
evaluated.
Section 4 – Pricing (25%)
Suppliers invited to tender are required to replicate and complete the applicable tables
below as part of their response to this section.
In addition, each individual project requirement and sub-requirement must be costed
separately.
Part A – Staff/project team charges
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*Grade/level of
staff
Daily rate
(ex VAT)
No. days offered
over course of
contract
£
£
£
£
£
Sub-total
[*Suppliers should also include sub-contractors]
Total price offered
per staff member
£
£
£
£
£
£
Part B – Non-staff/project team charges
Item
No. of items
Price per item
(ex VAT)
£
£
£
£
£
Sub-total
Total price per
offered
£
£
£
£
£
£
Part C – Full price offered
Sub-total (Part A + Part B)
VAT
TOTAL (Sub-total + VAT)
£
£
£
Section 5 – Requirement specific question/s (10%)
Suppliers must also provide:
 Confirmation of acceptance of DECC’s terms and conditions
 Confirmation and acceptance of the procurement timetable
 Details of any additional issues they think should be addressed.
Where suppliers are claiming a relevant system or standard adopted is equivalent to the
ones referenced above, they should note that it is their responsibility to demonstrate
how such systems are equivalent.
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INSTRUCTIONS TO SUPPLIERS
Suppliers are required to submit their tender and all documents listed above by email to
[email protected] and to [email protected] by noon on
14 January 2011
You are also instructed to return three priced copies and two unpriced copies of your
tender and all documents (one priced set should be clearly marked “original”) by post to
the below address by
Benedikt Koehler
Department of Energy and Climate Change
3 Whitehall Place
London
SW1A 2AW
Please ensure the outside of any packaging is clearly marked with the orange DECC
tender return labels.
DECC reserves the right to invite suppliers to discuss their tender proposal before a final
decision is made.
Suppliers must note that DECC reserves the right to withdraw this contract opportunity
without notice and will not be liable for any costs incurred by suppliers during any stage
of the process. Suppliers should also note that, in the event a tender is considered to be
fundamentally unacceptable on a key issue, regardless of its other merits, that tender
may be rejected.
If you require further information concerning the tender process, or the nature of the
proposed contract, please in the first instance email: [email protected].
Should questions arise during the tendering period, which in our judgement are of
material significance, we will inform all suppliers to explain the nature of the question,
and our formal reply. All suppliers should then take that reply into consideration when
preparing their own bids, and we will evaluate bids on the assumption that they have
done so.
Procurement timetable
DECC receipt of ITT
Notification of Interview
for shortlisted bidders
Interviews
Appoint contractor
Main deliverables
Further development work
Ongoing support
14 January 2011
20th January
21st / 24th January
Wednesday 26th January
March 2011
April 2011
March 2012
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CONDITIONS OF TENDER
Representations
A supplier may contact officers of DECC to obtain any further information about the
requirements of the contract or the tendering procedures if these are not evident or
clear from the documents supplied to suppliers.
Specification
For the avoidance of doubt, the contract specification shall include all requirements
explicit or implied within the invitation to tender.
It must be recognised that DECC reserve the right to withdraw this tender document
and all funding contained within it without notice.
Collusive Tendering
In submitting a tender against this contract, the supplier confirms that they have not
fixed or adjusted the amount of the tender by or under or in accordance with any
agreement or arrangement with any other person.
The supplier also certifies that at no time, before or following the submission of the
tender, has the Supplier carried out any of the following acts:
i)
communicating to a person other than the person calling for the tenders
the amount or approximate amount of the proposed tender, except
where such disclosure is required for the purpose of obtaining insurance;
ii)
entering into any agreement or arrangement with any person that he
shall refrain from tendering or as to the amount of any tender to be
submitted;
iii)
offering or paying or giving or agreeing to give any sum of money or
valuable consideration directly or indirectly to any person for doing or
having done or causing or having caused to be done in relation to any
other tender or proposed tender for the said work any act or thing of the
sort described above. The context of this clause the word ‘person’
includes any persons and anybody or association, corporate or
unincorporated; and ‘any agreement or arrangement’ includes any such
transaction, formal or informal, and whether legally binding or not.
Freedom of Information
Information in relation to this tender may be made available on demand in accordance
with the requirements of the Freedom of Information Act 2000.
Suppliers should state if any of the information supplied by them is confidential or
commercially sensitive or should not be disclosed in response to a request for
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information under the Act. Suppliers should state why they consider the information to
be confidential or commercially sensitive. This will not guarantee that the information
will not be disclosed but will be examined in the light of the exemptions provided in the
Act.
It is important to note that information may be commercially sensitive for a time (e.g.
during a tender process) but afterwards it may not be. The timing of any request for
information may be extremely important in determining whether or not information is
exempt. However Suppliers should note that no information is likely to be regarded as
exempt forever.
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