Commercial Learning Dave A Roberts, EA Technology

1

Commercial Learning

2 2

Context and background

The customer recruitment story

Unfortunate costings and long timescales

Changing contracts for the future

CONTEXT AND BACKGROUND

The project overview



£10m project

to understand the issue

and trial a mitigation solution (Esprit)



Led by EA Technology

, working with

SSEPD, Nissan, Northern Powergrid, Zero

Carbon Futures, plus others



£4.5m funded via

Ofgem’s Low Carbon

Networks Fund

The

largest

network related

EV trial

in

the UK (if not the world):

•

220x 3.5kW charging Nissan LEAF

•

18month lease deals

•

Locally clustered

•

Controlled at peak times

•

Analysed datasets

Innovation squared: EVs

5

1. Commercial innovation

A blueprint for commercial

contracts and management of

projects delivered by a third

party on behalf of a Distribution

Network Operator (DNO)

2. Technical innovation

Trialling a technology (Esprit) to

mitigate the impact of Electric

Vehicle (EV) charging on the

local electricity network

Innovation #1

Innovation #2

Who is EA Technology…?

6

An engineering, exporting, SME based in

the NW of England

We support

energy networks

to become

more

cost-effective and reliable

through:



Power Engineering Consultancy



Specialist Electrical Engineering Services



Power Skills Training Services



Specific products

We excel at

partnership brokering

,

customer engagement

and

innovation

:



Customer-Led Network Revolution



New Thames Valley Vision



My Electric Avenue



Employee-owned



Values-led



Innovation focused

Why did we get involved?

To address a likely issue

• Bringing a potential tomorrow problem to the minds of today • Combining our best skills in

collaborative working

To prove / test a solution

• Esprit developed and patented by EA Technology

• Providing a route to market

What roles did we play

Project

Management

Technology

supplier

Trial/data

verification

•

Partner liaison

•

Risk management

•

Delivery

•

Dissemination

•

Integration

•

Technical

verification

•

Supply of Esprit

•

Provision of equipment

•

Problem solving, etc

The commercial overview - concept



Project led by EA Technology on

behalf of SSEPD



Wrote bid



Delivered project and all milestones



Managed budgets and risk



Contract back-to-backed from

Ofgem to SSEPD to EA Technology



Skin in the game



The ‘right’ commercial tension



Contracts then put in place between

EA Technology and all project

partners / suppliers

Conventional approach

The commercial overview - practice



1 contract between Ofgem

and SEPD (Project Direction)



1 contract between SEPD and

EA Technology



11 sub-contracts put in place

between EA Technology and..



1x DNO



4x SMEs



1x OEM



1x sole trader



2x academic organisations



1x delivery partner



1x consultant

Some specifics of Ofgem’s Low Carbon Networks Fund

•

Introduced 2010-15 to look

at the issues posed and

solutions that can

enable

the efficient transition to a

low carbon economy

•

‘Tier 2’ projects

compete

for funding

in annual

competitions based on

value for money for

customers, and their

technical / commercial

validity

•

90% of costs are funded by

customers;

10% is put up

by the network operator

and only recovered based

on delivery against

milestones

11

An agreement to

share the 10%

contribution

An agreement to

sign up to the

terms in the

contract..

..including all

milestones..

..and any funding

restrictions.

THE CUSTOMER RECRUITMENT STORY

The need for customers

Technical trial

Minimum of 100 customers in

(very) local ‘clusters’

Social trial

Minimum of 100 customers

across GB to improve statistical

significance

The cluster challenge

…The contract stated

•

“No funding for cars / kit ‘allowed’ until

all

customers recruited”

•

“Project would be halted if [above]

criteria was not met”

14

You’ll never get

10 people on one

street!…

Even if you do,

you’ll only get

two or three

clusters

Stepping up to the mark

15

Cluster validation process

Funding

approved

• Cluster

operational

Cluster

validated

• Report to Ofgem

Checks and

surveys

• Network –

Capacity & PLC

• Home - charging

points

• Customer

-credit checks

Declaration

of Intent

forms

• Cluster sign up

Magic

number ten

• 10 customers

registered on

one LV feeder

Keeping everyone informed

17

•

Regular dialogue

amongst project

team

•

Regular dialogue

with Ofgem

•

Regular dialogue

with customers

18

19

Contract restrictions, risk mitigation and

Board meetings

20

Following a highly charged telecall with Ofgem late on Thursday

19th December, it was made clear to the project team that Ofgem

are seeking seven clusters of ten participants (with ten vehicles

deployed), and that anything else could be deemed insufficient,

with the only subsequent option being a Change Request

(minimum timescale 8 weeks). There appears to be no flexibility

around this, despite a clause in the contract stating that different

permutations could be sought providing they do not detract from

the SDRCs and learning.

…

This leaves the project with a predicament; we wanted a steer

from Ofgem by 20/12/13 that our approach was acceptable. The

only steer we have at this junction is that clusters of less than ten

are only acceptable once we have seven (of ten) in place.

Direct extract from (one of many) reports

presented to EA Technology Board

Action to avoid catastrophe

•

EA Technology chose to roll out

vehicles without Ofgem’s approval

•

This meant we underwrote the

project during it’s most critical

stage

•

SSEPD made available a short term

bridging loan to EA Technology

But… had we failed to recruit by just

one customer in the timescales given

•

It would have crystallised a loss of

£1.2m for EA Technology

•

Resulting in probable liquidation of

the company!

A worrying time, but a positive result

Rolled out vehicles from

December 2013

In parallel with

continuing to convert

new customers / clusters

Weekly updates to my

Board on progress

In March 2014 we achieved our targets

UNFORTUNATE COSTINGS AND LONG

TIMESCALES

Unfortunate costings

•

Spreadsheet transcription error

–

Raised prior to project award

•

Project conditions changed at last

minute

–

Changed approach for recruitment

and deployment and increased cost

24

Extract of Full Re-Submission Spreadsheet –

annotated to highlight the challenge of

managing a spreadsheet 149 columns wide

(11 widescreen computer monitors

across [at 100% zoom])

Delivering more for less

26

Transcription error resulting in reduced overall budget.

27

Size of project

increased to greater than originally planned.

28

Funding increase borne by partners (and almost

entirely by EA Technology).

29

Bridging loan made available by SEPD to ensure adequate funds before recruitment was completed.

Responsiveness to a Change Request

30 1st_April 2011 1st_April 2012 1st_April 2013 1st_April 2014

FY12

FY13

FY14

FY15

FY16

1st_April 2015 1st_April 2016

Bidding

Partner

contract(s)

Project

award

Contract

with Ofgem

Customer recruitment

Tech. roll out

Control, analysis & report

We are

here

ID funding issue

1

st

CR

Started May 2013 With Ofgem August 2013 Withdrawn by EATL Dec 2013

Responsiveness to a Change Request

31 1st_April 2011 1st_April 2012 1st_April 2013 1st_April 2014

FY12

FY13

FY14

FY15

FY16

1st_April 2015 1st_April 2016

Bidding

Partner

contract(s)

Project

award

Contract

with Ofgem

Customer recruitment

Tech. roll out

Control, analysis & report

We are

here

ID funding issue

1

st

CR

2

nd

CR

Started Apr 2014 With Ofgem Sept 2014 Approved by Ofgem Jul 2015 Decision published Oct 2015

Recommendations to streamline contract

negotiation

•

Face-to-face meeting to:

–

discuss the request

–

agree (subject to evidence)

–

or reject

•

Importantly,

agree all the evidence required in a face-to-face meeting

–

avoid extending the decision as this increases uncertainty and risk to the project

Discretionary Reward: It’s a LOOONG time to get

your money back!

CHANGING CONTRACTS FOR THE FUTURE

Key Project Learning – On Bidding

Fixed price quotes are provided on the basis of an anticipated

level of required effort and predicted risks

Changes made post-bid submission significantly increased

overall project risk

It is not always feasible / reasonable for project partners to

increase in-kind support to fill in any resultant funding gaps

Key Project Learning – On Contracts

Project Direction should be output focused

Contracts need to flex to suit the range of parties involved

Financial liabilities should be dispersed between the signatories in

accordance with the roles and responsibilities held

Change Request Process should be streamlined

Key Project Learning – On acceptance of Risk

The financial risk in our case was borne by Project lead; this would be daunting for any

SME

Differences between Regulation and customers’ perceptions; need for some

flexibility when dealing with customers

The relationship with Ofgem was arms length and lacked empathy with the SME

position (we are not a Regulated DNO)

IP is all a SME has, it’s reasonable they look to protect it

• Adoption of Product IP vs Application IP and an intentional split management within project lead

FINAL THOUGHTS

However let’s not forget our successes

We have

been

recognised as

world-leading

• And spread the name of the project, the challenge and the solution to a wider audience than ever before

We have a

tight project

team...

• ..across 11+ very different organisations. • We would all work

together again

We’ve

recruited

hundreds of

customers..

• ..And have shown novel ways to

engage and connect with homeowners and the general public

We’ve taken

on risk..

• ..and are still living to tell the tale

We’ve

delivered

everything

we set out

to..

• ..for less money than intended and with more onerous conditions

THANK YOU