APPENDIX 1 Leicestershire County Council Business Case Street Lighting Transformation Project

Leicestershire County Council Business Case Status: Final Template

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APPENDIX 1

Leicestershire County Council

Business Case

Street Lighting Transformation Project

Status: Final Template

Prepared by: Engineering Design Group

Version v1.4

Date November 2014

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Contents

1. DOCUMENT CONTROL 3 1.1 Control Details 3 1.2 Document Amendment Record 3 1.3 Document Review Record 3 1.4 Document Sign-off 3

2. MANAGEMENT SUMMARY 4 2.1 Introduction 7 2.2 Outcomes and Benefits 9 2.3 Scope 10 2.4 Preferred Option 10 2.5 Implementation Strategy Overview 11 2.6 Costs, Savings and Funding 13 2.7 Key risks Error! Bookmark not defined. 2.8 Conclusion and Recommendations 16

3. INTRODUCTION 17 3.1 Background 18 3.2 Project Mandate 19 3.3 Aims and Objectives 19 3.4 Outcomes and Benefits 20 3.5 Related work to date 21

4. OPTIONS APPRAISAL 23 4.1 Baseline (Do Nothing) 23 4.2 Option 1 25 4.3 Option 2 28 4.4 Option 3 29

4.5 Option 4 29 4.6 Options Summary 31

5. IMPLEMENTATION STRATEGY FOR THE PREFERRED OPTION 32 5.1 Implementation Approach 32 5.2 Procurement Approach 32 5.3 Assumptions, Dependencies and Risk Appraisal 32 5.4 Implementation Impact Analysis 35 5.5 Implementation Plan 37 5.6 Resource Plan 38 5.7 Key Stakeholders 39 5.8 Governance 39 5.9 Costs, Savings and Funding Summary 40

6. CONCLUSIONS AND RECOMMENDATIONS 41

7. APPENDIX 1 – FINANCIAL ASSUMPTIONS AND ANALYSIS 42 7.1 Financial Assumptions 42 7.2 Investment Analysis 42 7.3 Full Sensitivity Analysis 43

8. APPENDIX 2 – PROJECT PRIORITISATION ASSESSMENT CRITERIA 44

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1.Document Control

1.1 Control Details

Document Location:

F:\Change Management\0 Template Documents\CMU Document Templates\CIS\CMU_Business_Case_Template.doc

Production Software:

Microsoft Word 2007

Author: Tony Bull, Environment and Transport, Engineering Design Group Owner: Mark Stevens, Assistant Director (Highways), Environment and Transport

1.2 Document Amendment Record

Issue Amendment Detail Author Date Approved

V1.0 Tony Bull 19.09.14

V1.1 Project management detail added Karen Notman 22.09.14

V1.2 Document review and updated data & text Mark Stevens 09.10.14

V1.3 Figures updated, checked and other minor changes to text

Ravi Lakhani & Nick Wash

10.10.14

V1.4 Final document review/updating data & text Mark Stevens 13.10.14

1.3 Document Review Record

Service

Name

Date

Department Director

Finance

HR

S&IT

Commercial & Procurement

Communication

1.4 Document Sign-off

Project Manager:

Signature:

…………………………………………………………….

Printed Name:

…………………………………………………………….

Position:

…………………………………………………………….

Date:

…………………………………………………………….

Project Sponsor:

Signature:

…………………………………………………………….

Printed Name:

…………………………………………………………….

Position:

…………………………………………………………….

Date:

…………………………………………………………….

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2. Management Summary

This document constitutes the Business Case for the Street Lighting Transformation Project. This management summary is an overview of the benefits, costs and risks from implementing this project.

Leicestershire County Council’s (LCC) 2014 Medium Term Financial Strategy (MTFS) was approved at the meeting of the County Council on 19th February 2014 and identifies that there will be a service reduction (S46) associated with part-night lighting, switching off and dimming of Leicestershire’s street lighting, along with a more radical approach to street lighting energy reductions. The service reduction is valued at £245k in 2014/15, rising to £1.245m from 2017/18.

The £245k relates to the completion of the part-night lighting, switching off and dimming programme for street lighting, as approved by the Cabinet on 15th December 2009. The ‘Energy Reduction for Street Lighting Project’ commenced in 2010/11 and is set to be completed during this financial year, 2014/15. This Business Case primarily summarises how the additional £1m service reduction might be achieved within the 2014 MTFS period.

The anticipated outturns for energy consumption (evaluated at 27 million kilowatt hours) for the 2014/15 revenue budgets for illuminated signs and street lighting are £227k and £2.415m respectively. – a combined total of £2.642m. With the completion of the Energy Reduction for Street Lighting Project in 2014/15, the street lighting expenditure in 2015/16 would be expected to decrease to £2.15m (subject to any in-year energy price rises during 2014/15).

If the Council does not make further changes to its street lighting and illuminated signs stock, there is every expectation that the trend from previous years would continue – i.e. the total cost of electricity to the County Council will increase. According to the Department for Energy and Climate Change, the price of non-domestic electricity rose by 3.7% over the 2013/14 financial year. This was a relatively small annual increase given that the illuminated street furniture energy cost in 2005/6 was just £1.53m.

The inclusion of Street Lighting as one of the Council’s 24 Transformation Projects, with the aim of reducing the cost of street lighting though the use of new technology, alternative delivery models and partnership delivery arrangements, alongside the wider need to continue to reduce revenue expenditure, has been done with these continued cost pressures in mind.

The Council’s specific objectives for any investment in its street lighting include:

• Reducing carbon emissions;

• Reducing the future burden of energy bills and other associated costs;

• Meeting current commitments and demands relating to embedding of sustainable practices

in the Council’s activities;

• Being better prepared for future regulatory and monitoring requirements;

• Raising the environmental profile of the Council.

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A Street Lighting Project Board has been established, drawing resource from the Highway Design and Street Lighting Teams, as well as the Business Change Group and the Departmental Finance Business Partner. In the event that the Street Lighting Transformation Project proceeds into an implementation phase, the constitution of the Project Team is likely to change. However, the current Project Board has identified a long list of technical options from which the following shortlist of options was selected for further analysis against a ‘Do Nothing’ scenario. The ‘Minimal Changes’ option is a slight variation on the ‘Do Nothing’ option below to reflect a longer-term strategy.

Table 1: The Range of Options

Option Description

Do Nothing

A Base Case Option which broadly represents continuation of the

current asset strategy. This essentially entails using the current £1m

capital programme allocation to replace around 1650 lighting

columns and high-pressure sodium lanterns each year on a like-for-

like basis (reflecting a 40-year column life).

De-illumination of road

traffic signs on bollards

To extend the de-illumination of traffic signs and bollards in line with

the changes proposed for the Traffic Signs Regulations and General

Directions 2015.

Further switch-off and

removal of street lights

Limited scope for savings but recommended to pursue, subject to site

specific risk assessment and consultation where considered

appropriate. This is already being absorbed into the Energy Reduction

for Street Lighting project and thus does not warrant further

consideration due to the small-scale nature of change.

Minimal changes to the

current maintenance

regime (i.e. combine

switchover to LED

lighting only as part of

column replacement

programme)

There is limited scope for savings associated with how maintenance is

undertaken but recommended to pursue, subject to site specific risk

assessment and consultation where considered appropriate. 2014/15

has been used as a trial year for combining the street lighting column

replacement programme with a replacement of the high-pressure

sodium lanterns for LEDs. To maintain the required column

replacement rate of 1,650 columns per year, the annual capital

programme cost must increase by 30% but it will take 40 years to

achieve an entire LED lighting stock and accrue the full energy savings

potential

Converting all

remaining street lighting

stock to LED with a

Central Management

System

Accelerated replacement of all existing lighting stock with the

introduction of a Central Management System (CMS) to control

trimming, dimming and part-night operation.

Permanently turn off all

street lights

This would eliminate all street lighting maintenance and energy costs

as well as eradicate the need for street lighting column replacement. It

would require the removal of all 67,112 operational columns from the

highway network (as they would otherwise constitute highway

obstructions) but this is regarded as a socially unacceptable option.

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Results

The quantitative and qualitative impacts of the options were assessed and the results are summarised within the Table below:

Table 2.

Category Resource Implication

Forecast Annual Savings

Financial:

De-illumination of traffic signs on bollards

Conversion to LED lighting with a CMS (with energy costs based on 3.7% p.a. price increases)

Project management costs

£1.57m

£23.072m

£0.465m

£123k

£1.953m

Energy Efficiency:

Decrease in annual energy consumption

Tonnes of carbon saved

Upwards of 60%

5,132T

Benefits Significant benefits arise including a

>60% decrease in carbon emissions

and reduced electricity

consumption as quantified above.

Marginally positive benefits are

realised in relation to visual impact

and light pollution and central

overhead savings.

Risks Provides maximum protection to the Council regarding future energy

cost rises.

Lighting technology is developing at a rapid rate and more efficient

luminaires could be just around the corner.

Dimming and trimming could have a marginally negative impact on vehicle and pedestrian safety.

The replacement of all LCC’s lighting stock over a short period

could lead to a costly replacement programme within the next 15 to 20

years.

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Whilst progression of the de-illumination of traffic signs on bollards is warranted, the analysis indicates that complete replacement of the lighting stock with LEDs and the introduction of CMS technology is the most appropriate technical solution to achieve the £1m a year savings and Table 3 summarises how it meets the Council’s objectives for a street lighting investment:

Table 3.

LCC Objective Comments

Reduce carbon emissions

Conversion to LED lighting without CMS technology reduces street lighting carbon emissions from a base case projection of 10,646T to 5,514 (48%). With CMS technology implemented, carbon emissions can be brought down a further 165T (3%) by trimming and a further variable percent, dependent on dimming regimes

Reduce the future impact of energy costs and other

associated costs

The total predicted savings based on current energy and carbon costs indicates the benefits of such an investment against predicted rising energy costs.

Better prepared for future regulatory and future monitoring

requirements

The investment includes the introduction of a CMS which will allow the Council to monitor the real time performance of its street lighting networks, both in performance terms and also in energy consumption terms. This will assist LCC to respond to future regulatory and monitoring requirements.

Safer Communities Priorities

The effect of part-night lighting on the fear of crime is well documented but actual crimes have not increased across the county as a whole since the introduction of part-night lighting. The capability to switch lights back on/off remotely using a CMS system should the police request it (e.g. to perhaps help locate a missing person) could go some way to re-assure the public of LCC’s commitment to safety.

There are risks associated relating to the LED cost base including both forecast improvements in LED efficiency and forecast decrease in costs. As with any investment project, these risks would require to be monitored and managed in the procurement of the LEDs and CMS for the Street Lighting Transformation Project.

2.1 Introduction

The current financial year is the concluding year of the Council’s Energy Reduction for Street Lighting

Project which, in its totality, will deliver an annual saving of £800k to the Authority (based upon

current electricity energy prices) and has reduced the County Council’s carbon emissions. Initial

monitoring has shown that there has been no increase in either crime levels or road traffic accidents

associated with this project across Leicestershire. However, the Council will still be spending £2.15m

on street lighting energy at the beginning of 2015/16 as well as £680k on revenue maintenance and

£1m capital expenditure in providing its street lighting function.

This level of expenditure needs to be considered in the context of the Council’s overall financial

position within both the current MTFS and the roll-forward of the MTFS to 2018/19 which is likely to

mean that there will be a requirement to look again at all areas of activity to determine whether further

savings can be achieved.

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From April 2010, the County Council commenced a four-year programme to reduce the level of street

lighting across the County, with three aims of:


• Saving money;

• Reducing levels of night-time light pollution in urban and rural areas;

This project included introductions of part-night lighting, dimming and lamp switch-offs following

controlled consultation with local parish councils and the like, rather than consulting everyone in

affected communities. In addition, during the last year, the use of LED lighting was introduced as a

more expansive one year trial when installing a new street light or undertaking lantern replacements

on existing street lights. This has proven useful in obtaining a better understanding of what would

need to be procured for a more expansive roll-out. Due to the additional costs of LEDs above sodium

lamps, an additional capital allocation would be necessary for a permanent implementation of the

trial. Significant reductions in removing illumination from signs and some bollards were undertaken,

whilst still ensuring the Council complies with government regulations.

The current extent of assets related to ‘illuminated street furniture’ in Leicestershire is as follows:

(a) 9,281 illuminated signs;

(b) 2,930 illuminated bollards;

(c) 177 belisha beacons;

(d) 262 subway lighting units;

(e) 67,336 street lighting columns, of which 224 are switched off but not yet removed – leaving

67,112 operational columns.

A report on the County Council’s Strategic Plan and Transformation Programme was presented to the

Cabinet on 6th May 2014. The Strategic Plan and Transformation Programme have been developed

alongside and in support of the 2014 Medium Term Financial Strategy. The implementation of the

Transformation Programme will aim to achieve £40m of savings across the Council, required to ensure

delivery of part of the MTFS. Street Lighting is one of the Programme’s 24 transformation projects and

falls under one of five overall objectives, specifically ‘Working the Leicestershire Pound’. It has the aim

of reducing the cost of street lighting through the use of new technology, alternative delivery models

and partnership delivery arrangements.

In essence, the 2014 MTFS and Street Lighting Transformation Project identifies that £1,000,000 in

savings is to be made from ‘street lighting’ by 2017/18, over and above the final savings of £245,000

being realised from the completion of the Energy Reduction from Street Lighting project.

The objective of the business case is to assess the energy saving potential of LED street lights with a

Central Management System and their ability to deliver efficiencies that benefit LCC in the long term

and result in an acceptable payback on the initial investment.

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2.2 Outcomes and Benefits

2.2.1 Climate Change

Climate change is described as one of the biggest challenges mankind has ever faced, and carbon dioxide is one of its main causes. As an energy user and a community leader, Leicestershire County Council has an important role to play, by reducing its own carbon emissions and by setting an example for others to follow.

The UK Government has set targets for Green House Gases (GHG) reduction in the Carbon Plan that states the UK will reduce carbon emissions by 34% by 2020 compared to levels in 1990. Central government has and continues to develop the policy framework to meet this target. For instance they have created fiscal incentives such as the Feed-in-Tariff (FiT), the Renewable Heat Incentive (RHI), the Green Deal and Energy Company Obligation, as well as new regulations such as energy efficiency requirements for vehicles and products.

Sustainable development, including carbon reduction, is now a key strategic priority for LCC, reflected in all levels of work, from strategic plans to practical activities. According to the Department of Energy and Climate Change’s Total Emissions 2012 release, the total figure for Leicestershire’s “CO2 emissions within the scope of influence of Local Authorities” was 4228.5 kilotonnes.

The Carbon Reduction Target for Leicestershire is to reduce emissions by 23% between 2005 and 2020, as measured by the Department of Energy and Climate Change.

The current emissions for street lighting are based on the following information:

• 67,112 operational street lights;

• In 2010/11, street lighting carbon emissions amounted to 17,675 tonnes CO2

The Council’s Street Lighting Team has taken forward initiatives including energy-efficient control gear in new lanterns, part-night lighting and, as set out in Section 2.1 above, all future bulk column replacements could include LED conversion. In the short-term, street lighting measures will continue to be implemented.

2.2.2 Energy Savings

In essence, the 2014 MTFS and Street Lighting Transformation Project identifies that £1m in savings

is to be made from ‘street lighting’ by 2017/18. In terms of future energy costs, one could use the

3.7% figure for 2013/14 for any future evaluations. In this scenario, by 2018/19, the cost of energy for

street lighting and illuminated signs would rise from its 2014/15 value of £2.642m to £3.055m.

However, given the overall historic trend of electrical energy price growth, it may be that an average

increase of 3.7% understates energy price inflation over the medium term. It is therefore essential to

identify the means by which this sum can be reduced so as to better protect the ongoing delivery of

other services.

In reality, it has recently been announced that energy supply companies will be charging electricity at

different rates during the 24-hour period. The most expensive period will be the ‘black time band’

shown in Table 4 below, followed by the ‘yellow time band’ with the ‘green time band’ being the

cheapest. This means that there is likely to be scope to achieve additional savings potential if energy

consumption during the more expensive times can be reduced/curtailed.

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Table 4.

Time Bands for Half-Hourly Unmetered Properties

Black Time

Band

Yellow Time

Band

Green Time

Band

Monday – Friday

Nov - Feb 15:00 to 19:00

07:30 to 15:00

19:00 to 21:00

00:00 to 07:30

21:00 to 24:00

Monday – Friday

Mar - Oct 07:30 to 21:00 00:00 to 07:30

21:00 to 24:00

Weekends 00:00 to 24:00

Notes All the above times are in UK clock time

2.2.3 Light Pollution

LCC’s existing ageing stock of low pressure sodium (‘SOX’) lights (approximately 11,000 in total) has very broad light distribution. A lot of the light goes above the horizontal, resulting in an orange sky glow over villages and towns. LED lighting is much more directional with no direct light being distributed above the horizontal, leading to less light pollution. Equally, LED lighting is far more controllable in that it is more easily directed onto the road and pavement surfaces with little light being directed towards property beyond the highway boundary. In addition to this, when the lights are connected to a CMS system, it will be possible to dim individual lamps remotely thus further reducing light trespass into people’s windows.

2.3 Scope

The Street Lighting Transformation Project seeks to implement a modern system of street lighting with complete control functionality over every single lamp. LED lighting with a CMS system would enable this whilst providing an accurate energy usage meter so that LCC only pays for what it uses, a step away from historic unmetered supplies. A further aspect of the project aims to also remove unnecessary lighting from internally illuminated bollards, thus reducing the maintenance budget and energy use.

2.4 Preferred Option

A number of options exist to achieve the desired £1m savings and have been considered in terms of their deliverability and acceptability. Detailed consideration of these options and conclusions is summarised in Table 5 below. These options were presented to the Environment and Transport Overview and Scrutiny Committee on 4

th September 2014 with the Committee concluding:

‘That in order to meet the savings requirements as part of the County Council’s Medium Term Financial Strategy and Transformation Programme, this Committee: (a) Supports the submission of a detailed business case in October 2014 to the Cabinet by officers

for:- i) De-illumination of road traffic signs and billboards; and ii) Converting all of the remaining street lighting stock to LED with a centrally managed system.

(b) Notes the limited scope for additional savings also considered by officers, as outlined in the report’

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Table 5.

Option Acceptable Deliverable Comments

A De-illuminating road traffic signs on bollards

Yes Yes For further consideration, as set

out in this Business Case

B De-illuminating all road traffic signs

No No Not recommended and not to be

pursued further

C Further switching off and removal of street lights

Yes Yes

Limited scope for savings but recommended to pursue (subject to site-specific risk assessment

and consultation where considered appropriate) as an ongoing

element of the Energy Reduction for Street Lighting Project

D Make minimal changes to the current maintenance regime

Yes Yes

Limited scope for savings in the short-term as this would constitute replacing sodium lamps with LED lamps as part of a rolling 40-year

street lighting column replacement programme

E

Converting some or all of the remaining street lighting stock to LED with or without a Central Management System

Yes Yes For further consideration, as set

out in this Business Case

F Transfer of the lighting stock to local lighting authorities

Unlikely Possible

Only to be considered if a parish or district council etc wants to provide

a service over and above that provided by the County Council

G Turning off all street lights No No

Not recommended and not to be pursued further, although some

detail is provided in this business case for the sake of completeness

Consistent with the conclusions drawn by the Environment and Transport Overview and Scrutiny Committee, the preferred option that this Business Case pursues is to push ahead with the replacement of LCC’s existing street lighting stock with LED technology incorporating CMS control.

2.5 Implementation Strategy Overview

2.5.1 Introduction

Roll-out of LED lighting with a CMS is the preferred technical option for the Council. This option includes the replacement of all lanterns with LEDs over a four-year period commencing in 2015/16. CMS technology would be adopted on all lanterns, with a general policy of part-night lighting between midnight and 5.30am and some dimming.

Given the scale of work required and the extent of change, consideration would need to be given as to whether the LED conversion work could be undertaken by Leicestershire Highways Operations street lighting function working in conjunction with an external contractor or undertaken solely by an external contractor. Irrespectively, extensive procurement work would be required. However, it should be noted that the value of the operational work in completing the LED conversion and CMS installation amounts to around £3.9m. If this element of the cost falls within the range of services provided by Leicestershire Highways Operations (LHO), it not only offers work for an existing in-house service and helps spread the financial burden of LHO’s own and central overheads but helps retain this sum of money locally rather than serving to assist external contractors. This is in line with the Social Value Act 2012.

This Business Case is presented to the Cabinet for consideration and, if approved, will have a bearing on the Council’s capital programme and assets.

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This section of the Business Case reviews the potential procurement approach and the areas which the Council would require to address prior to procurement.

2.5.2 Procurement Approach

Following a review of the affordability implications of the Project, the proposed procurement approach can be to either enter into a supply only or supply and install contract with the required goods being provided over a four-year period. This Business Case assumes that the Council will finance the project management, purchase and installation costs of the LED lights, the Central Management System and the bollard replacements from its own resources. Other funding sources have been considered (as set out in the Environment and Transport Overview and Scrutiny Committee report) but none are as financially advantageous as sourcing the funds from within the Council.

The Business Case has assumed installation of the LED technology and the Central Management System between 2015/16 and 2018/19 to achieve a steady implementation rate that would provide flexibility to respond to market price variations and innovations, as well as providing a reasonably well-spread LED replacement rate starting in 15 or so years’ time, as and when the LEDs begin to degenerate at a large scale.

2.5.3 Installation

Given the highest returns would be on LCC’s all-night lighting stock, it would be prudent to start with replacing these. However, the patchwork appearance of introducing LED white lighting to locations retained as all-night lights amongst the orange SOX glow for part-night lighting column locations would not be aesthetically pleasing. Consideration should, nevertheless, be given to targeting all lighting in the areas with the highest proportion of all-night lighting has been retained as this would still provide good returns with a higher uniformity by street.

2.5.4 Project Management

Project Management

In progressing to the implementation stage, the Street Lighting Transformation Project would require a project delivery team to be established (working in tandem with and for the Project Board), with representatives from all sectors who are able to support the project, including:

• an experienced project manager;

• technical specialists who can manage the integrity of the street lighting data and specification; and

• procurement, finance and legal officers as required.

LCC will take cognisance of any central support which may be available for such a project.

Governance

As indicated above, the Street Lighting Transformation Project Board that has enabled this project to reach the Business Case stage would continue to manage the implementation of the project, albeit potentially with a different composition of participants.

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2.6 Costs, Savings and Funding

2.6.1 Costs & Savings

The evaluation of both cost and savings has to be directly linked to type of illumination (i.e. part-night

lighting or all-night lighting), the level of illumination (i.e. how powerful each lamp is within a column’s

lantern) and the relevant number of lighting columns.

The total number of lighting columns maintained by the County Council in Leicestershire is 67,336. Of

these, 224 are switched off, ready for permanent removal. A further 941 columns will have been

converted to LED lamps by 1st April 2015 (mainly through a combination of trials, including this year’s

street lighting column replacement programme), meaning that a total of 66,171 lighting columns (part-

night and all-night) require LED conversion.

A breakdown of the current and future energy and carbon consumption related to the transition to

LEDs only is as follows:

Table 6.

No. of

street

lighting

columns

Current

energy

(million

kilowatt

hours)

Future

energy

(million

kilowatt

hours

Energy

saving

(million

kilowatt

hours)

Energy

savings

per year

Current

carbon

usage

(tonnes

per

year)

Future

carbon

usage

(tonnes

per

year)

Carbon

savings

per year

(tonnes

per

year)

Value of

carbon

savings

per

year

Total cost

savings

All-night

lighting

26,558 13.363 6.095 7.268 £799k 6,975 3,150 3,825T £61,196 £861k

Part-

night

lighting

39,613 7.048 2.904 4.144 £455k 3,671 2,364 1,307T £20,911 £476k

TOTALS 66,171 20.411 8.999 11.412 £1.254m 10,646 5,514 5,132T £82,107 £1,337k

A further 3.86% energy saving of the 2015/16 anticipated energy bill of £2.15m could be generated

from effective ‘trimming’ of lighting levels at dusk and dawn on all lighting columns. This equates to

£83k. An additional 10% energy saving could be derived from dimming lamps at stages during the

night using the CMS. This would equate to £215k per annum. This saving would offset the £81,050

annual cost of a CMS service provider externally hosting the CMS. It is also considered that £250,000

of the current £680,000 street lighting maintenance budget could be saved by implementing this option

and £150,000 could be saved from the street lighting column replacement programme as the sodium

lamps would already have been replaced by LED lamps through this option. The total achievable

annual saving would therefore be:

£1.254m + £82k + £83k + £215k + £250k - £81k + £150k = £1.953m.

The estimated cost of replacing the existing lighting ‘all-night’ stock would be around £8.865m. The

cost of replacing the part-night lights would be a further £10.954m, whilst the cost of the CMS would

be a further £3.253m. The total cost of implementing LED Lighting with a CMS system would therefore

be £23.072m, excluding project management costs of £465k. The total cost of the LED and CMS

option would thus be £23.537m or, with the de-illumination of traffic signs on bollards, a total of

£25.107m.

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Table 7

Category Resource Implication

Forecast Annual Savings

Financial:

Initial Investment - De-illumination of signs on bollards

Lamp replacement with LED & CMS (Energy costs)

Project management cost

£1.57m

£23.072m

£0.465m

£123k

£1.953m

(based on 3.7% p.a. price

increase)

Energy Efficiency:

Decrease in annual energy consumption

Tonnes of Carbon saved

Upwards of 60%

5,132T

To assess the viability of the proposal to convert lights to LEDs, financial analysis over a 15-year

period was undertaken by Corporate Finance. Part of the evaluation would be related to how quickly

savings could be generated. Financial modelling has therefore assumed that energy savings would

accrue at the rate of 12.5% at the end of Year 1, 37.5% at the end of Year 2, 62.5% at the end of Year

3, 87.5% at the end of Year 4 and 100% at the end of year 5.

In essence, based on an assumption of 3.7% per annum energy price increases, this would mean that

62.5% of the £1.953m (i.e. £1.22m) saving associated with Option E in Table 5 above could be

realised within the 2014 MTFS period – with a further £730k being realised in 2018/19.

Should energy prices increase by more than 3.7% then savings would also increase. The greater the

price increase, the greater the saving. The saving is achieved through cost avoidance. Future price

increases are not currently included in the street lighting budget but would be required from central

inflation contingency.

The following table helps illustrate that a typical payback period for the conversion of all street lights to

LEDs, controlled by a Central Management System would be between 10 and 14 years. This therefore

makes this conversion proposal viable, particularly given the scale of cumulative savings that could be

derived with varying levels of electricity price increases.

Table 8.

Capital

investment

(NPV)

Energy

Price

increases

p.a.

Present value of

Cumulative Saving

Over 15 years

(likely value)

Payback

£000 £000 Years

25,107 0% 94k 13.7

25,107 3.7% -1,637 12.9

25,107 5% -3,715 12.1

25,107 8% -9,455 10.7

25,107 10% -14,156 10

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Assumptions:

• Table 8 has discounted future cash flows to show the present day (‘net present’) values ( or

NPV)

• Present value has been calculated based on estimated likelihoods of costs increasing or

decreasing.

• A 15-year life span for the LEDs has been assumed

2.6.2 Funding

It is assumed that the project would be funded from reserves. Hence, no borrowing repayments are included as part of the above calculations. Repayments on the interest element would be approximately £730k per annum, if that is the selected method of funding.

If Leicestershire Highways Operations undertakes the installation in-house, this would mean that a supply only contract would be required, reducing the amount of funds actually leaving the County Council. It would also realise a contribution to corporate overheads for the installation work, estimated to be £3.9m. Furthermore, variations to the pace and manner of the installation could be effected internally without incurring additional external costs.

The financial assessment above does not include any provision being set aside for funding replacements at the end of the operational life.

The business case does not factor in any external funding that may be secured from the Department for Energy and Climate Change from its ‘Energy Demand Reduction’ initiative that makes a total of £10m available to all organisations (by auction in January 2015) for reduced usage of energy during the hours of 4pm and 8pm, November to February inclusive.

2.7 Key risks

The implementation of an LED light conversion project across the whole of Leicestershire will have some long-term impacts. The current indications are that the preferred warm-end-of-spectrum LED lights will have a 15-year life. If implemented equally over a 4-year period, then 25% of 67,112 LEDs (about 16,800) will be required in Years 1, 2, 3 and 4 and then again in Years 16, 17, 18 and 19, then once more in Years 31, 32, 33 and 34.

This inevitably creates an unequal cost distribution over time. The replacement of the LEDs in those future years must be regarded as capital expenditure. That expenditure would either have to be dealt with as a four-year capital programme at the time, funded from the likes of sale of capital receipts or grants – or there needs to be a revenue investment (contribution to reserves) made each year to ensure funding availability when required.

A further risk is that the cost of energy does not rise at 3.7% per annum on an ongoing basis. However, this is regarded as highly unlikely, given its previous performance and continued increase in electricity demand that the Government (through DECC primarily) is attempting to reduce.

There are two further risks which it is considered have been addressed. The first relates to the assumption that LEDs are 60% more efficient than sodium-based lamps. This percentage figure is regarded as appropriate as it treats the industry’s claims that a 70% energy consumption reduction can be achieved from merely switching the lamps over. The other risk relates to the suggestion that LED light sources can be harmful to individuals’ health. Whilst there is no real factual evidence to support this, selection of an LED at the right point in the light spectrum would avoid this being an issue.

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2.8 Other street lighting options

There are other options that the County Council could pursue in its future provision of street lighting and the financial implications of these are as follows:

(a) Continue to replace sodium lamps on a like-for-like basis (the ‘do nothing’ option) – this yields no energy savings and fails to meet the MTFS requirement;

(b) Fully integrate the conversion of sodium lamps to LED lamps as part of the street lighting column replacement programme – this would take 40 years to yield the full energy saving of £1.254m but would require the capital programme allocation of £1m per annum to be increased to £1.3m to accommodate the additional cost of LEDs compared with sodium lamps (and the price secured per LED would be notably higher due to failing to bulk purchase);

(c) Switch off all lighting – this would save the £680k maintenance cost, the entire electricity cost of £2.15m and eradicate the need for the £1m street lighting column replacement programme. However, Leicestershire would be in complete darkness at night.

2.9 Conclusion and Recommendations

A complete LED solution with CMS control is recommended as, whilst requiring significant investment up front, this will more than fulfil the required £1m revenue savings by 2017/18 whilst giving the County Council complete control over its lighting stock and significantly reducing exposure to the risk of future rises in energy prices.

This report has identified that £1,570,000 investment in the de-illumination of traffic signs on bollards can yield a £123,000 per annum saving.

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3. Introduction

The current financial climate has placed significant pressure on the Council’s revenue budget with significant savings having been made over recent years and likely to be required in the future. In being able to reduce its carbon footprint, the Council will not only improve the local environment but will also be able to achieve revenue efficiencies through a reduction in its street lighting energy usage.

The key factors for consideration will be:

• The level of capital investment required and timing;

• The funding sources available to support the necessary capital investment;

• The revenue savings such investment will generate and the payback periods involved;

• The energy reduction outcomes from network upgrading;

• The level of service being consistent with stakeholder expectations and satisfaction levels (current levels of electronic control gear, part-night lighting, LED sign lighting and Council commitment to continue / progress these elements).

A business case which establishes that these requirements can be successfully achieved will clearly assist the Council in meeting its objectives. These objectives have been identified by the Council as:


• Reducing the future burden of energy bills and other associated costs;

• Meeting current commitments and demands relating to embedding of sustainable practices in the Council’s activities;

• Being better prepared for future regulatory and monitoring requirements;

• Setting an example to encourage partners and the wider community to make similar changes;

• Raising the environmental profile of the Council.

The Need for Change

The need for change is therefore driven by a number of key factors:

• The desire to continually improve the condition of the existing network and the public and political expectations in relation to standards of street lighting;

• Meeting the Council’s objectives in relation to a sustainable, attractive and safe environment;

• The significant revenue budgetary pressures facing the Council along with ongoing and anticipated energy price increases;

• The need to secure energy efficiencies and to reduce carbon emissions.

The remainder of this business case:

• Details the approach adopted to assess the energy efficiency implications of various street lighting investment opportunities;

• Appraises a short-list of technical options including CMS and LED lighting approaches. This includes an analysis of the financial, risk and qualitative aspects of the options;

• Identifies a preferred technical option and examines the affordability implications of this.

It then summarises the next steps required to take forward an energy efficiency business case.

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3.1 Background

The current financial year is the concluding year of the Council’s Energy Reduction for Street Lighting Project which has delivered annual revenue savings of £800k and reduced the County Council’s carbon emissions. Initial monitoring has shown that there has been no increase in either crime levels or road traffic accidents associated with this project across Leicestershire. However, the Council will still be spending £2.15m on street lighting energy at the end of 2014/15 as well as £680k on revenue maintenance and £1m capital expenditure on street lighting column replacement in providing its street lighting function.

This level of expenditure needs to be considered in the context of the Council’s overall financial position within both the current MTFS and the roll forward of the MTFS to 2018/19 which is likely to mean that there will be a requirement to look again at all areas of activity to determine whether further savings can be achieved.

From April 2010, the County Council commenced a four-year Energy Reduction for Street Lighting Project to reduce the level of street lighting across the County, with three aims of:


• Saving money;

• Reducing levels of night-time light pollution in urban and rural areas;

This project included introductions of part-night lighting, dimming and lamp switch-offs following consultation with local communities. In addition, opportunities were taken to remove illumination from signs and some bollards, whilst still ensuring the Council complied with Central Government regulations.

The current extent of assets related to ‘illuminated street furniture’ in Leicestershire is as follows:

(a) 9,281 illuminated signs;

(b) 2,930 illuminated bollards;

(c) 177 belisha beacons;

(d) 262 subway lighting units;

(e) 67,336 street lighting columns, of which 224 are switched off but not yet removed – leaving

67,112 operational columns.

The anticipated outturns for energy consumption (evaluated at 27 million kilowatt hours) for the 2014/15 revenue budgets for illuminated signs (i.e. (a) to (c) above) and street lighting (i.e. items (d) and (e) above) are £227k and £2.415m respectively. – a combined total of £2.642m. With the completion of the Energy Reduction for Street Lighting Project in 2014/15, the street lighting expenditure in 2015/16 would be expected to decrease to £2.15m (subject to any in-year energy price rises during 2014/15).

If Leicestershire County Council had not implemented the Energy Reduction for Street Lighting Project

between 2010 and 2014, the cost of energy consumption in 2014/15 would have been an additional

£565k – i.e. £3.10m. Although there will be a net saving of £800k annually from 2015/16 onwards, well

over £1m in gross revenue savings have been accrued to date.

If the Council does not make further changes to its street lighting and illuminated signs stock, there is

every expectation that the trend from previous years would continue – i.e. the total cost of electricity to

the County Council will increase. According to the Department for Energy and Climate Change

(DECC), the price of non-domestic electricity rose by 3.7% over the 2013/14 financial year. This was a

relatively small annual increase given that the illuminated street furniture energy cost in 2005/6 was

just £1.53m.

The inclusion of Street Lighting as one of the Council’s 24 Transformation Projects, with the aim of

reducing the cost of street lighting though the use of new technology, alternative delivery models and

partnership delivery arrangements, alongside the wider need to continue to reduce revenue

expenditure, has been done with these continued cost pressures in mind.

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3.2 Project Mandate

A report on the County Council’s Strategic Plan and Transformation Programme was presented to the

Cabinet on 6th May 2014. The Strategic Plan and Transformation Programme have been developed

alongside and in support of the 2014 Medium Term Financial Strategy. The Implementation of the

Transformation Programme will aim to achieve £40m of savings across the Council, required to ensure

delivery of part of the MTFS. Street Lighting forms one of the Programme’s 24 transformation projects

and falls under one of five overall objectives, specifically ‘Working the Leicestershire Pound’. It has the

aim of reducing the cost of street lighting through the use of new technology, alternative delivery

models and partnership delivery arrangements.

In essence, the 2014 MTFS and Street Lighting Transformation Project identifies that £1,000,000 in

savings is to be made from ‘street lighting’ by 2017/18, over and above the final savings of £245,000

being realised from the completion of the Energy Reduction from Street Lighting Project.

3.3 Aims and Objectives

Table 9

LCC Objective Comments

Reduce carbon

emissions

Conversion to LED lighting without CMS technology reduces street

lighting carbon emissions from a base case projection of 10,646T to

5,514T (48%). With CMS, carbon can be brought down a further

165T (3%) by trimming and a further variable percent dependent on

dimming regimes!

Reduce the future impact

of energy costs and

other associated costs

The total predicted savings of £1.953m based on current energy and

carbon costs indicates the benefits of such an investment against

predicted rising energy costs.

Better prepared for

future regulatory and

future monitoring

requirements

The investment includes the introduction of a CMS which will allow

the Council to monitor the real-time performance of their street

lighting networks both in performance terms and also in energy

consumption terms. This will assist LCC to respond to future

regulatory and monitoring requirements.

Safer Communities

Priorities

The effect of part-night lighting on the fear of crime is well

documented but actual crimes have not increased across the county

as a whole since the introduction of part-night lighting. The

capability to switch lights back on/off remotely using a CMS system

should the police request it (e.g. to locate a missing person) could

go some way to reassure the public of LCC’s commitment to safety.

There are risks related to the LED cost base including both forecast improvements in LED efficiency and forecast decrease in costs. As with any investment project, these risks would need to be monitored and managed in the procurement of a street lighting energy efficiency project.

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3.4 Outcomes and Benefits

3.4.1 Climate Change

Climate change is described as one of the biggest challenges mankind has ever faced, and carbon dioxide is one of its main causes. As an energy user and a community leader, Leicestershire County Council has an important role to play, by reducing its own carbon emissions and by setting an example for others to follow.

The UK Government has set targets for Green House Gases (GHG) reduction in the Carbon Plan that states the UK will reduce carbon emissions by 34% by 2020 compared to levels in 1990. Central Government has and continues to develop the policy framework to meet this target. For instance, it has created fiscal incentives such as the Feed-in-Tariff (FiT) the Renewable Heat Incentive (RHI), the Green Deal and Energy Company Obligation, and new regulations such as energy efficiency requirements for vehicles and products.

Sustainable development, including carbon reduction, is now a key strategic priority for LCC, reflected

in all levels of work, from strategic plans to practical activities. According to the Department of Energy

and Climate Change’s Total Emissions 2012 release, the total figure for Leicestershire’s “CO2

emissions within the scope of influence of Local Authorities” was 4228.5kt.

The Carbon Reduction Target for Leicestershire is to reduce emissions by 23% between 2005 and

2020 as measured by the Department of Energy and Climate Change.

The current emissions for street lighting are based on the following information:

• 67,112 operational street lights;

• In 2010/11, street lighting carbon emissions amounted to 17,675tCO2

The Council’s Street Lighting Team has taken forward initiatives including energy-efficient control gear

in new lanterns, part-night lighting and all future bulk column replacements could include LED

conversion. In the short-term, street lighting measures will continue to be implemented.

3.4.2 Energy Savings

In essence, the 2014 MTFS and Street Lighting Transformation Project identifies that £1m in savings

is to be made from ‘street lighting’ by 2017/18. In terms of future energy costs, one could use the

3.7% figure for 2013/14 for any future evaluations. In this scenario, by 2018/19, the cost of energy for

street lighting and illuminated signs would rise from its 2014/15 value of £2.642m to £3.055m.

However, given the overall historic trend of electrical energy price growth, it may be that an average

increase of 3.7% understates energy price inflation over the medium term. It is therefore essential to

identify the means by which this sum can be reduced so as to better protect the ongoing delivery of

other services.

In reality, it has recently been announced that energy supply companies will be charging electricity at

different rates during the 24-hour period. The most expensive period will be the ‘black time band’

shown in Table 10 below, followed by the ‘yellow time band’ with the ‘green time band’ being the

cheapest. This means that there is likely to be scope to achieve additional savings potential if energy

consumption during the more expensive times can be reduced/curtailed.

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Table 10

Time Bands for Half-Hourly Unmetered Properties

Black Time

Band

Yellow Time

Band

Green Time

Band

Monday – Friday

Nov - Feb 15:00 to 19:00

07:30 to 15:00

19:00 to 21:00

00:00 to 07:30

21:00 to 24:00

Monday – Friday

Mar - Oct 07:30 to 21:00 00:00 to 07:30

21:00 to 24:00

Weekends 00:00 to 24:00

Notes All the above times are in UK clock time

3.4.3 Light Pollution

LCC’s existing ageing stock of low pressure sodium (‘SOX’) lights (approximately 11,000 in total) has

very broad light distribution. A lot of the light goes above the horizontal, resulting in an orange sky

glow over villages and towns. LED lighting is much more directional with no direct light being

distributed above the horizontal, leading to less light pollution. Equally, LED lighting is far more

controllable in that it is more easily directed onto the road and pavement surfaces with little light being

directed towards property beyond the highway boundary. In addition to this, when the lights are

connected to a CMS system it will be possible to dim individual lamps remotely thus further reducing

light trespass into people’s windows.

3.5 Related work to date

The current financial year is the concluding year of the Council’s Energy Reduction for Street Lighting

Project which has delivered annual revenue savings of £800k and reduced the County Council’s

carbon emissions. Initial monitoring has shown that there has been no increase in either crime levels

or road traffic accidents associated with this project across Leicestershire. However, the Council will

still be spending £2.15m on street lighting energy at the beginning of 2015/16 as well as £680k on

revenue maintenance and £1m capital expenditure in providing its street lighting function.

LED street lights have been introduced on a trial basis as part of LCC’s annual street lighting column

replacement programme since January 2014. However, whilst this has enabled a start to be made on

changing from sodium-based lighting to LED lighting, it has had an adverse impact on the rate of

replacement. A key element of good asset management is to find the correct balance between

expenditure levels and life expiry of elements of local infrastructure. As Leicestershire’s lighting

column stock is in relatively reasonable condition (thereby making prior pursuit of Central

Government’s Private Finance Initiative (PFI) opportunities non-viable), it is able to work on the basis

of ‘steady state’. In other words, the £1m in the capital programme enables around 1650 lighting

columns per year to be replaced (at around £600 per column), reflecting a 40-year life of a street

lighting column.

However, as a sodium-based lantern costs around £100 to replace on a like-for-like basis compared

to around £400 to replace the sodium lantern with an LED lantern, this has pushed up the

replacement cost per column to around £900, reducing the number of columns that can be replaced

to around 1,100 per year. The net effect of this is that either the capital programme allocation would

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have to be increased to £1.3m per annum to sustain the steady state or 40-year life columns will be

expected to last upwards of 60 years. In essence, this latter outcome would require a significant

injection of capital investment at some point to reverse this underinvestment.

Officers visited Warwickshire County Council to see how its CMS operates and to discuss the benefits

of it. Subsequently, a single supplier (Telensa) was asked to provide a quote to implement such a

system for Leicestershire County Council.

The maintenance budget for the 9,281 illuminated signs (including illuminated bollards and belisha

beacons) in 2014/15 is £235,000. An energy saving project for the de-illumination of traffic signs was

implemented in 2011/12. This project removed 4,968 individual lamps from service (as some traffic

signs are often lit by multiple lamps), producing annual energy and maintenance savings of £21,094.

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4. Options Appraisal

4.1 Baseline (Do Nothing)

4.1.1 General observations

The anticipated outturns for energy consumption (evaluated at 27 million kilowatt hours) for the 2014/15 revenue budgets for illuminated signs and street lighting are £227k and £2.415m respectively. – a combined total of £2.642m. As identified above, with the completion of the Energy Reduction for Street Lighting Project in 2014/15, the street lighting expenditure in 2015/16 would be expected to decrease to £2.15m (subject to any in-year energy price rises during 2014/15). That energy cost under the baseline option would therefore continue.

In this option, the existing maintenance budget of £680,000 would not change, the £1m street lighting column replacement programme would continue as it is (including terminating the 2014/15 trial of converting lamps to LED lighting), effectively replacing low pressure sodium (SOX) lamps with high pressure sodium (SON) lamps. Furthermore, in spite of an ongoing combined annual revenue and capital expenditure of £3.83m, the £1m MTFS target would not be met.

During the 2014/15, there has been some assessment work done on the level of expenditure for street lighting maintenance. This has identified that there is insufficient allocation of funding, at present, to meet the Council’s statutory obligations for cable testing and replacement, as well as there being some concern that the structural testing of columns is less than it should be. If the ‘Do Nothing’ option were pursued, it is extremely likely that the £680k budget would need to increase.

In terms of ‘customer service’, the current volume of communication with the County Council about street lighting is unlikely to reduce as there is little scope for improvement with response timescales or repair rates. Given the scale of change towards part-night lighting, there has been extremely limited adverse comment from the general public over the last four years. This limited contact will subside but the calls regarding faulty street lights will either stay very constant or increase if the level of service that the Council provides for street lighting should reduce in any way.

If we do nothing and stop replacing lamps as part of the street lighting column replacement programme, using the current RPI of 2.4% (rather than the 3.7% DECC inflation rate), the year-on-year LCC energy cost for street lighting will be in the region of £4m by 2035.

Figure 1

2.0

2.5

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4.5

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20

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x 1

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Future energy costs

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4.1.2 Risks

Inefficient lamps are now being outlawed by Europe, making lamp changes essential anyway. The risk is therefore of LCC not conforming to future regulations.

Annual energy price increases may, and probably will, exceed the current RPI in future if the DECC increase of 3.7% for 2013/14 is taken into consideration. There are several pressures on energy prices that may increase costs at a higher rate over time. The call on revenue finance would therefore continue to grow unchecked.

New energy sources (such as those associated with fracking) may bring energy costs down or annual inflationary increases being lower than predicted. At present, however, these outcomes are considered unlikely although there may be some chance than national conversion to LED lighting by local highway authorities may mean that energy costs continue to rise over time, albeit at a slower rate than predicted above.

The County Council has, thus far, not pursued a large-scale transition to LED lighting due to the price of LEDs. The cost of LED lighting units has now fallen notably so the risk is that pursuing the transition now may precede a further decrease in price over time of LEDs. If this was the case, less capital investment would be required but, for whatever the intervening period might be, LCC would continue to have to meet energy costs that are significantly greater than it would be exposed to by converting to LED lighting.

4.1.3 Other observations

A variation on this ‘Do Nothing’ option would be the ‘Minimal Changes’ option – i.e. to adapt the current street lighting column replacement programme to accommodate a gradual change to LEDs. This would require an additional capital programme investment of £300k per annum and would take around 40 years to complete. The savings would accrue over that period of time at the net present value rate of 1/40

th of the anticipated reduction of £1.337m in carbon and electricity savings (as set out

in further detail in Table 11 and explained more fully in Section 4.1 below). In reality, this equates to a per year saving of £33,425 which, over the MTFS period, only amounts to a total saving of £100,725 – well short of the MTFS target. In that respect, there is little point in undertaking any further evaluation of this option.

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4.2 Option 1

This option (the most expansive approach under Option E in Table 5 above) constitutes the replacement of LCC’s existing stock of street lighting with LED technology and installation of a Central Management System (and its various components on each lighting column) to effect savings on both energy and carbon costs incurred by LCC. This option also includes the cost and associated savings for the de-illumination of traffic signs (Option C in Table 5 above) as this is regarded as a relatively straightforward addition to the work and, in essence, could be undertaken within the 2015/2106 financial year to achieve a £123k saving on £1.57m investment.

The evaluation of both cost and savings has to be directly linked to type of illumination (i.e. part-night lighting or all-night lighting), the level of illumination (i.e. how powerful each lamp is within a column’s lantern) and the relevant number of lighting columns. In the absence of complete details, a crude representation was given in the Environment and Transport Overview and Scrutiny Report of 4

th

September 2014 that can now be more clearly defined. However, investigation work continues so some figures are still estimated – but until any scheme is actually implemented, that need for estimation will continue.

The total number of lighting columns is 67,336. Of those, 224 are switched off, ready for permanent removal (leaving 67,112 columns). Of these, 26,558 all-night lights need to be converted to LED and a further 39,613 part-night lights require similar conversion – a total of 66,171 columns. By 1

st April

2014, the 2014/15 street lighting column replacement programme would have already effected LED lantern conversion for each replaced column, over and above those columns already converted to LED through localised trials. So, by that date, 941 lighting columns will have been converted to LED of which 260 are all-night lighting columns and 681 are part-night lighting columns. The roll-out of LED lighting therefore applies to 66,171 columns but the conversion to a Central Management System applies to 67,112 columns.

A breakdown of the current and future energy and carbon consumption related to the transition to LEDs only is as follows:

Table 11.

No. of

street

lighting

columns

Current

energy

(million

kilowatt

hours)

Future

energy

(million

kilowatt

hours

Energy

saving

(million

kilowatt

hours)

Energy

savings

per year

Current

carbon

usage

(tonnes

per

year)

Future

carbon

usage

(tonnes

per

year)

Carbon

savings

per year

(tonnes

per

year)

Value of

carbon

savings

per

year

Total cost

savings

All-night

lighting

26,558 13.363 6.095 7.268 £799k 6,975 3,150 3,825T £61,196 £861k

Part-

night

lighting

39,613 7.048 2.904 4.144 £455k 3,671 2,364 1,307T £20,911 £476k

TOTALS 66,171 20.411 8.999 11.412 £1.254m 10,646 5,514 5,132T £82,107 £1,337k

The above energy and carbon savings accrue from conversion of low-pressure sodium (SOX), high-

pressure sodium (SON) and other existing lamps to LED lamps. The new LED lamps range in power

between 22 watts to 200 watts so there is a supply price differential for each lamp whilst there is also a

slight variation in the actual task of changing from the existing lamp to the new lamp (due to column

height variability and the higher wattage lamps being on the strategic highway network, thereby

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requiring traffic management). The savings are also based on the premise that the energy

consumption will be 60% less for an LED lamp than the lamp being replaced.

Taking these factors into consideration, the estimated cost of replacing the existing lighting ‘all-night’

stock would be around £8.865m. The cost of replacing the part-night lights would be a further

£10.954m, whilst the cost of the CMS would be a further £3.253m. The total cost of implementing LED

Lighting with a CMS system would therefore be £23.072m (excluding project management costs).

At this stage, it is difficult to predict whether there could be any income generated by selling off ‘part-

used’ stock. The existing lamps have a relatively constant lifespan but there is likely to be some

residual life in the lamps that are removed. The level of income that could be generated from selling off

the part-used stock is likely to be limited, particularly as the lamps would need to be handled carefully

upon removal and thereafter stored, thus reducing any ‘sell-on’ income.

The crude estimate of the energy savings per year from LED conversion set out in the Overview and

Scrutiny Committee report was £1.29m. Table 6 provides a slightly more accurate figure of £1.254m,

insofar as the calculation is on a per lamp basis and 941 lighting columns can be excluded.

The Overview and Scrutiny report also set out that a further 3% energy saving could be generated

from effective ‘trimming’ of lighting levels at dusk and dawn on all lighting columns. The 3% figure is

based upon information provided by Telensa, a CMS provider that was consulted on when a combined

LED and CMS option was being researched. This saving relates to the total anticipated post Energy

Reduction for Street Lighting Project energy cost of £2.15m and is therefore equivalent to £65k.

Telensa suggested that, due to the black, yellow and green bandings for the price of energy (as set

out in Table 4), the actual additional energy saving could be 3.86% - i.e. £83k.

There would also be some scope for the dimming of all LEDs. Telensa identified that this could be a

sizeable reduction - in the order of 43% for energy consumption or 35% for energy cost. In order to

achieve this, though, the LEDs would have to operate at 50% power levels between 7pm and 7am. It

was considered that this may be an overambitious aspiration (as such levels of reduction could equally

be achieved by installing a lower output lamp in the first instance) so a more graded approach – e.g.

one stage of dimming at 9pm and a further stage at midnight could generate an additional 10% energy

saving. This would equate to £215k per annum. These savings would offset the £81,050 annual cost

of Telensa (or any other CMS service provider) externally hosting the CMS.

The current budget for street lighting maintenance is £680,000. This includes the cost of programmed

maintenance (£157,000), general repairs (£108,000) and reported fault repairs (£232,000). It is felt

that 50% of these maintenance costs would be eliminated by transferring to LED lamps with a CMS

(as there would be no need for bulk lamp change or night scouting), equivalent to a saving of around

£250,000. There are other elements to street lighting maintenance such as electrical testing and

replacement of cables (£197,000) and structural testing of columns (£20,000) to identify those

columns most likely to fail first. These budget elements are undergoing review and may not be

sufficient for the County Council to reach its statutory maintenance levels.

In addition, the annual street lighting column replacement programme of £1m includes an allocation of

around £150,000 for the replacement of sodium-based lamps. If all columns are converted to LEDs,

the sodium lamp replacement cost is no longer required, enabling the cost of the street lighting column

replacement programme to reduce to £850,000 per year.

The total revenue saving in implementing LED lighting with a CMS is therefore £1.254m + £83k +

£215k + £250k - £81k = £1.721m. The carbon saving of £82,107 per annum must also be added to

this, yielding a net saving of £1.803m.

If the capital programme saving is added to this, the total potential saving would be £1.953m.

N.B. This makes no allowance for the electrical and structural testing shortfall in the revenue budget.

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Table 12: Option 1 Financial Summary

Energy Price

Increase

Investment

required

NPV

(Net Present Value) of

saving Payback

Maximum

saving possible

(NPV)

Likely saving

(NPV)

Lowest

saving possible

(NPV)

Average

MTFS savings

(annual)

£'000 £'000 £'000 £'000 £'000

0.00% 25,107 2,836 13.7 years -206 94 3,135 -1,823

3.70% 25,107 1,131 12.9 years -1,947 -1,637 1,441 -1,983

5% 25,107 -917 12.1 years -4,039 -3,715 -594 -2,177

8% 25,107 -6,572 10.7 years -9,814 -9,455 -6,213 -2,715

10% 25,107 -11,204 10 years -14,544 -14,156 -10,816 -3,160

Table 13: Option 1 Top 4 Risks

Risk Mitigation Current

Risk Score

Financial Impact

Proposal does not provide a positive return on investment

Early desktop exercise.

Scenario modelling

External learning from other similar projects

4

More years to pay back initial outlay

Energy costs fall dramatically

The expected savings are significantly under the required £1m/yr saving.

4 More years to pay back initial outlay

LED lamp life falls short of expected 15yrs

Any LED procurement document to include a minimum 10year guarantee

4

Lamp replacement costs impact payback rate.

CMS transmitters give poor reliability

Procurement should seek substantial guarantees from the supplier

Seek market opinions


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4.3 Option 2

Option 2 would be to replace LCC’s existing stock of street lighting with LED technology on all lamps to effect savings on both energy and carbon costs incurred but without installing CMS. This would be a slightly less expansive version of Option E in Table 5 above. Using the information set out in Section 4.2 above, this would mean that the savings that could accrue from this would be limited to the electrical energy reduction of £1.254m and the carbon savings of £83k, achieving an overall saving of £1.337m.

The cost of implementing this option would be the cost of converting the 39,613 part-night lights to LED (i.e. £10,954m) and the 26,558 all-night lights to LED (i.e. £8.865m) – i.e. £19.819m (excluding project management costs).

This option includes the de-illumination of traffic signs on bollards which generates a £123k saving for a £1.57m investment.


Energy

Price

Increase

Project

Investment

required

NPV (Net Present

Value)

of saving Payback

Likely value

of saving

Average MTFS

savings

£'000 £'000 £'000 £000

0.00% 21,853 3,416 14.4 years 670 -1,421

3.70% 21,853 2,011 13.4 years -761 -1,546

5% 21,853 323 12.6 years -2,480 -1,697

8% 21,853 -4,338 11.1 years -7,227 -2,115

10% 21,853 -8,157 10.4 years -11,117 -2,461


Risk Mitigation Current Risk

Score

Financial Impact


Early desktop exercise.

Scenario modelling


4



The expected savings are significantly under the required £1m/yr saving.


LED lamp life falls short of expected 20yrs

Any LED procurement document to include a minimum 10yr guarantee

4


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4.4 Option 3

Option 3 looks in isolation at de-illuminating road traffic signs on bollards. The cost of this option would be £1.57m and generate a £123k saving.

It should be noted that this option does not satisfy the MTFS target of £1m saving by 2017/18. In that respect, it must be progressed in conjunction with other changes to street lighting and/or traffic sign maintenance.


Energy

Price Increase

Project

Investment required

NPV of saving Payback

Average

MTFS savings

£'000 £'000 £'000 £’000

0.00% 1,570 94 12.8 years -123

3.70% 1,570 -17 12 years -133

5% 1,570 -150 11.2 years -147

8% 1,570 -515 10 years -182

10% 1,570 -814 9.3 years -211



Risk Score

Financial Impact


Early desk top exercise.

Scenario modelling


4



The expected savings are significantly under the required annual saving.


LED street light product life falls short of expected 20yrs

Any LED procurement document to include a minimum 10yr guarantee

4


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4.5 Option 4

Option G in Table 5 is to permanently turn off all street lights in Leicestershire. This option would ultimately save the annual maintenance costs of £680,000, the £2.15m energy bill that will apply in 2015/16 following the completion of the Energy Reduction for Street Lighting Project and the £1m investment via the capital programme for street lighting column replacement,

This saving could not be effected immediately as each lighting column would need to be individually turned off but the timescale to achieve this would be relatively short (i.e. within the first six months of 2015/16). However, this option would still require a level of investment because the lighting columns would need to be permanently removed from the public highway where they could easily be considered to constitute an obstruction (since they would be serving no purpose) and therefore a safety hazard that could be readily eradicated through removal.

In order to minimise in-year maintenance cost, the street lighting columns would need to firstly be turned off within the column base (£3.78 per column), followed by electrical disconnection from the energy supply (an average of around £225 per column as this varies between high-level steel and low-level steel), followed by column removal and disposal and reinstatement of the highway (an average of about £40 per column as this varies between those in footways or grassed locations.

The cost of these three stages would apply to all 67,112 lighting columns. The total cost of these stages would be (£3.78 + £225 + £40) x 67,112 = £18.038m.

It is worth noting that the local electricity energy supplier (Western Power Distribution) would require all disconnected columns to be removed within 12 months of disconnection. This option therefore has a one-year implementation timescale cost.


Energy Price

Increase

Project Investment

required

NPV of

saving Payback

Average MTFS

savings

£'000 £'000

0.00% 18,038 -22,756 5.7 years -£3.83m

3.70% 18,038 -26,205 5.6 years -£4,184m

5% 18,038 -30,340 5.4 years -£4,610m

8% 18,038 -41,734 5.1 years -£5,795m

10% 18,038 -51,046 4.9 years -£6,771m



Risk Score

Financial Impact

Increase in night-time road traffic collisions and the number of people consequently killed or seriously injured

No realistic mitigation measures available

16

May have adverse impact on Integrated Transport capital allocation from the Department for Transport

Adverse impact on communities through reduction in night-time social activity


20

Greater call on other Council services due to reduction in potential for ‘care in the community’

Night-time economy eradicated through significant downturn in utilisation of facilities (e.g. leisure centres, shopping centres, public houses)


25

Reduction in income via business rates through business closure due to non-viability of community-led facilities

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4.6 Options Summary

The summary of these options is as follows:

Table 20:

Project Investment

£

NPV Benefits Overall Risk Rating

Baseline £0m £50.4m None as this does not achieve or contribute towards the MTFS target of

£1m additional saving by 2017/18.

Option 1 £25.1m -£1.64m This will meet the MTFS target of £1m additional saving by 2017/18 and

provide significant additional savings in 2018/19 (based on 3.7% p.a. price

increase)

12

Option 2 £21.8m -£0.77m This will meet the MTFS target of £1m additional saving by 2017/18 and

provide some additional savings in 2018/19

12

Option 3 £1.57m -£0.017m This only contributes towards the MTFS target of £1m additional saving by

2017/18 but falls significantly short of that target

12

Option 4 £18.038m -£26.2m This will significantly exceed the MTFS target of £1m additional saving by

2017/18

61

4.6.1 Preferred Option

The recommended Option 1 requires an initial investment of £25.107m primarily relating to installation of LED street lights with a CMS. To deliver the investment, a Street Lighting Transformation Project Team/Board will be required, in conjunction with a dedicated project resource costing £465k over a 4 year period is required. Option 1 is expected to deliver the highest level of savings of all of the options except Option 4 which is ruled out because of the adverse social impact and disproportionately high financial risk to the wider local economy and Leicestershire’s reputation. The anticipated benefits are savings of £1.953m per year from energy costs, carbon, and maintenance costs. Upon the completion of this 4-year project there will be a reduced requirement for street lighting operational personnel and this FTE saving is reflected in the estimated ongoing maintenance costs.

Financially, the recommended option provides an investment rate of return of 5% which compares favourably to the target rate of 3.5%, giving a positive NPV of £1.64m (based on a 3.7% p.a. price increase)

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5. Implementation Strategy for the

Preferred Option

5.1 Implementation Approach

It is proposed to set up appropriate governance, with a Street Lighting Transformation Project Board, project manager and dedicated project team comprising the project support, design and implementation staff required for the duration of the project implementation.

The Project Board will include senior finance and procurement representation, as well as the project sponsor, senior managers and representatives of the project team. Given the successful engagement of Leicestershire Constabulary as a representative of all emergency services in the Energy Reduction for Street Lighting Project, consideration will be given to inclusion of a Leicestershire Constabulary representative on the Street Lighting Transformation Project Board.

The project manager will deliver a PID, including proposed governance arrangements, and a proposed project team structure.

5.2 Procurement Approach

Procurement options will need to be appraised and the appropriate way forward determined with advice from the Corporate Procurement Team as follows:

LED lamp provision – a Leicestershire County Council contract for supply only (with installation by Leicestershire Highways Operations’ street lighting personnel) or for supply and install.

CMS provision – a Leicestershire County Council contract for CMS (with either Leicestershire Highways Operations’ street lighting personnel or an external contract undertaking component placement within each lighting column) with internal or external hosting.

Given that the value of the LED and CMS component costs of this project equate to around £19.1m of the £23.072m project cost, the normal practice of ESPO to charge a 1% levy would essentially add £191,000 to the cost of the project. This would be a disproportionate charge for any procurement assistance that might be required for the delivery of this project. This sum has not been included in the financial modelling in this business case for that very reason.

It is recognised that a local company, Advanced LEDs (based in Hinckley), has been providing LED components for the trialling of LEDs in the 2014/15 street lighting column replacement programme. Under the Social Value Act 2012, there would be significant advantage in such a local company being engaged for the provision of LEDs for this project as opposed to overseas suppliers providing such components for other local authorities.

Given the scale of work required and the extent of change, consideration would need to be given as to whether the LED conversion and CMS column component installation work could be undertaken by Leicestershire Highways Operations’ street lighting function working in conjunction with an external contractor or undertaken solely by an external contractor. However, it should be noted that the estimated value of the operational work in completing the LED conversion and CMS installation amounts to around £3.9m.

If this element of the cost falls within the range of services provided by Leicestershire Highways Operations (LHO), it not only offers work for an existing in-house service and helps spread the financial burden of LHO’s own and central overheads but helps retain this sum of money locally rather than serving to assist external contractors. This is further in line with the Social Value Act 2012.

5.3 Assumptions, Dependencies and Risk Appraisal

5.3.1 Assumptions

To assess the viability of the proposal to convert lights to LEDs, financial analysis over a 15-year period has been adopted by Corporate Finance. Part of the evaluation would be related to how quickly

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savings could be generated. Financial modelling has therefore assumed that energy savings would accrue at the rate of 12.5% at the end of Year 1, 37.5% at the end of Year 2, 62.5% at the end of Year 3, 87.5% at the end of Year 4 and 100% at the end of year 5.

In essence, based on an assumption of 3.7% per annum energy price increases, this would mean that 62.5% of the £1.953m saving associated with LED with CMS (i.e. £1.221m) could be realised within the 2014 MTFS period – with a further £731k being realised in 2018/19.

5.3.2 Constraints

It has been calculated that one street lighting gang could change up to 21 lamps in a day which amounts to approximately 5300/yr. if they worked on that alone. At that rate it would take up to 13 years to change all of the existing street lights in Leicestershire. With four teams operating this could be brought down to just over 3 years. Leicestershire Highways Operations’ street lighting function has the skilled operatives required to undertake this work (and is undertaking the LED conversion as part of the street lighting column replacement programme for 2014/15 already). It has also recently acquired up-to-date vehicles (mobile extending work platforms or ‘MEWPs’) to be better able to undertake this type of work. This function has already proven its competitiveness in the market by winning external contracts, including the installation of lighting on the Loughborough Inner Relief Road as a sub-contractor for Eurovia (Ringway).

5.3.3 Dependencies and Interfaces

The implementation of a CMS system would negate the need for a night patrol officer as the CMS would monitor each and every lamp’s operation. This would also significantly reduce the calls taken by the Customer Service Centre or other public contact made with the Council regarding defective lighting. If, as is suggested in this business case, the CMS is externally hosted, access to the CMS and monitoring and adjustment of Leicestershire’s street lighting would be via the Internet through a web portal. This would therefore place no additional call on resources on the County Council’s ICT service.

5.3.4 Risk Analysis

Table 20 above sets out the summary position of the top three risks for each of the options considered. This assessment has been undertaken using the risk scoring approach set out in Table 21 and Table 22 below.

Table 21

ID Risk Mitigation

Current Risk Score

(Impact x Likelihood)

Financial Impact

001 e.g. Insufficient resources to complete the project

Secure resources and monitor regularly, review project plan and schedule, reprioritise work

9

Project delay leading to loss of savings of

£x

002 e.g. May not meet legislative deadline.

Develop and monitor plan and key deliverables

15

Financial penalty of £X for every month of

delay

003 e.g. Predicted income levels over estimated

Undertake regular market testing, revise business case and model

15

Budget deficit of £x Year 1 and Year 2

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Table 22

5 Very High 5 10 15 20 25

4 High 4 8 12 16 20

3 Medium 3 6 9 12 15

2 Low 2 4 6 8 10

1 Negligible 1 2 3 4 5

1

Rare 2

Unlikely 3

Possible 4

Probable

5 Almost certain

5.3.5. Potential Opportunities

ID Opportunity Action Current

Opportunity Score

Financial Impact

001 There is a reasonable possibility that energy prices may increase by 3.7% per year leading to an increase in financial benefits

Monitor energy prices

9

002 More cost-effective procurement and delivery of the project

Utilise existing experience and expertise in Leicestershire Highways Operations’ street lighting function to optimise the specification and work, based on experience accrued with LED lamp installation in 2014/15.

5.3.6 Contingency and Sensitivity

It is considered that there may be about 5% overall contingency built into the estimated cost of the implementation of this project. That consideration comes from three elements: (a) the anticipated year-on-year energy price increases is taken as 3.7% but that is a significant

understatement based on the change in energy prices over the last 10 or so years; (b) the estimated LED cost is based upon current prices paid for LEDs on a small call-off basis.

Other authorities (such as Peterborough City Council and Leicester City Council have seen significant reductions in unit commodity price through bulk buying – the scale of proposed purchase is significantly higher by Leicestershire County Council for LEDs than in the past so this sizeable unit commodity price reduction is expected to be replicated;

Likelihood

Impact

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(c) the estimated savings from dimming has been taken as 10%, rather than the figure of 35% suggested by Telensa (as mentioned in Section 4.2 above).

The greatest overall area of sensitivity does rest with energy prices. This is firmly outside of the control of the County Council and will remain entirely unpredictable, even beyond the timescale for implementation of this Street Lighting Transformation project. This sensitivity has been built into the detailed appraisal of Option 1 in particular by Corporate Finance.

Sensitivity Analysis

Option

presented Expected Value

Variance Comments

Most Likely 100 120 20 Key drivers of the potential change Worse 80 -20 Better 140 40

5.4 Implementation Impact Analysis

People

The Project Board will include Finance and Procurement representatives.

The Project Team will need to be drawn from existing project management, operational and design staff.

The implementation of a CMS system would negate the need for a night patrol officer as the CMS would monitor each and every lamps operation. At the end of the LED and CMS conversion, there will be a reduced need for street lighting operatives to maintain Leicestershire County Council’s street lights. However, the experience and expertise developed through the project may then make those staff a valuable commodity to be engaged in similar activities by other local authorities.

Service users will need informing about the proposals. They will see new lighting sources installed that will have an impact upon their perception of lighting levels.

Equalities and Human Rights

An EHRIA will be completed for the project to assess any potential implications of the project and recommendations arising will be incorporated into the project processes.

Service users will need informing about the proposals. They will see new lighting sources installed that will have an impact upon their perception of lighting levels. This may prompt further fears regarding crime and security, as well as mobility at night for pedestrians.

Process

The impact of the project on associated capital and maintenance programmes will need to be further evaluated. For example, the bulk column replacement programme, routine inspection, testing and repair programmes will all need detailed assessment to ensure a balanced approach to these activities whilst the project is in progress.

Specific facilities will be required for LED unit ordering, delivery and storage, as well as for installation teams. However, space has been identified at Croft depot for storage, should Leicestershire Highways Operations be used to deliver the operational aspects of the Street Lighting Transformation project.

Information and data

Specific working arrangements will be needed for works and financial management to plan the implementation work, track work being undertaken and completed, capture costs and provide management information on progress against project targets. Consideration will be given as to how this could be made more interactive through the Online Service Board’s approach to revising the County Council’s website.

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IT systems

Minor installation or upgrading of IT systems may be required to relocate the dedicated Project Team to Mountsorrel. However, the external hosting of the CMS will eliminate much of the resource implications that would otherwise fall on ICT services in the support of this project.

Policies

Street lighting maintenance policies will need to be reviewed and amended to reflect the reduced maintenance liability and increased flexibility in street light control.

Organisation

Input will be required from financial, procurement and legal services in the procurement and implementation associated with the project. ESPO support may be needed in procurement exercises, subject to the concerns expressed above. Project consultation exercises and media responses may require PR unit input.

Environmental

The Street Lighting Transformation Project has some significant environmental benefits associated with it. Street lighting is recognised as one of the major areas of carbon consumption by the County Council and this business case is set out the carbon reduction that can be achieved through its implementation, as well as clarify what the associated financial benefits of such carbon reduction will be.

Since the end of July 2014, the Department for Energy and Climate Change (DECC) has sought expressions of interest from all forms of organisations wishing to access £20m of grant funding, tied to a commitment for energy reduction related directly to the hours of 4pm to 8pm between November and February inclusive. DECC is releasing the funding in two tranches of £10m.

The timetable to access the first of these funding tranches is as follows:

(a) submit an expression of interest by 30th September 2014; (b) submit a full, detailed application by 31st October 2014; (c) on 12th January 2015, submit a price per kilowatt hour reduction that the County Council

would offer in return for a portion of the available grant; (d) if the bid is successful, sign and submit a ‘Participant Agreement’ by 14th February 2015; (e) install and confirm ‘Operational Verification of Electricity Demand Reduction measures’ by 15

th

October 2015; (f) measure and report capacity savings over winter peak by 15th April 2016; (g) submit final report with 12 months data and evaluation from 27

th April 2016 to 1

st December

2016

The November to February 4pm to 8pm time-period represents about one ninth of the period of time over which Leicestershire’s street lights are in operation. In order to secure any part of the £20m, the Council needs to be able to prove the energy saving. Although the guidance documentation indicates that local authorities can bid for funds for street lighting conversion, Leicestershire’s lighting energy is evaluated on a non-metered basis. At this point in time, it is not entirely clear if it could adequately demonstrate achievement.

Thus far, the expression of interest was submitted on 30th September 2014. The Council received an

official acknowledgement and acceptance by DECC of the submission on 1st October 2014 and so the

detailed application needs to be prepared. If the roll-out of LED lamps is over a four-year period, then 1/8

th of the overall programme would be completed by the end of September 2015 in time to achieve

electricity savings during the 2015/16 winter period (if a start is made on 1st April 2015).

In crude terms, the output of 1/8th of the overall programme would be savings of 1.427m kilowatt hours

of energy, representing £157k reduction in electrical energy expenditure, reducing carbon consumption by 642 tonnes, saving a further £10k. This would be the full return on 1/8th of the work programme, whereas the actual saving during the 4pm to 8pm November to February would be a further 1/9

th fraction of that – e.g. 0.159m kilowatt hours from 1/72th of the overall Street Lighting

Transformation Project expenditure of £23.072m + project costs (i.e. £320k – the maximum grant that could realistically be secured if an April 2015 start was made to the Project).

Every attempt is therefore being taken to link together the financial and environmental benefits associated with the implementation of Option 1 of the Street Lighting Transformation project. It is also worth noting the concerns floated in the national press regarding exposure to LEDs. The most recent

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concern has revolved round the health impact of LED lighting reportedly causing migraines/headaches, difficulty sleeping, ‘toxic stress’ to the retina, neurological problems and even cancer due to the levels of blue light emitted. The informal view from Public Health England, though, is that “concerns relate to flicker and whether the lighting is fit for purpose. LED lighting is actually very similar to moonlight, which we (and the relevant flora and fauna) have evolved under.” It would therefore appear that this is not a major concern although selection of red-end spectrum LED lighting would help offset any public health concerns in any case.

5.5 Implementation Plan

The project manager will develop and maintain the project implementation plan. An initial indicative outline plan is given below. The proposed governance is as set out in Section 5.8 below, though.

Action Owner Comments

Develop PID Project Manager Thus far, the focus of the Street Lighting Transformation Project has been in exploring the significant financial costs of the project but also to explore the more technical aspects of the project. All project management documentation and controls will naturally follow on rapidly from any decision taken by the Cabinet to proceed with this project.

Establish Project Board, including terms of reference

Project Manager The identities of the members of this Project Board are known but its formal establishment awaits the aforementioned decision to proceed.

Develop Implementation Plan

Project Board/Project Manager

This is currently being mapped out by the early stage Project Board whose composition will change with and formal decision to proceed.

Establish governance arrangements

Project Board The manner in which this project would be managed would reflect the successful approach taken for the Energy Reduction for Street Lighting project.

Undertake EHRIA Project Manager This is being developed and will be presented with the business case with the report to Cabinet in November 2014.

Undertake Environmental Impact Assessment

Project Manager This is being similarly developed.

Establish Project Team

Project Board Once into the implementation stage, the revised Project Board will appoint appropriate personnel to the Project Team

Set up project facilities, systems and processes.

Project Manager Some forethought has already been given to this.

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5.6 Resource Plan

Resource Type Resource Requirement

(Effort)

Resource Requirement

(Duration)

Budget Requirement

£

Comments

Operations/Service Designer Gde10

Works supervisor

4x Installation Gangs

3 years

3 years

Included in installation costs

1FTE

Information/Data Management

Admin Support Officer Gd10

3 years £102k 1FTE

Human Resources N/A N/A N/A

Training/workforce development

Ensure accreditation up to date

tbc Included in installation costs

Change Management Inc. Cultural Change & Business Readiness

Watching brief (critical friend)

3.5 years Included in existing change mgt budget

Communications, Consultation and Engagement

PR officer

E&T staff

3 months

Included in existing budgets

Project Management & Support

Project Manager Gde14

Senior Engineer PM Support Gde12

3 years

3 years

£191k

£145k

1FTE

1FTE

ICT Design, Development, Test

ICT installation/upgrade, Mountsorrel

0.5 fte over 24 months (phased out) estimate

Approx £27k

Business Analysis, Systems & Processes

N/A N/A N/A

Commissioning &Procurement

Category Manager

ESPO

1 month

To be determined

Data/research & Insight

Senior Engineer PM Support

3 years N/A Included in cost of Gde12

Community Development/ Capacity Building

PR Unit.

Consultation resources.

3 years

3 months

Included within existing budgets

Legal Procurement exercise.

1 week Included within existing budgets

Other (specify)

TOTAL £465k

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5.7 Key Stakeholders

Who are they?

Why do they have an interest in the project?

What level of influence will they have on the success of the project?

(H,M,L)

Customers Direct impact of the works and the resulting change in light source used on the highway network on residents and highway users, particularly pedestrians.

Customer understanding of the changes, the changes they will see as a result and the overall benefits of adopting these changes will be key in gaining public and media support and reducing the amount of staff time required for responding to enquiries.

LED suppliers Industry interest in the specification and method of procurement for the work.

Influence in matching LCC requirements to industry recognised specifications and reasonable procurement process.

CMS suppliers Industry interest in the specification and method of procurement for the work.

Influence in matching LCC requirements to industry recognised specifications and reasonable procurement process.

5.8 Governance

Role Responsibility Recommendation Rationale

Project Board A decision making body and will take overall responsibility for the effective running of the project:

Those identified in this table plus financial and procurement representatives.

Significant financial investment and procurement exercise involved in delivery of the project.

Project Sponsor Chair of the project board and is ultimately accountable for the success of the project, including benefits realisation and project decisions that are made.

Assistant Director, Highways

Knowledge specific to the project. Project continuity and guidance.

Senior User (client) Accountable for ensuring that requirements are fully and accurately specified making sure that what is delivered is fit for purpose and that the solution meets users’ needs.

Engineering Design Manager

Asset Manager representative and specifications lead. Project management lead and support.

Senior Supplier Accountable for the quality of the products delivered by the project team. They must have authority to commit or acquire supplier resources as required.

LHO Manager Lead on unit procurement and installation work.

Project Manager Responsibility is to ensure the project delivers the agreed deliverables to the required quality standard and within the specified constraints of time and cost.

Project Manager A specific resource should be identified for a project of this scale.

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Role Responsibility Recommendation Rationale

Project Assurance Provides the check that the project continues to meet its specification, the required standards and the business case

E& Transport Change Management Business Partner

Check that proper project management approach is adopted. Challenge that correct requirements, progress and outputs.

Project Implementation Engineer

Provides technical support and implementation management support to the Project Manager.

Project Implementation Engineer

Project Manager ensures that all parties undertake required actions to meet project plan, but will need technical support and support in the day-to-day management of the implementation works.

5.9 Costs, Savings and Funding Summary

5.9.1 Savings Analysis

Current Expenditure Saving

Description £ ‘000s £ ‘000s % Enabler

Street Lighting 3,565 1,953 (based on 0% price increase)

55 Energy, carbon and maintenance savings from LED street lights

Lit bollards 235 123 52 Energy & maintenance saving from the decommission of illuminated road sign bollards

5.9.2 Cost Analysis

A detailed cost analysis has been undertaken by Corporate Finance, based upon the information provided by Environment and Transport Department personnel. This is set out in the Appendices and in evaluations outside of but summarised in this business case.

5.9.3 Project Funding

Detailed assessment of project funding has been undertaken by Corporate Finance. This is set out in the Appendices and in evaluations outside of but summarised in this business case.

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6. Conclusions and Recommendations

In essence, there is only one of the available options that delivers the requisite MTFS savings that does not carry substantial risk. It is therefore recommended that Option 1 (the implementation of LED lighting for the whole of Leicestershire County Council’s lighting stock, controlled by a Central Management System, in conjunction with the de-illumination of road signs on bollards) is formally initiated. In that way, procurement work can commence in earnest to ensure that the equipment is available to commence installation on or before 1

st April 2015.

It is also recommended that the opportunity to secure external funding from the Department for Energy and Climate Change is pursued so as to support the financing of the Street Lighting Transformation Project.

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7. APPENDIX 1 – Financial Assumptions

and Analysis

7.1 Financial Assumptions

Description £ Basis & source of estimate

Project Manager for 3 years £191,000 Assumed internal resource, similar duration to project

Senior Engineer for 3 years £145,000 Estimate

ICT development costs £27,000 0.5 fte over 24 months (phased out) estimate

Admin Support Officer £102,000 Assumed project support for 3 years

TOTAL £465,000

7.2 Investment Analysis

'000s Project

Investment

Operational Net Cost/Income

Ratio vs Base

Y1 Y2 Y3

On

Going

P/A

NPV IRR Index Payback

Baseline £0.0 £4,627.5 £4,669.9 £4,712.9 £5,269.5

Install LED

Street

Lighting

£25,107 £3,939.2 £3,611.9 £3,237.8 £2,852.0

£1,130.7 No

Return 0.05

12.9

years

0 £0.0 £0.0 £0.0 £0.0 £0.0

-

£56,563.2

No

Return 0.00 0 years

Option 3 £0.0 £0.0 £0.0 £0.0 £0.0

-

£56,563.2

No

Return 0.00 0 years

Option 4 £0.0 £0.0 £0.0 £0.0 £0.0

-

£56,563.2

No

Return 0.00 0 years

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7.3 Full Sensitivity Analysis

Install LED Street Lighting Assumption Change % Change '000s Probability Variance '000s Expected

Sensitivity Description of Group Description of Sensitivity Worse Better Worse Better Worse BetterMost

LikelyWorse Better Total Value

A 15% 30% £2,972.8 -£5,945.7 5% 45% 50% £139.4 -£2,509.6 -£2,370.1 £16,219.2

B 5% 10% £1,454.8 -£2,909.6 15% 25% 60% £170.5 -£568.4 -£397.9 £22,339.8

C 100%

D 100%

E 100%

F 100%

G 100%

H 100%

I 100%

J 100%

Balance 100% £16,366.9

Sub Total Sub Total £4,427.6 -£8,855.3 Sub Total £310.0 -£3,078.0 -£2,768.0 £54,925.9

Manual 1 100%

Manual 2 100%

Total £4,427.6 -£8,855.3 Total £310.0 -£3,078.0 -£2,768.0 £54,925.9

Original Worse BetterMost

Likely

EV NPV '000s £57,693.9 £58,003.9 £54,615.9 £54,925.9

Variance to Original '000s £310.0 -£3,078.0 -£2,768.0

Variance to Baseline '000s £1,130.7 £1,440.7 -£1,947.3 -£1,637.3

Capi ta l Ins ta l lation Costs

Revnue Savings

Varia bi l i ty in pri ce

Di fference in savings achived in khw

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8. APPENDIX 2 – Project Prioritisation Assessment Criteria

Contribution Criteria Low Contribution - 0 Medium Contribution - 5 High Contribution -10 Principle Validation Source(s)

Benefits Financial Size of savings delivered, with a financial return on the investment made. Strength of evidence for cost/income projections. Change in financial risk following the change.

Savings or cost avoidance does not justify the investment made (never paid back) Project & proposed outcome could significantly increase the level of financial risk, i.e. greater potential for uncontrollable financial variability. Serious concern over the quality of costs/income projections used to justify the investment

Reasonable level of savings expected (>£50k) and the investment justified (NPV better than zero). Project & proposed outcome has minimal effect on the level of financial risk/opportunity. Good supporting evidence for cost/income projections. Uncertainties could worsen but not completely undermine the projections.

High levels of savings or cost avoidance expected (>£250k) and the return on investment is better than average. Potential financial opportunities at least offset risks. Hence the financial risk is expected to reduce as a result of the change or possible additional benefits could be secured. Strong supporting evidence for cost/income projections, with minimal change expected.

Project Brief(PB)

• Current Expenditure • Expected Investment • Expected Benefit • Risk appraisal Business Case (BC)

• Financial Model • Recommended Option • Investment required • Financial benefits • Risk analysis

Benefits Strategic Alignment – to corporate vision, six strategic imperatives, target operation model or other corporate strategies e.g. ICT, Property, People

There is little evidence to support that is aligned with strategic priorities

There is evidence to support that is aligned with strategic priorities

There is strong it evidence to support that is aligned with strategic priorities

Project Brief(PB)

• Aims & Objectives • Benefits Business Case (BC)

• Project Mandate • Benefits • Aims & Objectives • Recommended Option

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Contribution Criteria Low Contribution - 0 Medium Contribution - 5 High Contribution -10 Principle Validation Source(s)

Legal Statutory – required to meet change in legal duty

There is no statutory requirement

This is responding to a statutory requirement but this is not imminent or could be delivered another way

This is responding to a statutory requirement and cannot be achieved another way and is imminent

Project Brief(PB)


• Project Mandate • Background • Recommended Option

Service Disruption, Performance and Delivery

Tactical – will provide flexibility in future or there is a limited window of opportunity

There is no tactical imperative

Some evidence that without the project there will be an impact on current and/or future service performance

Strong evidence that without the project there will be significant impact on current and/or future service performance. Or there is a limited window of opportunity.

Project Brief(PB)

• Benefits • Aims & Objectives Business Case (BC)

• Recommended Option • Benefits • Aims & Objectives

Urgency Enabler/Critical Dependency - required/key dependency to enable savings, cost avoidance and/or strategic alignment

There is little evidence to support that this is a key enabler or is critical dependency

There is evidence that this is an enabler and/or dependency but not for high priority projects or statutory requirement

There is strong evidence that this is an enabler and is a critical dependency for high priority project(s) or statutory requirement

Project Brief(PB)


• Benefits

• Recommended Option

Confidence Delivery Risk – extent to which there is a clear delivery plan and confidence of achievability

No clear project plan in place and/or delivery mechanism is unclear

Project plans are mostly in place and any delivery issues are believed to be manageable

The project has robust plans in place and there are sound reasons to believe delivery performance will be good

Project Brief(PB)

• Plan • Risk Appraisal • Assumptions • Deliverables Business Case (BC)

• Recommended Option • Implementation Approach • Resource Plan • Risk & Impact Analysis

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Project Prioritisation - Evaluation

Project Name:

Department: Service / Section:

Key Contact Name: Contact Details:

Evaluation Date: Evaluated By:

Contribution Criteria Score Rationale

Benefits

Strategic Alignment – to corporate vision, six strategic imperatives, target operation model or other corporate strategies e.g. ICT, Property, People

10

MTFS

Government guidelines on reduction of carbon output

The Carbon Reduction Target for Leicestershire is to reduce emissions by 23% between 2005 and 2020 as measured by the Department of Energy and Climate Change.

Financial Benefits

Size of savings delivered, with a financial return on the investment made. Strength of evidence for cost/income projections. Change in financial risk following the change.

10 High returns expected with low risk of failure

Legal Statutory – required to meet change in legal duty

0

Service Disruption, Performance and Delivery

Tactical – will provide flexibility in future or there is a limited window of opportunity

10

CMS will give LCC complete control over its street lights

The Lamps to be sourced must be future-proof ie: easy to change over the lamp tray should more efficient LED’s become available.

Urgency

Enabler/Critical Dependency - required/key dependency to enable savings, cost avoidance and/or strategic alignment

0

Confidence

Delivery Risk – extent to which there is a clear delivery plan and confidence of achievability

5 Research carried out to date indicates higher savings than required.

Total Score

35

360

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