Energy Eye - December 2013

This update contains brief details of Government and EU publications, legislation, cases and other policy developments in England and Wales relevant to those interested in energy, renewables, energy efficiency and the alternative energy sector, which have been published in the past month.

12/12/2013

Nadeem Arshad

Nadeem Arshad

Partner

This update contains brief details of Government and EU publications, legislation, cases and other policy developments in England and Wales relevant to those interested in energy, renewables, energy efficiency and the alternative energy sector, which have been published in the past month.

Items are set out by subject, with a link to where the full document can be found on the internet. All links are correct at the date of publication.

If you have been forwarded this update by a colleague and would like to receive it direct please email Claire Booth.

The following topics are covered in this update:

   Carbon Capture and Storage    Health and Safety
   Carbon Reduction    Infrastructure
   Community Energy    Permitting and Licensing
   Energy Efficiency    Renewable Energy
   Energy Policy    Shale Gas
   Finance    Solar Energy
   Green Deal    Wind Energy

Carbon Capture and Storage

DECC: Cleaner, greener future for British coal plants: the Energy and Climate Change Secretary Edward Davey has opened the Drax coal-to-biomass conversion plant. He also announced the award of FEED study funding to further the White Rose CCS project, that is to build a new state-of-the-art 426MW (gross) clean coal power plant with full carbon capture and storage. It will be the largest oxy-combustion plant in the world and will also have the potential to co-fire biomass. It will capture approximately 2m tonnes of CO2 per year that will be transported through National Grid’s proposed Yorkshire / Humber CCS Trunkline for permanent undersea storage in the North Sea. (9 December 2013)

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Carbon Reduction

Committee on Climate Change: Fourth Carbon Budget review: the CCC agreed with the Government that the fourth Carbon Budget (2023 – 2027) would be reviewed in 2014. The Climate Change Act 2008 sets out the basis for the review: it must be based on advice from the CCC and only if there has been significant change in circumstances, demonstrated by evidence and analysis, can the Budget be changed. This report compares a strategy of reducing emissions through the 2020s with one where action is delayed until the 2030s. It shows that there are significant savings associated with early action (e.g. over £100bn in present value terms under assumptions that the gas price remains at the current level, with much higher savings in a world with a high gas price). The only situation where early action would be more costly is if there were to be a combination of a low carbon price and low fossil fuel prices. This would be counter to UN ambition and to expectations for the oil and gas markets. It therefore advises that there has been no change in the circumstances upon which the fourth Carbon Budget was originally set in 2011 that would justify a lowering of ambition, so the Budget should not and cannot be changed under the terms of the Climate Change Act. If anything, changed circumstances point towards a tightening of the Budget; however, the CCC advises that it would be premature to do so until uncertainties at the EU level have been resolved. (11 December 2013)

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Community Energy

Friends of the Earth: Community power – The benefits of an energy revolution: this briefing explores the many benefits of community energy: for the climate, for the people and communities involved in owning or running their own energy production, and for society as a whole. The briefing includes case studies of successful and diverse community energy projects in Denmark, Ireland, the Czech Republic and Spain. It goes on to outline the steps needed to ensure that community energy reaches its full potential, including describing for policy-makers the right legislation needed to encourage community participation in our energy future. (1 December 2013)

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Energy Efficiency

DECC: Government action to help hardworking people with energy bills: announces a number of measures designed to reduce the impact of social and environmental programmes on household energy bills:

  • establishing a rebate saving the average customer £12 on their bill, for the next two years, worth a total of £600m. The Warm Homes Discount will continue to help millions of vulnerable households receive a £135 rebate off their energy bill.
  • reducing the cost of the Energy Company Obligation (ECO), an insulation scheme delivered by major energy suppliers. This will result in £30-£35 off bills, on average, next year. The existing dedicated support in ECO for low income and vulnerable households will be maintained and extended from March 2015 until March 2017;
  • energy efficiency grants of up to £1,000 for future home buyers to spend on important energy saving measures – equivalent to around half the stamp duty on the average house – or up to £4,000 for particularly expensive measures. The scheme will be available to all people moving house including those who do not pay stamp duty;
  • additional £90m over 3 years to improve the energy efficiency of schools, hospitals and other public sector buildings;
  • a new scheme to support private landlords to increase the energy efficiency of their properties, which will improve around 15,000 of the least energy efficient rental properties each year for 3 years;
  • including district heating schemes as a primary measure under the Carbon Obligation element of ECO, enabling whole communities to benefit from lower heating costs;
  • requiring the energy companies to bemore transparent about how much they spend on social and environmental measures, either through voluntary agreements or through legislation;
  • £540m in new incentives and support to boost take up of energy efficiency measures for both households and in the public sector. These measures will overall save around 2.7- 2.9 Mt of CO2 and ensure that the impact of the changes proposed is carbon neutral;
  • levies providing support for existing low carbon energy projects, such as the Renewables Obligation (RO), Contracts for Difference (CfDs) and feed in tariffs (FITs) will not change.

A number of these measures were also announced in the Chancellor's Autumn Statement on 5 December. The Government will consult on these changes. (2 December 2013)

WWF: Making more effective energy savings policy at EU level:  this briefing paper looks into what is needed to make more effective energy savings policy at EU level. It includes individual interviews with key participants in negotiations over EU energy efficiency policy. (28 November 2013)

Green Alliance: Seven steps to reducing energy bills: this report demonstrates how the cost of living crisis is being driven by inexorably rising energy bills. Improving home energy efficiency is the most effective way to combat rising energy prices, but politicians are focusing instead on energy company profiteering and environmental levies. The report highlights seven steps government should take to increase levels of home energy efficiency retrofit and reduce consumer energy bills, including: fixed financial incentives for owner-occupiers improving the energy efficiency of their homes; prioritising retrofit in LEP-led economic development programmes; and more effective integration of local public health and energy efficiency programmes. (2 December 2013)

CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2013 (SI 2013/3103): these regulations, which come into force on 1 February 2014, revoke and replace SI 2012/1386. They set out provisions for the sales of carbon trading scheme allowances during the second phase of the scheme, which begins on 1 April 2014. They set the timing of requests to be allocated allowances and govern the payment for and issue of allowances; set the price of allowances (£15.60 in the forecast period and £16.40 in the compliance period), the consequences of late or non-payment and the consequences of a transfer of excess allowances; and provide for the Environment Agency to charge fees to cover the costs of allocating allowances. (9 December 2013)

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Energy Policy

NAO: Departmental overview – The performance of the Department of Energy & Climate Change 2012-13: summarises DECC’s activity and performance since April 2012, based primarily on published sources, including DECC’s own accounts and the work of the NAO. It covers: DECC's responsibilities and how it spends its money; financial management; reported performance; amd issues identified in NAO reports. (4 December 2013)

Centre for Climate Change Economics and Policy: Climate change policies and the UK business sector – Overview, impacts and suggestions for reform: this policy paper provides an overview of the main energy and climate change policies and their impacts on business in the UK, and offers some proposals to introduce a simpler and more effective policy framework. It proposes a simplification that would see the three key downstream policies – namely the Carbon Reduction Commitment Energy Efficiency Scheme, Climate Change Agreements and Climate Change Levy – merged into a single tax instrument. (30 November 2013)

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Finance

HM Treasury: Autumn Statement 2013: the Chancellor has delivered his Autumn Statement to Parliament, giving a formal update on the current state of the economy, responding to the most recent analysis from the Office of Budgetary Responsibility, and setting out the Government's planned measures to boost growth. Key announcements for the energy sector are:

  • tax allowances aiming to encourage investment in shale gas to cut tax on early profits by 50% (see below); 
  • cost of the Energy Companies Obligation (ECO) reduced, resulting in £30-£35 off bills, on average, in 2014. The existing dedicated support in ECO for low income and vulnerable households will be maintained and extended from March 2015 until March 2017;
  • energy efficiency grants of up to £1,000 for future home buyers to spend on important energy saving measures or up to £4,000 for particularly expensive measures. The scheme will be available to all people moving house including those who do not pay stamp duty; 
  • additional £90m over three years to improve the energy efficiency of schools, hospitals and other public sector buildings; 
  • a new scheme to support private landlords to increase the energy efficiency of their properties, which will improve around 15,000 of the least energy efficient rental properties each year for three years; 
  • the Government is considering options to bring private capital into the Green Investment Bank to enable it to operate more freely in delivering its objectives; 
  • £5m during 2014-15 for a large scale electric vehicle-readiness programme for public sector fleets;
  • a  freeze on fuel duty for the remainder of this Parliament.
  • as set out in the National Infrastructure Plan 2013 (see below), the Government has now identified further assets with the potential for sale and the target for the sale of corporate and financial assets will be increased from £10bn to £20bn between 2014 and 2020; 
  • the National Infrastructure Plan 2013 incudes: 
    • the introduction of a specialist Planning Court to tackle delays to infrastructure delivery and reduce the impact of meritless claims raised through the Judicial Review process; 
    • an overarching review of the Nationally Significant Infrastructure Planning Regime, focused on improving the pre-application phase and further streamlining of consenting, and a freeze in planning fees for the Major Infrastructure Regime until at least the end of this Parliament.

    (5 December 2013)

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    Green Deal

DECC: Streamlining and improving the Green Deal: announces changes to the Green Deal to make it more straightforward and less time-consuming for families who want to improve their homes and benefit from lower bills in future. The changes include: 

  • opening up access to Energy Performance Certificate data, so that companies can more easily identify properties which will benefit most from energy efficiency improvements;
  • adding more measures to the list of those that can be supported under the Green Deal, and allowing more flexibility over the exact specification to which companies install;
  • working with industry to find ways to reduce the cost of insurance requirements attached to Green Deal measures;
  • seeking Parliament’s approval to change legislation to make it clearer that landlords and tenants can benefit from the Green Deal and encouraging industry to offer finance in the rented sector;
  • working towards increasing the range and availability of “top up loans” that customers can put alongside Green Deal finance if they wish.

Some of the changes will happen in January 2014, with more planned in the first half of 2014. The Government intends to introduce amendments to legislation  where that is necessary as well as working with industry to change the systems through which Green Deal operates. (2 December 2013)

ACE: Retrofitting the Green Deal: this report by Nicholas Schoon on behalf of BioRegional and the Association for the Conservation of Energy, considers how the Government’s new Green Deal energy saving loan scheme is failing ot meet its potential to transform energy saving in Britain’s homes. It concludes that the most important problem with the Green Deal, as it now stands, is a funding gap caused by its so-called ‘golden rule’. Most households which might be interested in taking out a Green Deal would find themselves having to pay at least £1,000 upfront. Green Deal assessments, the starting point for the scheme, need improving and the bulk of them need to be provided free of charge. The report makes several recommendations which, taken together, represent a retrofit for the Green Deal – one which would enable it to fulfil its great potential. These include recommendations for improving the assessment process, for encouraging more small businesses and traders to be engaged in the scheme, and for the Green Deal to have a stronger impact in streets and local communities. (2 December 2013).

Green Deal Oversight & Registration Body: Accepted approach to installer surveillance evaluation (GD CAP01): GD ORB has published the first Commonly Agreed Position (CAP) – these are agreed clarifications as to how affected parties have agreed to interpret and comply with requirements of Green Deal legislation, governance and standards. This CAP clarifies surveillance requirements under the Green Deal. (9 December 2013)

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Health and Safety

HSE: The Control of Substances Hazardous to Health Regulations 2002. Approved Code of Practice and guidance (6th ed): revised guidance on controlling substances that are hazardous to the health of workers. The Code provides practical guidance on complying with the general duties of the Health and Safety at Work Act and the requirements of the Control of Substances Hazardous to Health Regulations (COSHH). The Code is not law but does have a special legal status: if its advice is followed in relevant circumstances dutyholders can be confident they are complying with the law  (3 December 2013)

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Infrastructure

NAO: Infrastructure investment – The impact on consumer bills:  this report, which focuses on the energy, water and, to a lesser extent, telecoms sectors, recognises that the UK requires significant investment in new infrastructure. The Treasury expects that over two-thirds of the £310bn worth of the planned infrastructure it has identified will be privately financed, owned and operated but paid for by consumers through their utility bills. High levels of expected new investment in infrastructure mean that energy and water bills may rise significantly from current levels. Despite some good initiatives, such as efforts by Government to model future energy prices and bills, the NAO is concerned by the lack of a common approach across sectors to forecasting bills or measuring affordability. The NAO acknowledges there is a range of schemes to support vulnerable consumers in all three sectors, but is concerned that, without a fuller understanding of affordability in the round, Government and regulators cannot assess the adequacy of these schemes, now or in the future. Among the NAO’s recommendations are that the Treasury should publish the expected overall impact on consumer bills, to promote transparency and debate about new infrastructure and bill increases. In addition, departments should consider the implications for consumer bills and their overall affordability before making policy commitments influencing infrastructure. (13 November 2013)

HM Treasury: National Infrastructure Plan 2013: this updated Plan contains information on over £375bn of planned public and private sector infrastructure investment that has been announced by the Government. The plan sets out investment for energy, transport, flood defence, waste, water and communications infrastructure up to 2030 and beyond. It details the Government’s approach, sector by sector, to identifying and delivering the infrastructure that is needed and the rationale for selecting each of the Top 40 priority investments, with more detail on the timing, funding and status of each. It highlights new ways in which the Government will drive delivery of the Top 40 investments, including a dedicated ‘hot-desk’ in Infrastructure UK where Top 40 project owners can raise issues of concern, special consideration in the planning regime and UK Guarantees Scheme. There is also a new Major Infrastructure Tracking unit within Infrastructure UK which will allow it to track the progress of each Top 40 investment. (4 December 2013)
Alongside the Plan, the Government has published its forward-looking Infrastructure Pipeline 2013, which includes more detail than ever before on the status of UK infrastructure projects.
The Cabinet Office has published the latest Construction Pipeline 2013 that provides information on more than 9,000 projects and programmes over 19 sectors and around £119bn of investment to 2020 and beyond.

DCLG: Reviewing the nationally significant infrastructure planning regime – A discussion document: the Government is reviewing the nationally significant infrastructure regime five years after it was implemented through the Planning Act 2008, to ensure that the regime is operating as effectively and efficiently as possible. This discussion document highlights those areas where users have identified that there is still room for improvement. For each area, it sets out the main issues which have been identified and a range of suggestions and options for change which have been put forward by users of the regime. It seeks wider views on these areas where improvements are being suggested and more specific feedback on suggestions put forward through discussions so far. DCLG also welcomes any evidence that users of the regime are able to share on how the regime compares to its predecessors, in terms of timeliness, efficiency and costs. The closing date for comments is 24 January 2014. (4 December 2013)

European Commission: The implementation of the European Energy Programme for Recovery 2013: the European Energy Programme for Recovery (EEPR) co-finances projects that are designed to make energy supplies more reliable and help reduce greenhouse emissions, while simultaneously boosting Europe's economic recovery. The project cover three broad areas of the energy sector: gas and electricity connections, offshore wind energy, and carbon capture and storage. This progress report provides information on the state of play over the past year it shows that a substantial number of the 59 projects are now completed; others are well on track and will be operational soon. It also provides an overview of the current state of play and of the mid-term evaluation of the European Energy Efficiency Fund.(18 November 2013)

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Permitting and Licensing

  • DEFRA: Draft Environmental Permitting (England and Wales) (Amendment) Regulations 2013 – A package of measures: A summary of responses to the consultation & Government response: sets out the Government's response to the February 2013 consultation on proposed amendments to the EPR 2010 (SI 2010/675). The proposals, which are generally of a deregulatory nature, included possibly transferring the handling of appeals under the EPR 2010 from the Planning Inspectorate to the environment jurisdiction of the First Tier Tribunal (FTT): in light of responses, officials will further examine the issues raised before seeking Ministers’ views as to whether to proceed. The Government will also continue to look to develop the environmental jurisdiction of the FTT General Regulatory Chamber. It also acknowledges the desirability of consolidating the EPR 2010 as amended and will seek to do so as soon as practicable. (10 December 2013)

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    Renewable Energy

    DECC: Investing in renewable technologies – CfD contract terms and strike prices: sets out decisions on the Contract for Difference (CfD) strike prices for renewable technologies for the period 2014/15-2018/19, and provides an update on the key CfD contract terms, to provide investor and industry certainty that will maintain the UK’s position as one of the most attractive for low-carbon energy developers. The strike prices have been set to meet the Government’s objectives on renewable energy, decarbonisation, security of supply and minimising costs to consumers. They have also been informed by the feedback and evidence received through the draft Electricity Market Reform Delivery Plan consultation, conducted this summer. (4 December 2013)

    DECC: Final investment decision enabling for renewables – Updates 1, 2 and 3: the Final Investment Decision Enabling programme is designed to enable developers of low carbon electricity projects to take final investment decisions ahead of the CfD regime being put in place as part of Electricity Market Reform. DECC has now published a summary of the applications that applied and qualified through Phase 2 of the programme, including details of the FID Enabling for Renewables affordability envelope and an indicative timetable for the contract award process. Sixteen projects have met the minimum threshold evaluation criteria and will be invited to make binding applications. A further process will now establish which of these projects will be offered investment contracts where generators receive a fixed strike price for the electricity they produce. DECC will commence the final selection process later this month, and will assess final applications against the available budget in Spring 2014.(4 December 2013)

    For a summary of these developments, see the press release: Record investments of £40 billion in renewable electricity to bring green jobs and growth to the UK.

    DECC: Non-domestic Renewable Heat Incentive – Improving support, increasing uptake: sets out the Government's reponse to three consultations on Expanding the Non-Domestic Scheme (September 2012), Air-water Heat Pumps and Energy From Waste (September 2012) and Early Tariff Review (May 2012). It announces the decisions and rationale for expanding the non-domestic RHI. Key policy proposals, which remain subject to Parliamentary and State Aid approvals, are: 

  • eligibility for air-water heat pumps and medium and large biogas combustion installations in the non-domestic RHI; 
  • dedicated and increased tariffs for CHP; and
  • Deep Geothermal installations improvements to budget management and other scheme details.

The necessary amending regulations will be laid before Parliament in early 2014 and these changes should come into force by Spring 2014. (4 December 2013)

Centre for Climate Change Economics and Policy: The British Feed-in Tariff for small renewable energy systems – Can it be made fairer?: this policy paper looks at the fairness of the FiT scheme by examining how its costs and benefits have been distributed across rich and poor households during the scheme's first three years. The analysis suggests that the poorer half of British households receive (at least) between £14.2m and £26.6m less per year in FiT payments than they would if FiT-registered installations were distributed equally across income groups. This pattern in the distribution of FiT payments across income groups could persist for the life of the scheme – until 2033 and beyond – unless reforms are made. It recommends a number of changes to the scheme to address fairness issues in the way the scheme is targeted and paid for. (31 October 2013)

DECC: £3 million boost for energy storage innovation: announces that the EVEREST (Electric Vehicle Embedded Renewable Energy Storage and Transmission) Consortium has been awarded a contract worth £3m to spur on innovation in energy storage. The funds will be used to develop a new storage system, made partly out of recycled batteries from electric vehicles, that will store renewable energy generated at times of low demand for use at times of peak demand. (9 December 2013

International Renewable Energy Agency: Smart grids and renewables – A guide for effective deployment : this paper provides guidance to grid regulators, utilities and policymakers on how to accelerate the deployment of smart grids for renewable energy. It provides a set of strategies to guide decision makers in the transition to a smarter grid, along with a comprehensive overview of the smart grid technologies available for the integration of renewable energy, including relatively high shares of variable sources such as solar and wind energy. (30 November 2013) 

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Shale Gas 

HMRC: UK oil and gas fiscal regime – New onshore allowance: describes a new measure that is designed to incentivise investment in the exploration for, and development of, onshore oil and gas, including shale gas, with immediate effect from 5 December 2013. The new onshore allowance will reduce the effective tax rate companies investing in onshore oil and gas projects will pay on a portion of their profits from 62% to 30%. The amount of profits taxed at this lower rate will equal 75% of a company’s capital spend on qualifying projects on and after 5 December 2013. (5 December 2013)

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Solar Energy

DECC: Letter from Minister Gregory Barker to local authorities on solar energy: gives an update on the Department’s plans for solar energy following the publication of the UK Solar PV Strategy Part 1: Roadmap to a Brighter Future in October 2013. It highlights new planning guidance on renewable and solar energy that was issued in July 2013. The Government will pubish a full Solar PV strategy in Spring 2014. (20 November 2013)

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Wind Energy

Town and Country Planning (Development Management Procedure and Section 62A Applications (England) (Amendment) Order 2013 (SI 2013/2932): this Order, which comes into force on 17 December 2013, exercises the power in s.61W(1) of the Town and Country Planning Act 1990, inserted by s.122 of the Localism Act 2011, to require prospective applicants in specified cases to undertake compulsory pre-application consultation prior to the submission of an application for planning permission. It amends SI 2010/2184 and SI 2013/2140 to require developers seeking planning permission for onshore wind development involving more than two turbines or any turbine exceeding 15 metres in height to consult the local community before submitting a formal planning application. When a proposal meets the criteria, the developer will need to consult to ensure communities views about siting and other relevant planning issues can be heard first. (25 November 2013)

RenewableUK: Offshore wind – Decision time: article by Charles Ogilvie: offshore wind is a continuing UK success story. However, despite annual growth rates of over 50% in the last decade, as well as exciting forecasts for job creation, regional economic impact, and export markets, the offshore wind sector faces an  unprecedented challenge. This short paper highlights the scale of the challenge, and some of the pitfalls the UK offshore wind industry faces. It calls upon Government and industry to partner up and ensure that UK offshore wind realises its potential, and proposes clear actions to ensure that UK bill payers receive the best returns on their ongoing investment in the sector. (28 November 2013)

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