Energy Eye – March 2016

Brief details of recent legal and policy developments in England and Wales relevant to those interested in energy, renewables, energy efficiency and the alternative energy sector.

17/03/2016

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.

   Capacity Market    Heat
   Competition    Regulation
   Energy Efficiency    Renewables Obligation
   Energy Policy    Solar Power
   Energy Storage    Wind Power
   Feed in Tariffs  

Capacity Market

DECC: Consultation on further reforms to the Capacity Market: seeks views on a number of changes to the electricity Capacity Market (CM), building on the October 2015 consultation and further learning from the second Capacity Market Auction in December 2015. The consultation covers proposed changes on: new build assurance; termination fees; avoiding cumulation of State aid; eligibility for Transitional Arrangements; prequalification timings; and reviewing the Capacity Market Rules. It also covers proposals to introduce a supplementary capacity auction in 2016 for the delivery year 2017/2018. The consultation closes on 1 April 2016.
See also the Government's response to the October 2015 consultation on a number of changes to the electricity Capacity Market so as to ensure that new-build generating plant which win agreements in the CM auction face the right incentives and penalties to ensure that they deliver fully and according to their agreements. It also looked at wider issues on the future of the CM. It states that the Government aims to amend the CM legislation in time for the opening of the prequalification period for the 2016 CM auction. (1 March 2016)

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Competition

CMA: Energy market investigation – Summary of provisional decision on remedies: sets out a comprehensive and wide-ranging package of remedies to address the problems hindering competition, which the CMA proposes to introduce following the conclusion of its investigation in June. It finds that there are features of the markets for the supply of energy in Great Britain that result in an adverse effect on competition. It proposes a range of measures aimed directly at customers (including microbusinesses) to help and encourage a greater number to benefit from switching to more competitively priced deals, and also extensive measures to reset the relationship between Ofgem, DECC and the industry, so that decisions are made efficiently, on the basis of readily available accurate information, with the impact on consumers clearly set out. These include requiring the largest suppliers to provide fuller information on their financial performance, and increased public consultation by DECC on policy decisions being taken that will be a major driver of consumer prices in the future. (10 March 2016)

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Energy Efficiency

HC Energy and Climate Change Committee: Home energy efficiency and demand reduction: this report concludes that the Government must do more to reduce consumer gas and electricity bills by improving the energy efficiency of new and existing homes – including reinstating the zero carbon homes policy scrapped following the election. It warns that the energy efficiency supply chain has been affected by inconsistent and unpredictable policy signals – in the last year the Government has announced an end to the Green Deal and reneged on a long-standing commitment to require all new homes to be zero carbon from 2016. The zero carbon homes policy should either be reinstated or the Government should set out a similar policy that will ensure that new homes generate no net carbon emissions and are inexpensive to heat and light. The report calls on the Government to consider making energy efficiency a national infrastructure priority. This approach would put energy efficiency much more at the forefront of energy policy making and create a sustainable and durable long-term policy view that goes beyond parliamentary cycles. (12 March 2016)

Welsh Government: Energy Efficiency Strategy for Wales: considers the Welsh Government's role in driving the energy efficiency agenda as well as the role of other organisations, businesses and householders. It also highlights their vision to ensure that Wales can realise its full energy efficiency potential and become a major exporter of energy efficiency technology and know-how. (22 February 2016)

Energy Performance of Buildings (England and Wales) (Amendment) Regulations 2016 (SI 2016/284): these regulations, which mainly come into force on 6 April 2016, amend SI 2012/3188 to increase the fees currently charged for lodging energy performance of buildings data on the national registers and change the existing arrangements for access to energy performance of buildings data held on the national registers, enabling increased free access to relevant data. They also make a number of technical changes to the principal regulations, including to existing arrangements for the handling of data concerning buildings in relation to which security considerations arise. They clarify a number of matters concerning the calculation of the energy performance of buildings, and consolidate requirements concerning energy performance certificates to be provided on construction. (15 March 2016)

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Energy Policy

HM Treasury: Budget 2016: the Chancellor has delivered his Budget for 2016/17. Key announcements affecting the energy industry are: 

  • Fuel duty frozen for sixth year 
  • Abolition of the CRC energy efficiency scheme following the 2018-19 compliance year 
  • Climate Change Levy increased from 2019: see the factsheet 
  • Existing Climate Change Agreement (CCA) scheme eligibility criteria remain in place until at least 2023  
  • Contracts for Difference auctions of up to £730m this Parliament for up to 4GW of offshore wind and other less established renewables, with a first auction of £290m.
  • Support for offshore wind will be capped initially at £105/MWh (in 2011-12 prices), falling to £85/MWh for projects commissioning by 2026 
  • £50m for innovation in energy storage, demand-side response and other smart technologies over the next five years 
  • Consultation later this year on the priorities and delivery models for the Shale Wealth Fund, and how it can be deployed in local communities and the North as a whole. The Shale Wealth Fund could be worth up to £1bn over 25 years and will provide additional funds over and above industry schemes and other sources of government funding. 

(16 March 2016)

DECC: Single departmental plan 2015 to 2020: this plan sets out DECC's priority objectives for 2015 to 2020, based on its four objectives of: Security and resilience; Keeping bills low; Decarbonisation; and  Managing the UK’s energy legacy. (19 February 2016)

National Infrastructure Commission: Smart power: the NIC was asked to consider how the UK can better balance supply and demand, aiming towards an electricity market where prices are reflective of costs to the overall system. The report’s central finding is that smart power – principally built around three innovations, interconnection, storage, and demand flexibility – could save consumers up to £8bn a year by 2030, help the UK meet its 2050 carbon targets, and secure the UK’s energy supply for generations. The report makes some practical recommendations towards the creation of a level playing field and a better managed network. (4 March 2016)

HC Energy and Climate Change Committee: Investor confidence in the UK energy sector: the Government has cut support for onshore wind and solar, ended the "Green Deal" energy efficiency programme and cancelled a long-standing competition to deliver carbon capture and storage. The Committee heard that the contradictory signals coming from Government were causing some investors to put projects on hold, until there was more clarity on energy policy. Other factors affecting investor confidence include a lack of transparency in the policy decision-making process and a policy "cliff-edge" in 2020. It warns that investor confidence has been dented by a series of sudden policy changes since the election, which may lead to a hiatus in project developments and threaten the UK’s ability to meet its energy security and climate change objectives.
In response, DECC has published a list of the top 10 things the Government is doing to secure investment in clean secure energy. (3 March 2016)

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Energy Storage

Carbon Trust: Energy storage report – Can storage help reduce the cost of a future UK electricity system?: this report analyses how the potential for energy storage could deliver savings of up to £50 a year on an average consumer energy bill through a system wide saving of up to £2.4bn a year by 2030. It highlights the significant savings that could be made for consumers by deploying storage. It then explores two specific example applications of distributed storage to highlight a series of core barriers to deployment that have created a market failure, and makes recommendations on how to overcome these barriers to create a level playing field for storage. (2 March 2016)

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Feed in Tariffs

Feed-in Tariffs (Amendment) Order 2016 (SI 2016/319): this Order, which comes into force on 31 March 2016, amends SI 2012/2782 to make corrections to amendments to that Order inserted by the Feed-in Tariffs (Amendment) (No. 3) Order 2015, and also amends the 2015 Order by inserting a saving provision. These changes are designed to ensure that the changes to the FITs scheme confirmed by the Government in its Response to the Review of the FITs Scheme published on 17 December 2015 are delivered as envisaged. (10 March 2016)

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Heat

DECC: The Renewable Heat Incentive – A reformed and refocused scheme: seeks views on proposed reforms to the existing Domestic and Non-Domestic RHI schemes. The changes will be introduced in two stages. The first stage, from 1 April 2016, will include changes to how the RHI’s budget is managed, with a new budget cap mechanism, and to the way RHI tariffs are changed to reflect inflation. The second stage of reforms, to be implemented from Spring 2017, will cover the operation of the budget cap mechanism. The consultation closes on 27 April 2016. (3 March 2016)

DECC: Renewable Heat Incentive – Amendments to scheme eligibility: explains changes to eligibility and a number of minor administrative amendments that are being introduced through a regulatory amendment that is due to come into force on 24 March 2016. The key changes include: the removal of the need for a Green Deal Assessment and removal of the need for eligible new-build properties to have been occupied for a minimum of 183 days prior to first application date to receive deemed RHI payments. It also explains the alignment of RHI sustainability requirements with that of the Renewable Obligation. (3 March 2016)

Ofgem: RHI Register external user guide: guidance on the RHI Register, a web-based system for use by applicants and participants to the scheme. The RHI rules require periodic data to be submitted for meter readings, registered fuels and heat output data for biomethane in order to receive appropriate payments. (1 March 2016)

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Regulation

DBIS: Cutting Red Tape – Review of the energy sector: this report summarises the findings of the Cutting Red Tape review of regulatory barriers to growth, productivity and innovation in the energy sector. (3 March 2016)

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Renewables Obligation

Ofgem: Renewables Obligation – Sustainability criteria: guidance for operators of generating stations using solid biomass, biogas or bioliquid fuels on how to comply with the sustainability requirements under the Renewables Obligation. It is effective from 1 December 2015 in England, Scotland and Wales. (1 March 2016)

Ofgem: Renewables Obligation – Sustainability reporting: guidance operators of generating stations using solid biomass, biogas or bioliquids to generate electricity, and their auditors, on how to comply with sustainability reporting requirements under the Renewables Obligation. It is effective from 1 December 2015 in England, Scotland and Wales. (1 March 2016)

Ofgem: Renewables Obligation – Fuel measurement and sampling guidance: guidance for operators using biomass and waste fuels on their potential eligibility for ROCs, and how to implement FMS procedures to meet the requirements of the Renewables Obligation. (1 March 2016)

Solar Century Holdings Ltd v Secretary of State for Energy and Climate Change [2016] EWCA Civ 117 (CA): SCH were engaged in the installation of large-scale solar PV systems or "solar farms". They appealed against the dismissal of their application for judicial review of the Secretary of State's decision to bring the Renewables Obligation (RO) scheme to a premature close, subject to certain periods of grace. SCH contended that: the Order implementing the early closure of the RO scheme was ultra vires the powers granted by ss.32LA and 32LB of the Electricity Act 1989 because the statutory power was for the purpose of preserving the 2017 closure date and not for extending it; the Government's statements from 2010 onwards that the scheme would not close before 2017 were clear and unequivocal representations giving rise to a legitimate expectation which was not thwarted by any policy consideration; and the periods of grace were retrospective in effect and therefore unfair in public law.
The court held, dismissing the appeal, that there was no legitimate expectation that the Government would not change its policy with regard to the March 2017 closure date, and thereby impact those who had made pipeline investments. It must have been apparent to all concerned that, if uptake of solar PV threatened the cap, the Government might, and probably would, bring forward the closure date. Section 32LA was drafted widely enough to enable the Secretary of State to curtail the period of operation of the RO Scheme from 2017 to 2015, and there was no basis for suggesting that the power was only given for the purpose of closing the RO scheme on or after 31 March 2017. The effect of the changes announced in the decision was to alter the rules of the game after investors had started playing it but this was just one factor in the overall assessment of fairness of the exercise of the power. Moreover, if it was lawful for the Secretary of State to close the RO scheme in its entirety to new entrants with effect from 1 April 2015, it could not be unlawful to soften that blow by extending the scheme for a further year to those who had reached a particular stage of investment. The process of consultation adopted to determine where the line should be drawn was fair. The grace periods were not were the subject of retrospective legislation, and the use of the legislation to enact them was not unfair in a public law sense. (1 March 2016) 

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Solar Power

BRE: Batteries and solar power – Guidance for domestic and small commercial consumers: guide for consumers considering a battery system to work alongside an existing or new solar PV system. This guide is designed to help decide if a battery storage system makes sense for the consumer. It covers the basics of battery storage for solar PV systems, what one needs to consider to work out if they are suitable, where to find more information and the questions to ask any prospective installer. (20 January 2016)

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Wind Power

Infrastructure Planning (Onshore Wind Generating Stations) Order 2016 (SI 2016/306): this Order, which comes into force on 5 March 2016, amends the Planning Act 2008 to remove the provision for onshore wind generating stations to apply to the Secretary of State for development consent. Onshore wind generating stations over 50MW will apply to the local planning authorities under the Town and Country Planning Act 1990. The effect of the Order is to standardise the planning consents process for onshore wind farms in England and Wales, regardless of their size, allowing them all to be determined within the Town and Country Planning Act 1990 and ensures that the consenting process for onshore windfarms is primarily handled at the local level. (4 March 2016)

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