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Transcript of UKELA CCEWP Round-up of Climate Change Regulation Becky Clissmann Editor, PLC Environment Practical...
UKELA CCEWPRound-up of Climate Change
Regulation
Becky Clissmann
Editor, PLC Environment
Practical Law Company
10 October 2012
PLC disclaimer
Agenda
CRC Energy Efficiency Scheme (CRC) – Becky Clissmann Feed-in Tariffs (FITs) - Becky Clissmann Renewables Obligation (RO) - Becky Clissmann Renewable Heat Incentive (RHI) - Tom Bainbridge Electricity Market Reform (EMR) - Tom Bainbridge Nigel Cornwall, founder of Cornwall Energy – Are the
Government’s climate change and energy policies heading in the right direction or indeed anywhere at all?
CRC
What is the CRC?
A mandatory emissions trading scheme for large, non-energy intensive UK businesses and public sector organisations
Aims to reduce carbon dioxide emissions and encourage energy efficiency
Came into force in April 2010
Divided into 7 Phases
CRC Timeline
What do participants have to do?
Identify if they are covered and register Identify their CRC emissions and submit a Footprint
Report Purchase allowances to cover CRC Emissions for the
forthcoming year Monitor CRC emissions during the year and submit an
Annual Report Keep an Evidence Pack to support reports Surrender allowances equal to their CRC emissions
Using the Annual Reports, the scheme administrator will produce a league table ranking all the participants
What emissions covered?
Who does the CRC apply to?
Organisations that meet the qualification criteria for the relevant phase
Qualification criteria A “CRC participant” includes any organisation or
group organisation who: Was supplied with electricity via at least one
Settled Half Hourly Meter in the qualification year (2008 for the Introductory Phase)
Had aggregate electricity supplies via Half Hourly Meters in the UK which equalled or exceeded 6,000 MWh in the qualification year
Organisations affected by the CRC
Private sector Single companies
Groups Grouped under the Highest Parent Undertaking (HPU) Need to appoint a Primary Member (aka Account Holder) Complex rules round possibility of disaggregating certain subsidiaries
(“Significant Group Undertakings”)
Overseas organisations
Joint ventures
Franchises and other distribution agreements
Example of a group participant
X
X
XX
Public sector Mandated Participants: Disaggregation for government departments possible
Organisations designated as a "public authority" in the Freedom of Information Act 2000 (FOI) and the Freedom of Information (Scotland) Act 2002 (FOI(S))
Local authorities Schools County Fire Authorities Companies and other bodies in which they have a controlling interest
The Crown Executive Agencies and non-departmental bodies Fire Authorities Police Authorities NHS Universities
Organisations affected by the CRC
Buying allowances Introductory Phase Fixed price sale – 1st one April 2012 - allowances sold at £12/tonne
Phase 2 onwards? 2 Fixed Price Sales?
Registry account
Secondary market – a participant with surplus allowances can sell to other participants
Safety valve - if participants didn’t buy enough allowances in the sale and can’t get more allowances from the secondary market, they can ask the scheme administrator to buy EU ETS allowances on their behalf. These are then converted to CRC allowances and the EU ETS allowances are cancelled
Additional allowances can be sold or banked for use in the following compliance year (although not between Introductory and second phases)
What is the league table?
Ranks participants
Reputational driver
Based on 3 metrics Early action metric
Absolute metric (measure of change)
Growth metric (change in emissions per unit of turnover/revenue)
The Committee on Climate Change’s report: advice to the government on the second phase – September 2010
The government’s Spending Review – October 2010
DECC review/consultation to simplify the scheme – November 2010
DECC – 5 discussion papers – January 2011 DECC detailed proposals to simplify the
scheme and responses to the consultation – June 2011
DECC – Consultation on simplifying the CRC – March 2012
Its all changing….!
Qualification criteria based on electricity supply through Settled Half Hourly Meters (Settled HHMs)
Changes to the Supply rules including: Ability to claim unconsumed supply limited… but Landlords still responsible for
supply Number of fuels reduced from 29 to 4 Emission factors same as for GHG reporting Residual percentage rule and requirement to produce Footprint Reports and
RML removed Overlap with CCAs and EU ETS reduced Electricity Generating Credits will be scrapped
Changes to the Organisational rules including: Businesses to participate in “natural business units” Disaggregation possible for any subsidiary at any level , at any point in first year
of a Phase and annually thereafter Concept of SGU removed so no reporting in Annual Reports Changes to Designated change rules so only cover Participants and Participant
Equivalents Landlords will remain responsible for supplies of energy to their tenants – small
exception where land leased for tenant to build on Trusts treated as undertakings and therefore separate from other trusts with
same trustee
Summary of the changes
Sales of allowances changed so that: 2 Fixed Price Sales each year – one
forecasting sale and one retrospective sale No Safety Valve Banking of Allowances will not be permitted
across Phases Deadline for surrender moved from July to
September
Reporting and record keeping rules changed
Some reports scrapped Records kept for less time
No decision on Performance League Table yet
Appeals to be delegated to the First-tier Tribunal
Summary of the changes (2)
In the March 2012 Budget, the government said that if it is not possible to achieve very significant cuts in the administrative burdens, it would bring forward proposals in autumn 2012 to replace the CRC with an alternative environmental tax. If it decides to replace the CRC, it will engage with businesses before the autumn to identify potential alternatives to the CRC.
NB revenue stream for Treasury
Stakeholder event in June 2012
Defra’s announcement on GHG reporting for listed companies – July 2012
Will CRC be scrapped?
Change
Ahead !
Timing
Consultation closed on 18 June 2012
Decision on scheme in “autumn” 2012
Government aiming for amending legislation to be in force by April 2013 when Phase 2 begins
Renewables Obligation
Renewables Obligation
How does the RO work?
Background Renewable Energy Directive 2009 (RED)
EU target of 20% by 2020 UK target 15% by 2020
Utilities Act 2000 amended the Electricity Act 1989 to allow orders to be made to oblige electricity supplier to purchase a %age of their electricity from renewable sources
Renewables Obligation Order 2009 as amended by 2010 and 2011 orders RO runs until 2037 but now limited to 20 year’s support Aimed at large generators UK wide - 3 complementary schemes in UK for E&W, Scotland and NI – ROCs fully
fungible
Administrator – Ofgem
Obligation Placed on licensed electricity suppliers Level of obligation increases each year and is the higher of the fixed target or
headroom Expressed as the number of ROCs to be submitted for every MWh of electricity
supplied – currently 0.158 ROCs per MWh for 1 April 2012-31 March 2013
How does the RO work?
ROCs Can get between 0.25 ROCs and 5 ROCs for every MWh generated Currently 26 bands – different technologies and levels of ROCs - generally more
established technologies get less ROCs and the newer emerging technologies get more support
NB Co-fired ROCs cap – only up to 12.5% of a supplier’s obligation Valid for obligation period for which they were issued and for the following obligation
period - Banked ROCs can only be used to meet up to 25% of a supplier’s obligation Banding levels reviewed every 4 years unless reason for early review
Accredited generators Not defined – electricity deemed to have been generated from eligible renewable
sources if generated from renewable sources and not generated by an excluded generating station
Grandfathering Same, fixed level of support under the RO for 20 years from when they are first
accredited Protect investment decisions made in relation to a generating station on information
available at the time. Applied following the introduction of banding and applies also to banding reviews Some technologies are not grandfathered
Interaction with FITs ROCs - is for large scale generation >5MW NB where technologies are not covered by FITs
microgeneration is supported under the RO get 2 ROCs/MWh
FITs is for microgeneration and small generation <5MW
Transitional provisions in RO Order 2010 for when FITs were introduced in April 2010
DECC announced that their proposal on removing small generators choice between the two schemes due to take effect from 1 April 2013, will not be taken forward
Additional capacity – if over 5MW mark will be able to get support under the RO.
How will the RO change?
ROBR 2011/12 Consultation - Oct 2011 Response - July 2012 Draft RO Order 2012 – August 2012
Significant banding changes: Onshore wind – smaller changes than thought Large scale solar no immediate cut but now consulting again Significant increases for some marine technologies – up to 5
ROCs New biomass conversion band Co-firing band split into 3 (standard, mid and high range Support for EfW retained at 1 ROC/MWh instead of 50%
reduction originally proposed
How will the RO change?
FITs CfDs
How will the RO change?
FITs CfDs
First FIT CfD payments made
2012 2013 2014 2015 2016 2017
Transition period
Vintaged period
2037- - - - - -
First FIT CfD contracts signed
RO closes to new accreditations and additional
capacity at existing stations
RO ends
FITs
How do FITs work?
Ecotricity check s the household is eligible for
FITs using the MSC certificate and registers
the installation in the central FIT registerOfgem
Central FIT
Register
Ecotricity
National Grid
© Practical Law Publishing Limited 2010.
MSC certified equipment
and installer
Householder uses MSC
accredited equipment and
installer. Installer registers
household on Central FIT
register.
Householder gets MSC
certificate
Ecotricity pays the household for
electricity generated and electricity
exported to the grid.
Household pays for electricity
imported from grid in the usual way
Householder exports
electricity to the grid
when it is not using
what it generates
How do FITs work? Background
Powers in sections 41-43 of the Energy Act 2008 to introduce FITs.
(Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 (SI 2010/678) as amended
Modifications to the Standard Licence Conditions of Electricity Supply Licences
The scheme went live on 1 April 2010
Administrator is Ofgem
What generation covered? The scheme applies to small scale installations (less than 5MW)
5 technologies: anaerobic digestion hydro projects of 50kW or less domestic micro CHP (pilot programme with 2kW electrical capacity of declared net
capacity (DNC) or less) solar PV (roof mounted or stand alone) wind (building mounted or free standing turbines)
Tariffs Guaranteed payment by electricity supplier for both generated
and exported electricity FIT generators can choose export tariff or market rate Deemed export for very small-scale installations (≤30 kW) FIT generators “locked in” to tariff in year of installation Degression – PV and wind tariffs will decrease between 2013 –
2020 Tariff lifetimes vary from 10 years (micro CHP) to 25 years for
solar PV Linked to RPI Review
Installations on business or domestic properties can benefit
Receipt of FITs payments can be assigned
FIT are not taxable income for householders
Extensions – additional capacity at tariff rate for entire capacity at eligibility date
How do FITs work?
Who pays? FIT installations must find a supplier through
which they will be paid
Mandatory FIT Licensees - >50,000 domestic customers
Voluntary FIT Licensee
Levelisation process - the cost of FITs is borne by all licensed suppliers
Up-front costs not covered
How do FITs work?
FITs application process
© Practical Law Publishing Limited 2010.
Check site characteristics and select technology
MSC certified registration
Are you installing generating equipment with a DNC of more than 50 kW or is your chosen technology anaerobic digestion?
ROO-FIT accreditation
MSC certified installers installs MSC certified
technology and gives MSC certificateFind a FIT licensee to provide FIT services and
send a written request for MSC certified
registration FIT licensee verifies MSC certification and
eligibility and registers installation in central FIT
register
Ofgem sends confirmation notification
Opt-out of export tariff
Agree statement of FIT terms
FIT payments start
Apply to Ofgem for ROO-FIT accreditation after installation
Ofgem verifies eligibility and gives ROO-FIT accreditation number
Find a FIT licensee to provide FIT services and request
registration
FIT licensee verifies eligibility and ROO-FIT accreditation
and registers installation in central FIT register
How will FITs change? Originally reviews to coincide with ROBR – first review was
expected April 2013
February 2011 – Early Comprehensive Review announced
March 2011 - Fast track for large scale solar & AD
October 2011 – Phase 1 Comprehensive Review (smaller-scale solar PV)
December 2011 - Solar PV companies and FoE successful JR challenge to consultation
Secretary of State for Energy and Climate Change v Friends of the Earth and others [2012] EWCA Civ 28
February 2012 – Phase 2A (solar PV cost control) and 2B (non-solar technologies and FITs scheme issues)
FITs data to date 248,010 renewable installations have been
registered since 1 April 2010
1,091 MW of Total Installed Capacity has been registered since 1 April 2010
A total of £46,869,264.23 in FIT payments were due to generators in the quarter 1 January 2012 to 31 March 2012
92% of the total installed capacity under the scheme to date is photovoltaic and 5% is wind
26% of the total installed capacity relates to commercial properties and 69% to domestic properties
Source Ofgem FIT update issue 8/June 2012
For more information contact:
Becky ClissmannEditor, PLC Environment t: +44 (0)7814 470364 e: [email protected] or for a free trial contact e: [email protected] t: 020 7202 1220 http://uk.practicallaw.com/