Page 37 - Lawtext Utility Law Review Journal Sample

184 16[2006/2007]4 ULR
Renewables Obligation
May 2007
Climate Change Bill
13 May 2007
UTILITIES LAW REVIEW PUBLISHED BY LAWTEXT PUBLISHING LIMITED
UK CURRENT SURVEY
Costs borne by the private sector will vary depending on the number of new power
stations built and the ability to store new waste with legacy waste. A consultation is
proposed on a long-term waste management solution, including the government’s proposal
of waste disposal in a geological repository and safe and secure interim storage facilities.
The government is looking to implement measures that reduce uncertainty for energy
participants considering investment in new nuclear power stations. However, private
investors will need to understand the details and scope of actual and potential liability
relating to the full costs of decommissioning and waste management.
Although the Renewables Obligation (‘the RO’) is set to increase to 15.4 per cent by 2015,
the Energy White Paper (see above) has estimated that in its current form it will only
deliver 11.4 per cent of that. A consultation document on the implementation of the
government’s proposals for the RO was published alongside the Energy White Paper. The
main impact of the proposals would be to band the RO so that it works differently for
different types of renewable technologies, allowing more precise targeting of the benefit.
Also, a ‘guaranteed headroom’ would be provided for the RO so that if renewable capacity
were to exceed the obligation level, the RO could be increased in order to maintain the
value of its certificates. The UK Government has proposed measures to modify the RO to
deal with the anticipated shortfall between renewable capacity and the level of the RO at
present, and to further its aim of supporting less developed renewable technologies, including:
banding the RO, so that the number of ROCs awarded per MWh would vary depending on
the stage of the technological development and the costs involved, and therefore as a
consequence the obligation would be defined in terms of numbers of ROCs rather than
MWh, allowing the RO to be increased up to a maximum of 20 per cent to provide some
headroom for ROC prices to be maintained. The proposed headroom is 6 per cent, so the
RO should be no less than 106 per cent of the estimated level of ROCs to be issued in the
next ‘obligation period’, and lifting the caps on co-fired ROCs, which were introduced
originally so that this technology was not over-supported. While the government now
recognises the role co-firing can play in reducing carbon emissions from coal power stations,
concerns remain about the impact it can have on the promotion of other technologies.
The bandings would mean that the number of ROCs this technology receives could be
reduced. The new banding provisions would apply for renewable capacity becoming
operational from 1 April 2009.
The draft Climate Change Bill which is expected to come into force in Spring 2008 was
published by DEFRA on 13 May and is key for the United Kingdom in meeting the objectives
of the Energy White Paper, since it sets the framework of carbon targets within which
energy reduction initiatives will operate. It also introduces enabling powers to allow for
the implementation of these initiatives. The Climate Change Bill states that it has the
following two main aims:
• to tackle climate change and lead the international community in discussion on how
best to replace the Kyoto Protocol which ends in 2012;
• to influence and encourage UK businesses and individuals to plan around climate
change and to invest in low carbon technologies and energy-efficient measures.
The Bill will not directly impose liabilities or obligations on individuals or companies to
reduce carbon emissions but it sets out carbon reduction targets that the government
would be required to meet. However, as the Bill would create powers to enable the
government to introduce new domestic emissions trading schemes through secondary
legislation, it is possible that individuals and companies will be legally required to reduce
their own carbon emissions in the future. It is clear that if this passes through Parliament,
there may very well be indirect pressure to increase the greening of public procurement
and supply chains generally. The main provisions of the Bill are:
• The setting of targets for the UK Government for the reduction of carbon dioxide
emissions (including a reduction of 60 per cent from 1990 levels by 2050) and the
introduction of a system of five-yearly ‘carbon budgets’ set at least 15 years ahead. If
the government fails to meet the statutory budgets or emissions reductions targets,
the Bill provides for judicial review before the administrative courts and declaration
to that effect.
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