The new Energy Act 2008 - impact on renewables

On 26 November 2008 the UK Energy Bill received Royal Assent. The new Act implements the UK energy policy that emerged out of the Energy Review 2006 and the Energy White Paper 2007, namely to tackle climate change, reduce carbon dioxide emissions and ensure secure, clean and affordable energy.

The Energy Act introduces new legislative measures that will affect all areas of energy investment in the UK from Oil and Gas to Nuclear to Renewable Energy. This LawNow summarises the Renewable elements of the Energy Act (see our related LawNows for the Nuclear and Oil and Gas summaries of the Energy Act). A consolidated version of the Act should be available shortly.

The principal legislative measures:

• Carbon Capture and Storage: Creating a regulatory framework (including licensing and enforcement) to deal with the storage of CO2 and to enable companies to invest in such projects. This framework is currently limited to the offshore storage of CO2.
• Renewables Obligation: The introduction of banding into the Renewables Obligation to strengthen the existing regime and support different renewable technologies in the UK. It is proposed that the banding regime come into effect from 1 April 2009.
• Decommissioning of Offshore Renewable Energy Installations: Amending the existing regime under the Energy Act 2004 to improve the decommissioning provisions, including in respect of security, and strengthen the Secretary of State’s powers to require decommissioning programmes so as to minimise the risk of liabilities falling to the Government.
• Offshore electricity transmission: The introduction of new powers enabling Ofgem to run the offshore transmission licensing regime more effectively. These include powers to recover costs related to competitive tenders for determining to whom offshore electricity transmission licences will be granted and make property schemes to transfer property, rights and liabilities from an existing owner to a successful bidder for a licence.

For further information in relation to the above please see our previous LawNow, “Energy Bill: Not just about nuclear”.

Late introductions to the Energy Act:

At the last minute, the following amendments were introduced:

• Renewable Heat Incentive: Amendments to allow for a scheme to encourage investment in heat generation from renewable sources. The aim is to introduce a ‘banded’ system and the eligible renewable heat sources are biomass, biofuels, fuel cells, water, solar power, geothermal sources, heat from air, water or the ground and combined heat and power systems (from renewable heat only). It is envisaged that it would take at least 18 months to develop the scheme. This is described as the first such initiative in Europe. For further information please see our previous LawNow, “Renewable Heat Incentive”.
• Feed-in Tariffs: Amendments to allow for a scheme to enable feed-in tariffs for small-scale renewable energy projects. Whilst the proposal was originally aimed at households generating their own electricity to allow such to sell the surplus back to the grid this has now been extended to renewable energy schemes up to a maximum capacity to be designated by the Secretary of State, not to exceed 5MW. The scheme operates by allowing the Secretary of State to modify electricity supply and distribution licences to establish a system of financial incentives to encourage the small-scale low-carbon generation of electricity. The eligible sources of energy and technologies are biomass, biofuels, fuel cells, photovoltaics, water (including waves and tides), solar power, geothermal sources, combined heat and power systems with an electrical capacity of 50 kilowatts or less. The aim is that generators will receive a guaranteed payment for generating low carbon electricity.