UK: Consultation on ROO 2011 and Changes to REGOs

On Tuesday, the Government issued a consultation on certain changes it intends to make to the Renewables Obligation ("RO") and Renewable Energy Guarantees of Origin ("REGOs"), as well as a response to the consultation on grandfathering for Dedicated Biomass, Anaerobic Digestion and Energy from Waste.   We have summarised the key points from the consultation and the response below.

Note that the closing date for the section of the consultation relating to the RO is 19 October, while the closing date for the section on REGOs is 7 September. 

1. Changes to the RO

Offshore Wind: In order to account for the longer construction periods associated with building offshore, it is proposed to allow the operational capacity of offshore wind generating stations to be registered in phases, with each phase receiving 20 years' support (subject to the 2037 end date of the RO). This should help developers, who are otherwise faced with a dilemma about the best time to obtain RO accreditation (with the benefit of receiving ROC income sooner at a known banding being weighed against the disadvantage of some turbines receiving a reduced period of support).

Sustainability criteria for biomass and biogas: Sustainability criteria for biomass and biogas (which is at the discretion of each member state) would be introduced, with certain exemptions including for generating stations with a capacity of less than 1MW and for biomass or biogas made from waste (or consisting of waste).  This will encourage the use of waste for energy, such as manure and domestic food waste in anaerobic digesters.  

Sustainability criteria for bioliquids: The Government has set out its proposals for implementing the sustainability criteria for bioliquids required by the Renewable Energy Directive.  

Support for refurbishment and replacement of existing generating stations: Views are sought on whether to introduce additional support for existing generating stations where there is a major refurbishment or replacement of parts, including converting existing co-firing generation to dedicated biomass. 

Renewable heat support: The Government proposes to offer a one-off choice between the CHP uplift or any future renewable heat support for CHP stations accrediting under the RO between 15 July 2009 and 31 March 2013.  This would be implemented in the banding review starting in October and therefore the Government is seeking views to inform that review.

Mutualisation: Views are sought on amendments to the mutualisation cap as a result of the change from a fixed renewables obligation to a renewables obligation set by reference to headroom.  Mutualisation is the mechanism introduced in England & Wales and Scotland to ensure investor confidence in the RO is maintained.  It requires suppliers to make additional payments to Ofgem in the event of a shortfall in the buy-out fund (which is most likely to arise from a supplier becoming insolvent).  Any changes are likely to result in an increase in the potential liability of suppliers. 

The consultation does not give any further indication of what was meant by the commitment in the Coalition Programme for Government to maintain a banded RO alongside the implementation of a full feed-in tariff.  This should become clearer in the autumn when a consultation on electricity market reform is expected.  

2. Changes to REGOs

The changes are being proposed in order to ensure technical compliance with the Renewable Energy Directive by amending The Electricity (Guarantees of Origin of Electricity Produced from Renewable Energy Sources) Regulations 2003. They involve tweaking the definition of "renewable energy sources"; changing the measurement unit from one KWh to one MWh; imposing a time limit on the use of REGOs; including further information about the energy to which they relate and changing the circumstances in which Ofgem may refuse to recognise a REGO from another member state. 

3. Response to Consultation on Grandfathering Policy for Biomass, AD and EfW

Also on Tuesday DECC published a response to the consultation on the grandfathering policy of support for Dedicated Biomass, Anaerobic Digestion and Energy from Waste under the Renewables Obligation, which closed on 28th May 2010.  The response states that DECC have decided to grandfather RO support at the point of accreditation for Anaerobic Digestion ("AD") and Energy from Waste ("EfW") with CHP, dedicated biomass and advanced conversion technologies.  This news was welcomed by the industry as it provides a much needed degree of certainty sought by investors and financiers.

However, bioliquids and the energy crop uplift will not be grandfathered. Support for bioliquids will be considered in the forthcoming RO banding review, which is due to start in Autumn 2010.

Briefly, grandfathering is a policy intention to maintain a fixed level of support from the point of accreditation for the lifetime of a plant's eligibility for the RO. 

Further Information

To view the consultation on DECC's website, please click here

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 30 July 2010.

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