UK: UK Energy Policy In Crisis

Last Updated: 1 May 2012
Article by Becky Johnson and Edward Craft

UK energy policy has displayed bipolar characteristics for at least the last ten years; however, we do require our politicians to wrestle with this particularly complex and very pressing issue.  Energy policy must respond to global themes and impacts all of our lives and the UK economy.

We charge our politicians and regulators to make very difficult decisions about our energy future.  We must be supportive of those we mandate to make such difficult decisions, and must accept that they may not always get it right first time round and are prone to criticism and legal challenge from all angles.

Recent climate change challenges

Recent months have highlighted a number of key instruments that have been promoted by either the Coalition Government or the former government which now seem to be at risk of failure and/or unable to deliver either security of supply or the required behavioural changes to enable us to meet the immense climate change challenges we face.  This article highlights some of the recent developments.

Some key elements of Climate Change Act 2008

Feed-in tarriffs - Being reviewed and challenged
Renewable heat incentive - Being reviewed
CRC Energy Efficiency Scheme - Being reviewed, might even be abolished
Mandatory greenhouse gas reporting - Not being pursued
Committee on Climate Change - Remains

Feed-in tariffs

The Supreme Court has finally determined that the Secretary of State is not able to appeal against the judicial review case which was lost by him regarding changes to the feed-in tariff arrangement1. The court has confirmed that attempts by the Secretary of State to change the feed-in tariff rates without specific statutory authority are unlawful. This case presented interesting issues regarding the retrospective nature of legislation, particularly in the context of taxation.  The court has reached a correct decision: Government is not able to circumvent the clear will of Parliament as enshrined in statute and statutory instrument.

More generally in relation to feed-in tariffs, it is interesting that a champion policy to deploy specified low carbon technologies is now being criticised by the Government for being too successful in delivering solar photovoltaic projects: it is rare that Government changes its own policy decisions on the basis that a policy proves to be too popular!

Renewable heat incentive

The feed-in tariff pays a subsidised rate to generators of certain low carbon electricity in conjunction with the renewal heat incentive which applies to the generation of low carbon heat. 

The cost of the feed-in tariff is borne by us all as consumers through a hidden tariff added to our utility bills. However, the cost of the renewable heat incentive is paid through taxation revenues. Accordingly, it is no surprise that the renewable heat incentive is now also being reviewed.

The CRC Energy Efficiency Scheme

The CRC Energy Efficiency Scheme (the Scheme) was a creation of the last Labour government to waterfall down the principles of carbon trading set out in the EU Emissions Trading Scheme (EU-ETS) to businesses and major public sector organisations not otherwise participating in EU-ETS. One of the key weaknesses of the Scheme was that it was only ever focused on the UK. 

As has been regularly commented since October 2010, the Scheme which was engineered to incentivise low energy use within organisations and efficient use of that energy, has become a taxation cash grab by removing the recycling payments due to those who delivered significant reductions in energy use. In so doing, the Government has destroyed goodwill and placed a significant unnecessary and unbudgeted cost burden on businesses. 

It is somewhat ironic that since that October 2010, the Government has been seeking to reform the Scheme on the basis of cost benefit analysis and unnecessary bureaucracy. All of the complications of the Scheme are the creation of the Government itself.  These points were repeatedly made to the Government as the Scheme was developing but were not taken on board.

A further review of the Scheme is currently underway. If significant cost reductions cannot be delivered (which must be anticipated) the Government has indicated that it will replace the Scheme with the general carbon tax. The simplicity of the carbon tax is to be encouraged as this could be collected through simple existing schemes and structures such as the client change levy.

Mandatory greenhouse gas reporting

The Climate Change Act 2008 is a very important piece of legislation.  The major achievement of this legislation was to establish the Committee on Climate Change and to charge that body with holding the Government to account in relation to carbon performance year on year.

The Climate Change Act 2008 also contains an important provision requiring the Secretary of State to either create regulations for greenhouse gas reporting for corporates by 1 April 2012 or to report to parliament explaining why no such regulations have been made.

Over the spring and summer of 2011, the Department for Environment, Food and Rural Affairs (DEFRA) carried out a significant consultation process on mandatory greenhouse gas (GHG) reporting.  This process received an unprecedented 2,018 submissions and as part of the consultation significant meetings were held between stakeholders.  Through this consultation Wedlake Bell LLP represented the views of the Quoted Companies Alliance as well as itself. 

It is bitterly disappointing that the report issued by the Secretary of State at the end of March explaining why no mandatory GHG reporting regime will be put in place contains only eight paragraphs. After receiving 2,018 submissions and pursuing constructive engagement with many corporates and other stakeholders the Government has only deemed it appropriate to deliver a one page response.

The response itself states that the ministers require additional time to further analyse the situation and represents an abdication of responsibility – "no decision to make regulations has been reached". It fails to set any time frame as to when a decision will be made.

Businesses have a reasonable expectation that the Government will behave in a certain and decisive manner. Whilst it is understandable that through the current economic downturn it was unlikely that the Government were to seek an additional burden to be placed on businesses, an indication of evolving views and supporting analysis would have been useful.

Nuclear power

The Government's options in relation to our low carbon energy future seem to be narrowing. There was a high expectation that a lot of future base load generation would be delivered by new nuclear generating stations. 

However, in a further blow to the Government's current policy, the horizon joint venture of E.on and RWE has recently decided to pull out of new build nuclear.  It remains unclear as to where this leaves our security of supply and puts further pressure on the need for instruments that will deliver effective new build distributed energy (such as renewable).  EDF and Centrica have restated their intentions of investing in new build nuclear. The outlook is uncertain and one of increasing worry to commentators.

A glimmer of hope?

One area where low carbon policy seems to be going in the right direction is in relation to energy performance certificates (EPCs) and display energy certificates.

Amendments to the EPC Regulations have widened the scope of EPCs, and also ensure that prospective purchasers and tenants obtain information about the building's energy performance without delay.

From 6 April 2012 an EPC is required for both residential and commercial properties whether for sale or for rent (unless caught by any exclusions in the Regulations). Sellers and agents must ensure the EPC is commissioned before the property is marketed and must use all reasonable efforts to ensure the EPC is actually obtained within seven days of the property being put on the market (and in any event within a further 21 days). The updated Regulations confirm you cannot delay providing the full EPC until just before exchange, it must be provided up front.  It used to be possible to include the asset rating of the property only with the particulars, but now the entire first page of the EPC must be included (electronic particulars are also in this). Fines can be imposed for failure to comply with the Regulations.

Provided the new rules are effectively enforced, parties buying or renting properties should be able to make a more informed decision with regards to the property's energy efficiency.

Where next?

Perhaps some of the confusion is created by the multiple number of stakeholders at Government level.

The Department for Energy and Climate Change was created to bring together all relevant experts within the civil service working on climate change and energy mandates.  However, GHG reporting work is being delivered by DEFRA and responsibility for EPCs remains with the Department for Communities and Local Government.  Added to that, it is the Department for Business Innovation & Skills which must take responsibility for the narrative reporting framework and analysis of the economic effect of climate change initiatives.

The UK deserves a clear and consistent climate change policy to be delivered by the Government.  Responding to anthropogenic climate change is an area we must all be engaged in, but we do deserve more consistent and coherent policies and political structures to spur us to action.

Footnotes

1. The Secretary of State for Energy and Climate Change v Friends of the Earth and Others UKSC 2012/0052.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Edward Craft
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.