UK: Trading in Renewable Energy

Last Updated: 5 September 2002

Article by Simon Thorne

Government Energy Policy

Energy policy is under the spotlight. In June last year the Prime Minister asked the Performance and Innovation Unit of the Cabinet Office (PIU) to undertake a review of the strategic issues surrounding energy policy for Great Britain. The PIU published "the Energy Review" on 14 February this year.

The Government intends to issue a White Paper at the beginning of next year setting out its approach to future energy policy in the light of the PIU report, the findings of the Government’s current consultation process and existing relevant Government commitments.

The key elements of current UK strategy include the new electricity trading arrangements, the introduction of the renewables obligation to succeed the non-fossil fuel obligation, the climate change levy and an expanded support programme for renewable energy evidenced by grants and increased capital allowances.

A key aim of Government policy is to significantly reduce greenhouse gas emissions so long as the cost to the consumer is acceptable. The PIU recommended that the target for the proportion of electricity supplied from renewables sources should be increased from 10% by 2010 to 20% by 2020.

New Electricity Trading Arrangements

NETA went live on 27 March 2001. NETA involves splitting of the licensing of electricity generation and supply into generation, transmission, distribution and supply. A basic principal of NETA is that those wishing to buy and sell electricity should be able to enter into contracts with each other to do so. A role of NETA is to provide mechanisms for near real time clearing and settlement of the imbalances between contractual and physical positions of those producing and consuming electrical energy.

The impact of NETA has been negative on renewables and particularly intermittent renewables (wind power). This is because there is a significant risk of an imbalance between what the generator has contracted to supply and what it is able to actually generate in real time. The risks may be priced into any contract that a supplier offers a generator.

In terms of project financing investors in renewable energy projects are looking in essence for two things: absolute level of income and certainty of income. The new system is far from certain and short-term bilateral contracts will not necessarily be bankable.

Renewables Obligation

As well as NETA there has recently been the introduction of the Renewables Obligation (RO). The RO is an obligation on electricity supplies to ensure that a specified percentage of electricity supplied is met from renewables. The RO is the main mechanism for the Government meeting its stated targets for electricity from renewables. Suppliers are required to incrementally increase the volume of electricity supplied from renewable sources from 3% in 2002/2003 to 10.4% in 2010/2011. The new arrangements gives suppliers the opportunity to buy out all or part of their obligation in any given period as an alternative to supplying renewables generated electricity and/or buying renewable obligation certificates. The intention is that this will act as a safety net and limit the costs to the consumer should the price of renewables be higher than expected. The buyout price from the obligation to be paid to OFGEM rather than supply renewable electricity is 3pence kilowatt-hour.

Climate Change Levy

The climate change levy was introduced under the Finance Act 2000. The levy applies to energy used in industry, commerce, agriculture and the public sector. The levy is administered by Customs & Excise. It is the supplier of the taxable commodity (i.e., electricity) who is required to register and account to Customs for the levy. Taxable commodities include electricity, natural gas, petroleum, coal and coke. The rates charged vary but for electricity the levy is £0.0043 per kilowatt-hour and for gas £0.0015 per kilowatt-hour. The levy does not apply to certain renewable sources of energy such as municipal and industrial waste and landfill gas as well as to domestic use of fuel and power and fuel used by road vehicles. There are provisions for reduced rates for energy intensive users who enter into climate change levy agreements with the Government. The outcome is that these users enter into legally binding agreements to implement energy saving measures for a significant discount from the levy.

Carbon Emissions

As a supplement to climate change levy the carbon emission trading scheme is now up and running with 34 organisations taking on emission reduction targets at an auction held in March. The emission reduction targets for between now and 2006 add up to more than 4 million tons of carbon dioxide. The Government awarded grants in excess of £215M to successful organisations in the auction in return for them entering into commitments to reduce emissions. However, questions have to be asked over whether the scheme is subsidising reductions in emissions that would have taken place in any event and whether if regulation already requires emission reductions, subsidies should be given. There is a proposed EU directive on emissions trading which would be a mandatory scheme that does not provide financial incentive, and provides for automatic penalties and covers electricity generators. There is a high risk that sweeping changes will need to be made before the end of the UK scheme if the EU rules are implemented.

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.

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

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

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions