UK: UK Advances Energy Strategy — "Energy Act" Provisions Come into Effect

Provisions of the UK Energy Act 2008 were recently brought into effect. These include provisions relating to offshore gas importation and storage infrastructure, carbon capture and storage, renewable electricity generation, decommissioning of nuclear and offshore renewable energy and oil and gas infrastructure, and the introduction of smart meters. The Energy Act is one part of a program being implemented by the UK government to advance the goals of its energy strategy: to deliver energy security and accelerate the transition of the UK to a low carbon economy through an independently regulated, competitive market.

Increasing the proportion of total energy usage met by renewable energy is regarded as critical to the achievement of the UK's energy strategy goals and its EU energy commitments. In 2007, the EU agreed that 20 per cent of total energy usage would come from renewable sources by 2020, with each member state being allocated its own target. For the UK, the proposed target is 15 per cent of its total energy usage.

Meeting this target has been interpreted to require 30-35 per cent of electricity generation to come from renewable sources, compared to less than 5 per cent now. The Energy Act defines renewable resources as sources of energy other than fossil fuel or nuclear fuel and includes waste of which not more than a specified proportion either is, or is derived from, fossil fuel. Measures introduced by the UK government in three areas are key to determining whether the rapid growth in deployment of large-scale renewable electricity generation that this target implies can be achieved.


The main incentive for promoting renewable electricity generation in the UK is the Renewables Obligation (RO), a renewable portfolio standard introduced in 2002. The RO requires licensed electricity suppliers to source a specified percentage of their electricity supplies from renewable sources, which increases annually. To comply, suppliers either need to present the requisite number of Renewable Obligation Certificates (ROCs) or pay the "buy-out" price. Currently, irrespective of technology, generators of eligible renewable energy get 1 ROC per megawatt-hours (MWh) generated. The Energy Act introduces a banding system that allows for different renewable generation technologies to be entitled to different numbers of ROCs.

The proposed banding set out in the draft secondary legislation (The Renewables Obligation Order 2009) ranges from 1 ROC for every 4 MWh of electricity generated from landfill gas to 1 ROC for every 0.5 MWh of electricity generated from wave or tidal stream technologies. Also included are grandfathering provisions for previously accredited renewable energy generating stations and a provision allowing for the banking of ROCs. In addition, the government has committed to extend the RO to 2037. The government hopes that these changes will enable more early stage technologies to be commercialized and contribute to the renewable electricity generating target.

Planning Consents

Large-scale renewable electricity generating projects should also, in due course, be able to take advantage of the new system for approving major infrastructure projects of national importance created by the Planning Act 2008, the provisions of which are also being brought into force during 2009. The new regime applies to electricity generating stations (whether renewable or not) of 50 MW or more onshore or 100 MW or more offshore. An Infrastructure Planning Commission (IPC) is to be created that will, operating within national guidelines, administer a new, streamlined development consent procedure. This is intended to be a one-stop shop and will operate to a fixed timetable, including as to the time for objections and judicial review of any decisions. The government expects the IPC to begin processing applications in 2010.

Grid Access

The Transmission Access Review published in June 2008 sets out a number of measures intended to address the existing bottlenecks in providing grid connections to renewable electricity projects. In the short term, projects with planning permission will be connected through a "connect and manage" program. This will involve better management of the existing connection queue, sharing of capacity, release of additional capacity, and connecting some generation ahead of system reinforcement. In the longer term, the Office of Electricity and Gas Markets (Ofgem) has been charged, in conjunction with industry, to develop fundamental changes to the regime for grid access. The government has taken powers in the Energy Act to bring forward changes to the regulatory framework if it does not believe that Ofgem and industry are making appropriate progress.

McCarthy Tétrault Notes:

It is clearly too early to tell whether the measures described above, which are in varying stages of advancement, will succeed in delivering on the UK government's goals for renewable electricity generation and renewable energy generally. Although these measures have, in the main, been welcomed by the renewable energy industry, the industry is eagerly awaiting publication of the UK Renewable Energy Strategy later this spring to see how that pulls together the varying strands of the UK government's renewable energy policy of which these measures form a part.

The UK government's initiative reflects the intent of governments, including that of the Province of Ontario, to put their energy supplies on a more sustainable footing.

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.

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