Energy Bill debate

United Kingdom
26/10/2015
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On 21 October the House of Lords debated the Energy Bill (the “Bill”) containing amendments to Clause 66, which provides for the closure of Renewables Obligation (“RO”) for onshore wind on 31 March 2016.

The debate saw the House debate the pros and cons of the scheme passionately. Whilst non-governmental amendments to the content of Clause 66 were agreed earlier in the afternoon, Baroness Worthington’s amendment, to remove Clause 66 in its entirety, passed at the end of the session with a majority of 242 to 190 Peers.

The announcement that the Government would close the RO for onshore wind early sent shockwaves through the industry earlier this year prompting a cut to investment in the sector and drawing criticism from as far afield as the UN. The Government recognised the impact of the policy when the proposed drafting for the grace periods was published this month, with the introduction of an additional grace period for projects that had experienced financing issues as a result of uncertainty created by the Government. This grace period is intended to provide additional support for investors who can meet the strict criteria set out in the proposed grace period drafting and that experienced project financing delay due to uncertainty the early closure has created.

The debate also saw constitutional issues raised, with Conservative Peers seeking to invoke the Salisbury Convention under which the House of Lords will not block a Bill promised by the Government in their manifesto. The Labour peers denied that this was such a scenario and that the manifesto had been too vague on what the current Government would do to subsidies.

Uncertainty remains over the next steps for the Bill. The grace period amendments proposed prior to the removal of Clause 66 will not be introduced into the Bill at this stage. The Bill will go back before the House of Lords and it is likely that the Government will table amendments to re-insert Clause 66 at a further reading. At the very least, these additional steps will delay the implementation of the Bill.

If anything is certain it is that the Government’s plan to move quickly on the Bill and implement the changes to the RO scheme well in advance of 31 March 2016 has hit another obstacle.

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