Environment law update: Energy 6

United Kingdom

Energy efficiency

The Capital Allowances (Energy-saving Plant and Machinery) (Amendment) Order 2002 (SI 2002 No 1818) came into force on 5 August 2002. This Order amends the 2001 Order by revising and replacing the Energy Technology List with that published by DEFRA on 15 July 2002. It also adds further technology classes in which the plant and machinery must be listed to qualify for the 100% first-year allowance scheme.
(SO, 15 July 2002)

A consultation paper seeking views on the potential application of economic instruments to improve household energy efficiency has been issued by HM Treasury. The Government has stated that it does not intend to increase taxes on the domestic use of energy, due to its concerns about fuel poverty. However, as domestic energy consumption represents around 28% of UK energy demand, with consumption continuing to rise, and gives rise to 27% of carbon dioxide emissions, the Government recognises that reducing demand will contribute greatly to attaining targets for reducing greenhouse gas emissions under the Kyoto Protocol. Among the measures now being considered for improving household energy efficiency are: encouraging investment in more efficient products; encouraging work that improves the energy efficiency of housing; and the use of trading to improve household energy efficiency such as under the UK Emissions Trading Scheme. Respondents are invited to submit proposals for economic instruments by 8 October 2002.
(HM Treasury, July 2002)

Solar energy

The DTI has issued details of the first grants to be approved under its £20 million photovoltaic demonstration programme. Eight new medium and large-scale projects, representing 350 kilowatts, have won a share of £1.3 million. The Government received 16 applications during the bidding process by the end of May 2002. The deadline for the next round of bids is October 2002.
(DTI Press Release, 1 August 2002)

ROCs

Trading in Renewable Obligation Certificates (ROCs), which are used to certify that electricity companies are supplying electricity generated from eligible renewable sources, has begun. ROCs are issued by OFGEM either directly to renewable generators or can be bought by electricity suppliers to fulfil their commitments under the Renewable Obligation. Alternatively companies may pay a premium to make up a short fall. Online registers will show how many ROCs have been issued, who they have been issued to, and the details of any transfer.
(OFGEM News Release, 6 August 2002)

Community energy schemes

Grants of £3.3 million have been made available for community energy schemes. The Community Energy Programme, first announced in April 2001, and launched in January 2002, provides capital and development funding for the refurbishment of existing, and installation of new, community heating schemes. The Programme is financed from the Capital Modernisation Fund, which has £50 million for investment from 2002 to 2004. This initial funding is to be used to heat homes and public buildings and involves eight successful bids that demonstrated reductions in carbon emissions.
(DEFRA News Release, 7 August 2002)

Renewable Energy

The Environmental Audit Committee, which is appointed to consider the extent to which the policies and programmes of the Government contribute to environmental protection, has published a report on a sustainable energy strategy. The report supports the PIUs review published in February 2002. However, it also says that the Government’s policy framework for encouraging the increased use of renewable sources was insufficient to meet its energy targets for 2010. The report also forecasts that at the present rate of progress, only around half of the 10% target for electricity generation from renewables will be achieved by 2010. It criticises the Renewables Obligation for being inflexible and inefficient, and considers it inferior to the guaranteed feeds-in prices offered for renewable electricity in Spain, Germany and Denmark. OFGEM’s role in developing NETA, with the resultant problems for smaller generators, is also attacked in the committee’s report.
(House of Commons, July 2002)

The Government Export Credits Guarantee Department (ECGD) has announced it is to make £50 million available for exports in the renewable energy sector from April 2003. The allocation is designed to stimulate exports of renewable energy technology through emerging markets to boost the level of renewable applications.
(ECGD Press Release, 2 September 2002)

CHP

DEFRA has issued a consultation paper on the EU’s Proposal for a Directive on the Promotion of Cogeneration aimed at encouraging CHP (see below). The proposed Directive is intended to provide an EU-wide common framework for the promotion of cogeneration. The consultation is aimed at a wide range of parties including the electricity generation and distribution industries, operators of CHP plant, manufacturers of CHP technology, the construction industry, businesses, energy efficiency organisations, and other stakeholders. The Government has welcomed the aims of the proposal, and believes its emphasis on developing high efficiency co-generation is consistent with the UK target to at least double good quality CHP capacity to 10,000 MWe by 2010. Comments, which may be fed in to the negotiating process in the EU, should reach DEFRA by 21 December 2002.
(DEFRA, September 2002)

Biomass

DEFRA has consulted on a proposed new grant scheme to help develop the supply chain for the harvest, storage, processing and supply of biomass, such as energy crops and wood for fuel. As these energy crops are carbon neutral over their life cycle and, when used instead of fossil fuels, they have the potential to significantly reduce emissions of carbon dioxide. The details of the proposals were drawn up following discussions with the Forestry Commission and industry representatives. Various grant schemes are already available for promoting the growing and use of biomass. An additional £3.5 million has now been allocated for farmers, foresters and businesses in the UK to develop the physical and market infrastructure for biomass. The scheme is likely to come into force in early 2003 and the £3.5 million must be spent by 2006. Responses to the consultation were requested before 16 September 2002.
(DEFRA, June 2002)

Renewable energy – Scotland

The Scottish Executive is consulting on increasing Scotland’s renewable energy target. The Executive is already committed to an 18% target for the total electricity to be generated from renewable sources by 2010. It now seeks views on the potential to generate up to 40% of Scotland’s electricity from renewable sources by 2020, and looks at the opportunities for achieving this target. The deadline for responses is 30 November 2002.
(Scottish Executive, August 2002)

European Union

CHP

The European Commission has issued a proposal for a co-generation Directive seeking to promote a market for CHP. The proposed Directive is aimed at saving energy and combating climate change by encouraging the co-generation of heat and electricity, as new CHP plant can save at least 10% of the fuel otherwise used for separate production of heat and electricity. The Directive would require Member States to report on the progress and measures taken towards meeting co-generation targets. Member States would be required to: guarantee that electricity from co-generation would be transmitted and distributed on the basis of objective and transparent criteria; facilitate access to the grid for units with a capacity of less than 1 MWe; and ensure that guarantees of origin of electricity from co-generation would be issued on request by a competent body. The proposal would also establish a common definition of co-generation and a flexible methodology to identify high efficient co-generation. The co-generation industry has criticised the proposals for taking a two-step approach on the definition of CHP, as it makes a distinction between basic and high efficiency. They also point out that creating a market for co-generation is the most important provision. The Commission set an indicative target of doubling the share of electricity production from cogeneration in EU electricity production from 9% in 1994 to 18% by 2010 in its 1997 co-generation strategy. However, there has been no significant increase in the share of cogeneration in the EU in recent years.
(COM (2002) 415, 22 July 2002)

For further information please contact Paul Sheridan on +44 (0)20 7367 2186 or at [email protected]