Environment law update: Energy 7

United Kingdom

Electricity market

The DTI and OFGEM have issued a number of consultation papers seeking views on the introduction of the British Electricity Trading and Transmission Arrangements (BETTA). The move is the start of the process to introduce a single electricity market for Great Britain. Currently, there are different rules for regulating the market in Scotland compared with the market in England and Wales. It will allow small independent Scottish generators better opportunities to sell to the rest of the UK, particularly in the renewable sector. The four consultation documents issued to date are: ‘The Grid Code under BETTA’, ‘Connection and use of System Code under BETTA’, ‘The Balancing and Settlement Code under BETTA’ and ‘The Impact of BETTA on the Settlement Agreement for Scotland’. The closing date for all four consultation papers is 27 January 2003.
(DTI, December 2002)

Offshore wind

A consultation document entitled ‘Future Offshore’ is seeking views on a strategy for the future development of offshore wind farms. The consultation paper unveils the Government’s plans for offshore wind, which it suggest should be focused in three strategic zones – the Greater Wash, the Solway Firth down to North Wales and the Thames estuary. It proposes that strategic environment assessments of these three areas should be made so that any development is environmentally responsible. This, it suggests should be done before the Crown Estate invites bids for the next round of site leases, expected in April 2003 and before the European Directive on Environmental Assessment requires it in July 2004. New exploration licences will also be given for sites beyond the twelve mile legal limit from the shore line, enabling development beyond this limit. The DTI claims that the three areas could generate enough electricity at certain times to supply the whole of Great Britain. Reponses to the consultation paper should be sent by 18 February 2003.
(DTI, November 2002)

Consents have been granted for two new offshore wind farms, one in North Wales operated by National Windpower, and one in Norfolk operated by Powergen. The North Wales development will result in 90MW installed capacity, while the Norfolk project, consisting of 39 turbines, should result in an installed capacity of up to 80MW. The two sites represent the first projects to have gained the necessary consent from the 18 potential sites identified initially. Both projects received funding under the DTI’s capital grants programme for offshore wind during round one which was completed on 31 August 2002. Applications for round two closed at the end of December 2002. A project must receive all the necessary consents before it can apply for a grant.
(DTI News Release, 2 October 2002)

Renewable energy

A new Renewables Advisory Board has been established by the DTI with the aim of improving the development of renewable technologies and developing the infrastructure required to support the growth of the industry. It will also identify new export opportunities and make specific recommendation by summer 2003 for actions to be taken by the industry and Government. The Renewables Advisory Board, which held an interim meeting in May 2002, consists of representatives from government, industry and academia.
(DTI Press Release, 11 November 2002)

Energy efficiency

The EA has released the results of a study on the potential for energy efficiency in industry. The study concludes that industry could cut its energy consumption by a fifth by 2020. Although existing policy measures such as the climate change levy, emissions trading scheme and the regulatory energy efficiency requirements of IPPC are recognised as achieving positive results, the report says that further improvements in energy efficiency are possible and cost effective. The findings show a likely outcome, based on a continuation of past trends, of 10% improvement in industrial energy efficiency by 2020 relative to 2000, while demonstrating that a 20% reduction is achievable over the same period, even with an increased industrial output of 1.56% per annum, as projected by the DTI.
(EA, November 2002)

Biodiesel

It has been announced that local bus operators will be eligible for 100% fuel duty rebate on biodiesel. It will apply to bus services registered with the traffic commissioner as a local service and, since 1 May 2002, to a wide range of community transport services operated by non-profit making bodies under a Section 19 permit. Bus operators will be able to apply to the Department for Transport for the rebate under the existing bus operators grant scheme. Biodiesel is normally made up of conventional diesel oil with 5% recycled waste vegetable oils or virgin rapeseed oils and can be used in all regular diesel engines. Blends containing a higher percentage of vegetable oils, and even pure biodiesel, can also be used but may require engine modification. The use of biodiesel can lead to significant reductions in carbon dioxide and sulphur dioxide emissions.
(Department for Transport, 14 November 2002)

Coalmine methane

ALKANE Energy Plc has opened a new energy park, built on the site of a former coal mine in Wheldale in West Yorkshire. It will convert methane from the coal shafts of the former mine into electricity which will be fed into the National Grid. The new energy park will generate up to 10.6 MW of electricity for the local community, and will drastically reduce future releases of methane, a potent greenhouse gas, into the atmosphere. There are more than 1,000 abandoned coalmines in the UK. ALKANE Energy has developed five green energy parks to date in the East Midlands and Yorkshire and has accumulated 28 licensed areas covering abandoned and operating mines in Britain since 1996.
(DTI Press Release, 10 October 2002)

Photovoltaic

The DTI has announced 19 schemes winning a share of £2.2 million under the £20 million photovoltaic demonstration programme. The projects, representing 435 KW generation, represent the second set of proposals to be approved under the programme. The 19 projects range from installations in leisure centres, schools and offices and business parks. The deadline for the third call for bids under the programme, was 24 January 2002.
(DTI Press Release, 27 November 2002)

Climate change levy

The CBI and the Engineering Employers Federation have released a joint report on the impact of the climate change levy. The report criticised what it called the ‘flawed design’ of the energy tax and says that it has damaged the competitiveness of more than half the UK’s manufacturers. It is calling for modification of the levy, especially as in its current form it leaves some firms with large energy bills while favouring other firms, regardless of whether they have taken measures to improve energy efficiency. The manufacturing sector is cited as the worst affected, and estimated to have paid out an additional £143 million in the first year of the tax, while service sector companies with generally larger workforces and lower energy use are the main beneficiaries due to reductions in national insurance contributions. Friends of the Earth meanwhile have criticised the report claiming that the levy taxes the uses of ‘dirty’ energy and that it is essential in combating climate change. It also disputes the report’s finding that the levy is affecting competitiveness, pointing to the recent fall by around 40% of electricity prices in the UK.
(CBI and EEF, October 2002: Friends of the Earth Press Release, 1 November 2002)

The International Energy Agency (IEA) has criticised the climate change levy, suggesting that it should be extended to households and be based on the carbon content of fuels rather than their energy content. The IEA in its review also states that Britain is almost certain to meet its Kyoto targets for reducing greenhouse gas emissions, although with current policies it expects it to miss its domestic target of a 20% cut in carbon dioxide emissions, compared with 1990 levels, by 2010. The IEA report, part of a series of energy policy reviews for IEA countries, also praises achievements made in the UK energy market since the early 1990s, saying that it has demonstrated the many positive impacts resulting from market liberalisation. Some of the benefits identified were a fall in gas and electricity prices, improved fuel diversity and air pollution reductions.
(IEA, October 2002)

Small generators

An Internet site has been set up by OFGEM to provide guidance and information to help current and potential small electricity generators to better understand the current electricity trading arrangements. Small generators are defined as those who are license exempt or exemptible, generally with a generation capacity of 50 MW or less. Information relating to Scottish smaller generators is to be added once BETTA has been implemented.
(OFGEM, December 2002)

Biomass

The Government has awarded £2 million to Bronzeoak Wellman Limited to develop a new £6.43 million energy plant fuelled by wood chips. The award was made under the DTI’s research and development programme, and if the plant in Somerset is successful, it could lead to the development of similar plant throughout the UK. The plant uses gasification technology which turns the wood chip fuel into a combustible gas which fuels electricity generation. The Government has announced that it is keen to encourage the biomass industry in the UK, which it supports by means of a £66 million capital grant scheme made available for electricity, heat and CHP plant and the £32.5 million available for energy crops establishment and infrastructure.
(DTI News Release, 6 December 2002)

European Union

Hydrogen

The European Commission has announced the setting up of a strategy group to co-ordinate research on hydrogen as a fuel and the use of fuel cells. This technology is expected to play a major role in the future economy, as it is seen as pollution free, energy efficient and flexible. The Group is due to issue its first report in mid 2003 in which it will propose action to support a hydrogen economy and fuel cell industry.
(European Commission Press Release, 10 October 2002)

Wind power

The European Wind Energy Association (EWEA) has announced that Europe’s installed wind capacity reached 20,447 MW in the first nine months of 2002, and represents a 40% increase of European capacity over the last 12 months. It also means that Europe now has 74% of the world’s total capacity for wind generation. The EWEA also stated that with the appropriate policies, the cumulative global industry sector could be worth over _130 billion by 2010. Germany is the leading European country in the field of wind power generation, followed by Spain. However, the Netherlands, France and Austria were recognised as having made good progress.
(EWEA, November 2002)

Energy efficiency in buildings

The European Parliament and the Council have reached an agreement on a Directive on Energy Efficiency in Buildings which has allowed the Directive to be formerly adopted before its second reading in the Parliament. The Directive will establish a harmonised methodology for the development of integrated minimum energy performance standards for buildings. Energy performance certificates, to include advice in how to improve energy performance, will be available for all buildings when they are constructed, sold or rented. In addition, there will be inspection and assessment of boilers and heating and cooling systems by qualified personnel, with boilers above a certain size to be inspected on a regular basis. The Council revised its first reading common position and decided to adopt a six year maximum implementation deadline demanded by the Parliament. The Parliament’s other amendments, related to good energy management, thermal installation and billing based on actual consumption, were also accepted by the Council.
(European Parliament, October 2002)

For further information please contact Paul Sheridan on 020 7367 2186 or at [email protected]