Government emphasises commitment to renewable energy

There is a new framework in place for the delivery of renewable energy, though a series of important issues need consulting on, said Walker, referring to the consultation document on the Renewables Obligation, announced by the Secretary of State for Trade and Industry, Stephen Byers, last week. “Renewables are a crucial element in the UK Government’s overall energy policy,” she added. According to the Minister, this policy is “to ensure secure, diverse and sustainable supplies of energy within a competitive market framework”.

Though the proportion of natural gas supplying the energy market is expected to increase over the next few years, coal will play a less significant role, and after 2010 Britain will face the problem of nuclear power going off-stream. “We expect to be able to meet Kyoto targets,” she said, adding that the Government is not complacent. Renewable energy will become increasingly important, she said.

The Government’s policy on renewable energy is also important for the development of new technology, and will produce a significant contribution to employment, especially in rural areas, through the increase in energy crops, said Walker. Capital grants for energy crops, as well as for offshore wind power, will be announced at the end of the month, said the Minister.

The Renewables Obligation is a key policy instrument designed to increase the use of renewables, and was announced by Byers, at the fifth annual Greenpeace Business Conference on 5th October, the first time a secretary of state has addressed Greenpeace (see related story). The Obligation is the amount of energy from renewable sources that a company will have to use.

Important elements of the Government’s wider climate change programme include an increased emphasis on energy efficiency, together with a 10 gigawatt target for combined heat and power by 2010, said Walker. The programme also includes the Climate Change Levy intended to make companies think about the type and amount of energy that they are using, and is designed to be revenue neutral. Finally, the programme also addresses the accessibility of the network for small generators, said the Minister.

In order to be eligible for the Renewables Exemption from the Climate Change Levy (CCL), the energy source must meet the definition of renewable, and though it can be generated anywhere in the world, the energy must be being supplied to customers in the UK, explained Karen Marshall, Head of CHP and Renewables at the Office of Gas and Electricity Markets (OFGEM). Power generators must apply for accreditation for the exemption, and are issued with Levy Exemption Certificates (LECs), which are traded with the electricity sold to suppliers, explained Marshall. The suppliers then claim CCL exemption on behalf of their non-domestic customers.

A company’s Renewables Obligation, which is separate from the Climate Change Levy, can be met by purchasing electricity from qualifying renewable sources, by trading Renewable Obligation Certificates (ROCs), or by paying the Buy Out price, said Marshall. ROCs are issued to accredited generators, but differ from LECs as they can be traded separately from electricity, though the electricity itself must be for British customers.

The buy out price is designed to protect renewable energy producers from the possible higher costs of their electricity compared to more traditional sources, according to the consultation document. If the cost of renewable energy becomes prohibitively high, suppliers can choose to pay the buy out price. “If renewable electricity can be produced as less than the combined value of the market value of electricity, CCL exemption and the buy out price, then it will be cheaper for suppliers to buy renewable electricity, rather than buying non-renewable electricity in the market and paying the buy out price,” the consultation document announced.

The Government expects the first phase of the Renewables Obligation to begin in October next year, subject to European and UK parliamentary approval.

Hydroelectricity and energy from waste will not be eligible for the renewable’s schemes.