Sectors & Activities/Renewables
Developers of renewables projects have had an interesting yet frustrating
time of late. Government and policy makers have been fulsome in
their enthusiasm and encouragement for the development of renewable
generation plant and biofuels infrastructure, driven not only by
the climate change agenda but with a keen eye to security of energy
supply concerns.
A plethora of ambitious targets include a renewables target of
20% of UK generation capacity by 2020, driven by a market support
mechanism, the Renewables Obligation, which obliges electricity
suppliers to source an increasing percentage of their supplies from
renewables. This obligation guarantees a market for renewable obligation
certificates (ROCs), allocated to renewable generating plant based
on output. A similar obligation on transport fuel suppliers is intended
to drive growth in the use of biofuels.
The Government’s Energy White Paper published in May 2007
proposes the introduction of banding of ROCs for different technologies.
Whilst onshore wind is set to remain at the existing level of one
ROC per MWh, more established technologies such as landfill or sewage
gas will only attract a quarter of a ROC. On the other hand, offshore
wind will attract one and a half ROCs, and emerging technologies
such as solar PV and geothermal will benefit from two ROCs. The
absence of ROC allocations specifically for heat generation is perhaps
something of a wasted opportunity.
These market mechanisms are complemented by a range of grant funding
and tax incentives together with large numbers of eager venture
capitalists, and now banks, looking to invest in established, and
start-up, businesses in what is fast becoming a clean energy gold
rush.
So why have so many projects been stalling? One of the key problems
has been the planning and consents process, which has not proved
fit for purpose. Forthcoming changes include a relaxation of the
planning requirement for domestic micro-generation, which is a positive
move, and the possible creation of an independent Planning Commission
which will speed up decision-making. However, larger projects will
still inevitably raise locational planning issues, and developers
will need to engage carefully with local communities and stakeholders.
If the UK is to hit its renewables targets, offshore wind and emerging
technologies such as wave and tidal energy will be key. These offer
the advantage of scale, as well as a planning and consents framework
which has been made more transparent and user-friendly by the forthcoming
Marine Act. Offshore projects are also benefiting from a clearer
regulatory framework, which has made them more attractive from the
viewpoint of external funders. Furthermore, as discussed above,
wave and tidal energy, along with other emerging technologies, are
set to receive greater support through enhanced ROC allocations.
A more fundamental problem for first generation biofuels projects,
putting aside questions of true sustainability, has been crop supply
chain difficulties and also, from a project financing perspective,
the disconnect between crop prices and fuel prices and the resulting
difficulty in hedging risk. Solutions are likely to emerge with
the coming to market of a second generation of biofuels and possibly
from the maturing of the existing one.
We have experience and expertise advising developers on the wide
range of issues affecting a project, including:
- environmental consents and health and safety issues
- acquisition of land interests
- environmental impact assessment and all aspects of the
- planning process such as Section 106 Agreements and planning
conditions
- procurement legislation
- protection and exploitation of intellectual property
- licensing and exemption issues
- accreditation for green certificates
- concession agreements
- construction contracts, professional terms of engagement and
collateral warranties
- joint venture agreements
- operation and maintenance agreements
- connection and use of system agreements
- inward supply contracts
- offtake contracts
- contracts for sale of ROCs and other embedded benefits
- financing documentation
- decommissioning.
Catherine Burke, Partner
Head, Renewable Energy
T: 44(0)870 763 1552
E: catherine.burke@martineau-uk.com
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