Renewables
Renewables is no longer a buzz word; it’s now a serious issue. Renewables projects have had a frustrating time of late, with government and policy makers encouraging the development of renewable generation plant and biofuels infrastructure, driven by the climate change agenda and concerns over security of energy supply.
The EU is driving investment in renewable energy projects with its target of 20% of energy to come from renewable sources by 2020. Under the Renewables Obligation (RO) licensed electricity suppliers must source an annually increasing percentage of their electricity from renewable sources. This obligation guarantees a market for Renewable Obligation Certificates (ROCs), allocated to renewable generating plants based on output. A similar obligation on transport fuel suppliers will drive the use of biofuels – excuse the pun.
These ROCs are issued according to the amount of electricity produced and the technology used to produce it, this is known as banding. ROCs are tradable and compliance with the RO can be achieved by acquiring ROCs from generation or purchase, or paying a buy-out and in this way a market value is determined for electricity from renewable sources.
The Government introduced banding in April 2009 to provide more support to technologies which are currently further from commercial deployment in order to drive their continued development. Onshore wind farms continue to get one ROC per MWh, whereas offshore wind will, for a limited time, attract two ROCs per MWh for installations accredited between 1 April 2010 and 31 March 2014. Thereafter, it will attract one and half ROCs. Emerging technologies like solar photovoltaic and geothermal will benefit from two ROCs – which is good news for planet earth.
On 1 April 2010, the feed in tariffs (FITs), a government scheme designed to kick start the mass-uptake of renewable electricity, was launched. FITs involves guaranteed payments to generators of small-scale renewable electricity (installations of up to 5MW) for both generating the electricity and exporting the electricity to the grid. More information on FITs can be found in our recent publication which can be accessed here.
On 1 April 2011, the Renewable Heat Incentive (RHI) will be launched. This will be a scheme similar to FITs to the extent that generators of renewable heat will be entitled to a guaranteed payment for that production as well as any renewable heat exported to the grid. Unlike FITs, there will be no upper limit on the size of renewable heat installations which may be included in the scheme. More information on the RHI can be found in our recent publication which can be accessed here.
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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.
Problems with the planning and consents process have caused many projects to stall, but a relaxation of the planning requirement for domestic micro-generation is a positive move. The new independent Infrastructure Planning Commission should be ready to start handling its first proposals in the first half of 2010, speeding up decision-making and get many stalled projects back on track.
If the UK is to hit its renewables targets, offshore wind and emerging technologies such as wave and tidal energy will be vital. These offer the advantage of scale, as well as a planning and consents framework which has been made more transparent and user-friendly. Offshore projects are also benefiting from a clearer regulatory framework, which has made them more attractive from the viewpoint of external funders.
First generation biofuels projects suffer a more fundamental problem, with crop supply chain difficulties and the gap between crop prices and fuel prices causing difficulty in hedging risk – the problem should be resolved as the market matures.
We know renewables like the back of our collective hands so call us and we can talk you through all the issues, 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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