| 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:
Catherine Burke, Partner
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