Energy Act set to boost low-carbon generation

The Energy Act 2008 has received Royal Assent, bringing in measures on the Renewables Obligation, feed in tariffs, carbon sequestration, renewable heat and the decommissioning of renewable, fossil fuel and nuclear plant.

The Energy Act 2008, passed into law in December. Together with the historic Climate Change Act (see pp 14-15  ), it completes much of the framework needed for the UK’s transition to a low-carbon, energy secure economy.

It has major implications for renewables, through a reformed Renewables Obligation and a new feed-in tariff, nuclear waste management and fossil fuel sectors. It will also determine policy on the licensing of offshore transmission impacting on wind, wave and tidal energy projects.

But attention has been focused particularly on a key amendment introducing a feed-in tariff principle, bringing the UK more into line with much of the EU.

Section 41 of the Act will enable support for small-scale, low-carbon generation up to 5MW, with generators receiving a guaranteed tariff. The Act establishes or makes "arrangements for the administration of a scheme of financial incentives to encourage small-scale low-carbon generation of electricity".

It gives the Secretary of State the power to amend electricity suppliers’ licence conditions under the Electricity Act 1989, which may require them to accept, distribute and pay for the small-scale generation of low-carbon electricity.

Acceptable sources of energy include biomass, biofuels, fuel cells, photovoltaics, water (including waves and tides), wind, solar power, geothermal sources, combined heat and power systems with an electrical capacity of 50 kilowatts or less.

The Act strengthens the Renewables Obligation to facilitate expansion of renewable sources. A key change following consultation on reform of the RO earlier in 2008 (ENDS Report 402, p 41 ) is the introduction of five banding levels, providing different numbers of Renewable Obligation Certificates for different technologies.

On heat, currently accounting for 49% of final energy demand, the Act provides for a Renewable Heat Incentive, establishing a financial support mechanism for large industrial sites down to the household level. It aims to introduce a ‘banded’ system along the lines of the Renewables Obligation.

The Act establishes a licensing regime covering interim or permanent storage of CO2 from carbon capture and storage activities in, under or over territorial seas, including gas importation and storage zones. Enhanced petroleum recovery using CO2 also comes under the regime. The regime could encourage urgent private sector investment in CCS technology.

Part 3 of the Act covers the controversial issues of nuclear waste treatment, storage, transportation and disposal during operation of or clean-up of nuclear plant.

It establishes a duty to submit a funded decommissioning programme, including powers to manage and inspect such programme activities and associated records, together with third-party verification of funding arrangements if required.

These programmes must contain "details of the steps to be taken under the programme in relation to the technical matters", and "estimates of the costs likely to be incurred in connection with the designated technical matters", together with security matters.

The Act also provides for prohibition on disclosure of uranium enrichment information covered by the Official Secrets Act 1911.

Another major provision enables electricity and gas distribution and supply licences to require licence holders to install, or facilitate the installation of, smart meters for different customer segments, to include the domestic sector.

On decommissioning of offshore renewable energy installations and associated security issues, it introduces a regime including ring-fencing of funds held for the purpose.

The Act introduces similar protection for funds set aside for responsible abandonment programmes for offshore oil and gas structures and wells.

On offshore transmission licensing, the Act introduces amending powers enabling Ofgem to manage networks more effectively, facilitating renewables connection.

The Act brings in powers covering regulation of the exploitation of continental shelf areas for the unloading of gas to installations or pipelines, for the storing of gas, or the recovery of gas stored, and associated exploration activities.

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