Office of Public Sector Information
71.Where there has been a breach of a licence condition, this section enables the licensing authority (or an authority to which the relevant function has been transferred under section 34), to direct that the licence holder takes appropriate steps to remedy the breach. For example, if the licence requires equipment to be maintained to a good standard, a direction may require the equipment to be repaired or replaced. Subsection (3) requires the licence holder to be consulted before a direction is made.
72.If the licence holder fails to comply with the direction, the licensing authority (or the Authority to which the function is transferred), may, undersubsections (4) to (8), ensure that the necessary action is taken, at the expense of the licence holder, and (if so directed) with the latter’s assistance.
73.Subsection (9) ensures that this section does not affect any provision made by the licence itself for its enforcement (for instance, the licence may itself give the licensing authority powers of direction in certain circumstances).
74.Subsection (1) of this section provides that a failure to comply with a direction under section 24 is a criminal offence, with the penalties set out in subsection (2): a fine of up to the statutory maximum (currently £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland) on summary conviction, or an unlimited fine for conviction on indictment.
75.This section gives the Scottish Ministers (or an authority to which the relevant function has been transferred under section 34) the power to apply to the Court of Session for an interdict to restrain any actual or apprehended breach of section 17(1) in relation to a controlled place within the territorial sea adjacent to Scotland. In the case of any other such actual or apprehended breach, it gives the Secretary of State (or an authority to which the relevant function has been transferred under section 34) the power to apply to the High Court for an injunction or the Court of Session for an interdict.
76.For example, where there is evidence that a carbon dioxide storage-related activity is being carried out without a licence within the territorial sea adjacent to Scotland, the Scottish Ministers may apply to the Court of Session for an interdict requiring the operator to cease the activity. The Secretary of State, similarly, may apply for an injunction to the High Court (or, where appropriate, for an interdict to the Court of Session) where he becomes aware that such unlicensed activities are being carried out, for instance, in a place outside UK territorial waters but within a Gas Importation and Storage Zone designated under section 1. The powers created by this section are in addition to any other powers the Scottish Ministers or the Secretary of State may have under this Chapter.
77.Subsections (1) and (2) of this section allow the Secretary of State or (by subsection (6)) the Scottish Ministers, or an authority to which the relevant function has been transferred under section 34, to appoint persons to act as inspectors to assist in the carrying out of their functions under this Chapter, and enable the inspectors to be remunerated.
78.Subsection (3) gives the Secretary of State or (by subsection (6)) the Scottish Ministers the power to make regulations (subject to the negative resolution procedure – see section 105) setting out the powers and duties of the inspectors, and of any other person acting on their directions in connection with a function under this Chapter (such persons may include, for example, surveyors or other contractors instructed by the Secretary of State or the Scottish Ministers). These are likely to include, for example powers of entry, investigation and the right to take samples.
79.Subsection (5) enables such regulations to create criminal offences (for example it might be an offence to obstruct an inspector in the exercise of functions under the regulations). Such offences would attract the penalty of a fine not exceeding the statutory maximum (currently £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland) or such lesser amount as is specified in the regulations, on summary conviction or, on conviction on indictment, an unlimited fine.
80.Subsection (1) ensures that an offence arising by virtue of the provisions of this Chapter may be prosecuted in any part of the United Kingdom, regardless of the offshore location at which the offence may have been committed.
81.Subsections (3) and (4) ensure that prosecutions for such offences alleged to have been committed in a controlled place (i.e. within the territorial sea or a Gas Importation and Storage Zone) may be brought only by the Secretary of State or a person authorised by the Secretary of State (or an authority to which the relevant function has been transferred under section 34 or a person authorised by such an authority), or by or with the consent of the Director of Public Prosecutions (or the Director of Public Prosecutions for Northern Ireland). Such provision is unnecessary in relation to Scotland, as there all prosecutions are brought by or on behalf of the Lord Advocate.
82.Subsection (5) provides that the same restrictions procedure will apply to any prosecution for an offence created by regulations under section 27, except that references to a person authorised by the Secretary of State (or by an authority to which the relevant function has been transferred under section 34) are to be read as references to an inspector.
83.This section requires the Secretary of State (or an authority to which the relevant function has been transferred under section 34) to maintain a register containing prescribed information relating to all licences granted under this Chapter, and enables the Secretary of State to prescribe the information that must be included in the register. The information to be included will be prescribed by regulations (subject to the negative resolution procedure – see section 105), and might for example include details of licences issued, revoked or modified, and of any enforcement action taken in relation to those licences. However, provision is made by subsections (2) to (5) for certain information to be excluded from the register. Such information may be excluded by the licensing authority (or an authority to which the function has been transferred under section 34) on the grounds of commercial sensitivity. However, the function of excluding information on national security grounds is given only to the Secretary of State, even where the information relates to a licence granted by the Scottish Ministers. By subsection (6) there will be free public access to the register, but a charge may be made for obtaining copies (which would have to reflect the costs of providing them).
84.This section is similar to section 14 of Food and Environment Protection Act 1985 (c.48) (FEPA), which requires the licensing authority to compile and keep certain particulars of FEPA licences and to make them available for public inspection.
85.Subsection (1) applies the provisions of Part 4 of the Petroleum Act 1998 to offshore structures that are installed for the purposes of carbon dioxide storage activities. As a result, the operators of such installations will be required to decommission them in a timely manner after operations have permanently ceased. Bysubsection (2), the functions under Part 4 of that Act are to be exercised by the Scottish Ministers in the case of carbon dioxide storage installations licensed by them under this Chapter, and the Scottish Ministers have the power, by regulations subject to negative resolution procedure (see section 105), to make any appropriate modifications of the provisions of Part 4 of the Petroleum Act 1998 as they apply to such installations. By subsection (3) the powers of the Scottish Ministers under subsection (2) do not extend to installations used for Enhanced Oil Recovery (see the Note to section 33). By subsection (4) the Secretary of State has the power to make such regulations modifying Part 4 as it applies to any carbon dioxide storage installation not licensed by the Scottish Ministers.
86.This section gives the licensing authority the power to make regulations (subject to negative resolution procedure – see section 105) setting out the circumstances under which a licence may be terminated (which may be in addition to any termination provisions already contained in the licence). The regulations would also be able to require the licensing authority (or an authority to which the relevant function has been transferred under section 34) to take on the responsibility (including any financial liability) for the management of a carbon dioxide store on or after the termination of a licence. The intention is that regulations will, in particular, set out the conditions (in addition to any licence provisions) that must be met before the Secretary of State, or the said authority, can consent to the termination of a licence.
87.Subsection (3) ensures that any provisions of a licence granted under section 18 which relate to the termination of the licence are subject to the provisions made by such regulations.
88.Sections 21, 23 and 24 of the Petroleum Act 1987 provide for the automatic establishment of safety zones around oil and gas installations and set out offences and the applicable penalties in connection with such safety zones. This section extends those provisions to installations used for carbon dioxide storage. Such safety zones are areas extending 500 metres around the installation, from which vessels are prevented from entering or remaining except in accordance with regulations made by the Secretary of State or a consent given by the Health and Safety Executive. The penalty for such an offence is a fine not exceeding the statutory maximum (currently £5,000 in England, Wales and Northern Ireland and £10,000 in Scotland) on summary conviction and, on conviction on indictment, imprisonment not exceeding two years or an unlimited fine, or both.
89.Carbon dioxide can be used to improve the recovery of hydrocarbon production in a process known as Enhanced Oil Recovery (EOR) (which may also be applied to the recovery of natural gas). Subsection (1) ensures that the provisions of this Chapter do not extend to the use of carbon dioxide for the purpose of EOR, unless they are so extended by an order made by the Secretary of State (subject to negative resolution procedure – see section 105). The intention is to use this power, for example, to ensure that the requirements of this Chapter extend to operators undertaking an EOR activity if those operators wish to claim credits under the EU Emissions Trading Scheme (once carbon dioxide storage projects are included in that scheme). In the circumstances defined by an order under this subsection, a licence under section 18 would be required, as well as an authorisation (or, within the territorial sea, a lease) from The Crown Estate. (The latter requirement would not, however, apply in a case covered by subsection (3).)
90.Subsection (3) provides that the Secretary of State may, by the same order and, for example, for the purpose indicated above, extend the application of this Chapter to EOR activities carried out in the area of the Continental Shelf, as defined in section 1(7) of the Continental Shelf Act 1964, where the area in question falls outside any area designated as a Gas Importation and Storage Zone.
91.This section gives the Secretary of State or (by subsection (8)) the Scottish Ministers the power to transfer to another authority (which must be a public body, for example the Marine Fisheries Agency (or the Marine Management Organisation (MMO) once established) any of the functions conferred on them by this Chapter, with the exception of powers to make regulations or orders. Such a transfer may be made to several different authorities, either of different functions or of the same function in respect of different places. For example, one or more authorities may be given the function of granting licences in respect of all the activities covered by the Chapter, or just some of the activities. This allows flexibility in the choice of the regulatory authorities for carbon dioxide storage. Any transfer of functions under this section will be made by order subject to negative resolution procedure (see section 105).
92.Subsection (4) ensures that an order transferring functions to another authority may also provide for the financing of that authority’s exercise of the transferred functions, and may require fees collected by the Authority to be paid into the Consolidated Fund (or, in the case of fees collected by authorities exercising functions transferred by the Scottish Ministers, the Scottish Consolidated Fund). The order may also modify section 188 of the Energy Act 2004, and regulations made under that section, in order to reflect the fact that certain functions have been transferred to another authority. That section gives the Secretary of State the power to collect charges in respect of the performance of certain energy-related functions, and is amended by paragraph 13 of Schedule 1 to the Act so as to include functions of the Secretary of State under Chapters 2 and 3 of this Part, and to extend it to functions of the Scottish Ministers under Chapter 3.
93.Subsections (5) and (6) give the Secretary of State or (by subsection (8)) the Scottish Ministers a power of direction in relation to the exercise of functions by the authority to which they have been transferred. Before that power of direction is exercised, there is an obligation to consult with the authority concerned (subsection (7)).
94.Subsection (1) contains definitions of terms used in Chapter 3. Subsection (2) provides that, for the purposes of that Chapter, the boundary of the territorial sea adjacent to Scotland is determined in accordance with provision made by an Order in Council under section 126(2) of the Scotland Act 1998 (apportionment of sea areas). For example, if the Order in Council provides one set of boundaries of the Scottish territorial sea for a specific purpose (e.g. fisheries) and then a different set of boundaries for all "residual" purposes, then, for the purposes of Chapter 3, the boundaries defined for the "residual" purposes would apply. Alternatively, if the Order in Council defines the boundaries specifically for the purposes of Chapter 3, or generally for all purposes of the Scotland Act 1998, that provision would apply.
95.Paragraphs 1 to 3 of the Schedule amend section 7A of the Food and Environment Protection Act 1985 (“FEPA”), which excludes certain matters relating to offshore pipelines and installations from the requirements of Part 2 of FEPA (which regulates deposits in the sea and under the seabed), and make a consequential amendment to section 24. The effect of the amendments is to ensure that the exclusion extends to all activities for which a licence is required under Chapter 2 or Chapter 3 of this Part. In relation to Chapter 2, that exclusion applies to the territorial sea (i.e. up to 12 nautical miles) adjacent to England, and to waters beyond the territorial sea, other than waters within which the Scottish Ministers have functions under Part 2 of FEPA. In relation to Chapter 3, that exclusion applies to the territorial sea adjacent to England and Scotland, and to waters beyond the territorial sea.
96.Paragraph 4 amends the provisions of the Petroleum Act 1987 relating to automatic establishment of safety zones, to ensure that such zones are also established around all installations used for the purposes of the activities under Chapter 2 of this Part. Such safety zones are areas extending 500 metres around the installation, from which vessels are prevented from entering or remaining except in accordance with regulations made by the Secretary of State or a consent given by the Health and Safety Executive. A similar extension is made, for the purposes of Chapter 3 of this Part, by section 32.
97.Paragraphs 6 and 7 amend section 11 of the Petroleum Act 1998 to ensure that the power to apply civil law (such as the law of tort) to offshore installations extends to all installations used for the purposes of Chapter 2 or Chapter 3 of this Part.
98.The new subsections (4A) and (4B) of section 11, inserted by paragraph 7(g) of the Schedule, ensure that the power under that section cannot be used in relation to carbon dioxide storage activities in waters in or adjacent to Scotland up to the seaward limits of the territorial sea, with the exception of activities which involve injection of carbon as part of Enhanced Oil Recovery.
99.Paragraph 8 amends section 13 of the Petroleum Act 1998 to provide that the boundary of internal waters or territorial sea adjacent to Scotland is determined in accordance with provision made by an Order in Council under section 126(2) of the Scotland Act 1998 (apportionment of sea areas). For example, if the Order in Council provides one set of boundaries of the Scottish territorial sea for a specific purpose (e.g. fisheries) and then a different set of boundaries for all "residual" purposes, then, for the purposes of Part 2 of the Petroleum Act 1998, the boundaries defined for the "residual" purposes would apply. Alternatively, if the Order in Council defines the boundaries specifically for the purposes of Part 2 of Petroleum Act 1998, or generally for all purposes of the Scotland Act 1998, that provision would apply.
100.Paragraph 9 amends the definition of “gas” for the purposes of Part 3 of that Act, in order to ensure consistency with the definition in section 2 of this Act (which defines the kinds of gases that are licensable for offshore gas storage and unloading).
101.Paragraph 11 amends section 44 of the Petroleum Act 1998 to ensure that the provisions of Part 4 of that Act (which relate to the decommissioning of offshore installations including for example, obligations to remove the facilities completely after the permanent cessation of the facilities’ operations) apply to all installations used for the purposes of activities under Chapter 2 of this Part. Paragraph 10 makes corresponding amendments to section 30 of the Petroleum Act 1998, which sets out who will be required to submit a programme for such decommissioning to the Secretary of State. Similar provision is made, for the purposes of Chapter 3 of this Part, by section 30 of this Act.
102.Paragraph 12 amends section 47A of the Petroleum Act 1998, which was inserted by the Energy Act 2004. At present, that section enables the Secretary of State to have regard to matters connected with the offshore generation of electricity (for instance by means of wind farms) in exercising functions under the Petroleum Act 1998. The amendment made by this paragraph will permit the Secretary of State to have regard also to activities licensed under Chapter 2 or 3 of this Part. A corresponding provision is not needed in relation to the Secretary of State’s functions under Chapter 2 or 3 themselves, since in that case there are no existing licence holders who could claim to have a legitimate expectation that other offshore activities would not be taken into account in exercising the relevant functions.
103.Paragraph 13 amends section 188 of the Energy Act 2004 to ensure that regulations made under that section (which are subject to negative resolution) can impose charges to fund the Secretary of State’s functions in connection with activities under Chapters 2 and 3 of this Part, or the functions of the Scottish Ministers in connection with activities under Chapter 3. The regulations would be able to fix amounts that appear to be appropriate having regard to the costs that are likely to be incurred in carrying out the relevant functions, to be paid by the persons (within subsection (3) of that section) who are specified in the regulations. Where any of the Secretary of State’s or the Scottish Ministers’ functions under Chapter 3 are transferred to another authority under section 34, an order under that section can modify the operation of section 188 of the 2004 Act (see section 34(4)(c) and (8)).
104.This Part of the Act deals with the changes proposed to the Renewables Obligation. The Renewables Obligation (RO) was introduced in 2002 to stimulate growth of electricity generation from renewable sources. The support currently provided under the RO does not differentiate between renewable technologies. It is the main policy measure for supporting the development of renewable electricity across Great Britain and Northern Ireland. In Great Britain the RO operates under the Electricity Act 1989 (c.29) with separate orders in England and Wales (the Renewables Obligation Order 2006 (SI No 2006/1004), as amended by the Renewables Obligation (Amendment) Order 2007 (SI No 2007/1078)), and in Scotland (the Renewables Obligation (Scotland) Order 2007 (Scottish SI No 2007/267)). These, together with a parallel measure in Northern Ireland (the Renewables Obligation Order (Northern Ireland) 2007 (S.R.2007/104), made under Articles 52 to 56 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I.6))) provide for consistent Obligations in all three jurisdictions.
105.Under the existing regime, licensed electricity suppliers in the relevant part of Great Britain have a “renewables obligation” to produce to the Gas and Electricity Markets Authority (“the Authority”), before a specified day, certain evidence regarding the supply to customers in Great Britain of electricity generated by using renewable sources. The evidence required is in the form of renewables obligation certificates (“ROCs”) currently issued by the Authority to renewable electricity generators on the basis of 1ROC/MWh of renewable electricity. The generator can then sell these ROCs to suppliers with the electricity or separately. The Renewables Obligation Order in England and Wales and the one in Scotland set out the proportion of the electricity supplied by an electricity supplier that must be sourced from renewable sources.
106.As an alternative to providing ROCs, electricity suppliers may discharge their renewables obligations (either fully or partially) by making buy-out payments to the Authority. Payments made into the buy-out fund are redistributed at the end of the obligation period to suppliers who have produced ROCs, on a pro-rata basis. The obligation level has been deliberately set higher than the expected amount of renewables generation to be deployed in order to ensure there is a market for ROCs. This will mean some suppliers pay the buyout price for at least some of their obligation. The redistribution of the buyout fund in this way is intended further to promote competition between suppliers in supplying more electricity from renewables sources, and therefore to promote further investment in renewables generation.
107.The existing legislation also provides for suppliers who do not comply with the RO by the specified day to be treated as having subsequently discharged the RO if they make late buyout payments, together with escalating interest into a late payments fund.
108.It also makes provision for requiring suppliers to make payments to the Authority to cover some or all of an un-recovered shortfall in the buy-out fund caused, for example, by the insolvency of a supplier with an obligation who cannot make payments into the buyout fund. Where this occurs, additional sums are then required from the remaining electricity suppliers to cover the amounts that would have been paid by the insolvent supplier. This process is known as mutualisation.
109.As already mentioned, Northern Ireland has enacted legislation which is analogous to the provisions of the Electricity Act 1989 creating the RO. That legislation requires Northern Ireland suppliers to produce, as evidence, Northern Ireland Renewables Obligation Certificates (“NIROCs”) issued by the Northern Ireland equivalent of the Authority, the Northern Ireland Authority for Utility Regulation. ROCs issued in Northern Ireland are also recognised in Great Britain and can be used by GB suppliers to discharge their obligations. Similarly ROCs issued under the two GB orders can be used by suppliers to fulfil the Northern Ireland RO.
110.The Government’s proposed reform of the RO in Great Britain in the Act is designed to bring forward more renewables generation by increasing the effectiveness of the RO. The proposals enable the Secretary of State to increase support to some forms of renewable generation, while reducing subsidy to others.
111.The proposals will:
Allow the Renewables Obligation to be banded to provide different levels of support for different technologies based on their cost and other considerations specified in the Act.
Change the obligation to one in which suppliers must present a specified number of renewables obligation certificates (ROC), rather than supply a specified percentage of their electricity from renewable sources.
Maintain the rights of most existing generating stations to claim 1ROC/1MWh once banding is introduced.
Provide for the bands to be reviewed periodically or where a specified condition triggers a review.
Provide for a mechanism to prevent a price crash in the event of an anticipated oversupply of ROCs.
Require biomass operators to provide information to the Authority on the source of biomass fuels and what steps they have taken to ensure its sustainability.
Allow generating stations using both fossil fuel and renewable sources (e.g. energy from waste plants) to claim ROCs only for the proportion of electricity generated by the renewable source.
Enable the Authority to recover the costs of administering the RO from the buyout fund.
112.The Act transfers the functions of the Secretary of State under section 37 to the Scottish Ministers. In the past, the RO has been executively devolved to the Scottish Ministers by an Order in Council under section 63 of the Scotland Act 1998. In order to maintain the current devolution settlement, the new powers taken in relation to the RO need to be transferred to Scottish Ministers in so far as they apply to Scotland. This transfer of functions on the face of the Act has the same effect as if the powers had been transferred to the Scottish Ministers by an Order under section 63 of the Scotland Act 1998.
113.The detail of the changes will be covered in secondary legislation made under the new sections 32 to 32M of the Electricity Act 1989. The orders will be subject to a statutory consultation process.
114.Since the RO was first introduced in 2002, there have been a number of subsequent changes to the primary legislation (made by the Energy Act 2004 and the Climate Change and Sustainable Energy Act 2006) intended to improve the way that the RO works. However as has been indicated by the Committee of Public Accounts(2) and by the Government Review of the RO(3) there is scope for further increases in efficiency of the RO as a mechanism. The reforms proposed in this Act are intended to restructure the way the RO works while maintaining its overall aims. In practice there will continue to be an obligation on suppliers to present certificates to the Authority or to pay a penalty. The buy-out fund will continue to be recycled in order to promote competition in the renewables market. As there have been a number of previous changes to the primary legislation, the Government has also taken the opportunity through the Act to recast the existing legislation so that it is easier for the reader to follow.
115.Section 37 substitutes sections 32 to 32M in the Electricity Act 1989 in place of sections 32 to 32C. The new sections incorporate all amendments made to the Renewables Obligation (RO) in primary legislation since 2002, as well as the further additions and amendments proposed by this Act.
116.New section 32 defines the RO and provides a power for the Secretary of State and the Scottish Ministers to make a renewables obligation order detailing how the RO will operate in practice. The process for Parliamentary approval in the Westminster and Scottish Parliaments of the order by affirmative resolution is set out in sections 32L(2) and (3).
117.Subsection(6) sets out the new obligation which may be imposed on electricity suppliers in the relevant part of Great Britain. The existing obligation requires specified electricity suppliers to provide evidence of the supply of a certain quantity of electricity from renewable sources. The new obligation requires electricity suppliers to submit a certain number of ROCs during a specified period. The number of ROCs to be submitted will be calculated in respect of the total amount of electricity of any kind (i.e. renewable or non-renewable) supplied by a given supplier in that period.
118.New section 32A enables an order to specify how the level of the obligation is to be set. In particular, the order will:
specify how the number of ROCs which an electricity supplier must produce to the Authority for a given period is to be calculated;
allow scope to provide that ROCs issued in respect of electricity generated from different renewable sources or different types of generating station can only be used to discharge the obligation up to a certain number or a certain proportion of a supplier’s obligation (this allows for a cap on the contribution made by particular technologies such as co-firing of biomass by coal-fired power stations);
determine how the amount of electricity supplied by electricity suppliers to customers is to be calculated. The size of a supplier’s individual obligation is generally based on its electricity sales.
119.Subsection (3) provides that suppliers cannot produce the same ROC more than once as evidence of complying with the obligation.
120.Subsection (6) provides, among other things, for the order to enable suppliers to ‘bank’ a specified number of ROCs acquired during a current obligation period which can then be presented to the Authority in a later obligation period. This power is to allow suppliers to hold over ROCs where, for example, for business process reasons they do not manage to present ROCs by the due date or if they have more ROCs than they need to meet their obligation for a given period. The order can specify the proportion or numbers of ROCs that may be held back for any period.
121.New section 32B provides for the issue of ROCs by the Authority. It enables the order to set out the criteria for their issue. Section 32B also sets out what ROCs are to certify. Subsection (3) provides for a ROC to certify that the amount of electricity stated in the certificate is from a renewable source and that it has been supplied to customers in Great Britain or the part of Great Britain stated in the certificate. It also sets out a number of alternative matters which ROCs may be required to certify.
122.Subsections (5), (6) and (8) provide for ROCs to be issued in respect of total quantities of renewable electricity generated by more than one generator, which facilitates the issue of ROCs to agents acting for small generators.
123.Subsections (7) and (8) allow ROCs to be issued where renewable electricity has been generated but not sold through a licensed supplier in accordance with 32B(3) so long as that electricity has been used in a permitted way.
124.Subsections (9) and (10) set out what is meant by permitted way. This is where (i) the electricity which has been generated has been used by the operator of the generating station; (ii) where electricity is provided through a private wire network to customers (for example where a generator supplies electricity to customers on a neighbouring industrial estate); (iii) where the electricity has been provided to an electricity network in circumstances where its supply to customers cannot be demonstrated (for example, where a small generator produces excess electricity which it is unable to consume and the electricity automatically “spills” onto an electricity network). The definition of a private wire network is set out in subsection (11).
125.New section 32C allows the order to exclude specified renewable sources or descriptions of generating stations from eligibility for ROCs, or to confine such eligibility to a proportion of electricity from specified sources. For example, large hydroelectric plants that have been running for over fifty years can compete in the wholesale electricity market without any additional incentive from the RO.
126.Subsection (4) provides for generating stations using both fossil fuel and renewable sources to be able to claim ROCs only for the proportion of electricity generated by the renewable source. The order will specify how the proportion is to be calculated, and the consequences for issuing ROCs to a generating station where it uses more than a certain proportion of fossil fuel during a period.
127.Subsection (8) replicates provisions in the existing legislation for the RO. It requires the order to preclude the issue of ROCs in certain circumstances where the Northern Ireland Authority is not satisfied that the electricity has been supplied to customers in Northern Ireland.
128.New section 32D creates a new power to enable the Secretary of State, through the order, to set bands. Changing the obligation in this way will enable different levels of support to be provided to different technologies and, in particular, will enable the order to provide higher levels of support for less mature, emerging technologies, such as offshore wind and biomass.
129.Subsection (1) provides that the order may specify how much electricity each ROC is to certify as having been supplied. In particular, (as subsection (2) explains) the amount may vary as between different types of renewable sources or technologies. So a ROC issued in respect of “Source A” could certify a different amount of electricity from a ROC issued in respect of “Source B”, based on the band in which that particular technology or renewable source is placed
130.This banding power will thus allow for different technologies and renewable sources to be awarded ROCs for either greater or lesser amounts of electricity. For example, the Secretary of State and the Scottish Ministers may decide that a generating station using a certain renewable source or technology will have to generate 0.5 MWh of electricity to get 1 ROC. Equally the Secretary of State and the Scottish Ministers may decide that other generating stations using another renewable source or technology will have to generate 4 MWh of electricity in order to qualify for 1 ROC.
131.Subsection (4) sets out the matters to which the Secretary of State and the Scottish Ministers must have regard before setting bands in the order, namely:
the costs associated with generating electricity from renewable sources and the cost of transmitting or distributing that electricity;
the income that generators using renewable sources receive from generating electricity or from activities associated with the generation of electricity;
the impact of the exemption from the Climate Change Levy for those generators;
the likely impact of the proposed banding in securing the growth and development of renewables generation and associated industries;
the likely effect of the proposed banding on the number of ROCs issued by the Authority and the impact on the ROC market and on consumers;
the potential contribution of electricity generated from each of the various renewable sources to the attainment of any target relating to the generation of energy generally, or of electricity in particular, which arises from a target imposed by, for example, an EU Directive.
132.Subsections (7) and (8) provide that after the first order with banding provision is made, any subsequent order with banding provision cannot be made except where a review of banding is carried out in accordance with the terms of the order.
133.The purpose of allowing the bands to be reviewed is to ensure that they can be amended to reflect changes in the costs of technologies in the marketplace as markets mature. Subsection (8) provides that the order can authorise the Secretary of State and the Scottish Ministers to review the bands at: (a) intervals set out in the order or (b) where one or more specified conditions are met. This could, for example, enable the Secretary of State and the Scottish Ministers to review the bands on an “emergency” basis. An emergency review may be triggered if there is an unforeseen significant change, for example, in the marketplace (for example, to grid connection costs); a new support scheme is introduced; a new technology comes forward, or there is over-compliance with the obligation.
134.New section 32E introduces a power to make transitional provisions in relation to existing projects once a renewables obligation order containing banding provision is introduced. For example, it may be desirable to protect existing investments by enabling most existing generating stations which have been financed under the Renewable Obligation Order 2006 to continue to be awarded 1ROC/1MWh once banding is introduced. Subsections (1) to (3) provide that transitional provision may be made either when banding is first introduced or when it is revised.
135.Subsections (4) (5)and (6) provide that, for generating stations which are in receipt of statutory grants and are specified in the order, the banding provisions may be made conditional on giving up any entitlement to grant (and repaying sums paid under it). Provision might be made, for example, whereby the operator would have a choice between keeping the grant and continuing to receive 1 ROC/MWh for its generation or returning the grant and receiving more ROCs per MWh once banding is introduced. Subsection (9) defines the meaning of statutory grant.
136.New section 32F provides for an electricity supplier to be able to discharge its renewables obligation (to the extent provided for by the order) by presenting Northern Ireland Renewable Obligation Certificates which are issued by the Northern Ireland Authority for Utility Regulation (“the Northern Ireland authority”). The Northern Ireland authority administers the RO in Northern Ireland. The practical effect of this provision is that it allows the obligation in Great Britain to work alongside the obligation in Northern Ireland thereby providing a single market for ROCs across Great Britain and Northern Ireland.
137.New section 32G provides for the order to make provision for electricity suppliers to discharge their obligation by paying a ‘buyout’ price to the Authority. Subsection (1)(b) provides for late payments made by electricity suppliers to the Authority to be used towards discharging the obligation too. Subsection (2) provides for the buyout price to be determined through the order and subsection (3) allows the buyout price to be linked to, for example, the Retail Price Index.
138.Subsections (5) to (8) provide that an order can make arrangements to require electricity suppliers to make additional payments where there is a shortfall in the amount due into the buyout fund for a particular obligation period. These additional payments are referred to in the current renewables obligation order as mutualisation payments. They arise in circumstances where an electricity supplier cannot fulfil its obligation and is unable to make a buyout payment; for example, if a supplier goes into administration. Additional sums are then required from the remaining electricity suppliers to cover the amounts that would have been paid by the insolvent supplier. Subsections (9) and (10) define shortfall for these purposes.
139.Subsection (1) requires that payments made to the Authority in respect of the buyout fund and late payment fund be paid to electricity suppliers using an allocation system specified in the order. Subsection (2) allows for these payments to not be made where the money in the fund is instead used for the purposes set out in Section 32I (which relates to the recovery of the Authority’s costs in administering the RO). Subsection (3) allows for these payments to be made to specified categories of electricity supplier only.
140.Subsection (4) allows an order to specify that if certain circumstances are met, monies in the late payment fund will be held over till a later period. This is intended to provide for situations where, typically, sums in the late payment fund are so small that the bank charges incurred by the electricity suppliers of receiving this money would be larger than the amounts received. In this situation the payments could be postponed, for instance, until the following year and paid out with the money for that year. The order may specify the amounts which may trigger such a carry over.
141.New section 32I is a new power which enables the order to specify that a proportion of the money received into the buyout fund and late payment fund from electricity suppliers can be used by the Authority to cover some or all of its costs of administering the RO in England, Wales and Scotland. Money from the buyout fund could also be used by the Authority to make payments to the Northern Ireland authority to cover some or all of the costs incurred by that authority of administering the RO in Northern Ireland.
142.New section 32J enables the order to provide for the Authority to require electricity suppliers and others (who may include electricity generators and agents acting on behalf of generators) to provide certain information in relation to their participation in the RO.
143.Subsection (3) introduces a new power which allows the order to require operators of stations generating electricity wholly or partly from biomass to provide information relating to the biomass. This information could, for example, relate to the source of the biomass and the circumstances under which it is grown. The purpose of this provision is to enable the Authority to gather and make public information on sustainability. If generators fail to provide the information in the time and form specified, the Authority may be empowered to postpone the issue of ROCs until such time as the information has been provided, or not to issue ROCs at all.
Energy Act 2008