Energy Bill

Written evidence submitted by Energy UK (EB 25)

Key Messages

· The decision to close the RO for onshore from April 2016, one year earlier than planned, was disappointing to Energy UK’s members as onshore wind has proven to be the cheapest renewable technology with the ability to deploy at scale and will, therefore, play an important role in meeting our decarbonisation commitments in the most cost-effective way.

· Energy UK’s top priority for the remaining stages of the Energy Bill is the swift transition of the legislation to Royal Assent. The two month delay in the Bill’s progress from the Lords to the Commons was regrettable and has added further uncertainty to investors who await Royal Assent of the Bill, with appropriate grace periods, before making their final investment decision.

· At Lords Committee Stage of the Bill, the Government proposed amendments setting out a grace period for projects which as of 18th June 2015 had planning consent, a grid connection offer and acceptance; and proof of land rights. These grace periods went some way to addressing the concerns which industry had regarding projects which had invested a significant amount of capital prior to the announcement of the early RO closure.

· Although the grace period proposals are welcome, Energy UK believes that improvements can still be made to the provisions, in order to ensure that those projects which can provide suitable evidence of substantial capital investments made in confidence of receiving Renewables Obligation Certificates are protected from the change.

· We welcome the fact that the Committee will be giving some attention to possible improvements in the capacity mechanism. Although there is not enough time to develop a well formulated proposal in the committee stage of this Bill, it is helpful to put the question on the agenda for the Government to address in the next energy legislative package.

Proposed Amendments

· Energy UK members have three areas where they would like to see the grace period provisions improved to deliver certainty to investors:

Investment Freezing Condition

· We believe that the definition of a ‘recognised lender’ in the ‘investment freezing condition’ should be extended to include appropriate debt investors regulated by the Financial Conduct Authority. The current provisions which specify that a ‘recognised lender’ must have an ‘investment grade credit rating’ is onerous and fails to accurately represent the increasingly diverse range of sources for financial investment which fund energy infrastructure in the modern day. We would be happy to discuss with the Government a suitable replacement criterion.

Variations to Planning and Grid Connections

· It is not clear in the legislation whether projects meeting the approved development condition as of June 18 2015, but which subsequently have to modify their consent, would be able to accredit under the grace period. Section 73/Section 42 permissions are free standing permissions which can completely replace earlier permissions. At the moment the Governments proposals are unclear in this area despite statements from Ministers that indicate that varied consents will be included, clarity is required by investors to remove any doubt. Similarly, it is common practice for grid connection agreements to be modified as part of the development process, and such modifications are also not dealt with in the legislation.

Planning Amendments

· There are a number of amendments relating to planning which Energy UK members believe can be made to the proposed grace period made which would meet the Government’s own ambition to ensure:

"that those who have spent money - significant investment - and achieved everything technically to meet the cut-off date but, through reasons beyond their control haven't actually made it, that they are not penalised for reasons beyond their control." (Andrea Leadsom MP, ECC Committee, 20/10/15)

We believe that specific areas which require attention include:

Non-determination

· The current provisions deal with the situation where the LPA fails to determine the application on time and the applicant appealed successfully for non-determination. However it does not deal with the situation where the LPA was late but the developer did not appeal, perhaps because the LPA had assured the developer that a decision was imminent. It is unclear why a developer should be prejudiced for showing consideration for the LPA in such a case.

Section 36 Inquiries

· There is a significant anomaly over eligibility for projects consented under the section 36 regime, compared to those consented under the TCPA 1990 and the TCP (Scotland) Act 1997 regimes.

Under section 36 of the 1989 Act, the relevant planning authority is not the decision taker, but can object to the proposal, after which there must be a public inquiry and then a decision by the Secretary of State or devolved Minister (as appropriate). This process is analogous in practice to a refusal under local planning, followed by an appeal. Whilst the provisions, as drafted, would allow a successful appeal after 18th June to become eligible for the grace period, the provisions do not cover this analogous situation under section 36.

Projects with Local Planning Committee Recommendation

· We believe that developments which received approval by the local planning committee on or before 18 June 2015, but did not receive its official written consent notice until after that date should be considered for inclusion in the grace period.

There are a number of projects where recommendations to approve were made prior to 18 June but delays stemming from pre-election purdah or resource constraints meant that projects did not receive final consent or a full committee resolution until after this point. A great deal of investment will have gone into projects in good faith and without foreknowledge of the cut-off point of 18 June.

Northern Ireland Renewables Obligation (NIRO)

· We support an amendment to New Clause 3 which reflects the two closure dates (Smaller projects connecting at 33kV to the NI grid network by 30th September 2015; larger projects connecting as clusters of projects by 31st October 2015) proposed by Northern Irish Assembly Ministers. NI Ministers have yet to announce their decisions on NI closure as agreement between the NI Executive and UK Government has yet to be reached. This means that any subsequent NI legislation cannot be enacted via the NI Assembly until after the Energy Bill is enacted. It is therefore necessary that the Energy Bill is clear as to the limits of the application of the provision to NI and respects timescales proportionate to Northern Ireland generating stations. A failure to do this means that generating stations in Northern Ireland are penalised because of a misalignment of timescales between reserved and devolved powers in energy.

Background

On 18 June 2015, the Government announced that they would bring forward primary legislation to close the Renewables Obligation to onshore wind from April 2016, one year earlier than planned. The legislation would also remove onshore wind projects >50MW from the NSIP regime and return planning decisions to local authorities.

On 9 July, the Government introduced the Energy Bill to the House of Lords. Energy UK has been active in engaging with DECC, Government and Parliament on Part 5 of the Bill which contains provisions relating to the future of onshore wind.

Energy UK believes that, as one of the cheapest forms of renewable energy, appropriately sited onshore wind has an important part to play in meeting the UK’s domestic and international decarbonisation commitments.

For the fourth day of Lords Committee Stage, the Government tabled amendments setting out the grace period for projects which met certain conditions as of 18 June 2015. These were withdrawn with a view to re-tabling at Report. At Lords Report Stage, an Opposition amendment to delete the clause containing the provision for the early closure of the RO to onshore wind was passed by 242 votes to 190.

January 2016

 

Prepared 3rd February 2016