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United Kingdom Government Confirms Change to Sustainability Criteria for Biomass

by Caroline Lindsey

The Department of Energy and Climate Change (DECC) in the United Kingdom published its response to its “Consultation on proposals to enhance the sustainability criteria for the use of biomass feedstocks under the Renewables Obligation (RO)” on 22 August 2013 (the Response). The original consultation was published on 7 September 2012.

In the Response, the UK Government confirms that it will proceed with its proposals to revise the content and significance of the sustainability criteria applicable to the use of solid biomass and biogas feedstocks for electricity generation under the Renewables Obligation (RO). The RO is currently the principal regime for incentivising the development of large-scale renewable electricity generation in the United Kingdom. Eligible electricity generators receive renewables obligation certificates (ROCs) for each megawatt hour (MWh) of renewable source electricity that they generate. Biomass qualifies as renewable source electricity, subject to some conditions.

Changes to the criteria

The sustainability criteria associated with the RO is broadly divided into greenhouse gas (GHG) lifecycle criteria, land use criteria and profiling criteria. There will be changes to all of the criteria, but the significant changes relate to the first two criteria, and will take effect from 1 April 2014.

In general terms, the GHG lifecycle criteria are designed to ensure that each delivery of biomass results in a minimum GHG emissions saving, when compared to the use of fossil fuel. The savings are measured in kilograms (kg) of carbon dioxide equivalent (CO2eq) per MWh over the lifecycle of the consignment (sometimes referred to as “field or forest to flame”). The UK Government has confirmed that all generating plants using solid biomass and / or biogas (including dedicated, co-firing or converted plants and new and existing plants) will be on the same GHG emissions trajectory from 1 April 2020 (200 kg CO2eq per MWh). In the meantime, new dedicated biomass power will be placed on an accelerated GHG emissions trajectory (240kg CO2eq per MWh). All other biomass power will remain on the standard GHG emissions trajectory (285kg CO2eq per MWh) until 1 April 2020.

Changes to the land use criteria will also be introduced. In particular, generating plants using feedstocks which are virgin wood or made from virgin wood will need to meet new sustainable forest management criteria based on the UK Government’s timber procurement policy principles.

The land use criteria set out in the European Union (EU) Renewable Energy Directive 2009 (RED) will continue to apply to the use of all other solid biomass and biogas, with some specific variations for energy crops. As is the current position, the land use criteria will not apply to the use of biomass waste or feedstocks wholly derived from waste, animal manure or slurry.

The new sustainability criteria will be fixed until 1 April 2027, except if the EU mandates or recommends specific changes to the sustainability criteria for solid biomass, biogas or bioliquids, or if changes are otherwise required by EU or international regulation.

Making compliance mandatory

Currently, whilst generators using [...]

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Possible UK Power Shortages Raise Concerns

by Thomas Morgan and David McDonnell 

A warning from the UK’s energy regulator, Ofgem, on 27 June 2013, that the ‘buffer’ capacity of spare electricity on the UK’s national power grid could drop to as little as 2% of national supplies by 2015, has raised concerns in relation to the possibility of widespread disruptions in service. This spare capacity currently stands at about 4%.

The warning was linked to an extensive Electricity Capacity Assessment Report, also published by Ofgem that same day. Revised studies have indicated that power supplies will shrink considerably by 2015, as electricity demand in the United Kingdom is not decreasing in the manner previously foreseen by successive governments. This is due to a variety of factors, among them, the low uptake by residential households of environmentally friendly incentives and energy-efficient practices.

Ofgem recommends the implementation of far-reaching market changes proposed by the Department of Energy and Climate Change (DECC). Among other things, DECC stated in a report, also published on 27 June 2013, that the UK electricity sector will require approximately £110 billion of capital investment in the next decade to modernise its infrastructure. This would create opportunities for investment which a range of market players are likely to monitor with interest.

DECC has also emphasised the need for a ‘Capacity Market’ – essentially an insurance policy against the possibility of future blackouts – which would work by providing financial incentives to generators to keep a certain percentage of energy capacity in reserve to cope with spikes in demand.

The British government has been quick to retort to concerns of service disruption, downplaying the risk of blackouts to domestic consumers and, while it is unlikely that blackouts reminiscent of those experienced in the United Kingdom in the 1970s will be relived, the very publication of a formal warning from Ofgem highlights the potential significance of the concern.

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New Developments in The UK Shale Gas Sector

by David Birchall and Simone Goligorsky   The shale gas sector in the United Kingdom is still in its infancy, but the UK Government has announced recently new measures and incentives to encourage its growth.  On 13 December 2012, the Government lifted a temporary suspension of drilling at the only drilling site in the United Kingdom, introduced tighter regulations to manage risk associated with hydraulic fracturing (fracing), set out new tax incentives to help accelerate the growth of the industry, and announced that it would establish a new Government office dedicated to the shale gas sector.   Background   Fracing involves the pumping of water, sand and chemicals into shale rock at high pressure, for the purpose of extracting reserves of natural gas.  Many European countries have been wary of fracing and the practice is currently banned in several countries, including France.  The French Government banned fracing in May 2011 in response to pressure from environmental groups.  Reports have suggested that exploration permits were revoked from three companies that had announced they were intending to undertake fracing activities, and seven applications for permits were rejected.  It should be noted that by the French Government has not banned the exploration of shale gas, just the practice of fracing.    Apart from the United Kingdom, the only other European country that has allowed energy companies to undertake exploratory drilling is Poland.  Poland is said to have the largest reserves of shale gas in the European Union.  As of June 2012, it had granted over 100 licences to foreign companies wishing to undertake exploratory drilling activities in the country.     The exploitation of onshore gas reserves has already revolutionised the energy sector in the United States, and the UK Government now hopes that Britain will be able to service some of its future gas demand through the use shale gas obtained by fracing.  Europe, as the world’s second-largest gas market, has become increasingly dependent on imported gas, which not only is expensive, but also carries with it all the risks generally associated with an imported product, including the potential for a sudden termination of supply.    Reports on Shale Gas   The UK Government has commissioned several reports on shale gas in order to assess the potential risks of fracing.  These include, inter alia   In addition to these reports, the British Geological Survey (the BGS) conducts ongoing research into shale gas.  The BGS estimated in 2010 that if shale in the United Kingdom was as productive as shale in the United States, an estimated 150 billion cubic metres of gas could be produced.  The [...]

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Changes to the Feed-In Tariff Scheme for Non-Solar Photovoltaic Technologies in the UK

 by David Birchall and Caroline Lindsey

In April, we reported on changes to the feed-in tariff scheme for solar photovoltaic (PV) technology in the United Kingdom  Those changes were the outcome of Phase 1 of the Department of Energy and Climate Change’s (DECC) comprehensive review of the feed-in tariff scheme launched in February 2011 (the FIT Scheme).  In addition to solar PV technology, the FIT Scheme is available to hydro, wind, anaerobic digestion (AD) and micro-CHP technology.

The DECC then consulted on Phase 2B of its comprehensive review, which focused on feed-in tariffs for non-PV technologies and wider scheme administration issues (the Consultation). On July 20, 2012, the DECC published its response to the Consultation (the Response) and has confirmed that a number of changes will be made to the FIT Scheme. The changes will be introduced by way of amendments to the Standard Conditions of Electricity Supply Licences.  Most of the changes are expected to come into effect on December 1, 2012.

The key changes to the FIT Scheme to note are as follows.

1.  The generation tariffs for non-PV technologies will be reduced with effect from December 1, 2012, except that:

  • a new generation tariff will be introduced for hydro installations with a    capacity of between 100 and 500 kilowatts; and
  • the generation tariff for micro-CHP installations will be increased to 12.5p/kWh.

A full list of the generation tariffs to apply from December 1, 2012 is available at page 8 of the Response.  We note that the generation tariff for the largest capacity band of each technology is linked to the equivalent level of support available to that technology under the Renewables Obligation.  Consequently, the DECC has indicated that the tariffs applying to those bands will be amended to reflect the outcome of the DECC’s Renewables Obligation banding review.  The DECC announced the outcome of its current review on July 25, 2012, but is yet to confirm the corresponding amendments that will be made to those tariffs. 

2.  A preliminary accreditation process will be available to solar PV and wind installations with a capacity of more than 50 kilowatts, as well as all AD and hydro installations.  The criteria for preliminary accreditation will be similar to, but narrower than, the criteria to obtain preliminary accreditation as a renewable generator under the Renewables Obligation.  Among other things, installations for which a grid connection is required will need to produce evidence of a firm grid connection offer to receive preliminary accreditation.  Installations that receive preliminary accreditation will also benefit from a fixed tariff for a prescribed period.  

3.  A tariff degression mechanism will be introduced, under which generation tariffs for all non-PV technologies, with limited exceptions, will be decreased annually from April 1, 2014.  The baseline degression rate will start at 5 percent, and will be adjusted annually according to the level of deployment of the relevant technology.  As a result, the degression rate could be as [...]

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EU Emissions Trading System Single Registry: Timetable Announced

by Prajakt Samant and Simone Goligorsky

On April 27, 2012, the European Commission (EC) announced the full activation of the EU Emissions Trading System (EU ETS) single registry.  The full activation process will include the migration of over 30,000 EU ETS accounts from national registries.

On May 3, 2012, the EC provided the following transition table in relation to the full activation:

  • Starting on May 14, account holders (including aircraft operators) will not be able to open or close accounts or to modify accounts and account representative details, neither in national registries nor in the single registry.
  • From June 3, the operation of national registries and the single registry will be suspended simultaneously and account holders will not be able to access registry accounts, including allowances held in these accounts.  Data held by the national registers will start to be migrated to the EU registry.
  • On June 20, the single registry will be fully activated.  Users of existing national registries will be able to use the single registry as soon as they receive their new authentication credentials from their national administrator.

This will impact account holders in two ways.  First, account holders will have to comply with increased documentation requirements and security features to access the transferred accounts in the single registry.  Second, account holders will not be able to transfer any allowances until all necessary documentation requirements are satisfied.

In addition, the EC announced that in the event that account holders have any questions or difficulties during the transition, national helpdesks will continue to provide support.  The Environment Agency will continue to be the national administrator for the UK. 

The EC has further stated that the single registry to be activated in June will not contain all the required functionalities for phase III of the EU ETS.  A subsequent update will enable phase III auctions, new account categories and a trusted account list.  The EC has stated that software development in relation to these updates has been commenced and a timetable will be communicated on July 15, 2012.

Separately, on May 8, 2012, the UK Department of Energy and Climate Change launched a public consultation on the implementation of phase III EU ETS in the UK.  The consultation seeks the views of market participants on how the proposed legislative framework should be successfully implemented in the UK.  By simplifying the existing legislative framework, market participants will be subject to less of a regulatory burden than has been imposed by the current regime.  Market participants wishing to respond have until July 31, 2012 to do so.

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UK DECC Commissioned Report Recommends Hydraulic Fracturing in Britain

by Charlotte Doerr

The practice of fracing (referred to as “fracking” in the UK) in the United Kingdom has once again come under scrutiny.  The UK’s Department of Energy and Climate Change (DECC) commissioned an independent panel to examine a possible relationship between the practice and certain earthquakes which took place in April and May 2011.  The earthquakes occured near the site of the UK’s only fracing operation in Preese Hall, near Blackpool.  On April 17, 2012, the panel published its findings in a report

Fracing is the practice of pumping water, sand and chemicals into shale rock at a high pressure in order to extract reserves of natural gas stored within the shale rock, known as "shale gas."  The report considered the impact such a process may have on seismic activity.  The report concluded that the fracing operation (which was suspended following the earthquakes) had caused the earthquakes, thus providing some of the first evidence of this connection.  However, the report also found that the risk that fracing could cause an earthquake resulting in significant damage was "very low." 

The report recommended that fracing be allowed in the UK but, given that there is evidence of a connection between fracing and seismic activity, a number of safety provisions should be put in place to mitigate against seismic risks arising from fracing.  The safety provisions include:

  • conducting a detailed assessment of the relevant area prior to fracing taking place, including: performing baseline seismic monitoring so that seismic risk of the area can be determined; using both geological and geophysical data to determine the existence of any active faults in the area; and using ground motion prediction models to consider and assess the possible impact of any earthquakes; and
  • implementing a "traffic light" system with real-time monitoring of seismic activity during the fracking process.  A "red light" would be triggered by any seismic tremor meauring 0.5 local magnitude (a level lower than the size of the 2011 earthquakes) or higher.  The triggering of a red light would require the cessation of fracing and the taking of certain safety procedures including, allowing fluid to flow back to the surface.

In conjunction with the publishing of the panel’s report, the DECC is inviting public comment on the recommendations made by the report until May 25, 2012.

The DECC has stated that no decision will be made as to whether fracing operations for shale gas can be resumed until all comments in response to the report have been received and considered.

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