The Energy Regulation and Markets Review - Stikeman Elliott

United Kingdom
via the FiT CfD mechanism. Projects accredited prior to 1 April 2017 will continue to
receive support under the ROC scheme for 20 years, with consequential amendments
to the existing scheme to take account of the removal of the Renewables Obligation. 27
The FiT CfD mechanism is due to be introduced on 1 April 2014 and during the period
1 April 2014 to 31 March 2017 project developers may choose whether they wish to
receive ROCs or enter into a FiT CfD arrangement.
Feed-in tariffs (‘FiTs’) were introduced in 2010 as a means of supporting smallscale
(sub-5MW) generation. Owners of eligible small-scale generation plant receive a
payment from their electricity supplier for each unit of electricity that they generate
for own use, as well as a guaranteed payment for any surplus electricity that is sold
back to the grid. The level of payment depends on the technology used for generation.
Large electricity suppliers are obliged to enter into FiT arrangements with FiT eligible
generators. Smaller suppliers may elect to do so if they wish.
Following the introduction of the FiT scheme, there was a higher than expected
take up of FiTs for solar photovoltaic (‘PV’) generation. The government subsequently
took the decision to reduce the solar PV FiT but the implementation was successfully
challenged by legal action as the reduction was to be applied retrospectively. Ultimately,
the reduction in FiT was put in place by statutory instrument but the legal wrangles have
caused confusion and uncertainty in a business which was already nervous due to EMR.
The Renewable Heat Incentive (‘RHI’) is designed to support the generation of
heat from renewable sources at all scales. Implementation of RHI has also been subject to
legal delays due to issues with state aid clearance, although these have now been resolved.
The non-domestic scheme went live in November 2011 and is currently the subject of
further consultation. The take up of RHI has been low so far with few accreditations.
The Climate Change Levy (‘the CCL’) was introduced in the Finance Act 2000
as an end-user tax on energy consumption. Renewable and combined heat and power
(‘CHP’) electricity is CCL‐exempt and accredited generators of CCL exempt electricity
receive levy exemption certificates (‘LECs’) issued by Ofgem, which they can sell. Unlike
ROCs, LECs are not tradeable separately from the electricity to which they relate. The
two must therefore be sold together in order that the ultimate end user of the electricity
can redeem the LECs and claim exemption from the CCL. Given the nature of electricity,
proving the physical path of such electricity is impossible. Her Majesty’s Revenue and
Customs (‘HMRC’) therefore looks for an unbroken contractual chain to establish the
link from generator to end user.
The government has recently announced that CHP plants will not receive LECs
after 1 April 2013. Such plants will, however, receive favourable treatment of their fuel
inputs under the carbon price floor arrangements.
ii Energy efficiency and conservation
The CRC Energy Efficiency Scheme is a mandatory cap and trade scheme that applies
to large non-energy-intensive organisations in the public and private sector and which is
27 See the Department of Energy and Climate Change’s ‘Planning our electric future: technical
update’, December 2011, for further information.
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