The Energy Regulation and Markets Review - Stikeman Elliott

United Kingdom
designed to improve energy efficiency. The Scheme came into force on 1 April 2010 and
will be developed over several phases.
Participants will buy emission allowances based on what they predict their
CO 2
emissions will be during the relevant year, and will be allowed to buy or sell the
allowances from each other in the secondary market. At the end of each compliance year,
participants will be obliged to surrender sufficient allowances to cover the amount of CO 2
they have emitted. In order to incentivise participants to improve their energy efficiency,
participants will be ranked annually in a league table according to the action they have
taken to improve their energy efficiency. The government will then recycle the revenue
raised from the sale of allowances back to participants, applying either a bonus or penalty
– the size of which will be based on the participant’s position in the league table.
The scheme has been criticised for being too complicated, so the implementation
of phase 2 has been postponed and a consultation issued on possible simplifications.
The government has also established the Green Deal, which will be launched in
October 2012. Private firms will make loans to occupiers (domestic and non-domestic)
and private landlords, for the purpose of making energy-efficiency improvements to
properties.
The key principle is that energy efficiency improvements should pay for themselves.
The Energy Company Obligation (‘ECO’) will be integrated with the Green Deal, and
will require energy companies to assist in cases were the this is not the case, but there are
strong policy reasons for promoting energy efficiency measures (for example, supporting
the upfront costs of basic heating and insulation for those on low incomes).
Liability to repay Green Deal finance will attach to a property’s energy bill. Thus,
when a person ceases to be the billpayer, liability for any debt under the plan will pass to
the next billpayer.
iii Technological developments
The rollout of smart meters has been identified by the government as an important
part of the transition to a low-carbon economy. Energy suppliers will be responsible for
replacing gas and electricity meters with smart meters during the rollout programme due
to start in 2014 and complete in 2019. DECC is managing the implementation of the
programme.
Another key technology identified by the government is CCS. In early April 2012
the government relaunched its competition for CCS, at the same time as it released its
CCS roadmap. The competition will provide £1 billion in support to reduce the costs
of CCS so that it can be deployed during the 2020s. The chosen programme will be
used to address barriers to cost competitiveness, stimulate new investment in CCS and
encourage knowledge sharing. Bids must be submitted by early July 2012.
VI
THE YEAR IN REVIEW
The sector continues to feel the effects of the credit crunch, with credit availability
remaining very tight. Over the past year there has been some M&A activity including
the announcement by GDF Suez that it intends to acquire the remaining 30.23 per
cent stake in International Power plc. The most high-profile sale announced was that of
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