Regulatory and policy options to encourage development of ...

MODULE 9: RENEWABLE ENERGY: REGULATORY AND POLICY OPTIONSpage 9.1271. POLICY AND INDUSTRY STRUCTUREThe lead government department on energy policy in the United Kingdom is theDepartment of Trade and Industry (DTI) and it is here that renewables policy ismainly developed. However, the Department for the Environment, Food and RuralAffairs (DEFRA) is the lead government department on climate change and environmentalissues and it also has the lead on energy efficiency.The electricity and gas industries were privatized in the United Kingdom in thelate 1980s. There have been a number of changes in the energy market since privatizationbut the structure as at mid-2005 was as follows: six large integratedgas and electricity supply and generation companies and a number of smallercompanies involved in generation and/or supply; nine electricity distribution companies(distribution network operators—DNOs) in England and Wales; a singlegas transportation and electricity transmission company for England and Wales(that also does gas transportation in Scotland); two integrated electricity distribution,transmission and generation companies in Scotland, (they are also twoof the gas and electricity suppliers that serve Scotland, England and Wales). Thewhole industry is regulated by the Gas and Electricity Markets Authority (morecommonly known as the Office of Gas and Electricity Markets (Ofgem)) which isan independent regulator established by an Act of Parliament. There has beenfull retail competition since the late 1990s and price controls were removed fromthe household retail market in 2002. (Note that the situation in Northern Irelandis different where there is a separate market and regulator.)The United Kingdom Government’s Energy White Paper, published in 2003, makesa strong commitment to environmental as well as economic and social goals forenergy policy. The United Kingdom is signed up to the Kyoto protocol (thatrequires greenhouse gas emissions to be cut by 12.5 per cent compared to 1990levels by 2010) and has also set more internally demanding targets (20 per centreduction by 2010) for reducing carbon dioxide emissions. It has a number ofpolicies and programmes to foster the development of renewable energy andenergy efficiency to help achieve a low carbon economy.2. THE NON-FOSSIL FUEL OBLIGATION(NFFO)The United Kingdom’s first programme to support renewable energy was the Non-Fossil Fuel Obligation (NFFO) introduced in 1990. The NFFO was primarily established