On 7 May 2015, the UK General Election resulted in the election of a Conservative majority government. The 2015-16 session of Parliament began with the State Opening on 27 May 2015, during which an Energy Bill was announced. The changes proposed by the Energy Bill have the potential to significantly affect the energy sector.
This Client Alert summarises the main features of recent and proposed legislation concerning the renewable energy sector. In particular, this alert focusses on the implications of the election for wind energy.
What has already been done?
The Infrastructure Act 2015 (“IA”), which received Royal Assent in February 2015, contains a provision establishing a “community electricity right”. This will grant a statutory right for individuals and/or community groups to purchase a stake in renewable generation facilities located within the community or, if offshore, adjacent to the community. This right will only be exercisable where the facility has a capacity of at least 5 MW, and the maximum size of the purchasable stake will be 5% of the facility. The section of the IA granting the community electricity right will come into force on 1 June 2016 and regulations implementing this right are expected to be published on or soon after that date.
Imminent changes - the Energy Bill
The Energy Bill proposed in the Queen’s Speech for the 2015-16 Parliamentary session will include proposals affecting planning consent for onshore wind farms.
Currently, the Secretary of State for Energy and Climate Change is required to give consent for the construction of onshore wind farms with a capacity of more than 50 MW. The proposed Energy Bill will remove this requirement, leaving the decision solely in the hands of local planning authorities. This will be complemented by reforms to national planning policy in order to give local communities the final say on planning applications for onshore wind farms.
This proposed reform will not apply in Scotland or Northern Ireland. The majority of wind farm projects awaiting consent are in Scotland (37 out of 45 proposed sites and therefore will not be affected). The Government has stated that it is considering how the changes will apply in Wales in the context of further Welsh devolution. In particular, the Silk Commission has recommended that Wales eventually be granted powers to decide planning applications for onshore wind farms of up to 350 MW capacity. However, there is no suggestion that this proposal will be implemented via the Energy Bill. A Wales Bill was proposed in the Queen’s Speech, but has not yet been published.
What to expect?
On 18 June 2015, the Department of Energy & Climate Change ("DECC") announced that it would implement this pledge by introducing primary legislation to close the Renewables Obligation to new onshore wind projects from 1 April 2016, instead of April 2017 as had been planned. DECC's announcement can be found here.
There will be a grace period in place for projects which have already received planning consent, a grid connection offer and acceptance and evidence of land rights (estimated to apply to up to 5.2GW of capacity). The Government previously pledged to consult with the devolved administrations before changing the subsidy regime outside England. Scottish First Minister Nicola Sturgeon is reported to have demanded a veto over changes to subsidies applying to Scotland and Scottish Energy Minister Fergus Ewing has stated that the decision to end subsidies may be subjected to judicial review. It may be that the Government will agree a different regime for Scotland.
The Scotland Bill, which received its first reading on 28 May 2015, contains provisions granting new discretionary powers to Scotland over offshore renewable energy developments. If the Bill is passed, the Scottish Ministers will be able to declare a safety zone around renewable energy installations in Scottish waters and to determine what activities are prohibited within such zones. Scotland will also exercise powers over decommissioning obligations concerning offshore developments. Substantive debate began with the second reading on 8 June 2015. It is therefore possible that these proposals will not be implemented, or that they may undergo significant alteration.
The manifesto also contains a pledge to “provide start-up funding for promising new renewable technologies and research”, with the proviso that only projects representing clear value for money will receive significant support. It remains to be seen whether this pledge will be implemented.
Given the premature termination of the subsidy regime the government has potentially opened itself up to legal action; with leading industry figures already going on record threatening to litigate if their subsidies are cut. In particular, it is foreseeable that the DECC may face challenges to their decision under the Energy Charter Treaty, which was designed to protect energy investments. Similar claims under the Energy Charter Treaty have been made against Italy and Spain with respect to their governments respective decisions to make changes to the subsidy regimes in their renewables sectors.