Introduction

Since the last Briefing Note on climate change and renewable energy, there has been a flurry of activity. This was particularly so just before the summer recess, with the usually quiet months of July and August having a wide range of activity.

News Round Up

Permitted development rights have just been extended again in relation to the green agenda. The statutory instruments that amend the Town and Country Planning (General Permitted Development) Order 1995 were laid last week. These will allow further on and off site electric car charging points and, importantly, provide the missing PD rights for household wind turbines and air source heat pumps;

Also on the planning front, Epsom and Ewell BC have been in the press for issuing an enforcement notice against a resident that had installed solar PV under PD rights. The Council claims that the panels had not been sited "to minimize the effects on the external appearance of the building and the amenity of the area …." which is a precondition of permitted development. Whilst the Council may have a legitimate case in regard to this, it should step back and consider the bigger picture, as there is no doubt that this is attracting substantial negative publicity. There must be a simple solution to this issue;

Recycling policy has been challenged by the Campaign for Real Recycling. This impacts on whether a local authority offers mixed or kerbside sorted arrangements. The judicial review challenges DEFRA's interpretation of the EU's revised waste framework directive allowing comingled collection. It argues that co mingled collection does not meet the spirit or the letter of EU waste law. Obviously, such a ruling would impact on local authorities. Those Councils that do not offer such collection services at present would need to introduce them if the law changed;

The Renewables Obligation banding review is expected imminently. This will set out support levels from April 2013 and is being undertaken now to give future certainty to developers. There are a number of important areas, such as the 2 renewable obligation certificates (ROCs) currently paid for solar PV, which should be raised in the light of reductions in the feed in tariff (FIT) rates. The FIT scheme is relevant to this too because its budget is rapidly disappearing, whilst the ROC budget is underspent. This has led the Renewable Energy Association and others to call for the budgets to be joined, to give more capacity for micro renewables and technologies such as solar;

The Energy Bill has completed its passage in the House of Commons and moved back to the Lords on 4 October 2011. It is expected to come into law shortly;

Relevant to the Energy Bill is the Green Deal, the provisions in relation to which are in the Bill's detail. The government is to issue a consultation paper on Green Deal at the end of October and for the first time we will see the full explanation of how it will work;

The consultation paper from DECC on the wider review of Feed in Tariffs has also been delayed again (see further detail below - Is it Too Late for a Major Solar PV Scheme?). This was originally due to be published before the summer but has now been delayed well into October. Bearing in mind that the results of that consultation (widely believed to be cuts in FIT rates, perhaps even reaching 40%) will be introduced from 1 April 2012, this does not leave much time for a proper consultation, consideration of the results, laying of the relevant orders and then implementation. The delays illustrate the turmoil going on in DECC as to what to do about the FIT budgets. The current estimates are that this money will run out completely in 2012, which is prompting many local authorities to act now to fit solar PV, rather than waiting until next year (as commented on below).

The latest summary by OFGEM illustrates the roll out of renewables since the introduction of the Feed in Tariffs last April. The total figure seems certain to have exceeded 200 MW nationally now, although the registered figures are lower. This is because OFGEM is about three months behind in registering those systems that have been fitted already. Click here to view OFGEM report

Is It Too Late for a Major Solar PV Scheme?

DECC is due to publish its consultation on the wider review of feed in tariffs at any time now. This is the second of the two reviews of this year, the first having been the 'fast track' review of solar PV installations, which resulted in reductions in the amount of financial incentive for some key areas, such as land based systems.

It is unlikely that solar will escape unwelcome attention in the second review either, with rate reductions across the range of different sized solar PV facilities expected. Some reduction is inevitable, as costs have undoubtedly fallen over the past year. This means that the original projected returns of 5 - 7% proposed by the Government have been comfortably exceeded. How much the FIT rates will reduce by is more difficult to predict, but as high as 40% has been predicted.

These changes will be announced after the consultation closes, followed by the publication of proposals after Christmas and then any changes will come into effect on 1 April 2012.

So, if the rates are going to drop, does a local authority still have time to frame a large-scale housing solar PV project which would complete before the rates reduce? I would say that it is not too late, but only if the authority gets its act into gear very quickly.

But why would any local authority want to expedite such a project? The reason is simple really: if you have 2,500 social houses in your control and you fit an average 2.5 kwp system to each, you will reap the FIT rate of 43.3 p for every unit of electricity that you generate, from those systems and a further 3p for every unit put into the national grid.  If rates go down drastically then this amount may shrink to between 25p per kwh. If the average system generates around 3,000 - 3,500 kwh per annum, across 25 years, and 2500 houses, the reduction in income is enormous.

And its not just the level of the FITs either. There is another reason why a social housing project might be seen to be timely now. The review will look at ways DECC can control the FIT budget. Having firmly shut the door on large, land based solar farms, large social housing contracts (which are often also sizeable) are one of the last large calls on the FIT pot. The temptation for that door to be closed too by DECC must be real and it is possible that such projects will not be available at all after April 2012.

A number of large social housing schemes have come forwards recently, such as the Wrexham CBC project, where an award of contract is imminent and a programme is being finalised to complete work to 3,000 homes by the end of March 2012.  But work started on projects such as this some time ago.

All is not lost. Fortunately, a procurement exercise can be structured using the urgent restricted procedure with about a month. Provided the authority is prepared to pull out all the stops to give such a project priority, it can still be done.

Early political and managerial support will be essential. This cannot wait for normal scheduled meetings and will have to be expedited. If needs be, special meetings will need to be arranged.

In tandem with this, the authority will need to categorise its property and undertake preliminary, desk top surveys to check on orientation and other key factors.

The resources will need to be made available within the procurement exercise so that all work on the authority's side is done immediately, including the ranking of applicants, the selection of tenderers and the tender evaluation exercise itself.

Recent tendering exercises have shown that there are contractors out there still looking for commercial sized contracts and who are able to fit 100 - 150 properties a week under a planned programme.

So it is likely that we will see another major push by local government towards social housing projects over the next couple of months.

The Committee on Climate Change

The Committee is established under the Climate Change Act 2008 and its role is to give independent advice to the government and report on progress.

It published its third annual report to Parliament in June 2011. The report focuses on three areas:

  • Progress in reducing emissions - emissions have actually risen by 3%;
  • Underlying progress in reducing emissions - this is flat (which in incompatible with the deep cuts required);
  • Progress against indicators - this has been mixed and a 'step change' is still required.

Of particular interest in this report were references to heat from renewable sources, which "remains very low" at 2% compared to the 12% target set by the government (see below). The Electricity Market Reform process will also be key to achieving future carbon budgets.

Strategy and Action Plan for Microgeneration

The Government's new Microgeneration strategy and action plan were published in June 2011.  The last full microgeneration strategy was in 2006 and the scene looked very different then. Spookily, however, the messages are alarmingly similar: that document talks about the upfront cost of renewables being off putting, difficulty in accessing resources and he problems with planning and building regulations policy!

This latest paper is the result of a consultation last year and is based on two core principles: that financial incentives will help to start the move towards microgeneration but will then tail off; and secondly, as progress is not entirely dependent on money, those other barriers to progress need to be identified and removed. This strategy sets out actions to do that , ie who will do what and by when.

The key areas that need to be tackled include the Microgeneration Certification Scheme scheme, required changes to the SAP process and the need for development of further skills and knowledge.

Planning

The Draft national Planning Policy Framework

In the paper The Plan for Growth, which was issued alongside the Budget 2011, the Government gave details of its plans to reform the planning system. The latest raft of announcements are part of that process.

In July the DCLG published the draft national planning policy framework. Planning has long been identified as one of the barriers in relation to progress on many fronts, and it has been Government policy for some time (both this government and the last) to improve its performance. This document has been released in draft as part of a consultation process. Its aim is to set down the Government's planning policies clearly.

Added to the Policy Framework, the Government has also announced proposals for  a 'planning guarantee' and details of further proposed changes to information requirements. The planning guarantee will seek to ensure that no planning application takes more than 12 months to determine (including any appeal process). The information requirements stem from complaints that applicants are asked for too much detailed information, some of which is of marginal relevance but time consuming and costly to produce. The implication is that the practice of asking for such information will be constrained.

The National Policy Statements (NPS)

The Government has finally come to the end of the process of introducing new Policy Statements for Energy Infrastructure.   Between 2009 and 2010 the Government consulted on the first drafts of these documents. Over 3,000 responses were received. A second consultation was undertaken between October 2010 and January 2011. The final versions of the six statements were presented to Parliament on 23 June 2011. The main ones for consideration are the Overarching Energy NPS (EN 1) and the Renewable Energy Infrastructure NPS (EN 3). They were designated by the Secretary of State on 19 July and are therefore in force.

This means that the Infrastructure Planning Commission (IPC) has to have regard to them in its work. When it is abolished upon the passing of the Localism Bill, they will have effect on its successor body, the Major Infrastructure Planning Unit in the Planning Inspectorate.

The Government still has to sort the problem of delay to major planning applications and it is clear that this threatens the achievement of the climate change national targets. It has decided to replace the Infrastructure Planning Commission with a new Major Infrastructure Planning Unit in the Planning Inspectorate. It remains to be seen whether this will work.

Electricity Market Reform

The government has plans to reshape the UK electricity market framework, largely governed by the Electricity Act 1989, in order to provide better encouragement for investment in low carbon technologies.

A consultation paper was published in December 2010 called Electricity Market Reform and this has now been followed by a White Paper this year.  The Consultation opened on 16 December and closed on 10 March. In the covering note DECC says:

"In his Annual Energy Statement to Parliament on 27 July 2010, the Secretary of

State announced that Government will publish a consultation document on

electricity market reform to examine the reforms necessary to achieve the

Government's objectives on decarbonisation, renewables energy, security of supply and affordability.

The Electricity Market Reform Project will develop and deliver a new market framework that will enable the cost effective delivery of secure supplies of low carbon energy."

This is a key area. It is estimated that at least £200 bn is required to bring the infrastructure up to the required standards and the Government is keen to ensure that this investment is not jeopardized by the current system.

The white paper has now been published, again in July 2011. Entitled Planning Our Electric Future: a white paper for secure, affordable and low carbon electricity, it is 232 pages long. It sets out the Government's commitment to 'transform' the the UK's electricity supply system to ensure that supply does what it says on the tin ie is secure, low carbon and affordable.

It is worth quoting the bold rhetoric in paragraph 2:

"The package of reforms outlined here will mean that by 2030 we will have: a flexible, smart and responsive electricity system, powered by a diverse and secure range of low carbon sources of electricity … and we will have made this transition at the least cost to the consumer."

It seems that the unprecedented challenge that this task represents is all in a day's work for DECC.

Renewables Study for DECC

In June 2011 an independent study prepared for DECC by Arup was published. This is a mammoth document at just short of 300 pages and aims to provide baseline data to inform a consultation this summer on support levels for a range of renewable electricity technologies for the period 2013 - 2017 under the Renewables Obligation and Feed in Tariffs.

The debacle over solar PV has shown that DECC needs to ensure that it gets its data right when using such data to underpin important financial incentives. It is clear now that this was not the case with predictions on solar farms and so the Department is seeking to canvass external views on such matters.

This report is in two parts: the maximum feasible resource potential of renewable electricity technologies and, secondly, their generation costs. A number of constraints were taken into account (such as grid connections) before arriving at three deployment scenarios on the maximum amount of capacity that could be built per year - low, medium and high. The former would apply if current constraints continue, the middle choice if some are removed, and the latter if most constraints are relaxed.

As indicated below, the consultation on the Renewable Obligation banding, which this report supports, has not yet been released but is expected at any time.

The UK Renewable Energy Roadmap

July also saw the publication of the UK Renewable Energy Roadmap by DECC. This is a further 100 pages of reading and outlines a plan of action to accelerate deployment.

The Office for Renewable Energy Deployment (ORED) has been consulting for some time to identify the best way forward. This identifies 8 technologies that can deliver 90% of the required capacity.

The Solar Trade Association and REA have been critical of the fact that solar PV did not make it into the charts as it were. Many think that solar is likely to have a bigger effect  than currently envisaged by the Government.

DECC Acts to Close a Legal Loophole

As mentioned above, the rush to solar PV has caused some concern in Whitehall and the Government therefore felt the need to act to calm the growth.

The problem is with the amount of funding that has been earmarked for the Feed in Tariff regime. It now transpires that this is woefully inadequate and for this reason in June 2011 the Government followed up its 'fast track' review consultation process with the announcement of proposed changes that came into effect from 1 August 2011. These drastically reduced the Feed in Tariffs applicable to stand alone projects (ie those not buildings or roof mounted) and projects over 50 kw in capacity. In simple terms, the effect of these changes was to make such systems uneconomic and so by removing their business case support, the Government ensured that they would not proceed.

The Government has made it clear that the purpose of these changes was to reduce the pressure on the FIT budget, which is fixed for this spending period (up until 2014). It was concerned about the call of such large projects on the FIT pot of money.

It is therefore with some consternation that DECC has uncovered a legal loophole that could possibly allow many more larger or 'stand alone' systems to slip through the net and still be able to claim the higher FITs.

The way that this works is relatively straightforward. Due to the wording of the complex regulations, it is permitted for a developer to fit a solar PV system of at least 50kw and then to extend that system within the 12 month period following the installation. Under the regulations, if that happens, the complete, enlarged, system can then claim the same Feed in Tariff as the original system.

This would not be an issue at all were it not for the Government's changes to constrain the development of the so called 'solar farms' on open land. But bearing in mind the fact that such systems were effectively halted by the changes in FIT levels, this loophole suddenly became vitally important.

The reason is simple. A developer could fit a solar PV system with a capacity of more than 50 kw before the 1 August deadline, get this commissioned and registered with OFGEM and the clock would then stop. That developer would then have a full year to extend that system up to the very highest limit of 5 MW (200 times larger) and still be able to claim the higher rate of 29.3 pence per kwh, not the heavily curtailed rate of 8.5 pence per khw.

The existence of this loophole was widely known in the industry and the legal advisers working for solar PV developers.  In an unusual step, DECC have now confirmed that their lawyers have reached the same conclusion, ie that this is possible, and therefore have taken urgent steps to remedy the situation.

Just before the summer recess on 27 July 2011, DECC went out to consultation on a move to change this position. Its paper Consultation on a change to the rules on the treatment of extensions to installations under the GB Feed in Tariffs scheme, makes clear that it intends to close this legal loophole as soon as possible.

The Government now proposes a further amendment to the FITs Order that would effectively prohibit extensions within 12 months having this effect. They have issued a consultation paper and their response but have still not managed to lay the Orders before Parliament to bring this into effect.

This has a number of important consequences. The Solar Power Portal undertook a review of those projects that had made it 'under the wire' before the 1 August deadline. These included many large schemes that had been commissioned and built in record time after planning consent had been given. But some of these projects did not actually make it. In other words, a developer tried to complete a large facility before 1 August but was unable to do so. In these circumstances, provided that some part of the facility over 50 kw was commissioned before the deadline, construction work can continue until the loophole is closed and the full park, once completed, can still claim the higher FIT rate.

Conclusions

Over the past twelve months I have worked with local authorities up and down the country in relation to low carbon and renewable energy projects. During that time I have witnessed a sea change in views and the level of awareness of green issues. Last year it was difficult to get green issues on the management team agenda; now the financial incentives, together with the publicising of the wider benefits of renewable energy schemes to local authorities have changed all that.

Many councils are developing sophisticated renewable energy schemes and some are choosing ambitious, energy self sufficiency targets. The next twelve months will move this agenda on still further and will be an exciting time for all concerned.