Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

The authorisations required to construct and operate generation facilities depends on the type and size of facility to be constructed or operated. By way of example, certain types of energy infrastructure fall within the category of ‘nationally significant infrastructure project’, and as such require a Development Consent Order (DCO) under the Planning Act 2008. The thresholds for projects falling under this category are more than 50MW onshore, and more than 100MW offshore. Applications for DCO are made to and publicly examined by the Planning Inspectorate who then makes a recommendation to the Secretary of State for Energy and Climate Change. Projects with a generating capacity of 50MW and less in England and Wales are consented under the Town and Country Planning Act 1990.

For offshore generating stations with a generating capacity of more than 1MW but less than or equal to 100MW, consent under section 36 of the Electricity Act 1989 is also required.

In Scotland, section 36 of the Electricity Act 1989 applies to all projects above 50MW. Projects that are less must apply for consent to the local planning authority under the Scottish Planning Act. The Scottish Executive is responsible for dealing with applications for consent for generating projects onshore. Marine Scotland, a directorate of the Scottish Executive, is responsible for dealing with applications for consent under section 36 of the Electricity Act 1989 for offshore generating stations in Scottish waters.

Depending on the type of plant, further authorisations such as relating to health and safety, environmental or nuclear specific matters may also be required from the appropriate regulator.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

Generators applying directly to connect to the transmission system (ie, with a capacity of at least 100MW) need a connection agreement with National Grid Electricity Transmission (NGET) and are required to complete a connection application form, provide technical data and pay the relevant application fee.

The generator is required to become a party to the Connection and Use of System Code (CUSC) Framework Agreement and comply with the CUSC and the requirements of the Grid Code (which sets out rules related to planning, operation and use of the electricity transmission network). The Grid Code, the Balancing and Settlement Code and the System Operator Transmission Owner Code are maintained by NGET in accordance with its transmission licence to govern the relationship between it and the electricity industry participants.

Small generators wishing to connect to the distribution network, that do not require explicit access rights to the National Electricity Transmission System, make similar agreements with the relevant distribution network operator.

There may be other requirements, such as the provision of financial security by the generator, if additional works are required to be made before a connection is available.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Government policy does encourage power generation based on alternative energy sources, in particular, renewable energies. See the United Kingdom chapter in Getting the Deal Through: Renewable Energy 2019.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

The Climate Change Act 2008 was the world’s first legally binding climate change legislation. The United Kingdom is committed to achieving long-term goals of reducing greenhouse gas emissions and to ensuring steps are taken towards adapting to the impact of climate change under the Climate Change Act 2008, in addition to which, pursuant to the EU Renewable Energy Directive 2009/28 on the promotion of use of energy from renewable sources, the United Kingdom committed to have 15 per cent of its energy consumption derive from renewable sources by 2020 (Promotion of the Use of Energy from Renewable Sources Regulations 2011 (SI 2011/243)).

In November 2016, the government published its plans to upgrade UK energy infrastructure, reaffirming its commitment to spend £730 million of annual support on renewable electricity projects, also setting out proposals for the next steps to phase out electricity generation from unabated coal-fired power stations within the next decade. This indicates that government policy in the long-term is to invest in new, cleaner energy capacity.

Storage

Does the regulatory framework support electricity storage including research and development of storage solutions?

Electricity storage is treated as a form of electricity generation and, as such, the applicable legal framework for electricity storage is currently the same as that applicable to electricity generation. As a result, there is a lack of legislative clarity with respect to electricity storage that may act as a deterrent to investment. Towards the end of 2017, Ofgem ran a consultation with the aim of making changes to the electricity generation licence to make it fit for storage. Ofgem has stated that the intention of the changes would be to provide regulatory certainty to storage facilities, both existing and developing, encourage deployment of this new technology into the system and to ensure that a level playing field exists, so that storage can compete fairly with other sources of flexibility. The proposed changes would also address in an appropriate manner the issues storage facilities face surrounding final consumption levies (currently some storage could face double charging of final consumption levies both at the time of importing from and at the time of exporting electricity to the grid). The consultation is currently awaiting decision but indicates that the government intends to encourage the support of electricity storage research and solutions.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

The United Kingdom does not have a separate subsidy regime for new nuclear power plants, however nuclear generation may be eligible for subsidies designed to promote low-carbon generation as well as being able to participate in capacity market auctions. It is expected that government policy in relation to new nuclear power plants will also take its lead from public response to the progress of the Hinkley Point C plant.