In the last quarter, there has been many events, publications and legislation announced that will effect the Power and Renewables sector.
Below is a summary of what has happened:
Amber Rudd re-set speech
The Energy Secretary Amber Rudd has announced that the government will be launching a consultation to close all unabated coal-fired power stations in spring 2016. The consultation proposes to phase out coal by 2025, and restrict its use from 2023. This will make the UK the first country to put a moratorium on coal. The government also withdrew its funding for the CCS commercialisation programme.
Ms Rudd has also promised to support 10GW of new offshore wind projects in the 2020s on the proviso that the projects meet the government's conditions on cost reductions. If the industry is able to meet these conditions, there will be funding made available for three auctions during this Parliament, the first of which will take place by the end of 2016.
Autumn Statement RHI update
The future of the RHI was announced in the Autumn Statement last week. Despite initial concerns that the scheme would be cut short, the Government has confirmed its intention to extend the RHI to 2020/21; however, with reforms to reduce its budget by £700 million, to £1.15 billion.
Hinkley Point C/China – update CFD price?
China General Nuclear Power (CGN) has taken a 33.5% stake in the Hinkley Point C nuclear plant with EDF holding the remaining ownership stake of 66.5%. Having failed to secure other investment (including losing Centrica at the beginning of 2013), this deal has been crucial for the continuation of the project.
The Plant was originally scheduled to begin producing power in 2017; however, due to numerous delays EDF now predict the plant will be on stream in 2025. The agreement for subsidies with the UK Government provides for a long stop date of 2033. The current agreed strike price is £89.50/MWH for 35 years if the final investment decision is taken on Sizewell C. If this decision is not taken the strike price will be £92.50/MWH.
Climate Change Levy
As part of the July 2015 summer budget, George Osborne announced that the Climate Change Levy (CCL) exemption for electricity sourced from renewables would be removed. The changes were brought in 24 days later, at the beginning of August 2015, meaning that electricity suppliers could only claim certificates for electricity generated before 1 August 2015. Ofgem have stopped issuing any certificates for electricity generated after this date.
The decision to remove the CCL and the speed with which the decision was enacted is being challenged through the judicial review procedure. Drax Group and Infinis Energy have issued proceedings against the Treasury on the grounds of legitimate expectation and proportionality as a result of the notice period given when removing the exemption. The court has been asked to consider a reasonable and proportionate notice period.
The 21st session of the Conference of Parties (COP) began in Paris this week where at least 150 heads of state and government have gathered to discuss climate change. There is widespread hope that this will be the first year in which the Parties will achieve a legally binding and universal agreement on climate change, with an overall goal of keeping global warming below 2°C.
But what will a successful agreement look like? There is an understanding that a global agreement of this type will need to leave room for 'ratchet' and 'review' mechanisms. The review element of the Paris Agreement will enable parties to assess the impact of the agreement over the course of the next 35 years. The ratchet mechanism will enable the agreement to be tightened and the goals shifted as technologies advance and countries develop.
Over 180 countries have submitted their pledges towards a global climate change pact including the US and China - the two largest emitters of greenhouse gases.
CMA investigation into Big Six update
Following their publication of the Summary of Provisional Findings Report on 7 July 2015, over the past few months the Competition Markets Authority (CMA) has been considering the responses from suppliers and interested parties to these findings. At this stage the CMA is also due to be consulting on remedies and response hearings, following publication of its 'Notice of Possible remedies', also in July.
The provisional decision on remedies was initially due in October 2015. This date has now been pushed back to January 2016, the reason given being the volume of responses that the CMA has received for review. The investigation began with enthusiasm, having been initiated by the former Energy Secretary following pressure from the public and the Labour party; however, the appetite of the Conservative government towards intervention in the energy market has been questioned. The revised statutory deadline is currently set for 25 June 2016.