The government published its delayed Energy White Paper on 23 May 2007.
Much of the White Paper comprises broad policy statements and contains little that is new. A high level summary of the topics covered can be found in our separate note on the White Paper. However, one of the few areas where the White Paper does outline detailed new policy proposals is renewables and, in particular, the banding of the Renewables Obligation.
The government confirms its targets for renewables to provide ten per cent of UK electricity by 2010 and 20 per cent by 2020 and stresses its commitment to the Renewables Obligation. The White Paper explains how the government intends to strengthen the Renewables Obligation, primarily by:
- retaining the buy-out price link to the Retail Price Index (contrary to previous indications);
- increasing the Renewables Obligation level up to 20 per cent (on a guaranteed headroom basis - i.e. the level rises with renewable capacity); and
- introducing banding.
Banding will involve projects that utilise different technologies being awarded more or less than one Renewable Obligation Certificate (ROC) for each MWh of electricity they produce depending on the stage of the technological development and associated costs. The aim is to bring forward emerging renewable technologies.
The government has launched a consultation on the proposed banding regime. Its current proposals are set out in the table at the end of this briefing note.
It should be noted that from April 2009, the current caps on co-fired ROCs will be removed.
The government intends to continue to support wave and tidal technologies through the Marine Renewables Deployment Fund, alongside Renewables Obligation banding.
The government proposes to introduce banding on 1 April 2009. To maintain investor confidence, it is proposed that all schemes falling within the “Established” band, which would under the old regime have been entitled to one ROC per MWh, will remain entitled to one ROC per MWh provided that they are operational by 1 April 2009.
A delicate balance
The banding proposals remain broadly similar to those previously indicated by the DTI. The inherent difficulties in adjusting the Renewables Obligation in this way, as highlighted in our previous notes, remain.
It is, however, interesting to see, for the first time, concrete proposals regarding the extent of the banding, in terms of number, level and technology breakdown.