UK Energy Pocy Lwas Regulations

ENERGY POLICY, LAWS AND REGULATIONS HANDBOOK

VOLUME 1 BASIC STRATEGY AND REGULATIONS

International Business Publications, USAWashington DC, USA - United Kingdom

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ENERGY POLICY, LAWS AND REGULATIONS HANDBOOK VOLUME 1 BASIC STRATEGY AND REGULATIONS

UPDATED ANNUALLY

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Cover Design: International Business Publications, USA International Business Publications, USA. has used its best efforts in collecting, analyzing and preparing data, information and materials for this unique handbook. Due to the dynamic nature and fast development of the economy and business environment, we cannot warrant that all information herein is complete and accurate. IBP does not assume and hereby disclaim any liability to any person for any loss or damage caused by possible errors or omissions in the handbook. This handbook is for individual use only. Use this handbook for any other purpose, included but not limited to reproducing and storing in a retrieval system by any means, electronic, photocopying or using the addresses or other information contained in this handbook for any commercial purposes requires a special written permission from the publisher. 2009 4th Edition Updated Reprint International Business Publications, USA ISBN 1-4387-4992-9 For customer service and information, please contact: in the USA: International Business Publications, USA P.O.Box 15343, Washington, DC 20003 Phone: (202) 546-2103, Fax: (202) 546-3275. E-mail: [email protected]

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ENERGY POLICY, LAWS AND REGULATIONS HANDBOOK

VOLUME 1 BASIC STRATEGY AND REGULATIONS

TABLE OF CONTENTS

STRATEGIC AND BUSINESS PROFILES.............................................................................................. 7 STRATEGIC PROFILE............................................................................................................................. 7

COUNTRY OVERVIEW......................................................................................................................... 8 ECONOMIC OVERVIEW...................................................................................................................... 8 Geography ............................................................................................................................................. 9 People .................................................................................................................................................. 11 Government ......................................................................................................................................... 12 Economy .............................................................................................................................................. 14 Communications .................................................................................................................................. 17 Transportation ..................................................................................................................................... 17 Military ................................................................................................................................................ 18 Transnational Issues............................................................................................................................ 18

IMPORTANT INFORMATION FOR UNDERSTANDING UK ........................................................... 20 BASIC PROFILE ................................................................................................................................. 20 PEOPLE .............................................................................................................................................. 21 HISTORY ............................................................................................................................................. 21 GOVERNMENT................................................................................................................................... 23 U.S.-U.K. RELATIONS........................................................................................................................ 25 US AMBASSADOR .............................................................................................................................. 27

UK ENERGY POLICY AND STRATEGY ............................................................................................. 28 ENERGY SECTOR PROFILE ................................................................................................................ 28

Country Overview................................................................................................................................ 28 Economic Overview ............................................................................................................................. 28 Energy Overview ................................................................................................................................. 28 Environmental Overview ..................................................................................................................... 29 Background.......................................................................................................................................... 30 Oil ........................................................................................................................................................ 30 Natural Gas ......................................................................................................................................... 32 Coal ..................................................................................................................................................... 34 Electricity............................................................................................................................................. 34 Renewables .......................................................................................................................................... 36 Environment......................................................................................................................................... 36

ENERGY POLICY AND REGULATIONS ............................................................................................ 37 OVERVIEW ................................................................................................................................................ 37 1980S MARKET LIBERALISATION............................................................................................................... 38 ENERGY MARKET...................................................................................................................................... 38




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Primary energy sources....................................................................................................................... 38 Coal ..................................................................................................................................................... 38 Gas....................................................................................................................................................... 39 Nuclear Power..................................................................................................................................... 39 Renewables .......................................................................................................................................... 39 Energy end usage................................................................................................................................. 39 Carbon emissions reduction ................................................................................................................ 40 Climate Change Bill ............................................................................................................................ 40

RENEWABLE ENERGY................................................................................................................................ 40 ENERGY POVERTY..................................................................................................................................... 41 2007 ENERGY WHITE PAPER .................................................................................................................... 42

Government strategy............................................................................................................................ 42 Energy conservation ............................................................................................................................ 43 Energy supply ...................................................................................................................................... 44 Response of the Scottish Government .................................................................................................. 44

ENERGY REVIEW ...................................................................................................................................... 44 Background.......................................................................................................................................... 45 Contents ............................................................................................................................................... 45 Cleaner Energy.................................................................................................................................... 46 The Energy Security Challenge ........................................................................................................... 47

ISSUES OF THE UK POLICY..................................................................................................................... 47 ENERGY USE AND CONSERVATION ................................................................................................. 48

CARBON DIOXIDE EMISSIONS .................................................................................................................... 48 Future targets ...................................................................................................................................... 48 Past performance................................................................................................................................. 48

FINAL ENERGY CONSUMPTION .................................................................................................................. 49 ENERGY IMPORTS...................................................................................................................................... 49 ELECTRICITY SUPPLY................................................................................................................................ 50

Fuel sources......................................................................................................................................... 50 The UK 'energy gap' ............................................................................................................................ 50 energy SOURCES ................................................................................................................................ 51

ENERGY CONSERVATION REGULATIONS.............................................................................................. 53 Housing................................................................................................................................................ 53 Transport ............................................................................................................................................. 53 Industry................................................................................................................................................ 55

ENERGY RESEARCH................................................................................................................................... 55 ENERGY SOURCES IN THE UK ........................................................................................................... 56

NUCLEAR POWER IN THE UNITED KINGDOM ............................................................................................. 56 Economics of UK nuclear power ......................................................................................................... 56 The basics ............................................................................................................................................ 56 history .................................................................................................................................................. 57 Decommissioning................................................................................................................................. 58 Rising costs .......................................................................................................................................... 58 British Energy...................................................................................................................................... 58 Waste management and disposal ......................................................................................................... 58 Policy of the Labour Government........................................................................................................ 59 2006 energy review.............................................................................................................................. 59 2007 consultation................................................................................................................................. 60 2008 go-ahead given............................................................................................................................ 60 Public opinion...................................................................................................................................... 60 Opposition political parties' policies ................................................................................................... 61




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SOLAR POWER IN THE UNITED KINGDOM.................................................................................................. 61 PV commercialisation.......................................................................................................................... 62 Tariffs .................................................................................................................................................. 62

WIND POWER IN THE UNITED KINGDOM ................................................................................................... 62 Offshore wind farms ............................................................................................................................ 63 UK Offshore Windfarms ...................................................................................................................... 63 Onshore wind farms............................................................................................................................. 65 UK Onshore Windfarms ...................................................................................................................... 65

GEOTHERMAL POWER IN THE UNITED KINGDOM ...................................................................................... 67 ENERGY EFFICIENCY IN HOUSING: POLICY AND REGULATIONS ........................................ 68

CARBON EMISSIONS .................................................................................................................................. 68 Zero carbon ambition .......................................................................................................................... 68

DOMESTIC ENERGY USE ............................................................................................................................ 68 BUILDING REGULATIONS........................................................................................................................... 69

2006 changes ....................................................................................................................................... 69 Future changes .................................................................................................................................... 70 Home energy labelling......................................................................................................................... 71 Other rating schemes........................................................................................................................... 71

GRANTS .................................................................................................................................................... 71 Local government ................................................................................................................................ 71

DEMONSTRATION AND PIONEERING PROJECTS .......................................................................................... 72 International comparisons................................................................................................................... 72 Research .............................................................................................................................................. 73 Existing housing stock ......................................................................................................................... 73 Historic building regulations energy efficiency requirements............................................................. 73

PRINCIPAL LEGISLATIONS................................................................................................................. 75 ENERGY ACT 2008.................................................................................................................................... 81

CONTENT ........................................................................................................................................... 81 Part 1 Gas Importation and Storage ................................................................................................... 86 Part 2 Electricity from renewable sources ........................................................................................ 103 Part 3 Decommissioning of energy installations ............................................................................... 126 Part 4 Provisions relating to oil and gas........................................................................................... 154 Part 5 Miscellaneous ......................................................................................................................... 164 Part 6 General ................................................................................................................................... 180

PLANNING AND ENERGY ACT 2008 (C. 21)............................................................................................. 184 Energy policies .................................................................................................................................. 184 Interpretation..................................................................................................................................... 186

SUPPLEMENTS ...................................................................................................................................... 187 DEPARTMENT OF ENERGY AND CLIMATE CHANGE................................................................................. 187

Head Office Address .......................................................................................................................... 187 Ministers ............................................................................................................................................ 187 Senior Team....................................................................................................................................... 187

ENERGY CONTACTS ................................................................................................................................ 188 Advisory Panel contacts .................................................................................................................... 188 Carbon Abatement Technologies contacts......................................................................................... 188 UK Carbon Capture and Storage Demonstration Competition contacts........................................... 188 Climate Change contacts ................................................................................................................... 188 Coal contacts ..................................................................................................................................... 188 Competitiveness contacts................................................................................................................... 189 Downstream Gas & Electricity contacts............................................................................................ 189




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Electricity Licence Exemptions contacts ........................................................................................... 189 Electricity Markets contacts .............................................................................................................. 189 Energy Better Regulation contacts .................................................................................................... 190 'Energy Consumption in the UK' publication contacts ...................................................................... 190 Energy Efficiency contacts................................................................................................................. 190 Energy & Environment Research Programme (EERP) contacts....................................................... 190 'Energy - It's Impact...' contacts......................................................................................................... 190 Energy Mergers contacts ................................................................................................................... 191 Energy Markets Outlook contacts...................................................................................................... 191 Energy Market Structures contacts.................................................................................................... 191 Energy Prices contacts ...................................................................................................................... 191 Energy Statistics Publications contacts ............................................................................................. 191 Energy Services contacts ................................................................................................................... 192 Energy White Paper contacts ............................................................................................................ 192 Environmental Transformation Fund contacts .................................................................................. 192 EU Emissions Trading Scheme (EU ETS) contacts ........................................................................... 193 Fuel Poverty contacts ........................................................................................................................ 193 G8 & Gleneagles Dialogue contacts ................................................................................................. 193 Gas Infrastructure Projects contacts ................................................................................................. 194 Gas Markets contacts ........................................................................................................................ 194 General Energy Statistics contacts .................................................................................................... 194 Hydrogen and Fuel Cells contacts..................................................................................................... 194 IEA contacts....................................................................................................................................... 194 Inter-departmental Analysts Group Contacts .................................................................................... 194 International Oil Markets contacts.................................................................................................... 195 JWGEE contacts ................................................................................................................................ 195 Liberalisation contacts ...................................................................................................................... 195 Microgeneration contacts .................................................................................................................. 195 Nuclear Energy contacts.................................................................................................................... 195 Quality and Continuity of UK Supply contacts .................................................................................. 195 Regulation of Energy Markets contacts ............................................................................................. 196 Regional Energy Statistics contacts................................................................................................... 196 Renewables contacts.......................................................................................................................... 196 Security Of Supply contacts ............................................................................................................... 198 Smart Metering contacts.................................................................................................................... 198 The Southern Corridor contacts ........................................................................................................ 198 Transmission Charges contacts ......................................................................................................... 199 Updated Energy Projections contacts ............................................................................................... 199 Website Publisher (Energy) contacts................................................................................................. 199

STRATEGIC AND BUSINESS CONTACTS IN UK .......................................................................... 199 1. UK Government Agencies.............................................................................................................. 199 2. UK Trade Associations/Chambers of Commerce ......................................................................... 200 3. U.S. Embassy Contacts .................................................................................................................. 201 4. Washington DC-based USG Contacts (UK-specific)..................................................................... 201 5. Relevant U.S.-based Multipliers .................................................................................................... 202

BASIC FOREIGN COMMONWELATH OFFICE TREATIES ........................................................... 202 BRITAIN - THE BEST PLACE FOR INWARD INVESTMENT........................................................ 203




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STRATEGIC AND BUSINESS PROFILES

STRATEGIC PROFILE Capital London

51°30′N 0°7′W Most populous conurbation Greater London Urban Area

Official language English (de facto5) Government Constitutional monarchy - Queen HM Queen Elizabeth II - Prime Minister The Rt Hon Tony Blair MP (Labour)

Formation - Union of the Crowns 24 March 1603 - Acts of Union 1 May 1707 - Act of Union 1 January 1801 - Anglo-Irish Treaty 12 April 1922

Accession to EU 1 January 1973 Area

- Total 244,820 km² (79th) 94,526 sq mi

- Water (%) 1.34 Population

- 2005 estimate 60,209,5006 (21st) - 2001 census 58,789,194 - Density 243/km² (48th)

629/sq mi GDP (PPP) 2005 estimate

- Total $1.833 trillion (6th) - Per capita $30,436 (18th)

GDP (nominal) 2005 estimate - Total $2.201 trillion (5th) - Per capita $37,023 (13th)

HDI (2003) 0.939 (high) (15th) Currency Pound sterling (£) (GBP)

Time zone GMT (UTC+0) - Summer (DST) BST (UTC+1)

Internet TLD .uk7 Calling code +44

The United Kingdom of Great Britain and Northern Ireland (usually shortened to the United Kingdom, the UK, or Britain) is a country and sovereign state that is situated in west Northern Europe. Its territory and population are primarily situated on the island of Great Britain and in Northern Ireland on the island of Ireland, as well as numerous smaller islands in the surrounding seas. The United Kingdom is bounded by the Atlantic Ocean, and its ancillary bodies of water, including the North Sea, the English Channel, the Celtic Sea, and the Irish Sea. The mainland is




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linked to France by the Channel Tunnel and Northern Ireland shares a land border with the Republic of Ireland.

The United Kingdom is a political union made up of four constituent countries: England, Scotland, Wales and Northern Ireland. The United Kingdom also has several overseas territories, including Bermuda, Gibraltar, Montserrat and Saint Helena among others. The dependencies of the Channel Islands and the Isle of Man, formally possessions of the Crown, form a federacy with the United Kingdom collectively known as the British Islands. A constitutional monarchy, the United Kingdom is a Commonwealth Realm, sharing the same person — Queen Elizabeth II — with the fifteen other Realms as monarch and head of state, forming a personal union with each.

A member of the G8, the United Kingdom is a highly developed country with the fifth largest economy in the world and second largest in Europe, estimated at US$2.2 trillion. It is the third most populous state in the European Union with a population of 60.2 million and is a founding member of the North Atlantic Treaty Organisation (NATO) and the United Nations (UN), where it holds a permanent seat on the Security Council. The UK is also one of the world's major nuclear powers.

After the end of the British Empire, the UK retains influence throughout the world because of the extensive use of the English language as well as through the world-spanning Commonwealth of Nations, headed by Queen Elizabeth II. Indeed, its role in the early years of the twenty-first century have led some to suggest that the world is currently experiencing a 'British Moment'.

COUNTRY OVERVIEW

Head of State: Queen Elizabeth II Prime Minister: Anthony (Tony) Blair, elected May 1997 Population : 59.1 million Location/Size: Western Europe, islands including the northern one-sixth of the island of Ireland between the North Atlantic Ocean and the North Sea, northwest of France/244,820 sq km (slightly smaller than Oregon) Capital City: London Language: English Ethnic groups: English 81.5%, Scottish 9.6%, Irish 2.4%, Welsh 1.9%, Ulster 1.8%, West Indian, Indian, Pakistani, and other 2.8% Religions: Anglican 27 million, Roman Catholic 9 million, Muslim 1 million, Presbyterian 800,000, Methodist 760,000, Sikh 400,000, Hindu 350,000, Jewish 300,000 (1991 est.) Defense: Army, 113,900; Navy, 44,500; Air Force, 52,540

ECONOMIC OVERVIEW

Chancellor of the Exchequer: Gordon Brown Currency: Pound sterling Exchange Rate: 1 US Dollar = 0.67 pounds Gross Domestic Product (GDP): $591.8 billion Real GDP Growth Rate : 1.8% : 2.9% Inflation Rate (consumer prices): 1.6% : 2.9% Unemployment Rate : 4.3% : 4.2% Merchandise Exports : $110.8 billion Merchandise Imports : $128.6 billion Major Trading Partners: United States, Germany, France, Netherlands Major Exports: Food, beverages, and tobacco; crude materials, fuels, chemicals, machinery,




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transport equipment Major Imports: Food, beverages, and tobacco; crude materials, fuels, chemicals, machinery, transport equipment

Background: Great Britain, the dominant industrial and maritime power of the 19th century, played a leading role in developing parliamentary democracy and in advancing literature and science. At its zenith, the British Empire stretched over one-fourth of the earth's surface. The first half of the 20th century saw the UK's strength seriously depleted in two World Wars. The second half witnessed the dismantling of the Empire and the UK rebuilding itself into a modern and prosperous European nation. The UK currently is weighing the degree of its integration with continental Europe. A member of the EU, it chose to remain outside of the EMU for the time being. Constitutional reform is also a significant issue in the UK. Regional assemblies with varying degrees of power opened in Scotland, Wales, and Northern Ireland in 1999.

GEOGRAPHY

Location: Western Europe, islands including the northern one-sixth of the island of Ireland between the North Atlantic Ocean and the North Sea, northwest of France Geographic coordinates: 54 00 N, 2 00 W

Map references: Europe

Area: total: 244,820 sq km land: 241,590 sq km water: 3,230 sq km note: includes Rockall and Shetland Islands Area - comparative: slightly smaller than Oregon Land boundaries: total: 360 km border countries: Ireland 360 km Coastline: 12,429 km Maritime claims: continental shelf: as defined in continental shelf orders or in accordance with agreed upon boundaries exclusive fishing zone: 200 nm territorial sea: 12 nm Climate: temperate; moderated by prevailing southwest winds over the North Atlantic Current; more than one-half of the days are overcast Terrain: mostly rugged hills and low mountains; level to rolling plains in east and southeast

Elevation extremes: lowest point: Fenland -4 m highest point: Ben Nevis 1,343 m

Natural resources: coal, petroleum, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica, arable land

Land use: arable land: 25% permanent crops: 0% permanent pastures: 46% forests and woodland: 10% other: 19%




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Irrigated land: 1,080 sq km

Natural hazards: NA

Environment - current issues: sulfur dioxide emissions from power plants contribute to air pollution; some rivers polluted by agricultural wastes; and coastal waters polluted because of large-scale disposal of sewage at sea

Environment - international agreements: party to: Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulphur 94, Air Pollution-Volatile Organic Compounds, Antarctic-Environmental Protocol, Antarctic Treaty, Biodiversity, Climate Change, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Nuclear Test Ban, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands, Whaling signed, but not ratified: Air Pollution-Persistent Organic Pollutants, Climate Change-Kyoto Protocol

Geography - note: lies near vital North Atlantic sea lanes; only 35 km from France and now linked by tunnel under the English Channel; because of heavily indented coastline, no location is more than 125 km from tidal waters

PEOPLE

Population: 59,511,464

Age structure: 0-14 years: 19% (male 5,816,313; female 5,519,479) 15-64 years: 65% (male 19,622,152; female 19,228,938) 65 years and over: 16% (male 3,864,612; female 5,459,970) Population growth rate: 0.25% Birth rate: 11.76 births/1,000 population Death rate: 10.38 deaths/1,000 population Net migration rate: 1.07 migrant(s)/1,000 population

Sex ratio: at birth: 1.05 male(s)/female under 15 years: 1.05 male(s)/female 15-64 years: 1.02 male(s)/female 65 years and over: 0.71 male(s)/female total population: 0.97 male(s)/female

Infant mortality rate: 5.63 deaths/1,000 live births

Life expectancy at birth: total population: 77.66 years male: 74.97 years female: 80.49 years

Total fertility rate: 1.74 children born/woman




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Nationality: noun: Briton(s), British (collective plural) adjective: British Ethnic groups: English 81.5%, Scottish 9.6%, Irish 2.4%, Welsh 1.9%, Ulster 1.8%, West Indian, Indian, Pakistani, and other 2.8% Religions: Anglican 27 million, Roman Catholic 9 million, Muslim 1 million, Presbyterian 800,000, Methodist 760,000, Sikh 400,000, Hindu 350,000, Jewish 300,000 (1991 est.) Languages: English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about 60,000 in Scotland)

Literacy: definition: age 15 and over has completed five or more years of schooling total population: 99%

GOVERNMENT

Country name: conventional long form: United Kingdom of Great Britain and Northern Ireland conventional short form: United Kingdom abbreviation: UK

Data code: UK Government type: constitutional monarchy Capital: London

Administrative divisions: 47 counties, 7 metropolitan counties, 26 districts, 9 regions, and 3 islands areas; England - 39 counties, 7 metropolitan counties*; Avon, Bedford, Berkshire, Buckingham, Cambridge, Cheshire, Cleveland, Cornwall, Cumbria, Derby, Devon, Dorset, Durham, East Sussex, Essex, Gloucester, Greater London*, Greater Manchester*, Hampshire, Hereford and Worcester, Hertford, Humberside, Isle of Wight, Kent, Lancashire, Leicester, Lincoln, Merseyside*, Norfolk, Northampton, Northumberland, North Yorkshire, Nottingham, Oxford, Shropshire, Somerset, South Yorkshire*, Stafford, Suffolk, Surrey, Tyne and Wear*, Warwick, West Midlands*, West Sussex, West Yorkshire*, Wiltshire; Northern Ireland - 26 districts; Antrim, Ards, Armagh, Ballymena, Ballymoney, Banbridge, Belfast, Carrickfergus, Castlereagh, Coleraine, Cookstown, Craigavon, Down, Dungannon, Fermanagh, Larne, Limavady, Lisburn, Londonderry, Magherafelt, Moyle, Newry and Mourne, Newtownabbey, North Down, Omagh, Strabane; Scotland - 9 regions, 3 islands areas*; Borders, Central, Dumfries and Galloway, Fife, Grampian, Highland, Lothian, Orkney*, Shetland*, Strathclyde, Tayside, Western Isles*; Wales - 8 counties; Clwyd, Dyfed, Gwent, Gwynedd, Mid Glamorgan, Powys, South Glamorgan, West Glamorgan note: England may now have 35 counties and Wales 9 counties

Dependent areas: Anguilla, Bermuda, British Indian Ocean Territory, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Guernsey, Jersey, Isle of Man, Montserrat, Pitcairn Islands, Saint Helena, South Georgia and the South Sandwich Islands, Turks and Caicos Islands

Independence: England has existed as a unified entity since the 10th century; the union between England and Wales was enacted under the Statute of Rhuddlan in 1284; in the Act of Union of 1707, England and Scotland agreed to permanent union as Great Britain; the legislative union of Great Britain and Ireland was implemented in 1801, with the adoption of the name the United Kingdom of Great Britain and Ireland; the Anglo-Irish treaty of 1921 formalized a partition of Ireland; six northern Irish counties remained part of the United Kingdom as Northern Ireland and




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the current name of the country, the United Kingdom of Great Britain and Northern Ireland, was adopted in 1927

National holiday: Celebration of the Birthday of the Queen (second Saturday in June) Constitution: unwritten; partly statutes, partly common law and practice

Legal system: common law tradition with early Roman and modern continental influences; no judicial review of Acts of Parliament; accepts compulsory ICJ jurisdiction, with reservations; British courts and legislation are increasingly subject to review by European Union courts

Suffrage: 18 years of age; universal

Executive branch: chief of state: Queen ELIZABETH II (since 6 February 1952); Heir Apparent Prince CHARLES (son of the queen, born 14 November 1948) head of government: Prime Minister Anthony (Tony) BLAIR (since 2 May 1997) cabinet: Cabinet of Ministers appointed by the prime minister elections: none; the monarchy is hereditary; following legislative elections, the leader of the majority party or the leader of the majority coalition is usually the prime minister

Legislative branch: bicameral Parliament comprised of House of Lords (consists of approximately 500 life peers, 92 hereditary peers and 26 clergy) and House of Commons (646 seats since 2005 elections; members are elected by popular vote to serve five-year terms unless the House is dissolved earlier) elections: House of Lords - no elections (note - in 1999, as provided by the House of Lords Act, elections were held in the House of Lords to determine the 92 hereditary peers who would remain there; elections are held only as vacancies in the hereditary peerage arise); House of Commons - last held 5 May 2005 (next to be held by May 2010) election results: House of Commons - percent of vote by party - Labor 35.2%, Conservative 32.3%, Liberal Democrats 22%, other 10.5%; seats by party - Labor 356, Conservative 197, Liberal Democrat 62, other 31; note - as of 10 February 2006 party by seat in the House of Commons: Labor 353, Conservative 196, Liberal Democrat 63, Scottish National Party/Plaid Cymru 9, Democratic Unionist 9, Sinn Fein 5 (but cannot vote), other 11 note: in 1998 elections were held for a Northern Ireland Assembly (because of unresolved disputes among existing parties, the transfer of power from London to Northern Ireland came only at the end of 1999 and has been suspended four times the latest occurring in October 2002); in 1999 there were elections for a new Scottish Parliament and a new Welsh Assembly

Judicial branch: House of Lords, several Lords of Appeal in Ordinary are appointed by the monarch for life

Political parties and leaders: Alliance Party (Northern Ireland) [Seamus CLOSE]; Conservative and Unionist Party [William HAGUE]; Democratic Unionist Party (Northern Ireland) [Rev. Ian PAISLEY]; Labor Party [Anthony (Tony) Blair]; Liberal Democrats [Charles KENNEDY]; Scottish National Party [Alex SALMOND]; Sinn Fein (Northern Ireland) [Gerry ADAMS]; Social Democratic and Labor Party or SDLP (Northern Ireland) [John HUME]; Ulster Unionist Party (Northern Ireland) [David TRIMBLE]; Welsh National Party (Plaid Cymru) [Dafydd Iwan WIGLEY]

Political pressure groups and leaders: Campaign for Nuclear Disarmament; Confederation of British Industry; National Farmers' Union; Trades Union Congress




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International organization participation: AfDB, AsDB, Australia Group, BIS, C, CCC, CDB (non-regional), CE, CERN, EAPC, EBRD, ECA (associate), ECE, ECLAC, EIB, ESA, ESCAP, EU, FAO, G- 5, G- 7, G-10, IADB, IAEA, IBRD, ICAO, ICC, ICFTU, ICRM, IDA, IEA, IFAD, IFC, IFRCS, IHO, ILO, IMF, IMO, Inmarsat, Intelsat, Interpol, IOC, IOM (observer), ISO, ITU, MONUC, NAM (guest), NATO, NEA, NSG, OAS (observer), OECD, OPCW, OSCE, PCA, SPC, UN, UN Security Council, UNAMSIL, UNCTAD, UNESCO, UNFICYP, UNHCR, UNIDO, UNIKOM, UNMIBH, UNMIK, UNOMIG, UNRWA, UNTAET, UNU, UPU, WCL, WEU, WHO, WIPO, WMO, WTrO, ZC

Diplomatic representation in the US: chief of mission: Ambassador Sir Christopher J. R. MEYER chancery: 3100 Massachusetts Avenue NW, Washington, DC 20008 telephone: (202) 588-6500 FAX: (202) 588-7870 consulate(s) general: Atlanta, Boston, Chicago, Cleveland, Houston, Los Angeles, New York, and San Francisco consulate(s): Dallas, Miami, and Seattle

Diplomatic representation from the US: chief of mission: Ambassador Philip LADER embassy: 24/31 Grosvenor Square, London, W. 1A1AE mailing address: PSC 801, Box 40, FPO AE 09498-4040 telephone: [44] (171) 499-9000 FAX: [44] (171) 409-1637 consulate(s) general: Belfast, Edinburgh

Flag description: blue with the red cross of Saint George (patron saint of England) edged in white superimposed on the diagonal red cross of Saint Patrick (patron saint of Ireland) and which is superimposed on the diagonal white cross of Saint Andrew (patron saint of Scotland); known as the Union Flag or Union Jack; the design and colors (especially the Blue Ensign) have been the basis for a number of other flags including other Commonwealth countries and their constituent states or provinces, as well as British overseas territories

ECONOMY

Economy - overview:

The UK, a leading trading power and financial center, is one of the quintet of trillion dollar economies of Western Europe. Over the past two decades, the government has greatly reduced public ownership and contained the growth of social welfare programs. Agriculture is intensive, highly mechanized, and efficient by European standards, producing about 60% of food needs with less than 2% of the labor force. The UK has large coal, natural gas, and oil reserves; primary energy production accounts for 10% of GDP, one of the highest shares of any industrial nation. Services, particularly banking, insurance, and business services, account by far for the largest proportion of GDP while industry continues to decline in importance. GDP growth slipped in 2001-03 as the global downturn, the high value of the pound, and the bursting of the "new economy" bubble hurt manufacturing and exports. Output recovered in 2004, to 3.2% growth, then slowed to 1.7% in 2005 and 2.7% in 2006. The economy is one of the strongest in Europe; inflation, interest rates, and unemployment remain low. The relatively good economic performance has complicated the BLAIR government's efforts to make a case for Britain to join the European Economic and Monetary Union (EMU)




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Critics point out that the economy is doing well outside of EMU, and public opinion polls show a majority of Britons are opposed to the euro. Meantime, the government has been speeding up the improvement of education, transport, and health services, at a cost in higher taxes and a widening public deficit.

GDP (purchasing power parity):

$1.928 trillion

GDP (official exchange rate):

$2.346 trillion

GDP - real growth rate:

2.8%

GDP - per capita (PPP):

$31,800

GDP - composition by sector:

agriculture: 1% industry: 25.6% services: 73.4%

Labor force: 31.1 million Labor force - by occupation:

agriculture: 1.4% industry: 18.2% services: 80.4%

Unemployment rate:

2.9%

Population below poverty line:

17%

Household income or consumption by percentage share:

lowest 10%: 2.1% highest 10%: 28.5%

Distribution of family income - Gini index:

36.8

Inflation rate (consumer prices):

3%

Investment (gross fixed):

17.2% of GDP

Budget: revenues: $973 billion expenditures: $1.04 trillion; including capital expenditures of $87 billion

Public debt: 42.2% of GDP Agriculture - products:

cereals, oilseed, potatoes, vegetables; cattle, sheep, poultry; fish

Industries: machine tools, electric power equipment, automation equipment, railroad equipment, shipbuilding, aircraft, motor vehicles and parts, electronics and




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communications equipment, metals, chemicals, coal, petroleum, paper and paper products, food processing, textiles, clothing, other consumer goods

Industrial production growth rate:

0%

Electricity - production:

363.2 billion kWh

Electricity - consumption:

345.2 billion kWh

Electricity - exports:

2.3 billion kWh

Electricity - imports:

9.8 billion kWh

Oil - production: 2.075 million bbl/day Oil - consumption:

1.827 million bbl/day

Oil - exports: 1.956 million bbl/day Oil - imports: 1.654 million bbl/day Oil - proved reserves:

4.487 billion bbl

Natural gas - production:

95.97 billion cu m

Natural gas - consumption:

98.47 billion cu m

Natural gas - exports:

9.8 billion cu m

Natural gas - imports:

12.3 billion cu m

Natural gas - proved reserves:

589 billion cu m

Current account balance:

-$57.68 billion

Exports: $468.8 billion f.o.b. Exports - commodities:

manufactured goods, fuels, chemicals; food, beverages, tobacco

Exports - partners:

US 13.9%, Germany 10.9%, France 10.4%, Ireland 7.1%, Netherlands 6.3%, Belgium 5.2%, Spain 4.5% (2006)

Imports: $603 billion f.o.b. Imports - commodities:

manufactured goods, machinery, fuels; foodstuffs

Imports - Germany 12.8%, US 8.9%, France 6.9%, Netherlands 6.6%, China 5.3%,




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partners: Norway 4.9%, Belgium 4.5% Reserves of foreign exchange and gold:

$38.83 billion

Debt - external: $8.28 trillion Economic aid - donor:

ODA, $10.7 billion

Currency (code): British pound (GBP) Exchange rates: British pounds per US dollar - 0.5418 (2006), 0.5493 (2005), 0.5462 (2004),

0.6125 (2003), 0.6672 (2002) Fiscal year: 6 April - 5 April

COMMUNICATIONS

Telephones - main lines in use:

32.943 million

Telephones - mobile cellular:

61.091 million

Telephone system:

general assessment: technologically advanced domestic and international system domestic: equal mix of buried cables, microwave radio relay, and fiber-optic systems international: country code - 44; 40 coaxial submarine cables; satellite earth stations - 10 Intelsat (7 Atlantic Ocean and 3 Indian Ocean), 1 Inmarsat (Atlantic Ocean region), and 1 Eutelsat; at least 8 large international switching centers

Radio broadcast stations:

AM 219, FM 431, shortwave 3

Television broadcast stations:

228 (plus 3,523 repeaters)

Internet country code:

.uk

Internet hosts: 4,688,307 Internet users: 37.8 million

TRANSPORTATION

Railways: total: 16,878 km broad gauge: 342 km 1.600-m gauge (190 km double track); note - all 1.600-m gauge track, of which 342 km is in common carrier use, and is in Northern Ireland standard gauge: 16,536 km 1.435-m gauge (4,928 km electrified; 12,591 km double or multiple track) (1996)




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Highways: total: 371,603 km paved: 371,603 km (including 3,303 km of expressways) unpaved: 0 km

Waterways: 3,200 km Pipelines: crude oil (almost all insignificant) 933 km; petroleum products 2,993 km; natural gas 12,800 km

Ports and harbors: Aberdeen, Belfast, Bristol, Cardiff, Dover, Falmouth, Felixstowe, Glasgow, Grangemouth, Hull, Leith, Liverpool, London, Manchester, Peterhead, Plymouth, Portsmouth, Scapa Flow, Southampton, Sullom Voe, Tees, Tyne

Merchant marine: total: 173 ships (1,000 GRT or over) totaling 2,917,708 GRT/3,063,113 DWT ships by type: bulk 4, cargo 33, chemical tanker 5, combination ore/oil 1, container 39, liquified gas 2, passenger 8, passenger/cargo 1, petroleum tanker 50, roll-on/roll-off 18, short-sea passenger 10, specialized tanker 1, vehicle carrier 1

Airports: 498

Airports - with paved runways: total: 357 over 3,047 m: 10 2,438 to 3,047 m: 33 1,524 to 2,437 m: 166 914 to 1,523 m: 93 under 914 m: 55

Airports - with unpaved runways: total: 141 1,524 to 2,437 m: 1 914 to 1,523 m: 23 under 914 m: 117

Heliports: 12

MILITARY

Military branches: Army, Royal Navy (includes Royal Marines), Royal Air Force Military manpower - availability: males age 15-49: 14,574,955 Military manpower - fit for military service: males age 15-49: 12,134,272 Military expenditures - dollar figure: $36.884 billion Military expenditures - percent of GDP: 2.7%

TRANSNATIONAL ISSUES

Disputes - international: Northern Ireland issue with Ireland (historic peace agreement signed 10 April 1998); Gibraltar issue with Spain; Argentina claims Falkland Islands (Islas Malvinas); Argentina claims South Georgia and the South Sandwich Islands; Mauritius claims island of




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Diego Garcia in British Indian Ocean Territory; Rockall continental shelf dispute involving Denmark, Iceland, and Ireland (Ireland and the UK have signed a boundary agreement in the Rockall area); territorial claim in Antarctica (British Antarctic Territory); Seychelles claims Chagos Archipelago in British Indian Ocean Territory

Illicit drugs: gateway country for Latin American cocaine entering the European market; producer and major consumer of synthetic drugs, synthetic precursor chemicals; major consumer of Southwest Asian heroin; money-laundering center




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IMPORTANT INFORMATION FOR UNDERSTANDING UK

Official Name: The United Kingdom of Great Britain and Northern Ireland

BASIC PROFILE

GEOGRAPHY

Area: 244,820 sq. km. (94,525 sq. mi.); slightly smaller than Oregon. Cities: Capital--London (metropolitan pop. about 7.1 million). Other cities--Birmingham, Glasgow, Leeds, Sheffield, Liverpool, Bradford, Manchester, Edinburgh, Bristol, Belfast. Terrain: 30% arable, 50% meadow and pasture, 12% waste or urban, 7% forested, 1% inland water. Land use--25% arable, 46% meadows and pastures, 10% forests and woodland, 19% other. Climate: Generally mild and temperate; weather is subject to frequent changes but to few extremes of temperature.

PEOPLE

Nationality: Noun--Briton(s). Adjective--British. Population: 59.1 million. Annual population growth rate : 0.24%. Major ethnic groups: British, Irish, West Indian, South Asian. Major religions: Church of England (Anglican), Roman Catholic, Church of Scotland (Presbyterian), Muslim. Major languages: English, Welsh, Irish Gaelic, Scottish Gaelic. Education: Years compulsory--12. Attendance--nearly 100%. Literacy--99%. Health: Infant mortality rate --5.78/1,000. Life expectancy --males 75 yrs.; females 80 yrs. Work force (28 million): Services--75.2%; manufacturing--15.6%; construction-- 6.5%; agriculture and fishing--1.9%; energy and water--0.8%.

GOVERNMENT

Type: Constitutional monarchy. Constitution: Unwritten; partly statutes, partly common law and practice. Branches: Executive--monarch (head of state), prime minister (head of government), cabinet. Legislative--bicameral parliament: House of Commons, House of Lords; Scottish Parliament, Welsh Assembly, and Northern Ireland Assembly. Judicial--magistrates' courts, county courts, high courts, appellate courts, House of Lords. Subdivisions: Municipalities, counties, parliamentary constituencies, province of Northern Ireland, and Scottish regions. Political parties: In Great Britain: Conservative; Labour; Liberal Democrats; also, in Scotland: Scottish National Party; in Wales: Plaid Cymru (Party of Wales). In Northern Ireland: Ulster Unionist Party, Social Democratic and Labour Party, Democratic Unionist Party, Sinn Fein, Alliance Party and other smaller parties. Suffrage: British subjects and citizens of other Commonwealth countries and the Irish Republic resident in the U.K., at 18.




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ECONOMY

GDP (Nominal GDP): $1.8 trillion. Annual growth rate : 2.1%. Per capita GDP : $24,300. Natural resources: Coal, oil, natural gas, tin, limestone, iron ore, salt, clay, chalk, gypsum, lead, silica. Agriculture (1.8% of GDP): Products--cereals, oilseed, potatoes, vegetables, cattle, sheep, poultry, fish. Industry (31.5% of GDP): Types--steel, heavy engineering and metal manufacturing, textiles, motor vehicles and aircraft, construction, electronics, chemicals. Trade : Exports--$267.6 billion: manufactured goods, fuels, chemicals; food, beverages, tobacco. Major markets--U.S., Germany, France, the Netherlands, Ireland. Imports--$311 billion: manufactured goods, machinery, fuels, foodstuffs. Major suppliers--Germany, U.S., France, the Netherlands, Japan.

PEOPLE

In 1999, the United Kingdom's population was estimated at over 59 million--the third- largest in Europe and the 18th-largest in the world. Its overall population density is one of the highest in the world. Almost one-third of the population lives in England's prosperous and fertile southeast and is predominantly urban and suburban, with approximately 7.1 million in the capital of London. The U.K.'s high literacy rate (99%) is attributable to universal public education introduced for the primary level in 1870 and secondary level in 1900. Education is mandatory from ages 5 through 16. About one-fifth of British students goes on to post-secondary education. The Church of England and the Church of Scotland are the official churches in their respective parts of the country, but most religions found in the world are represented in the U.K..

A group of islands close to continental Europe, the British Isles have been subject to many invasions and migrations, especially from Scandinavia and the continent, including Roman occupation for several centuries. Contemporary Britons are descended mainly from the varied ethnic stocks that settled there before the 11th century. The pre-Celtic, Celtic, Roman, Anglo-Saxon, and Norse influences were blended in Britain under the Normans, Scandinavian Vikings who had lived in Northern France. Although Celtic languages persist in Wales, Scotland and Northern Ireland, the predominant language is English, which is primarily a blend of Anglo-Saxon and Norman French.

HISTORY

The Roman invasion of Britain in 55 BC and most of Britain's subsequent incorporation into the Roman Empire stimulated development and brought more active contacts with the rest of Europe. As Rome's strength declined, the country again was exposed to invasion, including the pivotal incursions of the Angles, Saxons, and Jutes in the fifth and sixth centuries AD up to the Norman conquest in 1066. Norman rule effectively ensured Britain's safety from further intrusions; certain institutions, which remain characteristic of Britain, could develop. Among these are a political, administrative, cultural, and economic center in London; a separate but established church; a system of common law; distinctive and distinguished university education; and representative government.




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UNION

Both Wales and Scotland were independent kingdoms that resisted English rule. The English conquest of Wales succeeded in 1282 under Edward I, and the Statute of Rhuddlan established English rule 2 years later. To appease the Welsh, Edward's son (later Edward II), who had been born in Wales, was made Prince of Wales in 1301. The tradition of bestowing this title on the eldest son of the British Monarch continues today. An act of 1536 completed the political and administrative union of England and Wales.

While maintaining separate parliaments, England and Scotland were ruled under one crown beginning in 1603, when James VI of Scotland succeeded his cousin Elizabeth I as James I of England. In the ensuing 100 years, strong religious and political differences divided the kingdoms. Finally, in 1707, England and Scotland were unified as Great Britain, sharing a single parliament at Westminster.

Ireland's invasion by the Anglo-Normans in 1170 led to centuries of strife. Successive English kings sought to conquer Ireland. In the early 17th century, largescale settlement of the north from Scotland and England began. After its defeat, Ireland was subjected, with varying degrees of success, to control and regulation by Britain.

The legislative union of Great Britain and Ireland was completed on January 1, 1801, under the name of the United Kingdom. However, armed struggle for independence continued sporadically into the 20th century. The Anglo-Irish Treaty of 1921 established the Irish Free State, which subsequently left the Commonwealth and became a republic after World War II. Six northern, predominantly Protestant, Irish counties have remained part of the United Kingdom.

BRITISH EXPANSION AND EMPIRE

Begun initially to support William the Conqueror's (c. 1029-1087) holdings in France, Britain's policy of active involvement in continental European affairs endured for several hundred years. By the end of the 14th century, foreign trade, originally based on wool exports to Europe, had emerged as a cornerstone of national policy.

The foundations of sea power were gradually laid to protect English trade and open up new routes. Defeat of the Spanish Armada in 1588 firmly established England as a major sea power. Thereafter, its interests outside Europe grew steadily. Attracted by the spice trade, English mercantile interests spread first to the Far East. In search of an alternate route to the Spice Islands, John Cabot reached the North American continent in 1498. Sir Walter Raleigh organized the first, short-lived colony in Virginia in 1584, and permanent English settlement began in 1607 at Jamestown, Virginia. During the next two centuries, Britain extended its influence abroad and consolidated its political development at home.

Great Britain's industrial revolution greatly strengthened its ability to oppose Napoleonic France. By the end of the Napoleonic Wars in 1815, the United Kingdom was the foremost European power, and its navy ruled the seas. Peace in Europe allowed the British to focus their interests on more remote parts of the world, and, during this period, the British Empire reached its zenith. British colonial expansion reached its height largely during the reign of Queen Victoria (1837-1901). Queen Victoria's reign witnessed the spread of British technology, commerce, language, and government throughout the British Empire, which at its greatest extent encompassed roughly one-fifth to one-quarter of the world's area and population. British colonies contributed to the United Kingdom's extraordinary economic growth and strengthened its voice in world affairs.




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Even as the United Kingdom extended its imperial reach overseas, it continued to develop and broaden its democratic institutions at home.

20TH CENTURY

By the time of Queen Victoria's death in 1901, other nations, including the United States and Germany, had developed their own industries; the United Kingdom's comparative economic advantage had lessened, and the ambitions of its rivals had grown. The losses and destruction of World War I, the depression of the 1930s, and decades of relatively slow growth eroded the United Kingdom's preeminent international position of the previous century.

Britain's control over its empire loosened during the interwar period. Ireland, with the exception of six northern counties, gained independence from the United Kingdom in 1921. Nationalism became stronger in other parts of the Empire, particularly in India and Egypt.

In 1926, the U.K., completing a process begun a century earlier, granted Australia, Canada, and New Zealand complete autonomy within the Empire. They became charter members of the British Commonwealth of Nations (now known as the Commonwealth), an informal but closely knit association that succeeded the Empire. Beginning with the independence of India and Pakistan in 1947, the remainder of the British Empire was almost completely dismantled. Today, most of Britain's former colonies belong to the Commonwealth, almost all of them as independent members. There are, however, 13 former British colonies--including Bermuda, Gibraltar, the Falkland Islands, and others--which have elected to continue their political links with London and are known as United Kingdom Overseas Territories.

Although often marked by economic and political nationalism, the Commonwealth offers the United Kingdom a voice in matters concerning many developing countries. In addition, the Commonwealth helps preserve many institutions deriving from British experience and models, such as parliamentary democracy, in those countries.

GOVERNMENT

The United Kingdom does not have a written constitution. The equivalent body of law is based on statute, common law, and "traditional rights." Changes may come about formally through new acts of parliament, informally through the acceptance of new practices and usage, or by judicial precedents. Although parliament has the theoretical power to make or repeal any law, in actual practice the weight of 700 years of tradition restrains arbitrary actions.

Executive government rests nominally with the Monarch but actually is exercised by a Committee of Ministers (cabinet) traditionally selected from among the members of the House of Commons and, to a lesser extent, the House of Lords. The prime minister is normally the leader of the largest party in the Commons, and the government is dependent on its support.

Parliament represents the entire country and can legislate for the whole or for any constituent part or combination of parts. The maximum parliamentary term is 5 years, but the prime minister may ask the Monarch to dissolve parliament and call a general election at any time. The focus of legislative power is the 650-member House of Commons, which has sole jurisdiction over finance. The House of Lords, although shorn of most of its powers, can still review, amend, or delay temporarily any bills except those relating to the budget. The House of Lords has more time than the House of Commons to pursue one of its more important functions--debating public issues. In 1999, the government removed the automatic right of hereditary peers to hold seats in the House of Lords. The current house consists of appointed life peers who hold their seats for




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life and 92 hereditary peers who will hold their seats only until final reforms have been agreed upon and implemented. The judiciary is independent of the legislative and executive branches but cannot review the constitutionality of legislation.

The separate identities of each of the U.K.'s constituent parts also is reflected in their respective governmental structures. Up until the recent devolution of power to Scotland and Wales, a cabinet minister (the Secretary of State for Wales) handled Welsh affairs at the national level with the advice of a broadly representative council for Wales. Scotland maintains, as it did before union with England, different systems of law (Roman-French), education, local government, judiciary, and national church (the Church of Scotland instead of the Church of England). In addition, separate departments grouped under a Secretary of State for Scotland, who also is a cabinet member, handled most domestic matters. In late 1997, however, following approval of referenda by Scottish and Welsh voters (though only narrowly in Wales), the British Government introduced legislation to establish a Scottish parliament and a Welsh Assembly. Elections for the two bodies were held May 6, 1999. The Welsh Assembly opened on May 26, and the Scottish parliament opened on July 1, 1999. The devolved legislatures have largely taken over most of the functions previously performed by the Scottish and Welsh offices.

Devolved government was reestablished in Northern Ireland in December 1999 under the terms of the Good Friday Agreement, which established the basis for ending the political divisions and violence that had plagued Northern Ireland for decades. The Good Friday Agreement provides for a 108-member elected Assembly, overseen by a 12-minister Executive Committee (cabinet) in which unionists and nationalists share leadership responsibility. While Northern Ireland elects 18 representatives to the Westminster parliament in London, the two Sinn Fein MPs who won seats in the last election have refused to claim their seats.

Northern Ireland had its own parliament and prime minister from 1921 to 1973, when the British Government imposed direct rule in order to deal with the deteriorating political and security situation. From 1973, the Secretary of State for Northern Ireland, based in London, was responsible for the region, including efforts to resolve the issues that lay behind the "the Troubles."

By the mid-1990s, gestures toward peace encouraged by successive British Governments and by President Clinton began to open the door for restored local government in Northern Ireland. An IRA cease-fire and nearly 2 years of multiparty negotiations, led by former U.S. Senator George Mitchell, resulted in the Good Friday Agreement of April 10, 1998, which was subsequently approved by majorities in both Northern Ireland and the Republic of Ireland. Key elements of the Agreement include devolved government, a commitment of the parties to work toward "total disarmament of all paramilitary organizations," police reform, and enhanced mechanisms to guarantee human rights and equal opportunity. The Good Friday Agreement also called for formal cooperation between the Northern Ireland institutions and the Government of the Republic of Ireland, and it established the British-Irish Council, which includes representatives of the British and Irish Governments as well as the devolved Governments of Northern Ireland, Scotland and Wales.

The parties disagree over the implementation of key elements of the Good Friday Agreement, and sporadic violence by paramilitary organizations continues to threaten the normalization process. The key parties, nevertheless, remain committed to the peace process and continue to work for full implementation of the agreement. While Unionists insist that actual decommissioning of paramilitary weapons should precede normalization of political and security arrangements, they have acknowledged the significance of intermediate steps, including the inspection of IRA arms




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dumps in June 2000 by independent international inspectors. Movement on decommissioning has been mirrored by progress on political and security normalization.

The United States remains firmly committed to the peace process in Northern Ireland and continues to support normalization of institutions as the best means to ensure that all parties' commitment to relying solely on peaceful and democratic means to resolve issues. U.S. Government policy on Northern Ireland condemns all acts of terrorism and violence, perpetrated by any party on either side. It also cautions all Americans to question closely any appeal for financial or other aid from groups involved in the Northern Ireland conflict to ensure that contributions do not end up in the hands of those who support violence, either directly or indirectly.

The U.S. also is committed to Northern Ireland's economic development and to date has given or pledged contributions of more than $300 million to the International Fund for Ireland. The fund provides grants and loans to businesses to improve the economy, redress inequalities of employment opportunity, and improve crossborder business and community ties.

PRINCIPAL GOVERNMENT OFFICIALS

Head of State--Her Majesty Queen Elizabeth II Prime Minister (Head of Government)--The Rt. Hon. Gordon Brown, MP Secretary of State for Foreign and Commonwealth Affairs--The Rt. Hon. David Miliband, MP Ambassador to the U.S.--Sir David Manning Ambassador to the UN--Sir Emyr Jones Parry, KCMG

The United Kingdom maintains an embassy in the United States at 3100 Massachusetts Ave. NW, Washington, DC 20008 (tel. 202-588-6500; fax 202-588-7870).

POLITICAL CONDITIONS

Current Labour Prime Minister Tony Blair was elected on May 1, 1997, with a massive 176-seat majority in the House of Commons. Labour's victory ended an 18-year run of Conservative (Tory) Party rule in the U.K.. Blair worked hard to reorganize and reenergize the Labour Party, moving it steadily to the center of the political spectrum. Both main British parties support a strong transatlantic link but have become increasingly absorbed by European issues as Britain's economic and political ties to the continent grow in the post-Cold War world. Prime Minister Blair has promised that the U.K. will play a leading role in Europe. Britain's relationship with Europe, in particular its potential participation in the single European currency, the euro, is a subject of considerable political discussion in the U.K. Whether Britain will adopt the euro is likely to be a defining issue in the next U.K. national elections, which could take place as early as spring 2001.

U.S.-U.K. RELATIONS

The United Kingdom is one of the United States' closest allies, and British foreign policy emphasizes close coordination with the United States. Bilateral cooperation reflects the common language, ideals, and democratic practices of the two nations. Relations were strengthened by the U.K.'s alliance with the United States during both World Wars and its role as a founding member of NATO, in the Korean conflict, and the Persian Gulf War. The United Kingdom and the United States continually consult on foreign policy issues and global problems and share major foreign and security policy objectives. In the United Nations, the U.K. is a permanent member of the Security Council.




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The U.K. is a founding member of the North Atlantic Treaty Organization (NATO) and has been a member of the European Community (now European Union) since 1973. The U.K. is one of NATO's major European maritime powers and ranked third in 1996 among NATO countries in total defense expenditure.

The British armed forces are charged with protecting the United Kingdom and its overseas territories, promoting Britain's wider security interests, and supporting international peacekeeping efforts. The 44,000-member Royal Navy is in charge of the U.K.'s independent strategic nuclear arm, which consists of four Trident missile submarines. The Royal Marines provide commando units for amphibious assault and for specialist reinforcement forces in and beyond the NATO area. The British Army, with a reported strength of 110,000 in 1999, including 7,600 women, and the Royal Air Force with a strength of 55,000, along with the Royal Navy and Royal Marines, are active and regular participants in NATO and other coalition operations.

TRADE AND INVESTMENT

The United Kingdom has the fourth-largest economy in the world, has one of the largest economies in the European Union, and is a major international trading power. London ranks with New York as a leading international financial center.

The U.K. is the fourth-largest U.S. market after Canada, Japan, and Mexico; U.S. exports to the U.K. in 1999 were $38.3 billion. For the first time in 5 years, the U.S. ran a deficit with the U.K., importing $39.2 billion in 1999. The U.K. is a large source of foreign tourists in the U.S.

The U.S. and the U.K. share the world's largest investment partnership. U.S. investment in the U.K. reached $213.1 billion in 1999, while U.K. investment is valued at $183.0 billion. This investment sustains over one million American jobs.

Since 1979, the British Government has privatized most state-owned companies, including British Steel, British Airways, British Telecom, British Coal, British Aerospace, and British Gas, although in some cases the government retains a "golden share" in these companies. The Labour government has continued the privatization policy of its predecessor, including by encouraging "public-private partnerships" (partial privatization) in such areas as the National Air Traffic Control System.

The United Kingdom is an energy-rich nation with significant reserves of oil and gas in the North Sea and the Irish Sea and large coal resources. A total of 150 million tons of oil were produced in the U.K. in 1999. U.K. offshore areas should be an important source of continued production and new discoveries for some years. U.S. oil and oil-service companies participate actively in the North Sea oil industry and consider the United Kingdom an attractive environment for future investment.

PRINCIPAL U.S. OFFICIALS

Ambassador--Robert Holmes Tuttle Deputy Chief of Mission--David T. Johnson Minister-Counselor for Political Affairs--Maura Connelly Minister-Counselor for Commercial Affairs--Stephan Wasylko Minister-Counselor for Economic Affairs--Mark Tokola Minister-Counselor for Public Affairs--Rick Roberts Minister-Counselor for Management Affairs--Richard Jaworski Minister-Counselor for Consular Affairs--John Caulfield




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Regional Security Officer--Robert G. Reed U.S. Consul General in Belfast--Dean Pittman Principal Officer in Edinburgh--Cecile Shea

The U.S. Embassy in the United Kingdom is located at: 24 Grosvenor Sq., W1A 1AE, London (tel. [44] (207) 499-9000; fax [44] (207) 409-1637). Internet website: http://www.usembassy.org.U.K.

US AMBASSADOR

Robert Holmes Tuttle Ambassador, United Kingdom Term of Appointment: 07/14/2005 to present

Robert Holmes Tuttle was sworn in as U.S. Ambassador to the Court of St. James's on July 14, 2005. A businessman with extensive experience in the private sector, Mr. Tuttle is Co-Managing Partner of Tuttle-Click Automotive Group, one of the largest automobile dealer organizations in the United States.

Mr. Tuttle has served on the boards of several prominent civic organizations, including the Ronald Reagan Presidential Library Foundation, the University of Southern California Annenberg School of Communication, and the Los Angeles Museum of Contemporary Art where he was Chairman from 2001 to 2004.

Mr. Tuttle began a second career in the public sector when he joined the White House staff in 1982 as Special Assistant to President Reagan. In 1985, President Reagan appointed him Director of Presidential Personnel, a position he held until the end of the Administration. By Presidential Appointment, Mr. Tuttle served on the Board of Directors of the Woodrow Wilson International Center for Scholars for four years.

A California native, Mr. Tuttle graduated from Stanford University and earned his M.B.A. at the University of Southern California. Mr. Tuttle is married and has two daughters. Mr. Tuttle and his wife are collectors of modern and contemporary art.




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UK ENERGY POLICY AND STRATEGY

ENERGY SECTOR PROFILE

COUNTRY OVERVIEW

Location Western Europe, islands including the northern one-sixth of the island of Ireland between the North Atlantic Ocean and the North Sea, northwest of France

Population 60,441,457 Languages English, Welsh (about 26% of the population of Wales), Scottish form of Gaelic (about

60,000 in Scotland) Religion Christian (Anglican, Roman Catholic, Presbyterian, Methodist) 71.6%, Muslim 2.7%, Hindu

1%, other 1.6%, unspecified or none 23.1% (2001 census) Ethnic Group(s)

white 92.1%, black 2%, Indian 1.8%, Pakistani 1.3%, mixed 1.2%, other 1.6% (2001 census)

ECONOMIC OVERVIEW

Gross Domestic Product $2.2 trillion Real GDP Growth Rate (2004E, 2005E, 2006F)

3.2%, 1.8%, 2.2%

Unemployment Rate 4.7% External Debt $7.1 trillion Exports $380 million Exports - Commodities manufactured goods, fuels, chemicals; food, beverages, tobacco Exports - Partners US 15%, Germany 10.7%, France 9.2%, Ireland 6.8%, Netherlands

6.1%, Belgium 5.2%, Spain 4.5%, Italy 4.2% Imports $461 million Imports - Commodities manufactured goods, machinery, fuels; foodstuffs Imports - Partners Germany 13%, US 9.2%, France 7.5%, Netherlands 6.6%, Belgium

5%, Italy 4.3%, China 4.2% Current Account Balance -$48 million

ENERGY OVERVIEW

Proven Oil Reserves 4 billion barrels Oil Production 1.9 million barrels per day, of which 85% was crude oil. Oil Consumption 1,8 million barrels per day Crude Oil Distillation Capacity

1.9 million barrels per day

Proven Natural Gas Reserves

18.8 trillion cubic feet

Natural Gas Production 3.6 trillion cubic feet Natural Gas Consumption 3,360.2 billion cubic feet Recoverable Coal Reserves

242.5 million short tons

Coal Production 30.6 million short tons Coal Consumption 68.8 million short tons Electricity Installed Capacity

74 gigawatts

Electricity Production 369.9 billion kilowatt hours Electricity Consumption 346.1 billion kilowatt hours Total Energy 9.8 quadrillion Btus*, of which Oil (35%), Natural Gas (34%), Coal (16%),




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Consumption Nuclear (11%), Other Renewables (1%), Hydroelectricity (0%) Total Per Capita Energy Consumption

166 million Btus

Energy Intensity 6,147 Btu per $2000-PPP**

ENVIRONMENTAL OVERVIEW

Energy-Related Carbon Dioxide Emissions

564.6 million metric tons, of which Oil (41%), Natural Gas (34%), Coal (25%)

Per-Capita, Energy-Related Carbon Dioxide Emissions

9.5 metric tons

Carbon Dioxide Intensity

0.4 Metric tons per thousand $2000-PPP**

Environmental Issues by 2005 the government aims to reduce the amount of industrial and commercial waste disposed of in landfill sites to 85% of 1998 levels and to recycle or compost at least 25% of household waste, increasing to 33% by 2015; between 1998-99 and 1999-2000, household recycling increased from 8.8% to 10.3%

Major Environmental Agreements

party to: Air Pollution, Air Pollution-Nitrogen Oxides, Air Pollution-Sulfur 94, Air Pollution-Volatile Organic Compounds, Antarctic-Environmental Protocol, Antarctic-Marine Living Resources, Antarctic Seals, Antarctic Treaty, Biodiversity, Climate Change, Climate Change-Kyoto Protocol, Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Ozone Layer Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94, Wetlands, Whaling signed, but not ratified:Air Pollution-Persistent Organic Pollutants

Oil and Gas Industry Organization Private sector active in all aspects of industry. Major Oil/Gas Ports Bacton, St. Fergus, Teeside, Easington, Isle of Grain, Cruden Bay, Sullom Voe,

Flotta, Nigg Bay, Southampton Foreign Company Involvement

Extensive, including many European and U.S. firms. The largest include Total, Chevron, BHP, Amerada Hess.

Major Oil Fields (production, bbl/d)

Schiehallion (98,900), Foinaven (72,600), Alba (67,100), Captain (66,000), Forties (55,300)

Major Natural Gas Fields

Elgin, Franklin, Halley, Scoter, Shearwater

Major Pipelines (length)

Forties-Cruden Bay (110 miles), Ninnan-Sullom Voe (110 miles), Piper-Flotta (130 miles), Cormorant-Sullom Voe (93 miles), Norpipe (220 miles), Shearwater-Elgin (SEAL), Scottish Area Gas Evacuation (SAGE, 200 miles), Central Area Transmission System (CATS, 250 miles), Far North Liquids and Gas System (FLAGS), Interconnector, Frigg.

Major Refineries (capacity, bbl/d)

Fawley (326,000), Stanlow (296,400), Killingholme South Humberside (221,300), South Killingholme (221,000), Coryton Essex (163,400),

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and waste electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data. **GDP figures from OECD estimates based on purchasing power parity (PPP) exchange rates.




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BACKGROUND With its significant North Sea reserves, the United Kingdom is a major European oil and natural gas producer. The United Kingdom (UK) is an important political and economic power in Europe and the world. It has the second-largest economy in the European Union (EU) with a nominal 2005 gross domestic product (GDP) of $2.2 trillion. The UK economy grew by 1.8 percent in 2005, with growth of 2.2 percent forecasted for 2006. While the UK has been a member of the EU since 1973, it does not participate in the European single currency, the Euro.

The UK is the largest producer of oil and natural gas in the EU. However, after years of being a net exporter of both fuels, the UK became a net importer of natural gas in 2004. Government estimates also predict that the country will become a net importer of oil by the end of the decade. Production from UK oil and natural gas fields peaked in the late 1990s and has declined steadily over the past several years, as the discovery of new reserves has not kept pace with the maturation of existing fields. In response, the government has begun a three-pronged approach to address the predicted domestic shortfalls: 1) increasing domestic production through efficiency gains and the exploitation of marginal fields; 2) establishing necessary import infrastructure, such as liquefied natural gas (LNG) receiving terminals and transnational pipelines; and 3) investing in energy conservation and renewables.

OIL The UK is the largest oil producer in the EU, but production has declined since peaking in 1999.

According to Oil and Gas Journal (OGJ), the UK had 4.0 billion barrels of proven crude oil reserves in 2006, the most of any EU member country. The UK consumed 1.8 million barrels per day (bbl/d) of oil in 2005, mostly flat from the previous year. The importance of oil to the UK economy has declined slightly over the past two decades, with oil's contribution to total energy consumption falling from in 37 percent in 1983 to 35 percent in 2003.

EXPLORATION AND PRODUCTION The UK Continental Shelf (UKCS), located in the North Sea off the eastern coast of the UK, contains the bulk of the country's oil reserves. There are also sizable reserves in the North Sea north of the Shetland Islands, with smaller amounts in the North Atlantic. Besides these offshore assets, the UK also has the Wytch Farm field, the largest onshore oil field in Europe. Total oil production (including condensates, natural gas liquids, and refinery gain) in the UK was 1.87 million bbl/d in 2005, a 10 percent decline from 2004 and 37 percent below the peak of production in 1999. The UK government expects oil production in the country to continue to decline, reaching 1.38 million bbl/d by 2009. Reasons for this decline include 1) the overall maturity of the country’s oil fields, 2) the application of new crude oil extraction technologies that lead to field exhausted at a quicker rate, and 3) increasing costs as production shifts to more remote and inhospitable regions. Most of the UK crude oil grades are light and sweet (30° to 40° API), which generally makes them attractive to foreign buyers. The UK has been a net exporter of crude oil since 1981. According to the British Department of Trade and Industry (DTI), the largest destinations of crude oil exports in 2004 were the United States (28 percent), the Netherlands (21 percent), Germany (17 percent), and France (14 percent). Much of the crude oil exported to the Netherlands is not actually consumed there, but rather sold at the Rotterdam spot market. In 2005, the UK exported 219,000 bbl/d of crude oil and 167,000 bbl/d of petroleum products to the U.S., contributing 2.2 percent and 4.8 percent to total U.S. crude oil and petroleum product imports, respectively.




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SECTOR ORGANIZATION BP is the largest oil producer in the UK, with 26 fields producing a total of 471,600 bbl/d in 2004, according to OGJ. BP also operates the single-largest oil field in the UK, Schiehallion, with 2004 production of 98,900 bbl/d. Other large oil producers in the UK include Shell, ChevronTexaco, and Total. As UK oil fields mature, the industry has shifted focus from discovering new reserves to increasing the productivity of existing fields and developing smaller, previously avoided ones. This trend has prompted oil major such as BP and Shell to begin selling their UK assets in order to focus on high growth, international opportunities. The result has been the entry into the UK oil sector of many smaller operators. In 2003, U.S.-based Apache purchased BP's Forties field for $630 million, and other smaller operators, such as Talisman, Perenco, and Paladin Resources, have acquired significant production assets in the country. In late 2004, EnCana announced that it would sell its North Sea assets to Canada-based Nexen for $2 billion. In 2005, Denmark’s Maersk Oil and Gas and UK natural gas company Centrica purchased the North Sea assets of U.S.-based Kerr McGee for $3 billion. These companies find smaller and maturing fields more economically viable than do the oil majors, because they have lower overhead costs, are more flexible, and often employ newer production and recovery technologies.

PIPELINES There is an extensive network of pipelines in the UK to carry oil extracted from North Sea platforms to coastal terminals in Scotland and northern England. BP operates the 110-mile, 36-inch Forties-Cruden Bay pipeline, linking fields in the Forties system to the oil terminal at Cruden Bay, Scotland. The company also operates a 110-mile, 36-inch pipeline connecting the Ninnian system to the Sullom Voe oil terminal on Shetland Island. Total operates a 150-mile, 24-inch pipeline linking the Bruce and Forties fields to Cruden Bay and a 130-mile, 30-inch pipeline connecting the Piper system with Flotta on Orkney Island. Shell and Esso jointly operate a 93-mile, 36-inch connection between the Cormorant oil field and Sullom Voe. Talisman Energy owns a 37-mile, 16-inch pipeline connection between its Beatrice field and the Nigg Bay oil terminal. There are also numerous, small pipelines that connect each North Sea oil platform to these major backbones. Finally, the UK does have a few onshore crude oil pipelines, including a 90-mile, underground pipeline operated by BP that links the Wytch Farm field to the refinery at Fawley and the nearby oil export terminal at Southampton.




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The UK has a single international crude oil pipeline, the 220-mile, 34-inch Norpipe operated by ConocoPhillips. With a capacity of 900,000 bbl/d, Norpipe connects Norwegian oil fields in the Ekofisk system to the oil terminal and refinery at Teesside.

DOWNSTREAM The UK had 1.9 million bbl/d of refining capacity in 2006, according to OGJ. ExxonMobil operates the single-largest refinery in the country, the 326,000-bbl/d Fawley facility in southern England. However, BP controls the largest total amount of refining capacity, with facilities in Grangemouth, Scotland (196,000 bbl/d) and Coryton, England (163,000 bbl/d). Other companies with significant refining capacity in the UK include Total (325,000 bbl/d), Shell (296,000 bbl/d), ConocoPhillips (221,000 bbl/d), and ChevronTexaco (210,000 bbl/d). According to DTI, refinery utilization in the UK was near 90 percent in 2004. The UK maintains an active international trade in refined petroleum products, exporting 36.1 million metric tons (mt) and importing 26.4 million mt in 2004.

NATURAL GAS The UK is one of the largest natural gas producers in the world. According to OGJ, the UK held an estimated 18.8 trillion cubic feet (Tcf) of proven natural gas reserves in 2006, a 10 percent decline from the previous year. Most of these reserves occur in three distinct areas: 1) associated fields in the UKCS; 2) non-associated fields in the Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; and 3) non-associated fields in the Irish Sea. In order to take advantage of its domestic reserves, the UK government has encouraged the use of natural gas, including its substitution for coal and oil in industrial consumption and electricity production. As a result, natural gas consumption in the UK reached 3.4 Tcf in 2003. Further, the percentage of total energy consumption sourced from natural gas in the UK has increased from 20 percent in 1980 to 34 percent in 2003. In 2004, the UK was a net importer of natural gas for the first time since 1996.

EXPLORATION AND PRODUCTION The UK produced 3.6 Tcf of natural gas in 2003, about the same as the previous year, but a decrease from the peak of 3.8 Tcf in 2000. The country is the fourth-largest producer of natural gas in the world, behind Russia, the United States, and Canada. The largest concentration of natural gas production in the UK is the Shearwater-Elgin area of the Southern Gas Basin. The area contains five gas fields, Elgin (Total), Franklin (Total), Halley (Talisman), Scoter (Shell), and Shearwater (Shell). Most of the leading oil companies in the UK are also the leading natural gas producers, including BP, Shell, and Total. The major gas distribution companies in the UK, such as Centrica and BG Group, also have a presence in this production sector. Like the oil industry, smaller independents have been able to acquire some maturing assets from larger operators, who find it difficult to profitably operate these older, declining fields.




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SECTOR ORGANIZATION Private companies control the UK natural gas sector, including production, distribution, and transmission. The largest gas distributor in the UK is now Centrica, a spin-off of the distribution assets of formally state-owned British Gas. National Grid Transeco (NGT), formed in 2002 through the merger of Lattice and former parastatal National Grid, controls the domestic gas transmission system.

PIPELINES Domestic System There are four main pipeline systems in the UK that carry natural gas from offshore platforms to coastal landing terminals. First, the Shearwater-Elgin Line (SEAL), operated by Total, transports gas from the Shearwater-Elgin area to the landing terminal at Bacton, England. Second, ExxonMobil operates the 200-mile, 30-inch Scottish Area Gas Evacuation (SAGE), which transports associated natural gas from UKGS fields to the landing terminal at St. Fergus, Scotland. Third, the 250-mile, 36-inch Central Area Transmission System (CATS), operated by BP, links fields in the Graben area of the UKCS to Teeside. Finally, Shell operates the Far North Liquids and Gas System (FLAGS) linking associated gas deposits in the Brent oil system with St. Fergus. Once brought onshore, the responsibility for transporting natural gas throughout the country belongs to NGT. The company operates over 4,200 miles of transmission lines in the UK. International Pipelines A consortium of companies, led by BG, Ruhrgas, and Distrigas, operates the Interconnector pipeline between Bacton, England and Zeebrugge, Belgium. The Interconnector, inaugurated in 1998, is capable of bi-direction operation, meaning either it can export natural gas from the UK to continental Europe (“Forward Mode”), or it can import natural gas into the UK (“Reverse Mode”). For most of its career, the Interconnector operated in Forward Mode, with a capacity of 1.9 Bcf/d. However, since mid-2005, the system has operated mostly in Reverse Mode, with a recent expansion increasing this capacity to 1.6 Bcf/d. The operators of the Interconnector plan to expand the system’s Reverse Mode capacity to 2.3 Bcf/d by the end of 2006.

The UK also imports natural gas through the Frigg pipeline system, operated by Total. Frigg connects the St. Fergus gas terminal with the Frigg gas field in the Norwegian sector of the North Sea. Finally, the UK-Eire Interconnector connects the UK with the Republic of Ireland, running from Moffat, Scotland to Dublin. In 2003, the UK and Norway finalized the necessary political conditions for construction of the Langeled pipeline system linking Norway's Ormen Lange natural gas field to Easington, England. The 750-mile Langeled would be the longest sub sea pipeline in the world, with an initial capacity of 1.9 Bcf/d and planned maximum capacity of 2.9 Bcf/d. Construction on the project has begun, with completion expected by 2007. Gasunie plans to build a 146-mile gas pipeline linking Balgzand, the Netherlands to Bacton, England. Initial construction on the Balgzand-Bacton Line (BBL) began in October 2004, with completion of the project




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expected by the end of 2006. According to Gasunie, the BBL will have an initial capacity of 1.1 Bcf/d, with a maximum capacity of 1.7 Bcf/d.

LIQUEFIED NATURAL GAS (LNG) Currently, the UK has a single LNG import terminal, the NGT’s Grain LNG on the Isle of Grain. The facility has a sendout capacity of 420 Bcf/d, which NGT plans to expand to 1.3 Bcf/d by the end of 2007. Algeria’s Sonatrach and BP are the principle importers using the terminal. ExxonMobil and Qatar Petroleum have received regulatory approval for the South Hook LNG receiving terminal in Milton Haven, Wales. The terminal will receive its LNG from the Qatargas II liquefaction project in Ras Laffin, Qatar, which is also a joint project between the two companies. The South Hook LNG project should come online by 2007, with an initial capacity of 1.0 Bcf/d and a maximum capacity of 2.1 Bcf/d by 2009. Finally, BG has collaborated with Netherlands-based Petroplus and Malaysia-based Petronas to also build an LNG receiving terminal in Milton Haven, on the site of an existing natural gas storage facility owned by Petroplus. Dragon received regulatory approval from Ofgem in early 2005, and the project should start receiving cargos by the end of 2008 at an initial sendout capacity of 580 Mmcf/d.

COAL Most UK coal consumption is for power generation. The UK had an estimated 243 million short tons (Mmst) of recoverable coal reserves in 2003. The country produced 30.6 Mmst in 2003, the fifth-most in the EU. Coal production in the UK has declined steadily and dramatically over the past several decades. Decreasing domestic consumption and a surge of low-cost imports have been the principle causes of the production decline. According to DTI, the UK now imports more coal than it produces domestically, with South Africa and Australian representing the principle source of these imports. In order to meet its obligations under the Kyoto Protocol, the UK likely will continue to phase out coal consumption and production. Nevertheless, the UK government continues to provide financial support to the industry. In June 2003, the UK government launched the Coal Investment Aid program, with a budget of up to $111 million. The goal of the project is to create or safeguard jobs in the UK coal industry by encouraging coal producers to enter into investment projects that maintain access to reserves.

ELECTRICITY Natural gas-fired power stations are replacing coal as the principle source of the UK power supply.




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The UK had installed electricity generation capacity of 74.0 gigawatts (GW) in 2003. Also in 2003, the UK generated 369.9 billion kilowatthours (Bkwh) of electricity while consuming 346.1 Bkwh. Most electricity generation comes from conventional thermal sources (74 percent), followed by nuclear (23 percent), other renewables (2 percent), and hydroelectricity (1 percent).

SECTOR ORGANIZATION The UK has a privatized electricity sector, where generators and distributors trade electricity on a wholesale market. The largest power producer in the country is British Energy (BE), which controls most of the nuclear power capacity and generates about 20 percent of the total electricity supply. Other important generating companies include E.ON UK, RWE npower, Scottish and Southern Energy (SSE), and ScottishPower (SP). Twelve regional monopolies control electricity distribution in the UK, most of which are owned by the leading generation companies. NGT owns and operates the national transmission system in England and Wales, whereas SSE and SP operate the grid in Scotland, and Northern Ireland Electricity (NIE), a subsidiary of the Viridian Group, operates the grid in Northern Ireland.

The UK has slowly integrated the formally-separate electricity markets of its component parts (England, Northern Ireland, Scotland, and Wales). The British government formed the New Electricity Trading Arrangements (NETA) in 2001 to integrate the electricity markets of England and Wales. In 2005, the British government extended NETA to Scotland as the British Energy Transmission and Trading Arrangements (BETTA). There are plans to eventual incorporate Northern Ireland in to the BETTA. In addition, SP and SSE have increased the transmission capacity between England and Scotland to allow them to sell more electricity to English and Welsh customers.

CONVENTIONAL THERMAL

As mentioned above, conventional thermal plants provide the bulk of the electricity supply in the UK. According to DTI, conventional thermal generation in 2004 consisted of natural gas (53 percent), coal (44 percent), oil (2 percent), and other (1 percent). One of the largest power plants in the UK is the Drax facility in North Yorkshire, which consists of six coal-fired units with total capacity of 4,000 megawatts (MW). The long-term trend in UK power generation has been a move from coal-fired plants to combined-cycle, gas-fired turbines (CCGFT). As a result, according to DTI, electricity generation from CCGFTs increased from zero in 1989 to 137.7 Bkwh in 2004.

Nuclear BE operates eight nuclear power stations in the UK, including seven stations using advanced, gas-cooled reactors (AGR) and one (Sizewell B) using a pressurized-water reactor (PWR). All of the AGR reactors will reach the end of their designed lifetime by 2023. British Nuclear Fuels Limited (BNFL), owned by the UK government, operates four nuclear plants containing first generation, magnesium-oxide (Magnox) reactors.




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The UK originally built 11 of these plants in the 1950s, and BNFL will close the remaining four by 2010. BNFL plans to convert one closed plant, Chapelcross, into a co-firing plant burning a combination of coal and locally grown willow trees.

RENEWABLES The UK government has introduced regulations that require electricity distributors to source a portion of their electricity supply from renewables (including hydroelectricity), currently 3 percent but set to rise to 10 percent by 2010. Investments in wind power have increased substantially, aiming to take advantage of the natural geographic advantage that the UK has in this regard. Another area of increased interest has been wave power. In 2004, the Pelamis project off the coast of Orkney delivered the first ever supply of electricity from wave energy to the UK national grid. Finally, hydroelectricity has regained attention, especially in Scotland, including the potential construction of the 100-MW Glendoe project.

ENVIRONMENT The UK is an Annex I country under the Kyoto Protocol. The UK emitted 564.6 million metric tons (Mmt) of energy-related carbon dioxide in 2003. The country is one of only four Western European countries to achieve a drop in carbon dioxide emissions since 1990. While carbon dioxide emissions have declined, total energy consumption has increased over the same period by 11.2 percent, reaching 9.8 quadrillion British thermal units (Btu) in 2003. The UK has ratified the Kyoto Protocol; however, the EU has decided to meet its requirements under the Protocol as a whole, rather than as individual signatories, with each member state given a different emissions target by the EU Commission. Under the EU plan, the UK must reduce its carbon dioxide emissions by 12.5 percent below the 1990 level during the 2008-2012 commitment period; the country was 8 percent above this target during 2003. The UK has seen dramatic improvements in air quality in recent decades, especially reductions in sulfur dioxide emissions: The principle driving force behind these reductions has been the transition away from coal-fired power plants, the drastic reduction in the use of coal for residential heating, and general economic shift from an industry-focused to service-based economy. In 2001, the UK government introduced the Climate Change Levy, a surcharge on energy produced from carbon dioxide-emitting sources charged to commercial and industrial energy users. By exempting renewable energy sources and co-generation facilities, the Levy has encouraged large energy consumers to increase conservation measures.




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ENERGY POLICY AND REGULATIONS

OVERVIEW The 2007 White Paper: “Meeting the Energy Challenge” sets out the Government’s international and domestic energy strategy to address the long term energy challenges faced by the UK, and to deliver 4 key policy goals:

1. To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;

2. To maintain reliable energy supplies; 3. To promote competitive markets in the UK and beyond, helping to raise the rate of

sustainable economic growth and to improve productivity; and 4. To ensure that every home is adequately and affordably heated.

The scope of energy policy includes the production and distribution of electricity, transport fuel usage, and means of heating (significantly Natural Gas). The policy recognises: "Energy is essential in almost every aspect of our lives and for the success of our economy. We face two long-term energy challenges:

• Tackling climate change by reducing carbon dioxide emissions both within the UK and abroad; and

• Ensuring secure, clean and affordable energy as we become increasingly dependent on imported fuel."

The policy also recognises that the UK will need around 30-35GW of new electricity generation capacity over the next two decades as many of the UK’s current coal and nuclear power stations, built in the 1960s and 1970s, reach the end of their lives and are set to close. The 2006 Energy Review reintroduced the prospect of new nuclear power stations in the UK. However, following a judicial review requested by Greenpeace, on February 15, 2007 elements of the 2006 Energy Review were ruled 'seriously flawed', and 'not merely inadequate but also misleading'. As a result, plans to build a new generation of nuclear power plants were ruled illegal at that time. (See Nuclear power in the United Kingdom for details). In response, the Government ran “The Future of Nuclear Power” consultation from May to October 2007. The Government’s response to the consultation conclusions, published in January 2008, state “set against the challenges of climate change and security of supply, the evidence in support of new nuclear power stations is compelling.” The January 2008 Energy Bill updates the legislative framework in the UK to reflect their current policy towards the energy market and the challenges faced on climate change and security of supply. Key elements of the bill address nuclear, carbon capture and storage, renewables, and offshore gas and oil. A framework to encourage investment in nuclear power within a new regulatory environment was simultaneously published in the January 2008 Nuclear White Paper. Though energy policy is an area reserved to the UK government under the Scotland Act 1998 that established devolved government for Scotland, the Scottish Government has an energy policy for Scotland at variance with UK policy, and has planning powers to enable it to put its policy priorities into effect.




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1980S MARKET LIBERALISATION Under the Conservatives during the 1980s and 1990s, Government policy was one of market liberalisation linked to the privatisation of state controlled energy companies and the dismantling of the Department of Energy. As a consequence, Government no longer has the ability to directly control the energy markets. Regulation is now carried out through the Office of Gas and Electricity Markets (OFGEM), while energy policy is largely limited to influencing the operation of the market. Such influence is exerted through taxation (such as North Sea Oil Tax ), subsidy (such as the Renewables Obligation), incentives, planning controls, the underwriting of liabilities (such as those carried by the Nuclear Decommissioning Authority), grants, and funding for research. An accomplishment of this liberalisation and privatisation has been a marked decrease in energy intensity, the measure of energy consumed per unit of GDP output. Another achievement has been substantial reduction of the population in energy poverty.

A third goal attained has been continuing its tradition of energy supply reliability (measured as distribution and delivery on the electric and natural gas grids); among European countries, the United Kingdom is second only to the Netherlands in reliability features.

ENERGY MARKET A Research and Markets review estimated the 2006 total market value of UK inland energy consumption was GBP 130.73bn. Consumption by the energy sector was valued at GBP 28.73bn, while the value of consumption by the non-energy sector was GBP 128.2bn, with transport being the largest component of the non-energy sector.

PRIMARY ENERGY SOURCES

Historically a country emphasising its coal, nuclear and off-shore natural gas production, the United Kingdom is currently in transition to become a net energy importer.

In the year 2007 the percentage of primary energy derived from major sources was as follows:

• Oil: 38.0% • Natural gas: 37.7% • Coal: 16.7% • Nuclear power: 5.8% • Renewable: 1.8%.

COAL

Coal usage may be expected to decline steadily because of eroding cost advantages and pressure to reduce sulphur and carbon (carbon dioxide) emissions, notwithstanding ongoing subsidy policies designed to retain jobs in the coal mining industry. Future coal usage is highly dependent on legislative drivers on emissions and the need to have security of supply. Whilst the costs of burning coal with desulphurisation and carbon capture facilities is greatly increased, it is still being actively considered as part of the UK energy strategy due to large domestic reserves, higher price stability than natural gas and reduced capital expenditure and construction time for plant compared to nuclear power.




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The 2002 Energy Review concluded that the option of new investment in clean coal technology (through carbon sequestration) needed to be kept open, and that practical measures should be taken to do this .

GAS

Natural gas looks set to take a smaller part in providing future UK energy needs. Domestic production from the North Sea gas fields continues to lessen. And despite investment to enhance pipelines and storage of imported natural gas (Mostly from Norway) there is a reluctance to allow too great a reliance on Russia and its gas exports for energy needs. By the year 2021, North Sea oil and natural gas production is predicted to slip 75 percent from 2005 levels to less than one million barrels per year. Oil and coal reserves for all of Europe are among the most tenuous in the developed world: for example, Europe's reserves to annual consumption ratio stands at 3.0, perilously low by world standards.

NUCLEAR POWER

Following the UK Government's January 2008 decision to support the building of new nuclear power stations, EDF announced that it plans to open four new plants in the UK by 2017. EON and Centrica have also shown interest in building further plants. However, Scotland's First Minister Alex Salmond has said there is "no chance" of more nuclear power stations being built in Scotland as the Scottish Government is opposed to new nuclear power stations and has sufficient powers to prevent any being built in Scotland. However, since the UK Parliament holds supremacy, new legislation could be passed to bypass any Scottish objection. For details of UK Government policy on nuclear power see Nuclear power in the United Kingdom

RENEWABLES

The UK Government's goal for renewable energy production is to produce 20% of electricity in the UK by the year 2020. The 2002 Energy Review set a target of 10% to be in place by 2010/2011. The target was increased to 15% by 2015 and most recently the 2006 Energy Review further set a target of 20% by 2020. For Scotland, the Scottish Executive has a target of generating 17% to 18% of electricity from renewables by 2010 , rising to 40% by 2020 Renewables located in Scotland count towards both the Scottish target and to the overall target for the UK.

ENERGY END USAGE

Year 2005 UK end use energy percentage is approximately:

• Transport: 35% • Space heating: 26% • Industrial: 10% • Water heating: 8% • Lighting/small electrics: 6%

There is a steady increase of fuel usage driven by an increasingly affluent and mobile population, so that fuel use increased by ten percent in the decade ending 2000. This trend is expected to be mitigated by increased percentage of more efficient diesel and hybrid vehicles. United Kingdom space and hot water heating consume a greater share of end use compared to the USA and more mild southern European or tropical climates. With regard to building and planning issues affecting energy use, the UK has developed guidance documents to promote




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energy conservation through local councils, especially as set forth in Part L of the Building Regulations (Conservation of Fuel and power) The associated document. Part 2B, addresses commercial uses, and is generally complete as to heating issues; the guidance is lacking on lighting issues, except with guidelines for local switching of lighting controls. In particular there are no standards set forth for illumination levels, and over-illumination is one of the most significant unneeded costs of commercial energy use.

CARBON EMISSIONS REDUCTION

Joining over 170 other nations the UK has committed to reduction of carbon dioxide emissions, with consequent constraints to its energy policy. The UK produces four percent of the world’s greenhouse gases as of 2003, compared to 23 percent by the USA and 20 percent for the rest of Europe. The long term reduction goal for carbon emissions is 60 percent decrease by the year 2050. A scheme of trading for carbon emission credits has been developed in Europe that will allow some of the reduction to arise from economic transactions. Road transport emissions reduction has been stimulated since 1999 by the banding of Vehicle Excise Duty. Bands for new vehicles are based on the results of a laboratory test, designed to calculate the theoretical potential emissions of the vehicle in grammes of CO2 per kilometre travelled, under ideal conditions. Average carbon emissions fell from 192 to 172 grams/mile between 1995 and 2004

Aviation fuel is not regulated under the Kyoto Protocol, so that if the UK is successful in carbon emission reduction, aviation will constitute 25 percent of UK generated greenhouse gases by the year 2030. The UK government has one project in the planning stage for natural gas fed power generation with carbon capture by seawater. This facility is contemplated at Peterhead, Scotland, a relatively remote exposure to the North Sea.

CLIMATE CHANGE BILL

On March 13, 2007, a draft Climate Change Bill was published following cross-party pressure over several years, led by environmental groups. The Bill aims to put in place a framework to achieve a mandatory 80% cut in the UK's carbon emissions by 2050 (compared to 1990 levels), with an intermediate target of between 26% and 32% by 2020. If approved, the United Kingdom is likely to become the first country to set such a long-range and significant carbon reduction target into law.

RENEWABLE ENERGY The established goals for UK renewable sources are 10% of electricity generation by 2010 and 20% by 2020, as published in the 2003 Energy White Paper. However, in 2007 the Energy Minister Malcolm Wicks indicated that by 2020 the figure has 'got to be somewhere between 10% and 15%'. The first such targets, 5% of by the end of 2003 and 10% by 2010 'subject to the cost to consumers being acceptable' was set by Helen Liddell in 2000. Although renewable energy sources have not played a major role in the UK historically, there is potential for significant use of tidal power and wind energy (both on-shore and off-shore) as recognised by formal UK policies, including the Energy White Paper and directives to councils in the form of PPS 22. The Renewables Obligation acts as the central mechanism for support of renewable sources of electricity in the UK, and should provide subsidies approaching one billion pounds sterling per annum by 2010. A number of other grants and smaller support mechanisms




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aim to support less established renewables. In addition, renewables have been exempted from the Climate Change Levy that affects all other energy sources. The amount of renewable generation added in the year 2004 was 250 megawatts and 500 megawatts in 2005. There is also a program established for micro-generation (less than 50 KWe (kilowatt electrical) or 45 KWt (kilowatt thermal) from a low carbon source) as well as a solar voltaic program. By comparison both Germany and Japan have photovoltaic (solar cell) programs much larger than the installed base in the UK. Hydroelectric energy is not a viable option for most of the UK due to terrain and lack of force of rivers. The government has established a goal of five percent of the total transport fuel that must be from renewable sources (e.g. ethanol, biofuel) by the year 2010 under the Renewable Transport Fuel Obligation. This goal may be ambitious, without the necessary infrastructure and paucity of research on appropriate UK crops, but import from France might be a realistic option (based upon the French wine lake). In 2005 British Sugar announced that it will build the UK's first ethanol biofuel production facility, using British grown sugar beet as the feed stock. The plant in Norfolk will produce 55,000 metric tonnes of ethanol annually when it is completed in the first quarter of 2007. However it has been argued that even using all the UK's set-aside land to grow biofuel crops would provide for less than seven percent of the UK's present transport fuel usage. UK electricity generation from renewable energy in 2004 - Total is 14171 GWh (3.6% of the

electricity generated) Source GWh %

hydro 4930 35 biomass 7302 52 landfill gas 4004 28 sewage sludge digestion 379 3 municipal solid waste combustion 971 7 cofiring of biomass with fossil fuels 1022 7 other biofuels 927 7 onshore wind 1736 12 offshore wind 199 1 solar photovoltaics 4 0.03

ENERGY POVERTY

Reducing occurrence of energy poverty (defined as households paying over ten percent of income for heating costs) is one of the four basic goals of UK energy policy. In the prior decade substantial progress has been made on this goal, but primarily due to government subsidies to the poor rather than through fundamental change of home design or improved energy pricing. The following national programs have been specifically instrumental in such progress: Winter Fuel Payment, Child Tax Credit and Pension Credit. Some benefits have resulted from the Warm Front Scheme in England, the Central Heating Program in Scotland and the Home Energy Efficiency Scheme in Wales. These latter programs provide economic incentives for physical improvement in insulation, etc.




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2007 ENERGY WHITE PAPER The 2007 Energy White Paper: Meeting the Energy Challenge was published on May 23, 2007. The 2007 White Paper outlines the Government’s international and domestic strategy for responding to two main challenges:

• cutting carbon emissions to tackle global warming • ensuring secure, clean and affordable energy as imports replace declining production

from North Sea oil and gas

It seeks to do this in a way that is consistent with its four energy policy goals:

• cutting the UK’s carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;

• maintaining the reliability of energy supplies; • promoting competitive markets in the UK and beyond, helping to raise the rate of

sustainable economic growth and to improve productivity; and • ensuring that every home is adequately and affordably heated.

The paper anticipates that it will be necessary to install 30-35 GW of new electricity generation capacity within 20 years to plug the energy gap resulting from increased demand and the expected closure of existing power plants. It also states that, based on existing policies, renewable energy is likely to contribute around 5% of the UK’s consumption by 2020, rather than the 20% target mentioned in the 2006 Energy Review.

GOVERNMENT STRATEGY

In summary, the government's proposed strategy involves 6 components:

• Establishing an international framework to tackle climate change, including the stabilisation of atmospheric greenhouse gas concentrations and a stronger European Union Emissions Trading Scheme

• Providing legally binding carbon targets for the whole UK economy, reducing emissions through the implementation of the Climate Change Bill.

• Making further progress in achieving fully competitive and transparent international markets, including further liberalisation of the European Union energy market.

• Encouraging more energy saving through better information, incentives and regulation • Providing more support for low carbon technologies, including increased international and

domestic public-private sector collaboration in the areas of research, development, demonstration and deployment – for example though the launch of the Energy Technologies Institute and the Environmental Transformation Fund.

To achieve the government's aims, the White Paper proposes a number of practical measures, including:

Ministers have adopted a 40 per cent target for Scotland's energy requirements to be generated from a mix of renewable sources by 2020, it was confirmed today.

Consultation on the 40 per cent level began last August and today Environment and Rural Development Minister Ross Finnie said that the potential to achieve a diverse mix of renewable technologies had persuaded Ministers to accept the target.




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Highlighting the need to promote a range of renewables, Mr Finnie also announced a £2 million investment in a new Marine Energy Research Centre in Orkney and the creation of a group to address possible barriers that might stand in the way of achieving the target.

He said:

"By setting this challenging target we are sending a clear signal of intent. We are supporting the accelerated development of renewable technologies.

"The widespread burning of fossil fuels produces greenhouse gases and other pollutants which contribute to climate change. We pledged ourselves in our programme for Government to tackling climate change, and promoting renewable energy is one of the ways we can meet that commitment.

"This ambitious target should not be seen as a dash to wind. Scotland enjoys enormous potential to tap a wide range of renewable sources of energy. It is essential that we move to a position where we make better use of all those resources.

"While hydro and onshore wind will continue to make an important contribution to Scotland's electricity needs, the £2 million we are announcing today will help to boost research into energy from wave and tide through the new Marine Energy Test Centre in Orkney.

"It is only by working with individuals and organisations who will deliver renewable energy facilities that our ambition can be realised. This is why we are establishing a high level Forum for Renwewable Energy Development in Scotland to accelerate the development of our renewable industry.

"We must continue to do everything we can to enhance public understanding of climate change and the important contribution that renewable energy plays in reducing emissions of greenhouse gases.

"Our ambition can only be realised by industry, our research institutions, developers and planners working together to find innovative ways to overcome the challenges that undoubtedly lie ahead."

ENERGY CONSERVATION

Businesses:

• A new mandatory cap and trade scheme for organisations consuming more than 6,000 MWh of electricity per year, to be known as the Carbon Reduction Commitment.

• The introduction of Energy Performance Certificates for business premises. • The extension of smart metering to most business premises within 5 years.

Homes:

• A requirement for all new homes to be zero-carbon buildings as soon as practically possible and preferably by 2016.

• Improving the energy efficiency of existing homes. • Improving the efficiency of consumer electronics and domestic appliances, and the

possible phase-out of inefficient light bulbs by around 2011.




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• Increasing the Carbon Emission Reduction Target for the electricity and gas industries for 2008-2011.

• A requirement that new domestic electricity meters should have real time displays from 2008, and a commitment to upgrade existing domestic meters on request.

Transport:

• The introduction of a Low Carbon Transport Innovation Strategy • Support for including aviation within the EU Emissions Trading Scheme

ENERGY SUPPLY

• The introduction of a Biomass Strategy to expand the use of biomass as an energy source.

• Measures to grow distributed electricity generation and distributed heat generation alongside the centralised system.

• A reconfirmation that, under the Renewables Obligation, renewable energy should supply 10% of electricity generation by 2010, an 'aspiration' to achieve 20% by 2020, together with the introduction of bands within the Obligation to support different renewable technologies.

• The launch in November 2007 of a competition to demonstrate commercial-scale carbon capture and storage technology

• A 'preliminary view is that it is in the public interest to give the private sector the option of investing in new nuclear power stations'. A consultation on this was launched at the same time as the White Paper.

• The introduction of the Renewable Transport Fuel Obligation in 2008-2009, with a commitment that biofuels should provide 5% of transport fuel by 2010-2011.

• Measures to support the recovery of the remaining oil and gas reserves from the North Sea.

• Removing barriers to developing new energy infrastructure and power plants through reform of planning permission processes, as detailed in the 2007 Planning White Paper: Planning for a Sustainable Future.

RESPONSE OF THE SCOTTISH GOVERNMENT

The Scottish Government responded to the UK government paper by making clear that it was against new nuclear power stations being built in Scotland and had the power to prevent any being built. In a statement to parliament, Energy Minister Jim Mather stated "Members will be aware that Greenpeace, backed by the courts, have forced the UK Government to consult properly on the future role of nuclear power. We will respond and we will make clear that we do not want and do not need new nuclear power in Scotland. If an application were to be submitted for a new nuclear power station that will be for Scottish Ministers to determine. We would be obliged to look at it - but given our policy position, our generating capacity, our multiplicity of energy sources and our strong alternative strategies such an application would be unlikely to find favour with this administration."

ENERGY REVIEW Following a judicial review requested by Greenpeace, on February 15, 2007 elements of the 2006 Energy Review were ruled 'seriously flawed', and 'not merely inadequate but also misleading'. As a result, plans to build a new generation of nuclear power plants were ruled illegal. See Nuclear power in the United Kingdom for details.




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BACKGROUND

The UK Government published its White Paper on Energy (“Our Energy Future – creating a Low Carbon Economy”) in 2003, establishing a formal energy policy for the UK for the first time in 20 years. Essentially, the White Paper recognised that a limitation of carbon dioxide (CO2 – the main gas contributing to global climate change) was going to be necessary. It committed the UK to working towards a 60% reduction in carbon dioxide emissions by 2050, and identified business opportunities in so doing: a recurrent theme throughout the document was “cleaner, smarter energy”. It also claimed to be based on four pillars: the environment, energy reliability, affordable energy for the poorest and competitive markets. However the White Paper focused more on analysing the issues than in providing detailed policy responses. Some detail began to filter through in a series of follow-on documents, including an Energy Efficiency Implementation Plan (April 2004) and the DTI Microgeneration Strategy "Our Energy Challenge" (March 2006). Nonetheless, most of the policies were a continuation of business as usual, with emphasis on market-led solutions and an expectation that consumers act rationally, for example in installing energy efficiency measures to make running cost savings. However, in November 2005 it was announced that the Government, under DTI leadership, would undertake a full scale Energy Review, and over 500 organisations and individuals made detailed submissions as part of this review. Officially, the review was to take stock of the outcomes to date of the White Paper, which a particular focus on cutting carbon (emissions of which remained stubbornly high) and to look in more detail at security of supply, as the UK’s oil and gas production from the North Sea had peaked, and Russia was seen as being a high-risk supplier of gas. Unofficially, it was widely felt that the real reason behind the review was to allow nuclear power back into the energy debate, as it had been sidelined in the 2003 White Paper. That document had said “This white paper does not contain specific proposals for building new nuclear power stations. However we do not rule out the possibility that at some point in the future new nuclear build might be necessary if we are to meet our carbon targets. Before any decision to proceed with the building of new nuclear power stations, there will need to be the fullest public consultation and the publication of a further white paper setting out our proposals.” The Energy Review was therefore to be this public consultation. A further White Paper was promised for early 2007.

CONTENTS

The Energy Challenge: The Energy Review Report 2006 In the event, the Energy Review Report 2006 came out as a broader and more balanced document than critics (in advance) had expected. It started by reiterating the Government’s four long-term goals for energy policy:

• To put the UK on a path to cut carbon dioxide emissions by some 60% by about 2050, with real progress by 2020;

• To maintain reliable energy supplies;

• To promote competitive markets in the UK and beyond, helping to raise the rate of sustainable economic growth and to improve productivity; and

• To ensure that every home is adequately and affordably heated.

It then identified two major long-term energy challenges:




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• Tackling climate change, along with other nations, as global carbon emissions from human activity continue to grow; and

• Delivering secure, clean energy at affordable prices, as we become increasingly dependent on imports for our energy needs.

The Review took an internationalist response, stressing that the world’s economies need to get on a path to being significantly less carbon-intensive, and noting rising global demand, especially from countries such as India and China. This means using less energy in products and services and changing the way energy is produced so that more of it comes from low-carbon sources. It also identified the need for a fairer distribution of energy around the world, and identified that many resources, especially of fossil fuels which are concentrated in just a few countries. It placed its main concerns and proposals into three groups: Saving Energy The starting point for reducing carbon emissions is to save energy. The challenge is to secure the heat, light and energy we need in homes and businesses in a way that cuts the amount of oil, gas and electricity used and the carbon dioxide emitted. Actions proposed include:

• Increasing information, eg. through Home Information Packs

• Raising basic standards, removing inefficient goods from the market

• Making best use of the EU Emissions Trading Scheme and Climate Change Levy

• Making the Government estate carbon neutral by 2012

• Increasing the focus on energy efficient transport

CLEANER ENERGY

Cost-effective ways of using less energy will help move towards the carbon reduction goal. But on their own they will not provide the solution to the challenges faced: there is also a need to make the energy used cleaner. Under this head, the Government considered:

• more distributed energy generation including low-carbon heat

• more use of community based systems, including CHP

• a strong commitment to carbon pricing in the UK, through improving the operation of the EU Emissions Trading Scheme

• a strengthened commitment to the Renewables Obligation

• proposals for reform of the planning regime for electricity projects

• a clear statement of our position on new nuclear build

• support for carbon capture and storage

• developing alternative fuels for transport




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THE ENERGY SECURITY CHALLENGE

The challenges of reducing carbon emissions and ensuring security of supply are closely linked. Security of supply requires that we have good access to available fuel supplies, the infrastructure in place to transport them to centres of demand and effective markets so that supply meets demand in the most efficient way. Many of the measures already described for tackling carbon emissions also contribute to the healthy diversity of energy sources that is necessary for meeting the energy security challenge. There are two main security of supply challenges for the UK:

• Managing increased dependence on oil and gas imports, especially in the light of the global distribution of energy reserves and growing international demand; and

• Ensuring that the market delivers substantial and timely investment in electricity generating capacity and networks so that households and businesses have the electricity they need at affordable prices.

The Government’s response is to continue to open up markets and to work internationally to develop strong relationships with suppliers, developing liberalised markets. So where does nuclear power fit within this debate? Although it is mentioned a lot more in the Review compared to the White Paper (441 times, compared to 55 to be exact), the Government does not propose building new stations itself. Instead, it will leave it to the market, although it will ease some of the planning constraints (which it also aims to do for renewables) and look into providing a design authorisation procedure. However, as with many other aspects of the Energy Review Response, the document is not likely to be the last word on the subject, as there are plans for further consultation, and the establishment of further reviews and studies in issues such as identifying suitable sites, and managing the costs of decommissioning and long term waste management.

ISSUES OF THE UK POLICY Despite some successes and stated goals, there are some issues that are incompletely addressed by UK policy. The principal such items are:

• Loss of energy independence. Rather than creating an aggressive plan to lessen the impending loss of energy independence, the UK policy succumbs to that outcome, with resultant risks to future supplies and costs.

• Lack of strong national policy on transport fuel efficiency. While the city of London and other local councils have given incentives to hybrid vehicles, the national policy does not provide any real stimulus to highly fuel efficient vehicles. In fact, the government has done so little to inform the public about fuel efficient options that a survey released in March, 2006: "Some of the 1200 people surveyed ... thought ‘hybrid’ meant two cars welded together. Others thought hybrids had to be plugged in at night."

• Lack of emphasis of energy conservation by reducing over-illumination, especially in commercial buildings.




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ENERGY USE AND CONSERVATION Energy use and conservation in the United Kingdom has been receiving increased attention over recent years. Key factors behind this are the UK Government's commitment to reducing carbon emissions, the projected 'energy gap' in electricity generation, and the increasing reliance on imports to meet national energy needs.

CARBON DIOXIDE EMISSIONS Projected temperature increase for a range of greenhouse gas stabilization scenarios (the coloured bands). The black line indicates 'best estimates'; the red and the blue lines the likely limits. From the work of IPCC AR4, 2007. Under the Kyoto protocol the UK Government committed to reducing the levels of carbon dioxide (CO2) and five other greenhouse gases by 12.5% below 1990 levels by 2008 to 2012. Based on a recommendation by the Royal Commission on Environmental Pollution, the Government has also committed to cutting CO2 emissions by 20% by 2010, 60% by 2050, and 80% by 2100, compared to 1990 levels. These reductions were thought in 2000 to be those required to stabilise atmospheric carbon dioxide at 550 ppm (compared to current levels of 380ppm), although latest scientific opinion is that stabilisation at this level is likely to be insufficient to avoid dangerous climate change. Research shows that the world is heading for much higher than the 650ppm level. The achievement of the first of these targets should have been made considerably easier due to an inadvertent reduction in CO2 emissions caused by the (cost driven) displacement of coal by natural gas in electricity generation. Compared to coal, gas produces around 30% less CO2 when burnt. Filling the electricity generation gap (see below) while cutting emission levels presents a significant challenge. CO2 emissions from electricity generation have already risen 15% since 1997, though were still 15.9% lower than 1990 levels. It is currently expected that the reduction by 2010 will actually be in the 15-18% range, although the 20% target remains.

FUTURE TARGETS

In March 2007 the Government published a draft Climate Change Bill aimed at requiring a mandatory 60% cut in the UK's CO2 emissions by 2050 (compared to 1990 levels), with an intermediate target of between 26% and 32% by 2020. A report by the University College London Environment Institute (commissioned by Channel 4 for heavily criticised Dispatches Great Global Warming Swindle programme) suggested that current government policies would achieve a reduction in greenhouse gasses of between 12 and 17% by 2020, compared to an implied target of up to 30%. The report states that the over-riding block to achieving 30% is that nearly all the government's targets are voluntary.

PAST PERFORMANCE

The figures below are the annual figures for carbon dioxide emissions since 1990. They exclude carbon emissions from international aviation and international shipping, which together rose by 74.2% from 22.65 to 39.45 million tonnes of carbon dioxide between 1990 and 2004.

UK greenhouse gas emissions (million tonnes carbon dioxide equivalent) Year Net CO2 Change* CH4 N2O HFCs PFCs SF6 Total Total Change*




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(Domestic target)** (UK) (Kyoto target)***

1990 592.1 0.0% 103.4 63.6 11.4 0.4 1.0 771.9 770.3 0.0% 1991 598.9 1.1% 102.6 63.5 11.9 1.2 1.1 779.2 776.6 0.2% 1992 581.9 -1.7% 101.1 57.3 12.3 0.6 1.1 754.3 752.4 -2.9% 1993 567.0 -4.2% 98.0 52.8 13.0 0.5 1.2 732.5 731.7 -5.6% 1994 559.2 -5.6% 91.0 54.1 14.0 0.5 1.2 720.0 719.3 -7.2% 1995 549.6 -7.2% 90.1 52.8 15.5 0.5 1.2 709.7 709.0 -8.5% 1996 571.3 -3.5% 87.7 53.2 16.7 0.5 1.3 730.7 730.1 -5.8% 1997 548.4 -7.4% 82.8 54.6 19.2 0.4 1.2 706.6 706.4 -8.9% 1998 550.1 -7.1% 78.2 54.3 17.3 0.4 1.3 701.6 701.9 -9.5% 1999 540.8 -8.7% 72.9 44.0 10.9 0.4 1.4 670.4 670.9 -13.4% 2000 548.8 -7.3% 68.4 43.5 9.1 0.5 1.8 672.1 672.8 -13.2% 2001 559.6 -5.5% 62.4 41.4 9.7 0.4 1.4 674.9 675.9 -12.8% 2002 543.2 -8.3% 59.4 39.9 9.9 0.3 1.5 654.2 655.8 -15.4% 2003 555.1 -6.3% 53.4 39.6 10.2 0.3 1.3 659.9 661.5 -14.7% 2004 554.6 -6.3% 51.6 40.4 8.9 0.3 1.1 656.9 659.3 -15.0% 2005 554.2 -6.4% 49.3 39.6 9.2 0.4 1.1 653.8 656.2 -15.3% *Change percentages are the figures originally published. All other figures are revised annually as improvements are made to the calculation methods, so the percentages shown do not necessarily align with the rest of the data.

**Domestic target is based on CO2 only. Baseline 592.1 ***Kyoto target is based on all greenhouse gases. Baseline is 775.2. Kyoto total differs from the sum of the columns due to differences in definitions used, and the inclusion of emissions from UK Overseas Territories. Note: Figures shown do not include any adjustment for the effect of the EU Emissions Trading Scheme. Source: DEFRA, published 2007-01-31

FINAL ENERGY CONSUMPTION During 2007, the total energy consumed in the UK was the equivalent to 164.6 million tonnes of oil (an increase of 11.74% compared to the equivalent of 147.3 million tonnes of oil used in 1990). This represented 65.5% of the total energy used; the other 34.5% was lost in converting or transmitting the energy, or was used by the energy industries themselves before it reached the consumers. Final energy consumption was used by consumers in the following proportions:

• Transport – 38.83% (33.00% in 1990) • Domestic – 28.19% (27.70% in 1990) • Industry – 20.21% (26.27% in 1990) • Services and agriculture – 12.77% (13.03% in 1990)

ENERGY IMPORTS With large coal reserves, and the extraction of North Sea oil and gas that started in the 1970s, until the 2000s the UK has been one of the few countries to have been largely self sufficient in energy, and indeed a net-exporter of oil and gas in recent decades.




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Due to the decline in North Sea production, and the costs of mining and using coal cleanly, unless action is taken to reduce demand, it is expected that the UK will become a major importer of oil and gas by 2015. After becoming a net exporter of gas in 1997, the UK became a net importer again in 2004.

ELECTRICITY SUPPLY With the development of the national grid, the switch to using electricity, UK electricity consumption increased by around 150% between the post war nationalisation of the industry in 1948 and the mid 1960s. During the 1960s growth slowed as the market became saturated.

FUEL SOURCES

During the 1940s some 90% of the generating capacity was fired by coal, with oil providing most of the remainder. The UK started to develop a nuclear generating capacity in the 1950s, with Calder Hall being connected to the grid on 27 August 1956. Though the production of weapons-grade plutonium was the main reason behind this particular power station, other civil stations followed, and 26% of the nation's electricity was generated from nuclear power at its peak in 1997. Despite the flow of North Sea oil from the mid 1970s, oil fuelled generation remained relatively small and continued to decline. Starting in 1993, and continuing through to the 1990s, a combination of factors lead to a so-called dash for gas, during which the use of coal was scaled back in favour of gas fuelled generation. This was sparked by the privatisation of the National Coal Board, British Gas, the Central Electricity Generating Board, the introduction of laws facilitating competition within the energy markets, and the availability of cheap gas from the North Sea. In 1990 just 1.09% of all gas consumed in the country was used in electricity generation. By 2004 the figure was 30.25%. By 2004, coal use in power stations had fallen by 43.6% (50.5 million tonnes, representing 82.4% of all coal used in 2004) compared to 1980 levels, though up slightly from its low in 1999. From the mid 1990s new renewable energy sources began to contribute to the electricity generated, adding to a small hydroelectricity generating capacity. By 2004, total electricity production stood at 382.7 TWh (up 23.7% compared to 309.4 TWh in 1990), generated from the following sources:

• gas – 39.93% (0.05% in 1990) • coal – 33.08% (67.22% in 1990) • nuclear – 19.26% (18.97% in 1990) • renewables – 3.55% (0% in 1990) • hydroelectric – 1.10% (2.55% in 1990) • imports – 1.96% (3.85% in 1990) • oil – 1.12% (6.82% in 1990)

UK Government energy policy expects that the total contribution from renewables should rise to 10% by 2010. The Scottish Executive has a target of generating 17% to 18% of Scotland's electricity from renewables by 2010, rising to 40% by 2020.

THE UK 'ENERGY GAP'

In the early years of the 2000s, concerns grew over the prospect of an 'energy gap' in UK generating capacity. This is forecast to arise because it is expected that a number of coal fired power stations will close due to being unable to meet the clean air requirements of the European




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Large Combustion Plant Directive (directive 2001/80/EC). In addition, the UK's remaining Magnox nuclear stations and two of the seven AGR nuclear stations will have closed by 2015. However the oldest AGR nuclear power station has had its life extended by ten years, and it is likely many of the others can be life-extended, reducing the potential gap. A report from the industry in 2005 forecast that, without action to fill the gap, there would be a 20% shortfall in electricity generation capacity by 2015. Similar concerns were raised by a report published in 2000 by the Royal Commission on Environmental Pollution (Energy - The Changing Climate). The 2006 Energy Review attracted considerable press coverage - in particular in relation to the prospect of constructing a new generation of nuclear power stations, in order to prevent the rise in carbon dioxide emissions that would arise if other conventional power stations were to be built. Among the public, according to a November 2005 poll conducted by YouGov for Deloitte, 35% of the population expect that by 2020 the majority of electricity generation will come from renewable energy (more than double the government's target, and far beyond the 5% likely based on government energy policy as of May 2007), 23% expect that the majority will come from nuclear power, and only 18% that the majority will come from fossil fuels. 92% thought the Government should do more to explore alternative power generation technologies to reduce carbon emissions.

ENERGY SOURCES

The first move to plug the UK's energy gap was the announcement by Centrica, in June 2006, that they are to go ahead with the construction of the conventionally gas-fired Langage Power Station. In 2007, proposals for the construction of two new coal fired power stations were announced, in Tilbury, Essex and in Kingsnorth, Kent. If built, they will be the first coal fired stations to be built in the UK in 20 years. Beyond these new plants, there are a number of options that might be used to provide the new generating capacity, while minimising carbon emissions.

FOSSIL FUELS

Fossil fuel power plants might provide a solution if there was a satisfactory and economical way of reducing their carbon emissions. Carbon capture might provide a way of doing this, however the technology is relatively untried and costs are relatively high. As yet (2006) there are no power plants in operation with a full carbon capture and storage system.

NUCLEAR

While nuclear power doesn't produce carbon dioxide in generation (though the construction, mining, waste handling and disposal, and decommissioning do generate carbon emissions), it raises other environmental and security concerns. Despite this, it has great potential for generating electricity. In France, for example, nearly 80% of the country's electricity production is nuclear powered. However, even with changes to the planning system to speed applications, there are doubts over whether the necessary timescale could be met, and over the financial viability of nuclear power. With no nuclear plants having been constructed since Sizewell B in 1995, there are also likely to be capacity issues within the native nuclear industry. The existing privatised nuclear supplier, British Energy, had been in financial trouble in 2004.




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WIND

A March 2006 report by the British Wind Energy Association forecast that onshore windfarms should be able to supply nearly 5% of the national electricity requirements by 2010 (6 GW). The development of offshore windfarms in the UK is more recent, with only 4 operational at the end of 2005 generating only 213.80 MW, though others are in the pipeline. The installed capacity of all wind farms in the UK passed the 2 GW milestone in February 2007, but there remains considerable scope for growth. The world leader in wind power is Germany, which had installed 20.6 GW by the end of 2006.

WAVE AND TIDE POWER

Due to the island location of the UK, the country has great potential for generating electricity from wave power and tidal power. To date, wave and tidal power have received very little money for development and consequently have not yet been exploited on a significant commercial basis due to doubts over their economic viability in the UK. Funding for the UK's first wave farm was announced by the Scottish Executive in February 2007. It will be the world's largest, with a capacity of 3 MW generated by four Pelamis machines and a cost of over 4 million pounds.

COGENERATION

Combined heat and power plants, where 'waste' hot water from generating is used for district heating, are also a well tried technology in other parts of Europe. While it heats about 50% of all houses in Denmark, Finland, Poland, Sweden and Slovakia, it currently only plays a small role in the UK. It has, however, been rising, and had reached an installed capacity of 5,777MWe by 2004, up from around 2,500 MWe in 1990. The Government has targeted 10,000 MWe by 2010.

BIOFUELS

Gas from sewage and landfill (biogas) has already been exploited in some areas. In 2004 it provided 129.3 GW·h (up 690% from 1990 levels), and was the UK's leading renewable energy source, representing 39.4% of all renewable energy produced (including hydro). Other biofuels can provide a close-to-carbon-neutral energy source, if locally grown. In South America and Asia, the production of biofuels for export has in some cases resulted in significant ecological damage, including the clearing of rainforest. In 2004 biofuels provided 105.9 GW·h, 38% of it wood. This represented an increase of 500% from 1990.

SOLAR ELECTRICITY

In some countries the installation of solar electricity has already received considerable Government support. At the end of 2006 the UK's installed capacity of 13 MWp (Megawatts peak) represented just 0.3% of the European total of 3.4 GWp. By way of comparison, due to their plans to phase out nuclear energy there is a growing (though heavily subsidised) capacity in Germany, where 3.0 GWp had been installed by the end of 2006 (90% of all European capacity).

GEOTHERMAL POWER

Main article: Geothermal power in the United Kingdom Investigations into the exploitation of Geothermal power in the United Kingdom, prompted by the 1973 oil crisis, were abandoned as fuel prices fell. Only one scheme is operational, in Southampton. In 2004 it was announced that a further scheme would be built to power heat the UK's first geothermal energy model village near Eastgate, County Durham.




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MICROGENERATION

Microgeneration technologies are seen as having considerable potential by the Government. However the micorgeneration strategy they launched in March 2006 was seen as a disappointment by many commentators. Microgeneration involves the local production of electricity by homes and businesses from low-energy sources including small scale wind turbines, ground source heat pumps and solar electricity installations. The Climate Change and Sustainable Energy Act 2006 is expected to boost the number of microgeneration installations, however funding for grants under the Low Carbon Building Programme is proving insufficient to meet demand with funds for March 2007 being spent in 75 minutes.

COMMUNITY ENERGY SYSTEMS

Sustainable community energy systems, pioneered by Woking Borough Council, provide an integrated approach to using cogeneration, renewables and other technologies to provide sustanable energy supplies to an urban community. It is expected that the same approach will be developed in other towns and cities, including London. Highlands and Islands Community Energy Company based in Inverness are active in developing community-owned and led initiatives in Scotland.

ENERGY CONSERVATION REGULATIONS Much of the emphasis in energy debates tends to focus on the supply side of the issue, and ignore the demand. A number of commentators are concerned that this is being largely overlooked, partly due to the strength of the energy industry lobby. Energy conservation also has great potential, and may be able to significantly cut the size of the supposed energy gap, if early and concerted action is taken.

HOUSING

Along with road transport, domestic housing and energy use is currently one of the major obstacles to achieving carbon reduction targets. Housing currently accounts for just over 30% of all carbon dioxide emissions in the UK, and by 2010 the emissions from housing are expected to have risen 18.5% above 1990 levels. This rise is projected to continue beyond 2010. While some action is being taken on new buildings, particularly due to the 2006 changes to the Building Regulations, relatively little is being done to improve the existing housing stock.

DOMESTIC APPLIANCES

In the housing sector, consumer electronics and IT products are an area where energy use is expected to continue to rise rapidly. In the decade from the mid 1990s to the mid 2000s electricity consumed by such goods rose by 47%. By the early 2010s it is expected to have risen again by over 80%.It was estimated that, in 2004, at least 8% of domestic electricity was used by items in standby mode, representing 360 kW·h and 42 kg of carbon emissions for each household. Consumption of electricity by all domestic appliances (including cooking and lighting) rose by 123% between 1970 and 2003, and by 223% when cooking and lighting are excluded.

TRANSPORT

Transport continues to grow as a significant user of fuel in the UK, and along with housing, this continues to be one of the major challenges to achieving the Government's carbon reduction targets. By 2003 the amount of fuel used by transport had risen by around 60% since 1970. While oil is the main energy source, electricity and LPG make up a small percentage. Carbon emissions from transport have almost doubled over this period. Increasing car usage, increasing engine sizes, and levels of congestion are some of the problem areas, as is increasing air travel.




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ROAD TRANSPORT

Efforts to reduce emissions of nitrogen oxides, sulphur dioxide and particulates from diesel vehicles have actually led to an increase in fuel consumption and carbon dioxide emissions. Current technology should allow further reductions in emissions without increases in fuel consumption, and hopefully future technology will allow fuel consumption, and therefore CO2 emissions, to reduce. The basis of Vehicle Excise Duty (VED), also known as "road tax", was changed so that cars registered on or after March 1, 2001 are taxed according to the VED band that they fall into. VED bands are based on the results of a laboratory test, designed to calculate the theoretical potential emissions of the vehicle in grammes of CO2 per kilometre travelled, under ideal conditions.

This has encouraged a 21% increase in the ownership of diesel cars, which produce lower CO2 emissions, but increase particulates. Company Car Tax was also revised to reflect both the list price and CO2 emissions. A voluntary scheme to display Fuel Economy Labels on new cars was introduced during July 2005, including information on Vehicle Excise Duty and likely fuel costs . The scheme brings the UK into line with European Directive 1999/94/EC, and aims to influence the behaviour of both consumers and manufacturers. During the 1990s the Fuel Price Escalator was used to raise road fuel tax in an attempt to reduce vehicle usage and cut emissions. The mechanism was abandoned in the wake of the 2000 fuel protests. In the December 2006 Pre-Budget Report the Government announced a rise in fuel tax, and stated that fuel prices should rise each year 'at least in line with inflation'. From 2008, a Renewable Transport Fuel Obligation is being introduced, under which petrol and diesel are likely to be blended with 5% biofuels by 2010. It is anticipated that this will cut carbon emissions in the transport sector by between 2% and 3%. The 'Low Carbon Vehicle Partnership'is pursuing the goal that new cars should produce no more than 100 g/km of CO2 by 2012. It also works in on reducing carbon emissions from commercial vehicles and in the area of alternative fuels.

DOMESTIC SHIPPING

Although 7.5% of freight within the UK is moved by coastal shipping and on inland waterways (in tonne kilometres, excluding crude oil from the North Sea), this is largely limited to stone, aggregates and refined petroleum. A series of reports have discussed the financial and environmental advantages of increasing this proportion. Compared to road transport, carbon emissions are around 80% less and nitrogen dioxide about 35% less. As a result the issue is receiving more attention with, for example, British Waterways considering the potential for developing inland container ports. Blocks to the regular movement of containers include the lack of regular shipping services by reliable shippers of adequate size, and the additional handling costs involved. In some areas, including London, investment is being made in the canal infrastructure in order to boost freight transport, and action is being taken to protect the remaining wharves on the Thames

TRANSPORT

Air transport is currently taxed through Air Passenger Duty. Carbon emissions from international aviation are currently excluded from UK and international carbon reduction targets. Due to the current and projected rise in passenger numbers, the sector




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is expected to become a major source of emissions in the future. In 1998, 123.9 million international passengers were carried through UK airports (159.1 million in total, including domestic aviation). Due to the expansion of airport capacity envisaged by the Department for Transport's white paper The Future of Air Transport, it is forecast that 470 million passengers are likely to be carried by 2030. Using the Department for Transport's 'best case' emission forecasts, in their August 2006 report the Environmental Audit Select Committee expect that the sector will account for 24% of the UK's emissions in 2050, compared to around 5% in 2006. In addition, due to a variety of altitude-related factors, carbon emissions from aviation are considered to be between 2 and 4 times as damaging as emissions at ground level. The Select Committee have called for a number of actions to combat this projected emissions increase, including the taxation of aviation fuel, the imposition of VAT on international air tickets, and a rise in Air Passenger Duty.

INDUSTRY

Compared to 1990, energy use by industry had fallen by over 5% by 2004. The highest profile initiative to cut carbon emissions is the European Union Emission Trading Scheme, which is operated in the UK under the 'Greenhouse Gas Emissions Trading Scheme Regulations'. Under Phase I of the scheme, the UK was allocated an allowance of 736 million tonnes of CO2 for the period 2005-2007 (i.e. an annual average of 245.3 million tonnes). An annual average of 246.2 million tonnes has been set for the Phase II period (2008-2012). Other measures affecting industry include the Climate Change Levy.

ENERGY RESEARCH Historically, public sector support for energy research and development in the UK has been provided by a variety of bodies with little co-ordination between them. Problems experienced have included poor continuity of funding, and the availability of funding for certain parts of the research-development-commercialisation process but not others. Levels of public funding have also been low by international standards, and funding by the private sector has also been limited. Research in the area of energy is carried out by a number of public and private sector bodies: The Engineering and Physical Sciences Research Council funds an energy programme spanning energy and climate change research. It aims to develop, embrace and exploit sustainable, low carbon and/or energy efficient technologies and systems to enable the UK to meet the Government’s energy and environmental targets by 2020. Its research includes renewable, conventional, nuclear and fusion electricity supply as well as energy efficiency, fuel poverty and other topics. Since being established in 2004, the UK Energy Research Centre carries out research into demand reduction, future sources of energy, infrastructure and supply, energy systems, sustainability and materials for advanced energy systems. The Energy Technologies Institute, expected to begin operating in 2008, is to 'accelerate the development of secure, reliable and cost-effective low-carbon energy technologies towards commercial deployment'. In relation to buildings, the Building Research Establishment carries out some research into energy conservation. There is currently international research being conducted into Fusion power. The ITER reactor is currently being constructed at Cadarache in France. The UK contributes towards this project through membership of the European Union. Prior to this, an experimental Fusion reactor (the Joint European Torus) had been built at Culham in Oxfordshire.




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ENERGY SOURCES IN THE UK

NUCLEAR POWER IN THE UNITED KINGDOM

As of 2006, the United Kingdom operates 24 nuclear reactors generating one-fifth of its electricity (19.26% in 2004). The UK also has major nuclear reprocessing plants, including Sellafield.

The UK's first commercial nuclear power reactor began operating in 1956 and, at its peak in 1997, 26% of the nation's electricity was generated from nuclear power. Since then a number of stations have been closed, and others are scheduled to follow. The two remaining Magnox nuclear stations and four of the seven AGR nuclear stations are currently planned to be closed by 2015. This is a cause behind the UK's forecast 'energy gap', though secondary to the reduction in coal generating capacity. However the oldest AGR nuclear power station was recently life-extended by ten years, and it is likely many of the others can be life-extended, significantly reducing the energy gap.

All UK nuclear installations in the UK are overseen by the Nuclear Installations Inspectorate.

Though the UK Government has recently given the go-ahead for a new generation of nuclear power stations to be built, the Scottish Government, with the backing of the Scottish Parliament, has made clear that Scotland will have no new nuclear power stations and is aiming instead for a non-nuclear future.

ECONOMICS OF UK NUCLEAR POWER

THE BASICS




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The history of nuclear energy economics in the UK is mixed. Early generation reactors (Magnox) were not built for sole commercial considerations while later reactors faced severe delays (culminating in the Sizewell B taking 7 years to build, after original consultations were in the early 1980s). Costs have also been made problematic by a lack of national strategy or policy for spent nuclear fuel, so that a mixed use of reprocessing and short-term storage have been employed, with little regard for long-term considerations (though a national depository has been proposed). There is a lack of consensus in the UK about the cost/benefit nature of nuclear energy, as well as ideological influence (for instance, those favouring 'energy security' generally arguing pro, while those worried about the 'environmental impact' con). Because of this, and a lack of a consistent energy policy in the UK since the mid-1990s, no new reactors have been built since Sizewell B in 1995. Costs have been a major influence to this (with Sizewell B having run at a cost of 6p/kWh for its first five years of operation), while the long-lead time between proposal and operation (at ten years or more) has put off many investors, especially with long-term considerations such as energy market regulation and nuclear waste remaining unresolved. It is important to note that any future project would be private, rather than public. This transfers the running and immediate concerns to the operator, while reducing (although not eliminating) government participation and long-term involvement/liability (nuclear waste, as involving government policy, will likely remain a liability, even if only a limited one). As of the 2007 energy white paper, the Government has endorsed a generally 'pro-nuclear' attitude, although many key details have been left out and any serious decision delayed until the end of 2007. However, in the wake of it, and stemming from the more favourable position already shown in the 2006 energy white paper, British Energy and EDF have expressed interest in a new generation of nuclear power stations in Britain.

HISTORY

When the rest of the UK generating industry was privatised, the Government introduced the Non-Fossil Fuel Obligation, initially as means of supporting the nuclear generators, which remained under state ownership until the formation of British Energy. British Energy, the private sector company that now operates the UK's more modern nuclear plants, came close to bankruptcy and in 2004 was restructured with UK government investment of over £3 billion. There are several reasons to expect significant improvement if new third generation nuclear power stations are built:

• modern designs are simpler, use fewer materials and require less on-site fabrication • the designs are internationally standardised, so reducing "first of a kind" costs • big-project management techniques have improved over the last 15 years • more competitive international process for letting a nuclear construction contract • turnkey (fixed price) contracts rather than the cost-plus contracts that were characteristic

of past UK nuclear construction • the most recently built nuclear stations elsewhere in the world (in China and South

Korea) have already achieved lower build cost and quicker construction times

As of 2007 no third generation power station has been completed in Europe, confirming these improvements. The construction of the first such power station, a European Pressurized Reactor at Olkiluoto in Finland, is running at least two years behind schedule, creating doubts that recent improvements sufficiently improve construction costs. However some observers suggest that such delays should be expected as this is the first reactor of its kind and the contractors are not used to working to the standards of the nuclear industry. The project is based on a "turnkey" contract which means the price to the customer is fixed regardless of the delays. Construction of a second reactor of the same design started in 2007 at Flamanville in France. In January 2008, the UK government indicated that it will take steps to encourage private operators to build new nuclear power plants in the coming years to meet projected energy needs




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as fossil fuel prices climb, however there would be no subsidies from the UK government for nuclear power. The Government hopes that the first station will be operational before 2020. However, Scotland has decided against new nuclear power stations. (see below) In May 2008, the head of the world's largest power company suggested that the Government has significantly underestimated the cost of building new nuclear power plants. The Times has reported that Wulf Bernotat, chairman and chief executive of E.ON, estimates that the cost could be as high as €6 billion (£4.8 billion) per plant, which is much higher than the Government's £2.8 billion estimate. The cost of replacing Britain's ten nuclear power stations could therefore reach £48 billion, excluding the cost of decommissioning ageing reactors or dealing with nuclear waste.

DECOMMISSIONING

The Nuclear Decommissioning Authority (NDA), formed in April 2005 under the Energy Act 2004, oversees and manages the decommissioning and clean-up of the UK's older Magnox power plants and the reprocessing facilities at Sellafield, which were transferred to its ownership from BNFL, and the former nuclear research and development facilities previously run by the UKAEA.

RISING COSTS

Prior to the 2002 white paper Managing the Nuclear Legacy, the cost of decommissioning these facilities had been estimated at around £42 billion. The white paper estimated the costs at £48 billion at March 2002 prices, an increase of £6bn, with the cost of decommissioning Sellafield accounting for over 65% of the total. This figure included a rise in BNFL's estimated decommissioning liabilities from £35 billion to £40.5 billion, with an estimate of £7.4 billion for UKAEA. In June 2003 the Department of Trade and Industry estimated that decommissioning costs, including the cost of running the facilities still in operation for their remaining life, were approximately £56 billion at 2003 prices, although the figure was 'almost certainly' expected to rise. This estimate was revised in subsequent years; to £57 billion in September 2004; £63 billion in September 2005; £65 billion in March 2006; and to £73 million in March 2007. Around £46 billion of the £73 billion is for the decommissioning and clean-up of the Sellafield site. In May 2008 a senior director at the Nuclear Decommissioning Authority indicated that the figure of £73 billion might increase by several billion pounds.

BRITISH ENERGY

In addition to the The Nuclear Decommissioning Authority's costs, British Energy's liabilities in relation to spent nuclear fuels have risen. In February 2006 it was reported that these had increased to £5.3 billion, an increase of almost £1 billion. The costs of handling these is to be met by the Nuclear Liabilities Fund (NLF), the successor to the Nuclear Generation Decommissioning Fund. Although British Energy contributes to the NLF, the fund is underwritten by the Government. The House of Commons Public Accounts Committee noted in 2007 that British Energy may lack an incentive to reduce the eventual liabilities falling to the Nuclear Liabilities Fund.

WASTE MANAGEMENT AND DISPOSAL

The UK has a large variety of different intermediate- and high-level radioactive wastes, coming from national programs to develop nuclear weapons and nuclear power. It is a national responsibility to pay for the management of these. In addition, new nuclear power stations could be built, the waste management from which would be the private sector's financial responsibility, although all would be stored in a single facility. Most of the UK's higher-activity radioactive waste is currently held in temporary storage at Sellafield. On July 31, 2006, the latest body to consider the issue of long-term waste management - the Committee on Radioactive Waste Management (CoRWM) - published its final report . Its main




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recommendation was that geological disposal should be adopted. This would involve burial at a depth between 200 – 1000m deep in a purpose-built facility with no intention to retrieve the waste in the future. It was concluded that this could not be implemented for several decades, and that there were social and ethical concerns within UK society about the disposal option that would need to be resolved as part of the implementation process. Such a repository should start to be closed as soon as practicable rather than being left open for future generations. 14 additional recommendations were also made. The report was criticised by David Ball, professor of risk management at Middlesex University who resigned from CoRWM in 2005, who said that it was based on opinions rather than sound science. On June 12, 2008, a white paper, Managing Radioactive Waste Safely, A Framework for Implementing Geological Disposal was published confirming CoRWM's conclusion of geologic disposal of higher-activity wastes. The policy announcement confirmed that there would be one geologic disposal site, for both national legacy waste as well as potential wastes from future programs. It announced that a process of volunteerism would be used in selecting a suitable site and invited communities from the UK to express interest. They would be rewarded by the infrastructure investment for the facility, jobs for the long term and a tailored package of benefits.

POLICY OF THE LABOUR GOVERNMENT

2006 ENERGY REVIEW

In April 2005, advisers to British Prime Minister Tony Blair were suggesting that constructing new nuclear power stations would be the best way to meet the country's targets on reducing emissions of gases responsible for global warming. The energy policy of the United Kingdom has a near-term target of cutting emissions below 1997 levels by 20%, and a more ambitious target of a 80% cut by 2050. In November 2005 the Government announced an energy review subsequently launched in January 2006, to "review the UK's progress against the medium and long-term Energy White Paper goals and the options for further steps to achieve them" Critics of nuclear power have suggested that the main reason behind the review is to provide a justification for the building of a new generation of nuclear reactors. They also say that doing so will not be able to help meet the 2010 target due to the length of time needed to plan, construct and commission such power plants, and will be too late to fill the 'Energy Gap' predicted to result from the closure of existing nuclear and coal fired power stations. However backers say nuclear power will help meet the longer term target of a 60% cut by 2050. (wikinews) The Mayor of London, Ken Livingstone, expressed reservations about the 2006 Energy Review, its dependence upon nuclear power and its likely impact upon London and Londoners.

2007 HIGH COURT RULING

On February 15, 2007, environmental group Greenpeace won a High Court ruling that threw out the government's 2006 Energy Review. Mr Justice Sullivan presiding held that the government's review was 'seriously flawed', in particular in that key details of the economics of the argument were only published after the review was completed.

Justice Sullivan held that the review's wording on nuclear waste disposal was "not merely inadequate but also misleading", and held the decision to proceed to be "unlawful". Judicial review proceedings were instigated by Greenpeace in October 2006 Responding to the news, Trade and Industry Secretary Alistair Darling said that there would be a fresh consultation, but that a decision was required before the end of 2007. He stated that the




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government remains convinced that new nuclear power plants are needed to help combat climate change and over-reliance on imported oil and gas. Greenpeace hold the view that carbon emissions can be cut more cost-effectively by investment in a decentralised energy system that makes maximum use of combined heat and power and renewable energy sources. Attention was drawn in the media to numerous connections to nuclear industry lobbyists within the Labour Party

2007 CONSULTATION

The 2007 Energy White Paper: Meeting the Energy Challenge was published on May 23, 2007. It contained a 'preliminary view is that it is in the public interest to give the private sector the option of investing in new nuclear power stations'. Alongside the White Paper the Government published a consultation document, The Future of Nuclear Power together with a number of supporting documents. One of these, a report by Jackson Consulting, suggests that it would be preferable to site new power stations on existing nuclear power stations sites that are owned by the Nuclear Decommissioning Authority or British Energy. Greenpeace responded to the release of the consultation document by repeating its position that by replacing the nuclear fleet rather than decommissioning would only reduce the UK's total carbon emissions by four percent On September 7 2007 several anti-nuclear groups including Greenpeace, Friends of the Earth, CND and the WWF announced that they had pulled out of the consultation process. They stated that it appeared as if the Government had already made up its mind regarding the future of nuclear power. The business and enterprise secretary, John Hutton, responded in a Radio 4 interview "It is not the government that has got a closed view on these issues, I think it is organisations like Greenpeace that have got a closed mind. There is only one outcome that Greenpeace and other organisations want from this consultation."

2008 GO-AHEAD GIVEN

In January 2008, the UK government gave the go-ahead for a new generation of nuclear power stations to be built. However, the Scottish National Party (SNP)-led Scottish Government has made clear that it opposes new nuclear power stations being built in Scotland and has the final say on planning matters in Scotland.

PUBLIC OPINION

In the early 1990s concern was raised in the United Kingdom about the effect of nuclear power plants on unborn children, when clusters of leukaemia cases were discovered nearby to some of these plants. The effect was speculative because clusters were also found where no nuclear plants were present, and not all plants had clusters around them. The latest studies carried by COMARE, Compete on Medical Aspects of Radiation in the Environment, in 2003 found no evidence between nuclear power and childhood leukaemia An opinion poll in Britain in 2002 by MORI on behalf of Greenpeace showed large support for wind energy and a majority for putting an end to nuclear energy if the costs were the same.

In November 2005 a YouGov poll conducted by business advisory firm Deloitte found that 36% of the UK population supported the use of nuclear power, though 62% would support an energy policy that combines nuclear along with renewable technologies.




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The same survey also revealed an unrealistic public expectation for the future rate of renewables development - with 35% expecting the majority of electricity to come from renewables in only 15 years, which is more than double the government's expectation. In the early 2000s there was a heated discussion about nuclear waste, leading to the creation of the Nuclear Decommissioning Authority (see above). The fringe Green Party of England and Wales has described nuclear power as "deplorable"

OPPOSITION POLITICAL PARTIES' POLICIES

CONSERVATIVE PARTY

The Conservatives do not rule out the use of nuclear power. On 10th January 2008, Alan Duncan MP issued a response to the Government's announcement on nuclear power, welcoming it and suggesting that the Conservatives supported a level economic playing field for different types of energy generation rather than a preference for one over another In a speech to Greenpeace on 6 December 2007 about energy generation, David Cameron offered a slightly different emphasis, talking of replacing large scale generation by government and big energy companies with "decentralised energy" such as CHP The speech did not mention nuclear power. Also on 6 December 2007 the Conservative Party released a green paper entitled "Power to the People: The Decentralised Energy Revolution" In a similar vein to David Cameron's speech, this paper makes no mention of nuclear energy other than to note that it currently accounts for 18% of the UK's energy generation.

LIBERAL DEMOCRATS

The Liberal Democrats are critical of the Government's support for nuclear power and believe that no new nuclear power plants should be built in the UK. Liberal Democrat spokesman Steve Webb MP said on 9 January 2008 "There is a real risk that focusing on new nuclear plants will undermine attempts to find a cleaner, greener, more sustainable and secure solution. We should be concentrating our efforts on renewables and greater energy conservation

SOLAR POWER IN THE UNITED KINGDOM

Until July 2008, solar power in the United Kingdom (photovoltaic electricity generation) was relatively commercially unattractive due to the moderate level of insolation, cheap grid electricity (compared to other European countries), and low financial incentives from government. In particular, net metering was not readily available, due to disagreement on what to do with the VAT.

In 2006, the United Kingdom had installed 12.5 MWp of photovoltaic capacity represented just 0.3% of the European total of 3.4GWp. By way of comparison, due to their plans to phase out nuclear power there is a growing capacity in Germany (due to a Feed-in Tariff program), where 3.0 GWp had been installed by the end of 2006 (90% of all European capacity). In contrast, solar thermal capacity to supply hot water was expected to grow to 25 MWth in 2006.

Due to an EU agreement to generate 15% of electricity from renewables by 2020, in June, 2008 a new program to encourage homeowners to generate their own electricity was announced, which will include a feed-in tariff.




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PV COMMERCIALISATION

The Energy Saving Trust that administers government grants for domestic photovoltaic systems, the Low Carbon Building Programme, estimates that an installation for an average-sized house would cost between £5,000- £8,000 per kWp installed, with most domestic systems usually between 1.5 and 3 kWp, and yield annual savings between £150 and £200. In August 2006 there was widespread news coverage in the United Kingdom of the major high street electrical retailers (Currys) decision to stock PV modules, manufactured by Sharp, at a cost of £1,000 per module. The retailer also provides an installation service.

PV MANUFACTURE

• The world's largest PV manufacturer, Sharp Solar, has a site in Llay near Wrexham. • G42i is building (2007) the world's first commercial scale dye sensitized TiO2 module

plant. • Solar Century offers BIPV modules to fit with standard UK concrete tiles.

GREEN ENERGY

The Green Energy for Schools program will be providing 100 schools across the UK with solar panels. The first school in Wales was the Tavernspite School, near Whitland, which has received panels worth £20,000, sufficient to produce 3,000kWh of electricity each year.

TARIFFS

Discussion on implementation of a feed-in tariff program concluded on September 26, 2008, and the results will be published in the spring of 2009. One story used the language "They will be able to sell back surplus electricity at premium prices to the national grid.", which is not a feed-in tariff, it is simply a means of reconciling any surplus from a net metering program. The key word is "surplus", not the word "sell". Net metering only requires the existing home electric meter, while a feed in tariff requires installation of a separate meter to measure generation. Australia has been criticized for implementing a similar program, paying 0.60 AUD (about ₤0.28) for each kWh over what is used each month, with Environment Victoria Campaigns Director Mark Wakeham calling it a "fake feed-in tariff".

WIND POWER IN THE UNITED KINGDOM

Wind power in the United Kingdom passed the milestone of 2 GW installed capacity on 9 February 2007 with the opening of the Braes O'Doune wind farm, near Stirling. The UK became the 7th country in the world to reach this capacity.

In 2007, approximately 1.5% of UK electricity was generated by wind power (with a total of around 4.5% of UK electricity coming from all renewable sources.) This is expected to rise dramatically in coming years, as a result of UK Energy Policy strongly supporting new renewable energy generating capacity. In the short to medium term, the bulk of this new capacity is expected to be provided by onshore and offshore wind power.

Plans for a massive expansion of a wind energy programme in the UK are to be unveiled by the Government. They will include the building of 7000 wind turbines.

Through the mechanism of Renewables Obligation Certificates, British electricity suppliers are now required by law to provide a proportion of their sales from renewable sources such as wind power or pay a penalty fee. The ROCs are the principal form of support for UK wind power,




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providing around half of the revenue from wind generation. Wind energy is also exempt from the climate change levy which is paid by fossil-fuel and nuclear generators.

Government targets anticipate a capacity utilisation factor (CF) of 30%, implying that 2GW of installed capacity will provide an average of 600MW to the national grid. A study by the Renewable Energy Foundation found that in practice only a few Scottish wind farms achieved this level, while turbines in lowland England were much less efficient, some operating at less than 10% of capacity. The foundation argued that too much subsidy had encouraged wind development on poor sites. Offshore Wind farms however generally have a higher capacity rating for which the 30% figure can be considered a more conservative estimate

OFFSHORE WIND FARMS

As of October 2008, the United Kingdom is the world leader in offshore wind power generation. With 590 MW of nameplate capacity, it has overtaken Denmark. The UK has been estimated to have over a third of Europe's total offshore wind resource, which is equivalent to three times the electricity needs of the nation at current rates of electricity consumption. The first developments in UK offshore wind power came about through the now discontinued Non-Fossil Fuel Obligation (NFFO), leading to two wind farms, Blyth Offshore and Gunfleet sands. The NFFO was introduced as part of the Electricity Act 1989 and obliged UK electricity supply companies to secure specified amounts of electricity from non-fossil sources, which provided the initial spur for the commercial development of renewable energy in the UK. The UK will require 7,500 offshore turbines by 2020 to meet EU targets.

ROUND 1

In 1998 the British Wind Energy Association (BWEA) began discussions with the government to draw up formal procedures for negotiating with the Crown Estate, the owner of almost all the UK coastline out to distance of 12 nautical miles (22.2 km). The result was a set of guidelines published in 1999, and a huge increase in the number of applications submitted. Eighteen of the applications were granted permission to proceed in April 2001, in what has become known as round one of UK offshore wind development. The first of the round one projects completed, and the first large scale offshore wind farm in the UK, North Hoyle, was commissioned in December 2003. The second, Scroby Sands, was completed one year later in December 2004, followed by the 90 MW Kentish Flats in 2005. The fourth, Barrow Offshore, with 30 turbines, finished construction in July 2006. Seven of the remaining projects have received consent from the planning authorities, while the remaining four are still awaiting consent, including the Shell Flat site off the coast of Lancashire.

ROUND 2

Lessons learnt from round one, particularly the difficulty in getting planning consent for offshore wind farms, together with the increasing pressure to reduce CO2 emissions, prompted the department of trade and industry (DTI) to develop a strategic framework for the offshore wind industry. The result, known as Round 2, was announced in December 2003 with 15 projects with a combined capacity of 7.2 GW. By far the largest of these are the 1 GW London Array and the 1.2 GW Triton Knoll.

UK OFFSHORE WINDFARMS

Farm Completed Power (MW)

No. Turbines Notes

Blyth Offshore December 4 2 Evaluation project




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2000 North Hoyle December

2003 60 30 The UK's first major offshore wind farm

Scroby Sands December 2004 60 30

Kentish Flats Offshore Wind Farm

December 2005 90 30 Construction completed 2005

Barrow Offshore Wind May 2006 90 30 Construction completed 2006 Burbo Bank October 2007 90 25 Construction completed 2007

Beatrice August 2007 10 2 Evaluation project. Construction started 2006

Lynn/Inner Dowsing October 2008 194 54 Construction started March 2007

Gunfleet Sands 1 108 30 Construction to start in first half of 2008

Robin Rigg - Solway Firth 180 60 Construction started summer

2007;

turbine assembly summer 2008

London Array 1,000 341 Permission granted December 2006

Thanet 300 83

Permission granted December 2006

Construction began September 2008

Greater Gabbard 500 140 Approved. Turbines to be delivered in 2009 and 2010.

Rhyl Flats 90 25 Construction began July 2007

Cromer 108 30 Withdrawn after approval

Scarweather Sands 108 30 Approved

Ormonde 108 30 Approved. Construction to begin in 2008.

Shell Flat 180 90 Resubmitted for planning consent

Teesside/Redcar 90 30 Submitted (TWA)

Gwynt y Môr 750 up to 250 Approved

Sheringham Shoal 315 up to 108 planning application submitted

Walney 160/440 93 planning application submitted

Lincs 250 83 planning application submitted

Gunfleet Sands 2 64 22 planning application submitted




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Docking Shoal 500 up to 83 planning application to be submitted end of 2006

Race Bank 500 up to 83 planning application to be submitted mid 2007

Triton Knoll 1,200

West Duddon 500

Atlantic Array 1,500 350 Planning stage, pending SEA, construction 2013-2018

ONSHORE WIND FARMS

The first windfarms in the UK were built onshore, and they currently generate more power than the offshore farms. A March 2006 report by the British Wind Energy Association forecast that onshore windfarms will be able to supply 6,000 MW peak, or on average nearly 5% of the national electricity requirement, by 2010.[33] Despite this potential, gaining planning permission for onshore wind farms is proving difficult, with many schemes stalled in the planning system, and a high rate of refusal. In the year to 31 March 2005, onshore wind farms, according to Ofgem, produced 1,734 GW·h (an average of 198 MW) but this is expected to rise to 2,500 GW·h (an average of 285 MW) in the following year, so there is considerable scope for further growth (16,600 MW peak capacity had been installed in Germany by 2004. According to DTI figures onshore wind farms in the UK generated 769 GW·h in 2005, while offshore farms generated 204 GW·h. This compares to a total electricity consumption of 407,265 GW·h for the same year, meaning that the combined on and offshore contribution to UK electricity generation was less than 0.25%. In 2007 the planning permission problem was exacerbated by a shortage of spare parts for certain models of generator, which put some turbines out of action for over six months, triggering clauses in planning consents requiring removal of the non-functional turbines.

UK ONSHORE WINDFARMS

Farm Completed Power (MW) Turbines Type Location Notes

Delabole[39] 1991 December 4.0 10

The UK's first commercial wind farm, owned by Good Energy

Blood Hill[40] 1992 December 2.25 10 Hemsby Norfolk near Great

Yarmouth Coal Clough 1992

December 9.6 24 Located near Burnley

Hollin Hill [41] 1993 June 9.2 23

Harlock Hill[42] 1997 April 2.5 5

Part of the Baywind Co-Op. Upgraded in 2001




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Haverigg[43] 1998 July 3/5 4 Part of the Baywind Co-Op.

Bears Downs [44][45] 2001 July 9.6 16

Moel Maelogan [46] 2003 January 15.6 12 Denbigh Moors,

North Wales

12 turbines — the first 3 erected in 2002, a further 9 erected in 2008 [47]

Crystal Rig 2004 May 50 20

Hadyard Hill 2006 March 120 52 Burton Wold

[48] 2006 March 20 10 ENERCON E-70 2MW Northamptonshire

Caton Moor 2006 July 16 8 Recently upgraded

Boyndie Airfiled 2006 October 14 7 ENERCON

E-70 2MW Aberdeenshire operated by Falck Renewables

Ben Aketil [49] 2007 December 23 10

ENERCON E-70 2.3MW

Isle of Skye

Westmill[50] 2008 April 6.5 5 Siemens 1.3MW

Watchfield near Shrivenham, Oxfordshire

A co-op windfarm

Scout Moor[51] 2008 September 65 26

Between Bury, Rossendale and Rochdale

Walkway, High

Swainston[52] 2008 21 7 Near Fishburn

Braidenhill Farm 2008 July 0.8 1 ENERCON

E-53 near Glasgow

Redbog 2008 July 1.6 2 ENERCON E-48 Aberdeenshire

University of Ulster

2008 September 0.8 1 ENERCON

E-48 Bangor, County Down, Northern Ireland

University of Ulster 2008 October 0.8 1 ENERCON

E-48 Coleraine, Northern Ireland

Liniclate 2008 November 0.9 1 ENERCON

E-44 Benbecula, Outer Hebrides, Scotland

Lowestoft Ness

2004 December 2.75 1 Vestas

NM923 Suffolk




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Balnamoon Wind Farm

2008 November 0.8 1 ENERCON

E-48 Keith, Moray, Scotland

Butterwick Moor [53] 2009 30 10 Fishburn

Close to the Walkway development

Ardrossan[54] 24 12 Black Law Wind Farm 124 Whitelee

Wind Farm 322 Eaglesham, Scotland

Carno wind farm 1996 October 33.6 56

Near Carno, Powys, Mid Wales

Dagenham 2004 April 3.6 2 ENERCON E-66 18.66 Dagenham

First wind farm to be built in Greater London

Clyde Wind Farm

2011 (projected) 548 152 Abington South

Lanarkshire

Approval given 21 July 2008. Completion expected in 2011.

Mynydd y Gwair 50 19 Swansea

Planning application submitted September 2009

Royd Moor Wind Farm 6 12 Peniston, South

Yorkshire

GEOTHERMAL POWER IN THE UNITED KINGDOM The potential for exploiting geothermal energy in the United Kingdom on a commercial basis was initially examined by the Department of Energy in the wake of the 1973 oil crisis. Several regions of the country were identified, but interest in developing them was lost as petroleum prices fell. The potential for exploiting geothermal energy in the United Kingdom on a commercial basis was initially examined by the Department of Energy in the wake of the 1973 oil crisis. Several regions of the country were identified, but interest in developing them was lost as petroleum prices fell.




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ENERGY EFFICIENCY IN HOUSING: POLICY AND REGULATIONS

Domestic housing in the United Kingdom presents a possible opportunity for achieving the 20% overall cut in UK carbon dioxide emissions targeted by the Government for 2010. However, the process of achieving that drop is proving problematic given the very wide range of age and condition of the UK housing stock. The relevance of carbon dioxide emissions to global warming is also controversial.

CARBON EMISSIONS Although carbon emissions from housing have remained fairly stable since 1990 (due to the increase in household energy use having been compensated for by the 'dash for gas'), housing accounted for around 30% of all the UK's carbon dioxide emissions in 2004 - 40 million tonnes of carbon - up from 26.42% in 1990 as a proportion of the UK's total emissions. The Select Committee on Environmental Audit noted that emissions from housing could constitute over 55% of the UK's target for carbon emissions in 2050. A 2006 report commissioned by British Gas estimated the average carbon emissions for housing in each of the local authorities in Great Britain, the first time that this had been done. This indicated that housing in Uttlesford (Essex) produced the highest emissions (8,092 kg of carbon dioxide per dwelling). This was 250% higher than than housing in Camden (London) which produced the least (averaging 3,255 kg). Among the 23 towns included, Reading had the highest emissions (6,189 kg), with Hull the lowest (4,395 kg). The variations are due to a number of factors, including the age, size and type of the housing stock, together with the efficiency of heating systems, the mix of fuels used, the ownership of appliances, occupancy levels and the habits of the occupants.

ZERO CARBON AMBITION

In the December 2006 Pre-Budget Report the Government announced their 'ambition' that all new homes will be 'zero-carbon' by 2016 (i.e. built to zero-carbon building standards). To encourage this, an exemption from Stamp duty land tax is to be granted, lasting until 2012, for all new zero-carbon homes up to £500,000 in value. Whilst some organisations applauded the initial announcement of the scheme, in the pre-budget statement from the then UK Chancellor, Gordon Brown, others are concerned about the government's ability to deliver on the promise.

DOMESTIC ENERGY USE The housing stock in the United Kingdom is amongst the least energy efficient in Europe. In 2004 housing (including space heating, hot water, lighting, cooking, and appliances) accounted for 30.23% of all energy use in the UK (up from 27.70% in 1990). The figure for London is higher at approximately 37%. In view of the progressive tightening of the Building Regulations' requirements for energy efficiency since the 1970s (see the history section below), it might be expected that a significant cut in domestic energy use would have occurred, however this has not yet been the case. Although insulation standards have been increasing, so has the standard of home heating. In 1970, only 31% of homes had central heating. By 2003 it had been installed in 92% of British




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homes, leading in turn to a rise in the average temperature within them (from 12.1°C to 18.20°C). Even in homes with central heating, average temperatures rose 4.55°C during this period. At the same time, the increase in the number of households, increasing numbers of domestic electrical appliances, an increase in the number of light fittings, reduction in the average number of occupants per household, plus other factors, had led to an increase in total national domestic energy consumption from around 25% in 1970 to about 30% in 2001, and remained on an upward trend (BRE figures). The figures for energy consumed by end use for 2003.

• Space heating - 60.51% (57.61% in 1990) • Water heating - 25.23% (25.23% in 1990) • Appliances and lighting - 13.15% (13.4% in 1990) • Cooking - 2.74% (3.76%)

BUILDING REGULATIONS The 1965 Building Regulations introduced the first limits on the amount of energy that could be lost through certain elements of the fabric of new houses. This was expressed as a u-value - the amount of heat lost per square metre, for each degree Celsius of temperature difference between inside and outside. In effect the Target Insulation is a ration of 1.33 W/m^2/K of floor area (Document L 2006). So to keep your square metre warm you are limited as to how much energy you can use. This is slightly regressive in that richer people live in bigger houses which tend to have a lower surface area /floor area, although this is partially offset by them being detached. These limits were tightened following the 1973 oil crisis, and on several subsequent occasions (see below. Despite this, UK insulation levels have remained low compared to the EU average.

2006 CHANGES

The energy policy of the United Kingdom through the 2003 Energy White Paperarticulated directions for more energy efficient building construction. Hence, the year 2006 saw a significant tightening of energy efficiency requirements within the Building Regulations With the long term aim of cutting overall emissions by 60% by 2050, and by 80% by 2100, the intention of the 2006 changes was to cut energy use in new housing by 20% compared to a similar building constructed to the 2002 standards. The changes were the first to the regulations brought about by the desire to reduce emissions, though some have raised doubts about whether they will actually achieve the 20% cut (see criticisms section). In the 2006 regulations, the u-value was replaced as the primary measure of energy efficiency by the Dwelling Carbon Dioxide Emission Rate (DER), n estimate of carbon dioxide emissions per m² of floor area. This is calculated using the Government's Standard Assessment Procedure for Energy Rating of Dwellings (SAP 2005). In addition to the levels of insulation provide by the structure of the building, the DER also takes into account the airtightness of the building, the efficiency of space and water heating, the efficiency of lighting, and any savings from solar power or other energy generation technologies employed, and other factors. For the first time, it also became compulsory to upgrade the energy efficiency in existing houses when extensions or certain other works are carried out.




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Some organisations have raised doubts over the claim that the changes will result in a 20% saving. Issues cited have included alleged problems with the calculation methods, the limitations of the modelling software, and the specification of the reference building used in the model. For example, a 2005 study sponsored by the Pilkington Energy Efficiency Trustindicated that the savings would only be in the region of 9%. There are also concerns about enforcement, with a Building Research Establishment study in 2004 indicating that 60% of new homes do not conform to existing regulations. A 2006 survey for the Energy Saving Trust revealed that Building Control Officers considered energy efficiency 'a low priority' and that few would take any action over failure to comply with the Building Regulations because the matter 'seemed trivial'. Despite the tightening of the requirements and previous loopholes, the regulations have been criticised by some for not going further. Criticisms include the exclusion of domestic appliances from the calculations, not requiring provision to be made for retrofitting of solar or other technologies, lack of remedial requirements if airtightness tests are failed, and for not requiring greater insulation standards. A more fundamental criticism by some is that even if the expected 20% cut is achieved, this falls far short of achieving the long term goal of a 60% cut in carbon dioxide emissions by 2050. The London Sustainable Development Commission, for example, has calculated that to meet the 60% target, all new developments would have to be constructed to be carbon-neutral with immediate effect (using zero energy building techniques), in addition to cutting energy used in existing housing by 40%. In the United Kingdom, in December 2006 the government announced that by 2016 all new homes will be zero energy buildings. To encourage this, an exemption from Stamp Duty Land Tax is planned. In October 2007 the UK Green Building Council warned that few zero carbon developments were actually being built as the criteria for carbon neutral stamp relief was so stringent A further issue is the omission of the impact of domestic sector air conditioning in the projections. Air conditioning is beginning to gain acceptance in the domestic sector, driven in part by cheap self-install systems from the Pacific Rim, but with the established brands now also offering specifically targeted professionally installed ranges. Demand for cooling systems is rising mainly due to increased awareness, since air conditioning is standard on almost all new cars sold in the UK and also in the commercial sector, but also because of tight housing densities and long working hours, leading to problems with heat at night. The latter problem is compounded by the 'energy efficient' new build features such as tight insulation and small windows.

FUTURE CHANGES

In December 2006 the government announced their 'ambition' that all new housing should be build to zero-carbon standards from 2016, i.e. that the carbon emitted during a typical year should be balanced by renewable energy generation. Despite being the first country in the world to adopt such a policy the initiative was generally welcomed by the industry in principle, despite some subsequent concern over the practicalities. In 2004 the Government indicated that the next revision to the energy performance standards of the Building Regulations would be in 2010. In the consultation document Building a Greener Future: Towards Zero Carbon Development it is proposed that the 2010 revision should require a further 25% improvement in the energy/carbon performance, in line with the 2004 proposals. It is further envisaged that there would be a 44% improvement in 2013, compared to 2006 levels. This would then be followed by the adoption of a zero carbon requirement in 2016, applied to all home




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energy use including appliances. These steps in performance would align the energy efficiency requirement of the Building Regulations with those of Levels 3, 4 and 6 of the Code for Sustainable Homes in 2010, 2013 and 2016 respectively

HOME ENERGY LABELLING

Originally, from June 2007, all homes (and other buildings) in the UK would have to undergo Energy Performance Certification before they are sold or let, in order to meet the requirements of the European Energy Performance of Buildings Directive (Directive 2002/91/EC). (This has now been put back to August 2007, and will operate on a phased introduction basis, starting with large 4 bedroom homes). This will provide the owner or landlord with an 'energy label' so that they can demonstrate the energy efficiency of the property, and is also to be included in the new Home Information Packs. It is hoped that energy labelling will raise awareness of energy efficiency, and encourage upgrading to make properties more marketable. Incentives may be available for carrying out energy conservation measures. For new building, SAP 2005 calculations are to form the basis for the certification, while RDSAP (Reduced Data SAP) will be used to assess existing properties. It is estimated that only 10% of the nation's housing will score above 60 on the scale, although most will score above 40.

OTHER RATING SCHEMES

Another rating scheme of note is the Government sponsored EcoHomes rating, mostly used in public sector housing, and only applicable to new properties or major refurbishments. This actually measures a range of sustainability issues, of which energy efficiency is only one. EcoHomes is to be replaced by the Government's Code for Sustainable Homes in 2007. The Energy Saving Trust set requirements for 'good practice' and 'advanced practice' for achieving lower energy buildings, while the Association for Environment Conscious Building's CarbonLite programme specifies Silver and Gold standards, the latter approaching a zero energy building.

GRANTS The Government's low carbon buildings programme was launched in 2006 to replace the earlier Clear Skies and Solar PV programmes. It offers grants towards the costs of solar thermal heating, small wind turbine, micro hydro, ground source heat pump, and biomass installations. As of January 2007 funding for grants is proving insufficient to meet demand.[38] A similar scheme, the Scottish Community and Household Renewables Initiative operates in Scotland, which also offers grants towards the cost of air source heat pumps.

LOCAL GOVERNMENT

Under the Home Energy Conservation Act 1995, local authorities are required to consider measures to improve the energy efficiency of all residential accommodation in their areas. However they are not required to implement any measures, and only a minority of local authorities have done anything to inform or help households other than those in social housing and the fuel poor. It was expected that the Act would result in a 30% cut in energy usage between 1996 and 2010. An overall cumulative improvement of 14.7% was reported to DEFRA for the year ending March 2004, but a large part of this would have happened without HECA. In the South most local authority housing was sold off in the 1980s-90s under RTB (Right to buy scheme), so the remaining stock is small. Much social housing has also been transferred to housing associations.




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DEMONSTRATION AND PIONEERING PROJECTS One of the most important energy efficiency demonstration projects was the 1986 Energy World exhibition in Milton Keynes, which attracted international interest. Fifty-one houses were built, designed to be at least 30% more efficient than the Building Regulations then in force. This was calculated using the Milton Keynes Energy Cost Index (MKECI), a test-bed for the subsequent SAP rating system and the National Home Energy Rating scheme. The Beddington Zero Energy Development (BedZED), a non-traditional housing scheme of 82 dwellings near Beddington, London included zero energy usage as one of its key features. The project was completed in 2002 and is the UK's largest eco-development. The only energy used is generated from renewables on site. Due to their superinsulation, the properties use 73% less energy for space heating compared to those built to the 2002 Building Regulations, while the reduction for water heating is 44%. The Green Building in Manchester City Centre and has been built to high energy efficiency standards and won a 2006 Civic Trust Award for its sustainable design. The cylindrical shape of the ten storey tower provides the smallest surface area related to the volume, ensuring less energy is lost through thermal dissipation. Other technologies including solar water heating, a wind turbine and triple glazing. The South Yorkshire Energy Centre at Heeley City Farm in Sheffield is an example of refurbishing an existing property to show the options available. The EcoHouse in Leicester incorporates products and materials selected for their green credentials, and operates as an advice centre with videos on products and suppliers, and refurbished computers for sale.

INTERNATIONAL COMPARISONS

International comparisons of particular note include:

• The 1977 Danish BR77 standard (the first to set demanding energy efficiency requirements).

• The SBN-80 (Svensk Bygg Norm) 1980 Swedish Building Standards, which in 1983 was in advance of the UK 2002 standards.

• The voluntary Canadian R-2000 standard, to which around 14,000 houses had been built in the 10 years to 1992.

Since then many more have been built in Canada, in Japan, and in various other countries including a number in the UK. Currently energy savings of 30% to 40% are typically achieved in Canada.

• The voluntary German Passivhaus standard. Properties built to the standards use approximately 85% less energy and produce 95% less carbon dioxide compared to properties built to the UK's 2002 standards. Over 6,000 such houses have been built across several European countries.

• The voluntary Swiss Minergie standard which requires that general energy consumption must not to be higher than 75 % of that of average buildings and that fossil-fuel




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consumption mustnot to be higher than 50 % of the consumption of such buildings, and the Minergie-P standard, requiring virtually zero energy consumption.

RESEARCH

In 2005 the Select Committee on Environmental Audit expressed their concern that there was a lack of significant funding for research and development of sustainable construction methods, with funding for the Building Research Establishment having been 'drastically' cut in the previous 4 years. As a result, many of the sustainable building materials used in the UK are imported from Germany, Switzerland and Austria - some of the countries that have been prominent in research.

EXISTING HOUSING STOCK

Even if all new housing does become 'zero carbon' by 2016, the energy efficiency of the remainder of the housing stock would need to be addressed. The 2006 Review of the Sustainability of Existing Buildings revealed that 6.1 million homes lacked an adequate thickness of loft insulation, 8.5 million homes had uninsulated cavity walls, and that there is a potential to insulate 7.5 million homes that have solid external walls. These three measures alone have the potential to save 8.5 million tonnes of carbon emissions each year. Despite this, 95% of home owners think that that the heating of their own home is currently effective.

HISTORIC BUILDING REGULATIONS ENERGY EFFICIENCY REQUIREMENTS

The u-value limits introduced in 1965 were:

• 1.7 for walls • 1.4 for roofs

Following the 1973 oil crisis, these were tightened in 1976 to:

• 1.0 for exposed walls, floors and non-solid ground and exposed floors • 1.7 for semi-exposed walls • 1.8 average for walls and windows combined • 0.6 for roofs

1985 saw the second tightening of these limits, to:

• 0.6 for exposed walls, floors and ground floors • 1.0 for semi-exposed walls • 0.35 for roofs

These limits were reduced again in 1990:

• 0.45 for exposed walls, floors and ground floors • 0.6 for semi-exposed walls • 0.25 for roofs • plus a requirement that the area of windows should not be more than 15% of the floor

area.




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Like the 2006 changes, it was predicted that the introduction of these limits would result in a 20% reduction in energy use for heating. A survey by Liverpool John Moores University predicted that the actual figure would be 6% (Johnson, JA “Building Regulations Research Project”). In the 1995 Building Regulations, insulation standards were cut to the following U-values:

• 0.45 for exposed walls, floors and ground floors • 0.6 for semi-exposed walls and floors • 0.25 for roofs • the limit on window area was raised to 22.5%

The 2002 regulations reduced the U-values, and made additional elements of the building fabric subject to control. Although there was in practice considerable flexibility and the ability to 'trade off' reductions in one are for increases in another, the 'target' limits became:

• 0.35 for walls • 0.25 for floors • 0.20 or 0.25 for pitched roofs (depending on the construction) • 0.16 for flat roofs • 2.2 for metal framed doors and windows • 2.0 for other doors and windows • the limit on window area was raised again to 25%

Similar limits were introduced into Scotland in 2002 & 2006, though with a lower limit of 0.3 or 0.27 for walls, and some other variations. It was claimed by Government that these measures should cut the heating requirement by 25% compared to the 1995 Regulations. It was subsequently also claimed that they had achieved a 50% cut compared to the 1990 Regulations. While the u-value ceased being the sole consideration in 2006, u-value limits similar to those in the 2002 regulations still apply, but are no longer sufficient by themselves. The DER, and TER (Target Emission rate) calculated through either the Uk Government's Standard Assessment Procedure for Energy Rating of Dwellings (SAP rating), 2005 edition, or the newer SEBM* (*Small Energy Building Model)which is aimed at non-dwellings, became the only acceptable calculation methods. Several commercial energy modeling software packages have now also been verified as producing acceptable evidence by the BRE Global & UK Government. Calculations using previous versions of SAP had been an optional way of demonstrating compliance since 1991. They are now a statutory requirement (B. Reg.17C et al) for all building regultions applications, involving new dwelling/buildings and large extensions to existing non-domestic buildings.




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PRINCIPAL LEGISLATIONS Document Year and

number Legislation

type The Energy Order 2003 (Supply of Information) Regulations (Northern Ireland) 2008 2008 No. 3 S.R. (N.I.)

Planning and Energy Act 2008 2008 c. 21 Act (UK Public General)

Energy Act 2008 2008 c. 32 Act (UK Public General)

The Home Energy Efficiency Scheme (Scotland) Amendment Regulations 2008 2008 No. 38 S.S.I. (Scottish

General) The Domestic Energy Efficiency Grants (Amendment) Regulations (Northern Ireland) 2008 2008 No. 67 S.R. (N.I.)

The Energy Performance of Buildings (Certificates and Inspections) Regulations (Northern Ireland) 2008 2008 No. 170 S.R. (N.I.)

The Energy Performance of Buildings (Certificates and Inspections) (Amendment) Regulations (Northern Ireland) 2008 2008 No. 241 S.R. (N.I.)

The Energy Performance of Buildings (Scotland) Regulations 2008 2008 No. 309 S.S.I. (Scottish General)

The Energy Performance of Buildings (Scotland) Amendment Regulations 2008 2008 No. 389 S.S.I. (Scottish

General) Electricity (Guarantees of Origin of Electricity Produced from Renewable Energy Sources) (Amendment) Regulations (Northern Ireland) 2008

2008 No. 507 S.R. (N.I.)

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2008 2008 No. 647 S.I. (UK

General)

The Energy-Saving Items (Corporation Tax) Regulations 2008 2008 No. 1520

S.I. (UK General)

The Finance Act 2007, Section 17(2) (Corporation Tax Deduction for Expenditure on Energy-Saving Items) (Appointed Day) Order 2008

2008 No. 1521 (C. 68)

S.I. (UK General)

The Climate Change and Sustainable Energy Act 2006 (Sources of Energy and Technologies) Order 2008

2008 No. 1767

S.I. (UK General)

The Capital Allowances (Energy-saving Plant and Machinery) (Amendment) Order 2008

2008 No. 1916

S.I. (UK General)

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment No.2) Regulations 2008

2008 No. 2363

S.I. (UK General)

The Home Energy Efficiency Scheme (Scotland) Amendment Regulations 2007 2007 No. 85 S.S.I. (Scottish

General) The Energy (2003 Order ) (Commencement No. 4) Order (Northern Ireland) 2007

2007 No. 283 (C. 16) S.R. (N.I.)

The Energy (2003 Order) (Commencement No. 5) Order (Northern Ireland) 2007

2007 No. 320 (C. 21) S.R. (N.I.)

The Home Energy Efficiency Schemes (Wales) Regulations 2007 2007 No. 375 (W.35)

S.I. (Welsh General)

The Climate Change and Sustainable Energy Act 2006 2007 No. 538 S.I. (UK




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(Commencement) Order 2007 (C. 21) General)

The Energy-Saving Items Regulations 2007 2007 No. 831 S.I. (UK General)

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 2007 No. 991 S.I. (UK

General)

The Energy Act 2004 (Commencement No. 8) Order 2007 2007 No. 1091 (C. 47)

S.I. (UK General)

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment) Regulations 2007

2007 No. 1669

S.I. (UK General)

The Ecodesign for Energy-Using Products Regulations 2007 2007 No. 2037

S.I. (UK General)


2007 No. 2165

S.I. (UK General)

The Energy-Saving Items (Income Tax) Regulations 2007 2007 No. 3278

S.I. (UK General)

The Energy Performance of Buildings (Certificates and Inspections) (England and Wales) (Amendment No. 2) Regulations 2007

2007 No. 3302

S.I. (UK General)

The Energy Act 2004 (Designation of Publicly Owned Companies) Order 2007

2007 No. 3479

S.I. (UK General)

Climate Change and Sustainable Energy Act 2006 2006 c. 19 Act (UK Public General)

The Climate Change Agreements (Energy-intensive Installations) Regulations 2006 2006 No. 59 S.I. (UK

General) The Domestic Energy Efficiency Grants (Amendment No. 5) Regulations (Northern Ireland) 2006 2006 No. 183 S.R. (N.I.)

Energy (Amendment) Order (Northern Ireland) 2006 2006 No. 424 S.R. (N.I.)

The Home Energy Efficiency Scheme (Scotland) Regulations 2006 2006 No. 570 S.S.I. (Scottish General)

The Energy Administration (Scotland) Rules 2006 2006 No. 772 (S. 8)

S.I. (UK General)

The Energy-Saving Items Regulations 2006 2006 No. 912 S.I. (UK General)

The Measuring Instruments (Active Electrical Energy Meters) Regulations 2006

2006 No. 1679

S.I. (UK General)

The Home Energy Efficiency Scheme (England) (Amendment) Regulations 2006

2006 No. 1953

S.I. (UK General)

The Energy Act 2004 (Commencement No. 7) Order 2006 2006 No. 1964 (C. 66)

S.I. (UK General)


2006 No. 2233

S.I. (UK General)

The Home Energy Efficiency Scheme Amendment (Scotland) Regulations 2005 2005 No.144 S.S.I. (Scottish

General)

The Energy Act 2004 (Commencement No. 4) Order 2005 2005 No. 442 (C.20)

S.I. (UK General)

The Energy Act 2004 (Assistance for Areas with High Distribution Costs) Order 2005 2005 No. 528 S.I. (UK

General)




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The Energy Act 2004 (Nuclear Decommissioning) (Exempt Activities and Further Conditions) Regulations 2005 2005 No. 644 S.I. (UK

General)

The Energy Act 2004 (Commencement No. 5) Order 2005 2005 No. 877 C. 38)

S.I. (UK General)

The Energy Act 2004 (Designation of Companies and Designated Date) Order 2005 2005 No. 884 S.I. (UK

General)

The Energy-Saving Items Regulations 2005 2005 No. 1114

S.I. (UK General)

The Home Energy Efficiency Scheme (England) Regulations 2005 2005 No. 1530

S.I. (UK General)

The Energy Information (Household Air Conditioners) (No. 2) Regulations 2005

2005 No. 1726

S.I. (UK General)

Document Year and number Legislation type

The Capital Allowances (Energy-saving Plant and Machinery) (Amendment) Order 2005 2005 No. 2424 S.I. (UK General)

The Energy Administration Rules 2005 2005 No. 2483 S.I. (UK General)

The Energy Act 2004 (Commencement No. 6) Order 2005 2005 No. 2965 (C. 127) S.I. (UK General)

The Renewable Energy Zone (Designation of Area) (Scottish Ministers) Order 2005 2005 No. 3153 S.I. (UK General)



2004 No. 71 (C. 1) S.R. (N.I.)

The Home Energy Efficiency Scheme Amendment (Scotland) Regulations 2004 2004 No. 188 S.S.I. (Scottish

General) The Sustainable Energy Act 2003 (Commencement No. 2) Order 2004

2004 No. 1203 (C.51) S.I. (UK General)

The Energy Information (Household Refrigerators and Freezers) Regulations 2004 2004 No. 1468 S.I. (UK General)

The Energy Act 2004 (Commencement No. 1) Order 2004 2004 No. 1973 (C. 87) S.I. (UK General)

The Excise Warehousing (Energy Products) Regulations 2004 2004 No. 2064 S.I. (UK General)


The Energy Act 2004 (Commencement No. 2) Order 2004 2004 No.2184 (C. 95 ) S.I. (UK General)

The Energy Act 2004 (Designation of System Operator) Order 2004 2004 No.2242 S.I. (UK General)

The Home Energy Efficiency Scheme (England) (Amendment) Regulations 2004 2004 No. 2430 S.I. (UK General)

The Energy Act 2004 (Commencement No. 3) Order 2004 2004 No. 2575 (C.110) S.I. (UK General)




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The Energy-Saving Items (Deductions for Expenditure etc.) Regulations 2004 2004 No.2664 S.I. (UK General)

The Renewable Energy Zone (Designation of Area) Order 2004 2004 No. 2668 S.I. (UK General)

The Electricity and Gas (Energy Efficiency Obligations) Order 2004 2004 No. 3392 S.I. (UK General)

Sustainable Energy Act 2003 2003 c. 30 Act (UK Public General)


2003 No. 203 (C. 15) S.R. (N.I.)


General)

The Energy (Northern Ireland) Order 2003 2003 No. 419 (N.I. 6)

Order in Council (N.I.) (Revised)

The Energy (Northern Ireland) Order 2003 2003 No. 419 (N.I. 6)

Order in Council (N.I.) (Unrevised)

The Home Energy Efficiency Scheme Amendment (No. 2) (Scotland) Regulations 2003 2003 No. 529 S.S.I. (Scottish

General) The Energy Information (Household Air Conditioners) Regulations 2003 2003 No. 750 S.I. (UK General)

The Energy Information (Household Electric Ovens) Regulations 2003 2003 No. 751 S.I. (UK General)

The Home Energy Efficiency Scheme (England) (Amendment) Regulations 2003 2003 No. 1017 S.I. (UK General)

The Electricity and Gas (Energy Efficiency Obligations) (Amendment) Order 2003 2003 No. 1180 S.I. (UK General)


The Home Energy Efficiency Scheme (England) (Amendment) (No. 2) Regulations 2003 2003 No. 2263 S.I. (UK General)

The Electricity (Guarantees of Origin of Electricity Produced from Renewable Energy Sources) Regulations 2003 2003 No. 2562 S.I. (UK General)

The Sustainable Energy Act 2003 (Commencement No. 1) Order 2003

2003 No. 2986 (C. 110) S.I. (UK General)

The Sustainable Energy (CHP Provisions) Order 2003 2003 No. 2987 S.I. (UK General) The Home Energy Efficiency Scheme (England) (Amendment) Regulations 2002 2002 No. 115 S.I. (UK General)

The Warm Homes and Energy Conservation Act 2000 (Commencement) (Wales) Order 2002

2002 No. 758 (W.81) (C.18) S.I. (Welsh General)

The Atomic Energy Authority (Special Constables) Order 2002 2002 No. 1151 S.I. (UK General)


The Atomic Energy (Americium) Order 2002 2002 No. 2533 S.I. (UK General) The Measuring Instruments (EC Requirements) (Electrical Energy Meters) (Amendment) Regulations 2002 2002 No. 3082 S.I. (UK General)




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The Gas (Calculation of Thermal Energy) (Amendment) Regulations 2002 2002 No. 3130 S.I. (UK General)


General) The Climate Change Agreements (Energy-intensive Installations) Regulations 2001 2001 No. 1139 S.I. (UK General)

The Capital Allowances (Energy-saving Plant and Machinery) Order 2001 2001 No. 2541 S.I. (UK General)

The Energy Information and Energy Efficiency (Miscellaneous Amendments) Regulations 2001 2001 No. 3142 S.I. (UK General)

The Energy Efficiency (Ballasts for Fluorescent Lighting) Regulations 2001 2001 No. 3316 S.I. (UK General)

The Electricity and Gas (Energy Efficiency Obligations) Order 2001 2001 No. 4011 S.I. (UK General)

Warm Homes and Energy Conservation Act 2000 2000 c. 31 Act (UK Public General)

The Energy from Waste Plants (Rateable Values) (England) Order 2000 2000 No. 952 S.I. (UK General)

The Home Energy Efficiency Scheme (Amendment) (Wales) Regulations 2000

2000 No. 1039 (W. 68) S.I. (Welsh General)


The Home Energy Efficiency Scheme (England) Regulations 2000 2000 No. 1280 S.I. (UK General)

The Energy Act 1976 (Reserve Powers) Order 2000 2000 No. 2449 S.I. (UK General) The Home Energy Efficiency Schemes (Wales) Regulations 2000

2000 No. 2959 (W. 190 ) S.I. (Welsh General)

The Energy Crops Regulations 2000 2000 No. 3042 S.I. (UK General)

The Energy Efficiency (Northern Ireland) Order 1999 1999 No. 659 (N.I. 3)


The Energy Efficiency (Northern Ireland) Order 1999 1999 No. 659 (N.I. 3)


The Home Energy Efficiency Scheme (Amendment) (Scotland) Regulations 1999

1999 No. 1018 (S. 72) S.I. (UK General)

The Energy Information (Lamps) Regulations 1999 1999 No. 1517 S.I. (UK General) The Energy Information (Dishwashers) Regulations 1999 1999 No. 1676 S.I. (UK General) The Energy Conservation Act 1996 (Commencement No. 3 and Adaptations) Order 1997

1997 No. 47 (C.4) S.I. (UK General)

The Home Energy Efficiency Scheme Regulations 1997 1997 No. 790 S.I. (UK General) The Energy Information (Washing Machines) (Amendment) Regulations 1997 1997 No. 803 S.I. (UK General)

The Gas (Calculation of Thermal Energy) (Amendment) Regulations 1997 1997 No. 937 S.I. (UK General)

The Energy Information (Combined Washer-driers) Regulations 1997 1997 No. 1624 S.I. (UK General)




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The Energy Efficiency (Refrigerators and Freezers) Regulations 1997 1997 No. 1941 S.I. (UK General)

The Foods Intended for Use in Energy Restricted Diets for Weight Reduction Regulations 1997 1997 No. 2182 S.I. (UK General)

Energy Conservation Act 1996 1996 c. 38 Act (UK Public General)

The Gas (Calculation of Thermal Energy) Regulations 1996 1996 No. 439 S.I. (UK General) The Energy Conservation Act 1996 (Commencement) Order (Northern Ireland) 1996

1996 No. 559 (C. 26) S.R. (N.I.)

The Home Energy Efficiency Grants (Amendment) Regulations 1996 1996 No. 587 S.I. (UK General)

The Energy Information (Washing Machines) Regulations 1996 1996 No. 600 S.I. (UK General)

The Energy Information (Tumble Driers) Regulations 1996 1996 No. 601 S.I. (UK General) The European Communities (Definition of Treaties) (The Energy Charter Treaty) Order 1996 1996 No. 1639 S.I. (UK General)

The United Kingdom Atomic Energy Authority (Extinguishment of Liabilities) Order 1996 1996 No. 2511 S.I. (UK General)

The Energy Conservation Act 1996 (Commencement No. 1) (Scotland) Order 1996

1996 No. 2796 (C.81) (S.214) S.I. (UK General)

The Home Energy Conservation Act 1995 (Commencement No. 3) (Scotland) Order 1996

1996 No. 2797 (C.82) (S.215) S.I. (UK General)

The Domestic Energy Efficiency Schemes (Northern Ireland) Order 1996

1996 No. 2879 (N.I. 21)


The Domestic Energy Efficiency Schemes (Northern Ireland) Order 1996

1996 No. 2879 (N.I. 21)


The Home Energy Conservation Act 1995 (Commencement No. 4) (Wales) Order 1996

1996 No. 3181 (C.100) S.I. (UK General)

The Town and Country Planning (Atomic Energy Establishments Special Development) (Revocation) Order 1996

1996 No. 3194 S.I. (UK General)

Home Energy Conservation Act 1995 1995 c. 10 Act (UK Public General)

Atomic Energy Authority Act 1995 1995 c. 37 Act (UK Public General)


The Home Energy Conservation Act 1995 (Commencement) Order (Northern Ireland) 1995

1995 No. 455 (C. 9) S.R. (N.I.)

The Measuring Instruments (EC Requirements) (Electrical Energy Meters) Regulations 1995 1995 No. 2607 S.I. (UK General)

The Home Energy Conservation Act 1995 (Commencement No. 2) (England) Order 1995

1995 No. 3340 (C.79) S.I. (UK General)


The Energy Information (Refrigerators and Freezers) 1994 No. 3076 S.I. (UK General)




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Regulations 1994 The Home Energy Efficiency Grants (Amendment) Regulations 1993 1993 No. 2799 S.I. (UK General)

The Home Energy Efficiency Grants Regulations 1992 1992 No. 483 S.I. (UK General) The Transfers of Functions (Energy) Order 1992 1992 No. 1314 S.I. (UK General) The United Kingdom Atomic Energy Authority (Limit on Borrowing) Order 1991 1991 No. 1736 S.I. (UK General)

Atomic Energy Act 1989 1989 c. 7 Act (UK Public General)

Atomic Energy Authority Act 1986 1986 c. 3 Act (UK Public General)


Energy Conservation Act 1981 1981 c. 17 Act (UK Public General)

Atomic Energy (Miscellaneous Provisions) Act 1981 1981 c. 48 Act (UK Public General)

Atomic Energy Authority (Special Constables) Act 1976 1976 c.23 Act (UK Public General)

Energy Act 1976 1976 c.76 Act (UK Public General)

Atomic Energy Authority (Weapons Group) Act 1973 (c. 4) 1973 c.4 Act (UK Public General)


Atomic Energy Authority Act 1971 1971 c.11 Act (UK Public General)Atomic Energy Authority Act 1959 1959 c.5 Act (UK Public General)Atomic Energy Authority Act 1954 1954 c.32 Act (UK Public General)Atomic Energy Act 1946 1946 c.80 Act (UK Public General)

ENERGY ACT 20081

CONTENT

[Part 1 Gas Importation and Storage] [Chapter 1 Gas Importation and Storage Zones] [1 Exploitation of areas outside the territorial sea for gas importation and storage] [Chapter 2 Importation and storage of combustible gas] [ Activities requiring a licence] [2 Prohibition on unlicensed activities] [3 Exception for activities carried on partly on land etc] [ Licensing]

1 Selected Chapters




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[4 Licences] [5 Applications] [6 Terms and conditions] [7 Model clauses] [ Enforcement] [8 Offence to carry on unlicensed activities] [9 Offences relating to licences] [10 Secretary of State's power of direction] [11 Failure to comply with a direction under section 10] [12 Injunctions restraining breaches of section 2(1)] [13 Inspectors] [14 Criminal proceedings] [ Supplementary] [15 Interaction with the petroleum licensing requirements] [ Interpretation] [16 Chapter 2: interpretation] [Chapter 3 Storage of carbon dioxide] [ Activities requiring a licence] [17 Prohibition on unlicensed activities] [ Licensing] [18 Licences] [19 Requirements relating to grant of licences] [20 Terms and conditions] [21 Content of licences: regulations] [ Enforcement] [22 Offence to carry on unlicensed activities] [23 Offences relating to licences] [24 Licensing authority's power of direction] [25 Failure to comply with a direction under section 24] [26 Injunctions restraining breaches of section 17(1)] [27 Inspectors] [28 Criminal proceedings] [ Registration] [29 Requirement for public register] [ Abandonment of offshore installations] [30 Abandonment of installations] [ Termination of the licence] [31 Termination of licence: regulations]




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[ Miscellaneous] [32 Safety zones] [33 Enhanced petroleum recovery: power to make orders] [34 Power of Secretary of State etc to transfer functions] [ Interpretation] [35 Chapter 3: interpretation] [Chapter 4 General provisions about gas importation and storage] [36 Chapters 2 and 3: consequential amendments]

Part 2 Electricity from renewable sources The renewables obligation

37 The renewables obligation 38 Section 37: supplemental provision

[39 Existing savings relating to section 32 of the Electricity Act 1989] [40 The Northern Ireland renewables obligation] [ Feed-in tariffs for small-scale generation of electricity] [41 Power to amend licence conditions etc: feed-in tariffs] [42 Power to amend licence conditions etc: procedure] [43 Feed-in tariffs: supplemental] [ Offshore electricity transmission] [44 Offshore electricity transmission] [Part 3 Decommissioning of energy installations] [Chapter 1 Nuclear sites: decommissioning and clean-up] [ Funded decommissioning programmes] [45 Duty to submit a funded decommissioning programme] [46 Approval of a programme] [47 Prohibition on use of site in absence of approved programme] [ Modification of approved programmes] [48 Modification of approved programme] [49 Procedure for modifying approved programme] [50 Power to disapply section 49] [51 Time when modification takes effect] [ Information] [52 Provision of information and documents] [53 Power to review operation of programme] [ Regulations and guidance] [54 Nuclear decommissioning: regulations and guidance] [55 Funded decommissioning programmes: verification of financial matters] [ Protection of decommissioning funds]




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[56 Protection of security under approved programme] [ Enforcement] [57 Offence to fail to comply with approved programme] [58 Secretary of State's power of direction] [59 Offence of further disclosure of information] [60 Offence of supplying false information] [61 Restriction on prosecutions under this Chapter] [ Miscellaneous] [62 Power to apply this Chapter to other nuclear installations] [63 Co-operation with other public bodies] [64 Continuity of obligations] [65 Amendment of Nuclear Installations Act 1965] [66 Disposal of hazardous material] [ General] [67 Meaning of "associated"] [68 Interpretation] [Chapter 2 Offshore renewables installations] [69 Decommissioning notices relating to offshore renewable energy installations] [70 Security for decommissioning obligations] [71 Provision of information to Secretary of State] [Chapter 3 Oil and gas installations] [72 Persons who may be required to submit abandonment programmes] [73 Financial resources etc] [74 Protection of abandonment funds from creditors] [Chapter 4 Wells] [75 Information about decommissioning of wells] [Part 4 Provisions relating to oil and gas] [ Petroleum licences] [76 Transfers without the consent of the Secretary of State] [77 Model clauses of petroleum licences] [ Third party access] [78 Third party access to infrastructure] [79 Modification of pipelines] [80 Third party access to oil processing facilities] [81 Directions under section 80: supplemental] [82 Meaning of "associate"]

Part 5 Miscellaneous [ Duties of Gas and Electricity Markets Authority]




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[83 Duties of the Gas and Electricity Markets Authority] [ Transmission systems] [84 Power to amend licence conditions etc: transmission systems] [85 Section 84: procedure] [86 Section 84: supplemental] [ Energy reports] [87 Energy reports]

Smart meters 88 Power to amend licence conditions etc: smart meters 89 Power to amend licence conditions etc: procedure 90 Smart meters: supplemental 91 Licensing of activities relating to smart meters

[ Gas meters] [92 Gas meters] [93 Section 92: consequential amendments] [94 Power to amend licence conditions: gas] [ Electricity meters] [95 Electricity meters] [96 Section 95: consequential amendments] [97 Power to amend licence conditions: electricity] [ Connection offer expenses] [98 Costs connected with making an offer of connection] [ Electricity safety] [99 Electricity safety] [ Renewable heat incentives] [100 Renewable heat incentives] [ Nuclear information] [101 Security of sensitive nuclear information]

Application of general duties 102 Application of general duties to functions relating to licences

Part 6 General [103 Offences by bodies corporate etc]

104 Subordinate legislation 105 Parliamentary control of subordinate legislation 106 Interpretation 107 Minor and consequential amendments

[108 Repeals] [109 Transitional provision etc]




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110 Commencement 111 Financial provisions 112 Extent 113 Short title

SCHEDULES [SCHEDULE 1 AMENDMENTS RELATING TO CHAPTERS 2 AND 3 OF PART 1] [SCHEDULE 2 PROPERTY SCHEMES] [SCHEDULE 3 PETROLEUM LICENCES: AMENDMENTS TO MODEL CLAUSES] [Part 1 Petroleum (Production) (Landward Areas) Regulations 1995] [Part 2 Petroleum (Current Model Clauses) Order 1999] [Part 3 Petroleum Licensing (Exploration and Production) (Seaward and Landward Areas) Regulations 2004 ]

SCHEDULE 4 SMART METERS: LICENSABLE ACTIVITIES Part 1 Gas Part 2 Electricity

SCHEDULE 5 MINOR AND CONSEQUENTIAL AMENDMENTS [SCHEDULE 6 REPEALS]

PART 1 GAS IMPORTATION AND STORAGE

CHAPTER 1 Gas Importation and Storage Zones

1 Exploitation of areas outside the territorial sea for gas importation and storage

(1) The rights to which this section applies have effect, by virtue of this section, as rights belonging to Her Majesty. (2) This section applies to the rights under Part V of the Convention that are exercisable by the United Kingdom in areas outside the territorial sea— (a) with respect to any of the matters mentioned in subsection (3), or (b) for any other purposes connected with any of those matters. (3) The matters are— (a) the exploitation of those areas for the unloading of gas to installations or pipelines; (b) the exploitation of those areas for the storing of gas (whether or not with a view to its being recovered), or the recovery of gas so stored; (c) the exploration of those areas with a view to their exploitation as mentioned in paragraph (a) or (b). (4) For the purposes of subsection (3), references to gas include any substance which consists wholly or mainly of gas. (5)




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Her Majesty may by Order in Council designate an area as an area within which the rights to which this section applies are exercisable (a “Gas Importation and Storage Zone”). (6) In this section— “the Convention” means the United Nations Convention on the Law of the Sea 1982 (Cmnd 8941) and any modifications of that Convention agreed after the passing of this Act that have entered into force in relation to the United Kingdom; “gas” means any substance which is gaseous at a temperature of 15°C and a pressure of 101.325 kPa (1013.25 mb); “installation” includes any floating structure or device maintained on a station by whatever means.

CHAPTER 2 IMPORTATION AND STORAGE OF COMBUSTIBLE GAS

Activities requiring a licence

2 Prohibition on unlicensed activities (1)No person may carry on an activity within subsection (3) except in accordance with a licence. (2)But subsection (1) is subject to section 3. (3)The activities are— (a)the use of a controlled place for the unloading of gas to an installation or pipeline; (b)the use of a controlled place for the storage of gas; (c)the conversion of any natural feature in a controlled place for the purpose of storing gas; (d)the recovery of gas stored in a controlled place; (e)the exploration of a controlled place with a view to, or in connection with, the carrying on of activities within paragraphs (a) to (d); (f)the establishment or maintenance in a controlled place of an installation for the purposes of activities within this subsection. (4)In this section— “controlled place” means a place in, under or over— (a)the territorial sea, or (b)waters in a Gas Importation and Storage Zone (within the meaning of section 1(5)); “gas” means any combustible substance which is gaseous at a temperature of 15°C and a pressure of 101.325 kPa (1013.25 mb) and which consists wholly or mainly of— (a)methane, (b)ethane, (c)propane, (d)butane, (e)a substance designated for the purposes of this section by an order made by the Secretary of State, or (f)a mixture of two or more of the substances mentioned in paragraphs (a) to (e). 3 Exception for activities carried on partly on land etc (1)This Chapter does not apply in relation to— (a)the use of a controlled place for the unloading of gas to an installation which is connected with land by a permanent structure providing access at all times and for all purposes; (b)the conversion of a natural feature of which part is in a controlled place and part under land, if the operations necessary for the conversion take place wholly or mainly on, over or under land; (c)the use of a place for the storage of gas, or the recovery of gas so stored, where— (i)the gas was, or is to be, introduced into the store by means of a well on land, and (ii)part of the place is a controlled place and part is under land; (d)the establishment or maintenance of an installation for the purposes of activities falling within paragraph (a). (2)In this section— “land” means—




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(a)land in England; (b)land in Wales; (c)land in Scotland landward of the low water mark; “well” includes a borehole. Licensing 4 Licences (1)The Secretary of State may grant a person a licence in respect of one or more activities within section 2(3). (2)The controlled place in respect of which a licence is granted may be determined by reference to the provisions of a Crown lease which has been or may be granted. (3)For this purpose “Crown lease” means a lease of property forming part of the Crown Estate, or an authorisation to exercise rights forming part of that Estate (whether by virtue of section 1 or otherwise). 5 Applications The Secretary of State may by regulations— (a)prescribe the persons, or classes of persons, by whom an application for a licence may be made; (b)prescribe requirements which must be met by, or in relation to, a person who makes an application; (c)prescribe the manner in which an application must be made; (d)prescribe the information which an application must contain and any documents which must accompany it; (e)require an application to be accompanied by a fee of an amount prescribed by, or determined in accordance with, the regulations. 6 Terms and conditions (1)A licence may be granted on such terms and subject to such conditions as the Secretary of State considers appropriate. (2)The provisions of a licence may be expressed by reference to provision made in a Crown lease, and, in particular, may provide— (a)for the commencement of the licence to be conditional upon the commencement of a Crown lease which has been or may be granted in respect of the controlled place to which the licence relates or any part of that place; (b)for the period of the licence to be determined by reference to the period of such a Crown lease. (3)A licence may authorise, in such circumstances and subject to such conditions as are specified, the transfer of the licence to another person (or the inclusion of another person as a joint licence holder). (4)The provisions of a licence may include— (a)provision requiring the licence holder to obtain the prior written consent of the Secretary of State or another person for specified acts or omissions; (b)provision providing that any such consent may be given subject to conditions. (5)The conditions imposed on a consent by virtue of subsection (4)(b) may include conditions requiring, or otherwise providing for, the modification of the licence in such manner as the Secretary of State considers appropriate. (6) In this section— “Crown lease” has the same meaning as in section 4; “specified”, in relation to a licence, means specified in, or determined in accordance with, the licence.




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7 Model clauses (1)The Secretary of State may make regulations prescribing model clauses for licences. (2)Subject to subsection (3), the model clauses, as they have effect at the time a licence is granted, are deemed to be incorporated into the licence. (3)The Secretary of State may decide to exclude or modify one or more of those model clauses in the case of a particular licence. Enforcement 8 Offence to carry on unlicensed activities (1)It is an offence for a person to carry on an activity within section 2(3) at a controlled place unless, at the time the activity is carried on, that person— (a)has a licence for the carrying on of that activity at that place, or (b)is carrying on the activity on behalf of a person who has such a licence. (2)It is an offence for a person to cause or permit another person to commit an offence under subsection (1). (3)But subsections (1) and (2) are subject to section 3. (4)A person guilty of an offence under this section is liable— (a)on summary conviction, to a fine not exceeding the statutory maximum, or (b)on conviction on indictment, to a fine. 9 Offences relating to licences (1)An offence is committed by a licence holder if— (a)a thing is done for which the licence specifies that the prior consent of the Secretary of State or any other person is required, without that consent first having been obtained; (b)such a thing is done in circumstances where that consent was obtained subject to conditions and those conditions have not been satisfied; (c)the licence holder fails to keep records, give a notice or make a return or report, in accordance with the provisions of the licence; (d)the licence holder breaches any other provision of the licence which is specified, or of a description specified, in an order made by the Secretary of State. (2)In proceedings against a person for an offence under subsection (1), it is a defence for the person to prove that due diligence was exercised to avoid committing the offence. (3)It is an offence for a person to make a statement which the person knows to be false, or recklessly to make a statement which is false, in order to obtain— (a)a licence, or (b)the consent of the Secretary of State or any other person for the purposes of any requirement imposed by virtue of section 6(4). (4)It is an offence for a person to fail to disclose information which the person knows, or ought to know, to be relevant to an application for— (a)a licence, or (b)the consent of the Secretary of State or any other person for the purposes of any requirement imposed by virtue of section 6(4). (5)A person guilty of an offence under this section is liable— (a)on summary conviction, to a fine not exceeding the statutory maximum, or (b)on conviction on indictment, to a fine. 10 Secretary of State's power of direction (1)This section applies if a licence holder fails to comply with any provision of the licence. (2)The Secretary of State may direct the licence holder to take steps which the Secretary of State considers necessary or appropriate to comply with the provision within a period specified in the direction.




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(3)The Secretary of State must consult the licence holder before giving a direction under subsection (2). (4)If the licence holder fails to comply with a direction under subsection (2), the Secretary of State may— (a)comply with the direction on behalf of the licence holder, or (b)make arrangements for another person to do so. (5)A person taking action by virtue of subsection (4) may— (a)do anything which the licence holder could have done, and (b)recover from the licence holder any reasonable costs incurred in taking the action. (6)A person ( “P”) liable to pay any sum by virtue of subsection (5)(b) must also pay interest on that sum for the period beginning with the day on which the person taking action by virtue of subsection (4) notified P of the sum payable and ending with the date of payment. (7)The rate of interest payable in accordance with subsection (6) is a rate determined by the Secretary of State as comparable with commercial rates. (8)The licence holder must provide a person taking action by virtue of subsection (4) with such assistance as the Secretary of State may direct. (9)The power to give a direction under this section is without prejudice to any provision made in the licence with regard to the enforcement of any of its provisions. 11 Failure to comply with a direction under section 10 (1)It is an offence for a person to fail to comply with a direction under section 10, unless the person proves that due diligence was exercised in order to avoid the failure. (2)A person guilty of an offence under subsection (1) is liable— (a)on summary conviction, to a fine not exceeding the statutory maximum, or (b)on conviction on indictment, to a fine. 12 Injunctions restraining breaches of section 2(1) (1)Where the Secretary of State considers it necessary or expedient to restrain any actual or apprehended breach of section 2(1), the Secretary of State may apply to the court for an injunction or, in Scotland, an interdict. (2)An application may be made whether or not the Secretary of State has exercised or is proposing to exercise any of the other powers under this Chapter. (3)On an application under subsection (1), the court may grant such an injunction or interdict as the court thinks appropriate for the purpose of restraining the breach. (4)Rules of court may provide for an injunction or interdict to be issued against a person whose identity is unknown. (5)In this section “the court” means— (a)the High Court, or (b)in Scotland, the Court of Session. 13 Inspectors (1) The Secretary of State may appoint persons to act as inspectors to assist in carrying out the functions of the Secretary of State under this Chapter. (2) The Secretary of State may make payments, by way of remuneration or otherwise, to inspectors appointed under this section. (3) The Secretary of State may make regulations about— (a) the powers and duties of inspectors appointed under this section; (b)




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the powers and duties of any other person acting on the directions of the Secretary of State in connection with a function under this Chapter; (c) the facilities and assistance to be accorded to persons mentioned in paragraph (a) or (b). (4) The powers conferred by virtue of subsection (3) may include powers of a kind specified in section 108(4) of the Environment Act 1995 (c. 25)(powers of entry, investigation, etc). (5) Any regulations under this section may provide for the creation of offences which are punishable— (a) on summary conviction by a fine not exceeding the statutory maximum or such lesser amount as is specified in the regulations, and (b) on conviction on indictment by a fine. 14 Criminal proceedings (1) Proceedings for a relevant offence may be taken, and the offence may for all incidental purposes be treated as having been committed, in any place in the United Kingdom. (2) Section 3 of the Territorial Waters Jurisdiction Act 1878 (c. 73)(restriction on prosecutions) does not apply to any proceedings for a relevant offence. (3) Proceedings for a relevant offence alleged to have been committed in a controlled place may not be instituted in England and Wales except— (a) by the Secretary of State or a person authorised by the Secretary of State, or (b) by or with the consent of the Director of Public Prosecutions. (4) Proceedings for a relevant offence alleged to have been committed in a controlled place may not be instituted in Northern Ireland except— (a) by the Secretary of State or a person authorised by the Secretary of State, or (b) by or with the consent of the Director of Public Prosecutions for Northern Ireland. (5) In the application of subsection (3) or (4) to an offence created by regulations under section 13— (a) the words “alleged to have been committed in a controlled place” are to be omitted, and (b) the references to a person authorised by the Secretary of State are to be read as references to an inspector appointed under that section. (6) In this section “relevant offence” means an offence under this Chapter or created by regulations under section 13. Supplementary 15 Interaction with the petroleum licensing requirements (1) This section applies where there is a licence for the recovery of gas stored in a controlled place.




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(2) The Secretary of State may give a direction in respect of the place or any part of it ( “the relevant stratum”). (3) The effect of the direction is that any operations under the licence to recover gas from the relevant stratum are not to be regarded as resulting in the boring for or getting of petroleum for the purposes of Part 1 of the Petroleum Act 1998 (c. 17). (4) A direction may be given only if the Secretary of State is satisfied that the amount of petroleum which exists in its natural condition in the relevant stratum is so small that it ought to be disregarded for the purposes of that Part. (5) Where a direction has effect, if the Secretary of State ceases to be satisfied as mentioned in subsection (4), the Secretary of State must give the licence holder a notice revoking the direction and specifying a time for the purposes of subsection (6). (6) Where a notice is given under subsection (5), the revocation of the direction takes effect— (a) if an application for a petroleum licence in respect of the relevant stratum is made by the licence holder before the specified time, immediately before the time the application is determined or withdrawn, and (b) in any other case, at the specified time. (7) Before giving or revoking a direction, the Secretary of State must consult the licence holder. (8) In this section— “petroleum” means petroleum to which section 3 of the Petroleum Act 1998 (c. 17) applies; “petroleum licence” means a licence under that section authorising a person to bore for and get petroleum. Interpretation 16 Chapter 2: interpretation In this Chapter— “controlled place” has the meaning given by section 2(4); “gas” has the meaning given by section 2(4); “installation” includes any floating structure or device maintained on a station by whatever means; “licence”, except where the context otherwise requires, means a licence under section 4, and “licence holder” is to be construed accordingly. CHAPTER 3 STORAGE OF CARBON DIOXIDE Activities requiring a licence 17 Prohibition on unlicensed activities (1) No person may carry on an activity within subsection (2) except in accordance with a licence. (2) The activities are— (a) the use of a controlled place for the storage of carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal);




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(b) the conversion of any natural feature in a controlled place for the purpose of storing carbon dioxide (with a view to its permanent disposal, or as an interim measure prior to its permanent disposal); (c) the exploration of a controlled place with a view to, or in connection with, the carrying on of activities within paragraph (a) or (b); (d) the establishment or maintenance in a controlled place of an installation for the purposes of activities within this subsection. (3) In this section, “controlled place” means a place in, under or over— (a) the territorial sea, or (b) waters in a Gas Importation and Storage Zone. Licensing 18 Licences (1) The licensing authority may grant a licence to a person in respect of one or more activities within section 17(2). (2) The licensing authority is— (a) in the case of a licence in respect of activities within section 17(2)(a) to (c) and a controlled place which is not in, under or over the territorial sea adjacent to Scotland, the Secretary of State, (b) in the case of a licence in respect of such activities and a controlled place which is in, under or over that territorial sea, the Scottish Ministers, (c) in the case of a licence in respect of such activities and a controlled place only part of which is in, under or over that territorial sea, either the Secretary of State or the Scottish Ministers, and (d) in the case of a licence in respect of activities within section 17(2)(d), whichever of the Secretary of State or the Scottish Ministers licenses the activities for the purposes of which the installation is established or maintained; and in this Chapter references to the licensing authority in relation to a licence falling within paragraph (c) are references to the person who grants the licence or, if the licence has not yet been granted, to whom the application for the licence was made. (3) The controlled place in respect of which a licence is granted may be determined by reference to the provisions of a Crown lease which has been or may be granted. (4) For this purpose a “Crown lease” means a lease of property forming part of the Crown Estate, or an authorisation to exercise rights forming part of that Estate (whether by virtue of section 1 or otherwise). 19 Requirements relating to grant of licences (1) Each licensing authority may by regulations make provision about the circumstances in which it may grant licences, including—




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(a) provision about the requirements to be met by or in relation to an applicant, and (b) provision about any other requirements which must be met for a licence to be granted. (2) Regulations under subsection (1)(a) may, in particular— (a) prescribe the persons, or classes of persons, by whom an application for a licence may be made; (b) prescribe the manner in which an application must be made; (c) prescribe the information which an application must contain and any documents which must accompany it; (d) require an application to be accompanied by a fee of an amount prescribed by, or determined in accordance with, the regulations; (e) require an applicant, before a licence is granted, to make arrangements (whether by way of trust or otherwise) to provide financial security in respect of the applicant's future obligations relating to the activities under the licence (whether those obligations will or may arise under the licence or otherwise). 20 Terms and conditions (1) A licence may be granted on such terms and subject to such conditions as the licensing authority considers appropriate, subject to regulations under section 21. (2) Subject to such regulations, a licence may, in particular, include provision of a kind mentioned in subsections (3) to (7). (3) A licence may include— (a) provision about the circumstances in which financial security (which may be provided by way of a trust or other arrangements) may be required in respect of the obligations mentioned in section 19(2)(e)(in addition to any security required by virtue of that section), and the form of any such security; (b) provision about the circumstances in which financial security may be released (in whole or in part); (c) provision enabling the licensing authority to review the licence in specified circumstances or at specified intervals; (d) provision enabling the licensing authority, after consulting the licence holder, to modify the licence in specified circumstances (with or without the consent of the licence holder); (e) provision preventing or enabling the licensing authority to prevent a licence holder, in specified circumstances, from carrying on an activity in respect of which the licence was granted; (f) provision about closure of a carbon storage facility; (g) provision about obligations of a licence holder between closure of a carbon storage facility and termination of the licence;




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(h) provision about termination of the licence (which may include provision about financial arrangements). (4) The provisions of a licence may be expressed by reference to provision made in a Crown lease and, in particular, may provide— (a) for the commencement of the licence to be conditional upon the commencement of a Crown lease which has been or may be granted in respect of the controlled place to which the licence relates or any part of that place; (b) for the period of the licence to be determined by reference to the period of such a Crown lease. (5) A licence may authorise, in such circumstances and subject to such conditions as are specified, the transfer of the licence to another person (or the inclusion of another person as a joint licence holder). (6) The provisions of a licence may include— (a) provision requiring the licence holder to obtain the prior written consent of the licensing authority or another person for specified acts or omissions; (b) provision providing that any such consent may be given subject to conditions. (7) The conditions imposed on a consent by virtue of subsection (6)(b) may include conditions requiring, or otherwise providing for, the modification of the licence in such manner as the licensing authority considers appropriate. (8) In this section— “carbon storage facility” means a controlled place, or part of a controlled place, in which carbon dioxide has been stored pursuant to a licence; “closure”, in relation to a carbon storage facility, means the point at which carbon dioxide has ceased to be added to the facility and the licence holder intends, or the licensing authority directs in accordance with the licence, that the cessation should be permanent; “Crown lease” has the same meaning as in section 18; “specified”, in relation to a licence, means specified in, or determined in accordance with, the licence. 21 Content of licences: regulations (1) Each licensing authority may make regulations about the terms and conditions of licences granted by it. (2) Regulations under subsection (1) may specify that a licence must contain specified provisions or provisions of a specified description. Enforcement 22 Offence to carry on unlicensed activities (1) It is an offence for a person to carry on an activity within section 17(2) at a controlled place unless, at the time the activity is carried on, that person— (a)




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has a licence for the carrying on of the activity at that place, or (b) is carrying on the activity on behalf of a person who has such a licence. (2) It is an offence for a person to cause or permit another person to commit the offence in subsection (1). (3) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding £50,000, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. (4) If the activity constituting the offence falls within section 17(2)(c), or relates to the establishment or maintenance of an installation for the purposes of an activity mentioned in that provision, subsection (3) has effect as if— (a) the reference to £50,000 were a reference to the statutory maximum, and (b) the reference to imprisonment were omitted. 23 Offences relating to licences (1) An offence is committed by a licence holder if— (a) a thing is done for which the licence specifies that the prior consent of the licensing authority or any other person is required, without that consent first having been obtained; (b) such a thing is done in circumstances where that consent was obtained subject to conditions and those conditions have not been satisfied; (c) the licence holder fails to keep records, give a notice or make a return or report, in accordance with the provisions of the licence; (d) the licence holder breaches any other provision of the licence which is specified, or of a description specified, in an order made by the licensing authority. (2) In proceedings against a person for an offence under subsection (1), it is a defence for the person to prove that due diligence was exercised to avoid committing the offence. (3) A person guilty of an offence under subsection (1) is liable— (a) on summary conviction, to a fine not exceeding £50,000, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. (4) If an offence under subsection (1) relates to an activity within section 17(2)(c), or relates to the establishment or maintenance of an installation for the purposes of an activity mentioned in that provision, subsection (3) has effect as if— (a) the reference to £50,000 were a reference to the statutory maximum, and




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(b) the reference to imprisonment were omitted. (5) It is an offence for a person to make a statement which the person knows to be false, or recklessly to make a statement which is false, in order to obtain— (a) a licence, or (b) the consent of the licensing authority or any other person for the purposes of any requirement imposed by virtue of section 20(6). (6) It is an offence for a person to fail to disclose information which the person knows, or ought to know, to be relevant to an application for— (a) a licence, or (b) the consent of the licensing authority or any other person for the purposes of any requirement imposed by virtue of section 20(6). (7) A person guilty of an offence under subsection (5) or (6) is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, or (b) on conviction on indictment, to a fine. 24 Licensing authority's power of direction (1) This section applies if a licence holder fails to comply with any provision of the licence. (2) The licensing authority may direct the licence holder to take steps which the licensing authority considers necessary or appropriate to comply with the provision within a period specified in the direction. (3) The licensing authority must consult the licence holder before giving a direction under subsection (2). (4) If the licence holder fails to comply with a direction under subsection (2), the licensing authority may— (a) comply with the direction on behalf of the licence holder, or (b) make arrangements for another person to do so. (5) A person taking action by virtue of subsection (4) may— (a) do anything which the licence holder could have done, and (b) recover from the licence holder any reasonable costs incurred in taking the action. (6) A person ( “P”) liable to pay any sum by virtue of subsection (5)(b) must also pay interest on that sum for the period beginning with the day on which the person taking action by virtue of subsection (4) notified P of the sum payable and ending with the date of payment. (7)




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The rate of interest payable in accordance with subsection (6) is a rate determined by the licensing authority as comparable with commercial rates. (8) The licence holder must provide a person taking action by virtue of subsection (4) with such assistance as the licensing authority may direct. (9) The power to give a direction under this section is without prejudice to any provision made in the licence with regard to the enforcement of any of its provisions. 25 Failure to comply with a direction under section 24 (1) It is an offence for a person to fail to comply with a direction under section 24, unless the person proves that due diligence was exercised in order to avoid the failure. (2) A person guilty of an offence under subsection (1) is liable— (a) on summary conviction, to a fine not exceeding £50,000, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. 26 Injunctions restraining breaches of section 17(1) (1) Where the Scottish Ministers consider it necessary or expedient to restrain any actual or apprehended breach of section 17(1) in relation to a controlled place in, under or over the territorial sea adjacent to Scotland, they may apply to the Court of Session for an interdict. (2) Where the Secretary of State considers it necessary or expedient to restrain any other actual or apprehended breach of section 17(1), the Secretary of State may apply— (a) to the High Court for an injunction, or (b) to the Court of Session for an interdict. (3) An application may be made under this section whether or not the applicant has exercised or is proposing to exercise any of the other powers under this Chapter. (4) On an application under this section, the Court of Session may grant such an interdict, or the High Court may grant such an injunction, as it thinks appropriate for the purpose of restraining the breach. (5) Rules of court may provide for an injunction or interdict to be issued against a person whose identity is unknown. 27 Inspectors (1) The Secretary of State may appoint persons to act as inspectors to assist in carrying out the functions of the Secretary of State under this Chapter. (2) The Secretary of State may make payments, by way of remuneration or otherwise, to inspectors appointed under this section. (3) The Secretary of State may make regulations about—




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(a) the powers and duties of inspectors appointed under this section; (b) the powers and duties of any other person acting on the directions of the Secretary of State in connection with a function under this Chapter; (c) the facilities and assistance to be accorded to persons mentioned in paragraph (a) or (b). (4) The powers conferred by virtue of subsection (3) may include powers of a kind specified in section 108(4) of the Environment Act 1995 (c. 25)(powers of entry, investigation, etc). (5) Any regulations under this section may provide for the creation of offences which are punishable— (a) on summary conviction by a fine not exceeding the statutory maximum or such lesser amount as is specified in the regulations, and (b) on conviction on indictment by a fine. (6) This section applies in relation to the Scottish Ministers and the functions of the Scottish Ministers under this Chapter as it applies in relation to the Secretary of State and the functions of the Secretary of State under this Chapter. 28 Criminal proceedings (1) Proceedings for a relevant offence may be taken, and the offence may for all incidental purposes be treated as having been committed, in any place in the United Kingdom. (2) Section 3 of the Territorial Waters Jurisdiction Act 1878 (c. 73)(restriction on prosecutions) does not apply to any proceedings for a relevant offence. (3) Proceedings for a relevant offence alleged to have been committed in a controlled place may not be instituted in England and Wales except— (a) by the Secretary of State or a person authorised by the Secretary of State, or (b) by or with the consent of the Director of Public Prosecutions. (4) Proceedings for a relevant offence alleged to have been committed in a controlled place may not be instituted in Northern Ireland except— (a) by the Secretary of State or a person authorised by the Secretary of State, or (b) by or with the consent of the Director of Public Prosecutions for Northern Ireland. (5) In the application of subsection (3) or (4) to an offence created by regulations under section 27— (a) the words “alleged to have been committed in a controlled place” are to be omitted, and (b) the references to a person authorised by the Secretary of State are to be read as references to an inspector appointed under that section. (6)




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In this section “relevant offence” means an offence under this Chapter or created by regulations under section 27. Registration 29 Requirement for public register (1) The Secretary of State must maintain a register containing prescribed information relating to licences. (2) Information is not to be included in the register if— (a) the Secretary of State thinks that disclosure of the information would be contrary to the interests of national security, or (b) the licensing authority thinks that disclosure of the information would prejudice to an unreasonable degree a person's commercial interests. (3) Information excluded from the register by virtue of subsection (2)(b) is treated, subject to subsection (4), as ceasing to prejudice a person's commercial interests at the end of the period of 4 years beginning with the date on which the licensing authority made the decision to exclude it. (4) The licensing authority may, on the application of the person whose commercial interests are affected, decide whether the information should be included in the register at the end of the period mentioned in subsection (3) or should continue to be excluded. (5) Where information of any description is excluded from the register by virtue of subsection (2)(b), a statement is to be included in the register indicating the existence of information of that description. (6) The Secretary of State must— (a) secure that the register maintained under this section is available for inspection by the public free of charge, and (b) afford to members of the public facilities for obtaining copies of entries, on payment of a fee. (7) In this section “prescribed” means prescribed by regulations made by the Secretary of State. Abandonment of offshore installations 30 Abandonment of installations (1) Part 4 of the Petroleum Act 1998 (c. 17)( “the 1998 Act”) applies in relation to a carbon storage installation as it applies in relation to an offshore installation within the meaning given by section 44 of the 1998 Act, subject to subsections (2) and (4). (2) In relation to a carbon storage installation established or maintained at a controlled place under a licence granted by the Scottish Ministers— (a) the functions conferred on the Secretary of State by Part 4 of the 1998 Act are exercisable by the Scottish Ministers rather than the Secretary of State (and, accordingly, the reference in section




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39(6) of the 1998 Act to either House of Parliament is to be read as a reference to the Scottish Parliament), and (b) the Scottish Ministers may make regulations providing that that Part applies with such other modifications as may be specified in the regulations. (3) For the purposes of subsection (2), orders under section 33(1) are to be disregarded and installations used for a purpose ancillary to getting petroleum (within the meaning of section 1 of the 1998 Act) are not to be treated as carbon storage installations. (4) In relation to any other carbon storage installation, the Secretary of State may make regulations providing that Part 4 of the 1998 Act applies in relation to such an installation with such modifications as may be specified in the regulations. (5) In this section, “carbon storage installation” means an installation established or maintained for the purposes of an activity mentioned in section 17(2)(a), (b) or (c). Termination of the licence 31 Termination of licence: regulations (1) The licensing authority may by regulations make provision— (a) about the circumstances in which a licence may be terminated; (b) imposing obligations on the licensing authority in respect of a carbon storage facility on or after the termination of a licence relating to the facility. (2) Regulations under this section may, in particular, make provision about financial arrangements to be made in relation to a closed carbon storage facility on or after the termination of a licence relating to the facility. (3) A licence has effect subject to any regulations under this section. Miscellaneous 32 Safety zones Sections 21, 23 and 24 of the Petroleum Act 1987 (c. 12)(safety zones) apply in relation to a carbon storage installation as they apply in relation to an installation within section 21(1) of that Act. 33 Enhanced petroleum recovery: power to make orders (1) The use of carbon dioxide, in a controlled place, for a purpose ancillary to getting petroleum is to be regarded as— (a) an activity within section 17(2), or (b) the storage of gas for the purposes of section 1(3)(b), only in the circumstances specified by the Secretary of State by order. (2) Subsection (1) and orders made under it are without prejudice to Part 1 of the Petroleum Act 1998 (c. 17).




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(3) An order under subsection (1) may provide that the use of carbon dioxide, in a designated place, for a purpose ancillary to getting petroleum is to be regarded, for the purposes of this Chapter, as the use of carbon dioxide in a controlled place for such a purpose. (4) A designated place means a place designated by the order which is a place in, under or over waters in an area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29), other than waters in a Gas Importation and Storage Zone. (5) In this section “petroleum” has the meaning given by section 1 of the Petroleum Act 1998 (c. 17). 34 Power of Secretary of State etc to transfer functions (1) The Secretary of State may by order transfer to a public body any function conferred on the Secretary of State by or under this Chapter, other than a power to make regulations or an order. (2) A function transferred by an order under subsection (1) reverts to the Secretary of State if the order is revoked. (3) An order under subsection (1) may— (a) transfer different functions to different bodies; (b) transfer functions to a body in respect of all activities within section 17(2) or only specified activities; (c) transfer the same function to different bodies in respect of different activities; (d) transfer functions to different bodies in respect of different places. (4) An order under subsection (1) may— (a) provide for the Secretary of State to make payments to a body to which a function has been transferred in respect of the body's expenditure in connection with the exercise of the function; (b) require any fee paid to such a body under this Chapter to be paid into the Consolidated Fund; (c) make such modifications of section 188 of the Energy Act 2004 (c. 20)(power to impose charges to fund energy functions), or any regulations made under that section, as the Secretary of State considers appropriate in consequence of the transfer of a function by virtue of this section. (5) The Secretary of State may give a direction to a body to which functions have been transferred under subsection (1) about— (a) whether, or in what circumstances, a function specified in the direction is to be carried out; (b) the manner in which a function specified in the direction is to be carried out. (6) A direction under subsection (5) may be general or specific. (7) The Secretary of State may not give a direction under subsection (5) without first consulting the body to which the Secretary of State proposes to give the direction. (8)




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This section applies in relation to the Scottish Ministers and any functions conferred on them by or under this Chapter as it applies in relation to the Secretary of State and any functions conferred on the Secretary of State by or under this Chapter, except that— (a) in its application to the Scottish Ministers the reference in subsection (4)(b) to the Consolidated Fund is to be read as a reference to the Scottish Consolidated Fund, and (b) the reference in that subsection to section 188 of the Energy Act 2004 (c. 20) is to be read as a reference to that section as applied and modified by subsection (12)(inserted by paragraph 13(e) of Schedule 1 to this Act). Interpretation 35 Chapter 3: interpretation (1) In this Chapter— “carbon storage facility” has the meaning given by section 20(8); “carbon storage installation” has the meaning given by section 30(5); “closure”, in relation to a carbon storage facility, has the meaning given by section 20(8); “controlled place” has the meaning given by section 17(3); “Gas Importation and Storage Zone” means an area designated under section 1(5); “installation” includes any floating structure or device maintained on a station by whatever means; “licence” means a licence granted under section 18(1), and “licence holder” is to be construed accordingly; “licensing authority” has the meaning given by section 18(2). (2) An Order in Council under section 126(2) of the Scotland Act 1998 (c. 46)(apportionment of sea areas) has effect for the purposes of this Chapter if, or to the extent that, the Order is expressed to apply— (a) by virtue of this subsection, for the purposes of this Chapter, or (b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act. CHAPTER 4 GENERAL PROVISIONS ABOUT GAS IMPORTATION AND STORAGE 36 Chapters 2 and 3: consequential amendments Schedule 1 contains amendments relating to Chapters 2 and 3.

PART 2 ELECTRICITY FROM RENEWABLE SOURCES

The renewables obligation 37 The renewables obligation For sections 32 to 32C of the Electricity Act 1989 (c. 29) substitute— "32 The renewables obligation (1) The relevant minister may make a renewables obligation order. (2) “The relevant minister” means— (a)




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in the case of Scotland, the Scottish Ministers, (b) in any other case, the Secretary of State. (3) In subsection (2) “Scotland” includes— (a) so much of the internal waters and territorial sea of the United Kingdom as are adjacent to Scotland, and (b) a Renewable Energy Zone, or any part of such a Zone, which is designated by order under section 84(5) of the Energy Act 2004 (areas in relation to which Scottish Ministers have functions). (4) A renewables obligation order is an order which imposes the renewables obligation on each electricity supplier falling within a specified description (a “designated electricity supplier”). (5) The descriptions of electricity supplier upon which a renewables obligation order may impose the renewables obligation are those supplying electricity to customers in the relevant part of Great Britain, excluding such categories of supplier (if any) as are specified. (6) The renewables obligation is that the designated electricity supplier must, by each specified day, have produced to the Authority the required number of renewables obligation certificates in respect of the amount of electricity supplied by it during a specified period to customers in the relevant part of Great Britain. (7) Subsection (6) is subject to sections 32A to 32M. 32A Further provision about the renewables obligation (1) A renewables obligation order may make provision generally in relation to the renewables obligation. (2) A renewables obligation order may, in particular, specify— (a) how the number of renewables obligation certificates required to be produced by an electricity supplier in respect of the amount of electricity supplied by it to customers in the relevant part of Great Britain during a specified period is to be calculated; (b) different obligations for successive periods of time; (c) that renewables obligation certificates issued in respect of electricity generated— (i) using specified descriptions of renewable sources, (ii) by specified descriptions of generating stations, (iii) in specified ways, or (iv) in other specified cases or circumstances, are to count towards discharging an electricity supplier's obligation only up to a specified number, or a specified proportion, of the certificates required to be produced to discharge the obligation; (d)




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that a specified number, or a specified proportion, of the renewables obligation certificates produced by an electricity supplier when discharging its renewables obligation must be certificates in respect of electricity generated— (i) using specified descriptions of renewable sources, (ii) by specified descriptions of generating station, (iii) in specified ways, or (iv) in other specified cases or circumstances; (e) how the amount of electricity supplied by an electricity supplier to customers in the relevant part of Great Britain during a specified period is to be calculated; (f) that specified information, or information of a specified nature, is to be given to the Authority; (g) the form in which such information is to be given and the time by which it is to be given. (3) A renewables obligation certificate may count once only towards the discharge of the renewables obligation. (4) Except as provided by a renewables obligation order, a renewables obligation certificate counts towards discharging the renewables obligation regardless of whether the order under which it is issued is made by the Secretary of State or the Scottish Ministers. (5) A renewables obligation order may specify that the only renewables obligation certificates which count towards discharging the renewables obligation are certificates which are issued— (a) in respect of electricity supplied to customers in the relevant part of Great Britain, or (b) in respect of electricity used in a permitted way (within the meaning of section 32B(9) and (10)) in that part of Great Britain. (6) A renewables obligation order may, in relation to any specified period ( “the current period”)— (a) provide that renewables obligation certificates in respect of electricity supplied in a later period may, when available, be counted towards discharging the renewables obligation for the current period; (b) provide that renewables obligation certificates in respect of electricity supplied in the current period may, in a later period, be counted towards discharging the renewables obligation for that period; (c) specify how much later the later period referred to in paragraph (a) or (b) may be; (d) specify a maximum proportion of the renewables obligation for any period which may be discharged as mentioned in paragraph (a) or (b); (e) specify a maximum proportion, or maximum number of, the renewables obligation certificates issued in respect of electricity supplied in any period which may be counted towards discharging the renewables obligation for a different period. (7)




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For the purposes of subsection (6) a certificate which certifies that electricity has been used in a permitted way (within the meaning of section 32B(9) and (10)) in a particular period is to be treated as if it were a certificate which certifies that electricity has been supplied in that period. 32B Renewables obligation certificates (1) A renewables obligation order may provide for the Authority to issue from time to time, in accordance with such criteria (if any) as are specified in the order, a certificate ( “a renewables obligation certificate”) to— (a) the operator of a generating station, (b) an electricity supplier or a Northern Ireland supplier, or (c) if the order so provides, a person of any other description specified in the order. (2) A renewables obligation certificate is to certify— (a) the matters within subsection (3) or (4), or (b) if the order provides that a certificate may certify the matters within subsection (5), (6), (7) or (8), the matters within that subsection. (3) The matters within this subsection are— (a) that the generating station, or, in the case of a certificate issued otherwise than to the operator of a generating station, a generating station specified in the certificate, has generated from renewable sources the amount of electricity stated in the certificate, and (b) that it has been supplied by an electricity supplier to customers in Great Britain (or the part of Great Britain stated in the certificate). (4) The matters within this subsection are— (a) that the generating station, or, in the case of a certificate issued otherwise than to the operator of a generating station, a generating station specified in the certificate, has generated from renewable sources the amount of electricity stated in the certificate, (b) that the generating station in question is not a generating station mentioned in Article 54(1) of the Energy (Northern Ireland) Order 2003, and (c) that the electricity has been supplied by a Northern Ireland supplier to customers in Northern Ireland. (5) The matters within this subsection are— (a) that two or more generating stations have, between them, generated from renewable sources the amount of electricity stated in the certificate, and (b) that it has been supplied by an electricity supplier to customers in Great Britain (or the part of Great Britain stated in the certificate). (6) The matters within this subsection are—




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(a) that two or more generating stations have, between them, generated from renewable sources the amount of electricity stated in the certificate, (b) that none of them is a generating station mentioned in Article 54(1) of the Energy (Northern Ireland) Order 2003, and (c) that the electricity has been supplied by a Northern Ireland supplier to customers in Northern Ireland. (7) The matters within this subsection are— (a) that the generating station, or, in the case of a certificate issued otherwise than to the operator of a generating station, a generating station specified in the certificate, has generated from renewable sources the amount of electricity stated in the certificate, and (b) that the electricity has been used in a permitted way. (8) The matters within this subsection are— (a) that two or more generating stations have, between them, generated from renewable sources the amount of electricity stated in the certificate, and (b) that the electricity has been used in a permitted way. (9) For the purposes of subsections (7) and (8), electricity generated by a generating station, or generating stations, of any description is used in a permitted way if— (a) it is used in one of the ways mentioned in subsection (10), and (b) that way is specified in the order as a permitted way— (i) in relation to all generating stations, or (ii) in relation to generating stations of that description. (10) Those ways are— (a) being consumed by the operator of the generating station or generating stations by which it was generated; (b) being supplied to customers in Great Britain through a private wire network; (c) being provided to a distribution system or a transmission system in circumstances in which its supply to customers cannot be demonstrated; (d) being used, as respects part, as mentioned in one of paragraph (a), (b) or (c) and as respects the remainder— (i) as mentioned in one of the other paragraphs, or (ii) as respects part, as mentioned in one of the other paragraphs and as respects the remainder as mentioned in the other;




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(e) being used, as respects part, as mentioned in paragraph (a), (b), (c) or (d) and as respects the remainder by being supplied by an electricity supplier to customers in Great Britain or by a Northern Ireland supplier to customers in Northern Ireland, or both. (11) For the purposes of subsection (10)(b) electricity is supplied through a private wire network if it is conveyed to premises by a system which is used for conveying electricity from a generating station in circumstances where— (a) the operator of the generating station is exempt from section 4(1)(c) and does not hold a supply licence, and (b) the electricity is supplied to one or more customers— (i) by the operator directly, or (ii) by a person to whom the operator supplies the electricity, being a person who is exempt from section 4(1)(c) and does not hold a supply licence. (12) In this section “generating station”— (a) in the case of an order made by the Scottish Ministers, means a generating station which is situated in Scotland; (b) in the case of an order made by the Secretary of State, means a generating station which is not situated in Scotland. (13) For this purpose “Scotland” is to be construed in accordance with section 32(3). 32C Section 32B: supplemental provision (1) A renewables obligation order may provide— (a) that no renewables obligation certificates are to be issued in respect of electricity generated in specified cases or circumstances, or (b) that renewables obligation certificates are to be issued in respect of a proportion only of the electricity generated in specified cases or circumstances. (2) In particular, provision made by virtue of subsection (1) may specify— (a) electricity generated using specified descriptions of renewable sources, (b) electricity generated by specified descriptions of generating station, or (c) electricity generated in specified ways. (3) Provision made by virtue of subsection (1)(b) may include— (a) provision about how the proportion is to be determined; (b) provision about what, subject to such exceptions as may be specified, constitutes sufficient evidence of any matter required to be established for the purpose of determining that proportion;




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(c) provision authorising the Authority, in specified circumstances, to require an operator of a generating station to arrange— (i) for samples of any fuel used (or to be used) in the generating station, or of any gas or other substance produced as a result of the use of such fuel, to be taken by a person, and analysed in a manner, approved by the Authority, and (ii) for the results of that analysis to be made available to the Authority. (4) In the case of electricity generated by a generating station fuelled or driven— (a) partly by renewable sources, and (b) partly by fossil fuel (other than waste which constitutes a renewable source), only the proportion attributable to the renewable sources is to be regarded as generated from such sources. (5) A renewables obligation order may specify— (a) how the proportion referred to in subsection (4) is to be determined, and (b) the consequences for the issuing of renewables obligation certificates if a generating station of the type mentioned in that subsection uses more than a specified proportion of fossil fuel during a specified period. (6) Those consequences may include the consequence that no certificates are to be issued in respect of any of the electricity generated by that generating station during that period. (7) A renewables obligation order may specify circumstances in which the Authority may revoke a renewables obligation certificate before its production for the purposes of the renewables obligation. (8) A renewables obligation order must— (a) prohibit the issue of a renewables obligation certificate certifying matters within section 32B(4) or (6) where the Northern Ireland authority has notified the Authority that it is not satisfied that the electricity in question has been supplied to customers in Northern Ireland, and (b) require the revocation of such a certificate if the Northern Ireland authority so notifies the Authority at a time between the issue of the certificate and its production for the purposes of the renewables obligation. (9) References in section 32B and this section to the supply of electricity to customers in Northern Ireland are to be construed in accordance with the definition of “supply” in Article 3 of the Electricity (Northern Ireland) Order 1992. 32D Amounts of electricity specified in certificates (1) A renewables obligation order may specify the amount of electricity to be stated in each renewables obligation certificate, and different amounts may be specified in relation to different cases or circumstances. (2)




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In particular, different amounts may be specified in relation to— (a) electricity generated from different renewable sources; (b) electricity generated by different descriptions of generating station; (c) electricity generated in different ways. (3) In this section “banding provision” means provision made in a renewables obligation order by virtue of subsection (1). (4) Before making any banding provision, the relevant minister must have regard to the following matters— (a) the costs (including capital costs) associated with generating electricity from each of the renewable sources or with transmitting or distributing electricity so generated; (b) the income of operators of generating stations in respect of electricity generated from each of those sources or associated with the generation of such electricity; (c) the effect of paragraph 19 of Schedule 6 to the Finance Act 2000 (c. 17)(supplies of electricity from renewable sources exempted from climate change levy) in relation to electricity generated from each of those sources; (d) the desirability of securing the long term growth, and economic viability, of the industries associated with the generation of electricity from renewable sources; (e) the likely effect of the proposed banding provision on the number of renewables obligation certificates issued by the Authority, and the impact this will have on the market for such certificates and on consumers; (f) the potential contribution of electricity generated from each renewable source to the attainment of any target which relates to the generation of electricity or the production of energy and is imposed by, or results from or arises out of, a Community obligation. (5) For the purposes of subsection (4)(a), the costs associated with generating electricity from a renewable source include any costs associated with the production or supply of heat produced in connection with that generation. (6) For the purposes of subsection (4)(b), an operator's income associated with the generation of electricity from a renewable source includes any income connected with— (a) the acquisition of the renewable source; (b) the supply of heat produced in connection with the generation; (c) the disposal of any by-product of the generation process. (7) After the first order containing banding provision is made by the relevant minister, no subsequent order containing such provision may be made by that minister except following a review held by virtue of subsection (8). (8) A renewables obligation order—




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(a) may authorise the relevant minister to review the banding provision at such intervals as are specified in or determined in accordance with the order, and (b) may authorise the relevant minister to review the whole or any part of the banding provision at any time when that minister is satisfied that one or more of the specified conditions is satisfied. 32E Section 32D: transitional provision and savings (1) This section applies where a renewables obligation order contains banding provision. (2) The order may provide for the effect of any banding provision made in an earlier order, or of any provision of a pre-commencement order, to continue, in such circumstances as may be specified, in relation to— (a) the electricity generated by generating stations of such a description as may be specified, or (b) so much of that electricity as may be determined in accordance with the order. (3) For the purposes of subsection (2) “pre-commencement order” means an order made under section 32 before the coming into force of this section. (4) Subsection (6) applies to a generating station in respect of which a statutory grant has been awarded if— (a) the generating station is of a specified description, or (b) the circumstances of the case meet specified requirements. (5) The requirements specified under subsection (4)(b) may relate to the time when the grant was awarded (whether a time before or after the coming into force of this section). (6) A renewables obligation order which contains banding provision may provide for the operation of that provision in relation to electricity generated by a generating station to which this subsection applies to be conditional upon the operator of the station agreeing— (a) if the grant or any part of it has been paid, to repay to the Secretary of State the whole or a specified part of the grant or part before the repayment date, (b) to pay to the Secretary of State interest on an amount repayable under paragraph (a) for such period, and at such rate, as may be determined by the Secretary of State, and (c) if the grant or any part of it has not yet been paid, to consent to the cancellation of the award of the grant or part. (7) If the grant in respect of which an amount falls to be paid under paragraph (a) or (b) of subsection (6) was paid by the Scottish Ministers, the references in those paragraphs to the Secretary of State are to be read as references to those Ministers. (8) For the purposes of subsection (6)— (a) “the repayment date” means the date specified in or determined in accordance with the order, and




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(b) the period for which interest is payable must not begin before the grant was paid or, if the repayment relates to an instalment of the grant, before the instalment was paid; and, for the purposes of provision made under that subsection, a renewables obligation order may make provision about the cancellation of an award of a statutory grant or an instalment of such a grant. (9) In this section “statutory grant” means— (a) a grant awarded under section 5(1) of the Science and Technology Act 1965 (grants to carry on or support scientific research), or (b) any other grant which is payable out of public funds and awarded under or by virtue of an Act. (10) This section is without prejudice to section 32K(1)(b)(power for renewables obligation order to include transitional provision and savings). 32F Use of renewables obligation certificates issued in Northern Ireland (1) A renewables obligation order may provide that— (a) in such cases as may be specified in the order, and (b) subject to such conditions as may be so specified, an electricity supplier may (to the extent provided for in accordance with the order) discharge its renewables obligation (or its obligation in relation to a particular period) by the production to the Authority of a Northern Ireland certificate. (2) In this section “Northern Ireland certificate” means a certificate issued by the Northern Ireland authority in accordance with provision included, by virtue of Article 54 of the Energy (Northern Ireland) Order 2003, in an order under Article 52 of that Order (renewables obligations for Northern Ireland suppliers). 32G Payment as alternative to complying with renewables obligation order (1) A renewables obligation order may provide— (a) that an electricity supplier may (in whole or in part) discharge its renewables obligation by making a payment to the Authority before the last discharge day, and (b) that an electricity supplier's renewables obligation that was not discharged in whole or in part before the last discharge day is to be treated as having been discharged to the extent specified in the order where the payment for which the order provides is made to the Authority before the end of the late payment period. (2) The order may make provision— (a) as to the sum which for the purposes of subsection (1) is to correspond to a renewables obligation certificate, (b) for the sums that must be paid in order for an obligation to be treated as having been discharged to increase at a rate specified in the order for each day after the last discharge day; (c)




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for different sums or rates falling within paragraph (a) or (b) in relation to different periods; (d) for different such sums or rates in relation to electricity generated in different cases or circumstances specified in the order (including those of a kind referred to in section 32A(2)(c)); (e) for any such sum or rate to be adjusted from time to time for inflation by a method specified in the order. (3) The method specified under subsection (2)(e) may, in particular, refer to a specified scale or index (as it may have effect from time to time) or to other specified data of any description. (4) A renewables obligation order may provide that, where— (a) a renewables obligation is one in relation to which provision made by virtue of subsection (1)(b) applies in the case of the electricity supplier who is subject to the obligation, and (b) the period ending with such day (after the last discharge day) as may be specified in or determined under the order has not expired, the taking of steps under section 27A in respect of a contravention by that supplier of that obligation is prohibited or otherwise restricted to the extent specified in the order. (5) A renewables obligation order may provide that, in a case in which the amount received by the Authority, or by the Northern Ireland authority, by way of discharge payments for a period falls short of the amount due in respect of that period, every person who— (a) was subject to a renewables obligation for the relevant period or for a subsequent period specified in or determined under the order, and (b) is of a description so specified or determined, must by the time and in the circumstances so specified or determined make a payment (or further payment) to the Authority of an amount calculated in the manner so specified or determined. (6) A renewables obligation order may not by virtue of subsection (5) confer an entitlement on the Authority to receive a payment in respect of the shortfall for any period— (a) in the case of a shortfall in the amount received by the Authority, if the receipt of the payment is to be while a prohibition or restriction by virtue of subsection (4) applies, in one or more cases, to the taking of steps in relation to contraventions of renewables obligations for that period, or (b) in the case of a shortfall in the amount received by the Northern Ireland authority, if the receipt of the payment is to be while a prohibition or restriction by virtue of a corresponding provision having effect in Northern Ireland applies, in one or more cases, to the taking of steps in relation to contraventions of Northern Ireland obligations for that period. (7) The provision that may be made by virtue of subsection (5) includes— (a) provision for the making of adjustments and repayments at times after a requirement to make payments in respect of a shortfall for a period has already arisen, and (b) provision that sections 25 to 28 are to apply in relation to a requirement imposed by virtue of that subsection on a person who is not a licence holder as if the person were a licence holder. (8)




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References in this section to an electricity supplier's renewables obligation include references to its renewables obligation in relation to a particular period. (9) For the purposes of this section, the amount received by the Authority by way of discharge payments for a period falls short of the amount due in respect of that period if, and to the extent that, the Authority would have received more by way of discharge payments if every renewables obligation for that period, so far as it was not otherwise discharged, had been discharged by payment. (10) For the purposes of this section the amount received by the Northern Ireland authority by way of discharge payments for a period falls short of the amount due in respect of that period if, and to the extent that, that authority would have received more by way of discharge payments if every Northern Ireland obligation for that period, so far as not otherwise discharged, had been discharged by payment. (11) In this section— “discharge payment”, in relation to a period, means— (a) a payment by virtue of subsection (1)(a) for discharging (in whole or in part) an electricity supplier's renewables obligation for that period, (b) so much of a payment by virtue of subsection (1)(b) for securing that such an obligation is treated as discharged to any extent as does not exceed the payment that would have discharged that obligation to the same extent if it had been made before the last discharge day, or (c) so much of any payment to the Northern Ireland authority as corresponds in relation to a Northern Ireland obligation for that period, to anything falling within paragraph (a) or (b) above; “last discharge day” means the day specified as the day by which renewables obligation certificates must be produced for the purposes of section 32(6); “late payment period” means such period beginning with the last discharge day as may be specified; “Northern Ireland obligation” means a renewables obligation of a Northern Ireland supplier under Article 52 of the Energy (Northern Ireland) Order 2003; “the relevant period”— (a) in relation to a shortfall in amounts received by the Authority by way of discharge payments for a period, means that period, and (b) in relation to a shortfall in amounts received by the Northern Ireland authority by way of discharge payments for a period, means any period that includes the whole or a part of that period. 32H Allocation of amounts to electricity suppliers (1) The amounts received by the Authority by virtue of section 32G must be paid by it to electricity suppliers in accordance with a system of allocation specified in a renewables obligation order. (2) Subsection (1) does not apply to those amounts to the extent that they are used by the Authority under section 32I. (3) The system of allocation specified in the order may provide for payments to specified categories of electricity supplier only. (4)




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That system may also provide for the postponement of a requirement to make payments to electricity suppliers of amounts received by the Authority under section 32G(1)(b) if, at the time the payments would otherwise fall to be made, the aggregate of the amounts so received (and not used under section 32I or already paid under subsection (1)) is less than an amount specified in the order. (5) The references in this section to electricity suppliers include references to Northern Ireland suppliers. 32I Costs of the Authority and the Northern Ireland authority (1) A renewables obligation order may provide for amounts received by the Authority by virtue of section 32G to be used by the Authority— (a) to make payments into the Consolidated Fund in respect of costs (or a proportion of costs) which have been or are expected to be incurred by the Authority in connection with the performance of its functions conferred by or under sections 32 to 32M, or (b) to make payments to the Northern Ireland authority in respect of costs (or a proportion of costs) which have been or are expected to be incurred by that authority in connection with the performance of its functions conferred by or under Articles 52 to 55 of the Energy (Northern Ireland) Order 2003. (2) A renewables obligation order— (a) may exclude amounts of a specified description from being used as mentioned in subsection (1); (b) may prevent the Authority using amounts to make payments in respect of costs of a specified description. 32J Information (1) A renewables obligation order may provide for the Authority to require— (a) an electricity supplier to provide the Authority with information, or with information of a particular kind, which in the Authority's opinion is relevant to the question whether the supplier is discharging, or has discharged, its renewables obligation; (b) a person to provide the Authority with information, or with information of a particular kind, which in the Authority's opinion is relevant to the question whether a renewables obligation certificate is, or was or will in future be, required to be issued to the person. (2) That information must be given to the Authority in whatever form it requires. (3) A renewables obligation order may— (a) require operators of generating stations generating electricity (wholly or partly) from biomass to give specified information, or information of a specified kind, to the Authority; (b) specify what, for this purpose, constitutes “biomass”; (c) require the information to be given in a specified form and within a specified period; (d)




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authorise or require the Authority to postpone the issue of certificates under section 32B to the operator of a generating station who fails to comply with a requirement imposed by virtue of paragraph (a) or (c) until such time as the failure is remedied; (e) authorise or require the Authority to refuse to issue certificates to such a person or to refuse to issue them unless the failure is remedied within a prescribed period. (4) The Authority may publish information obtained by virtue of subsection (3). (5) No person is required by virtue of this section to provide any information which the person could not be compelled to give in evidence in civil proceedings in the High Court or, in Scotland, the Court of Session. 32K Renewables obligation order: general provision (1) A renewables obligation order may— (a) make further provision as to the functions of the Authority in relation to the matters dealt with by the order; (b) make transitional provision and savings; (c) provide for anything falling to be calculated or otherwise determined under the order to be calculated or determined by such persons, in accordance with such procedure and by reference to such matters and to the opinion of such persons, as may be specified in the order; (d) make different provision for different cases or circumstances. (2) Provision made by virtue of subsection (1)(b) may, in particular, include provision about the treatment of certificates issued under section 32B before the substitution of that section by section 37 of the Energy Act 2008. (3) Provision made by virtue of subsection (1)(d) may, in particular, make— (a) different provision in relation to different suppliers; (b) different provision in relation to generating stations of different descriptions; (c) different provision in relation to different localities. (4) In subsection (3) “supplier” means an electricity supplier or a Northern Ireland supplier. 32L Renewables obligation orders: procedure (1) Before making a renewables obligation order, the relevant minister must consult— (a) the Authority, (b) the Council, (c) the electricity suppliers to whom the proposed order would apply, (d)




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such generators of electricity from renewable sources as the relevant minister considers appropriate, and (e) such other persons, if any, as the relevant minister considers appropriate. (2) A renewables obligation order is not to be made by the Secretary of State unless a draft of the instrument containing it has been laid before and approved by a resolution of each House of Parliament. (3) A renewables obligation order is not to be made by the Scottish Ministers unless a draft of the instrument containing it has been laid before and approved by a resolution of the Scottish Parliament. 32M Interpretation of sections 32 to 32M (1) In this section and sections 32 to 32L— “banding provision” is to be construed in accordance with section 32D(3); “fossil fuel” means— (a) coal, (b) lignite, (c) natural gas (within the meaning of the Energy Act 1976), (d) crude liquid petroleum, (e) petroleum products (within the meaning of that Act), or (f) any substance produced directly or indirectly from a substance mentioned in paragraphs (a) to (e); “generated” means generated at any place whether situated in the United Kingdom or elsewhere, and cognate expressions are to be construed accordingly; “Northern Ireland authority” means the Northern Ireland Authority for Utility Regulation; “Northern Ireland supplier” means an electricity supplier within the meaning of Part 7 of the Energy (Northern Ireland) Order 2003; “the relevant minister” has the meaning given by section 32; “the relevant part of Great Britain” means— (a) in the case of a renewables obligation order made by the Secretary of State, England and Wales (including so much of the internal waters and territorial sea of the United Kingdom as are adjacent to England or Wales); (b) in the case of a renewables obligation order made by the Scottish Ministers, Scotland (including so much of the internal waters and territorial sea of the United Kingdom as are adjacent to Scotland); “the renewables obligation” is to be construed in accordance with section 32(4); “renewables obligation certificate” is to be construed in accordance with section 32B; “renewables obligation order” is to be construed in accordance with section 32; “renewable sources” means sources of energy other than fossil fuel or nuclear fuel, but includes waste of which not more than a specified proportion is waste which is, or is derived from, fossil fuel; “specified”, in relation to a renewables obligation order, means specified in the order.




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(2) For the purposes of the definition of “renewable sources”, a renewables obligation order may make provision— (a) about what constitutes “waste”; (b) about how the proportion of waste which is, or is derived from, fossil fuel is to be determined; (c) about what, subject to such exceptions as may be specified, constitutes sufficient evidence of that proportion in any particular case; (d) authorising the Authority, in specified circumstances, to require an operator of a generating station to arrange— (i) for samples of any fuel used (or to be used) in the generating station, or of any gas or other substance produced as a result of the use of such fuel, to be taken by a person, and analysed in a manner, approved by the Authority, and (ii) for the results of that analysis to be made available to the Authority. (3) For the purposes of the definition of “the relevant part of Great Britain”, the territorial sea adjacent to England is the territorial sea adjacent to the United Kingdom, other than the territorial sea adjacent to Scotland, Wales or Northern Ireland. (4) An Order in Council under section 126(2) of the Scotland Act 1998 (c. 46)(apportionment of sea areas) has effect for the purposes of this section and sections 32 to 32L if, or to the extent that, the Order is expressed to apply— (a) by virtue of this subsection, for those purposes, or (b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act. (5) An order or Order in Council made under or by virtue of section 158(3) or (4) of the Government of Wales Act 2006 (apportionment of sea areas) has effect for the purposes of this section if, or to the extent that, the order or Order in Council is expressed to apply— (a) by virtue of this subsection, for those purposes, or (b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act. (6) An Order in Council under section 98(8) of the Northern Ireland Act 1998 (c. 46)(apportionment of sea areas) has effect for the purposes of this section if, or to the extent that, the Order is expressed to apply— (a) by virtue of this subsection, for those purposes, or (b) if no provision has been made by virtue of paragraph (a), for the general or residual purposes of that Act. (7) A renewables obligation order may make provision, for the purposes of sections 32 to 32L, about the circumstances in which electricity is to be regarded as having been supplied—




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(a) to customers in Great Britain; (b) to customers in the relevant part of Great Britain; (c) to customers in Northern Ireland." 38 Section 37: supplemental provision (1) In the case of an order made under section 32 of the Electricity Act 1989 (c. 29) after the commencement of section 37, the requirements of section 32L(1) of that Act (as substituted by section 37) may be satisfied by consultation undertaken before that commencement or the passing of this Act. (2) Where a NI amending order is made, the Secretary of State may, by order— (a) make consequential amendments to any reference to a provision of the NI Energy Order contained in sections 32 to 32M of the Electricity Act 1989 (as substituted by section 37); (b) amend section 32K(2) of that Act (as so substituted) so as to extend it to certificates issued before the relevant time by the Northern Ireland Authority for Utility Regulation under provision included, by virtue of Article 54 of the NI Energy Order, in an order made under Article 52 of that Order. (3) In this section— “NI amending order” means an order under Article 56 of the NI Energy Order which (by virtue of section 40(2)) makes amendments to Part 7 of that Order to take account of any amendments made or proposed to be made by section 37; “NI Energy Order” means the Energy (Northern Ireland) Order 2003 (S.I. 2003/419 (N.I. 6)); “the relevant time” means the time when the first order made under Article 52 of the NI Energy Order by virtue of a NI amending order comes into force. 39 Existing savings relating to section 32 of the Electricity Act 1989 In section 67 of the Utilities Act 2000 (c. 27)(savings relating to section 32 of the Electricity Act 1989 etc), in subsection (1)(c) for “(as mentioned in that section) made pursuant to such an order” substitute "made pursuant to such an order (or such arrangements as modified or replaced by virtue of an order under this section)". 40 The Northern Ireland renewables obligation (1) In section 121 of the Energy Act 2004 (c. 20)(power of Gas and Electricity Markets Authority to act on behalf of Northern Ireland regulator)— (a) in subsection (1) for “Energy” substitute "Utility", (b) in subsection (2) for “Articles 52” to the end substitute "the Northern Ireland provisions.", and (c) after that subsection insert— "(3) For this purpose “the Northern Ireland provisions” means— (a) Articles 52 to 55 of the Energy (Northern Ireland) Order 2003 (renewables obligations for Northern Ireland suppliers), and




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(b) any provision made (whether before or after the passing of the Energy Act 2008) by an order under Article 56 of the Energy (Northern Ireland) Order 2003 which amends Part 7 of that Order." (2) In Article 56(1) of the NI Energy Order (power to amend Part 7 of that Order to take account of amendments of corresponding Great Britain provisions), the reference to amendments made to sections 32 to 32C of the Electricity Act 1989 (c. 29) includes a reference to section 37 of this Act. (3) In the case of an order under Article 52 of the NI Energy Order made by virtue of a NI amending order, the requirements of Article 52(6) of the NI Energy Order (consultation before making a renewables order) may be satisfied by consultation undertaken before the NI amending order came into force or the passing of this Act. (4) In this section “NI amending order” and “NI Energy Order” have the same meaning as in section 38. Feed-in tariffs for small-scale generation of electricity 41 Power to amend licence conditions etc: feed-in tariffs (1) The Secretary of State may modify— (a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (distribution and supply licences); (b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act; (c) a document maintained in accordance with the conditions of licences under section 6(1) of that Act, or an agreement that gives effect to a document so maintained. (2) The Secretary of State may exercise the power in subsection (1) for the purpose only of— (a) establishing, or making arrangements for the administration of, a scheme of financial incentives to encourage small-scale low-carbon generation of electricity; (b) requiring or enabling the holder of a distribution licence to make arrangements for the distribution of electricity generated by small-scale low-carbon generation; (c) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a) or (b). (3) Modifications made by virtue of subsection (1) may include— (a) provision requiring the holder of a supply licence to make a payment to a small-scale low-carbon generator, or to the Authority for onward payment to such a generator, in specified circumstances; (b) provision specifying how a payment under paragraph (a) is to be calculated; (c) provision for the level of payment under paragraph (a) to decrease year by year in accordance with a formula published, or to be published, by the Secretary of State; (d)




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provision about the circumstances in which no payment, or a reduced payment, may be made to a small-scale low-carbon generator; (e) provision about the circumstances in which a payment may be recovered from a small-scale low-carbon generator; (f) a requirement for the holder of a supply licence or distribution licence to pay a levy to the Authority at specified times; (g) provision specifying how a levy under paragraph (f) is to be calculated (which may require specified matters to be determined by the Authority or the Secretary of State); (h) provision conferring an entitlement on the holder of a supply licence or distribution licence to receive a payment from the Authority. (4) In this section— “Authority” means the Gas and Electricity Markets Authority; “distribution licence” means a licence under section 6(1)(c) of the Electricity Act 1989 (c. 29); “owner”, in relation to any plant which is the subject of a hire purchase agreement, a conditional sale agreement or any agreement of a similar nature, means the person in possession of the plant under that agreement; “plant” includes any equipment, apparatus or appliance; “small-scale low-carbon generation” means the use, for the generation of electricity, of any plant— (a) which, in generating electricity, relies wholly or mainly on a source of energy or a technology mentioned in subsection (5), and (b) the capacity of which to generate electricity does not exceed the specified maximum capacity; “small-scale low-carbon generator” means an owner of plant used or intended to be used for small-scale low-carbon generation, whether or not the person is also operating or intending to operate the plant; “specified maximum capacity” means the capacity specified by the Secretary of State by order, which must not exceed 5 megawatts; “supply licence” means a licence under section 6(1)(d) of the Electricity Act 1989 (c. 29). (5) The sources of energy and technologies are— (a) biomass; (b) biofuels; (c) fuel cells; (d) photovoltaics; (e) water (including waves and tides); (f) wind; (g) solar power; (h) geothermal sources;




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(i) combined heat and power systems with an electrical capacity of 50 kilowatts or less. (6) The Secretary of State may by order modify the list of sources of energy and technologies for the time being listed in subsection (5). (7) The power conferred by subsection (1)— (a) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied); (b) may be exercised differently in different cases or circumstances; (c) includes a power to make incidental, supplemental, consequential or transitional modifications. (8) Provision included in a licence by virtue of that power— (a) need not relate to the activities authorised by the licence; (b) may make different provision for different cases. 42 Power to amend licence conditions etc: procedure (1) Before making a modification, the Secretary of State must consult— (a) the holder of any licence being modified, (b) the Gas and Electricity Markets Authority, and (c) such other persons as the Secretary of State considers appropriate. (2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act. (3) Before making modifications, the Secretary of State must lay a draft of the modifications before Parliament. (4) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications. (5) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft. (6) Subsection (4) does not prevent a new draft of proposed modifications being laid before Parliament. (7) The Secretary of State must publish details of any modifications as soon as reasonably practicable after they are made. (8) In this section, “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid). (9)




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For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days. (10) In this section “modification” means a modification under section 41(1). 43 Feed-in tariffs: supplemental (1) A modification under section 41 of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989 (c. 29). (2) Where the Secretary of State makes modifications under section 41(1)(b) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority ( “the Authority”) must— (a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and (b) publish the modification. (3) The Secretary of State may by order— (a) make provision conferring functions on the Authority or the Secretary of State (or both) in connection with the administration of any scheme established by virtue of section 41; (b) make such modifications of provision made by or under an Act or an Act of the Scottish Parliament (whenever passed or made) as the Secretary of State considers appropriate in consequence of provision made under paragraph (a) or section 41. Offshore electricity transmission 44 Offshore electricity transmission (1) Part 1 of the Electricity Act 1989 (electricity supply) is amended as follows. (2) After section 6C insert— "6D Section 6C: supplemental provision (1) The provision made by regulations under section 6C(1) may also include— (a) provision requiring a person within subsection (2), in relation to a tender exercise, to make payments to the Authority, in prescribed circumstances, in respect of the Authority's tender costs in relation to the exercise; (b) provision requiring a person within subsection (2)(a)( “the relevant person”) in prescribed circumstances— (i) to pay a deposit of a prescribed amount to the Authority, or to provide the Authority with security in a form approved by it, or (ii)




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to make arrangements for a person approved by the Authority to pay to the Authority such a deposit or provide it with such security, in respect of any liability which the relevant person has, or may in future have, by virtue of paragraph (a); (c) provision requiring the owner of a regulated asset, in a case where a transitional tender exercise has been held, to make a payment of a prescribed amount to the Authority in respect of any costs incurred by the Authority in connection with any assessment of the costs which have been, or ought to have been, incurred in connection with that asset; (d) provision about the times at which payments are to be made under regulations made by virtue of paragraph (a) or (c) or deposits or other forms of security are to be provided under regulations made by virtue of paragraph (b); (e) provision about— (i) the circumstances in which a payment made in accordance with regulations made by virtue of paragraph (a) is to be repaid (wholly or in part); (ii) the circumstances in which such a repayment is to include an amount representing interest accrued on the whole or part of the payment; (iii) the circumstances in which a deposit (including any interest accrued on it) or other security provided in accordance with regulations made by virtue of paragraph (b) is to be released or forfeited (wholly or in part); (f) provision about the effect on a person's participation in the tender exercise of a failure to comply with a requirement imposed by virtue of this subsection, and the circumstances in which the tender exercise is to stop as a result of such a failure. (2) The persons within this subsection, in relation to a tender exercise, are— (a) the person who made the connection request for the purposes of which the tender exercise has been, is being or is to be, held; (b) any person who submits an application for the offshore transmission licence to which the tender exercise relates. (3) For the purposes of subsection (2)(a) a person makes a connection request when the person— (a) makes an application to the holder of a co-ordination licence (in accordance with any provision made by the licence) for an offer of connection to and use of a transmission system, or (b) before the coming into force of section 180 of the Energy Act 2004 (meaning of “high voltage line”), makes an application to the holder of a distribution licence (in accordance with any provision made by the licence) for an offer of connection to and use of a system in circumstances where the application is for connection to and use of that system by a system— (i) which was a distribution system at the time the application was made (or would have been had it been in existence at that time), and (ii) which consists (wholly or mainly) of electric lines of a nominal voltage of 132 kilovolts. (4)




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A person ( “P”) is to be treated as within subsection (2)(a) if— (a) P would have made the connection request, but for the fact that another person had already made an application within subsection (3)(a) or (b), and (b) the benefit of that application, or any agreement resulting from it, is vested in P. (5) Where regulations are made by virtue of subsection (1)(a) or (b), regulations made by virtue of subsection (1)(e) must ensure that, as soon as reasonably practicable after a tender exercise is finished, steps are taken by the Authority, in accordance with the regulations, to ensure that the aggregate of— (a) any fees under section 6A(2) in respect of applications for the offshore transmission licence to which the tender exercise relates, (b) any payments made in accordance with regulations made by virtue of subsection (1)(a) and not repaid, and (c) the value of any security forfeited in accordance with regulations made by virtue of subsection (1)(e)(iii), does not exceed the Authority's tender costs. (6) Where regulations under section 6C— (a) restrict the making of applications for offshore transmission licences, or (b) operate so as to prevent an application from being considered or further considered, if the applicant does not meet one or more prescribed requirements, such regulations may make provision enabling a person to apply to the Authority for a decision as to the effect of any such restriction or requirement if the person were to make an application for such a licence. (7) Regulations made by virtue of subsection (6) may enable the Authority to charge a person who makes such an application a prescribed fee for any decision given in response to it. (8) In this section— “co-ordination licence” means a transmission licence which authorises a person to co-ordinate and direct the flow of electricity onto and over a transmission system— (a) by means of which the transmission of electricity takes place, and (b) the whole or a part of which is at a relevant place (within the meaning of section 4(5)); “offshore transmission licence” has the same meaning as in section 6C; “prescribed” has the same meaning as in that section; “regulated asset”, in relation to a tender exercise, means an asset which the person granted the offshore transmission licence requires in order to enable that person to comply with the obligations under the licence; “successful bidder”, in relation to a tender exercise, means the person to whom, as a result of that exercise, the offshore transmission licence has been, or is to be, granted; “tender costs”, in relation to a tender exercise, means— (a) any costs incurred or likely to be incurred by the Authority for the purposes of the exercise, and (b)




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such proportion as the Authority considers appropriate of the costs which— (i) have been, or are likely to be, incurred by it under or for the purposes of section 6C or of regulations under that section, and (ii) are not directly attributable to a particular tender exercise; “tender exercise” means the steps taken in accordance with regulations under section 6C with a view to determining to whom a particular offshore transmission licence is to be granted; “transitional tender exercise” means a tender exercise in relation to which paragraph 1(1) of Schedule 2A applies. (9) Any sums received by the Authority under regulations made by virtue of this section are to be paid into the Consolidated Fund. 6E Property schemes in respect of offshore transmission licences Schedule 2A (which provides for property schemes in connection with grants of offshore transmission licences) shall have effect." (3) In section 64 (interpretation of Part 1), after subsection (1) insert— "(1A) An electric line is a relevant offshore line for the purposes of the definition in subsection (1) of “high voltage line” if— (a) it is wholly or partly in an area of GB internal waters, an area of the territorial sea adjacent to the United Kingdom or an area designated under section 1(7) of the Continental Shelf Act 1964, and (b) it is— (i) used to convey electricity to a place in Scotland, or (ii) constructed wholly or mainly for the purpose of conveying, to any other place, electricity generated by a generating station situated in an area mentioned in paragraph (a). (1AA) In subsection (1A)(a) “GB internal waters” means waters in or adjacent to Great Britain which are between the mean low water mark and the seaward limits of the territorial sea adjacent to Great Britain, but do not form part of that territorial sea." (4) Before Schedule 3 insert the Schedule set out in Schedule 2 (property schemes).

PART 3 DECOMMISSIONING OF ENERGY INSTALLATIONS

CHAPTER 1 NUCLEAR SITES: DECOMMISSIONING AND CLEAN-UP Funded decommissioning programmes 45 Duty to submit a funded decommissioning programme (1) This section applies where, on or after the day on which this section comes into force, a person applies for a nuclear site licence in respect of a site to which subsection (2) applies. (2) This subsection applies to— (a)




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a site on which the person intends to construct a nuclear installation for a purpose for which a licence under section 6(1)(a) of the Electricity Act 1989 (c. 29) or Article 10(1)(a) of the Electricity (Northern Ireland) Order 1992 (S.I. 1992/231 (N.I.))(generating licences) is required, and (b) a site to which this section previously applied by virtue of paragraph (a) and on which the person intends to operate a nuclear installation which was constructed for such a purpose. (3) The person must— (a) give written notice of the application to the Secretary of State, and (b) prepare and submit to the Secretary of State a funded decommissioning programme. (4) A funded decommissioning programme is a programme which— (a) makes provision for the technical matters, and (b) specifies how the implementation of that provision, so far as it relates to the designated technical matters, is to be financed. (5) The technical matters, in relation to a site, are— (a) the treatment, storage, transportation and disposal of hazardous material (within the meaning of section 37 of the Energy Act 2004 (c. 20)) during the operation of a nuclear installation on the site, (b) the decommissioning of any relevant nuclear installation and the cleaning-up of the site, and (c) activities preparatory to the matters mentioned in paragraph (b); and for the purposes of paragraph (a) a nuclear installation is not to be regarded as being operated at a time when it is being decommissioned. (6) The designated technical matters, in relation to a site, are— (a) such of the matters within subsection (5)(a) or (c) as are specified by the Secretary of State by order, and (b) the matters within subsection (5)(b). (7) The funded decommissioning programme must, in particular, contain— (a) details of the steps to be taken under the programme in relation to the technical matters, (b) estimates of the costs likely to be incurred in connection with the designated technical matters, and (c) details of any security to be provided in connection with those costs. (8) A person who submits a programme must pay to the Secretary of State such fee as may be determined in accordance with regulations under section 54, in respect of the costs mentioned in subsection (9), at a time determined in accordance with such regulations. (9)




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The costs are those incurred by the Secretary of State in relation to the consideration of the programme, including, in particular, the costs of obtaining advice in relation to— (a) the programme, or (b) information required in relation to the programme in accordance with section 52(4). 46 Approval of a programme (1) The Secretary of State may approve or reject a funded decommissioning programme submitted under section 45 in respect of a site. (2) The Secretary of State may approve a programme— (a) with or without modifications, and (b) unconditionally or subject to conditions. (3) A modification under subsection (2) may, in particular, impose obligations, or additional obligations, on a body corporate associated with the person who submitted the programme. (4) The Secretary of State's powers under subsections (1) to (3) must be exercised with the aim of securing that prudent provision is made for the technical matters (including the financing of the designated technical matters). (5) Before deciding whether to approve or reject a programme, the Secretary of State must consult each interested body about— (a) the programme, and (b) any modification which it is proposed to make, or any condition it is proposed to impose, so far as it relates to a function conferred on the interested body by or under an enactment. (6) “Interested body” means— (a) the Health and Safety Executive, (b) in relation to a funded decommissioning programme for a site in England and Wales, the Environment Agency, and (c) in relation to a funded decommissioning programme for a site in Northern Ireland, the Department of the Environment for Northern Ireland. (7) Before approving a programme with modifications or subject to conditions, the Secretary of State must give the following persons an opportunity to make written representations about the proposed modifications or conditions— (a) the site operator; (b) any other person with obligations under the programme; (c) in the case of proposed modifications, any person who would have such obligations were the modifications made.




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(8) The Secretary of State may not reject a programme without informing the site operator of the reasons for doing so. (9) The Secretary of State must act without unreasonable delay in reaching a decision as to whether to approve or reject a programme. (10) Where a nuclear site licence has been applied for, but not yet granted, in respect of a site, references in this section to the site operator include references to the person who has applied for a nuclear site licence in respect of the site. 47 Prohibition on use of site in absence of approved programme (1) This section applies where a person is required to submit a programme under section 45 by reason of an application made for a nuclear site licence in respect of a site. (2) It is an offence for the person to use or permit another person to use the site, by virtue of the licence, at a time when there is no programme submitted in accordance with that requirement and approved under section 46. (3) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. Modification of approved programmes 48 Modification of approved programme (1) Where the Secretary of State has approved a funded decommissioning programme in respect of a site, a person mentioned in subsection (2) may— (a) propose a modification of the programme, or (b) propose a modification of the conditions to which the approval of the programme is subject. (2) Those persons are— (a) the Secretary of State, (b) the site operator, and (c) any other person who has obligations under the programme (provided that the site operator consents to the proposed modification). (3) A proposal under subsection (1) may, in particular, propose— (a) that obligations, or additional obligations, be imposed on a body corporate associated with the site operator, or (b) the removal of obligations imposed on a body corporate which is or was so associated.




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(4) In subsection (1)(b) “modification of the conditions” includes the imposition of conditions where the programme was approved unconditionally. 49 Procedure for modifying approved programme (1) This section applies in relation to a proposal for the modification of an approved funded decommissioning programme, or of the conditions, under section 48 (but is subject to regulations under section 50). (2) The proposal must be made by notice in writing given— (a) if the proposal is made by the Secretary of State, to the site operator, and (b) in any other case, to the Secretary of State. (3) Where a proposal is made, the site operator must pay to the Secretary of State such fee as may be determined in accordance with regulations under section 54, in respect of the costs mentioned in subsection (4), at a time determined in accordance with such regulations. (4) The costs are those incurred by the Secretary of State in relation to the consideration of the proposal, including, in particular, the costs of obtaining advice in relation to— (a) the proposal, or (b) information required in relation to the proposal in accordance with section 52(4). (5) Where the Secretary of State makes the proposal, the following persons must be given the opportunity to make written representations about the proposal— (a) the site operator; (b) any other person with obligations under the programme; (c) any person who would have such obligations if the proposed modification were made. (6) The Secretary of State must— (a) decide whether the proposed modification is to be made, and (b) give notice of the decision, and the reasons for it, to every person who has obligations under the approved funded decommissioning programme, and (c) if the decision is to make the modification, give such notice to any other person who will have such obligations by reason of the modification. (7) The Secretary of State's power under subsection (6)(a) must be exercised with the aim of securing that prudent provision is made for the technical matters (including the financing of the designated technical matters). (8) Before deciding whether the proposed modification is to be made, the Secretary of State must consult each interested body (within the meaning of section 46(6)) in so far as the modification relates to a function conferred on the interested body by or under an enactment.




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50 Power to disapply section 49 (1) The Secretary of State may make regulations disapplying section 49 in relation to modifications which— (a) are proposed by a person within section 48(2)(other than the Secretary of State), and (b) are of a description specified by the regulations. (2) Before making regulations under subsection (1), the Secretary of State must consult— (a) the Health and Safety Executive, (b) the Environment Agency, and (c) the Department of the Environment for Northern Ireland, in so far as the regulations relate to a function conferred on the body by or under an enactment. (3) The regulations may, in particular— (a) describe a modification by reference to its financial consequences; (b) specify that, in determining whether a modification is of a specified description or not, the cumulative financial effect of all modifications, or all modifications of a specified class, within a specified period is to be taken into account. (4) In the case of a modification to which the regulations apply, the site operator must give notice of the modification to the Secretary of State in such manner as may be specified in the regulations. 51 Time when modification takes effect (1) This section applies where, in the case of an approved funded decommissioning programme, a modification is made of the programme or of the conditions to which its approval is subject. (2) The modification does not take effect until the relevant time, and from that time this Chapter has effect— (a) in the case of a modification of the programme, as if the programme had been approved by the Secretary of State under section 46 in the modified form; (b) in the case of a modification of the conditions to which the approval of the programme is subject, as if the Secretary of State had approved the programme under that section subject to the modified conditions. (3) “The relevant time” means— (a) in the case of a modification to which section 49 applies, the time specified in the notice given under section 49(6)(b) of the Secretary of State's decision that the modification is to be made, and (b) in the case of a modification to which regulations under section 50 apply, the time specified in the notice of the modification given to the Secretary of State in accordance with section 50(4).




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(4) The time specified in a notice, as mentioned in subsection (3)(a) or (b), must not be earlier than the time the notice is given. Information 52 Provision of information and documents (1) This section applies where either Condition A or Condition B is satisfied. (2) Condition A is that a funded decommissioning programme has been submitted to the Secretary of State under section 45 and the Secretary of State has not yet decided whether to approve or reject it. (3) Condition B is that— (a) a modification of a programme, or of the conditions subject to which a programme is approved, has been proposed in accordance with section 48, (b) the modification is not one to which regulations under section 50(1) apply, and (c) the Secretary of State has not yet decided whether the modification should be made. (4) The Secretary of State may by notice in writing require a person within subsection (5)— (a) to produce documents, or documents of a description, specified in the notice, or (b) to provide information, or information of a description, specified in the notice. (5) Those persons are— (a) the site operator; (b) any other person with obligations under the programme; (c) in a case where Condition A is satisfied, any body corporate associated with the site operator and in relation to which the Secretary of State is considering making a modification under section 46 which, if made, would result in the body corporate having obligations under the programme; (d) in a case where Condition B is satisfied, any person who would have such obligations if the proposed modification were made. (6) A notice under subsection (4)— (a) must specify the period within which the documents or information are to be provided or produced; (b) may, in the case of information, require it to be provided in a manner or form specified in the notice. (7) This section applies only to information and documents the provision or production of which the Secretary of State considers necessary for the purpose of making the decision referred to in subsection (2) or (3).




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(8) If at any time it appears to the Secretary of State that a person has failed to comply with a notice under subsection (4), the Secretary of State may make an application to the High Court under this section. (9) If, on an application under this section, the High Court decides that the person has failed to comply with the notice, it may order the person to take such steps as it directs for securing that the notice is complied with. (10) Where a nuclear site licence has been applied for, but not yet granted, in respect of a site, references in this section to the site operator include references to the person who has applied for a nuclear site licence in respect of the site. 53 Power to review operation of programme (1) This section applies where a funded decommissioning programme has been approved by the Secretary of State in relation to a site under section 46. (2) The Secretary of State may by notice in writing require information relating to the operation of the programme from— (a) the site operator; (b) any other person who has obligations under the programme. (3) A notice under subsection (2) may be given only for the purpose of enabling the Secretary of State to determine— (a) whether the programme is being complied with; (b) whether it will be possible for obligations under the programme arising at a future date to be complied with; (c) whether the programme makes prudent provision for the technical matters (including the financing of the designated technical matters). (4) Subsection (5) applies if the Secretary of State has reason to believe (whether as a result of information obtained under this section or otherwise)— (a) that the programme is not being complied with, (b) that it will not be possible for an obligation under the programme arising at a future date to be complied with, or (c) that the programme does not make prudent provision for the matters mentioned in subsection (3)(c). (5) The Secretary of State may by notice in writing require information from— (a) the site operator, (b) any other person who has obligations under the programme, or (c)




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any body corporate associated with the site operator, for the purpose of enabling the Secretary of State to determine whether to make a proposal, or the nature of any proposal to be made, under section 48 in respect of the programme. (6) Where a notice under subsection (2) or (5) has been given, the Secretary of State may require the site operator to pay to the Secretary of State such fee in respect of costs incurred by the Secretary of State in obtaining advice in relation to the information as may be determined in accordance with regulations under section 54. (7) A fee under subsection (6) must be paid at a time determined in accordance with regulations under section 54. (8) If at any time it appears to the Secretary of State that a person has failed to comply with a notice under subsection (2) or (5), the Secretary of State may make an application to the High Court under this section. (9) If, on an application under this section, the High Court decides that the person has failed to comply with the notice, it may order the person to take such steps as it directs for securing that the notice is complied with. Regulations and guidance 54 Nuclear decommissioning: regulations and guidance (1) The Secretary of State may make regulations about— (a) the preparation, content and implementation of funded decommissioning programmes, (b) the modification of funded decommissioning programmes under sections 48 to 51, and (c) the modification, under those sections, of the conditions subject to which funded decommissioning programmes are approved. (2) Regulations under this section may, in particular, make provision— (a) about the technical matters in relation to sites to which section 45(2) applies; (b) about the estimation of the costs likely to be incurred in connection with the designated technical matters in relation to such sites, and about the manner in which such estimates are to be verified (which may include provision requiring verification by an independent third party); (c) about the financing of those designated technical matters, including the security to be provided for the performance of obligations imposed in respect of those matters by virtue of programmes and the establishment and maintenance, for the purposes of such security, of trusts or other arrangements to hold and accumulate funds; (d) about payments to a site operator or another person from funds so held or accumulated; (e) for information prescribed, or of a description prescribed, by the regulations to be supplied to the Secretary of State by persons with obligations under programmes at such intervals, or on such occasions, as may be so prescribed; (f)




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enabling the Secretary of State to charge a fee to a site operator in order to recover the costs of obtaining advice in relation to information supplied in accordance with regulations under paragraph (e); (g) about how fees payable under this Chapter are to be determined; (h) about when fees payable under this Chapter are to be paid. (3) Regulations under this section may include provision making it an offence to contravene specified provisions of the regulations. (4) Where regulations under subsection (3) create an offence, they must also make provision as to the mode of trial and punishment of offences; but— (a) any provision as to punishment on summary conviction must not authorise a fine exceeding the statutory maximum or imprisonment, and (b) any provision as to punishment on conviction on indictment must not authorise imprisonment for a term exceeding 2 years. (5) The Secretary of State may publish guidance about the preparation, content, modification and implementation of funded decommissioning programmes (including any matter mentioned in subsection (2)(a) to (e)). (6) The Secretary of State must publish guidance about factors which it may be appropriate to consider in deciding whether or not— (a) to approve a programme, (b) to approve a programme with modifications or subject to conditions, or (c) to make a proposed modification to a programme or the conditions subject to which it is approved. (7) When making a decision of a kind mentioned in subsection (6), the Secretary of State must have regard to the guidance for the time being in force under this section. (8) Before making regulations or publishing guidance under this section, the Secretary of State must consult— (a) the Health and Safety Executive, (b) the Environment Agency, and (c) the Department of the Environment in Northern Ireland, in so far as the regulations or guidance relate to functions conferred on them by or under an enactment. (9) Subsection (8) may be satisfied by consultation before, as well as by consultation after, the commencement of this section or the passing of this Act. (10) The Secretary of State must lay before Parliament a copy of any guidance published under this section.




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(11) Guidance under this section may make different provision for different cases or circumstances. 55 Funded decommissioning programmes: verification of financial matters (1) Regulations under section 54 may make provision enabling the Secretary of State to rely, in specified circumstances, on verification of financial matters by an independent third party. (2) Regulations may, in particular, provide that for the purposes of the Secretary of State's functions under this Chapter, the Secretary of State may— (a) rely on estimates of costs verified by an independent third party in accordance with the regulations; (b) rely on an independent third party's assessment of the prudence or otherwise of any provision made for the financing of the designated technical matters. Protection of decommissioning funds 56 Protection of security under approved programme (1) This section applies where, in relation to a site to which section 45 applies, any security for the performance of obligations relating to the designated technical matters has been provided by a person ( “the security provider”) by way of a trust or other arrangements, in accordance with an approved funded decommissioning programme. (2) In this section a reference to “the protected assets” is a reference to the security and any property or rights in which it consists. (3) In this section “security” includes— (a) a charge over a bank account or any other asset; (b) a deposit of money; (c) a performance bond or guarantee; (d) an insurance policy; (e) a letter of credit. (4) The manner in which, and purposes for which, the protected assets are to be applied and enforceable (whether in the event of the security provider's insolvency or otherwise) is to be determined in accordance with the trust or other arrangements. (5) For the purposes of subsection (4), no regard is to be had to so much of the Insolvency Act 1986 (c. 45), the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) or any other enactment or rule of law as, in its operation in relation to the security provider or any conduct of the security provider, would— (a) prevent or restrict the protected assets from being applied in accordance with the trust or other arrangement, or (b)




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prevent or restrict their enforcement for the purposes of being so applied. Enforcement 57 Offence to fail to comply with approved programme (1) It is an offence for a site operator or a body corporate associated with a site operator (a “relevant person”) to fail to comply with an obligation imposed on the relevant person by an approved funded decommissioning programme in respect of the site. (2) In proceedings against a person for an offence under this section, it is a defence for the person to prove that due diligence was exercised to avoid committing the offence. (3) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. 58 Secretary of State's power of direction (1) This section applies where— (a) a person fails to comply with an obligation imposed on the person by an approved funded decommissioning programme, or (b) a person on whom obligations are imposed by such a programme has engaged in unlawful conduct which the Secretary of State thinks may affect the programme. (2) In this section— “the defaulter” means a person to whom subsection (1)(a) or (b) applies, and “unlawful conduct” means conduct which is unlawful under the criminal law of a part of the United Kingdom. (3) A person has engaged in unlawful conduct for the purposes of subsection (1) if— (a) the person has been found guilty of the unlawful conduct by a court in a part of the United Kingdom, (b) the period for an appeal against the conviction has expired, and (c) if an appeal has been made, it has been withdrawn or finally determined. (4) The Secretary of State may direct the defaulter to take steps which the Secretary of State considers necessary or appropriate to comply with the obligation or remedy the effects of the unlawful conduct. (5) Before giving a direction under subsection (4), the Secretary of State must consult each interested body (within the meaning of section 46(6)) in so far as the direction relates to a function conferred on the interested body by or under an enactment. (6)




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If at any time it appears to the Secretary of State that the defaulter has failed to comply with a direction under subsection (4), the Secretary of State may make an application to the High Court under this section. (7) If, on an application under this section, the High Court decides that the defaulter has failed to comply with the direction, it may order the defaulter to take such steps as it directs for securing that the direction is complied with. 59 Offence of further disclosure of information (1) A person who discloses information obtained by virtue of a notice under section 52(4) or 53(2) or (5), or regulations under section 54(2)(e), is guilty of an offence unless the disclosure is permitted by this section. (2) The disclosure is permitted if— (a) it is made with the consent of the person by or on behalf of whom the information was provided; (b) it is made under section 63 or for the purposes of any other function of the Secretary of State under this Chapter; (c) it is a disclosure of information obtained under section 63 by the Health and Safety Executive and it is made by the Executive for the purposes of its functions under the Nuclear Installations Act 1965 (c. 57); (d) it is a disclosure of information obtained under that section by the Environment Agency or the Department of the Environment for Northern Ireland and it is made by the Agency or Department for the purposes of its functions under the Radioactive Substances Act 1993 (c. 12); (e) it is required by or under an enactment. (3) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum; (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. 60 Offence of supplying false information (1) It is an offence for a person, knowingly or recklessly, to supply information which is false or misleading in a material respect to the Secretary of State in response to a requirement under this Chapter. (2) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. 61 Restriction on prosecutions under this Chapter




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No proceedings for an offence under this Chapter (including an offence created by regulations under section 54) may be instituted except by the Secretary of State or— (a) in England and Wales, the Director of Public Prosecutions, or (b) in Northern Ireland, the Director of Public Prosecutions for Northern Ireland. Miscellaneous 62 Power to apply this Chapter to other nuclear installations (1) The Secretary of State may, by order, modify section 45 so that it also applies where, on or after the day on which the order comes into force, a person applies for a nuclear site licence in respect of a site of a description specified in the order. (2) The sites which fall within a description specified under subsection (1) must be— (a) sites on which the person intends to construct a nuclear installation for a purpose connected with the generation of electricity, or (b) sites in respect of which an obligation has previously arisen under section 45 by virtue of paragraph (a) and on which the person intends to operate a nuclear installation which was constructed for such a purpose. 63 Co-operation with other public bodies (1) The Secretary of State may require a body within subsection (2) to provide the Secretary of State with such assistance as that body is reasonably able to give in connection with the performance by the Secretary of State of a function under this Chapter. (2) Those bodies are— (a) the Health and Safety Executive; (b) the Environment Agency; (c) the Department of the Environment for Northern Ireland. (3) A body within subsection (2) may provide information to the Secretary of State if— (a) the information relates to a person within subsection (5), and (b) the Secretary of State or the body thinks that the information is relevant to a function of the Secretary of State under this Chapter. (4) The Secretary of State may provide information to a body within subsection (2) if— (a) the information relates to a person within subsection (5), and (b) the Secretary of State or the body thinks that the information is relevant to a function of the body in relation to the programme. (5) The persons are—




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(a) a site operator, or another person, who has obligations under a funded decommissioning programme (whether or not the programme is approved), (b) a body corporate which is associated with a site operator who has submitted a funded decommissioning programme if— (i) the Secretary of State is considering making a modification under section 46 which, if made, would result in the body corporate having obligations under the programme, or (ii) a proposal under section 48 has been made for a modification which, if made, would result in the body corporate having obligations under the programme, or (c) in the case of subsection (3) only, a body corporate which is so associated and in relation to which the Secretary of State is considering whether to make a proposal of the kind mentioned in paragraph (b)(ii). (6) This section applies despite any statutory or other restriction on the disclosure of information. (7) Where a nuclear site licence has been applied for, but not yet granted, in respect of a site, references in this section to the site operator include references to the person who has applied for a nuclear site licence in respect of the site. 64 Continuity of obligations (1) This section applies where a person ( “the former site operator”) ceases to hold a nuclear site licence in respect of a site. (2) This Chapter continues to apply to the former site operator as if it were the site operator in relation to the site. (3) But the Secretary of State may give notice to the former site operator releasing it from its obligations under— (a) this Chapter, and (b) an approved funded decommissioning programme in respect of the site. (4) A notice under subsection (3)— (a) may relate to all the former site operator's obligations or only to specified obligations; (b) may relate to the whole or part of a site; (c) may relate to all nuclear installations on a site or only to specified nuclear installations; (d) may be unconditional or subject to conditions. (5) The power conferred by subsection (3) applies in relation to any other person with obligations under a programme within subsection (3)(b) as it applies in relation to the site operator. (6) This section is without prejudice to the operation of this Chapter in relation to another person who applies for or is granted a nuclear site licence in respect of the site.




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65 Amendment of Nuclear Installations Act 1965 After section 1(3) of the Nuclear Installations Act 1965 (c. 57)(nuclear site licences) insert— "(4) Subsection (1) is subject to section 47 of the Energy Act 2008 (prohibition on use of site in absence of approved funded decommissioning programme)." 66 Disposal of hazardous material (1) Where the Secretary of State enters an agreement for, or in connection with, the disposal of relevant hazardous material by or on behalf of the Secretary of State, the agreement may provide for a fee to be paid to the Secretary of State. (2) The Secretary of State may not enter an agreement which provides for the payment of a fee unless the consent of the Treasury has been obtained in relation to the amount of the proposed fee. (3) The fee for which such an agreement provides may include— (a) such amount as the Secretary of State considers prudent by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred in connection with the Secretary of State's obligations under the agreement in relation to the relevant hazardous material; (b) an amount in respect of such proportion as the Secretary of State considers appropriate of the aggregate of— (i) the relevant expenditure which has been, will or may be, incurred in connection with the design and construction of a repository in which material (including any hazardous material to which the agreement relates) is to be disposed of, and (ii) such amount as the Secretary of State considers it prudent to make allowance for by reason of any uncertainty which exists about the relevant expenditure which will or may be incurred as mentioned in sub-paragraph (i). (4) In this section— “hazardous material” has the meaning given by section 37 of the Energy Act 2004 (c. 20); “relevant expenditure” means expenditure incurred by the Secretary of State, the Nuclear Decommissioning Authority or any other person; “relevant hazardous material” means hazardous material which is, or is required to be, the subject of a funded decommissioning programme. General 67 Meaning of “associated” (1) For the purposes of this Chapter, one body corporate is associated with another if one of them has a significant interest in the other or a third body corporate has a significant interest in both of them; and subsections (2) to (5) set out the circumstances in which one body corporate ( “A”) has a significant interest in another ( “B”). (2) Where B is a company, A has a significant interest in B if A possesses or is entitled to acquire— (a)




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20% or more of the issued share capital of B, (b) such rights as would entitle A to exercise 20% or more of the votes exercisable in general meetings of B, (c) such part of the issued share capital of B as would entitle A to 20% or more of the amount distributed if the whole of the income of B were in fact distributed among the shareholders, or (d) such rights as would, in the event of the winding up of B or in any other circumstances, entitle it to receive 20% or more of the assets of B which would then be available for distribution among the shareholders. (3) Where B is a limited liability partnership, A has a significant interest in B if A— (a) holds 20% or more of the voting rights in B, (b) is a member of B and has a right to appoint or remove 20% or more of other members, or (c) is a member of B and controls alone, or pursuant to an agreement with other members, 20% or more of the voting rights in B. (4) In subsection (3)(a) and (c) the references to “voting rights” are to the rights conferred on members in respect of their interest in a limited liability partnership to vote on those matters which are to be decided on by a vote of the members of the limited liability partnership. (5) In any case, A has a significant interest in B if A has the power, directly or indirectly, to secure that the affairs of B are conducted in accordance with A's wishes. (6) In determining whether, by virtue of this section, A has a significant interest in B, A shall be taken to possess— (a) any rights and powers possessed by a person as nominee for A, and (b) any rights and powers possessed by a body corporate which A controls (including rights and powers which such a body corporate would be taken to possess by virtue of this paragraph). (7) In order to determine whether one body corporate controls another for the purposes of subsection (6)(b), subsections (2) to (5) and (6)(a) are to be applied, but as if— (a) for “has a significant interest in” in each place there were substituted "controls", and (b) for “20%” in each place there were substituted "50%". 68 Interpretation In this Chapter— “approved funded decommissioning programme” means a funded decommissioning programme approved under section 46; “cleaning-up” and “decommissioning”, in relation to a site or installation, include the treatment, storage, transportation and disposal of hazardous material (within the meaning of section 37 of the Energy Act 2004) and of other matter and substances that need to be dealt with or removed in or towards making the site or installation suitable to be used for other purposes; “the designated technical matters” has the meaning given by section 45; “document” includes anything in which information is recorded in any form;




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“enactment” includes an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament or Northern Ireland legislation; “funded decommissioning programme” is to be construed in accordance with section 45; “nuclear installation” has the meaning given by section 26 of the Nuclear Installations Act 1965 (c. 57); “nuclear site licence” has the meaning given by that section; “relevant nuclear installation”, in relation to a site, means a nuclear installation which is or is intended to be established on the site; “site operator” means a person who holds a nuclear site licence in respect of a site; “the technical matters” has the meaning given by section 45. CHAPTER 2 OFFSHORE RENEWABLES INSTALLATIONS 69 Decommissioning notices relating to offshore renewable energy installations (1) The Energy Act 2004 (c. 20) is amended as follows. (2) In section 105(2)(notices), for “that person” substitute "— (a) a person falling within subsection (1)(a), (b) or (c), or (b) if a person to whom paragraph (a) applies is a body corporate, a body corporate associated with that person (subject to section 105A),". (3) In section 105(3)(consents) for the words from the beginning to “proposals—” substitute— "(3) Before requiring a person to submit a decommissioning programme in respect of proposals made by a person within paragraph (a) or (b) of subsection (1), the Secretary of State must be satisfied that at least one of the statutory consents required for giving effect to those proposals—". (4) After section 105 (requirement to prepare decommissioning programme) insert— "105A Section 105 notices: supplemental (1) The Secretary of State may not give a notice under section 105(2)(b) to a body corporate associated with a person ( “the responsible person”) within section 105(1)(a), (b) or (c) unless the Secretary of State— (a) has given a notice to the responsible person under section 105(2)(a), and (b) is not satisfied that adequate arrangements (including financial arrangements) have been made by the responsible person to ensure that a satisfactory decommissioning programme will be carried out. (2) Subsection (1) does not apply if— (a) there has been a failure to comply with a notice under section 105(2), or (b) the Secretary of State has rejected a programme submitted in compliance with such a notice. (3)




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For the purposes of this section and section 105, one body corporate is associated with another if one of them controls the other or a third body corporate controls both of them, and subsections (4) to (8) set out the circumstances in which one body corporate ( “A”) controls another ( “B”). (4) Where B is a company, A controls B if A possesses or is entitled to acquire— (a) one half or more of the issued share capital of B, (b) such rights as would entitle A to exercise one half or more of the votes exercisable in general meetings of B, (c) such part of the issued share capital of B as would entitle A to one half or more of the amount distributed if the whole of the income of B were in fact distributed among the shareholders, or (d) such rights as would, in the event of the winding up of B or in any other circumstances, entitle it to receive one half or more of the assets of B which would then be available for distribution among the shareholders. (5) Where B is a limited liability partnership, A controls B if A— (a) holds a majority of the voting rights in B, (b) is a member of B and has a right to appoint or remove a majority of other members, or (c) is a member of B and controls alone, or pursuant to an agreement with other members, a majority of the voting rights in B. (6) In subsection (5)(a) and (c) the references to “voting rights” are to the rights conferred on members in respect of their interest in a limited liability partnership to vote on those matters which are to be decided on by a vote of the members of the limited liability partnership. (7) In any case, A controls B if A has the power, directly or indirectly, to secure that the affairs of B are conducted in accordance with A's wishes. (8) In determining whether, by virtue of subsections (4) to (7), A controls B, A is to be taken to possess— (a) any rights and powers possessed by a person as nominee for it, and (b) any rights and powers possessed by a body corporate which it controls (including rights and powers which such a body corporate would be taken to possess by virtue of this paragraph)." (5) In section 108 (reviews of decommissioning programmes), after subsection (3) insert— "(3A) A proposal under subsection (3)(b) may, in particular, be made in relation to a body corporate associated with a person who has a duty under section 109(1)(and for this purpose “associated” is to be construed in accordance with section 105A(3) to (8))." 70 Security for decommissioning obligations (1) After section 110 of the Energy Act 2004 (c. 20)(failure to carry out decommissioning programme) insert— "110A




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Protection of funds held for purposes of decommissioning (1) This section applies where any security in relation to the carrying out of an approved decommissioning programme, or for compliance with the conditions of its approval, has been provided by a person ( “the security provider”) by way of a trust or other arrangements. (2) In this section a reference to “the protected assets” is a reference to the security and any property or rights in which it consists. (3) The manner in which, and purposes for which, the protected assets are to be applied and enforceable (whether in the event of the security provider's insolvency or otherwise) is to be determined in accordance with the trust or other arrangements. (4) For the purposes of subsection (3), no regard is to be had to so much of the Insolvency Act 1986, the Insolvency (Northern Ireland) Order 1989 or any other enactment or rule of law as, in its operation in relation to the security provider or any conduct of the security provider, would— (a) prevent or restrict the protected assets from being applied in accordance with the trust or other arrangement, or (b) prevent or restrict their enforcement for the purposes of being so applied. (5) In subsection (4) “enactment” includes an instrument made under an enactment. 110B Section 110A: supplemental (1) The Secretary of State may direct a security provider to publish specified information about the protected assets. (2) A direction under this section may specify— (a) the time when the information must be published, and (b) the manner of publication. (3) If a security provider fails to comply with a direction, the Secretary of State or a creditor of the security provider may make an application to the court under this section. (4) If, on an application under this section, the court decides that the security provider has failed to comply with the direction, it may order the security provider to take such steps as the court directs for securing that the direction is complied with. (5) In this section— “the protected assets” has the same meaning as in section 110A; “security provider” means a person who has provided security in relation to which that section applies. (6) In subsections (3) and (4) references to “the court” are references— (a) to the High Court, in relation to an application in England and Wales or Northern Ireland, or (b) to the Court of Session, in relation to an application in Scotland." (2)




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In section 114(2) of that Act (interpretation), in the definition of “security” after paragraph (c) insert— "(ca) an insurance policy;". 71 Provision of information to Secretary of State After section 112 of the Energy Act 2004 (c. 20)(duty to inform Secretary of State) insert— "112A Power of Secretary of State to require information and documents (1) The Secretary of State may by notice require a person within subsection (2) to provide the Secretary of State with such relevant information or documents as the Secretary of State may require in connection with the exercise of functions under this Chapter. (2) Those persons are— (a) a person who has been, or may be, given a notice under section 105(2)(a) in relation to a relevant object, (b) where a person falling within paragraph (a) is a body corporate, a body corporate associated with that person, (c) a person not within paragraph (a) or (b) who by virtue of provision made under section 108(3)(b) is subject to the duty under section 109(1) in relation to a decommissioning programme relating to a relevant object. (3) Information or a document is “relevant” if it relates to— (a) the place where the relevant object is or is to be situated, (b) the relevant object, (c) where the recipient of the notice is a body corporate falling within subsection (2)(c) or section 105(2)(a), details of an associated body corporate, (d) the financial affairs of the recipient of the notice or, where the recipient is a body corporate falling within subsection (2)(c) or section 105(1)(a), (b) or (c), an associated body corporate, (e) the security that the recipient proposes to provide in relation to the carrying out of a decommissioning programme relating to the relevant object or for the recipient's compliance with any conditions of the programme's approval, or (f) where the recipient of the notice ( “R”) is a body corporate falling within subsection (2)(c) or section 105(1)(a), (b) or (c), the name or address of any person whom R believes to be an associated body corporate. (4) But if a notice under subsection (1) requires information in connection with a function of the Secretary of State under section 107(1) or (4), the notice may require the provision of information or documents which the Secretary of State considers are necessary or expedient for the purpose of exercising those functions (whether or not they are of a kind specified in subsection (3)). (5) A notice under subsection (1) must specify the documents or information, or the description of documents or information, to which it relates.




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(6) Information or documents required to be provided under this section must be provided within such period as is specified in the notice under subsection (1). (7) In this section, “associated”, in relation to a body corporate, is to be construed in accordance with section 105A(3) to (8). (8) A person who fails, without reasonable excuse, to comply with a notice under subsection (1) is guilty of an offence. (9) A person who discloses information obtained by virtue of a notice under this section is guilty of an offence unless the disclosure— (a) is made with the consent of the person by or on behalf of whom the information was provided, (b) is for the purpose of the exercise of the Secretary of State's functions under this Chapter, the Electricity Act 1989 or Part 4 of the Petroleum Act 1998, or (c) is required by or under an enactment." CHAPTER 3 OIL AND GAS INSTALLATIONS 72 Persons who may be required to submit abandonment programmes (1) Section 30 of the Petroleum Act 1998 (c. 17)(persons who may be required to submit programmes) is amended as follows. (2) In subsection (1)— (a) after paragraph (b) insert— "(ba) a person to whom subsection (5)(a) and (b) applied in relation to the installation, but who— (i) transferred the right mentioned in that subsection to another person, and (ii) has not obtained a consent required under the licence in relation to the transfer;", and (b) in paragraph (e) for “company” in each place substitute "body corporate". (3) In subsection (2)(c) for “company” in each place substitute "body corporate". (4) For subsection (5)(b) substitute— "(b) either— (i) any activity mentioned in subsection (6) is carried on from, by means of or on the installation, or (ii) the person intends to carry on an activity mentioned in that subsection from, by means of or on the installation,". (5) For subsection (8) substitute— "(8)




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For the purposes of this section, one body corporate is associated with another if one of them controls the other or a third body corporate controls both of them; and subsections (8A) to (8D) set out the circumstances in which one body corporate ( “A”) controls another ( “B”). (8A) Where B is a company, A controls B if A possesses or is entitled to acquire— (a) one half or more of the issued share capital of B, (b) such rights as would entitle A to exercise one half or more of the votes exercisable in general meetings of B, (c) such part of the issued share capital of B as would entitle A to one half or more of the amount distributed if the whole of the income of B were in fact distributed among the shareholders, or (d) such rights as would, in the event of the winding up of B or in any other circumstances, entitle it to receive one half or more of the assets of B which would then be available for distribution among the shareholders. (8B) Where B is a limited liability partnership, A controls B if A— (a) holds a majority of the voting rights in B, (b) is a member of B and has a right to appoint or remove a majority of other members, or (c) is a member of B and controls alone, or pursuant to an agreement with other members, a majority of the voting rights in B. (8C) In subsection (8B)(a) and (c) the references to “voting rights” are to the rights conferred on members in respect of their interest in a limited liability partnership to vote on those matters which are to be decided on by a vote of the members of the limited liability partnership. (8D) In any case, A controls B if A has the power, directly or indirectly, to secure that the affairs of B are conducted in accordance with A's wishes." (6) In subsection (9)— (a) for “subsection (8)” substitute "subsections (8) to (8D)", and (b) for “company” in each place substitute "body corporate". (7) In section 31 of that Act (notices: supplementary provision), before subsection (1) insert— "(A1) The Secretary of State may not give a notice under section 29(1) in relation to an offshore installation to a person ( “P”) who, in relation to the installation, falls within paragraph (b) or (c) of section 30(1), if— (a) P is not entitled to derive, and never has been entitled to derive, any financial or other benefit from any activity within section 30(6)— (i) which has been or is carried on (or is intended to be carried on) from, by means of or on the installation, and (ii) is an activity to which subsection (B1) applies, and




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(b) P is not, and never has been, a person within section 30(1)(a), (ba), (d) or (e) in relation to the installation. (B1) This subsection applies to an activity if— (a) where the activity is the exploitation or exploration of mineral resources, it relates to an oil field for which the installation is or is to be established or maintained; (b) where the activity is the conveyance of minerals, the minerals are got, or to be got, from such an oil field; (c) where the activity is the unloading, storage or recovery of gas, it relates to a controlled place (within the meaning of Chapter 2 or 3 of Part 1 of the Energy Act 2008) for which the installation is or is to be established or maintained; (d) where the activity is the conveyance of gas being stored or recovered, the storage or recovery of the gas relates to such a controlled place; (e) where the activity is within section 30(6)(c)— (i) the installation is in an oil field in respect of which P has an interest, or (ii) the installation is in a controlled place in respect of which P has a licence under Part 1 of the Energy Act 2008. (C1) For the purposes of subsection (B1)— (a) “oil field” means an area which the appropriate authority (within the meaning of paragraph 1(2) of Schedule 1 to the Oil Taxation Act 1975) has determined to be an oil field for the purposes of Part 1 of that Act, (b) P has an interest in an oil field if P is entitled to derive, or has at any time been entitled to derive, any financial or other benefit from activities within section 30(6)(other than paragraph (c)) carried on in the field. (D1) The Secretary of State may not give a notice under section 29(1) in relation to an offshore installation to a body corporate if— (a) the body corporate falls within paragraph (e) of section 30(1)(and no other paragraph of that section), and (b) the body corporate falls within that paragraph by reason only that it is associated (within the meaning given by section 30(8)) with a person to whom the Secretary of State may not give a notice in relation to the installation by virtue of subsection (A1)." (8) In section 34 of that Act (revision of programmes), after subsection (3) insert— "(3A) A proposal that a person who is or has been within paragraph (b) or (c) of section 30(1) is to have a duty to secure that a programme is carried out may not be made if the Secretary of State would be prevented from giving a notice under section 29(1) to the person by virtue of section 31(A1) if the programme had not already been approved under this section."




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73 Financial resources etc (1) Section 38 of the Petroleum Act 1998 (c. 17)(information and notices) is amended as follows. (2) For subsection (1) substitute— "(1) The Secretary of State may, for a purpose specified in subsection (1A), give a notice to a person within subsection (1B) requiring the person, within a time specified in the notice— (a) to provide specified information relating to the person's financial affairs; (b) to supply copies of specified documents, or documents of a specified description, relating to those affairs. (1A) Those purposes are— (a) determining whether to give a notice under section 29 to a person in respect of an installation or pipeline; (b) determining whether to make a proposal under section 34(1) to impose a duty on a person under section 36; (c) where a person has made such a proposal, determining whether to impose the duty on the person proposed. (1B) A person falls within this subsection if— (a) a notice under section 29(1) may be given to the person, (b) the person falls within section 34(2)(a) or (b) and the Secretary of State is considering proposing, in accordance with section 34(1)(b), that the person should have a duty under section 36, or (c) the person falls within section 34(2)(a) or (b) and the Secretary of State is considering whether to impose a duty on the person under section 36 in accordance with a proposal made under section 34(1)(b)." (3) In subsection (2)— (a) for the words from “who has” to “that duty” substitute "falling within subsection (2A) will be capable of carrying out any abandonment programme which has been submitted (whether or not it is approved) or may be submitted in relation to an installation or pipeline", and (b) in paragraph (a) after “information” insert "(which may relate to the estimated costs of abandonment of the installation or pipeline or to any other financial or other matter)". (4) After that subsection insert— "(2A) A person falls within this subsection if— (a) a notice under section 29(1) has been given to the person, or (b) the person has a duty under section 36 to secure that an abandonment programme is carried out."




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(5) For subsection (4) substitute— "(4) The Secretary of State may, after consulting the Treasury, give written notice to a person to whom subsection (4A) applies, requiring the person to take such action as may be specified in the notice within such time as may be so specified. (4A) This subsection applies to a person if— (a) the person falls within subsection (2A), and (b) the Secretary of State is not satisfied that the person will be capable of carrying out any duty which has been, or is likely to be, imposed on the person by section 36." (6) After subsection (6) add— "(7) It is an offence for a person to disclose information obtained by virtue of a notice under subsection (1) or (2) unless the disclosure— (a) is made with the consent of the person by or on behalf of whom the information was provided, (b) is for the purpose of the exercise of the Secretary of State's functions under this Part, Chapter 3 of Part 2 of the Energy Act 2004 or Part 1 of the Energy Act 2008, or (c) is required by or under an enactment." 74 Protection of abandonment funds from creditors (1) After section 38 of the Petroleum Act 1998 (c. 17) insert— "38A Protection of funds set aside for the purposes of abandonment programme (1) This section applies where any security for the performance of obligations under an approved abandonment programme has been provided by a person ( “the security provider”) by way of a trust or other arrangements. (2) Subsection (1) applies whether the security is provided before or after the programme is approved. (3) In this section a reference to “the protected assets” is a reference to the security and any property or rights in which it consists. (4) In this section “security” includes— (a) a charge over a bank account or any other asset; (b) a deposit of money; (c) a performance bond or guarantee; (d) an insurance policy; (e) a letter of credit.




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(5) The manner in which, and purposes for which, the protected assets are to be applied and enforceable (whether in the event of the security provider's insolvency or otherwise) is to be determined in accordance with the trust or other arrangements. (6) For the purposes of subsection (5), no regard is to be had to so much of the Insolvency Act 1986, the Insolvency (Northern Ireland) Order 1989 or any other enactment or rule of law as, in its operation in relation to the security provider or any conduct of the security provider, would— (a) prevent or restrict the protected assets from being applied in accordance with the trust or other arrangement, or (b) prevent or restrict their enforcement for the purposes of being so applied. (7) In subsection (6) “enactment” includes an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament or Northern Ireland legislation. 38B Directions to provide information about protected assets (1) The Secretary of State may direct a security provider to publish specified information about the protected assets. (2) A direction under this section may specify— (a) the time when the information must be published, and (b) the manner of publication. (3) If a security provider fails to comply with a direction, the Secretary of State, or a creditor of the security provider, may make an application to the court under this section. (4) If, on an application under this section, the court decides that the security provider has failed to comply with the direction, it may order the security provider to take such steps as the court directs for securing that the direction is complied with. (5) In this section— “court”— (a) in relation to an application in England and Wales or Northern Ireland, means the High Court, and (b) in relation to an application in Scotland, means the Court of Session; “security provider” means a person who has provided security in relation to which section 38A applies; “the protected assets”, in relation to a security provider, means the security, and any property or rights in which it consists." (2) This section has effect in relation to a trust or other arrangements established on or after 1st December 2007. CHAPTER 4 WELLS 75 Information about decommissioning of wells (1)




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In Part 5 of the Petroleum Act 1998 (c. 17), before section 46 (Northern Ireland and Isle of Man shares of petroleum revenue) insert— "45A Abandoned wells (1) This section applies in relation to a person who has drilled, or commenced drilling, a well in pursuance of a petroleum licence or a licence under section 4 of the Energy Act 2008 (gas storage and unloading licences). (2) The Secretary of State may give a notice requiring the person— (a) to provide specified information relating to the person's financial affairs, or (b) to supply copies of specified documents, or documents of a specified description, relating to those affairs. (3) A notice under subsection (2) must specify the time within which the information or documents must be provided. (4) Subsection (5) applies if— (a) the person fails to provide information or documents required by such a notice within the period specified in the notice, or (b) on receiving information or documents required by a notice under subsection (2) the Secretary of State is not satisfied that the person will be capable of plugging and abandoning the well. (5) Where this subsection applies the Secretary of State may give the person a notice, after consulting the Treasury, requiring the person to take the action specified in the notice within the time so specified. (6) The Secretary of State may not give a notice to a person under subsection (5) without first giving the person an opportunity to make written representations as to whether the notice should be given. (7) It is an offence for a person to fail to comply with a notice under subsection (2) or (5) unless it is proved that the person exercised due diligence to avoid the failure. (8) A person guilty of an offence under this section is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, or (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. (9) Section 41 (other than subsection (5)) applies in relation to prosecutions for offences under this section as it applies in relation to prosecutions for offences under Part 4. (10) In this section— “petroleum licence” means a licence under section 2 of the Petroleum (Production) Act 1934 or section 3 above; “well” includes a borehole." (2)




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This section applies in relation to any well the drilling of which commences on or after the date on which this section comes into force.

PART 4 PROVISIONS RELATING TO OIL AND GAS

Petroleum licences 76 Transfers without the consent of the Secretary of State After section 5 of the Petroleum Act 1998 (c. 17)(existing licences) insert— "5A Rights transferred without the consent of Secretary of State (1) This section applies if— (a) a person is (or two or more persons are) the licensee in respect of a licence under section 2 of the Petroleum (Production) Act 1934 or section 3 above ( “the transferor”), (b) the transferor transfers a right granted by the licence, or derived from a right so granted, to another person ( “the transferee”) after commencement in circumstances where the consent of the Secretary of State is required for the transfer, and (c) that consent is not obtained. (2) The Secretary of State may, by notice given to the transferor and the transferee, direct that the right is to revert to the transferor from a date specified in the notice. (3) The date specified must not be earlier than the date on which the notice is given. (4) Before giving a notice to a person under subsection (2), the Secretary of State must— (a) notify the person of the proposal to give the notice, and (b) give the person a reasonable period within which to make written representations. (5) The Secretary of State may not give a notice under subsection (2) after the end of the period of 3 months beginning with the date on which the Secretary of State learns of the transfer. (6) In this section— “commencement” means the time when this section comes into force; “transfer” does not include a transfer by way of security for a loan. 5B Information (1) The Commissioners for Her Majesty's Revenue and Customs may disclose to the Secretary of State information relating to the transfer of a right granted by a licence under section 2 of the Petroleum (Production) Act 1934 or section 3 above, or derived from a right so granted, for the purpose of enabling the Secretary of State to determine whether a transfer to which section 5A applies has taken place. (2) This section applies despite any statutory or other restriction on the disclosure of information. (3) Information disclosed under this section must not be further disclosed except—




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(a) for the purpose mentioned in subsection (1), with the consent (which may be general or specific) of the Commissioners, (b) in pursuance of an order of a court, or (c) with the consent of each person to whom the information relates. (4) A person who discloses information contrary to subsection (3) commits an offence if the identity of the person to whom the information relates— (a) is specified in the disclosure, or (b) can be deduced from it. (5) It is a defence for a person charged with an offence under this section to prove that the person reasonably believed that— (a) the disclosure was lawful, or (b) the information had already and lawfully been made available to the public. (6) A person guilty of an offence under this section is liable— (a) on summary conviction, to imprisonment for a term not exceeding 12 months or to a fine not exceeding the statutory maximum, or both, and (b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine, or both. 5C Offences under section 5B: supplemental (1) No proceedings for an offence under section 5B may be instituted in England and Wales except— (a) by the Director of Revenue and Customs Prosecutions, or (b) with the consent of the Director of Public Prosecutions. (2) No proceedings for an offence under section 5B may be instituted in Northern Ireland except— (a) by the Commissioners for Her Majesty's Revenue and Customs, or (b) with the consent of the Director of Public Prosecutions for Northern Ireland. (3) In the application of section 5B to Northern Ireland the reference in section 5B(6)(a) to 12 months is to be read as a reference to 6 months. (4) In the application of section 5B to England and Wales in relation to an offence committed before the commencement of section 282 of the Criminal Justice Act 2003 (c. 44)(short sentences) the reference in section 5B(6)(a) to 12 months is to be read as a reference to 6 months." 77 Model clauses of petroleum licences




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(1) Schedule 3 amends the model clauses contained in the instruments specified in that Schedule. (2) Where a licence granted under the Petroleum (Production) Act 1934 (c. 36) or the Petroleum Act 1998 (c. 17), and in force immediately before commencement, incorporates model clauses amended by a paragraph of Schedule 3, the licence has effect with the amendments provided for by that paragraph of that Schedule. (3) The reference in subsection (2) to model clauses includes model clauses subject to any amendment or modification or with the omission of any model clause. (4) Where an amendment made by a paragraph of Schedule 3 confers a power to give a notice requiring the plugging and abandonment of a well, the power may not be exercised in relation to a well the drilling of which began before commencement. (5) Where an amendment made by a paragraph of Schedule 3 confers a power of revocation or partial revocation of a licence, that power may not be exercised by reason of an event which takes place before commencement. (6) A reference in any document to provisions of a licence which are amended by Schedule 3 is to be construed, unless the nature of the document or the context otherwise requires, as a reference to those provisions as amended. (7) A provision inserted in a licence by virtue of Schedule 3 may be altered or deleted by deed executed by the Secretary of State and the licensee or, as respects Scotland, by an instrument subscribed by the Secretary of State and the licensee in accordance with the Requirements of Writing (Scotland) Act 1995 (c. 7). (8) In this section “commencement”, in relation to a paragraph of Schedule 3, means the time when that paragraph comes into force. Third party access 78 Third party access to infrastructure (1) In section 66(1) of the Pipe-lines Act 1962 (c. 58)(interpretation)— (a) in the definition of “gas processing operation”, omit “and” after paragraph (b) and after paragraph (c) insert— "(d) separating, purifying, blending, odorising or compressing gas, for the purpose of— (i) converting it into a form in which a purchaser is willing to accept delivery from a seller, or (ii) enabling it to be loaded for conveyance to another place (whether inside or outside Great Britain); and (e) loading gas— (i) at a facility which carries out operations of a kind mentioned in paragraph (d), or (ii) piped from such a facility,




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for the purpose of enabling the gas to be conveyed to another place (whether inside or outside Great Britain);", (b) in the definition of “terminal”, omit “and” after paragraph (b) and after paragraph (c) insert "; and (d) oil processing facilities (within the meaning given by section 81(8) of the Energy Act 2008);", and (c) in the definition of “upstream petroleum pipe-line” after paragraph (c) insert— "including all apparatus, works and services associated with the operation of such a pipe-line or network." (2) In section 12 of the Gas Act 1995 (c. 45)(rights to use gas processing facilities)— (a) in subsection (6), in the definition of “gas processing operation”, omit “and” at the end of paragraph (b) and after paragraph (c) insert— "(d) separating, purifying, blending, odorising or compressing gas for the purpose of— (i) converting it into a form in which a purchaser is willing to accept delivery from a seller, or (ii) enabling it to be loaded for conveyance to another place (whether inside or outside Great Britain); and (e) loading gas— (i) at a facility which carries out operations of a kind mentioned in paragraph (d), or (ii) piped from such a facility, for the purpose of enabling the gas to be conveyed to another place (whether inside or outside Great Britain);", and (b) for subsection (7) substitute— "(7) For the purposes of this section “associate”, in relation to the owner of a gas processing facility, is to be construed in accordance with section 82 of the Energy Act 2008 (and for this purpose the reference in subsection (1) of that section to the owner of an oil processing facility is to be read as a reference to the owner of a gas processing facility)." (3) In section 26 of the Petroleum Act 1998 (c. 17)(meaning of “pipeline”)— (a) in subsection (1) for “any apparatus and works associated with such a pipe or system” substitute "all apparatus, works and services associated with the operation of such a pipe or system", and (b) omit subsection (2). (4) In section 28 of that Act (interpretation of Part 3)— (a) in the definition of “gas processing operation”, omit “and” after paragraph (b) and after paragraph (c) insert— "(d) separating, purifying, blending, odorising or compressing gas, for the purpose of— (i) converting it into a form in which a purchaser is willing to accept delivery from a seller, or




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(ii) enabling it to be loaded for conveyance to another place (whether inside or outside Great Britain); and (e) loading gas— (i) at a facility which carries out operations of a kind mentioned in paragraph (d), or (ii) piped from such a facility, for the purpose of enabling the gas to be conveyed to another place (whether inside or outside Great Britain);", (b) after the definition of “notice” insert— "“oil processing facility” means any facility in Great Britain, the territorial sea adjacent to the United Kingdom or the sea in any area designated under section 1(7) of the Continental Shelf Act 1964 which carries out oil processing operations; “oil processing operations” means any of the following operations— (a) initial blending and such other treatment of petroleum as may be required to produce stabilised crude oil and other hydrocarbon liquids to the point at which a seller could reasonably make a delivery to a purchaser of such oil and liquids; (b) receiving stabilised crude oil and other hydrocarbon liquids piped from an oil processing facility carrying out operations of a kind mentioned in paragraph (a), or storing oil or other hydrocarbon liquids so received, prior to their conveyance to another place (whether inside or outside Great Britain); (c) loading stabilised crude oil and other hydrocarbon liquids piped from a facility carrying out operations of a kind mentioned in paragraph (a) or (b) for conveyance to another place (whether inside or outside Great Britain);", and (c) in the definition of “terminal”, after paragraph (a) insert— "(aa) oil processing facilities;". 79 Modification of pipelines (1) The Pipe-lines Act 1962 (c. 58) is amended as follows. (2) After section 10F (reducing necessity for constructing additional pipelines) insert— "10G Compulsory modifications of pipe-lines (1) In the case of an upstream petroleum pipe-line, the Secretary of State may, on the application of a person other than the owner, give a notice (a “pipe-line modification notice”) to the applicant and the owner. (2) The Secretary of State may give a pipe-line modification notice only if the Secretary of State is satisfied— (a) that the capacity of the pipe-line can and should be increased by modifying the apparatus and works associated with the pipe-line, or (b)




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that the pipe-line can and should be modified by installing in it a junction through which another pipe-line may be connected to the pipe-line. (3) A pipe-line modification notice must— (a) specify the modifications which the Secretary of State thinks should be made, (b) specify the sums, or the method of determining the sums, which the Secretary of State thinks should be paid to the owner by the applicant for the purpose of defraying the cost of the modifications, (c) require the applicant to make such arrangements as the Secretary of State thinks appropriate to secure that those sums will be paid to the owner if the owner carries out the modifications or satisfies the Secretary of State that they will be carried out, (d) specify the period within which the applicant must make the arrangements mentioned in paragraph (c), (e) require the owner, if the applicant makes the arrangements mentioned in paragraph (c) within the period specified under paragraph (d), to carry out the modifications within a period specified in the notice, and (f) authorise the owner to recover the sums mentioned in paragraph (b) from the applicant if the works are carried out or the Secretary of State is satisfied that they will be carried out. (4) Before giving a pipe-line modification notice, the Secretary of State must give the owner of the pipe-line an opportunity to be heard. (5) References in this section to modifications include, in the case of apparatus and works, references to changes in, substitutions for and additions to the apparatus and works. (6) This section does not apply in relation to a pipe-line if and to the extent that section 14 of the Petroleum Act 1998 applies in relation to it. 10H Enforcement (1) It is an offence for the owner of a pipe-line to contravene any provision of a pipe-line modification notice under section 10G in respect of the pipe-line. (2) A person guilty of the offence is liable— (a) on summary conviction, to a fine not exceeding the statutory maximum, and (b) on conviction on indictment, to a fine. (3) It is a defence, in any proceedings for the offence, to prove that the accused exercised due diligence to comply with the provisions of the pipe-line modification notice. (4) Proceedings for the offence may not be instituted in England and Wales except— (a) by the Secretary of State or by a person authorised to do so by the Secretary of State, or (b) by or with the consent of the Director of Public Prosecutions.




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(5) Where the offence is committed by a body corporate and is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, an officer of the body corporate, that officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and dealt with accordingly. (6) Where the affairs of a body corporate are managed by its members, subsection (5) applies in relation to the acts and defaults of a member in connection with the member's functions of management as it applies to an officer of the body corporate. (7) In this section “officer”, in relation to a body corporate, means— (a) any director, secretary or other similar officer of the body corporate, or (b) any person who was purporting to act in any such capacity." (3) In section 10E (third party access to upstream petroleum pipelines), in subsection (1) after “pipe-lines” insert "(but does not apply to a pipe-line if and to the extent that section 14 of the Petroleum Act 1998 applies in relation to it)". (4) In section 10F (supplemental provision relating to third party access), after subsection (4) add— "(5) Before giving a notice under section 10G(1), the Secretary of State must give the person who applied for that notice— (a) particulars of the modifications which it is proposed to specify in the notice, and (b) an opportunity to make applications under section 10E in respect of the pipeline; and section 10E and subsections (1) to (4) of this section have effect for this purpose as if references to a pipe-line were references to the pipe-line as it would be with those modifications." 80 Third party access to oil processing facilities (1) A person ( “the applicant”) who seeks a right to have petroleum processed by an oil processing facility must, before making an application to the Secretary of State under subsection (5), apply to the owner of the facility for the right. (2) An application under subsection (1) may be made only in respect of an oil processing facility which is situated in— (a) Great Britain, (b) the territorial sea adjacent to Great Britain, or (c) the sea in any area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29). (3) An application under subsection (1) is to be made by notice in writing specifying the nature of the right which is being sought. (4) The notice must, in particular, specify— (a) the period during which the petroleum is to be processed by the facility, (b)




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the kind of petroleum to be processed, and (c) the quantities of petroleum to be processed. (5) If the owner and the applicant do not reach agreement on the application, the applicant may apply to the Secretary of State for directions which would secure to the applicant the right specified in the notice. (6) The Secretary of State may not consider an application under subsection (5) unless satisfied that the parties have had a reasonable time in which to reach agreement. (7) When considering an application under subsection (5) the Secretary of State must— (a) decide whether the application is to be adjourned to enable further negotiations between the parties, considered further or rejected, (b) give notice of that decision to the applicant, and (c) in the case of a decision to consider the application further, give notice to the persons mentioned in subsection (8) and give them the opportunity to be heard in relation to the application. (8) Those persons are— (a) the owner of the oil processing facility, (b) any person with a right to have petroleum processed at the facility, and (c) the Health and Safety Executive. (9) On an application under subsection (5), the Secretary of State may give directions if satisfied that they will not prejudice— (a) the efficient operation of the oil processing facility, (b) the processing by the facility of the quantities of petroleum which the owner or an associate of the owner requires or may reasonably be expected to require to be processed by the facility for the purposes of any business carried on by the owner or associate, or (c) the processing by the facility of the quantities of petroleum which another person with a right to have petroleum processed by the facility requires to be processed in the exercise of that right. 81 Directions under section 80: supplemental (1) Directions under section 80 may— (a) specify the terms on which the Secretary of State considers that the owner of the oil processing facility should enter into an agreement with the applicant for all or any of the purposes mentioned in subsection (2); (b) specify the sums, or the method of determining the sums, which the Secretary of State considers should be paid by the applicant as consideration for the right to have petroleum processed at the facility; (c)




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require the owner, if the applicant pays or agrees to pay those sums within a period specified in the directions, to enter into an agreement with the applicant on the terms specified under paragraph (a). (2) The purposes mentioned in subsection (1)(a) are— (a) securing to the applicant the right to have petroleum, of the kind and in the quantities specified in the direction, processed at the oil processing facility; (b) securing that the applicant is not prevented or impeded from exercising that right; (c) regulating the charges which may be made for the processing of petroleum by virtue of that right; (d) securing to the applicant such ancillary or incidental rights as the Secretary of State considers necessary or expedient, which may include the right to have a pipeline connected to the facility by the owner. (3) For the purpose of considering an application under section 80(5), the Secretary of State may by notice require the owner or the applicant to provide such information relevant to the application as may be specified or described in the notice. (4) The information mentioned in subsection (3) may, in particular, include financial information relevant to the owner's or the applicant's activities with respect to oil processing operations. (5) The Secretary of State may not disclose to any person any information obtained under subsection (3) unless— (a) the person by or on behalf of whom the information was provided consents to the disclosure, or (b) the disclosure is required by virtue of an obligation imposed on the Secretary of State by or under an enactment. (6) Compliance with directions under section 80 is enforceable by civil proceedings by the Secretary of State for an injunction or interdict or for any other appropriate relief. (7) Civil proceedings under subsection (6) are to be brought— (a) in England and Wales, in the High Court, or (b) in Scotland, in the Court of Session. (8) In this section and section 80— “oil processing facility” means any facility which carries out oil processing operations; “oil processing operations” means any of the following operations— (a) initial blending and such other treatment of petroleum as may be required to produce stabilised crude oil and other hydrocarbon liquids to the point at which a seller could reasonably make a delivery to a purchaser of such oil and liquids; (b) receiving stabilised crude oil and other hydrocarbon liquids piped from an oil processing facility carrying out operations of a kind mentioned in paragraph (a), or storing oil or other hydrocarbon liquids so received, prior to their conveyance to another place (whether inside or outside Great Britain);




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(c) loading stabilised crude oil and other hydrocarbon liquids piped from a facility carrying out operations of a kind mentioned in paragraph (a) or (b) for conveyance to another place (whether inside or outside Great Britain); “owner”, in relation to an oil processing facility, includes a lessee and any person occupying or controlling the facility; “petroleum” has the meaning given by section 1 of the Petroleum Act 1998 (c. 17) and includes petroleum which has undergone any processing. 82 Meaning of “associate” (1) For the purposes of section 80(9) a person is an associate of the owner of an oil processing facility if— (a) either or both of them is a body corporate, and (b) one of them controls the other, or both are controlled by the same person or persons, and subsections (2) to (6) set out the circumstances in which one person ( “A”) controls another ( “B”). (2) Where B is a company, A controls B if A possesses or is entitled to acquire— (a) one half or more of the issued share capital of B, (b) such rights as would entitle A to exercise one half or more of the votes exercisable in general meetings of B, (c) such part of the issued share capital of B as would entitle A to one half or more of the amount distributed if the whole of the income of B were in fact distributed among the shareholders, or (d) such rights as would, in the event of the winding up of B or in any other circumstances, entitle it to receive one half or more of the assets of B which would then be available for distribution among the shareholders. (3) Where B is a limited liability partnership, A controls B if A— (a) holds a majority of the voting rights in B, (b) is a member of B and has a right to appoint or remove a majority of other members, or (c) is a member of B and controls alone, or pursuant to an agreement with other members, a majority of the voting rights in B. (4) In subsection (3)(a) and (c) the references to “voting rights” are to the rights conferred on members in respect of their interest in a limited liability partnership to vote on those matters which are to be decided on by a vote of the members of the limited liability partnership. (5) In any case, A controls B if A has the power, directly or indirectly, to secure that the affairs of B are conducted in accordance with A's wishes. (6) In determining whether, by virtue of subsections (2) to (5), A controls B, A shall be taken to possess— (a)




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any rights and powers possessed by a person as nominee for it, and (b) any rights and powers possessed by a body corporate which it controls (including rights and powers which such a body corporate would be taken to possess by virtue of this paragraph).

PART 5 MISCELLANEOUS

Duties of Gas and Electricity Markets Authority 83 Duties of the Gas and Electricity Markets Authority (1) In section 4AA of the Gas Act 1986 (c. 44)(duties of the Gas and Electricity Markets Authority)— (a) in subsection (1) after “interests of” insert "existing and future", (b) after subsection (2)(b) insert "; and (c) the need to contribute to the achievement of sustainable development.", (c) omit subsection (5)(ba), and (d) in subsection (6) for “this section “consumers” includes” substitute "subsections (3) and (4) references to consumers include". (2) In section 3A of the Electricity Act 1989 (c. 29)(duties of the Gas and Electricity Markets Authority)— (a) in subsection (1) after “interests of” insert "existing and future", (b) after subsection (2)(b) insert "; and (c) the need to contribute to the achievement of sustainable development.", (c) omit subsection (5)(ba), and (d) in subsection (6) for “this section “consumers” includes” substitute "subsections (3) and (4) references to consumers include". Transmission systems 84 Power to amend licence conditions etc: transmission systems (1) The Secretary of State may modify— (a) a condition of a particular licence under section 6(1)(a) to (d) of the Electricity Act 1989 (generation, transmission, distribution and supply licences); (b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act; (c)




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a document maintained in accordance with the conditions of licences under section 6(1)(a) to (d) of that Act, or an agreement that gives effect to a document so maintained. (2) The Secretary of State may exercise the power conferred by subsection (1) for the purpose only of facilitating— (a) access to a transmission system in Great Britain or offshore waters; (b) efficient use of a transmission system in Great Britain or offshore waters. (3) The power conferred by subsection (1)— (a) may be exercised to make different provision in relation to different classes of customer; (b) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied); (c) may be exercised differently in different cases or circumstances; (d) includes a power to make incidental, supplementary, consequential or transitional modifications. (4) The power conferred by subsection (1) may not be exercised after the end of the period of 2 years beginning with the day on which that subsection comes into force. (5) Provision included in a licence by virtue of that power— (a) need not relate to the activities authorised by the licence; (b) may do any of the things authorised by section 7(2) to (4) of the Electricity Act 1989 (c. 29)(which apply to the Gas and Electricity Markets Authority's power with respect to licence conditions under section 7(1)(a)). (6) In this section— “offshore waters” means— (a) waters in or adjacent to Great Britain which are between the low water mark and the seaward limits of the territorial sea, and (b) waters within an area designated under section 1(7) of the Continental Shelf Act 1964 (c. 29); “transmission system” has the meaning given by section 4(4) of the Electricity Act 1989. 85 Section 84: procedure (1) Before making a modification, the Secretary of State must consult— (a) the holder of any licence being modified, (b) the Gas and Electricity Markets Authority, and (c) such other persons as the Secretary of State considers appropriate. (2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act.




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(3) The Secretary of State must publish details of any modifications as soon as reasonably practicable after they are made. (4) In this section “modification” means a modification under section 84. 86 Section 84: supplemental (1) A modification under section 84 of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989 (c. 29). (2) Where the Secretary of State makes modifications under section 84(1)(b) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority must— (a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and (b) publish the modification. (3) The Secretary of State may by order make such modifications of provisions made by or under an Act or an Act of the Scottish Parliament (whenever passed or made) as the Secretary of State considers appropriate in consequence of provision made under section 84. Energy reports 87 Energy reports (1) In section 1 of the Sustainable Energy Act 2003 (c. 30)(annual reports on progress towards sustainable energy aims)— (a) in subsection (1) for “in each calendar year, beginning with 2004,” substitute ", for each reporting period,", (b) in subsection (1A) omit paragraphs (a), (b) and (c), (c) omit subsections (1B) and (1C), (d) for subsections (2) and (3) substitute— "(2) “Reporting period”, for the purposes of subsections (1) to (1AA), means— (a) the period beginning with 24 February 2008 and ending with 31 December 2008, and (b) each successive calendar year. (3) A sustainable energy report must be published during the period beginning with 1 January and ending with 31 October following the reporting period to which it relates ( “the publication period”).", and (e) after subsection (4) insert— "(4A)




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A report or part of a report published under this section must specify the period to which it relates." (2) In section 5 of the Climate Change and Sustainable Energy Act 2006 (c. 19)(national microgeneration targets: modification of section 1 of the Sustainable Energy Act 2003) in subsection (2)— (a) for “(1B)” substitute "(1AA)", and (b) omit “and as if” to the end. Smart meters 88 Power to amend licence conditions etc: smart meters (1) The Secretary of State may modify— (a) a condition of a particular licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29)(distribution and supply licences); (b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act; (c) a condition of a particular licence under section 7 or 7A of the Gas Act 1986 (c. 44)(transporter, supply and shipping licences); (d) the standard conditions incorporated in licences under those provisions by virtue of section 8 of that Act; (e) a document maintained in accordance with the conditions of licences under section 6(1) of the Electricity Act 1989 or section 7 or 7A of the Gas Act 1986, or an agreement that gives effect to a document so maintained. (2) The Secretary of State may exercise the power in subsection (1) for the purpose only of— (a) requiring the holder of a licence to provide or install, or facilitate the provision, installation or operation of, meters of a particular kind, or (b) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a). (3) Modifications made by virtue of subsection (1) may include— (a) technical specifications for meters (including specifications in respect of matters relevant to the ability to obtain remote access to meters); (b) a prohibition on the supply of gas or electricity through a meter other than a meter which complies with a technical specification under paragraph (a); (c) provision about the installation of meters which comply with a technical specification under paragraph (a)(including provision about the replacement of existing meters); (d) provision about electricity generated by a customer;




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(e) provision about the circumstances in which any pre-payment facilities of a meter may be utilised; (f) provision about the use of a meter remotely to disconnect a customer's premises; (g) provision about the protection of consumers; (h) provision about access to, and the use of, an electricity distribution system or part of an electricity distribution system for communication in connection with a meter; (i) provision about access to information from meters (including provision enabling a customer, or a person acting on a customer's behalf, to have access to information about the customer's consumption of gas or electricity); (j) provision about communication of information by or to meters (including provision about its onward communication) and about the use of such information; (k) provision requiring the holder of the licence to enter (or refrain from entering) into an agreement of a specified kind, or with a specified person; (l) provision specifying, or enabling the determination of, a date from which a modification is to take effect. (4) The power conferred by subsection (1)— (a) may be exercised to make different provision in relation to different classes of customer; (b) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied); (c) may be exercised differently in different cases or circumstances; (d) includes a power to make incidental, supplementary, consequential or transitional modifications. (5) The power conferred by subsection (1) may not be exercised after the end of the period of 5 years beginning with the day on which that subsection comes into force. (6) Provision included in a licence by virtue of that power— (a) need not relate to the activities authorised by the licence; (b) in the case of a licence under section 7 or 7A of the Gas Act 1986 (c. 44), may do any of the things authorised by section 7B(5) of that Act (which apply to the Gas and Electricity Markets Authority's power with respect to licence conditions under section 7B(4)(a)); (c) in the case of a licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29), may do any of the things authorised by section 7(2) to (4) of that Act (which apply to that Authority's power with respect to licence conditions under section 7(1)(a)). (7) In this section a reference to a meter includes a reference to a visual display unit, or any other device, associated with or ancillary to a meter. 89 Power to amend licence conditions etc: procedure




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(1) Before making a modification, the Secretary of State must consult— (a) the holder of any licence being modified, (b) the Gas and Electricity Markets Authority, and (c) such other persons as the Secretary of State considers appropriate. (2) Subsection (1) may be satisfied by consultation before, as well as by consultation after, the passing of this Act. (3) Before making modifications, the Secretary of State must lay a draft of the modifications before Parliament. (4) If, within the 40-day period, either House of Parliament resolves not to approve the draft, the Secretary of State may not take any further steps in relation to the proposed modifications. (5) If no such resolution is made within that period, the Secretary of State may make the modifications in the form of the draft. (6) Subsection (4) does not prevent a new draft of proposed modifications being laid before Parliament. (7) The Secretary of State must publish details of any modifications as soon as reasonably practicable after they are made. (8) In this section “40-day period”, in relation to a draft of proposed modifications, means the period of 40 days beginning with the day on which the draft is laid before Parliament (or, if it is not laid before each House of Parliament on the same day, the later of the 2 days on which it is laid). (9) For the purposes of calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than 4 days. (10) In this section “modification” means a modification under section 88. 90 Smart meters: supplemental (1) A modification under section 88 of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 (c. 44) or Part 1 of the Electricity Act 1989 (c. 29). (2) Where the Secretary of State makes modifications under section 88(1)(b) or (d) of the standard conditions of a licence of any type, the Gas and Electricity Markets Authority must— (a) make the same modification of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and (b) publish the modification. (3)




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The Secretary of State may by order make such modifications of provision made by or under an Act or an Act of the Scottish Parliament (whenever passed or made) as the Secretary of State considers appropriate in consequence of provision made under section 88.

91 Licensing of activities relating to smart meters Schedule 4 contains amendments to the Gas Act 1986 and the Electricity Act 1989. Gas meters 92 Gas meters (1) The functions of the Gas and Electricity Markets Authority ( “the Authority”) under gas meter legislation are transferred to the Secretary of State. (2) References in gas meter legislation to the Authority (including references in that legislation which, by virtue of section 3(2) of the Utilities Act 2000 (c. 27), are treated as references to the Authority) are to be treated, so far as necessary for the purposes or in consequence of the transfer, as if they were references to the Secretary of State. (3) Regulations made, or treated as made, by the Authority under section 17 of the Gas Act 1986 (gas meter testing and stamping) and in force immediately before commencement have effect on and after commencement as if they had been made by the Secretary of State. (4) Anything else done by the Authority under gas meter legislation which has effect immediately before commencement has effect on and after commencement as if it had been done by the Secretary of State. (5) In this section— “commencement” means the day on which this section comes into force; “gas meter legislation” means— (a) section 17 of the Gas Act 1986 (c. 44), and (b) gas meter regulations; “gas meter regulations” means— (a) the Measuring Instruments (EEC Requirements) Regulations 1988 (S.I. 1988/186); (b) the Measuring Instruments (EEC Requirements)(Gas Volume Meters) Regulations 1988 (S.I. 1988/296); (c) the Measuring Instruments (Non-Prescribed Instruments) Regulations 2006 (S.I. 2006/1270); (d) the Measuring Instruments (Gas Meters) Regulations 2006 (S.I. 2006/2647); (e) any regulations made, or treated as made, under section 17 of the Gas Act 1986. 93 Section 92: consequential amendments (1) Section 17 of the Gas Act 1986 is amended as follows. (2)




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In subsection (2) for the words “a member of the Director's staff”(which, by virtue of section 3(2) of the Utilities Act 2000 (c. 27), are treated as a reference to a member of the staff of the Gas and Electricity Markets Authority) substitute "employed in the civil service of the State". (3) In subsections (7), (8) and (10) for the words “members of the Director's staff”(which, by virtue of section 3(2) of the Utilities Act 2000, are treated as references to members of the Authority's staff) substitute "employed in the civil service of the State". (4) After subsection (7) insert— "(7A) The Secretary of State may pay, out of money provided by Parliament, to meter examiners who are not employed in the civil service of the State or to any employer of such examiners— (a) sums in connection with the performance by such examiners of functions conferred by or under this section or gas meter regulations (within the meaning of section 92 of the Energy Act 2008), and (b) sums in respect of any pension payable to or in respect of such examiners." (5) In subsection (9) omit “with the consent of the Secretary of State”. 94 Power to amend licence conditions: gas (1) The Secretary of State may modify— (a) the conditions of a particular licence under section 7 of the Gas Act 1986; (b) the standard conditions incorporated in licences under that section by virtue of section 8 of that Act. (2) The Secretary of State may exercise the power in subsection (1) for the purpose only of enabling the Gas and Electricity Markets Authority ( “the Authority”) to recover and pay into the Consolidated Fund amounts in respect of— (a) payments made by the Secretary of State by virtue of section 17(7) or (7A) of the Gas Act 1986 (c. 44); (b) other costs incurred by the Secretary of State in performing a function conferred by section 17 of the Gas Act 1986 or by gas meter regulations (within the meaning of section 92). (3) The power in subsection (1) includes a power to make incidental, consequential or transitional modifications. (4) Before making a modification under this section the Secretary of State must consult— (a) the holder of any licence being modified, (b) the Authority, and (c) such other persons as the Secretary of State considers appropriate. (5) Subsection (4) may be satisfied by consultation before, as well as by consultation after, the time when this section comes into force.




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(6) The Secretary of State must publish modifications under this section. (7) A modification under subsection (1)(a) of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986. (8) Where the Secretary of State modifies the standard conditions under subsection (1)(b), the Authority must— (a) make the same modifications of those standard conditions for the purposes of their incorporation in licences granted after that time, and (b) publish the modifications. (9) The power under subsection (1) may not be exercised after the end of the period of 6 months beginning with the day on which that subsection comes into force. Electricity meters 95 Electricity meters (1) The functions of the Gas and Electricity Markets Authority ( “the Authority”) under electricity meter legislation are transferred to the Secretary of State. (2) References in electricity meter legislation to the Authority (including references in that legislation which, by virtue of section 3(2) of the Utilities Act 2000 (c. 27), are treated as references to the Authority) are to be treated, so far as necessary for the purposes or in consequence of the transfer, as if they were references to the Secretary of State. (3) Regulations made, or treated as made, by the Authority under Schedule 7 (other than paragraph 12 of that Schedule) to the Electricity Act 1989 (c. 29)(electricity meters) and in force immediately before commencement have effect on and after commencement as if they had been made by the Secretary of State. (4) Anything else done by the Authority under electricity meter legislation which has effect immediately before commencement is treated on and after commencement as if it had been done by the Secretary of State. (5) In this section— “commencement” means the day on which this section comes into force; “electricity meter legislation” means— (a) Schedule 7 (other than paragraph 12 of that Schedule) to the Electricity Act 1989 (c. 29), and (b) electricity meter regulations; “electricity meter regulations” means— (a) the Measuring Instruments (EC Requirements)(Electrical Energy Meters) Regulations 1995 (S.I. 1995/2607); (b) the Electromagnetic Compatibility Regulations 2006 (S.I. 2006/3418); (c)




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the Measuring Instruments (Active Electrical Energy Meters) Regulations 2006 (S.I. 2006/1679); (d) any regulations made under Schedule 7 (other than paragraph 12 of that Schedule) to the Electricity Act 1989. 96 Section 95: consequential amendments (1) The Electricity Act 1989 is amended as follows. (2) In section 106 (regulations and orders), in subsection (1) after “conferred by” insert "section 23,". (3) In paragraph 1 of Schedule 7 (consumption to be monitored by appropriate meters)— (a) for sub-paragraph (7) substitute— "(7) In relation to a dispute arising under this paragraph between an electricity supplier and a customer, section 23 of this Act applies with the substitution, for references to the Authority (and references treated as references to the Authority) of references to the Secretary of State.", and (b) in sub-paragraphs (8) and (9), after “section 23 of this Act” insert "(as modified by sub-paragraph (7))". (4) In paragraph 4 of that Schedule (appointment of meter examiners)— (a) in sub-paragraph (2) after “examiners” insert "employed in the civil service of the State", (b) after that sub-paragraph insert— "(2A) The Secretary of State may pay, out of money provided by Parliament, to meter examiners who are not employed in the civil service of the State or to any employer of such examiners— (a) sums in connection with the performance by such examiners of functions conferred by or under this Schedule or electricity meter regulations (within the meaning of section 95 of the Energy Act 2008), and (b) sums in respect of any pension payable to or in respect of such examiners.", and (c) in sub-paragraph (3) after “examiners” insert "employed in the civil service of the State". (5) In paragraph 5 of that Schedule (certification of meters), in sub-paragraph (4)(b) after “paid”(in the first place) insert "to meter examiners employed in the civil service of the State". (6) In paragraph 6 of that Schedule (apparatus for testing etc of meters), in sub-paragraph (2) for “their functions under” substitute "functions conferred by or under". (7) In paragraph 7 of that Schedule (testing etc of meters)— (a) in sub-paragraph (1) after “examiner” insert "employed in the civil service of the State", and (b) in sub-paragraph (3) after “paid”(in the first place) insert "to meter examiners employed in the civil service of the State". (8)




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For paragraph 10 of that Schedule (meters to be kept in proper order), for sub-paragraph (2A) substitute— "(2A) In relation to a dispute arising under this paragraph between an electricity supplier and a customer, section 23 of this Act applies, with the substitution for references to the Authority (and references treated as references to the Authority) of references to the Secretary of State." (9) In paragraph 13 of that Schedule (interpretation) for the definition of “regulations” substitute— "“regulations” means— (a) in paragraph 12, regulations made by the Authority with the consent of the Secretary of State, and (b) in every other case, regulations made by the Secretary of State." 97 Power to amend licence conditions: electricity (1) The Secretary of State may modify— (a) a condition of a particular licence under section 6(1)(b) or (c) of the Electricity Act 1989 (c. 29)(transmission and distribution licences); (b) the standard conditions incorporated in licences under those provisions by virtue of section 8A of that Act. (2) The Secretary of State may exercise the power in subsection (1) for the purpose only of enabling the Gas and Electricity Markets Authority ( “the Authority”) to recover and pay into the Consolidated Fund amounts in respect of— (a) payments made by the Secretary of State by virtue of paragraph 4(2) or (2A) of Schedule 7 to the Electricity Act 1989 (payments relating to meter examiners); (b) other costs incurred by the Secretary of State in performing a function conferred by Schedule 7 to the Electricity Act 1989 or by electricity meter regulations (within the meaning of section 95). (3) The power in subsection (1) includes a power to make incidental, consequential or transitional modifications. (4) Before making a modification under this section the Secretary of State must consult— (a) the holder of any licence being modified, (b) the Authority, and (c) such other persons as the Secretary of State considers appropriate. (5) Subsection (4) may be satisfied by consultation before, as well as by consultation after, the time when this section comes into force. (6) The Secretary of State must publish modifications under this section. (7)




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A modification under subsection (1)(a) of part of a standard condition of a licence does not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Electricity Act 1989 (c. 29). (8) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (1)(b), the Authority must— (a) make the same modifications of those standard conditions for the purposes of their incorporation in licences of that type granted after that time, and (b) publish the modifications. (9) The power under subsection (1) may not be exercised after the end of the period of 6 months beginning with the day on which that subsection comes into force. Connection offer expenses 98 Costs connected with making an offer of connection (1) Section 16A of the Electricity Act 1989 (procedure for requiring a connection) is amended as follows. (2) After subsection (4) insert— "(4A) The Secretary of State may, after consulting the Authority, make provision by regulations for the purpose of entitling an electricity distributor to require a person requiring a connection in pursuance of section 16(1) to pay connection offer expenses to such extent as is reasonable in all the circumstances. (4B) In this section “connection offer expenses” means expenses which— (a) are of a kind specified by the regulations, and (b) have been reasonably incurred by the electricity distributor. (4C) Regulations under subsection (4A) may specify— (a) circumstances in which an electricity distributor may not require the payment of connection offer expenses by virtue of the regulations; (b) the manner in which expenses reasonably incurred by an electricity distributor are to be calculated for the purposes of subsection (4B)(b)." (3) In subsection (5) for “and any information” to “connection” substitute ", any information requested under subsection (3) and any amount payable by virtue of subsection (4A) to the distributor by the person requiring the connection, the distributor shall give to that person". Electricity safety 99 Electricity safety (1) Part 1 of the Health and Safety at Work etc. Act 1974 (c. 37) has effect as if section 29 of the Electricity Act 1989 (c. 29)(security of supply, safety and inspections), and regulations made




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under that section, in so far as they relate to the protection of the public from dangers relating to electricity and to eliminating or reducing the risks of personal injury, were existing statutory provisions within the meaning of that Part. (2) Without prejudice to the generality of section 15(1) of the 1974 Act (health and safety regulations), regulations under that section may— (a) repeal or modify a provision mentioned in subsection (1), (b) make any provision which, but for a repeal or modification under paragraph (a), could be made by regulations made under section 29 of the Electricity Act 1989. Renewable heat incentives 100 Renewable heat incentives (1) The Secretary of State may make regulations— (a) establishing a scheme to facilitate and encourage renewable generation of heat, and (b) about the administration and financing of the scheme. (2) Regulations under this section may, in particular— (a) make provision for the Secretary of State or the Authority to make payments, or to require designated fossil fuel suppliers to make payments, in specified circumstances, to— (i) the owner of plant used or intended to be used for the renewable generation of heat, whether or not the owner is also operating or intending to operate the plant; (ii) a producer of biogas or biomethane; (iii) a producer of biofuel for generating heat; (b) make provision about the calculation of such payments; (c) make provision about the circumstances in which such payments may be recovered; (d) require designated fossil fuel suppliers to provide specified information to the Secretary of State or the Authority; (e) require the payment of a levy by designated fossil fuel suppliers to the Secretary of State or the Authority; (f) make provision about the calculation of the levy; (g) make provision for payments to fossil fuel suppliers in specified circumstances; (h) make provision about the enforcement of obligations imposed by or by virtue of the regulations (which may include a power for the Secretary of State or the Authority to impose financial penalties); (i) confer functions on the Secretary of State or the Authority, or both.




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(3) In this section— “Authority” means the Gas and Electricity Markets Authority; “biofuel” means liquid or gaseous fuel which is produced wholly from biomass; “biogas” means gas produced by the anaerobic conversion of organic matter; “biomass” means material, other than fossil fuel, which is, or is derived directly or indirectly from, plant matter, animal matter, fungi or algae; “biomethane” means biogas which is suitable for conveyance through pipes to premises in accordance with a licence under section 7 of the Gas Act 1986 (c. 44)(gas transporter licences); “designated fossil fuel suppliers” means— (a) if the regulations so provide, a specified class of fossil fuel suppliers, and (b) in any other case, all fossil fuel suppliers; “fossil fuel” means— (a) coal; (b) lignite; (c) natural gas (within the meaning of the Energy Act 1976 (c. 76)); (d) crude liquid petroleum; (e) petroleum products (within the meaning of that Act); (f) any substance produced directly or indirectly from a substance mentioned in paragraphs (a) to (e); “fossil fuel supplier” means a person who supplies fossil fuel to consumers for the purpose of generating heat; “owner”, in relation to any plant which is the subject of a hire purchase agreement, a conditional sale agreement or any agreement of a similar nature, means the person in possession of the plant under that agreement; “plant” includes any equipment, apparatus or appliance; “renewable generation of heat” means the generation of heat by means of a source of energy or technology mentioned in subsection (4). (4) The sources of energy and technologies are— (a) biomass; (b) biofuels; (c) fuel cells; (d) water (including waves and tides); (e) solar power; (f) geothermal sources; (g) heat from air, water or the ground; (h)




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combined heat and power systems (but only if the system's source of energy is a renewable source within the meaning given by section 32M of the Electricity Act 1989 (c. 29)). (5) Regulations may— (a) modify the list of sources of energy and technologies in subsection (4); (b) modify the definition of “biogas” or “biomass” in subsection (3). (6) Regulations may make provision, for the purposes of subsection (2)(a)(iii) and the definition of “fossil fuel supplier”, specifying that particular activities do or do not constitute generating heat. (7) Before making regulations under this section which extend to Scotland, the Secretary of State must— (a) if the regulations contain any provision which would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament, obtain the consent of the Scottish Ministers; (b) in any other case, consult the Scottish Ministers. Nuclear information 101 Security of sensitive nuclear information In Part 8 of the Anti-terrorism, Crime and Security Act 2001 (c. 24), after section 80 (prohibition on disclosure of uranium enrichment information) insert— "80A Extension of Official Secrets Acts to certain places (1) A place to which subsection (2) applies is deemed to be a place belonging to or used for the purposes of Her Majesty for the purposes of section 3(c) of the Official Secrets Act 1911 (c. 28)(power of Secretary of State to declare a place belonging to or used for the purposes of Her Majesty a prohibited place). (2) This subsection applies to a place if— (a) equipment or software which is designed or adapted for use in, or in connection with, the enrichment of uranium (or which is not so designed or adapted but is likely to be of exceptional use in that connection) is held at the place, or (b) information relating to, or capable of use in connection with, the enrichment of uranium is held at the place. (3) In this section— “enrichment of uranium” means a treatment of uranium which increases the proportion of isotope 235 contained in the uranium, and “equipment” includes equipment which has not yet been assembled and a component of equipment."

Application of general duties

102 Application of general duties to functions relating to licences




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(1) Sections 4AA to 4B of the Gas Act 1986 (c. 44)(principal objectives and general duties) apply to the carrying out, as respects the matters mentioned in subsection (2), of functions conferred on the Secretary of State or the Authority by or under— (a) sections 88 to 90; (b) section 94. (2) The matters are— (a) activities required to be authorised by gas licences, (b) such licences and the conditions of such licences, (c) documents maintained in accordance with the conditions of such licences, or agreements that give effect to documents so maintained, and (d) companies holding such licences. (3) In section 4AA(2)(b) of the Gas Act 1986 (c. 44)(duty to have regard to ability of licence holders to finance obligations) for “or the Utilities Act 2000” substitute ", the Utilities Act 2000 or Part 5 of the Energy Act 2008". (4) Sections 3A to 3D of the Electricity Act 1989 (c. 29)(principal objectives and general duties) apply to the carrying out, as respects the matters mentioned in subsection (5), of functions conferred on the Secretary of State or the Authority by or under— (a) sections 41 to 43; (b) sections 84 to 86; (c) sections 88 to 90; (d) section 97. (5) The matters are— (a) activities required to be authorised by electricity licences, (b) such licences and the conditions of such licences, (c) documents maintained in accordance with the conditions of such licences, or agreements that give effect to documents so maintained, and (d) companies holding such licences. (6) In section 3A(2)(b) of the Electricity Act 1989 (duty to have regard to ability of licence holders to finance obligations) for “or Part 2 or 3 of the Energy Act 2004” substitute ", Part 2 or 3 of the Energy Act 2004 or Part 2 or 5 of the Energy Act 2008". (7) In this section— “the Authority” means the Gas and Electricity Markets Authority;




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“electricity licence” means a licence for the purposes of section 4 of the Electricity Act 1989 (prohibition on unlicensed activities); “gas licence” means a licence for the purposes of section 5 of the Gas Act 1986 (prohibition on unlicensed activities).

PART 6 GENERAL

103 Offences by bodies corporate etc (1) Where an offence is committed by a body corporate and is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, an officer of the body corporate, that officer (as well as the body corporate) is guilty of the offence and is liable to be proceeded against and dealt with accordingly. (2) Where the affairs of a body corporate are managed by its members, subsection (1) applies in relation to the acts and defaults of a member in connection with the member's functions of management as it applies to an officer of the body corporate. (3) Where an offence— (a) is committed by a Scottish firm, and (b) is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, a partner of the firm, the partner (as well as the firm) is guilty of the offence and liable to be proceeded with and dealt with accordingly. (4) In this section— “offence” means an offence under this Act; “officer”, in relation to a body corporate, means— (a) any director, secretary or other similar officer of the body corporate, or (b) any person who was purporting to act in any such capacity. 104 Subordinate legislation (1) Orders and regulations made by the Secretary of State or the Scottish Ministers under this Act are to be made by statutory instrument. (2) An instrument to which this subsection applies may— (a) provide for a person to exercise a discretion in dealing with any matter; (b) include incidental, supplementary and consequential provision; (c) make transitory or transitional provisions or savings; (d) make provision generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as conditions specified in the instrument are satisfied); (e) make different provision for different cases or circumstances or for different purposes. (3)




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Subsection (2) applies to— (a) an Order in Council under this Act, (b) an order or regulations made by the Secretary of State or the Scottish Ministers under this Act (other than an order which contains provision made under section 110 (commencement) only). (4) The provision which may be made by virtue of subsection (2)(b) or (c) includes provision modifying any provision made by or under an Act or an Act of the Scottish Parliament (whenever passed or made). 105 Parliamentary control of subordinate legislation (1) A statutory instrument containing an Order in Council, order or regulations under this Act is subject to annulment in pursuance of a resolution of either House of Parliament. (2) Subsection (1) does not apply to— (a) an order which contains, or regulations which contain, (whether alone or together with other provision) provision made under— (i) section 13 (importation and storage of combustible gas: inspectors), (ii) section 27 (carbon dioxide storage: inspectors), (iii) section 41(6)(feed-in tariffs for small-scale electricity generation), (iv) section 45(6)(a)(power to specify matters as designated technical matters), (v) section 62(1)(power to apply Chapter 1 of Part 3 to other nuclear installations), or (vi) section 100 (renewable heat incentives); (b) an order, regulations or Order in Council which contains (whether alone or together with other provision) provision which, by virtue of section 43(3)(b), 86(3), 90(3), 104(4), 107(2)(a) or 109(3)(a) modifies an Act or an Act of the Scottish Parliament; (c) an order which contains provision made under section 110 (commencement orders) only. (3) No order, regulations or recommendation to make an Order in Council, within subsection (2)(a) or (b), may be made unless a draft of the order, regulations or Order in Council has been laid before, and approved by a resolution of, each House of Parliament. (4) In the case of a statutory instrument containing an order or regulations made by the Scottish Ministers, this section has effect as if— (a) in subsection (1) the reference to either House of Parliament were a reference to the Scottish Parliament, (b) in subsection (2)(b) for “107(2)(a)” there were substituted "107(3)(a)", and (c) in subsection (3) the reference to each House of Parliament were a reference to the Scottish Parliament.




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106 Interpretation In this Act— “functions” includes powers and duties; “modify” includes amend, add to, revoke or repeal (and references to “modifications” are to be construed accordingly); “territorial sea” means the territorial sea adjacent to the United Kingdom.

107 Minor and consequential amendments (1) Schedule 5 contains minor and consequential amendments. (2) The Secretary of State may by order make such modifications of— (a) an Act, or Act of the Scottish Parliament, passed before the end of the session in which this Act was passed, or (b) an instrument made before the end of that session, as the Secretary of State considers appropriate in consequence of this Act. (3) The Scottish Ministers may by order make such modifications of— (a) an Act, or Act of the Scottish Parliament, passed before the end of the session in which this Act was passed, or (b) an instrument made before the end of that session, as the Scottish Ministers consider appropriate in consequence of Chapter 3 of Part 1 of this Act as that Chapter applies in relation to the territorial sea adjacent to Scotland (within the meaning of that Chapter) or in relation to functions of the Scottish Ministers. 108 Repeals Schedule 6 contains repeals (including repeals of spent provisions). 109 Transitional provision etc (1) The Secretary of State may by order make any transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, this Act. (2) The Scottish Ministers may by order make any transitional, transitory or saving provision which appears appropriate in consequence of, or otherwise in connection with, Chapter 3 of Part 1 of this Act as that Chapter applies in relation to the territorial sea adjacent to Scotland (within the meaning of that Chapter) or in relation to functions of the Scottish Ministers. (3) The provision which may be made by virtue of subsection (1) or (2) includes provision modifying any provision made by— (a) an Act, or Act of the Scottish Parliament, passed before the end of the session in which this Act was passed, or (b) an instrument made before the end of that session. (4)




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Provision made under this section is additional, and without prejudice, to that made by or under any other provision of this Act.

110 Commencement (1) The following provisions come into force on the day on which this Act is passed— (a) section 37, so far as is necessary for enabling the exercise on or after that day of any power to make an order that is conferred by virtue of that section, and section 38(1); (b) sections 88 to 91 (and sections 104 and 105 in so far as those sections apply in relation to orders made under section 90(3)) and Schedule 4; (c) section 102; (d) this section and sections 106, 111, 112 and 113; (e) paragraph 5 of Schedule 5 (and section 107(1) so far as it relates to that paragraph). (2) Subject to that, the provisions of this Act come into force on such day as may be appointed by order of the Secretary of State. (3) An order under this section may— (a) include incidental, supplementary and consequential provision; (b) make transitory or transitional provisions or savings; (c) make different provision for different cases or circumstances or for different purposes.

111 Financial provisions The following are to be paid out of money provided by Parliament— (a) any expenditure incurred by the Secretary of State by virtue of this Act; (b) any expenditure incurred by the Gas and Electricity Markets Authority by virtue of this Act; (c) any increase attributable to this Act in the sums payable out of money so provided under any other enactment. 112 Extent (1) Subject to subsections (2) to (5), this Act extends to England and Wales, Scotland and Northern Ireland. (2) The following provisions extend to England and Wales and Scotland only— (a) section 38 (renewables obligation: supplemental provision); (b) sections 41 to 43 (feed-in tariffs for small-scale electricity generation); (c)




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section 80 to 82 (third party access to oil processing facilities); (d) sections 84 to 86 (power to amend licence conditions: transmission systems); (e) sections 88 to 90 (smart meters); (f) sections 92 to 97 (gas and electricity meters); (g) section 99 (electricity safety); (h) section 100 (renewable heat incentives); (i) section 102 (general duties of Authority and Secretary of State). (3) Chapter 1 of Part 3 (other than section 65)(nuclear decommissioning) extends to England and Wales and Northern Ireland only. (4) Section 40(2) to (4)(the Northern Ireland renewables obligation) extend to Northern Ireland only. (5) An amendment or repeal contained in this Act has the same extent as the enactment or relevant part of the enactment to which the amendment or repeal relates. 113 Short title This Act may be cited as the Energy Act 2008.

PLANNING AND ENERGY ACT 2008 (C. 21) An Act to enable local planning authorities to set requirements for energy use and energy efficiency in local plans.

[13th November 2008]

BE IT ENACTED by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

ENERGY POLICIES

(1)

A local planning authority in England may in their development plan documents, and a local planning authority in Wales may in their local development plan, include policies imposing reasonable requirements for—

(a)

a proportion of energy used in development in their area to be energy from renewable sources in the locality of the development;

(b)

a proportion of energy used in development in their area to be low carbon energy from sources in the locality of the development;

(c)




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development in their area to comply with energy efficiency standards that exceed the energy requirements of building regulations.

(2)

In subsection (1)(c)—

“energy efficiency standards” means standards for the purpose of furthering energy efficiency that are—

(a)

set out or referred to in regulations made by the appropriate national authority under or by virtue of any other enactment (including an enactment passed after the day on which this Act is passed), or

(b)

set out or endorsed in national policies or guidance issued by the appropriate national authority;

“energy requirements”, in relation to building regulations, means requirements of building regulations in respect of energy performance or conservation of fuel and power.

(3)

In subsection (2) “appropriate national authority” means—

(a)

the Secretary of State, in the case of a local planning authority in England;

(b)

the Welsh Ministers, in the case of a local planning authority in Wales.

(4)

The power conferred by subsection (1) has effect subject to subsections (5) to (7) and to—

(a)

section 19 of the Planning and Compulsory Purchase Act 2004 (c. 5), in the case of a local planning authority in England;

(b)

section 62 of that Act, in the case of a local planning authority in Wales.

(5)

Policies included in development plan documents by virtue of subsection (1) must not be inconsistent with relevant national policies for England.

(6)

Policies included in a local development plan by virtue of subsection (1) must not be inconsistent with relevant national policies for Wales.




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(7)

Relevant national policies are—

(a)

national policies relating to energy from renewable sources, in the case of policies included by virtue of subsection (1)(a);

(b)

national policies relating to low carbon energy, in the case of policies included by virtue of subsection (1)(b);

(c)

national policies relating to furthering energy efficiency, in the case of policies included by virtue of subsection (1)(c).

INTERPRETATION

In this Act—

“development plan document” has the same meaning as in Part 2 of the Planning and Compulsory Purchase Act 2004;

“local planning authority” has the same meaning as in the Town and Country Planning Act 1990 (c. 8).

3 Short title and extent

(1)This Act may be cited as the Planning and Energy Act 2008.

(2)This Act extends to England and Wales.

Note: These attributes apply to this level only, lower levels have their own attributes.




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SUPPLEMENTS

DEPARTMENT OF ENERGY AND CLIMATE CHANGE

HEAD OFFICE ADDRESS

3 Whitehall Place London SW1A 2HH General enquiries: 0300 060 4000 (standard national rate) Email us: [email protected] The Department brings together much of the Climate Change Group, previously housed within the Department for Environment, Food and Rural Affairs (Defra), with the Energy Group from the Department for Business, Enterprise and Regulatory Reform (BERR).

MINISTERS

Ed Miliband is Secretary of State for the Department of Energy and Climate Change. Minister of State - Mike O'Brien MP Minister of State - Lord Hunt of Kings Heath OBE (jointly with Department for Environment, Food and Rural Affairs); and Deputy Leader of the House of Lords Parliamentary Under-Secretary of State - Joan Ruddock MP

SENIOR TEAM

Moira Wallace is the Permanent Secretary for the Department. Mike Anderson is Director General, Climate Change Willy Rickett is Director General, Energy

Energy Group deals with energy-related matters from production to supply. It is committed to delivering the Government’s policy goals of safe, secure and sustainable energy supplies and ultimately a low-carbon economy, through competitive and independently regulated energy markets.

Energy is essential in almost every aspect of our lives and for the success of our economy, but we face two long-term challenges:

• tackling climate change by reducing carbon dioxide emissions both within the UK and abroad; and

• ensuring secure, clean and affordable energy as we become increasingly dependent on imported fuel.

The Government’s current energy policy was set out in the Energy White Paper of May 2007, building on previous work including the 2003 Energy White Paper and the Energy Review Report in 2006. The 2007 White Paper sets out the Government’s international and domestic energy strategy to respond to the changing circumstances in global energy markets and to address the long term energy challenges we face. Our strategy can be summarised as follows:




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• establish an international framework to tackle climate change; • reduce emissions progressively, via legally binding carbon targets; • make further progress towards fully competitive and transparent international markets; • encourage more energy saving through better information, incentives and regulation; • provide more support for low-carbon technologies; • ensure the right conditions for investment.

The Energy community of the BERR website contains detailed information about the work of Energy Group. The Group is headed by Director General Willy Rickett.

ENERGY CONTACTS

ADVISORY PANEL CONTACTS

• Kanta Varsani, tel: 020 7215 3999 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 277, 1 Victoria Street London SW1H 0ET

CARBON ABATEMENT TECHNOLOGIES CONTACTS

• Nicholas Aluko, tel: 020 7215 3075 Cleaner Fossil Fuels Team Department of Energy and Climate Change (DECC) Bay 221, 1 Victoria Street London SW1H 0ET

UK CARBON CAPTURE AND STORAGE DEMONSTRATION COMPETITION CONTACTS

• Rachel Crisp, tel: 020 7215 0303

CLIMATE CHANGE CONTACTS

• Barbara Green, tel: 020 7215 5398 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 287, 1 Victoria Street London SW1H 0ET

COAL CONTACTS




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• Clare Harding, tel: 020 7215 6263 UK Producing Coal Industry, Coal Liabilities Unit Department of Energy and Climate Change (DECC) Bay 137, 1 Victoria Street London SW1H 0ET

• David Leitch, tel: 020 7215 5252 Coal Authority, Coal Pensions, Coal Liabilities Unit Department of Energy and Climate Change (DECC) Bay 137, 1 Victoria Street London SW1H 0ET

• Jeremy Cousins, tel: 020 7215 6145 Coal Forum and Bevan Boys Award, Coal Liabilities Unit Department of Energy and Climate Change (DECC) Bay 137, 1 Victoria Street London SW1H 0ET

• Coal Health Claims Unit, tel: 020 7215 2869 Department of Energy and Climate Change (DECC) Case tracking at www.coalclaims.com

COMPETITIVENESS CONTACTS

• Stephen Green, tel: 020 7215 6201 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 294, 1 Victoria Street London SW1H 0ET

DOWNSTREAM GAS & ELECTRICITY CONTACTS

• Andy Stevenson, tel: 020 7215 6254 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 213, 1 Victoria Street London SW1H 0ET

ELECTRICITY LICENCE EXEMPTIONS CONTACTS

• Chris Chown, tel: 020 7215 2766 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 222, 1 Victoria Street London SW1H 0ET

ELECTRICITY MARKETS CONTACTS




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ENERGY BETTER REGULATION CONTACTS

• Energy Better Regulation, tel: 020 7215 2332

'ENERGY CONSUMPTION IN THE UK' PUBLICATION CONTACTS

• Jennifer Knight, tel: 020 7215 6490 Department of Energy and Climate Change (DECC) Bay 297 1 Victoria Street London SW1H 0ET

ENERGY EFFICIENCY CONTACTS

• Tom Bastin, tel: 020 7238 5449 CESPS2 Energy Efficiency Department of Energy and Climate Change (DECC) Ergon House, Horseferry Road, London SW1P 2AL

ENERGY & ENVIRONMENT RESEARCH PROGRAMME (EERP) CONTACTS


'ENERGY - IT'S IMPACT...' CONTACTS

• Julian Prime, tel: 020 7215 6178 Department of Energy and Climate Change (DECC) Bay 297 1 Victoria Street London SW1H 0ET

• Jennifer Knight, tel: 020 7215 6490 Department of Energy and Climate Change (DECC)




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Bay 297 1 Victoria Street London SW1H 0ET

ENERGY MERGERS CONTACTS

• Keith Evans, tel: 020 7215 5694 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 223, 1 Victoria Street London SW1H 0ET

ENERGY MARKETS OUTLOOK CONTACTS

• Robert Clay, tel: 020 7215 5272 Market Regulatory Framework Directorate Department of Energy and Climate Change (DECC) Bay 138, 1 Victoria Street London SW1H 0ET

ENERGY MARKET STRUCTURES CONTACTS


ENERGY PRICES CONTACTS

• Jo Marvin, tel: 020 7215 6935 Energy Strategy & International Unit Department of Energy and Climate Change (DECC) Bay 299, 1 Victoria Street London SW1H 0ET

ENERGY STATISTICS PUBLICATIONS CONTACTS

• Kevin Harris, tel: 020 7215 6049 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 299, 1 Victoria Street London SW1H 0ET




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ENERGY SERVICES CONTACTS

• Geoff Hatherick, tel: 020 7215 5047 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 220, 1 Victoria Street London SW1H 0ET

ENERGY WHITE PAPER CONTACTS

• Nicola Robinson, tel: 020 7215 2332 Energy Strategy and International Unit (ESIU) Department of Energy and Climate Change (DECC) Bay 277, 1 Victoria Street London SW1H 0ET

ENVIRONMENTAL TRANSFORMATION FUND CONTACTS

• Farida Isroliwala, tel: 020 7215 3774 Environmental Transformation Fund (ETF) Department of Energy and Climate Change (DECC) Bay 215, 1 Victoria Street London SW1H 0ET

• Jackie Walsh (Defra), tel: Environmental Transformation Fund (ETF)

• Ray Eaton, tel: 020 7215 2650 Renewable Energy and Innovation Unit (REIU) Department of Energy and Climate Change (DECC) Bay 233, 1 Victoria Street London SW1H 0ET

• Nicholas Aluko, tel: 020 7215 3075 Cleaner Fossil Fuels Team Department of Energy and Climate Change (DECC) Bay 221, 1 Victoria Street London SW1H 0ET

• Trevor Raggatt, tel: 020 7215 2204 Marine Renewables Deployment Fund (MRDF) Department of Energy and Climate Change (DECC) Bay 214, 1 Victoria Street London SW1H 0ET

• David Hollier, tel: 020 7215 6296 Bio-energy Capital Grants Scheme Department of Energy and Climate Change (DECC)




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Bay 241, 1 Victoria Street London SW1H 0ET

• Paul Rochester, tel: 020 7215 6389 Low Carbon Buildings Programme: Phase 1 Department of Energy and Climate Change (DECC) Bay 241, 1 Victoria Street London SW1H 0ET

• John Moriarty, tel: 020 7215 1969 Low Carbon Buildings Programme: Phase 2 Department of Energy and Climate Change (DECC) Bay 234, 1 Victoria Street London SW1H 0ET

• Richard Daniels, tel: 020 7215 0404 Offshore Wind Capital Grants Scheme Department of Energy and Climate Change (DECC) Bay 209, 1 Victoria Street London SW1H 0ET

EU EMISSIONS TRADING SCHEME (EU ETS) CONTACTS

• Martin Bond, tel: 020 7215 0340 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 286, 1 Victoria Street London SW1H 0ET

FUEL POVERTY CONTACTS

• Damon Wingfield, tel: 020 7215 2720 Energy Markets Unit (EMU) Department of Energy and Climate Change (DECC) Bay 208, 1 Victoria Street, London, SW1H 0ET

• Marina Pappa, tel: 020 7215 1137 Energy Markets Unit (EMU) Department of Energy and Climate Change (DECC) Bay 143, 1 Victoria Street, London, SW1H 0ET

G8 & GLENEAGLES DIALOGUE CONTACTS

• Craig Jones, tel: 020 7215 3563 Energy Strategy & International Unit (ESIU) Department of Energy and Climate Change (DECC) Bay 263, 1 Victoria Street




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London SW1H 0ET

GAS INFRASTRUCTURE PROJECTS CONTACTS

• John Havard, tel: 020 7215 5546 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 138, 1 Victoria Street London SW1H 0ET

GAS MARKETS CONTACTS

• John Havard, tel: 020 7215 5546 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 138, 1 Victoria Street London SW1H 0ET

GENERAL ENERGY STATISTICS CONTACTS

• Clive Sarjantson, tel: 020 7215 2698 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 2101, 1 Victoria Street London SW1H 0ET

HYDROGEN AND FUEL CELLS CONTACTS

• Ray Eaton, tel: 020 7215 2650 Renewable Energy and Innovation Unit (REIU) Department of Energy and Climate Change (DECC) Bay 233, 1 Victoria Street London SW1H 0ET

IEA CONTACTS

• Alison Zhu, tel: 020 7215 6971 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 261, 1 Victoria Street London SW1H 0ET

INTER-DEPARTMENTAL ANALYSTS GROUP CONTACTS




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INTERNATIONAL OIL MARKETS CONTACTS

• Lynsey Tinios, tel: 020 7215 5450 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 260, 1 Victoria Street London SW1H 0ET

JWGEE CONTACTS


LIBERALISATION CONTACTS

• Sue Harrison, tel: 020 7215 2778 Energy Strategy & International Unit Department of Energy and Climate Change (DECC) Bay 264, 1 Victoria Street London SW1H 0ET

MICROGENERATION CONTACTS

• Microgeneration, tel: 020 7215 0303

NUCLEAR ENERGY CONTACTS

• Office for Nuclear Development (OND), tel: 020 7215 5000

QUALITY AND CONTINUITY OF UK SUPPLY CONTACTS




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• Tim Wickes, tel: 020 7215 2667 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 204, 1 Victoria Street London SW1H 0ET

REGULATION OF ENERGY MARKETS CONTACTS


REGIONAL ENERGY STATISTICS CONTACTS

• Jennifer Knight, tel: 020 7215 6490 Department of Energy and Climate Change (DECC) Bay 297 1 Victoria Street London SW1H 0ET


• Joanna Chan, tel: 020 7215 2703 Department of Energy and Climate Change (DECC) Bay 297 1 Victoria Street London SW1H 0ET

RENEWABLES CONTACTS

• Claire Ball, tel: 0207 215 2812 Energy Industries and Technologies Unit: International programmes Department for Business, Enterprise & Regulatory Reform Bay 244, 1 Victoria Street London SW1H 0ET

• Chris Turner, tel: 020 7215 5977 Energy Development Unit: Press Enquiries Department for Business, Enterprise & Regulatory Reform Bay 750, 1 Victoria Street London SW1H 0ET




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• Fishing Liaison for Offshore Wind Group, tel: n/a Energy Development Unit: Secretary to FLOW Department for Business, Enterprise & Regulatory Reform Bay 2117, 1 Victoria Street London SW1H 0ET

• Fiona Livingston, tel: 01224 254015 Energy Development Unit: Renewables website/It's Only Natural Campaign Department for Business, Enterprise & Regulatory Reform Atholl House, 86-88 Guild Street Aberdeen B11 6AR

• Francis Lajumoke, tel: 0207 215 2660 Energy Development Unit: Renewables Policy Department for Business, Enterprise & Regulatory Reform Bay 2106, 1 Victoria Street London SW1H 0ET

• Georgina Webb, tel: 0870 1906301 Renewables Advisory Board AEA Technology, The Gemini Building Fermi Avenue, Harwell International Business Centre Didcot OX11 0QR

• John Overton, tel: 0207 215 6481 Energy Development Unit: Grid Issues Under Renewables Department for Business, Enterprise & Regulatory Reform Bay 2111, 1 Victoria Street London SW1H 0ET

• John Spurgeon, tel: 0207 215 2134 Energy Industries and Technologies Unit: Wave and Tidal Energy Department for Business, Enterprise & Regulatory Reform Bay 238, 1 Victoria Street London SW1H 0ET

• Martin Marais, tel: 079 7940 6771 Energy Development Unit: Planning for Renewables Department for Business, Enterprise & Regulatory Reform Bay 2108, 1 Victoria Street London SW1H 0ET

• Nicola Barber, tel: 2027 215 2651 Energy Development Unit: Renewables Obligation Department for Business, Enterprise & Regulatory Reform Bay 219, 1 Victoria Street London SW1H 0ET

• Offshore Renewables Energy Environmental Forum, tel: n/a Energy Development Unit: Secretariat to OREEF Department for Business, Enterprise & Regulatory Reform Bay 2117, 1 Victoria Street




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London SW1H 0ET

• Patrick Fownes-Walpole, tel: 0207 215 2829 Energy Development Unit: Hydro Department for Business, Enterprise & Regulatory Reform Bay 2106, 1 Victoria Street London SW1H 0ET

• Phillip Baker, tel: 0207 215 2675 Energy Development Unit: Transmission and Distribution Department for Business, Enterprise & Regulatory Reform Bay 2111, 1 Victoria Street London SW1H 0ET

• Renewable Energy Trade Promotion Service , tel: 01664 565083 Renewables Trade Promotion Service: Trade Promoter

• Research Advisory Group, tel: n/a Energy Development Unit: Secretariat to RAG Department for Business, Enterprise & Regulatory Reform Bay 2117, 1 Victoria Street London SW1H 0ET

• Richard Brooks, tel: 01224 254094 Energy Development Unit: Business Development team Department for Business, Enterprise & Regulatory Reform Atholl House, 86-88 Guild Street Aberdeen AB11 6AR

SECURITY OF SUPPLY CONTACTS

• Robert Clay, tel: 020 7215 5272 Market Regulatory Framework Directorate Department of Energy and Climate Change (DECC) Bay 138, 1 Victoria Street London SW1H 0ET

SMART METERING CONTACTS

• Phil Nash, tel: 020 7215 5049 Energy Markets Unit Department of Energy and Climate Change (DECC) Bay 143, 1 Victoria Street London SW1H 0ET

THE SOUTHERN CORRIDOR CONTACTS




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• Alison Zhu, tel: 020 7215 6971 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 261, 1 Victoria Street London SW1H 0ET

TRANSMISSION CHARGES CONTACTS


UPDATED ENERGY PROJECTIONS CONTACTS

• Emissions Projections, tel: 020 7215 6106 Energy Strategy and International Unit Department of Energy and Climate Change (DECC) Bay 298, 1 Victoria Street London SW1H 0ET

WEBSITE PUBLISHER (ENERGY) CONTACTS

• Ian Montague, tel: 020 7215 2709 Energy Strategy & International Unit Department of Energy and Climate Change (DECC) Bay 277, 1 Victoria Street, London, SW1H 0ET

STRATEGIC AND BUSINESS CONTACTS IN UK 1. UK GOVERNMENT AGENCIES

British Overseas Trade Board Department of Trade & Industry Kingsgate House 66-74 Victoria Street London SW1E 6SN Tel: 44-171-215-5000 Fax: 44-171-215-8000 Invest in Britain Bureau Department of Trade and Industry London Tel: 011-44-171-215-2501

Fax: 011-44-171-215-8451 -Invest in Britain Bureau USA. Atlanta Tel: (404) 524-8823 Boston Tel: (617) 248-9555 Chicago Tel: (312) 346-1810 Cleveland Tel: (216) 621-7674 Houston Tel: (713) 659-6275 Los Angeles Tel: (310) 477-3322 New York Tel: (212) 745-0495 Seattle Tel: (206) 622-9255




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Washington D.C. Tel: (202) 462-1340 Embassy of Great Britain 3100 Massachusetts Avenue Washington, D.C. 20008, USA Tel: (202) 462-1340 Fax: (202) 898 4255 Department of Trade and Industry 123 Victoria Street London SW1H 0NN Tel:011-44-171-215-5000 Fax:011-44-171-215-6739 - General Inquiries Consumer Affairs Division 1A Department of Trade and Industry 10-18 Victoria Street London SW1H 0NN Tel: 011-44-171-215-0332 Fax: 011-44-171-215-0315 - Packaging and Labeling Requirements HM Board of Customs and Excise Tel: 011-44-171-620-1313 Fax: 011-44-171-865-4944 - Customs and Rules/Regulations for the UK HM Stationery Office Bookshop 49 Holborn London WC1V 6HB Tel: 011-44-171-873-0011 Tel: 011-44-1603-695767 (UK equivalent of the U.S. Government Printing Office) U.S. Representative: Kraus-Thompson Publishers, Tel: (914) 762-2200 Central Office of Information Hercules Road London SE1 7DU Tel: 011-44-171-928-2345 Fax: 011-44-171-928-5037 Central Statistical Office Great George Street London SW1P 3AQ Tel: 011-44-171-270-3000 Department of Employment Caxton House

12 Tothill Street London SW1H 9NA Tel: 011-44-171-273-3000 - Work Permits, Consular Matters Department of the Environment 2 Marsham Street London SW1P 3EB Tel: 011-44-171-276-0900 or 276-3000 - Environmental Regulations Department of Health Richmond House 79 Whitehall London SW1 Tel: 011-44-171-210-4850 - Medicinal Licenses and Regulations Patent and Trademark Office Concept House Cardiff Road Newport NP9 1RH Tel: 011-44-1645-500505 - UK Patents Bank of England Threadneedle Street London EC2V 8DQ Tel: 011-44-171-601-4444 - Central Bank The House of Commons Houses of Parliament London SW1A 0AA Tel: 011-44-171-219-3000

2. UK TRADE ASSOCIATIONS/CHAMBERS OF COMMERCE

The UK's trade associations and chambers of commerce are too numerous to list in a report of this nature. Some notable, multi-sectoral business associations are listed below: American Chamber of Commerce in the UK 75 Brook Street London W1Y 2EB, UK Tel: 011-44-171-493-0381 Fax: 011-44-171-493-2394 Association of British Chambers of Commerce 9 Tufton Street London SW1P 3QB Tel: 011-44-171-565-2000




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Fax: 011-44-171-565-2049 British American Chamber of Commerce 8 Staple Inn, Holborn London WC1V 7QH Tel: 011-44-171-404-6400 Fax: 011-44-171-404-6828 International Chamber of Commerce 14-15 Belgrave Square London SW1X 8PS Tel: 011-44-171-823-2811 Fax: 011-44-171-235-5447 British Standards Institution 389 Chiswick High Road London W4 4AL Tel: 011-44-181-996-9000 Fax: 011-44-181-996-7400. Confederation of British Industry Centre Point 103 New Oxford Street London WC1A 1DU Tel: 011-44-171-379-7400 Fax: 011-44-171-240-1578

3. U.S. EMBASSY CONTACTS

American Embassy 24/31 Grosvenor Square London, WIA 1AE England Tel: 011-44-171-499-9000 Fax: 011-44-171-491-4022 http://usembassy.org.uk Address for U.S. mail: American Embassy (London) PSC 801 Box 27 (for Economic Section) or Box 33 (for Commercial Section) or Box 48 (for Agriculture) or Box 54 (for Defense) FPO AE 09498-4033 Economic Minister Tel: 011-44-171-408-8011 Fax: 011-44-171-409-1637 The Commercial Service Tel: 011-44-171-408-8019 Fax: 011-44-171-408-8020 The International Marketing Center (IMC)

Tel: 011-44-171-409-2927 Fax: 011-44-171-495-2944 E-Mail: [email protected] http://usembassy.org.uk/ukfcs.html The Office of Agricultural Affairs Tel: 011-44-171-408-8063 Fax: 011-44-171-409-2019 http://[email protected] Office of Defense Cooperation (ODC) Tel: 011-44-171-894-0737 Fax: 011-44-171-514-4634 The European Bank For Reconstruction & Development Office of the Senior Commercial Officer Tel: 011-44-171-588-4027/4028 Fax: 011-44-171-588-4026

4. WASHINGTON DC-BASED USG CONTACTS (UK-SPECIFIC)

U.S. Department of Commerce UK Country Desk Officer Robert McLaughlin Washington, D.C. 20230 Tel: (202) 482-3748 Fax: (202) 482-2897 http://www.doc.gov Multilateral Development Bank Office Janet G. Thomas - Director Tel: (202) 482 3399 Fax: (202) 273-0927 US&FCS Regional Director (Europe): Mr. Keith Curtis Tel: (202) 482-1599 Fax: (202) 482-3159 Bureau of Export Administration Tel: (202) 482-8547 State Department UK Desk Tel: (202) 647-8027 - Political relations Agriculture Department - food exports Foreign Agriculture Service European Area Officer Tel: (202) 720-2144 Fax: (202) 690-2909 Treasury Department




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UK Desk Tel: (202) 622-0166 - Financial matters American National Standards Institute Tel: (212) 642-4900

Fax: (212) 302-1286 - Information on UK standards National Institute for Standards and Technology (Washington D.C.) Tel: (301) 975-3058

5. RELEVANT U.S.-BASED MULTIPLIERS

British American Chamber of Commerce 275 Madison Ave. New York, NY 10016 Tel: (212) 661-4060 Fax: (212) 661-4074

BASIC FOREIGN COMMONWELATH OFFICE TREATIES

The Treaty Section of the FCO's Records and Historical Department keeps records of all multilateral and bilateral treaties to which the UK is a party and provides a treaty enquiry service. Treaty Section also coordinates the UK's responsibilities as depositary for 34 international agreements.

List of current international agreements for which the Government of the United Kingdom is depositary (includes full status lists of parties to the agreements):

• Agreement concerning an International Observer Scheme for Factory Ships engaged in Pelagic Whaling in the Antarctic (not in force)

• Agreement Concerning the European Air Group and Amending Protocol to the Agreement Concerning the European Air Group

• Agreement establishing an International Foot and Mouth Disease Vaccine Bank • Agreement on CAB International • Agreement on German External Debts • Agreement on the Conservation of Bats in Europe • Agreement On The Rescue Of Astronauts, The Return Of Astronauts And The Return Of

Objects Launched Into Outer Space • Agreement terminating the Commonwealth Telecommunications Organisation Financial

Agreement, 1973 • Amendment to the Agreement on the Conservation of Bats in Europe • Arrangements for the Regulation of Antarctic Pelagic Whaling • Commonwealth Telecommunications Organisation Financial Agreement, 1983 • Constitution of the United Nations Educational, Scientific and Cultural Organisation • Convention for the Conservation of Antarctic Seals • Convention for the Regulation of Meshes of Fishing Nets and the Limits of Fish • Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation • Convention for the Suppression of Unlawful Seizure of Aircraft • Convention on Civil Liability for Oil Pollution Damage resulting from Exploration for and

Exploitation of Seabed Mineral Resources • Convention on Future Multilateral Co-operation in North-East Atlantic Fisheries (note: the

UK is not a signatory) • Convention on International Liability for Damage caused by Space Objects • Convention on the Conduct of Fishing Operations in the North Atlantic




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• Convention On The Prevention Of Marine Pollution By Dumping Of Wastes And Other Matter

• Convention On The Prohibition Of The Development, Production And Stockpiling Of Bacteriological (Biological) And Toxin Weapons And On Their Destruction

• Fisheries Convention (with Protocol of Provisional Application and two Agreements as to Transitional Rights)

• Framework Agreement between France, Germany, Italy, Spain, Sweden and the UK, concerning Measures to Facilitate the Restructuring and Operation of the European Defence Industry

• International Agreement regarding the Maintenance of Certain Lights in the Red Sea • International Convention for Permanent Control of Outbreak of the Red Locust • International Convention relative to the London Preservation of Fauna and Flora in their

Natural State • Modifying the International Convention of 22 February 1949 • North-East Atlantic Fisheries Convention • Protocol for the Suppression of Unlawful Acts of Violence at Airports serving International

Civil Aviation, Supplementary to the Convention for the Suppression of Unlawful Acts against the Safety of Civil Aviation

• Treaty Banning Nuclear Weapon Tests in the Atmosphere, in Outer Space and Under Water

• Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies

• Treaty On The Non-Proliferation Of Nuclear Weapons • Treaty on the Non-Proliferation of Nuclear Weapons (declarations of signatories) • Treaty On The Prohibition Of The Emplacement Of Nuclear Weapons And Other

Weapons Of Mass Destruction On The Sea-Bed And The Ocean Floor And In The Subsoil Thereof

BRITAIN - THE BEST PLACE FOR INWARD INVESTMENT

Prime Minister's speech to the Global Borrowers and Investors Forum Conference

All Governments round the world today face the same challenge: how to provide opportunity and security for all in a world of change. Global finance and technology transform not just our economies but our social fabric. Living standards, certainly in the richer nations, may rise. But so does insecurity. The old, familiar certainties - jobs for life, stable communities, settled family ties - are gone or under pressure.

The nations that succeed are those that combine a strong sense of values with a willingness to adapt, to move with the grain of change.

This is reinforced by the fact that the greatest resource of a nation today, certainly one like Britain, is its people. Their education and ability are the key to economic success as well as social stability. So opportunity for all is not just socially desirable; it is increasingly an economic necessity.

All of this transforms the role of modern governments and politics. Old categories of left and right become out of date. Values remain but policies require a radical overhaul.

We have been tougher on monetary and fiscal discipline than any Conservative Government before us; and are proud of it. Yet after cutting the deficit, we are now embarking on a sustained




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expansion of investment and education, skills and technology. We are pro-business, but are tackling social exclusion through policies like the New Deal for the unemployed. We have introduced tough policies on crime, but are also resolutely in favour of a society of tolerance, without prejudice or discrimination.

People say this is a political contradiction. I say if you want something that works, it is the new consensus around which successful Government has to be based. It is the reason we created New Labour and the reason we will continue it.

One big part of our programme is to make Britain the number one place in Europe for business. Attracting business and investment is essential, economically and socially. If we live in a global economy, get as much of it as you can. Otherwise full employment is a chimera. So we need you and we want you here.

We believe Britain can become the European hub of the emerging global economy. In Europe, a bridge to America, attracting investment from both and from around the world. In effect, Europe's corporate headquarters.

Inward Investment in Britain

Britain is already Europe's top location for inward investment. We get over 25% of all investment into the EU, including over 40% of all US and Japanese investment.

This investment accounts for 19% of British employment and over a third of manufacturing investment. There are 18,000 foreign firms now operating in Britain, accounting for 20% of Britain's top 100 exporters.

The total stock of investment at the end of last year stood at 240 billion pounds, 50% up since the general election. Since 1997, foreign investment has created over 90,000 new jobs and safeguarded 158,000 more.

Figures being published on 5 July will further show that last financial year set new records in terms of new investment, particularly in terms of new start-ups and new jobs. These figures will demonstrate that investors not only regard Britain as the business centre of Europe but they increasingly see us as Europe's digital centre - the natural home of Europe's vibrant and growing software and e-commerce industries.

There is always more to do. We are putting in place a new framework for bringing together the way we promote trade and investment in Britain, joining up the different agencies and creating a one-stop shop for investors and business alike.

That is why our strategy is:

First, to entrench our new framework for monetary and fiscal stability;

Second, to reform our education system so that we can compete from a position of strength in the new knowledge economy;

Third, to create one of the world's most independent and robust competition frameworks to open Britain up to new startups and inward investors;




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Fourth, to put in place a framework that rewards small and medium size businesses and entrepreneurs for innovation and risk-taking;

And lastly, to put structural reform and competitiveness at the top of Europe's economic agenda through constructive engagement in the European Union.

Stability

The British economy is forecast to grow by around 3% this year and 2.5% for the next two years. We have avoided the recession so many predicted. But it hasn't been chance. It has been the result of policy reforms: price stability based on an inflation target, and fiscal stability based on tough fiscal rules.

We have established a more robust and credible institutional framework by making the Bank of England independent and legally enshrining our new fiscal procedures in a new code for fiscal stability.

The results of this new macroeconomic approach speak for themselves:

Inflation down to 2.0%. Short term interest rates down to 6%. Long-term interest rates down to German levels for the first time in thirty years. A budget surplus this year of 17 billion pounds where we inherited a deficit of 28 billion pounds. National debt down to 35% of GDP from 44% in 1997.

At the same time, we have freed up substantial new money for public investment. We will shortly be setting out our plans for increased investment including in the transport system over the next ten years. None of this has come easy. It is only because we were prepared to take the tough choices necessary to keep spending under control, to sort out the deficit, to cut the bills of social and economic failure, that we are able to deliver stability for the long term and that we are now able to invest more in the key public services.

Precisely because we recognise the importance of stability, we recognise the potential benefits of Britain's membership of the single currency.

Whatever you may read, our policy has not changed, and will not change. In principle we favour joining a successful single currency. In practice the five tests, which include sustainable economic convergence and the effect on the City of London, must be met. In the meantime we prepare so that should they be met, Britain is able to join. The final say is with the people in a referendum. We have repeatedly said, most recently the Chancellor last Thursday, that we will make the assessment early in the next Parliament.

I have no doubt at all that it is essential for Britain to develop its rule as a key player in Europe. Not for Europe's sake, but for Britain's. To talk of withdrawal from Europe or a retreat to its margins is the fastest job-losing strategy I know. My Government won't follow.

Education, training, welfare-to-work

We need a modern flexible labour market and a radically improved education system.

Last year's results in primary schools were the best ever; we are reforming our secondary schools; introducing performance-related pay for our teachers; giving more people access to




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higher education, with the goal of extending further education to 50% of young people by 2010. And giving people throughout their life greater opportunities to continue to learn and retrain.

But just as we are preparing the next generation for tomorrow's challenges, so we are working to help this generation adapt to those of today.

As the OECD said in their recent report on the UK, our welfare-to-work programme is having a significant impact in improving Britain's labour market and moving people out of declining industries into new opportunities.

By demanding responsibility as well as giving opportunity, the New Deal has already helped cut youth unemployment by over half. Nearly one million jobs have been created.

As a result we are spending 2-3 billion pounds a year less on welfare.

Competition

If stability is the pre-requisite for investment, competition is the driving force.

Competition is also the key to improving Britain's poor record on productivity - the traditional Achilles heel of British industry.

That is why this Government is putting in place the most rigorous competition framework this country has ever seen.

Our new Competition Act builds on our decision to create a new independent competition authority.

For banking and financial services, the Financial Services Authority will now, for the first time, be required to facilitate competition.

And for the regulatory system, the Government will consider how to scrutinise regulatory bodies and review existing and proposed regulations to ensure they are promoting not impeding new entrants and competitive forces.

Creating the best environment for investment

Making Britain the best place to do business in Europe means creating the best environment for investment, innovation and risk taking.

Of course, business will always have its concerns with this or that aspect of Government policy. We have set up a new Small Business Service, based on the American model, to promote small businesses' interests, including tackling regulation. Recently there has been disagreement over so-called "mixer taxes" though I believe with the new Treasury proposals these can now be laid to rest.

But it is important to emphasise the business-friendly nature of much of our tax reform.




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To promote small business development, we have cut small business tax from 23p to 20p and introduced a new starting rate of tax of 10p in the pound for all companies making profits of up to 50,000 pounds a year.

To promote expansion in larger businesses, we have cut corporation tax from 33% to 30%, the lowest rate of corporation tax of any major industrialised economy.

To promote longer term investment, we have cut capital gains tax from 40% to 35% after one year, tapering down to 10% after four years.

And to promote the best talent entering the new high-tech sectors, we have also introduced a new share-ownership scheme allowing firms to offer share option incentives of up to 100,000 pounds for up to 15 employees.

As we can, so we will do more.

Economic reform in Europe

But reform at home must be matched by reform abroad if we are to reap the full benefits of the massive changes sweeping the global economy.

That is why we, along with like-minded governments on the continent, have led the drive to accelerate structural reform in Europe. At the Lisbon Summit last March we succeeded in getting the European Union to put job creation through economic reform at the heart of the EU's agenda; and to focus future legislation on opening up new markets and liberalising existing ones.

Gordon Brown's personal triumph at the Summit in Portugal earlier this week is further proof of that new economic realism in Europe. Six months ago Britain was all but isolated in arguing that the best way of cracking down on tax evasion was by exchanging information, not imposing a one-size-fits-all tax across the European Union.

Today, the threat of a withholding tax being imposed on the City of London has been lifted. By winning the argument, not by using the veto.

And by winning the rest of Europe round to our point of view we have done more than protect Britain's interests over the withholding tax.

We have advanced our vision of an open, deregulated Europe in which legitimate tax competition is a spur to economic development not a threat.

Conclusion

Which brings me back to where I started.

Our ambition to make Britain Europe's corporate headquarters. The leading destination for inward investment, the best place to do business in Europe.

Getting the fundamentals right has been our priority. We can now move on in the confidence that we are building on stability.




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I believe our reputation for economic competence is one of our most important achievements. There are many responsibilities that face a government. They don't come bigger than managing the nation's finances, delivering economic stability, jobs and rising living standards.

There is a tendency in this country to knock rather than celebrate. I believe that inward investors share my view about Britain today. That it is a great country, with a great past, and a great future.

That there is nowhere better on earth to work, to live, to do business.

So I thank those who invest here already for the faith you put in Britain.

And I promise you today that we will carry on working, day in day out, to deliver the policies that help you thrive and prosper in the UK

Renewable Energy

Reform of the Renewables Obligation

RENEWABLE ENERGY – REFORM OF THE RENEWABLES OBLIGATION

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Why is DTI conducting this consultation?

In the Energy Review Report: The Energy Challenge the Government set out a seriesof proposals for the reform of the Renewables Obligation (RO). These were thesubject of a consultation, Reform of the Renewables Obligation and StatutoryConsultation on the Renewables Obligation Order 2007, issued in October 2006.

The Energy White Paper, Meeting the Energy Challenge, published on 23 May 2007sets out how the RO will be reformed. This consultation sets out, and seeks views on,the detailed implementation of the changes that are being introduced. These include:

� extension of the obligation level to a maximum of 20% on a headroom basis;

� ‘banding’ the RO to provide groups of technologies needing similar levels ofsupport with the encouragement to bring forward generation solutions; and

� removal of the current caps on co-firing.

These changes to the RO are subject to the necessary State Aid clearance and thesuccessful passage of primary legislation. It is our intention to introduce a bill whenParliamentary time allows. This would mean the changes coming into force on 1 April2009 at the earliest. However, to provide the certainty that investors need theGovernment is seeking views now on the precise arrangements and banding levelsthat would apply after the legislation is in place.

A Regulatory Impact Assessment is included in this consultation document.

Issued on: 23 May 2007

Respond by: 6 September 2007

Enquiries to: Stephen ClarkRenewables Obligation PolicyDepartment of Trade and Industry2nd Floor1 Victoria StreetLondon SW1H 0ET

Email: [email protected]: 020 7215 5014Fax: 020 7215 2890

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Foreword by Lord Truscott, Parliamentary Under Secretary of State for Energy 1

1. Introduction 3Summary of Proposals 3Timetable 4How to respond 5Additional copies 5Confidentiality & Data Protection 5Help with queries 6

2. Banding the Renewables Obligation 7Future development of renewables in the UK 7Proposed approach 9Key principles 9How will a multiple ROC Obligation work? 10Net neutrality of Banding 11Number of Bands 12

3. Proposed Bands for implementation from 1 April 2009 14Overview of Proposed bands 15Established – 0.25 ROCS/MWh 16Reference Band – 1 ROC/MWh 16Post-Demonstration Band – 1.5 ROCS/MWh 17Emerging Technologies Band – 2.0 ROCS/MWh 18Other Issues 20

Contents

4. Setting bands and when they will apply 22Independence of advice on band setting 22Criteria to be taken into account 23Expertise of Committee members 23Frequency of band setting 24Grandfathering 26Commitments from Previous Consultation 26Proposals on Grandfathering 27Duration of grandfathering 30

5. RO Levels in a Banded RO 31Extending RO levels to 20% on a “guaranteed headroom” basis 32Retaining the RPI link to the buy-out price 34Preventing ROC price crashes: the “cliff edge” issue 34

6. Co-firing and Sustainability of Biomass 37Co-firing 37Energy Crops 39Sustainability 40Waste 41Determining Biomass Fraction of Waste 41Making RO neutral to waste (Solid Recovered Fuels) 43

Annex A: List of Questions 44

Annex B: Regulatory Impact Assessment 47

Annex C: Consultation Criteria 58

Annex D: 2010 Levelised Technology Costs and Current and Projected Supply 59

Annex E: Analysis on Biomass Fraction of Waste for Use in Deeming the Fossil Fuel Fraction of Waste 60


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Summary of Proposals

1.1 The Energy White Paper, Meeting the Energy Challenge, announced theGovernment’s decision on future reform of the Renewables Obligation (RO) forEngland and Wales. This follows last year’s Energy Review Report which announcedour intention to:

a. increase the level of the Obligation above the level previously announced if actualgeneration requires, to a maximum level equivalent to 20%;

And the “Reform of the Renewables Obligation and Statutory Consultation on theRenewables Obligation Order 2007” which closed on 5 January 2007 whichproposed to:

b. band the RO to provide differentiated levels of support for different technologies;

c. introduce a mechanism intended to maintain Renewables Obligation Certificate(ROC) prices in a situation of ROC oversupply.

1.2 The Government believes banding the RO will provide the flexibility necessary toincrease deployment of renewable electricity generation in the years following 2009and respond to the UK share of the EU 2020 target. Any changes to the Obligationsin Scotland and Northern Ireland will be subject to separate consultations andParliamentary agreement, once the necessary primary legislation has been secured.

1.3 The approach that the Government has taken has focused on the period up to 2015.Deployment beyond 2015 will depend strongly on developments in technologicalinnovation, technology costs and other policy instruments aimed at mitigating theeffects of climate change, in particular greenhouse gas emissions. Whenconsidering proposals to band the RO, our objectives were to:

� bring on additional deployable technologies by providing appropriate levels ofsupport and certainty for future investments through the RO while maintainingbroadly similar costs to consumers;

� protect the position of existing renewable energy projects and investors and alsothose projects under construction or which come into operation prior to theintroduction of a new regime; and

1. Introduction

� allow adjustments to the RO to avoid over-subsidisation of technologies as costsand revenues evolve.

1.4 The Government recognises that banding the RO represents a significantamendment to the current system. This consultation sets out the proposed wayforward, identifying questions remaining to be answered on the detailedarrangements to apply when the reforms to the RO are introduced. It also includesdetails of the transitional arrangements that will apply in the run up to the newarrangements being brought into force.

1.5 The Government will consult widely on the issues raised in this consultationdocument over the next fifteen weeks, in accordance with Government guidance onpublic consultation exercises.

Timetable

1.6 The RO is set out in legislation called the Renewables Obligation Order (ROO). Thisis a form of secondary legislation known as a Statutory Instrument. It sets out thedetail of the RO and can only be amended if it is first subject to a consultation andthen debated and approved by both Houses of Parliament.

1.7 The powers enabling the Government to introduce the ROO are set out in theenabling primary legislation. The primary legislation for the ROO is the Electricity Act1989 as amended, for example by the Energy Act 2004, which enabled the ROO toaccommodate the introduction of the Northern Ireland Renewables Obligation.Banding the RO will require further modifications to the primary legislation througha new Act of Parliament. This process can take some time.

1.8 Although changes will not be introduced until 1 April 2009 at the earliest, theGovernment recognises that both the investment and development communitiesneed to have as much certainty as possible over the future regulatory framework,if projects are not to be delayed. This consultation sets out for commentarrangements that the Government proposes to bring forward via future legislation(primary and secondary) in a way which should provide the reassurance thatinvestors are seeking.

1.9 Following this consultation, the Government will take a decision on the form that abanded RO will take. A statutory consultation on the details of the implementationwill be required.

1.10 These changes will be contingent on obtaining State Aid approval from theEuropean Commission as the recycling of the buy-out fund is considered to be astate aid. The original RO was notified to the Commission and approved prior to itsintroduction in 2002 and subsequent changes have also been notified to andapproved by the Commission.


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How to respond

1.11 Responses to this consultation must be received by 6 September 2007. These canbe submitted by e-mail, letter or fax to:

Stephen ClarkRenewables Obligation PolicyDepartment of Trade and Industry2nd Floor1 Victoria StreetLondon SW1H 0ET

Tel: 020 7215 5014Fax: 020 7215 2890E-mail: [email protected]

1.12 When responding please state whether you are responding as an individual orrepresenting the views of an organisation. If responding on behalf of an organisation,please make it clear whom the organisation represents and, if applicable, howmembers’ views were assembled.

Additional copies

1.13 You may make copies of this document without seeking permission. Printed copiesof the consultation document can be obtained from:

DTI Publications OrderlineADMAIL 528London SW1W 8YT

Tel: 0845 015 0010Fax: 0845 015 0020Minicom: 0845 015 0030www.dti.gov.uk/publications

1.14 An electronic version can be found at www.dti.gov.uk/files/file39497.pdf

Confidentiality & Data Protection

1.15 Your response may be made public by the DTI. If you do not want all or part ofyour response or name made public, please state this clearly in the response. Anyconfidentiality disclaimer that may be generated by your organisations’ IT system orincluded as a general statement in your fax cover sheet will be taken to apply only toinformation in your response for which confidentiality has been specifically requested.


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1.16 Information provided in response to this consultation, including personal information,may be subject to publication or disclosure in accordance with the access toinformation regimes (these are primarily the Freedom of Information Act 2000(FOIA), the Data Protection Act 1998 (DPA) and the Environmental InformationRegulations 2004). If you want other information that you provide to be treated asconfidential, please be aware that, under the FOIA, there is a statutory Code ofPractice with which public authorities must comply and which deals, amongst otherthings, with obligations of confidence.

1.17 In view of this, it would be helpful if you could explain to us why you regard theinformation you have provided as confidential. If we receive a request for disclosureof the information we will take full account of your explanation, but we cannotgive an assurance that confidentiality can be maintained in all circumstances. Anautomatic confidentiality disclaimer generated by your IT system will not, of itself,be regarded as binding on the Department.

1.18 The Department will process your personal data in accordance with the DPA andin the majority of circumstances this will mean that your personal data will not bedisclosed to third parties.

Help with queries

1.19 Questions about the policy issues raised in the document can be addressed toStephen Clark at the address in paragraph 1.1.

1.20 If you have comments or complaints about the way this consultation has beenconducted, these should be sent to:

Kathleen McKinlay, Consultation Co-ordinatorDepartment of Trade and IndustryBetter Regulation Team1 Victoria StreetLondon SW1H 0ET

E-mail: [email protected] Tel: 020 7215 2811Fax: 020 7215 2235

1.21 A copy of the Code of Practice on Consultation is in Annex C.


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2.1 The RO was introduced in 2002 and represents the Government’s main policymeasure for stimulating the growth of electricity generation from renewablesources1; and for achieving both the target of 10% of electricity from renewablesources by 2010 and our aspiration to double this to 20% by 2020. The RO in itscurrent form is designed to bring forward the most economic renewabletechnologies and so levels of support do not differentiate between technologies.

Future development of renewables in the UK

2.2 The Government believes that renewables have a significant role to play in thefuture electricity generation mix and that the stimulus provided by the developmentof a carbon market through the EU Emissions Trading Scheme (EU ETS) and theRO will lead to further growth in renewables development over the coming years.However, the pace of growth towards the Government’s target (and aspiration) forrenewable electricity could be constrained by a number of factors, in particular:delays in the planning and grid connection of renewable energy projects, constraintson the practical resource available for the most economic forms of renewableenergy, and the higher costs of renewable energy projects in less mature oremerging technology areas, such as offshore wind and biomass.

Summary of Chapter 2� Subject to Parliamentary approval, the Government will introduce banding.

� Banding the RO is predicted to increase the deployment of renewables by over40% over 2009-2015 compared to the existing RO.

� Banding will follow the multiple/fractional ROC model.

� The Obligation on suppliers will be to present a certain number of ROCs rather thanto supply a certain amount of renewable electricity.

� Bands will be based on technology groupings.

2. Banding the RenewablesObligation

1 www.dti.gov.uk/energy/sources/renewables/policy/obligation/page15630.html

2.3 The Government recognises the urgency in tackling planning and grid constraints, bothin terms of accelerating deployment and reducing project risk and costs. Meeting theEnergy Challenge 2 discusses the steps the Government is taking to address barriersin these areas. Taken together we believe that these changes will significantly improvethe development lifecycle, reducing development costs and risks.

2.4 There are constraints on the availability and deployment of the cheaper forms ofrenewables which mean that, to meet the Government’s long-term targets forrenewable energy we will need a significant contribution from renewable sourcesthat are currently more expensive. As a technology-neutral instrument, the RO hasthus far proved less successful in bringing forward development of the less welldeveloped renewable technologies.

2.5 The majority of respondents agreed that, in the absence of additional fundingthrough separate mechanisms, banding the RO was the best option. The modellingOxera3 have carried out for us indicates that leaving the RO unchanged will meanthat we will not be on a trajectory to achieve our aspiration of doubling our 2010target of 10% renewable generation by 2020. Under the central assumptions4 forthe model an unchanged RO is predicted to deliver 8.1% (26.8 TWh) and 11.4%(39.3 TWh) of electricity from ROC eligible renewable sources by 2010 and 2015respectively. It is clear that a change is necessary to increase deployment andflexibility for the RO within acceptable costs to consumers.

2.6 Our decision to band was also informed by our own modelling of the changes andassociated cost benefit analysis. This work was based on:

� an analysis and informal consultation on current market costs of each technology.This work was undertaken on our behalf by Ernst & Young. A report, givingdetails of the cost review findings and those organisations consulted, can befound at www.dti.gov.uk/files/file39038.pdf; and

� modelling of the renewable electricity market, undertaken on our behalf byOxera. Details of this work are also published atwww.dti.gov.uk/files/file39039.pdf.

Details of our cost benefit analysis are available in the attached Regulatory ImpactAssessment. In summary, modelling (using the Central Assumptions for futuretechnology costs and electricity prices) suggests that we will be able to deliver13.5% of electricity from ROC eligible renewable sources by 2015 under a bandedscenario (7.4 TWh additional generation). The increase in ROC eligible renewableelectricity between 2009 and 2015 is over 40% higher than under the base scenario.These figures do not take account of the renewable technologies which are notsupported by the RO, including existing large hydro-electric schemes, conventionalEnergy from Waste (EfW) power stations and microgeneration installations not


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2 www.dti.gov.uk/energy/whitepaper/3 www.dti.gov.uk/files/file39039.pdf4 The central assumptions include: the electricity and carbon prices from the central scenario of the Updated Energy Projections

(UEP) forecast; that future costs of renewable technologies are those predicted by Ernst and Young. The central assumptions do notinclude any of the expected benefits from reform of the planning and grid access regimes set out in Meeting the Energy Challenge.

claiming ROCs. We estimate that this will amount to around 6.2 TWh of electricitysupply by 2015.

Proposed approach

2.7 The earlier consultation considered two potential broad approaches to banding the RO:

� award more than 1 ROC per MWh (multiple ROCs) to some technologies, andless than 1 ROC per MWh (fractional ROCs) to others (this document refers tothis approach as the ‘multiple ROC’ approach); and

� create separate obligations for the different technologies, with different buy-outprices and targets (the ‘multiple obligation’ approach).

2.8 The Government believes the multiple ROC approach has a number of clear advantages:

� it leaves it up to the market to decide what generation mix is appropriate andin so doing should promote better decision-making that takes into account allaspects of project development and operation;

� it reduces the overall complexity of banding, recognising that banding makes theRO more complex; and

� simplifies the protection of existing projects.

2.9 It is important to note that while we refer to fractional and multiple ROCs, inpractice Ofgem will continue to issue whole ROCs. The multiple ROC approachmeans that a technology in the 0.25 ROC per MWh band will have to generate4 MWh in order to claim 1 ROC, and a technology in a 2 ROC per MWh band willneed to generate 0.5 MWh to claim 1 ROC. The number of ROCs will be calculatedby multiplying the electricity generated from a given project for each power station’smonthly (or annual) ROC claim during an obligation period by the banding index androunding any partial ROCs of 0.5 or greater up to the nearest whole ROC and anybelow 0.5 ROCs down. For example, an offshore wind farm generating 2,001 MWhin a month will receive 3,002 ROCs. This is calculated by multiplying the amount ofgeneration in MWh by the banding factor for offshore wind which is 1.5 whichcomes to a total of 3,001.5. This number is then rounded up to 3,002.

2.10 The majority of respondents to the recent consultation on the proposal to introducebanding supported this approach.

Key principles

2.11 In introducing banding, the Government believes that the following key principlesare essential to ensure the success of the system:


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� grandfathering – the position of those who have made significant investmentsshould be protected in terms of the number of ROCs they receive (this issue isdiscussed in Chapter 4);

� notification – any reduction in support for a technology should only be made aftera reasonable notice period. This should be at least enough time for a typicalproject to go from financial close to operation;

� transparency – the process for setting the bands should be open and clear andinvolve consultation with industry and other key interested parties; and

� reliability – the market should have confidence that the bands will be set on thebasis of an independent and objective assessment of the commercial positionand prospects of different renewable technologies.

2.12 These principles were endorsed by the vast majority of the consultation responses,and have formed the basis for the arrangements set out in this document. Bandingthe RO on this basis provides the opportunity to:

� increase total renewables growth;

� increase RO efficiency in terms of renewables capacity with only moderateincrease in the costs to consumers;

� help bring forward developing technologies.

How will a multiple ROC Obligation work?

2.13 As it stands, the RO places an obligation on electricity suppliers to supply a certainamount of eligible renewable electricity (evidenced by presenting ROCs), or to pay abuy-out price. But with a banded RO, one ROC will not necessarily be equivalent toone MWh of renewable electricity – it could be more or less, depending on thetechnology. The number of ROCs presented by an electricity supplier at the end of anobligation year will no longer exactly represent the volume of renewable energy inMWh supplied by that supplier.

2.14 For this reason, the introduction of a banded multiple ROC obligation would involveconverting the existing legislative obligation on suppliers to supply a specifiedproportion of electricity from eligible renewable sources (or pay a buy-out price) intoa legislative obligation to present a specified number of ROCs (or pay a buy-outprice). In practice, as evidence of renewable electricity supply is demonstrated bythe presentation of ROCs, electricity suppliers already operate on this basis withinthe current RO.

2.15 The Government proposes that in the first instance this conversion to a ROCobligation would be made on the basis of the Government’s announcements on ROlevels and retaining (for the purposes of calculating the ROC obligation) the 1:1relationship between a supplier’s obligation in MWh and their obligation in ROCs.


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2.16 Thus for example, the RO level for 2011/12 is set at 11.4%. For an electricity supplierwith sales of 50 TWh, this would represent, under the current RO, an obligation tosupply 5.7 TWh, or 5,700,000 MWh, of electricity from renewable sources. Under abanded RO, this would be converted to an obligation to present 5,700,000 ROCs (orto pay a buy-out price for each ROC not presented). This approach may in time beovertaken by the implementation of headroom (see Chapter 5).

2.17 Another implication of the change to a banded RO with a legislative obligation topresent ROCs is that suppliers could meet their obligation by supplying either moreor less actual renewable energy than would be the case under the present system.Continuing the example in paragraph 2.16, a supplier with an obligation to present5,700,000 ROCs could potentially meet that obligation using either mainly renewableenergy sources that attracted multiple ROCs or mainly through renewable energysources that were awarded fractional ROCs. In the former case, the supplier wouldsupply less actual renewable electricity than under the current RO (but with higherproportions from more expensive and developing renewable technologies). In thelatter case, the supplier would supply more actual renewable electricity than underthe current RO.

2.18 Later in this Chapter we explain how future RO levels will be set. Under ourguaranteed headroom proposals future increases in RO levels will be calculated onthe basis of the number of ROCs expected to be in circulation. This mitigates the riskthat breaking the 1:1 equivalence between MWh and ROCs could undermine the RO,either by entrenching high levels of recycling or reducing or even eliminating thefuture revenue certainty that guaranteed headroom is designed to provide.

Net neutrality of Banding

2.19 The creation of a banded multiple ROC obligation breaks the existing direct linkbetween the overall size of the electricity market, and the actual amount ofrenewable energy which would be required to meet the RO. Therefore, theGovernment recognises that decisions on bands might have the effect of eitherputting more ROCs into the market than the number of MWh generated (this may bereferred to as “net banding up”) or fewer ROCs than MWh (”net banding down”).

2.20 While some element of net banding up or down is almost inevitable in a bandedRO, the Government’s view is that it will be important to set bands in a way whichpreserves the overall stability of the ROC market. This is especially the case giventhe Government’s announcements on RO levels in the Energy Review Report5 (seeChapter 5 of this document for further discussion) which seek to add additional long-term certainty to the minimum ROC price likely to be achieved in a banded RO.


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5 www.dti.gov.uk/energy/review/

2.21 On this basis, in our recent consultation document, the Government indicated that,for the purposes of retaining the credibility of the RO as the key mechanism forachieving the Government’s renewable energy targets, it would be important to aimto achieve a broad balance between the additional supply of ROCs created by“banding up” of certain technologies with the reduced supply of ROCs created bythe “banding down” of others. In short, the aim would be to ensure that, forexample, an RO level of 13.4% in 2013/14 could be satisfied by somethingreasonably close to 13.4% of actual renewable energy.

2.22 Our proposal to set future bands on a net neutral basis attracted a significant levelof comment. Most responses suggested that fixed targets for net neutral bandingwould be too difficult to achieve and maintain given current technology costs. Inaddition such an approach could artificially constrain the level of support provided toeach technology, leading to less overall generation than might otherwise be the case.

2.23 Although our general intention would be to aim for a net neutral banding approach,we acknowledge that the risks set out above exist and on that basis we will notstrictly apply this approach in setting banding levels.

2.24 The overriding goal of the RO remains to promote the deployment of renewables ata reasonable cost to consumers in a way that best supports progress towards our10% target and aspiration to double this by 2020. On that basis, we believe netneutrality remains an important guiding principle in informing future decision-makingto ensure that the RO supports progress towards these targets and maintains bothconsumer and investor confidence. We believe that this can be delivered by futurereviews of banding taking into account the principles set out at paragraph 4.4 –in particular that the bands should be set taking into account the impact on thenumber of ROCs likely to be in the market, and aim to maintain investor confidenceand ensure that consumers get value for money.

Number of Bands

2.25 In the recent consultation the Government proposed that bands should be set bytechnology, and asked for views on whether bands could also cover sub-sets oftechnologies (for example, separate bands for smaller and larger projects). In doingso, we recognised the trade-off between the ability to fine-tune support to projectsand the increasing complexity of the RO – the more bands there are, the morecomplex it will be to administer and potentially to predict ROC values.

2.26 More than two-thirds of the responses to the consultation agreed that bands shouldbe set by technology. However many responses argued that, at least initially,technologies should be grouped so that those at an approximately equivalentposition in technology development and cost should be grouped together. Whenasked directly how many bands there should be the majority argued for no morethan six bands.


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2.27 Our approach has been to assess the expected current and forward costs over thenext few years for each of the technologies set out in our previous consultationdocument. We have found that these costs6 seem to fall into loose groupings whichreflect at least in general terms the market and technological development that thetechnologies have reached to date. We are, however, also aware that there is aconsiderable degree of uncertainty over cost predictions, as has been evidenced in themovements in costs over the past two years since previous studies7. For example thecost of wind generation has risen by over 20% mostly due to higher internationaldemand driving increased prices for wind turbines. Given these uncertainties, theGovernment does not think it appropriate to make fine distinctions between the levelsof support given to different technologies but rather to take groups of technologiesand set support levels which reflect the general position of that group.

2.28 The costs arise from two principal sources, capital costs which are often the majorissue for technologies such as wind, and fuel costs which are most significant forthe biomass using technologies. Taking both of these sources of cost into accountthe Government has identified groups which can in the initial phase of a banded RObe treated in similar fashion. These bands are set out in Chapter 3. The allocation oftechnologies to these groups result from an empirical observation of the costs theyface and does not mean that the numbers of bands and distribution of technologiesmay not change in future (after appropriate consultation).


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6 www.dti.gov.uk/files/file39038.pdf7 Enviros, The costs of Supply Renewable Energy, Sept 2005 www.dti.gov.uk/files/file21118.pdf

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3.1 This Chapter sets out the bands that, subject to the outcome of this consultationand a statutory consultation on a future Renewables Obligation Order, willapply when the new arrangements are brought into force. The target date forimplementation is 1 April 2009 subject to the availability of Parliamentary time andState Aids clearance. We are setting the bands out now to provide a clear view fordevelopers to build projects with confidence. An early indication is necessary toprevent any delay as renewable projects can take several years to develop.

3.2 In order to assess the banding levels, we commissioned Ernst and Young to lookat the costs of RO eligible technologies. Their report is published alongside thisconsultation8. Ernst and Young used their own experience of financing renewableprojects, existing reports and consultation with interested parties to produce anestimate of the levelised cost (including capital, cost of capital, fuel, operating andmaintenance costs) per MWh for each technology at four key points – 2006, 2010,2015 and 2020. The levelised costs are presented as a range to illustrate that costscan vary due to a number of factors (grid, planning, wind speed, efficiencies) foreach technology. The range, and the spread of projects across it, is not necessarilythe same for each technology. This also reflects the uncertainty in costs goingforward for emerging technologies and learning curve effects.

Summary of Chapter 3� 4 bands are proposed:

– technologies in the Established Band will receive 0.25 ROCs/MWh;

– technologies in the Reference Band will receive 1 ROC/MWh;

– technologies in the Post-Demonstration Band will receive 1.5 ROCs/MWh;

– technologies in the Emerging Technologies Band will receive 2 ROCs/MWh.

� Microgeneration projects will be placed in the same bands as large scale generationusing the same technology.

3. Proposed Bands forimplementation from1 April 2009

8 www.dti.gov.uk/files/file39038.pdf

3.3 It is not the Government’s intention through banding to provide all projects withexactly the support level they need. This would not incentivise developers to siteand build economic projects or reflect some of the natural constraints on the limitsof future resource. For example we do not think that multiple ROCs should beprovided for the development of wind farms at sites where wind speed is low andgrid or customers are distant. The RO was developed as a market mechanism topull forward the most economic and efficient projects and this remains our aimwithin the bands set out below. This ensures that the cost to the consumer isminimised and market principles are maintained.

3.4 The Government is proposing a banding regime based on modelling taking intoaccount our policy objectives (set out in Chapter 2). Cost data on eligibletechnologies were fed into an economic model of the renewables generationmarket which takes into account revenue from electricity, Climate Change LevyExemption Certificates (LECs) and the carbon price. A report of the modelling workis published alongside this consultation9. The modelling shows that electricity andcarbon prices are currently not sufficient to promote deployment for all projectsfrom any technology without support from the RO. A variety of support scenarioswere run through the model to assess the impact on:

� generation;

� resource costs;

� costs to the consumer, firms and the Exchequer.

The costs and benefits of options are discussed in further detail in the partialRegulatory Impact Assessment accompanying this consultation.

Overview of Proposed bands

3.5 The following table and sections provides an overview of each proposed band.Annex D provides an overview of technology costs and current deployment andfuture deployment levels.

Band Technologies Level of support

ROCs/MWh

Established Sewage gas; landfill gas; co-firing of non-energy crop 0.25(regular) biomass

Reference Onshore wind; hydro-electric; co-firing of energy crops; 1.0EfW with combined heat and power; other not specified

Post-demonstration Offshore wind; dedicated regular biomass 1.5

Emerging technologies Wave; tidal stream; advanced conversion technologies 2.0 (anaerobic digestion, gasification and pyrolysis); dedicated biomass burning energy crops (with or without CHP), dedicated regular biomass with CHP; solar photovoltaics; geothermal


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Established – 0.25 ROCs/MWh

3.6 There are some technologies which are relatively mature and low risk in that theyrequire low levels of capital investment sometimes on existing sites and may haveother regulatory requirements or income streams to support their business cases.These include the generation of electricity from:

� Landfill gas (LFG) and sewage gas. The technologies deployed to convert thegas into energy are well developed in comparison to many and sites are oftenlocated relatively close to grid connections. The use of LFG is subject to theLandfill Regulations (2002) which imply that LFG should be combusted in anengine wherever feasible or else it must be flared. The generation capacity forsewage gas is assumed to be essentially saturated. The cost analysis andmodelling work we have commissioned predicts that despite the low costs thatthey face there would be little additional growth in the capacity even under anunbanded RO.

� Co-firing of regular biomass. This requires comparatively little additionalinvestment and receives (in the case of coal-fired power stations) increasedincentives from the additional avoided costs from EU ETS carbon price. Themodelling assumes that EU ETS will produce a cost of carbon of €20/tonne CO2in 2010. The avoided cost of co-firing is that of the coal and carbon avoided. Thisamounts to £28.40/MWh in 2010/11. A more detailed consideration of the issuessurrounding co-firing and biomass more generally is set out in Chapter 6.

Reference Band – 1 ROC/MWh

3.7 Technologies which are relatively mature but require significant capital investmentinclude onshore wind farms and hydro-electric schemes. Also included in this bandwill be EfW power stations which produce combined heat and power (CHP) and theco-firing of energy crops. The rationales for their inclusion are discussed below.

� Onshore wind and hydro-electric are both well established technologies butwhich require significant capital investment proportionate to the electricitygenerated. They also have a wide range of levelised costs which reflects thedegree to which their output is dependent on the energy from the wind or waterwhich passes through the turbine. Onshore wind is assessed as having asignificant potential to deploy new capacity over the lifetime of the RO althoughthe cost effectiveness will decline if the most advantageous available sites aredeveloped first. The availability of further economical hydro-electric sites issignificantly more limited.

� Co-firing Energy Crops: The energy crop supply chain is under-developed,resulting in higher costs for projects that want to use energy crops. TheGovernment also believes that there is a policy rationale for supporting thedevelopment of energy crops for the longer term future of the renewable energymarket10. Generation of electricity using energy crops can therefore generally


16

10 www.defra.gov.uk/environment/climatechange/index.htm

expect to be in a higher band than equivalent technologies using “regular11”biomass (except those that fall into the emerging technology band). This willprovide certainty for those planting energy crops and recognises the fact thatenergy crops often need to be planted some years ahead of first harvest. Thereis also the need to promote the supply chain and necessary processing centresto enable large scale utilisation of energy crops. The issue of energy crops isdiscussed in more detail in Chapter 6.

� EfW with CHP: The Ilex report on extending eligibility to EfW with CHP12

estimated that increased deployment of EfW with CHP power stations wouldlead to additional carbon savings above and beyond ineligible EfW facilities. TheErnst and Young report took into account the additional income from waste gatefees, and indicated that we need to maintain support at the level equivalent tothis band. We also propose to address the barriers to accreditation under the ROthat this fuel supply faces (see Chapter 6).

� Others: Projects that apply for accreditation under the RO and future technologiesthat have not been allocated a particular band will join the RO within the referenceband pending the next review of the bands.

� Tidal Impoundment: Tidal impoundment technologies such as tidal barragesor lagoons work on similar principles to conventional hydro-electric schemescontaining water behind a dam to be released to drive a turbine, as opposed totidal stream technologies discussed at paragraph 3.9. This technology has notbeen included in our cost analysis to date. Chapter 5 of Meeting the EnergyChallenge contains details of a major study underway on tidal power. The study islooking at a broad range of issues including the economics of tidal impoundmenttechnologies and so will inform further analysis on the RO's role in supportingthis technology.

Q1: Are there any technologies that will fall into the reference band as ‘others’

that should be given a different support level? Please provide evidence as to

the technology and cost.

Post-Demonstration Band – 1.5 ROCs/MWh

3.8 There is a further group of technologies where the technology is relatively welldeveloped but the deployment in a commercial fashion still presents significantchallenges.

� Offshore wind is a technology which is now ready for large scale deploymentbut faces higher costs and risks than the more mature onshore wind sector. As aresult offshore wind does not receive enough support from the RO in its currentform and is justified in receiving greater levels of support. The overall assessmentof the potential deployment of offshore wind over the period to 2015 is greaterthan that for onshore wind.


17

11 “Regular” here refers to biomass which is neither waste nor energy crops as defined in the Renewables Obligation Order 2006 andamended by the Renewables Obligation Amendment Order 2007.


� Dedicated Biomass power stations: The analysis in the Ernst and Young reportsuggests that dedicated biomass projects do not at present receive enoughsupport, but have the potential to deploy increased capacity over the comingyears. Existing projects have come forward through a mixture of grant support,being part of an industrial process and utilising fuels that would otherwise bedisposed of in landfill and therefore are supported by the avoided Landfill Taxpayment. The Government is proposing to set the level for dedicated biomassprojects to take account of the fact that there are a range of biomass costs andpower stations may use a combination of feed stocks. The Government believesthat it is appropriate to distinguish the level of support for power stations thatutilise energy crops and/or CHP as the market for Energy Crops and heat are lesswell developed so these projects will be in the emerging technologies band (seeparagraph 3.9).

Q2: Do you agree that it is appropriate to distinguish between energy crop and

regular dedicated biomass projects?

Emerging Technologies Band – 2.0 ROCs/MWh

3.9 There is then a group of emerging technologies which need to show much greaterreductions in costs if they are to become competitive even with other renewablesand whose scope for large scale deployment is uncertain. They may requiredevelopment in terms of their business model or in the underlying technology. Thecosts for these are generally much higher than for the other technologies and herewe will not be banding to cover the full deployment costs. The RO is intended tosupport mass deployment of near commercial projects and we believe that it wouldbe inappropriate to use it as the sole method of support for those technologies thatare still in a research, development or early demonstration phase. These technologiesare generally eligible for grant support (e.g. marine technology through the MarineRenewables Deployment Fund (MRDF))13. Meeting the Energy Challenge set out thefunding mechanisms available at each of the development stages – these measurescollectively will help to bring forward emerging renewable technologies efficiently.Details of Government support for energy R&D, including the EnvironmentalTransformation Fund, can be found in Chapter 6 of Meeting the Energy Challenge.We propose, therefore, to set the banding of these technologies so that they areprovided with a target level of costs that they can aim for with a prospect of supportfor an economic business case. These include:

� Wave and tidal stream which are at a demonstration phase and require furthertechnology development. Although the UK has a large potential resource togenerate energy from marine, it is not expected to make a significant contributionto UK energy until 2020 when the Ernst and Young analysis suggests a potentialexpected maximum of 2.6TWh. The BWEA response to the Energy ReviewReport was more optimistic at 7.88TWh. The disparities between these figures


18

13 More information on the Marine Renewables Deployment Fund is available from:www.dti.gov.uk/energy/sources/renewables/business-investment/funding/marine/page19419.html

exposes the great uncertainty about the speed and scale of marine technologydeployment. Since 1999 around £30 million has already been committed for theresearch and development of marine energy technologies. In addition, a further£50 million MRDF and additional funding from the Scottish Executive has beenallocated to support the first larger-scale demonstrations. We believe that existingcapital support schemes (such as the MRDF) from the DTI, Carbon Trust andDevolved Administrations combined with revenue support from the RO at thehighest multiple will provide the right conditions to continue the pull through ofmarine technologies in the UK;

� Advanced conversion technologies, which include anaerobic digestion,pyrolysis and gasification are also at a demonstration phase. They presentpotential advantages in efficiency for using biomass and therefore meritcontinued support. For example, anaerobic digestion has potential to generaterenewable energy from manures and slurries and certain organic wastes, whilstat the same time mitigating methane emissions from agriculture and landfill.The UK Biomass Strategy sets out other measures to drive a faster growth inanaerobic digestion by local authorities, businesses and farmers;

� Dedicated biomass power stations with CHP. CHP is a more efficient way ofusing biomass and avoiding carbon emissions than power stations generatingelectricity alone. However at present the heat market needs to develop further asoutlined in Chapter 3 of Meeting the Energy Challenge. Therefore it is appropriateto provide additional support over that given to dedicated biomass power stationsproviding only electricity;

� Electricity generated by burning energy crops in dedicated biomass power

stations. The allocation into this band reflects both the additional risks and costsinherent in the immature supply chains for energy crops;

� Solar photovoltaic (PV). There is a role for PV to play in generating electricityin the UK but natural constraints on available resource in the UK mean thatthis will be targeted at a smaller scale. In order to be competitive PV requiresthe next generation of technology to come forward and a business model forthe incorporation into construction to become the norm. The Governmenthas supported PV technologies through a number of capital grant initiatives –PV Demonstrator and the Clear Skies programme and currently through theLow Carbon Buildings Programme14. The Government work on distributedgeneration and microgeneration will support the continued development ofthe UK PV market.

Q3: Do you agree with the rationale for grouping technologies in this way?

Q4: Do you agree with the proposed banding levels? If not, please provide

evidence as to why these should be changed. Views are also invited on

the reports by Ernst and Young and Oxera published alongside this

consultation document


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14 www.lowcarbonbuildingsphase2.org.uk/

Other Issues

3.10 Geopressure. Electricity generated from geopressure (for example, using naturally-occurring high pressure gases to drive a turbine coupled to a generator) is eligibleto earn ROCs, though none has ever been issued by Ofgem to date. The Governmentviews the eligibility of electricity generated from geopressure where it occurs inconjunction with fossil fuel (e.g. natural gas) as an anomaly in the legislation andwishes to exclude geopressure associated with fossil fuels from the RO on thegrounds it is not a renewable source of electricity. Geopressure not associatedwith fossil fuels will continue to be eligible.

Q5: Do you agree with the proposal that Geopressure occurring in conjunction

with fossil fuel should be excluded from the RO?

3.11 Microgeneration is an important contributor to renewables generation and wehave introduced several changes to the RO to make it easier for microgeneratorsto access the benefits of the RO. However, we believe that other policymechanisms will prove more effective at driving the installation and progression ofrenewable microgeneration. For the purposes of simplicity we propose to placemicrogeneration projects in the same technology bands as large scale generation.

3.12 The October 200615 consultation on Reform of the RO included a statutoryconsultation on proposals which came into force on 1 April 2007. This consultationalso invited views on longer term issues relating to the RO and microgeneration.Specifically:

� Type approval and deeming of output from small generators wheremicrogeneration equipment meeting certain standards for the equipment and itsinstallation is deemed, for the purposes of claiming ROCs, to have generated acertain amount of renewable electricity.

� The Energy Efficiency Commitment (EEC)16 and interaction with the RO.

3.13 Responses on the issue of type approval and deeming were mixed. Whilst manywere supportive of introducing a simplified system for claiming ROCs they also stillfelt it would be necessary for generators to demonstrate actual generation at somepoint during an obligation period. Other responses did not support this proposal asthey felt it could subject the system to fraud. Comments on wider aspects of thescheme were also made such as suggestions to simplify the accreditation process.With regard to EEC, respondents generally felt that the EEC and RO schemes werequite different and that, although care should be taken to avoid double counting ofcarbon savings, otherwise the two should continue to be kept separate.


20

15 Details of the Government Response to Statutory Consultation on ROO 2007 can be found atwww.dti.gov.uk/consultations/page34162.html

16 www.defra.gov.uk/environment/energy/eec/index.htm

3.14 The Energy Review Report committed to the Government’s 2006 MicrogenerationStrategy17 being implemented aggressively by the Government including a numberof recommendations to make it easier for small generators to benefit from the RO.This commitment is restated in Meeting the Energy Challenge along with a packageof measures to remove barriers to and encourage more widespread deployment ofdistributed generation.

3.15 Meeting the Energy Challenge is clear that in the long-term microgeneration canmake a significant contribution in terms of carbon savings. However, althoughwe have simplified the administration of the RO to make it more accessible tomicrogenerators, the Obligation was designed to support large scale deploymentof renewables and we do not feel that it is the best way to deliver the incentivesthat the microgeneration industry require. OFGEM will continue to streamline theadministrative processes in the RO for small generators where possible. However,we do not propose to take forward more fundamental changes to the RO such asthe deeming of generation discussed in paragraph 3.12. A more detailed responsedealing with the issue of deeming of generation for the issue of ROCs will bepublished as an action falling from the Microgeneration Strategy.


21

17 www.dti.gov.uk/energy/sources/sustainable/microgeneration/strategy/page27594.html

22

Independence of advice on band setting

4.1 A significant number of respondents to the previous consultation supportedan approach which included an independent element to band setting. We aretherefore proposing that when setting the bands the advice would be provided byan independent body on a UK-wide basis. Advice would be published in full andwould be provided with regard for wider regional priorities and considerations.Decisions would continue to be taken by Ministers in DTI, Scotland and NorthernIreland, and the intention is that the advice will provide a common starting pointto help facilitate agreement of banding levels on a UK-wide basis. The Governmentrecognises the value of consistency between the three Obligations. There is acommon interest in ensuring a strong and stable market for ROCs and we arecommitted to working with the Devolved Administrations to achieve that.

4.2 The Government is looking at whether the Committee on Climate Change proposedin the draft Climate Change Bill would be an appropriate body to provide advice onthis issue. The main remit of the Committee would be to provide advice on settingUK emissions targets and EU ETS caps. However, it is also anticipated that theCommittee will provide advice on other climate change related issues specified by

Summary of Chapter 4� The Government remains committed to the principle of grandfathering.

� After initial band setting, bands will be reviewed so that changes come into force atsimilar times as future phases of the EU ETS (on current expectations 1 April 2013and 1 April 2018).

� Ministers will set the bands and for future reviews will be advised by anindependent committee of experts.

� Any changes to bands will be announced 18 months prior to introduction.

� Triggers will be set for allowing early reviews in extreme circumstances.

� Special arrangements for projects in receipt of capital grants will apply.

4. Setting bands and when theywill apply

the Government, which could include RO band setting. This option is dependenton successful passage through Parliament of the draft Climate Change Bill. As theCommittee is not yet established, the indicative banding set out here has beendeveloped from analysis and modelling published alongside this document.

Criteria to be taken into account

4.3 The process of determining the bands will be a critical factor in ensuring thesuccess of a banded RO, and as such will reflect the four key principles ofgrandfathering, notification, transparency and reliability referred to in paragraph 2.11.

4.4 In setting the bands the Independent Advisory Committee and Ministers will berequired to consider the following:

a) the bands should take account of the full project costs (including the costs ofscoping, planning, construction, grid connection, transmission charges etc.) andincomes (for example, due to the wholesale price of electricity, the avoided costof schemes such as the EU ETS, Landfill Tax and the Climate Change Levy etc.);

b) the bands should aim to deliver the maximum deployment for a given level ofsupport of renewable generation over the following 5-10 years and sustainablebeyond that, recognising the risks in predicting costs and technologies overthat time and that retaining the confidence of investors will be key to deliveringthat outcome;

c) the bands should be set taking into account the impact on the number of ROCslikely to be in the market, and aim to maintain investor confidence and ensurethat consumers get value for money;

d) bands should take into account the cost effectiveness and long-term potentialof different renewable technologies in delivering the Government’s renewableenergy targets. It is not the Government’s intention that banding should restrictdevelopment of the most economic forms of renewables, or to providepermanently high levels of support for very expensive forms of renewable energy;

e) wider strategic issues, such as sustainability, carbon emission reduction,cost effectiveness and the Government strategies for waste management,and biomass.

Expertise of Committee members

4.5 The RO is a complex market-based mechanism and the Committee:

� should have an understanding of wider the Government climate change polices;

� have/develop expert understanding of the Government policies underpinning theRO and its operation;


23

� have expert understanding of the renewables market and the ROC market;

� have full understanding of issues surrounding investor confidence and deployingthe full range of renewables technologies for example on cost, timelines andother barriers; and

� have an understanding of the regional impact of their advice.

Q6: Do you agree with the principle of providing independent advice to Ministers

to help agree UK wide bands, and on who should provide that advice?

Frequency of band setting

4.6 Our previous consultation document asked how the Government should balancethe need for a stable and predictable system for investors and developers, in whichthe bands did not change too often, with a need to change support levels overtime to reflect changes in the cost of renewable technologies and other marketdevelopments. Two options were presented, reviews on a time basis or reviewstriggered by the deployment of a particular volume of generating capacity. Themajority of opinion was clear that there should be a limit on how often the bandsshould change and that the reviews should happen on an agreed timetable ratherthan being triggered by particular levels of installed capacity for each technology.

4.7 The consultation document proposed a range of 3-5 years between reviews andwhile there was a strong view that reviews should happen no more often than this,there was no clear preference for any particular period within this range with similarlevels of support for three, four and five year periods.

4.8 The operation of this system clearly needs to be read in the context of the approachthat the Government proposes to take over grandfathering. Paragraph 4.19 sets outour decision, for generators over 50 kW, to switch from our original proposal tograndfather based on the point of first supply to one based on the point on whichpreliminary accreditation is effective.


24

4.9 The support levels required for renewables will in the future be increasinglydependent on the carbon price under the EU ETS. For that reason there seems tobe a good argument for reviews of the banding levels under the RO to be linked tothe timetable for the different phases of the EU ETS. EU ETS Phase II will run from2008 to 2012 and modelling of the initial banding levels has taken advantage of thepredicted prices for carbon under Phase II which have become more certain as theelements of the National Allocation Plan have been confirmed by the Commission.Phase III is currently expected to run from 2013 until 2017.

4.10 The Government therefore proposes that the first two reviews of the RO bandinglevels should take place in time for any changes to the banding levels to beintroduced on 1 April 2013 and 1 April 2018.

4.11 Any future review of the RO will be made on the basis of a technical review of thecosts and other principles by the Independent Advisory Committee (see paragraph4.4). The Government will make proposals, based on their report, which will besubject to a public consultation. The results of this exercise will be announced atleast 18 months in advance of introduction. The announced bands will be subject tothe statutory consultation required before introduction of a ROO that will bring thebanding regime into effect.

Q7: Do you support this approach to timing of reviews?

4.12 Setting limits on how often bands can be changed does increase the potentialimpact of a band being set at not quite the right level to bring on a particulartechnology, or of not being able to respond quickly to changes in the costs of a

Apr2013

Apr2015

Apr2017

Apr2019

Apr2021

Apr2023

Apr2025

Apr2027

Apr2011

1st Review

2nd Review

3rd Review?

Review Period

Notice Period(includingStatutoryConsultation

Implementation

Start of Review

Review Reportpublished

ImplementationDate

Diagram showing Frequency and Process for Band Setting

Apr2009


25

technology in response to external factors. One possible way of addressing this riskwould be to add a caveat, which could be activated in extreme cases. This couldthen trigger an early review by Government of one or more of the bands.

4.13 The previous consultation asked for views on this principle and the majority ofrespondents agreed that this was a sensible provision as long as the conditionswhich would amount to an extreme case were set out in advance.

4.14 The proposed criteria to trigger an early review are:

a. significant change in grid connection/transmission regime;

b. new technology eligible under the RO emerges with potential to deploy onlarge scale;

c. other major support scheme with impact on renewables market starts, endsor is subject to significant changes;

d. demonstrated significant variation in net costs (for an individual technology)changing the economic case from that assumed in the setting of banding levels;

e. ROCs from co-firing (regular) contribute to more than 10%18 of the obligation seeChapter 6;

f. over-compliance of obligation; or

g. other unforeseen event with significant effect on the operation of the RO.

4.15 A review could be triggered following one or a combination of the criteria being met.

4.16 The Government does not believe that the review of one technology will necessarilyrequire a wholesale review of the banding regime for all technologies.

Q8: Do you agree with the criteria set out in paragraph 4.14? Should there be any

additional criteria?

Grandfathering

Commitments from Previous Consultation

4.17 The Government remains committed to the principle of grandfathering, as set outin the 2005 Review of the RO and in the Energy Review Report published in July2006. Any reduction in the number of ROCs/MWh will only apply to future projects.The exception to this is co-firing (see paragraph 4.24).


26

18 10% was chosen to mirror the former cap on co-firing.

4.18 The Government set out a number of commitments with regard to thegrandfathering of projects in the Energy Review Report which can be found atwww.dti.gov.uk/energy/review/page31995.html

4.19 In the consultation document published on 9 October 2006 the Governmentindicated that it was willing to consider a trigger point for grandfathering earlier thanfirst supply of electricity for which ROCs may be claimed. There was no consensuson the appropriate trigger point from respondents to the consultation, although themajority favoured an earlier trigger date than first supply. We now propose tograndfather based on the date of planning consent.

Proposals on Grandfathering

4.20 The Government proposes that when banding is introduced (i.e. on 1st April 2009under current plans), with the exception of co-firing and projects in receipt ofcapital grants:

� Eligible generating capacity which was operational on or before the publication ofthe Energy Review Report which raised the possibility of banding the RO (11 July2006) will retain its entitlement of 1 ROC/MWh regardless of technology;

� Generating capacity which became operational or achieved planning consent after11 July 2006 but before 1 April 2009 will, subject to accreditation requirementsset out in paragraph 4.21;

– retain its entitlement of 1 ROC/MWh in the case of technologies being bandeddown (i.e. for which entitlement post 1 April 2009 will be less than 1 MWh);

– move to its higher entitlement in the case of technologies being bandedup (i.e. for which entitlement post 1 April 2009 will be more than 1 MWh).This is to avoid any incentive to delay projects in order to benefit fromhigher banding.

� Generating capacity which becomes operational on or after 1 April 2009 willreceive entitlement according to the bands in place.

4.21 In the case of generating capacity which has or will become operational after11 July 2006 but before 1 April 2009, grandfathering rights as set out in paragraph4.20 will be conditional on appropriate accreditation by Ofgem.

� Power stations over 50 kW will need to apply for and receive:

i. preliminary accreditation with an effective date before 1 April 2009 and

ii. full accreditation with an effective date that is within two years of theintroduction of banding (i.e. an effective accreditation date that is on orbefore 31 March 2011 based on the current timetable for EU ETS).

� In the case of power stations of 50 kW and under, which is generally not subjectto the same planning requirements or lead times for building, grandfathering of


27

rights as set out in paragraph 4.20 will be on the basis of first supply of electricityand full accreditation by Ofgem to be effective before the introduction ofbanding.

4.22 Additional capacity in existing power stations: Where a power station that wasoperational on or before 11 July 2006 has notified Ofgem of additional capacityinstalled since 11 July 2006, this additional capacity will for the purposes of the RObe allocated to a band as though it was a new power station becoming operationalon the date at which the revised accreditation becomes effective. The electricitygenerated could be calculated either as a fraction pro rata to the installed capacitiesor be subject to separate metering. The arrangements for this will be informed bythe responses to the consultation.

4.23 If any operators believe that they have (or will have) increased the capacity of apower station due to receive more than 1 ROC/MWh after 11 July 2006 and thepublication of this document they will need to inform Ofgem of this even if theyhave previously notified Ofgem under the existing arrangements.

4.24 Co-firing: Co-firing will not benefit from these grandfathering proposals. As co-firingrequires relatively little capital investment at the generating power station comparedto other forms of renewable projects, it would not be appropriate to grandfatherbands for co-fired power station. When the band containing co-firing is introduced,and if it were subsequently changed, that band would apply to all co-firersirrespective of when the capacity became operational. This rationale was set out inthe October 2006 consultation document, and was supported by the great majorityof consultation responses.

4.25 Projects in receipt of grants: Some projects coming into operation after 11 July2006 are in receipt of grants awarded before that date. As these grants were allocatedon the basis that the project would receive 1 ROC/MWh support, it would not beappropriate for them to benefit also from the higher bands. However the Governmentproposes, subject to State Aid clearance from the European Commission, to giveprojects in this category the option of returning the grant and becoming eligible forthe higher banding. We believe that this will ensure that consumer value for moneyis protected and projects are not delayed while investors and others wait for theintroduction of higher bands, allowing smoother growth of generation.

4.26 Subsequent changes to bandings: The principles set out above will be applied onan equivalent basis for the next review of banding. For example, if it were decidedthat a particular technology were to move to a higher band as from 1 April 2013,generating capacity using that technology and which became operational after theannouncement of the review but before 1 April 2013 would move to the higherbanding as from 1 April 2013. Conversely, if it were decided in a future reviewthat a particular technology were to move to a lower band as from 1 April 2013,generating capacity using that technology and which became operational afterthe announcement of the review but before 1 April 2013 would retain its pre-April2013 banding.


28

Q9: Do you agree that the proposed trigger points for grandfathered rights,

including the transitional arrangements for projects consented on 1st April

2009, are appropriate?

Q10: Should the electricity generated from power stations that add additional

capacity after the point at which they are grandfathered be calculated as a

fraction pro rata to the installed capacities and/or be subject to separate

metering at the generators’ discretion?

Q11: Do you agree with the proposed treatment of projects under 50 kW as set

out in para 4.22?

Two years after proposedintroduction of banding,

e.g. 1 April 2011

Publication of EnergyReview Report,

11 July 2006

Proposed introductionof banding date,e.g. 1 April 2009

All eligible capacityoperational prior to 11 July2006, with exceptionof co-firing(1), will beGrandfathered at oneROC for lifetime of RO

Capacity from technologiesto be banded down needeffective dates for full orpreliminary accreditation inorder to be grandfathered,New capacity fromtechnologies to be bandedup becoming operationalwill be eligible for newband from introduction(2).

Capacity which has beenawarded preliminaryaccreditation effectivebetween 11 July 2006 and31 March 2009 will needto become operational inorder for grandfatheringto become effective.

Diagram to show levels Generation will be Grandfathered over time

(1) No co-firing will be grandfathered.(2) Some projects in receipt of Government Grants may not be eligible to receive new band unless grant is repaid.


29

Duration of grandfathering

4.27 It has been suggested that our approach to grandfathering is too generous.The argument is that as projects are typically financed on a 15-20 year businesscase27, guaranteeing the return beyond this time is unnecessary to stimulateinvestment. If true this would represent poor value for money to the consumer.It would be possible to account for this by limiting the period for whichgrandfathering would be applicable.

4.28 One way that this might work in practice would be to grandfather all projects for20 years from the date of first supply. At the end of this period schemes would bemoved into the lowest band (the band for Established technologies, receiving 0.25ROC/MWh) on the grounds that any further investment after 20 years would be low-risk e.g. repowering of wind farms. For example, a power station first operating in2002 would only be grandfathered until 2022.

4.29 Ministers have committed that RO eligible NFFO 3, 4 and 5 projects would remaineligible for the full support of the Obligation when their contracts expire. If a 20 yearlimit to grandfathering was imposed it is arguable that the limit should apply fromthe commencement of supply under a NFFO contract.

Q12: Is there any reason why RO support at the grandfathered level would need to

continue after the initial investment had been paid back?

Q13: Accepting that there will be variation between projects, is 20 years a fair proxy

for project financing timescales?

Q14: Should this provision apply to projects under NFFO 3, 4 and 5 from date of

contract, date of first supply or date of commencement in RO?


30

19 Duration of projects in terms of financing and business case are discussed in the Ernst and Young Report published alongside thisdocument.

31

5.1 At present, the level of the RO is set to rise to 15.4% of electricity by 2015/16, andremain at that level thereafter until 2027 – the end date for the RO in the legislation.The Government remains committed to its existing announcements on RO levels upto 2015/16 as a minimum.

5.2 The Government recognises that long-term certainty around the price of ROCs is amajor factor in decisions to develop and finance new renewable energy projects,and will be critical to the success of a banded RO. We also recognise thatincreasing deployment will tend to decrease the ROC price and increase the risk ofover-compliance. We will, as necessary, increase the RO to keep it ahead of thepredicted number of ROCs from the introduction of banding.

5.3 The proposals to increase the RO to 20% on a headroom basis do not apply to Scotlandor Northern Ireland as they have separate Obligations. Any changes to the Obligations inScotland and Northern Ireland will be subject to separate consultations andParliamentary agreements. It is the Government's wish to maintain a consistent marketacross the UK and therefore we will be consulting with the devolved administrationswith the aim that a headroom mechanism and any ski-slope mechanism would apply inall three jurisdictions covered by the RO.

5.4 The implementation of these proposals is discussed in paragraphs 5.17–5.26.

Summary of Chapter 5� The Government remains committed to its existing announcements on RO levels

rising to 15.4% by 2015/16 as a minimum.

� The RPI link to buy-out price will be retained.

� The level of the Obligation will be extended to 20% on a headroom basis.

� Headroom will be set as percentage of ROCs rather than electricity supply. This willbe 6% of the expected ROCs in a year.

� Headroom will be introduced alongside banding.

� A cross industry working group will be established to consider the introduction ofan appropriate mechanism to prevent a crash in the ROC market.

5. RO Levels in a Banded RO

Extending RO levels to 20% on a “guaranteed headroom” basis

5.5 The Government’s commitment to maintain RO levels above renewable generationup to a level of 20% is not a commitment to increase RO levels to 20% by 2020.Any increases in RO levels above those already announced will be contingent uponappropriate growth in renewable generation. That said, if growth in renewablegeneration was extremely rapid, the level of the RO could potentially rise to 20%before 2020 under a guaranteed headroom approach.

5.6 In the earlier consultation document the Government proposed that a guaranteedheadroom of 1% of the electricity supply market should be sufficient to provide long-term confidence on the support provided by the RO, given the ability of suppliers tobank ROCs and our intention to modify the RO to remove the risk of ROC pricecrashes. The majority of those who responded to the consultation argued that aheadroom set in terms of the electricity supply market would carry risks given theloss of a direct equivalence between generation and ROCs which will occur whenbanding is introduced. The clear preference was for headroom to be set as apercentage of the ROCs to be issued in the relevant obligation period. A headroombased on ROCs would remove the risk that net banding up would cause a sustainedover-compliance in ROCs while generation continued to fall short of the nominalobligation. Taking these comments into account the Government intends toimplement headroom on the basis of 6% of the expected ROCs in a given obligationperiod – this would be approximately equivalent to one percentage point ofheadroom on the electricity supply market for an obligation of 16.7%.

5.7 The way that the Government predicts that this would work is as follows.

5.8 Each year, the DTI will estimate the likely level of ROCs to be issued in the nextobligation period, taking into account both already installed capacity and anticipatednew projects likely to come on line during the forthcoming obligation period. If thisestimate, which would be compiled after consultation with industry, when multipliedby 106% was below the existing level of the RO (calculated in ROCs), the ROwould be raised to a level 6% above the anticipated number of ROCs for thatobligation period.

5.9 The following example illustrates how this might work in practice. The final yearfor which the RO has already been set is 2015/16. The level set is 15.4% of thetotal electricity demand. If the total market is 373 TWh then the RO would be57.4 million ROCs. If the predicted ROC issue for the following obligation period(2016/17) is less than 57.4 million/1.06 = 54.2 million then the level of the ROwould not be increased.

5.10 If however the predicted number of ROCs to be issued in 2016/17 was say55 million then the RO would be increased to 55 million x 1.06 = 58.3 millionROCs as long as the obligation would not exceed a level equivalent to 20% ofthe electricity supply market if one ROC was equivalent to one MWh.


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5.11 There is a possibility that the obligation may be exceeded before 2015. For thatreason the Government proposes to introduce headroom from the date on whichbanding is implemented. This would not replace the current commitment toincrease the size of the obligation in regular increments up to 15.4% in 2015 butwould act as an additional measure of security. In practice, the process set out inparagraph 5.8 would be followed if the previously announced obligation for theobligation period in question did not allow sufficient headroom.

5.12 A number of comments should be made at this stage about the proposed approach:

a) The Government’s objective is that the method described provides a minimumunderpinning guarantee, for the life of the RO, about the level of the RO upto 20% renewables. It is not intended to rule out the possibility that theGovernment could, in the future, decide to set RO levels that were higher thanthe minimum level of guaranteed headroom would require, or for more than oneobligation period ahead. It may remain desirable to set RO levels for a number ofobligation periods ahead in order to provide greater market certainty, or avoid theneed for repeated legislation to make minor changes to RO levels.

b) The approach does not provide an absolute guarantee that the demand for ROCscreated by the RO will be greater than supply during any particular obligationperiod. The RO level would be set on the basis of an estimate. Annual variationsin rainfall or wind speeds or other supply factors could lead to unpredictably highlevels of renewable generation and thus an excess of ROCs over demand.However, the Government considers that, with 6% guaranteed headroom, andbearing in mind the ability of suppliers to bank 25% of their ROCs forpresentation in the following obligation period, an excess of ROC supply overdemand arising is highly unlikely.

c) It would be possible to calculate the level of the Obligation at a number of pointsin time from two years before the beginning of the obligation period through tothe point at which all the ROCs for the obligation period have been presented.On one hand, the earlier the announcement is made the more notice supplierswill have while on the other the later the analysis is performed the greater is thecertainty that the headroom will be precisely 6%.

5.13 In the Government’s view, the change to setting headroom in ROCs reduces theneed for a mechanism (the “ski-slope”) that allows for a gradual tapering down ofROC values in the event of an excess of ROCs over demand. However this changedoes not remove the need to manage the RO once 20% generation has beenachieved. This is discussed in more detail in paragraphs 5.17–5.26.

Q15: Is a guaranteed headroom of 6% of ROCs adequate, given the ability of

suppliers to bank ROCs and our intention to also remove the risk of a ROC

price crash through introducing the ski-slope?

Q16: At what point in time should the level of Obligation for a given obligation

period be announced?


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Retaining the RPI link to the buy-out price

5.14 In the Energy Review Report, the Government proposed removing from 2015/16the link between the buy-out price under the RO and the Retail Price Index (RPI) inorder to mitigate the expected increase in the cost of the RO to consumers oncethe obligation began to rise above the previous 15.4% limit.

5.15 Since that time we have seen rises in the costs of renewable electricitytechnologies. Moreover, new analysis20 commissioned to inform our bandingproposals indicates that we are likely to see further rises in the costs of renewableelectricity technologies in the period to 2010/11. The implication of this is that theprojected deployment of renewables is now lower than at the time we publishedthe Energy Review Report. The updated analysis also indicates that the projectedlevel of renewables deployment for the banding regime under consideration wouldlead to a fall in the total financial support provided by the RO when compared tothe existing regime, even though it would increase the overall level of renewablesdeployment. A number of respondents to the recent renewables consultation21

made a similar observation and argued strongly against the removal of the RPI linkfrom 2015/16 on the basis that it would lead to an overall reduction in the supportavailable to renewables.

5.16 One of our objectives when considering proposals to band the RO was to increasedeployment of renewables, while maintaining broadly similar costs to consumers.The Government has therefore decided to retain the link between the buy-out priceand RPI from 2015-16 as part of confirming new proposals to band the RO. Thiswill provide a greater stimulus for the deployment of renewables over the lifetime ofthe RO. A banded RO retaining RPI is predicted to deploy around 40% morerenewables between 2009 and 2015 than the current regime would have over thesame period.

Preventing ROC price crashes: the “cliff edge” issue

5.17 In the last consultation the Government addressed the issue of what would happenshould the market for ROCs remain over-compliant for an extended period, withthe risk that ROC prices could fall steeply as some ROCs could not be redeemed– the “cliff-edge” problem. The Government made clear that it believed the risk tobe small but one which needed to be addressed especially if there were to besignificant net banding up.


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20 www.dti.gov.uk/files/file39038.pdf21 Reform of the Renewables Obligation and Statutory Consultation on the Renewables Obligation Order 200721

www.dti.gov.uk/files/file34470.pdf

5.18 The suggested solution was the introduction of a mechanism known as a ski-slopewhich would reduce the risk of an over-supply of ROCs. Three mechanisms wereput forward for discussion – the Pöyry Energy (Ilex) solution, the Eufinium Solution,and the Virtual Payment solution.

5.19 Responses to the consultation were mixed. A narrow majority – not including themajor suppliers – favoured the introduction of a ski-slope. A clear majority of thosewho expressed a preference supported the Virtual Payment mechanism. Supportfor the Pöyry and Eufinium mechanisms was roughly equal.

5.20 For all of the proposed solutions a number of important issues were raised whichrequired further exploration. The Government therefore commissioned additionalanalysis. The initial findings, alongside the consultation responses, have informedthe Government’s proposals on the way forward.

5.21 The Government has reached the following initial conclusions:

� The Eufinium Solution in particular is likely to decrease the likelihood of additionalrenewables being brought forward, as it ties up working capital due to the needto make cash payments into the buy-out fund in the event of over-supply.

� The Virtual Payments solution is possibly more complex than first thought andwould not easily be able to develop complete information allowing it to operateas envisaged.

� The Pöyry solution may be implementable if the process is changed a little tomeet the objection regarding negative balances on the buy-out fund. Reversingthe steps, e.g. making a cash call on presenters of ROCs before making apayment out to suppliers who have over-presented ROCs should overcomethis problem.

5.22 An alternative solution was suggested by the Co-Operative Group. It allows that inthe event of over-presentation of ROCs the RO percentage is adjusted upwardssuch that the RO percentage equals the total ROCs presented, and the buy-outprice is adjusted downwards such that the value of the total number of ROCsmultiplied by the floor price remains equal to the number of ROCs in the 20%compliance case multiplied by the unadjusted floor price, e.g.:

RO percentage = 20%Buy-out Price = £50Total ROCs presented = 22%Over presentation of ROCs = ((22/20)-1) x 102 = 10.2%Revised RO percentage = 20 x 110.2% = 22.04% Revised Buy-out Price = £50 x (102%-10.2%) = £45.90

(The factor of 102 was chosen to allow for leakage of ROCs from the system due tonon-presentation of ROCs by some suppliers.)


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5.23 This proposal appears to work with mutualisation and goes some way towardsaddressing the perceived threat to liquidity of firms which have been identifiedwith the other mechanisms. However, further analysis needs to be carried out.

5.24 A number of responses suggested that the ski-slope mechanism was overlycomplicated. These respondents were particularly concerned it would introduceuncertainty into the buy-out price, destabilising longer term planning anddisincentivising investment.

5.25 Given the concerns of respondents, the Government believes that it should delayintroducing a ski-slope mechanism until more work has been done to ensure thatany chosen mechanism is fit for purpose. However, the Government intends to takea power in primary legislation, subject to Parliamentary approval, with the aim ofintroducing a ski-slope through secondary legislation in the event it is thoughtdesirable, consulting on the mechanism to be used at that time.

5.26 Due to the importance of this issue in ensuring investor confidence the Governmentwill establish a cross-industry working group, comprising representatives fromgenerators, suppliers, investors and Ofgem to test possible solutions and informour choice of an appropriate mechanism. Expressions of interest are welcomed.

Q17: Do you agree with the intention to take a power to introduce a ski-slope in

primary legislation subject to a later need?


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Co-firing

6.1 When the RO was first introduced, there was a debate as to whether co-firing – theburning of biomass alongside fossil fuels – should be included as an eligibletechnology. Some raised concerns that it may extend the life of coal power stations,locking in carbon emissions. It was also felt that that an entirely technology-neutralRO would provide co-firing with more support than it requires; and that the speedwith which levels of co-firing could be increased risked destabilising the ROCmarket. In the light of these concerns, the RO currently has a cap of 10% onthe proportion of a suppliers’ obligation that can be met through co-firing.

6.2 As coal continues to play a role in electricity generation, it makes sense to abate thecarbon emissions from coal power stations as much as possible. The Governmentbelieves that co-firing potentially has a long-term role to play in this context, as partof a wider carbon abatement strategy for fossil fuels. This view was endorsedby the majority of respondents to the consultation. Furthermore, the currentcap fragments the market in ROCs. We therefore propose to remove the cap on co-firing within the RO.

6.3 At the same time, we recognise that co-firing is over-rewarded in the current RO.We are therefore proposing to reduce the level of support it receives. At theproposed banding support level, co-firers will be required to generate 4 MWh toreceive 1 ROC. This should address concerns over the impact on other renewables

Summary of Chapter 6� The cap on the proportion of the obligation that can be met through co-firing will be

removed.

� Larger generators will be required to report on the source and sustainability of thebiomass that they use.

� We will work to remove technical barriers to the use of waste in EfW projects thatare currently eligible under the RO.

6. Co-firing and Sustainabilityof Biomass

and on other biomass using industries. Removing the cap should allow co-firersmore certainty in their planning.

6.4 Despite our proposal to band down co-firing, some respondents to our earlierconsultation expressed concerns about the potential volatility of co-firing volumesand the impact that these could have on the ROC market. To address theseconcerns, we have included an emergency review criterion that would be triggeredif co-fired ROCs surrendered represented more than 10% of the total Obligation.This, in combination with the regular reviews of banding levels, will allow for thesupport level to respond to changes in the economics of co-firing, reducing any riskto the overall ROC market and other technologies.

6.5 An alternative approach (favoured by some respondents) would be to maintain a capon the number of co-fired ROCs that can be surrendered. Setting a cap of 10% ofROCs would allow for four times more co-firing than currently without any additionalimpact on the ROC market. We do not intend at this point to impose such a cap butwe would welcome views on whether the idea would be preferable to our proposedapproach.

6.6 The support level we are proposing has been set to recognise that the level ofcapital investment required for co-firing is comparatively small and the industry hastypically assumed that these would be recouped over a five year period . It is likelythat many of the initial investments for the handling of regular biomass will havebeen made and paid back by 2009. To continue providing support at a level whichincludes an element for full capital costs risks over-rewarding co-firing with aconsequent damaging impact on value for money for consumers, the ROC marketand on the other users of biomass.

6.7 The Ernst and Young report makes it clear that a considerable part of the potentialregular biomass supply is imported, and discusses the recent volatility of theinternational biomass market. We do not wish to add to price volatility by settingfuture UK support levels to reflect what may be an inflated price for importedbiomass.

6.8 The modelling by Oxera suggests that, depending on developments within thecarbon market within the lifetime of the RO, it may in the future be possible toentirely remove co-firing of non-energy crops from the RO and support it entirelythrough the carbon price alone.


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Q18: Do you agree with the need for a special co-firing criterion for an emergency

review of banding? Is 10% of ROCs an appropriate trigger point?

Q19: Do you agree with the Government’s proposal that reducing support and

reviewing the co-firing band for regular biomass if it contributes 10% of ROCs

makes a cap on co-firing unnecessary? If not, please provide evidence as to

what the likely impact of uncapping co-firing at the proposed level of support

would be and the level of cap appropriate.

Energy Crops

6.9 Energy crops are defined within the RO as:

“a plant crop planted after 31st December 1989 and which is grown primarily forthe purpose of being used as fuel or which is one of the following:

(a) miscanthus giganteus;

(b) salix (also known as short rotation coppice willow); or

(c) populus (also known as short rotation coppice poplar)”

6.10 The Government remains committed to promoting energy crops because of theneed to increase the total biomass resource that is available for energy use andminimise the impacts on other biomass using industries, the security of supplybenefits of having indigenous biomass sources and the new opportunities theypresent for farmers.

6.11 We are also aware that farmers have planted and are planting energy crops on thebasis that the RO will provide a clear market for their product; and we recognise thecommitment and investment that some generators have made to encourage co-firing with energy crops.

6.12 For this reason, since April 2007 the limit on energy crops within the overall cap onco-firing has been removed. Building on this approach, when banding is introducedenergy crops will be given a higher support level in comparison to other biomass.This will provide a significant market incentive to plant and use energy crops in allbiomass applications including co-firing. It also reflects the fact that the developmentof these new crops, and those power stations that use them, may require additionalinvestment, as well as the ongoing fuel and other operation and maintenance costs.

6.13 We are also proposing that ROCs from energy crop co-firing should not be countedtowards the 10% of obligation met through co-fired ROCs that would trigger areview of support levels to provide additional security to growers.

6.14 However, we will closely monitor the materials co-fired as energy crops to ensurethat additional support levels are not leading to behaviour that does not supportsustainable energy crop supply chains. If evidence were to emerge that this was


39

happening then we would consult further on the case for actions to reduce thisimpact.

Q20: Do you agree with the proposed treatment of energy crops set out in

paragraphs 6.9–6.14?

Sustainability

6.15 The Government believes that it is important to ensure that the most sustainableforms of co-firing and biomass are incentivised over the long-term. This view wasechoed by a large majority of respondents to the previous consultation. Keyconcerns over sustainability are land use change (particularly deforestation) andthe distance transported.

6.16 The Themba Technology report23 on sustainability illustrated that the carbon balancefor co-firing was positive. It also found that most current forms of co-firing usingwastes that would otherwise have gone to landfill or other fuels from sustainablesources have benefits. However, it suggested that it would be important to continueto monitor this position.

6.17 We therefore propose to ask biomass users for a range of information that capturesthe benefits of using existing schemes. These reporting requirements should coverall those claiming ROCs on biomass, whether CHP, co-firing or dedicated powerstations. In recognition of the different biomass volumes used and relativesustainability impact, it is proposed that a threshold on sustainability reportingis introduced.

6.18 We propose to require biomass users to present Ofgem with an annual reportcontaining the following information:

� biomass used, origin and volumes;

� whether it is a waste/residue or co-product or energy crop;

� whether it has been sourced under any quality standards (sustainability inparticular, RTFO, RTSPO, IPPC on land use)24;

� what the land use has been from 2005; and

� whether producers/generators are under any voluntary code of conduct.

6.19 This will allow us to gather and make public information on sustainability so that wecan assess whether any additional information may become necessary to report onin the future.


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23 www.dti.gov.uk/files/file34448.pdf24 The Themba Technology Report suggested that there were a number of accreditation approaches already in place or under

development, such as the UK Woodland Assurance Standard, the Roundtable on Sustainable Palm Oil, and the AssuredCombinable Crop Scheme, which could be applied to biomass used for electricity. It also suggested that these existing codes ofpractice may be capable of adaptation.

6.20 We will monitor the development of any European sustainability standards onbiomass used for electricity and look to include in the RO if appropriate.

6.21 We propose that should operators fail to provide this information, OFGEM will havethe power to freeze the issue of those ROCs they are due until such time as theycomply.

Q21: Do you agree that sustainability requirements should cover all biomass users?

Q22: Should those generating less than 50 kW be exempted from sustainability

reporting? Should any other threshold be used

Q23: Do you agree with the criteria to address sustainability for biomass?

Q24: Do you agree that Ofgem should freeze the ROCs of operators who do not

provide the necessary information on sustainability?

Waste

Determining Biomass Fraction of Waste

6.22 Certain EfW technologies can claim ROCs on the biomass fraction of waste, whichis classed as a renewable energy source under the EC Directive on Renewables.These technologies are gasification, pyrolysis, anaerobic digestion and EfW withCHP. Electricity only waste incinerators are driven by gate fee income and so do notneed further support.

6.23 While the intent is clear it has proved very difficult to accurately determine howmuch of the energy content of mixed waste streams derives from biomassmaterials. This is because residual waste is highly variable in composition, reflectingits source (i.e. municipal or commercial), different recycling policies and evenseasonal factors. Comprehensive sampling and measurement of mixed wastes forthe purposes of determining how much of its energy content derives from biomassmaterials is complex and prohibitively expensive.

6.24 The Government, Ofgem and industry have been working together to find asolution. One such solution would be to deem the fossil fuel content of waste, sothat operators of eligible facilities would be able to claim ROCs on the remainingbiomass energy content. The level at which to deem the fossil fuel fraction needsto be carefully set, due to the variable and changing composition of mixed wastes(e.g. as recycling increases) and to minimise the risk of ROCs being erroneouslyawarded to non-biomass wastes. It is also important that the RO does notencourage combustion of waste streams that should be recycled. These factorsall point towards a high deemed level of fossil fuel.


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6.25 The Landfill Allowance Trading Scheme (LATS) deems collected municipal waste tobe 68% biodegradable in content. This will change as local authorities continue tointroduce measures to reduce waste arisings (such as by promoting homecomposting) and increase separate collections of food waste and other wastestreams for recycling. Our analysis suggests that removing a large proportion ofrecyclable materials from the residual waste stream (including, for example, highlevels of food and green waste in line with the Government's aspirations) wouldreduce its biomass energy content to around 35%. This is illustrated by thescenarios in Annex E, which suggest that high rates of recycling could result in aresidual biomass energy content in the range 30–38%. Commercial waste isgenerally expected to be more homogenous in nature, making it easier to monitor.However, a mixed sample of commercial waste has a very similar biomass energycontent to municipal waste.

6.26 In the light of this we propose 65% as the deemed value of the fossil fuel content(unless we know that the biomass energy content is lower). This reflects theGovernment’s aspirations for much higher levels of recycling and is felt to besuitably conservative to address the potential concerns with deeming.

6.27 The Government believes this approach should be supplemented by a provision thatallows operators to present Ofgem with evidence in accordance with fuelmeasurement and sampling guidelines (that are applicable to all technologies usingbiomass) of a lower fossil fuel energy content. For example, international standardsare being developed for some solid recovered fuels which require a minimumbiomass fraction higher than the residual value of the proposed deemed fossil fuelfraction. Ofgem would then assess this evidence and ongoing measurementproposals prior to granting more ROCs than would be provided by the deemedvalue.

6.28 These proposed changes would not be expected to have a significant impact on theRO. A report25 commissioned as part of the 2005-06 RO review estimated futureadditional EfW-CHP amounting to 3-5% of the RO by 2020. This was projected to bea mix of existing power station conversion and new facilities serving eithercommunity heating schemes or industrial demand.

Q25: Do you agree that deeming the fossil fuel content of waste is appropriate?

Should operators be given the opportunity to present Ofgem with evidence

that the fossil fuel content is lower?

Q26: Is 65% fossil fuel the right level to deem? Does the remaining 35% receiving

ROCs provide a suitable incentive through the RO without compromising the

Government’s aspirations for increased recycling?


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25 Ilex Consulting, Extending ROC eligibility to energy from waste plant with CHP.

Making RO neutral to waste (Solid Recovered Fuels)

6.29 In the previous consultation, consultees were asked about remaining barriersto waste in the RO, to which a few respondents suggested that the RO was abarrier to recovering EfW amongst other issues like the Waste Incineration Directive(WID) and planning issues. WID is essential to protect health and the environmentallowing EfW projects to contribute sustainably to our long-term waste managementand energy objectives. Recognising the significant potential of EfW and wastederived fuels, we are considering modifying the current restrictions whereby ROCscannot be claimed for eligible biomass when they are co-fired in a fossil fuel powerstation alongside waste. This would not result in extending the eligibility of wastesbut would allow co-firers to use waste feed stocks without losing ROCs for eligiblebiomass.

6.30 We consulted on making the RO neutral to waste in the 2005-06 RO Review, but itwas not progressed then due principally to concerns about the risk of ROCs beingawarded for combustion of mixed wastes. This risk should be mitigated byextending neutrality only to solid recovered fuels (i.e. not to unsorted, mixed waste),which is the waste feedstock most likely to be of interest to power generators,industrial intensive energy users and biomass energy power stations. This wouldhelp open markets for waste derived fuels, with benefits for security of supply andlower carbon generation, without disrupting operators’ existing ROC businesses. Itwould also complement the EfW with CHP provisions. Mixed waste incinerators,which operate as gate fee businesses, would be unaffected by such a change.

6.31 Power stations co-firing waste derived fuels would need to demonstrate its GCV toOfgem to allow ROCs to be awarded for eligible biomass fuels. We would welcomeviews on the feasibility of this approach and rigour needed, given ROCs will not beawarded for this feedstock. This change will require a definition of solid recoveredfuels in the legislation, which it is proposed to base on that in CEN343.26

Q27: Do you agree that the RO should be made ‘neutral to waste (SRF)’ in this

way? Would there be any negative consequences? Do you agree that a CEN

based definition is appropriate?


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26 Solid fuel prepared from non-hazardous waste to be utilised for energy recovery in incineration or co-incineration plants, andmeeting the classification and specification requirements laid down in prCEN/TS 15359. N.B. "Prepared" here means processed,homogenised and up-graded to a quality that can be traded amongst producers and users.

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Q1: Are there any technologies that will fall into the reference band as ‘others’ thatshould be given a different support level? Please provide evidence as to thetechnology and cost.

Q2: Do you agree that it is appropriate to distinguish between energy crop and regulardedicated biomass projects?

Q3: Do you agree with the rationale for grouping technologies in this way?

Q4: Do you agree with the proposed banding levels? If not, please provide evidence asto why these should be changed. Views are also invited on the reports by Ernst andYoung and Oxera published alongside this consultation document

Q5: Do you agree with the proposal that Geopressure occurring in conjunction withfossil fuel should be excluded from the RO?

Q6: Do you agree with the principle of providing independent advice to Ministers tohelp agree UK wide bands, and on who should provide that advice?

Q7: Do you support this approach to timing of reviews?

Q8: Do you agree with the criteria set out in paragraph 4.14? Should there be anyadditional criteria?

Q9: Do you agree that the proposed trigger points for grandfathered rights, including thetransitional arrangements for projects consented on 1st April 2009, are appropriate?

Q10: Should the electricity generated from power stations that add additional capacityafter the point at which they are grandfathered be calculated as a fraction pro ratato the installed capacities and/or be subject to separate metering at the generators’discretion?

Q11: Do you agree with the proposed treatment of projects under 50 kW as set out inpara 4.21?

Annex A: List of Questions

Q12: Is there any reason why RO support at the grandfathered level would need tocontinue after the initial investment had been paid back?

Q13: Accepting that there will be variation between projects, is 20 years a fair proxy forproject financing?

Q14: Should this provision apply to projects under NFFO 3, 4 and 5 from date of contract,date of first supply or date of commencement in RO?

Q15: Is a guaranteed headroom of 6% adequate, given the ability of suppliers to bankROCs and our intention to also remove the risk of a ROC price crash throughintroducing the ski-slope?

Q16: At what point in time should the level of Obligation for a given obligation periodbe announced?

Q17: Do you agree with the intention to take a power to introduce a ski-slope in primarylegislation subject to a later need?

Q18: Do you agree with the need for a special co-firing criterion for an emergency reviewof banding? Is 10% of ROCs an appropriate trigger point?

Q19: Do you agree with the Government’s proposal that reducing support and reviewingthe co-firing band for regular biomass if it contributes 10% of ROCs makes a capon co-firing unnecessary? If not, please provide evidence as to what the likelyimpact of uncapping co-firing at the proposed level of support would be and thelevel of cap appropriate.

Q20: Do you agree with the proposed treatment of energy crops set out inparagraphs 6.9–6.14?

Q21: Do you agree that sustainability requirements should cover all biomass users?

Q22: Should those generating less than 50 kW be exempted from sustainabilityreporting? Should any other threshold be used

Q23: Do you agree with the criteria to address sustainability for biomass?

Q24: Do you agree that Ofgem should freeze the ROCs of operators who do not providethe necessary information on sustainability?

Q25: Do you agree that deeming the fossil fuel content of waste is appropriate?Should operators be given the opportunity to present Ofgem with evidence thatthe fossil fuel content is lower?


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Q26: Is 65% fossil fuel the right level to deem? Does the remaining 35% receivingROCs provide a suitable incentive through the RO without compromising theGovernment’s aspirations for increased recycling?

Q27: Do you agree that the RO should be made ‘neutral to waste (SRF)’ in this way?Would there be any negative consequences? Do you agree that a CEN baseddefinition is appropriate?


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47

Partial Regulatory Impact Assessment for Banding of the

Renewables Obligation

Part 1 – General Issues

1. Title of Proposal

1.1 Banding of the Renewables Obligation (RO).

2. Introduction

2.1 The Energy White Paper, Meeting the Energy Challenge, published on 23 May 2007sets out our plans to reform the RO following a Government consultation, Reformof the Renewables Obligation and Statutory Consultation on the RenewablesObligation Order 2007, which closed on 5 January.

2.2 The consultation this partial RIA accompanies, sets out, and seeks views on, thedetailed implementation of the changes that are being introduced. Informationprovided in response to this consultation will be incorporated into the final versionof the RIA.

3. Background

3.1 The RO27, introduced in 2002, is the Government’s main policy measure toencourage the development of electricity generation capacity using renewableenergy sources in the UK. It is underpinned by a substantial package of financialand non-financial supporting mechanisms and active assistance to the industry todevelop its competitive potential. The RO has already provided, and will continue toprovide, an impetus for the new renewable generating capacity that will be neededto meet the UK’s current 10% target for electricity produced from renewable energysources and as a basis for further reductions in carbon dioxide emissions.

Annex B: Regulatory ImpactAssessment

27 The details of the RO are contained in the Renewables Obligation Order 2006 in England and Wales, the Renewables Obligation(Scotland) Order 2006 in Scotland, and the Northern Ireland Renewables Obligation Order 2006 and the Renewables ObligationOrder 2006 (Amendment Order) 2007. RIAs were produced for the implementation of the Obligation in England & Wales andScotland in 2002; the amendments to the Obligation in 2004 and 2007; the new powers set out in the Energy Act 2004; theConsolidated Orders in 2005 and 2006; and the new powers in the Climate Change and Sustainable Energy Act 2006.

3.2 The RO requires licensed electricity suppliers to ensure specified amounts of theelectricity they supply are from renewable sources. For 2007/08, this level is 7.9%and rises to 15.4% in 2015/16. Without the financial support provided by the RO,most forms of renewable electricity would not be economic.

3.3 The RO does not operate in a vacuum. Movement in a number of external factorsaffect the effectiveness of the RO in supporting renewables technologies. Anexample of this is the cost of wind generation which has risen by some 25%over the past two years due in large part to the increased prices of wind turbinesdriven by international increases in demand, as well as underlying rises in costsof raw materials.

4. Regulatory Burdens and Compensatory Simplification

4.1 The details of the RO are set out in secondary legislation, introduced in 2002, withsubsequent amendments in 2004, 2005, 2006 and 2007. The major regulatoryburden imposed by the RO is that, in order to provide additional support for thegeneration of electricity from renewable sources, costs to all electricity consumersare increased. These costs are capped by the levels of the RO and the “buy-out”price in the RO. The previous RIAs referred to in Footnote 27 considered the costsand benefits of the introduction and subsequent extension of the RO at the timethat those measures were introduced.

4.2 The RO also imposes some regulatory burdens on renewable generators andthe electricity supply industry in relation to the administration required to benefitfrom and comply with the scheme. Amendments introduced by the RenewablesObligation Order 2007 include a small number of detailed changes that will makeit easier for renewable generators to benefit from the RO, and electricity suppliersto comply with it. This will reduce the regulatory burdens on business, particularlysmall businesses. Equally, the measures to introduce banding of the RO aim toimprove the performance of the RO and make it easier for the renewables sectoras a whole to benefit from the RO. Removal of current regulations around co-firingwill also reduce the complexity of compliance.

5. Business sectors affected by the RO

General5.1 The main business sectors affected are:

� companies involved in the supply of electricity to all electricity consumers;

� companies involved in the generation of renewable electricity;

� large consumers of electricity who may be particularly affected, given that theRO increases the cost of electricity; and

� users of biomass materials for purposes other than electricity generation may beaffected through increased competition for these materials.


48

5.2 The Government’s proposals on RO levels are designed to bring forward morerenewables generation by increasing the effectiveness of the RO, while maintainingbroadly similar costs to consumers. The proposals increase support to some formsof renewable generation, while reducing subsidy to others. Where it incentivisesadditional generation there will be a cost to firms in terms of the cost of theadditional technology. Details of these costs to firms are given in Part 2. The firmscost represents the cost of the additional technology, net of electricity revenues.Revenues and payments from the buy-out fund recycling are regarded as beinginternalised among firms and not added to the costs.

5.3 The precise outcome will depend on the impact of the changes on renewablesgeneration, which in turn rely on a number of external market forces. Among thosefactors external to the RO are future electricity prices, future carbon prices, andfuture capital and operating costs for renewables. Sensitivity analysis carried outindicates that a 10% reduction in the future generation costs has potential toincrease the level of ROC eligible renewable electricity generation by 10–15%in 2015. Improvements in grid and planning will provide an additional boost.

Small Business5.4 The major impact of the RO on the large majority of small businesses is likely to

come from increased costs of electricity which will affect all electricity consumers.Details of the estimated increases in electricity prices are given in Part 2.

5.5 There are a number of small businesses active in the generation of renewableenergy and/or the supply of electricity to customers in the UK, and these are likelyto be affected by the changes to the RO. The DTI has held meetings with manyrelevant interested parties, companies and trade associations in the renewableenergy sector and the proposals to band the RO have received support froma number of smaller companies actively developing projects or supplyingtechnologies in these areas.

5.6 Measures introduced as part of the Renewables Obligation Order 2006(Amendment Order) 2007 are aimed at making it easier for smaller generators ofrenewable electricity – in many cases small businesses – to participate in the RO.These changes have been generally welcomed.

6. Competition Assessment

6.1 The RO is a market-based instrument that operates in a competitive market forelectricity. The rules of the RO apply in a non-discriminatory way to all participantsin the renewables industry and electricity sector. The Government’s intention is thatthis will remain the case.


49

7. Enforcement and Sanctions, Compliance and Monitoring

7.1 The Renewables Obligation Order (ROO) are administered and enforced by Ofgem.Non-compliance is considered a breach of a ‘relevant requirement’ of a supplier’slicence and Ofgem may impose appropriate sanctions. Ofgem reports annually28 onits administration of the RO and conducts regular audits in relation to compliancewith the RO.

7.2 The DTI is responsible for monitoring the impact of the RO on the development ofrenewable energy and collects detailed information on growth in renewable energygeneration and projects under development.

7.3 The changes proposed will introduce few, if any, additional enforcement orinspection measures on business in line with Hampton principles. They do notintroduce any new powers of sanction.

8. Post-Implementation Review

8.1 In the consultation document the Government has undertaken to carry out reviewsof the Banded RO on an agreed timetable. The Government has proposed that thefirst two reviews of the RO banding levels should take place in time for any changesto the banding levels to be introduced on 1 April 2013 and 1 April 2018.

8.2 The Government will continue to monitor the performance of the RO and liaise closelywith Ofgem on issues relating to the administration of the RO and compliance with it.

9. Consultation

9.1 The longer-term changes for the RO were first proposed as part of the EnergyReview Report. The Government has held a preliminary consultation on theseproposals and the consultation which this RIA accompanies, sets out in more detailthe proposed way forward.

9.2 DTI will hold meetings with a wide range of interested parties during thisconsultation period to discuss these issues further, as well as receiving writtenresponses to the consultation and so far as is possible receiving individualrepresentations from interested parties.

9.3 The proposals outlined here will then be subject to the normal processes forbringing forward primary legislation. During primary legislation the proposals will besubject to parliamentary scrutiny. There will then be a statutory consultation on thesecondary legislation needed to implement the proposals. A further more detailedRIA on the proposed changes will be developed in the light of issues raised duringconsultation and the further development of the proposals.


50

28 www.ofgem.gov.uk/Pages/MoreInformation.aspx?docid=73&refer=Sustainability/Environmnt/ RenewablObl

Part 2 – Proposals

10. Reform of the RO

What is the proposal?10.1 To:

� Amend the RO so more expensive renewable energy generation technologies,especially those at an earlier point in their development of technology andbusiness model, are awarded more than 1 Renewables Obligation Certificate(ROC)/MWh of electricity generation (multiple ROCs) while projects in moreeconomic technologies are awarded less than 1 ROC/MWh (fractional ROCs);

� Increase the level of the Obligation above the level previously announced ifactual generation requires (known as ‘headroom’), to a maximum level equivalentto 20%;

� Subject to the outcome of the cross-industry working group, introduce amechanism to mitigate the risk of a collapse in the price of a ROC in the eventof full compliance with the Obligation; and

� Remove the current cap on the proportion of the obligation that suppliers canmeet through co-firing biomass with fossil fuels.

10.2 The Government also wishes to increase investor confidence in the predictability ofthe value of RO. Existing projects and those operational prior to the introduction ofbanding, with the exception of co-firing (which requires comparatively low levels ofcapital investment), will be grandfathered at 1 ROC/MWh for at least 20 years fromtheir date of operation. Mechanisms may also be introduced to mitigate the risk of acollapse in the price of a ROC in the event of full compliance with the Obligation.

Way forward?10.3 The RO was devised as a technology-neutral instrument designed to bring forward

the most economic forms of renewable generation. The Government believes ithas been broadly effective in achieving this goal; renewable generation has grownsignificantly and there is a large pipeline of projects under development. Totalgeneration from RO eligible renewable sources was 4% of electricity in 2005,up from 1.8% in 2002.

10.4 However, due to, among other factors, increased costs for renewables generationthe RO, in its current form, seems unlikely to achieve Government targets.Government work on how to bring forward additional renewables generation withoutprejudicing investment undertaken on the basis of the RO has led to thedevelopment of banding. The RO needs long term certainty to operate to its fullestpotential.

10.5 In order to develop this work the Government commissioned Ernst & Young toresearch the costs of different renewable generation technologies, and to provide


51

levelised costs of technologies under the RO, taking into account their capital andoperational costs. This data was then provided to Oxera and formed the basis oftheir modelling work of changes to the RO, including the introduction of banding,the ski-slope and headroom mechanisms, and changes to the planning regime.Reports from both of these consultants are published alongside this consultationdocument.

10.6 Oxera used their model of the renewable generation market, which simulates thefuture pattern of renewables investment, based on assumptions as to the futurerevenue stream and costs of various renewable generation technologies (basedon the Ernst & Young report). They analysed a number of scenarios of RO reform,examining the impact on the renewables generation market. The scenarios included:leaving the RO unchanged; giving each technology a separate band dependant onneed; and various ways of grouping technologies in different bands with differinglevels of support. Other elements such as the implementation of a headroommechanism to mitigate the risk of ROC price crashes were also modelled.

10.7 This work allowed the Government to identify a short list of scenarios which beginto deliver on our policy goals of increasing renewables generation against the10% target and aspiration of 20% by 2020, through incentivising new renewablestechnologies and increasing carbon emissions savings, whilst increasing value formoney for the consumer and increasing the efficiency of the RO. Oxera ran anumber of sensitivity tests on the electricity price, the carbon price and technologycosts, as well as some assumptions about the impact of reduced capital costs dueto reform of planning and grid connection.

What are the options?10.8 The Oxera Report published alongside this consultation presents results from the

modelling work in more detail. The options selected highlight particular effects ofbanding at specific levels and we would appreciate comments from consultees.All of the scenarios quoted use the central case and are discounted over the lifetimeof the RO, in line with HMT Green Book methodology and discount rates.

Option One – Do Nothing10.9 The assumptions made about the current Obligation scenario (the base case) are:

� each MWh generated earns one ROC (i.e. no banding);

� it is based on the current trajectory to an obligation of 15.4% by 2015/16;29

� it includes RPI-indexation of the buy-out price for the lifetime of the RO(until 2027);

� that the energy crop co-firing remains uncapped from 1 April 2007, and existingcaps on non-energy crop co-firing are maintained – implying a cap of 10% until2010/11, 5% until 2015/16 and nothing thereafter


52

29 An equivalent cap of 6.3% exists for Northern Ireland starting in 2012/13.

10.10 The modelling indicates that unchanged (the “do-nothing” scenario), the RO willdeliver 8.1% electricity from ROC eligible renewables generation by 2010 against atarget of 10% and 11.4% by 2015 and 11.5% by 2020. Under this option the levelof generation does not come near to the maximum obligation level of 15.4%.

10.11 Under central electricity price/central technology cost assumptions, this level ofgeneration is achieved at a total subsidy cost of £27.3 billion over the lifetime ofthe policy. This cost is assumed to equate to the cost to consumers, the figures inthe table assume 100% cost pass-through. Over the lifetime of the technologiessupported through the RO, this option saves 90.6 million tonnes of carbon (MtC).

10.12 Under the central electricity price/central technology cost assumptions, thelifetime resource cost (i.e. the cost of the renewable technologies) is estimatedat £14.6 billion. Assuming this resource cost is passed through to electricity prices,we estimate that the RO under this option leads to increased electricity prices ofaround 5%. The difference between the subsidy cost and the resource cost istherefore estimated at £9.1 billion over the lifetime of the renewable technologies.This represents the ‘deadweight’ cost of the RO – a measure of the efficiency ofthe instrument.

10.13 The deadweight cost is due in part to the amount by which technologies receivesubsidy under the RO which is greater than the level needed for them to beeconomic. For example co-firing and landfill gas technologies which have very lowcapital costs and are over-subsidised by the current model. It is this deadweightelement that the RO reforms are aiming to address.

Notes:1. All costs are at 2007 real prices, discounted. The low scenario is modelled assuming technology costs are

10% higher in the central case, with a lower level of renewable generation. High costs assume technologycosts are 10% lower than in the central case, with a higher level of generation, and therefore costs.

Option One: Do Nothing 20151 Lifetime

Low Central High Low Central High

Resource Cost £bn 0.8 0.8 0.7 14.1 14.6 13.8

Carbon Saved MtC 3.3 3.8 4.2 78.9 90.6 102.9

NPV Cost-Benefit £bn (cost+/benefit-) 0.6 0.5 0.4 9.2 9.0 7.4

Cost-Effectiveness £/tC 179 161 134

RO Deadweight Cost £bn 0.5 0.5 0.6 9.6 9.1 9.9

Distributional Analysis

Exchequer Cost £bn 0.1 0.1 0.1 1.6 1.9 2.1

Firms Cost £bn 0.8 0.8 0.7 13.4 13.8 12.9

Consumer Cost £bn 1.3 1.3 1.3 23.7 23.7 23.7


53

Option Two – Banding Package with many Bands (Scenario One)10.14 This scenario assumes a separate band for each technology, with bands set to make

the central step of each individual technology supply curve economic. Co-firing isuncapped. Co-firing is set at 0.4 ROCs/MWh in this scenario.

10.15 A headroom mechanism is included, which increases the level of the obligationwhen the headroom threshold is breached, ensuring that the actual number ofROCs is 6% higher than generated volumes from 2009/10 with a ski-slopemechanism included to prevent the ‘cliff-edge’ problem when ROC volumesexceed the obligation size.

10.16 Under central electricity price/central technology cost assumptions, the modellingindicates that this scenario would deliver 10.2% generation from ROC eligiblerenewables generation by 2010, 13.8% by 2015 and 13.8% by 2020. This optionbrings forward significant increases in the amount of generation from co-firing (dueto the removal of the cap on co-firing), offshore wind, and for a lesser extent waveand tidal (due to the banding up of these technologies). The higher banding levelsincrease both the actual deployment for renewable electricity as well as leading tomore ROCs being issued than the level of generation in MWh. If ROCs areconverted on a one for one basis, the level of ROCs in 2027/28 is 67 TWh comparedto a volume of generation of 52 TWh. Combined with the increase in absolutedeployment, this has the impact of reducing the ROC price, and therefore expectedrevenues, which in turn is predicted to decrease investment in onshore wind,despite onshore wind continuing to receive one ROC.

10.17 This level of generation is achieved at a lifetime cost to consumers of £28.8 billionover the lifetime of projects supported by the RO technologies, saving 107.1 MtCemissions. Overall therefore, this option increases the level of renewablesgeneration but at considerable cost to the consumer. Over the lifetime of theRO, the cost to the consumer increases by £5.1 billion.

10.18 This option increases the overall resource cost incurred through the RO, andincreases the cost/tonne of carbon, and the Net Present Value (NPV) cost, comparedto option one. This is because the banding regime brings forward more expensivetechnologies (i.e. offshore wind and wave and tidal). This increased resource cost,combined with a reduction in the total subsidy, results in a reduction in the lifetimedeadweight of £2.0 billion compared to option one – representing increasedefficiency of the subsidy The higher level of resource cost results in a slightly higherestimated impact on electricity prices, of around 8%, compared to around 5% inoption one. This option delivers slightly higher intermittent generation under optionone (wind and wave and tidal power) which means that this option will incur slightlyhigher system balancing costs than under option one.

10.19 However, this scenario is complex, and is more precise than it is really possible to bewhen predicting future costs. This banding regime is likely to require banding levels tobe reset on a more frequent basis than one with fewer bands, introducing increaseduncertainty for investors, and leading to Government trying to predict the market andpick winners, something consultation responses have strongly advised against.


54

Notes:1. All costs are at 2007 real prices, discounted. The low scenario is modelled assuming technology costs are

10% higher in the central case, with a lower level of renewable generation. High costs assume technologycosts are 10% lower than in the central case, with a higher level of generation, and therefore costs.

Option Three – Banding Package with Four Bands10.20 This scenario is the same as option two, though it simplifies the number of bands to

be introduced, with each technology being assigned to one of four banding levels:

� Technologies in the Established Band will receive 0.25 ROCs/MWh

� Technologies in the Reference Band will receive 1 ROC/MWh

� Technologies in the Post-Demonstration Band will receive 1.5 ROCs/MWh

� Technologies in the Emerging Technologies Band will receive 2 ROCs/MWh

10.21 One of the most important features of this option is that it reduces the level ofsubsidy to the most expensive technologies compared to option two. This in turnreduces the divergence between the number of ROCs and the level of generation,which was found under option two. Under this option ROC prices remain at a levelwhich allows an increase in the level of onshore wind generation, while retaining thelevel of support necessary to bring forward increases in generation from biomassand offshore wind. The smaller number of bands also allows greater flexibility, andreduces the need for frequent reviews.

10.22 The modelling indicates that under central electricity and central technology costassumptions, this scenario would deliver 8.6% ROC eligible renewables generationby 2010, 13.5% by 2015 and 13.5% by 2020. Actual deployment will depend on thevalidity of those assumptions. Additional policy measures proposed by Governmentincluding reforms to the planning and grid access regimes are intended to removeregulatory barriers to the deployment of renewable electricity generation. Thesepolicies are still in development and it has not been possible to assess the impactof these changes has been assumed in this modelling work.

Option Two: Scenario 1 20151 Lifetime


Resource Cost £bn 1.2 1.2 1.3 20.1 21.7 23.0

Carbon Saved MtC 4.0 4.7 5.5 89.5 107.1 128.7






Firms Cost £bn 1.1 1.2 1.2 19.3 20.8 21.9

Consumer Cost £bn 1.3 1.6 1.7 24.4 28.8 29.4


55

10.23 Under these assumptions, the total subsidy is estimated at £25.1 billion (an increasein total subsidy of £1.4 billion compared to option one) over the lifetime of the RO.This option saves 103.1 MtC of Carbon over the lifetime of the technologies, anincrease of 12.5 MtC over option one.

10.24 This option, is predicted to bring forward similar levels of new renewablesgeneration to option two, but does so for a much lower increase in the cost toconsumers of roughly £3.7 billion compared to option two or scenario one.

10.25 Resource costs under this option are estimated at £19.4 billion over the lifetime, anincrease of £4.8 billion over option one. Cost/tonne of carbon is £188 higher thanoption one, but lower than option two. The increased resource cost and reducedconsumer cost leads to an estimated lifetime deadweight cost of £5.7 billion. This isa reduced deadweight cost of £3.4 billion compared to option one – making it themost efficient of the options considered here. The higher resource cost implieshigher electricity prices than under option one – an estimated 7% increase – higherthan under option one, but lower than under option two. This option leads to ahigher level of intermittent generation than under option one, which will incur someadditional system balancing costs. Using UK Energy Research Centre (UKERC)30

estimates of the costs of intermittent generation, this leads to an additional costof approximately £60-70 million over the lifetime of the RO.

10.26 This is the Government’s favoured Option.

Notes:1. All costs are at 2007 real prices, discounted. Low scenario is modelled assuming technology costs are 10%

higher in the central case, with a lower level of renewable generation. High costs assume technology costsare 10% lower than in the central case, with a higher level of generation, and therefore costs.

Option Three: Four Bands 20151 Lifetime


Resource Cost £bn 1.1 1.1 1.1 19.9 19.4 19.1

Carbon Saved MtC 3.9 4.5 5.1 86.8 103.1 123






Firms Cost £bn 1.1 1.1 1.0 19.1 18.5 18.1

Consumer Cost £bn 1.3 1.4 1.6 23.7 25.1 28.6


56

30 www.ukerc.ac.uk

What are the costs?10.27 Introducing a banded obligation on its own will not increase the total amount of cost

subsidy in the RO, and will not therefore increase costs to consumers. Under thecentral assumptions option three is predicted to cost consumers an additional£1.4 billion, compared to option one, over the lifetime of the RO. The out-turnwill vary with the actual level of deployment – increased deployment will beaccompanied by increased costs to consumers.

10.28 The change will result in additional investment in renewables generation, inparticular in higher cost technologies and will result in an increased resource costof £4.8 billion. This resource cost is the cost to the economy of producingrenewable energy as opposed to conventional generation. However, the ability totarget support in a banded RO, means that banding has the potential to significantlyincrease the efficiency of the RO (reducing the ‘deadweight’ element of thesubsidy) through providing support levels more closely linked to the needs ofdifferent technologies.

10.29 Changes to the RO will result in changes to its administration which will result inincreased costs to the RO administrator. The Government has no plans to changethe funding arrangements for the administration of the RO. However, we will keepopen the option of changes should they be necessary.


57

58

1. Consult widely throughout the process, allowing a minimum of 12 weeks for writtenconsultation at least once during the development of the policy.

2. Be clear about what your proposals are, who may be affected, what questions arebeing asked and the timescale for responses.

3. Ensure that your consultation is clear, concise and widely accessible.

4. Give feedback regarding the responses received and how the consultation processinfluenced the policy.

5. Monitor your department’s effectiveness at consultation, including through the useof a designated consultation coordinator.

6. Ensure your consultation follows better regulation best practice, including carryingout a Regulatory Impact Assessment if appropriate.

The complete code is available on the Cabinet Office’s web site, addresswww.cabinet-office.gov.uk/servicefirst/index/consultation.htm

Annex C: Consultation Criteria

59

Technology Cost of Energy 2006 Supply30 Supply TWh

£/MWh29 TWh 2015 Projected

No Change Banded RO31

Sewage Gas 28-53 0.3 0.9 0.9

Landfill Gas 32-63 4.1 4.3 4.2

Co-firing 51-75 2.2 3.9 5

Onshore Wind 54-106 3.4 15.2 12.4

Energy from Waste with CHP 75-83 0 1.1 0.9

Hydro-electric 46-97 2.3 2.9 2.8

Offshore Wind 82-102 0.7 8.4 16.7

Dedicated Biomass (regular) 77-114 1 2.6 2.8

Dedicated Biomass (energy crops) & Biomass CHP 119-180 0 0 0.6

Wave and Tidal Stream 121-282 0 0 0.3

Anaerobic Digestion/ Gasification/Pyrolysis 103-202 0 0 0.1

Solar PV 488-717 0 0 0

Annex D: 2010 LevelisedTechnology Costs and Currentand Projected Supply

29 These figures are from the range of levelised costs for 2010 as presented in the Ernst and Young report which accompanies thisconsultation. Some technologies have been grouped.

30 These figures only represent the electricity supply on which RO Certificates have been claimed.31 The figures, taken from the Oxera report, indicate estimated generation in the Obligation period 2015/16 and take into account

proposed policy changes.

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Printed in the UK on recycled paper containing a minimum of 75% post consumer waste.First published May 2007. Department of Trade and Industry. www.dti.gov.uk

© Crown Copyright. DTI/05/07/NP. URN 07/636

Introduction

A supplement to the Fourth Annual Report on progress towards the 2003 Energy White Paper goals 1

UK ENERGY SECTOR INDICATORS 2007

A supplement to the Fourth Annual Report on progress towards the 2003 Energy White Paper goals

Introduction

UK ENERGY SECTOR INDICATORS 2007 2

INTRODUCTION

In February 2003, the Energy White Paper “Our Energy Future – Creating a Low Carbon Economy” set out a new framework for energy policy. It contained four goals:

To put ourselves on a path to cut the UK’s CO2 emissions – the main contributor to global warming – by some 60% by about 2050, as recommended by the Royal Commission on Environmental Pollution (RCEP), with real progress by 2020.

To maintain the reliability of energy supplies

To sustain our industrial and business competitiveness

To ensure that every home is adequately and affordably heated

2. Thus the first goal for current energy policy is environmental sustainability and, in particular, putting the UK on a path to reduce carbon dioxide emissions by some 60% by about 2050. The quality of the environment has always been important but climate change is now a reality. The worst effects of climate change can be avoided if concentrations of greenhouse gases in the atmosphere can be stabilised. We can reduce carbon dioxide emissions by reducing the amount of energy we consume, combined with a rapid acceleration in electricity generation through renewable energy.

3. The second goal is to maintain the reliability of Britain’s energy supplies, so that people and businesses can rely on secure supplies of energy. Reliable energy supplies are fundamental to the economy as a whole and to sustainable development. An adequate level of energy security must be satisfied at all times in both the short and longer term. This requires the right infrastructure and regulatory system at home and liberalised energy markets in Europe. It also means pursuing closer international relationships to promote regional stability and economic reform in key energy producing areas of the world.

4. The third goal is to raise the sustainable rate of economic growth and our industrial and business competitiveness through competitive energy markets that are reliable and affordable. It is important for our economy and for our productivity that the cost of energy does not threaten the overall competitiveness of UK business or discourage inward investment. Equally it is important to business and consumers generally that energy for manufacturing processes, heating, lighting, cooking, powering IT and so on, is affordable. Liberalised and competitive markets will continue to be a cornerstone of energy policy. Where the market alone cannot create the right signals (for example on the environment) we will take steps that encourage business to innovate and develop new opportunities to deliver the outcomes we are seeking.

5. The final and fourth goal is to achieve our social objectives and ensure that every home is adequately and affordably heated. Our policies should take account of impacts on all sectors of society and specific measures will be needed for particular groups of people, for example, to tackle fuel poverty.

Introduction


6. These four goals are designed to be achieved together.

7. In many cases the objectives can reinforce each other. For example, improving the efficiency with which we use energy will reduce greenhouse gas emissions, help those in fuel poverty, cut energy bills for businesses and households, and support energy security by reducing demand. Additionally, other measures, such as those to encourage renewable energy, can help create new markets and new industries, alongside environmental and energy security benefits. But it is also recognised that from time to time there will be tensions between objectives. For example, extremely high energy prices would promote energy efficiency, and thereby reduce emissions. But they would also have a negative effect on people on low incomes and business.

8. For 2007, this publication is only being made available on the DTI Energy website. As last year it contains only the four key indicators, one for each goal and the 28supporting indicators. The full range of background energy indicators can also be found on the DTI Energy web site at www.dti.gov.uk/energy/statistics/publications/indicators/page39558.html. Thus the full range of indicators as published in “UK Energy Sector Indicators 2005” remains available.

9. Except where the supporting indicators are summaries of the background indicators, the 28 supporting indicators are repeated in the appropriate sections of the background indicators so as to set them in a wider context.

10. This remains an evolving set of indicators and work will continue to develop new indicators in a number of areas. The work of the Joint Energy Security of Supply Working Group (www.dti.gov.uk/energy/reliability/security-supply/jess/index.html) has developed further, forward-looking indicators on security of supply and the annex to the Government’s Annual Progress Report on UK fuel poverty strategy (www.dti.gov.uk/energy/fuel-poverty/strategy/index.html) includes a wide range of social indicators.

List of charts and tables


LIST OF CHARTS AND TABLES

Key White Paper Indicators

1 Low Carbon: Greenhouse gas and carbon dioxide emissions 9

2 Reliability: Gas and electricity capacity margins 9

3 Competitiveness: Overall competitiveness score for selected EU energy markets 10

4 Fuel Poverty: Number of households in Fuel Poverty 10

Supporting Indicators Low carbon

1.1 Total carbon dioxide emissions by sector 11

1.2 Final energy consumption by sector 11

1.3 Carbon intensity, Carbon dioxide emissions per unit of GDP 12

1.4 Energy ratio in G8 countries 12

1.5 Share of fuels contributing to primary energy supply; fossil fuel dependency 13

1.6 Proportion of electricity generated by renewables 14

1.7 CHP capacity for electricity generation 14

1.8 Energy intensity 15

1.9 Energy intensities for road passengers, road freight and air 16

1.10 Specific energy consumption for households 16

1.11 Average new CO2 emissions 17

Reliability

2.1 Electricity generating capacity, average load factor and simultaneous max load met for major power producers 18

2.2 Gas capacity – maximum supply, maximum demand and peak 1 in 20 winter estimated demand 18

2.3 Security and availability of electricity supply for the average customer 19

2.4 Shares and diversity of fuels used for electricity generation 20

2.5 Diversity of primary energy supply in G8 countries 21

2.6 Diversity of oil imports 21

2.7 Diversity of supply of primary fuels 22

Competitiveness

3.1 Changes in the productivity of the energy industries 23

3.2 Percentage of Gross Value Added accounted for by energy expenditure 23

3.3 Fuel prices indices for the industrial sector 24

3.4 Industrial gas prices within the EU and G7 24

3.5 Industrial electricity prices in the EU and G7 25

Fuel poverty

4.1 Total number of households in fuel poverty 26

4.2 Trends in fuel poverty by severity 27



4.3 SAP rating of households in the lowest 30 per cent income groups and average SAP rating for

England 28

4.4 Fuel prices indices for the domestic sector 28

4.5 Fuel expenditure as a percentage of total expenditure by income group 29

Technical Notes 30

Contact List 33

Background indicators not included in this document can be found on the DTI Energy Web site at www.dti.gov.uk/energy/statistics/publications/indicators/page39558.html are:

Background Indicators

E1 Energy in the Economy; Investment and Productivity

E1.1 Contribution to GDP and total employment in the energy industries

E1.2 Value of exports and imports of fuels as a percentage of the value of all visible exports and imports E1.3 Investment by the energy industries E1.4 Research and Development by the energy industries E1.5 Changes in productivity of the energy industries E1.6 Percentage of Gross Value Added accounted for by energy expenditure E1.7 Contribution to GDP by the oil and gas industry E1.8 Investment by the oil and gas industry E1.9 Changes in the productivity of the oil and gas industry E1.10 Contribution to GDP by the electricity industry E1.11 Investment by the electricity industry E1.12 Changes in the productivity of the electricity industry E1.13 Contribution to GDP by the gas industry E1.14 Investment by the gas industry E1.15 Changes in the productivity of the gas industry E1.16 Contribution to GDP by the coal industry E1.17 Investment by the coal industry E1.18 Changes in the productivity of the coal industry E1.19 Contribution to GDP by the nuclear industries E1.20 Investment by the nuclear industries E1.21 Changes in the productivity of the nuclear industries

RELIABLE SUPPLIES OF ENERGY

E2 Resources

E2.1 Discovered UK oil, cumulative production plus estimates of remaining reserves in present discoveries

E2.2 Oil production and production as a proportion of reserves E2.3 Production of oil and gas against PILOT targets E2.4 Discovered UK gas, cumulative production plus estimates of remaining reserves in present

discoveries E2.5 Gas production and production as a proportion of reserves E2.6 Coal production E2.7 Shares of UK coal supply E2.8 Capacity of renewable sources for electricity generation E2.9 Nuclear generation capacity

E3 Energy Diversity



E3.1 Trade and consumption E3.2 Shares of fuels contributing to primary energy supply; fossil fuel dependency E3.3 Diversity of supply of primary fuels (Shannon-Wiener measure of diversity) E3.4 Shares electricity generated from different fuels E3.5 Diversity of electricity generated from different fuels by major power producers (Shannon-Wiener

measure of diversity) E3.6 Proportion of electricity generated by renewables E3.7 Electricity generation from renewable sources, excluding large-scale hydro E3.8 Diversity of oil imports

E4 Capacity Utilisation

E4.1 Oil refinery utilisation E4.2 Electricity generating capacity, average load factor and simultaneous maximum load met for major

power producers. E4.3 Gas capacity - maximum supply, maximum demand and peak (1 in 20 winter) estimated demand, E4.4 CHP capacity for electricity generation and average load factor.

E5 International Comparisons of Energy Production and Use

E5.1 Ratio of energy production to primary energy consumption in OECD countries and Russia E5.2 Ratio of energy production to primary energy consumption for G8 countries E5.3 Diversity of energy supply in OECD countries and Russia (Shannon-Wiener measure of diversity) E5.4 Diversity of primary energy supply for G8 countries (Shannon-Wiener measure of diversity) E5.5 Fossil fuel dependency in OECD countries and Russia E5.6 Fossil fuel dependency in G8 countries E5.7 The energy ratio in OECD countries and Russia E5.8 The energy ratio in G8 countries E5.9 Ratio of final energy consumption to primary energy consumption in OECD countries and RussiaE5.10 Ratio of final energy consumption to primary energy consumption in G8 countries E5.11 Household energy use per person in OECD countries and Russia E5.12 Household energy consumption per person in G8 countries

INDUSTRIAL AND BUSINESS COMPETITIVENESS

E6 Fuel Prices

E6.1 Fuel price indices for the industrial sector E6.2 Petrol and Diesel prices E6.3 Fuel price indices for the domestic sector E6.4 Trends in the NW European marker price of coal E6.5 Trends in the price of Brent crude oil E6.6 Industrial gas prices within the EU15 and G7 E6.7 Percentage change in industrial gas prices E6.8 Industrial electricity prices in the EU15 and G7 E6.9 Percentage change in industrial electricity prices E6.10 Domestic gas prices in the EU and G7 E6.11 Percentage change in international domestic gas prices (including taxes) E6.12 Domestic electricity prices in the EU and G7 E6.13 Percentage change in international domestic electricity prices (including taxes) E6.14 European consumer prices of Lead Replacement Petrol in pence/litre (discontinued) E6.15 European unleaded prices in pence/litre E6.16 Unleaded prices in pence/litre for selected G7 countries E6.17 European diesel prices in pence/litre E6.18 G7 diesel prices in pence/litre E6.19 Taxes and duties as a percentage of selling price of unleaded petrol E6.20 Taxes and duties as a percentage of selling price of diesel

E7 Competition in Energy Markets

E7.1 Competition in electricity generation (Herfindahl-Hirschman measure of concentration)



E7.2 Competition in electricity sales to industry (Herfindahl-Hirschman measure of concentration) E7.3 Competition in electricity sales to the commercial sector (Herfindahl-Hirschman measure of

concentration) E7.4 Competition in electricity sales to the domestic sector (Herfindahl-Hirschman measure of

concentration) E7.5 Competition in gas sales to electricity generators (Herfindahl-Hirschman measure of concentration) E7.6 Competition in gas sales to the industrial sector (Herfindahl-Hirschman measure of concentration) E7.7 Competition in gas sales to the commercial sector (Herfindahl-Hirschman measure of

concentration) E7.8 Competition in gas sales to the domestic sector (Herfindahl-Hirschman measure of concentration) Table E7.1 Number of major power producers Table E7.2 Percentage of total generation and total capacity by major power producers Table E7.3 Number of companies supplying electricity Table E7.4 Percentage of electricity supplied Table E7.5 Number of companies supplying gas Table E7.6 Percentage of gas supplied

SOCIAL OBJECTIVES

E8 Standards of Service

E8.1 Number of Guaranteed Standards of performance payments per 100,000 electricity tariff customers E8.2 Percentage of gas performance targets achieved E8.3 Security and availability of electricity supply for the average customer E8.4 Number of gas and electricity complaints received by the Industry Regulators and Energywatch E8.5 Transfer complaints per 1,000 transfers received by the Industry Regulators and Energywatch

Table E8.1 Electricity Guaranteed Standards of Performance Table E8.2 Electricity Overall Standards of Performance Table E8.3 British Gas Trading standards of service and performance Table E8.4 National Grid guaranteed standards of service Table E8.5 Standards of service

E9 Fuel Poverty

E9.1 Number of households in Fuel Poverty E9.2 Fuel expenditure as a percentage of total expenditure by income group E9.3 Expenditure on fuel as a percentage of overall income for the lowest three income decile groups E9.4 Weekly household expenditure on fuel, food and housing as a percentage of total expenditure E9.5 Energy efficiency by fuel poverty group E9.6 Trends in fuel poverty severity E9.7 SAP rating of households in the lowest 30 per cent income groups and the average SAP rating for

England

Table E9.1 Percentage of total expenditure accounted for by expenditure on food and fuel

ENVIRONMENTAL OBJECTIVES

E10 Conversion Efficiencies

10.1 Ratio of final to primary energy consumption 10.2 Ratio of fuel use for electricity generation to electricity used by final users 10.3 Gas flared per tonne or oil produced

E11 Energy Use Indicators

E11.1 The energy ratio E11.2 Final energy consumption by sector



E11.3 Industrial energy consumption and output E11.4 Energy intensity of the iron and steel industry E11.5 Energy intensity of the chemicals industry E11.6 Energy intensity of the food, drink and tobacco industry E11.7 Energy intensity of the minerals industry E11.8 Transport energy consumption by type of transport E11.9 Energy consumption and distance travelled by road passengers E11.10 Energy consumption and distance travelled by road freight E11.11 Average new car CO2 emissions E11.12 Car use per person E11.13 Domestic energy consumption E11.14 Domestic energy consumption by final use E11.15 SAP rating of housing stock E11.16 Ownership of central heating by type E11.17 Thermal efficiency of housing stock E11.18 Specific energy consumption for households E11.19 Ownership and depth of loft insulation E11.20 Electricity consumption by household domestic appliance by broad type E11.21 Percentage of households owning refrigeration appliances E11.22 Percentage of households owning domestic washing and drying appliances E11.23 Energy efficiency of new cold appliances E11.24 Service sector energy consumption and output E11.25 Final energy use and value added by public administration E11.26 Final energy use and value added by commercial and other services

Table E11.1 Industrial energy use by sector

E12 Energy and the Environment

E12.1 Emissions of greenhouse gas E12.2 Progress towards meeting Kyoto targets to reduce green house gas emissions for selected EU

countries E12.3 Carbon dioxide emissions on an IPCC basis and measurement towards targets E12.4 Carbon dioxide emissions by UNECE source E12.5 Carbon dioxide emissions by fuel E12.6 Power station emissions of carbon dioxide E12.7 Carbon dioxide emissions per unit of GDP E12.8 Carbon dioxide emissions per head for G8 countries E12.9 Sulphur dioxide emissions by sector E12.10 Sulphur dioxide emissions by fuel E12.11 Sulphur dioxide by GDP E12.12 Power station emissions of sulphur dioxide E12.13 Nitrogen oxides emissions by source E12.14 Road transport emissions of nitrogen oxides E12.15 PM10 emissions by source E12.16 Radioactive discharges from the nuclear industry

KEY INDICATORS


Key indicators

The four key indicators set out below help to capture in headline form the progress we have made in implementing the four goals for our energy policy set out in the 2003 Energy White Paper.

1 Low carbon

Greenhouse gas and carbon dioxide emissions

0

50

100

150

200

250

1990 1995 2000 2003 2006

prov

Millio

n t

on

nes o

f C

arb

on

Basket of Greenhouse Gases

Kyoto Basket target by 2008-2012

Carbon Dioxide (CO2)

Year 2010 domestic goal

Net emissions of carbon dioxide fell by 5¼% between 1990 and 2006. Estimates based on energy production and consumption in 2006 indicate that emissions rose by 1¼% during 2006. The increase in 2006 resulted from fuel switching from natural gas and nuclear to coal for electricity generation.

Emissions of the ‘basket’ of six greenhouse gases, weighted by global warming potential, fell by about 15% between 1990 and 2006.

Carbon dioxide currently accounts for 84% of total UK greenhouse emissions with methane and nitrous oxide contributing around 8% and 6% respectively. Of the three remaining components hydrofluorocarbons (HFC) contributed about 1% and perfluorocarbons (PFC) and sulphur hexafluoride (SF6) a total of ¼%.

2006 figures are Department of Trade and Industry provisional estimatesSource: Department for Environment, Food and Rural Affairs

2 Reliability

Gas and electricity capacity margins - maximum supply and maximum demand 1993/94 to 2006/07

0

2

4

6

8

10

12

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

winter

TW

h/d

ay

0

15

30

45

60

75

90

GW

Forecast maximum gas supply (left hand scale)

Actual maximum gas demand (left hand scale)

Total electricity declared net capacity (right hand scale)

Simultaneous maximum electricity load met (right hand scale)

Gas margin

Electricity margin

Data for winter 2006/07 are provisional Source: National Grid and Department of Trade and Industry

Target is to ensure that the market provides sufficient capacity to meet maximum gas and electricity demand in each year.

In response to higher electricity prices, more previously mothballed capacity was back in service for winter 2005/06 and remained for the mild winter 2006/07. One new plant began to operate in Northern Ireland in 2005/06. In Great Britain the plant margin rose from around 20% in 2004/05 to 25% for the winter period in 2006/07.

For gas, Liquefied Natural Gas (LNG) imports and two new pipeline routes almost balanced the reduction in indigenous supply in 2006/07 and will further increase supply in 2007/08. As gas prices eased back, gas demand was higher than each of the two previous years.

KEY INDICATORS


3 Competitiveness

Overall competitiveness score for selected EU energy markets (using preliminary 2005 data)

0

1

2

3

4

5

6

7

8

9

10A

ustr

ia

De

nm

ark

Fin

lan

d

Ge

rma

ny

Ire

lan

d

Ita

ly

Ne

the

rla

nd

s

Po

rtu

ga

l

Sp

ain

Sw

ed

en

UK

Sco

re

Electricity Gas Energy

The methodology for assessing the competitiveness of energy markets was developed by OXERA on behalf of Department of Trade and Industry, based on indicators of energy market liberalisation at each stage of the supply chain (upstream, wholesale markets, network and retail) and applied to energy markets in the EU and G7. The methodology used is designed to be both analytically robust, drawing on well-identified indicators of market competitiveness from economic theory, and practical for the purpose of annual assessment. An initial sift is used on all EU and G7 countries to identify those with the most competitive markets, which then undergo a more detailed analysis. The final report which sets out the methodology in more detail is available at www.dti.gov.uk/files/file35324.pdf .

Source: Study undertaken by OXERA on behalf of Department of Trade and Industry

4 Fuel Poverty

Number of households in Fuel Poverty (UK)

The latest estimates show that the number of vulnerable fuel poor households in the UK has fallen from about 5 million in 1996 to around 1½ million in 2004.

Since 2003, prices have begun to rise, with all the energy supply companies having introduced significant increases to date. Analysis of the overall effects of changes in fuel prices and incomes, excluding consideration of energy efficiency improvements, suggests that the total number of vulnerable households in fuel poverty is likely to rise by around one million households in England between 2004 and 2006, with a proportional rise in figures for the Devolved Administrations.

Source: Department of Trade and Industry, For further details on fuel poverty seewww.dti.gov.uk/energy/fuel-poverty/index.html

0

1

2

3

4

5

6

7

1996 1998 2001 2002 2003 2004

Nu

mb

er

of

ho

useh

old

s (

millio

n)

UK estimate Vulnerable Groups

SUPPORTING INDICATORS Low carbon economy


Supporting indicators

The 28 supporting indicators set out below explain in more detail the trends shown by the Key indicators and the progress to date described in the 2007 Annual Report on the Energy White Paper.

1 Low carbon economy

1.1 Total carbon dioxide emissions by sector(1)(2)

-10

0

10

20

30

40

50

60

70

1990 1992 1994 1996 1998 2000 2002 2004 2006

prov

Millio

n t

on

nes o

f carb

on

Pow er stations (3)Industrial combustionTransportDomesticServices, agricultural and other (4)Net land use, land use change & forestry

Pow er stations(3)

other(4)

It is estimated that 153 million tonnes of carbon (MtC) were emitted – as carbon dioxide – during 2006. Carbon dioxide emissions have fallen by 5¼% since 1990.

Power stations are the largest single source of carbon dioxide emissions. However if the emissions from power stations were re-allocated to the sector consuming the electricity, the industrial sector dominates.

Around 21 MtC out of the 49 MtC emitted from power stations can be allocated to industry; 14½ MtC results from domestic electricity consumption, and 12½ MtC comes from the service sector. A further 1 MtC can be allocated to the transport sector.

(1) Emissions on Intergovernmental Panel on Climate Change (IPCC) basis. (2) 2006 figures are Department of Trade and Industry provisional estimates. (3) Power station emissions have been split between, and added to, Industrial combustion, Transport, Domestic and Services in proportion to each sectors

electricity consumption. The emissions from power stations are also shown separately. (4) Includes commercial and public service, military aircraft and naval vessels, fugitive emissions from solid fuels and natural gas and waste.

Source: Department for Environment Food and Rural Affairs

1.2 Final energy consumption by sector

0

10

20

30

40

50

60

70

1970 1975 1980 1985 1990 1995 2000 2006

Million tonnes o

f oil e

quiv

ale

nt

Domestic Services (1)

Transport Industry (2)

prov

Transport has been the biggest single energy user in the UK for the past 18 years. It accounted for 38% of final energy use in 2006.

Households are responsible for 29% of final energy use, whilst industrial consumption now accounts for 21%.

The remaining 13% of final energy is used by the services and agriculture sector.

(1) Services include the commercial sector, public administration and agriculture.

(2) Industry includes construction.

Source: Department of Trade and Industry



1.3 Carbon intensity, carbon dioxide emissions per unit of GDP

Carbon dioxide emissions per unit of Gross Domestic Product (GDP) decreased by 64% between 1970 and 2006 while GDP increased by 131%.

Carbon dioxide emissions have fallen steadily over the period despite substantial economic growth. This is due to energy being used in a more efficient way; changes in the structure of the economy; and the increased use of fuels that are less carbon intensive.

Source: Department for Environment, Food and Rural Affairs; Office for National Statistics

1.4 Energy ratio(1) in G8 countries

0

500

1000

1500

2000

2500

Canada France Germany Italy Japan Russia(2) UK US

kto

e p

er

bil

lio

n U

S d

oll

ars

(2

00

0 p

ric

es

)

1970 1980 1990 2000 2004

The energy ratio is the ratio of overall primary energy consumption to GDP at constant prices. Differences between countries reflect many factors including climatic differences, the dependence on energy intensive industries, the relative importance of transport, and the efficiency in the use of energy in all sectors of the economy.

All G8 countries except Russia have seen improvements in the energy ratio since 1970 with growth in GDP outstripping that of primary energy consumption. In Russia the ratio has improved since 2000. Of the remaining countries Japan, in percentage terms, has seen the smallest improvement in the ratio since 1970, with GDP growing only slightly faster than energy use.

(1) Energy consumption (thousand tonnes of oil equivalent) per billion US dollars (2000 prices).

(2) Russia data for 1970 to 1990 estimated from Former USSR data.

Source: International Energy Agency

0

50

100

150

200

250

1970 1975 1980 1985 1990 1995 2000 2006

prov

Ind

ex (

1970 =

100)

Gross Domestic Product

Carbon dioxide emissions

Carbon dioxide emissions per unit of Gross Domestic Product



1.5 Shares of fuels contributing to primary energy supply; fossil fuel dependency

0

20

40

60

80

100

1970 1975 1980 1985 1990 1995 2000 2006

prov

Pe

rce

nta

ge

of

pri

ma

ry e

ne

rgy

su

pp

ly

Renew ables and w astePrimary electricity (nuclear, hydro and net imports)Natural gasPetroleumCoalFossil fuel dependency

The mix of primary fuels consumed for energy purposes in the UK has become increasingly diverse since 1960.

In 1984 the miners strike led to a fall in the coal consumed and a drop in the diversity of supply as oil’s share of supply rose.

In the 1990s coal consumption continued to fall as the amount of natural gas consumed increased. Coal consumption remained steady between 1997 and 2005. Provisional figures for 2006 show coal consumption rising by 11% on 2005. This results from more coal being used to generate electricity.

Fossil fuel dependency can be measured as the proportion of primary energy supply met by coal, oil or gas. The overall trend has been that fossil fuel dependency has been falling gradually since 1960. Dependency has increased slightly since 1997.




1.6 Proportion of electricity generated by renewables 1988 to 2006

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

1988 1992 1997 2002 2006

Per

cen

t Total renew ables

Obligation basis (per cent of sales)

2006 data are provisional estimates

Renewables provided 4.2% of the electricity generated in the UK in 2005 and the expectation is that this will have risen to 4.5% in 2006.

The amount of electricity produced using hydro sources of energy varies from year to year depending on the rainfall. Low precipitation resulted in low hydro output during 2001 and 2003 hence the fall in generation from renewables in those years. Hydro output was also low because of dry weather in 2006.

Renewables included in the “Renewables Obligation”, (ie biofuels, wave, solar photovoltaics, onshore/offshore wind and small scale and re-furbished hydro) accounted for over 75% of generation from renewables in 2005 and it is estimated that this will have risen to over 80% in 2006.


The aim of the Renewables Obligation (RO) is to increase the contribution of electricity from renewables in the UK so that by 2010 10% of licensed UK electricity sales should be from sources eligible for the RO, rising to 15% by 2015. Certain generating plants using renewables and wastes are excluded from the list of eligible sources. These exclusions are existing hydro plant of over 20 MW; all plants using renewable sources built before 1990 (unless re-furbished); plants using energy from mixed waste combustion unless the waste is first converted to fuel using advanced conversion technology. Only the biodegradable fraction of any waste is eligible. All stations outside the UK are also excluded.

1.7 CHP capacity for electricity generation and average load factor

Between 1994 and 2005 the electricity generation capacity of CHP plants doubled.

The plant load factor measures how intensively the CHP plants were used. The average load factor peaked in 2000 at 64% then fell sharply in 2001 to 54% with high gas prices playing a role in the reduction, but picked up slightly in 2003 to nearly 60% and maintained that level in 2005.

In 2005 CHP provided 7% of all the electricity generating capacity in the UK.

The Government’s target is for at least 10,000 MWe of good quality CHP by 2010 as part of the UK’s Climate Change Programme. In 2004, there was a net increase of over 900 MWe taking capacity above 5,000 MWe and a further 100 MWe were added in 2005.

Source: Department of Trade and Industry and AEA Energy and Environment

The main purpose of a number of CHP schemes is the generation of electricity including export to others. Such schemes may not be sized to use all of the available heat. The total capacity and output of these schemes have been scaled back using the methodologies outlined in the CHP Quality Assurance scheme (CHPQA). Only the portion of the capacity and output that qualifies as Good Quality is counted in the capacity figures used in this indicator.

0

2

4

6

8

10

12

1977

1983

1988

1991

1993

1995

1997

1999

2001

2003

2005

GW

0

20

40

60

80

100

Per

cen

t

2010 capacity target

Capacity (left

axis)

Plant load factor (right

axis)



1.8 Energy intensity

0

20

40

60

80

100

120

1970 1975 1980 1985 1990 1995 2000 2006

prov

Ind

ex

(1

97

0=

10

0)

Transport Domestic Industrial

Service Energy Ratio

Total industrial energy consumption has fallen by 47% since 1970. Over the same period industrial output has risen by 48%. As result energy consumption per unit of output, (energy intensity), has fallen by 64% since 1970.

While there have been overall increases in energy efficiency over this period, there has also been a decline in the importance of energy intensive industries and considerable fuel switching.

Energy intensity in the service sector has fallen 58% since 1970, as output has risen at a significantly faster rate than energy consumption. Most of the fall in intensity is likely to be due to higher efficiency although structural change within the sector has also brought about some reduction in energy use.

Energy intensity in the domestic sector has fallen 52% since 1970, due to a fast increase in total household disposable income and a much slower increase in domestic energy consumption.

Source: Building Research Establishment; Department for Environment, Food and Rural Affairs; Office for National Statistics; Department of Trade and Industry

By contrast, energy intensity in the transport sector has remained fairly flat over the last 30 years, and is currently 2% lower than in 1970.



1.9 Energy intensities for road passengers, road freight and air

0

20

40

60

80

100

120

140

160

1970 1975 1980 1985 1990 1995 2000 2006

Ind

ex (

1970=100)

Road Freight energy intensity

Road passenger energy intensity

Air energy intensity

Combined energy intensity

prov

Fuel use by road passenger vehicles has increased by 72% since 1970.

Over the same period the distance travelled by passengers has doubled, while energy consumption per passenger kilometre fell slightly.

Fuel use for freight transport has nearly trebled since 1970, whilst the number of tonne kilometres has risen by 93%.

Goods vehicles on average use more fuel per km than in 1970, but also carry more goods.

Energy consumption per tonne/km of goods transported which remained relatively stable during the 1970s, appeared to have a general upwards trend up to 1992 when it reached 37% higher than 1970. Having fallen back slightly in the mid 1990’s, it rose again and the provisional 2006 figure was 46% above the 1970 level.

Source: Department for Transport, Department of Trade and Industry

1.10 Specific Energy Consumption for Households

Specific energy consumption is defined as the change in the energy required to produce a constant level of energy service in households. It is a modelled alternative to energy intensity, and takes account of changes in energy service demand (such as level of household comfort or hot water use).

Service demand and energy consumption, which are both dominated by space heating, show a fluctuating trend because of variations in the weather from year to year. However the specific energy consumption, which is dominated by cumulative insulation levels and boiler efficiencies, behaves much more steadily.

Source: Department for Environment Food and Rural Affairs

80

90

100

110

120

130

140

150

1990 1992 1994 1996 1998 2000 2002 2004

Ind

ex (

19

90

= 1

00

)

Service Demand

Energy Consumption

Consumption per Household

Specif ic Energy Consumption



1.11 Average new car CO2 emissions

160

165

170

175

180

185

190

195

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

CO

2 e

mis

sio

ns

g/k

m

0

Carbon dioxide emissions from new cars have fallen steadily since 1995. Emissions in 2005, at an average of 170g/km, were 11% lower than in 1995.

Source: Department for Transport, DVLA

SUPPORTING INDICATORS Reliability


2. Reliability

2.1 Electricity generating capacity, average load factor and simultaneous maximum load met for major power producers

0

10

20

30

40

50

60

70

80

1970

1975

1980

1985

1990

1995

2000

2006 P

rov

at year end (1)

GW

0

10

20

30

40

50

60

70

80

90

100

Per

cen

t

GW Total Declared Net Capacity in UK (left axis)

Per cent Plant load factor in UK (right axis)

GW Simultaneous maximum load met, UK (left axis)

(1) Before 1997 capacities are as at the end of March of the following year. Figures prior to 1985 are for GB

Total electricity generating capacity remained within the 60 to 70 GW band between 1970 and 1999, but after that started rising and exceeded 74 GW at the end of 2005 but has fallen back in 2006 with the closure of two Magnox nuclear stations.

Since the 1970s the capacity utilised (ie the load factor) has risen from around 40% to 56% in 2003, falling back a little to 53% in 2006. There was a sharper increase in the 1990s with the growth in the use of Combined Cycle Gas Turbines, which in 2006 accounted for 34% of the electricity supplied by major power producers, having been 38% in 2004.

Maximum demand in 2005/06 was slightly less than the record high of 61.7 GW recorded in 2002/03. In 2006/07 warm weather saw maximum demand 2.6 GW lower than the record. In 2002/03 maximum demand was equal to 87½% of the capacity of major power producers. However, in 2006/07 it was equivalent to only about 80% of the capacity of major power producers.


2.2 Gas capacity - maximum supply, maximum demand and peak 1 in 20 winter estimated demand

Between the winter of 1993/94 and the winter of 2006/07 the estimated maximum amount of gas that could be supplied to the UK from offshore and onshore production, storage and Europe has exceeded actual maximum winter demand by between 16 and 39%.

Maximum supply was forecast to be less than peak gas demand forecast for a one in twenty (1:20) winter day in each of 2004/05, 2005/06 and 2006/07. However, none of these winters approached the 1 in 20 level and high gas prices brought a demand side response in 2005/06.

The seasonal variation in gas demand means that on average during the year daily gas demand is only two thirds of maximum winter demand. In the early 1990s, before the use of gas for electricity generation, gas demand was more seasonal and the daily average demand was only around half the winter maximum.

Source: National Grid and Department of Trade and Industry

0

1

2

3

4

5

6

7

93/9

4

94/9

5

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

winter

TW

h/d

ay

Forecast maximum supply

Forecast peak day demand - 1 in 20 w inter

Actual maximum demand

Average daily demand in the

corresponding calendar year



2.3 Security and availability of electricity supply for the average customer

As shown in chart 2.3, during 2005/06 there were 74.6 interruptions per 100 customers. This was lower than the 2004/05 figure of 78.4 per 100 customers, representing a decrease of 4.8%.

The average length of time without supply in 2005/06 was 69.5 minutes per customer.This was lower than the 2004/05 figure of 94.3 per 100 customers, representing an decrease of 26.3%. However, the 2004/05 average was principally as a result of the storms in January 2005.

Source: Ofgem

0

20

40

60

80

100

120

140

160

1991/9

2

1992/9

3

1993/9

4

1994/9

5

1995/9

6

1996/9

7

1997/9

8

1998/9

9

1999/0

0

2000/0

1

2001/0

2

2002/0

3

2003/0

4

2004/0

5

2005/0

6

Nu

mb

er

Minutes lost per

customer

Interruptions per

100 customers



2.4 Shares and diversity of fuels used for electricity generation(1)

0

20

40

60

80

100

1965 1970 1975 1980 1985 1990 1995 2000 2006

Perc

en

tag

e o

f to

tal fu

el im

pu

t

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

Less D

ivers

e M

ore

Div

ers

e

Prov

Data for 2006 are provisional and for some earlier years are estimated. (1) Mainly coke and breeze, coke oven gas, blast furnace gas and renewable sources other than hydro.


Fuel use for electricity generation became more diverse through the late 1960s and early 1970s, as the share of electricity generated from petroleum grew at the expense of coal, peaking at 29% in 1972. This trend was reversed in the late 1970s.

The 1990s saw more rapid increases in diversity, with the gas’ share of fuel used for electricity generation rising to 34% in 2000 after the introduction of gas fired Combined Cycle Gas Turbines stations. This was coupled with the decreasing share of coal, down to 32% in 1999.

After 2000 gas' share fell back but returned to 34% in 2004, declining again to 30% in 2006. Correspondingly coal’s share picked up to 38% in 2003, fell to 37% in 2004 but has since risen to 41% in 2006. In 1999 nuclear's share fell below 25% for the first time since the early 1990s with increased outages at nuclear stations for repairs, maintenance and safety case work. With closures, nuclear’s share has declined further (on this fuel input basis) to under 20% in 2006.

Under the Shannon-Wiener measure, diversity increased in the 1970s and the use of oil in generation grew but fell back in the 1980s. It increased temporarily in 1984 during the miners strike as more oil and less coal was used. Diversity increased once more in the early 1990s with the use of gas for generation.

After 1996 the diversity measure declined because coal, gas and nuclear have squeezed other fuels (particularly oil) from 10% of the total down to below 2%, despite the shares of these three main fuels becoming more equal. Since 1999, diversity has stabilised. Further growth in this indicator is not expected although the recent resurgence in coal use has tended to increase diversity, while nuclear’s decline has pulled the indicator in the opposite direction.

See page 30 for a definition of the Shannon-Wiener statistics.

Coal Petroleum

Natural Gas Other fuels(1)

Primary electricity (nuclear and net imports)

Shannon Wiener

Sh

an

no

n-W

ien

er

Me

asu

re



2.5 Diversity of primary energy supply (1) in G8 countries Shannon-Wiener Measure

All G8 countries have seen increases in the diversity of their energy supplies since 1970. In France the increasing dominance of nuclear power has resulted in a reversal of this trend in recent years.

(1) Based on the shares of five groups of fuels: coal, oil, gas, primary electricity and waste.

(2) Russia data for 1970 to 1990 estimated from Former USSR data.

Source: International Energy Agency See page 30 for a definition of the Shannon-Wiener statistics

2.6 Diversity of oil imports Although an oil producer, the UK imports crude

oil for various reasons. Primarily, refiners consider the type of crude oil rather than its origin. Most UK refineries use North Sea ‘type’ crude oil and do not differentiate between the UK and Norwegian oil. The close proximity of UK and Norwegian oil fields mean that they may use the same pipeline infrastructure.

Some crude oils, notably from some OPEC countries, are specifically imported for the heavier hydrocarbons required for bitumen or lubricant production.

The UK considers that open, competitive and diverse oil markets are the best means of ensuring reliable supplies at competitive prices.

Source: H M Revenue and Customs

0

5

10

15

20

25

30

35

40

45

50

55

60

2003 2004 2005 2006

Quantit

y im

ported to U

K

in m

illio

n tonnes

Norway Russia OPEC Others

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

Canada France Germany Italy Japan Russia(2) UK US

1970 1980 1990 2000 2004

Mo

re d

ivers

eL

ess d

ivers

e



2.7 Diversity of supply of primary fuels(1)

Shannon-Wiener Measure

There was a slight increase in diversity in the early 1990s as nuclear electricity use increased.

In the late 1990’s there was a steady decline in diversity due to the growth of gas supply and decline in the use of other fuels.

In 2001 there was a small increase in diversity due to a small decline in gas consumption and increases in the use of coal, oil, nuclear electricity and renewables and waste. Diversity decreased in 2002 and 2003 but rose slightly in 2004, 2005 and 2006.

(1) Includes coal, oil, natural gas, nuclear electricity, hydro electricity, net electricity imports and renewables.

Source: Department of Trade and Industry See page 30 for a definition of the Shannon-Wiener statistics

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1970 1975 1980 1985 1990 1995 2000 2006

Less d

ivers

e M

ore

div

ers

e

Shannon-Wiener

prov

SUPPORTING INDICATORS Competitiveness


3. Competitiveness

3.1 Changes in the productivity of the energy industries(1)

0

50

100

150

200

250

300

1980 1985 1990 1995 2000 2006

prov

£ t

ho

usan

d, 2003 p

rices

Output per w orker

Since 1980 the productivity of the energy industries has increased nearly 6 fold and has trebled since 1990.

Productivity peaked in 2000 at £234.8 thousand per head. It fell back slightly in 2001 and 2002. In 2004 it had reached a new record level of £257.5 thousand per head. It has fallen again in the last two years and the provisional figure for 2006 is £214.4 thousand per head.

(1) Includes coal, oil, gas, electricity and the nuclear industries

Source: Office for National Statistics

3.2 Percentage of Gross Value Added accounted for by energy expenditure

0

1

2

3

4

5

6

7

8

Industrial Commercial Education, health &

social w ork

% o

f G

VA

sp

en

t o

n e

ne

rgy

2000 2001 2002

2003 2004 2005 (1)

The amount of GVA spent on energy in the industrial sector is 6.8%. This is larger than the amount spent on energy in the commercial sector and the education, health and social work sector which are 2.2% and 0.7% respectively.

GVA spent on energy in the industrial sector fell in 2001 and 2002 and has risen since. GVA spent on the commercial sector fell for three years after 2000, but has risen since. Inthe education, health and social work sector GVA spent on energy fell every year between 2000 and 2004, before rising in 2005.

(1) 2005 figures are Department of Trade and Industry provisional estimates Source: Office for National Statistics

SUPPORTING INDICATORS Competiveness


3.3 Fuel price indices (1) (2) for the industrial sector, 1970 to 2006

0

50

100

150

200

250

300

350

1970 1975 1980 1985 1990 1995 2000 2006

Real te

rms (

1990=100)

In 2006, annual average real terms industrial electricity prices, including the Climate Change Levy (CCL), rose 30% when compared to 2005. The increase in the spot price of gas that started in 2005 has led to annual average gas prices including CCL, being the highest they have been since 1986. Heavy fuel oil prices were at their highest levels since 1985.

Between 1996 and 2006, industrial fuel prices including CCL have risen in real terms by 3% for coal and 19% for electricity. Over this period the price of heavy fuel oil increased by 110% in real terms and the price of gas by 177%.

(1) Prices deflated by the GDP (market prices) deflator (2) Including CCL


3.4 Industrial gas prices within the EU 15 and G7 in 2005: converted to UK pence per kWh(1)(2)(3)

0.0

0.5

1.0

1.5

2.0

Irela

nd

Po

rtu

gal

Fra

nce

US

Gre

ece UK

Can

ad

a

Sp

ain

Fin

lan

d

Pen

ce/k

Wh

In 2005, industrial gas prices in the UK were the fourth lowest within the EU15, and the second lowest in the G7, on a common pounds sterling currency basis.

In comparison, UK industrial gas prices in 1995 were the lowest within the EU15 and the third lowest within the G7.

Average industrial gas prices in the UK have been below the EU15 median (for countries where data are available) for every year since 1995.

Average UK industrial gas prices have been below the G7 median (for countries where data are available) for every year since 1995.

Notes: Prices include taxes where not refunded. (1) Converted using average 2005 exchange rates. (2) Data not yet available for Austria, Belgium, Denmark, Germany, Italy, Japan, Luxembourg, Netherlands and Sweden. (3) The positions of 2005 prices for Austria, Belgium, Germany, Italy, Japan and Netherlands have been estimated relative to the median and UK prices. Source: Derived from IEA data

Electricity

Gas

Coal

Heavy fuel oil

SUPPORTING INDICATORS Competitiveness


3.5 Industrial electricity prices within the EU15 and G7 in 2005: converted to UK pence per kWh(1)(2)(3)

0

2

4

6

8

10

12It

aly

Au

str

ia

Irela

nd

Po

rtu

gal

UK

Sp

ain

Fin

lan

d

Gre

ece

Fra

nce

US

Pen

ce/ kW

h

In 2005, UK average industrial electricity prices were the seventh lowest within the EU15 and fourth lowest within the G7, on a common pounds sterling currency basis.

In comparison, UK industrial electricity prices in 1995 were the sixth lowest within the EU15 and the fourth lowest within the G7.

In 2005, industrial electricity prices in the UK are around the EU15 median and G7 median.

Notes: Prices include taxes where not refunded.

(1) Converted using average 2005 exchange rates. (2) Data not yet available for Belgium, Canada,

Denmark, Germany, Japan, Luxembourg, Netherlands and Sweden.

(3) The positions of 2005 prices for Belgium, Canada, Denmark, Germany, Japan, Netherlands and Sweden have been estimated relative to the median and UK prices.

Source: Derived from IEA data.

SUPPORTING INDICATORS Fuel Poverty


4. Fuel poverty

4.1 Total number of households in fuel poverty (1]

0

1

2

3

4

5

6

7

1996 1998 2001 2002 2003 2004

Year

Nu

mb

er

of

ho

us

eh

old

s (

mil

lio

n)

England Scotland Wales Northern Ireland

(1) Based on the definition including Housing Benefit and Income Support for Mortgage Interest (ISMI) as income.

Source: England - 1996, 2001, 2003 & 2004 English House Condition Survey,Department for Communities and Local Government; 1998 Energy Follow-Up Survey, Department of Trade and Industry. Scotland - 1996, 2002 & 2004 - Scottish House Condition Survey, Scottish Executive; Wales - 1997/98 Welsh House Condition Survey, 2004 Welsh Household & Dwelling Survey, National Assembly for Wales; Northern Ireland - 1995/96, 1996/97, 1997/98 Northern Ireland Family Expenditure Survey, Office for National Statistics; 2001 Northern Ireland House Condition Survey, 2004 Interim House Condition Survey, Department for Social Development.

A fuel poor household is one that needs to spend more than 10% of its income on fuel to maintain a satisfactory heating regime. In 2004, the latest year for which estimates are available, approximately two million households in the UK were in fuel poverty, and around one and a half million of these were vulnerable households, i.e. containing children or those who are elderly, sick or disabled.

The number of fuel poor households in the UK is estimated to have fallen by around four and a half million between 1996 and 2004. The number of fuel poor in England has fallen by approximately four million households in the same period, although there was no change between 2003 and 2004. Reduced energy prices were a significant factor in these reductions in fuel poverty in the early years.

Energy prices rose significantly between 2004 and 2006. Analysis of the overall effects of changes in fuel prices and incomes, excluding consideration of energy efficiency improvements, suggests that the total number of vulnerable households in fuel poverty is likely to have risen by around one million households in England between 2004 and 2006, with a proportional rise in figures for the Devolved Administrations.



4.2 Trends in fuel poverty by severity(1)(2)

The total number of fuel poor has been reducing significantly, and it would appear from Chart 4.2 that the greatest fall in overall numbers has occurred within the “marginal category” paying between 10% and 15% of their incomes on fuel poverty. However, a significant core remain who have to pay more than 15% of their income on fuel to maintain an adequate standard of heating, a considerably higher proportion than the national average expenditure of 3.1% (2001/02 – 2005/06). The numbers in this category have stayed about the same between 2003 and 2004.

(1) Based on the definition including Housing Benefit and Income Support for Mortgage Interest (ISMI) as income. (2) England onlySource: Department for Communities and Local Government

0.0

0.5

1.0

1.5

2.0

2.5

3.0

1996 1998 2001 2003 2004

Year

Nu

mb

er

of

ho

useh

old

s (

millio

n)

10-15% marginal

15-20% moderate

>20% severe



4.3 SAP rating of households in the lowest 30% income groups and the average SAP rating for England(1)

The Standard Assessment Procedure (SAP) provides a means of rating the energy efficiency of a dwelling and is based on estimates of space and water heating costs. Under the 2001 methodology, a rating of 120 is the highest rating, while a score of 65 is considered energy efficient.

The energy efficiency of the country’s housing stock has risen from an average SAP rating of 14 in 1970 to 52 in 2004.

The increase is due to major developments in insulation standards and the replacement of inefficient heating systems, such as open coal fires, by more efficient, mainly gas-fired, central heating.

(1) Data based on EHCS 1991, 1996, 2001, 2003, 2004 and EFUS 1998.Source: Department for Communities and Local Government, Department of Trade and Industry.

(2) SAP (Standard Assessment Procedure) 2001. The rating takes into account heating systems and insulation in homes. The rating runs from 1 (highly inefficient) to 120 (highly efficient). It is designed to reflect the energy efficiencyof the dwelling, irrespective of its size, geographical location and characteristics or behaviour of its occupants. The rating measures the cost of heating per unit of floor area, taking into consideration the rate of heat loss and the cost of supplying the lost heat. The heat loss depends on the dwelling, the thermal properties of the building fabric, the degree of insulation and level of ventilation. The cost is affected by the efficiency of the heating system, the price of the particular fuel used and any solar gain. The SAP rating takes no account of the climatic conditions in which the building is situated. In 2005, a new SAP rating from 1 to 100 was launched. The above figures are based on the 2001 methodology which has a scale of 1 to 120.

4.4 Fuel price indices(1) for the domestic sector

0

20

40

60

80

100

120

140

1970 1975 1980 1985 1990 1995 2000 2006

Real p

rices in

clu

din

g V

AT

(1990=100)

Electricity Gas

Between 1996 and 2006, annual average domestic prices in real terms including VAT fell by 1% for electricity and rose by 16% for coal and smokeless fuels, 31% for gas, and 69% for heating oils.

Between 2005 and 2006, domestic electricity prices increased by 19% in real terms, while gas increased by 29%. Coal and smokeless fuels rose by 5%, and heating oils by 11%.

(1) Prices deflated using GDP (market prices) deflator Source: Office for National Statistics.

20

25

30

35

40

45

50

55

1991 1996 1998 2001 2003 2004

Year

SA

P r

ati

ng

Low est 30% income groups All households



4.5 Fuel expenditure as percentage of total expenditure by income group(1)

0

2

4

6

8

10

12

141970

1980

1990

2000/0

1

2001/0

2

2002/0

3

2003/0

4

2004/0

5

2005/0

6

Perc

enta

ge

Lowest decile

Highest decile

(1) Income groups are defined in terms of weekly income, in pounds, as follows: low high 1970 <10 >80 1980 <40 >350 1990 <80 >800 2000/01 <107 >993 2001/02 <115 >1,085 2002/03 <123 >1,085 2003/04 <124 >1,092 2004/05 <132 >1,184 2005/06 <135 >1,224

The proportion of expenditure on fuel has changed between 1970 and 2005/06 for both the lowest and highest income groups. Whilst there has been an overall reduction in the proportion spent by both groups, a significant difference still exists. The proportion of expenditure spent on fuel dropped most significantly for the lowest income group over the period 1990 to 2003/04 with most of this fall having taken place since 1995/96. There was a slight rise between 2004/05 and 2005/06.

Source: Office for National Statistics

Technical notes


TECHNICAL NOTES

1 Two technical measures, the Shannon-Wiener measure of diversity and the Herfindahl-Hirschman measure of concentration, are used in Energy Sector Indicators 2007.

Shannon-Wiener

2 The Shannon-Wiener measure of diversity has been chosen because it places weight on the contributions of smaller participants in various fuel markets as they provide the options for future fuel switching. This is done by multiplying the market share by the natural log of the market share, which diminishes the impact of larger participants. However, it is recognised that there are shortcomings in using only one indicator to represent a concept as complicated as diversity.

3 It is expressed by the following equation:

Shannon-Wiener measure = The market share multiplied by the natural log of the market share for each fuel in the market summed together

In mathematical terms, that is:

Shannon-Wiener measure = i

iiln

where i represents the proportion of the total supplied by fuel i.

The minimum value that the Shannon-Wiener measure can produce is zero which occurs when only one fuel is available for use. In this case, there would be no diversity of supply.

4 The Shannon-Wiener measure of diversity can be used to see how diversity of a particular market is changing over time. It should not be used to compare different markets with each other.

5 Seven fuels have been used to calculate the Shannon-Wiener measure of diversity for primary energy supply. If each fuel making up our energy supply provided an equal proportion, the value of the coefficient would be 1.95 showing total equality, the largest possible value for the Shannon-Wiener measure in this case. For electricity generation six fuels have been used, the largest possible value for the Shannon-Wiener measure in this case is 1.79, whilst for the international comparisons five fuels are used with the maximum value being 1.61.

Herfindahl-Hirschman (used only in the Background Indicators)

6 The Herfindahl-Hirschman measure attempts to measure market concentration. It places extra emphasis on the contributions of participants with the largest shares. The

Technical notes


measure is commonly used to assess whether mergers should go ahead and whether they will significantly affect the balance of the market in a particular sector.

7 It is expressed by the following equation:

Herfindahl-Hirschman measure = The square of each participant’s market share added together across all participants in the market

Values vary between zero, which signifies a perfectly competitive industry, and ten thousand, for a pure monopoly.

8 The Herfindahl-Hirschman measure of concentration in 2006 was calculated assuming 30 generating companies, 10 to 22 electricity supply companies, depending on the sector, and 8 to 13 gas supply companies, again depending on the sector.

Fuel poverty

9 In November 2001 the Government published its Fuel Poverty Strategy. The Strategy sets out the approach of the Government and the Devolved Administrations to tackling fuel poverty in the UK. The aim of ending the problem of fuel poverty in vulnerable households by 2010 was restated in the Energy White Paper. The Strategy detailed a range of programmes and measures that had been put in place to address the main causes of fuel poverty, and said that the Government would report on progress annually. To monitor progress the annual reports would include information on the number of households, and the factors that affect fuel poverty (income, fuel prices and housing conditions). The strategy also set out a range of indicators that could be used to monitor progress towards the Government’s target, and, accordingly these are also updated annually.

10 The Government’s Fourth Annual Progress Report on the UK Fuel Poverty Strategy was published in June 2006 and includes statistics for the number of fuel poor households in 2004. It is accompanied by an internet-only series of annexes, including a detailed analysis of the profile of the fuel poor and an update of the nineteen Fuel Poverty Indicators as developed by the Fuel Poverty Monitoring and Technical Group. The web reference for all documents is: www.dti.gov.uk/energy/fuel-poverty/strategy/index.html .The next annual progress report will be published in June 2007.

Energy Efficiency Indicators

11 Traditionally, energy intensity (e.g. energy consumption per household, or per unit of economic output in business) has been used as a proxy for an energy efficiency indicator. However, intensity changes include changes in energy service demand (e.g. level of household comfort or hot water use) or to structural changes in Business (at sub-sectoral and product levels). Specific Energy Consumption (SEC) is defined as the change in the energy required to produce a constant level of energy service (in households) or unchanged unit of physical product in Business (at a suitably

Technical notes


disaggregated level). SEC is therefore a better indicator of energy efficiency changes than energy intensity. It is important to remember that SEC falls as it improves whereas efficiency rises – but the rates of change are equivalent. An overall SEC indicator for a sector is obtained by combining sub-indicators for individual services or sub-sectors, using energy consumption as the weighting factors.

12 In the chart 1.10, service demand and consumption – both dominated by space heating – show considerable fluctuations about the trend because of variations in the weather from year to year, whereas the SEC – dominated by cumulative insulation levels and boiler efficiencies – behaves much more steadily.

ESTIMATED DATA

13 Where feasible, charts have been updated to the latest possible year using provisional monthly data. Final energy data for 2006 are to be published in the DTI’s Digest of UK Energy Statistics, 2007 on 26 July 2007. www.dti.gov.uk/energy/statistics/publications/dukes/page29812.html

33

Contact List

The following people in the Department Trade and Industry may be contacted for further information about the topics listed:

Contact: Telephone e-mail

020 7215

Coal and other solid fuels Mike Janes 5186 [email protected]

Sally Mercer 2717 [email protected]

Oil and gas production and Clive Evans 5189 [email protected]

reserves

North Sea profits, operating Suhail Siddiqui 5262 [email protected] and investments

Petroleum (downstream) Clive Evans 5189 [email protected]

Kelly Adams 2712 [email protected]

Gas supply (downstream) Mike Janes 5186 [email protected]

Sally Mercer 2717 [email protected]

Electricity Mike Janes 5186 [email protected]

Joe Ewins 5190 [email protected]

Combined heat and power Mike Janes 5186 [email protected]

Foreign trade Chris Michaels 2710 [email protected]

Energy prices Iain MacLeay 6898 [email protected]

Industrial, International & Oil prices Jo Marvin 6935 [email protected]

Domestic energy prices Mary Gregory 6532 [email protected]

Fuel poverty Peter Matejic 2720 [email protected]

Mary Gregory 6532 [email protected]

Renewable sources of energy Mike Janes 5186 [email protected]

Energy and the environment Julian Prime 6178 [email protected]

Calorific values and conversion Chris Michaels 2710 [email protected]

Factors

General Enquiries (enquiry Clive Sarjantson 2698 [email protected]

helpdesk)

All the above can be contacted by fax on 020 7215 2723

More information on DTI energy publications is available on our website

www.dti.gov.uk/energy/statistics/publications/index.html

For additional analytical, business and investment opportunities information,

please contact Global Investment & Business Center, USA at (202) 546-2103. Fax: (202) 546-3275. E-mail: [email protected]

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