Legislation
In line with the Kyoto Protocol, in March 2007 EU leaders agreed to adopt a binding target on the use of renewable energy, concluding that renewable energy could contribute 20% of total EU energy consumption by 2020.
A financial incentivisation plan was formulated to stimulate growth within the renewables arena; implemented under the Utilities Act 2000, The Renewable's Obligation ('RO') came into effect in April 2002. The legislation places an obligation on electricity suppliers to source an increasing proportion of electricity from renewable sources or pay a penalty. The target levels will increase each year by circa 1% from 7.9% in 2008/09 to 15.4% by 2015 at which point it will remain at such a level into the end of RO legislation in 2027.
In May 2007 the UK Government introduced a white paper, "Meeting The Energy Challenge", the proposals set out are due to come into legislation in April 2009. The main proposals changed include:
- Banding
- Increase in the RO level
- Indexation of the RO certificate buy-out price
- Grandfathering
Under the 2008 Renewable Energy Strategy Consultation, the European Commission has proposed an increase in the percentage of renewable energy we use from a figure of 1.6% in 2006 to 15% by 2020. The Government is proposing to extend the end date of the RO obligation from 2027 to 2035. With the increasing drive to combat global warming and the weight of thermal generation dependence in the UK (72% of electricity produced from gas or coal), the 20% renewables target by 2020 allows for vast, supported and profitable growth potential within the in UK hydroelectric market.
Alongside the RO programme, HMRC has introduced the Climate Change Levy, an environmental tax on certain taxable commodities, i.e. electricity, gas and coal. However to stimulate the production of renewable energy HMRC will waive the charge on hydro. For every MWh that an accredited renewable generator produces, Ofgem, the energy regulator, will issue an LEC (Levy Exemption Certificate).
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