Wednesday, 18 August 2010

Local Authorities - Renewable Energy Generation

The UK's commitment to achieving a 20 per cent reduction in greenhouse gas emissions by 2020 may be raised to 30 per cent (driven in part by reduced energy consumption from the recession). Local authorities ("LAs") are now being encouraged to play their part in meeting emissions targets by both championing energy efficiency and renewable energy generation.

Whilst LAs were always able to generate renewable electricity for their own use, the Department of Energy and Climate Change ("DECC") has announced draft legislation1 (the "Renewable Electricity Sales Order") to remove a restriction which prevented LAs from selling electricity; a restriction2 which was designed to protect the privatised electricity generators. Under the draft legislation, LAs which sponsor renewable energy developments may now benefit not only from lower energy bills for their own consumption, but also from central government financial incentives such as Feed in Tariffs (FIT) (applicable to electricity generation projects up to 5MW) and the Renewables Obligation (generally applicable to larger scale electricity generation projects), both for generating renewable electricity and for exporting it to the national grid for sale.

LAs will be monitoring also the potentially higher returns (and unlimited project size) currently planned (but not finalised) under the Renewable Heat Incentive (RHI) (which is designed to encourage the renewable generation of heat with a tariff targeted upon a 12 per cent return on initial capital) which is currently due to be implemented in April 2011, subject to a funding decision expected after the October spending review.

Under the Renewable Electricity Sales Order, LAs will be able to sell electricity generated from:

biogases;biomass;hydropower;landfill gas;marine;sewage treatment gas;solar PV; andwind.

According to DECC, only 0.01 per cent of electricity in England is generated by local authorities and means, according to Gary Porter of the Local Government Association:

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