UK Clean Energy Incentives

The Renewables Obligation (RO), which came into effect in April 2002 (April 2005 in Northern Ireland), is the main support scheme for renewable electricity projects in the UK. It places an obligation on UK suppliers of electricity to source an increasing proportion of their electricity from renewable sources. In the UK, excluding Northern Ireland, the obligation was set at 3% in 2002-03. This has risen to 7.9% for 2007-08, will continue to rise to 9.1% for 2008-09, reaching 15.4% in 2015-16, remaining at this level until 2026-27. The Government intends that suppliers will be subject to a renewables obligation until 31 March 2027.

Companies can meet their obligation by presenting Renewable Obligation Certificates. ROCs are issued to renewable generators for each 1MWh of electricity generated, these are then bought by supply companies. Suppliers can also meet their obligation by paying a buy-out fund contribution per MWh or a combination of the two. Money from the buy-out fund is recycled pro-rata to companies presenting ROCs, hence the value of a ROC = buyout price + money recycled from buy-out fund. The recycling mechanism gives suppliers an additional incentive to invest in renewables and acquire ROCs. ROC value as of July 2008: £35.76/MWh

ROCs can also be sold on EROC - www.e-roc.co.uk - a site run by the non-fossil fuel purchase association (NFPA). Auctions are held four times each year. A track record of ROC sales and prices on EROC can be seen here: http://www.e-roc.co.uk/trackrecord.htm
Under the Low Carbon Buildings Programme - www.lowcarbonbuildings.org.uk - renewables can qualify for grants when purchased for home / business use. Details of the grants are available and updated here: http://www.lowcarbonbuildings.org.uk/about/hfaqs/
Climate Change Levy (CCL)

The Climate Change Levy (CCL) - www.cclevy.com - was introduced in April 2001. The CCL is an energy tax that adds approximately 15% to typical energy bills of UK businesses.

The CCL adds a tax of 0.456 pence / kWh to the price of electricity generation for businesses. Renewable energies for electricity production allow businesses to avoid this extra tax.

The CCL is applied to electricity, gas, coal and Liquid Petroleum Gas (LPG), but is not applied to any domestic supplies. The impact of the CCL upon UK businesses has been helped by a 0.3% reduction in National Insurance contributions. Energy intensive industries are able to join Climate Change Agreements to help further mitigate the effects of this tax.
Wind

A draft plan could allow companies to develop up to a further 25GW of offshore wind by 2020, in addition to the 8GW already planned. In November of 2007, John Hutton, Secretary of State for Business, Enterprise and Regulatory Reform, announced that the Government is ready to set aside large parts of the sea bed in English and Welsh territorial waters for the development of wind energy. Currently, there are 7,468 MW onshore in the planning system and 2,149 MW offshore, against a total UK electricity generating capacity of 83 GW.

As with all renewable energies for electricity production, wind power is exempt from the Climate Change Levy.

Biofuels

The Renewable Transport Fuel Obligation (RTFO) has, from April 2008, placed an obligation on fuel suppliers to ensure that a certain percentage of their aggregate sales is made up of biofuels, ensuring that 5% (by volume) of their overall fuel sales is from a renewable source by 2010/11, with staged required levels of 2.5% (by volume) for 2008/9 and 3.75% (by volume) in 2009/10 - these are targets from the EU, yet to be fully ratified in the UK. Following the Gallagher review - http://www.renewablefuelsagency.org/reportsandpublications/reviewoftheindirecteffectsofbiofuels.cfm - the RTFO has come under much scrutiny. Ed Gallagher, chair of the RFA (see below), has proposed that the introduction of biofuels should be slowed until effective controls are in place to prevent land use change and higher food prices. The review also proposed that UK's biofuels target should be reduced to 0.5% increases per year, leading to 5% in 2013/14.

Sources:

* Climate Change Levy personal correspondence
* DEFRA
* EROC (Non-Fossil Purchasing Agency - NFPA)
* OFGEM