Alternative energy is at the forefront of UK government policy. That means there are plenty of incentives for entrepreneurs, investors and established players but those tempted by rich pickings should be mindful of the complex regulatory environment that exists.
The Big Energy Picture
Currently fossil fuels – coal, gas, oil – provide most of UK energy needs but produce large amounts of CO2, contributing to climate change. Energy sources that do not produce CO2 and are renewable are called ‘alternative’, such as wind, wave, hydro and nuclear power. New technologies to extract gas and oil tend to be classed as ‘alternative energy’ although they relate to fossil fuels.
Government policy is to increase the use of low-carbon technologies, achieve energy security, reduce emissions through carbon capture and storage (CCS), and to meet “15% of the UK’s energy demand from renewable sources by 2020”.
The Renewable Energy Roadmap
The ‘Renewable Energy Roadmap’ sets out plans for accelerating the use of energy generation from onshore and offshore wind; wave and solar power; biomass and ground source heat. There are incentives for suppliers to source a proportion of their electricity from renewable sources, and £1bn capital funding to support the design, construction and operation of commercial CCS.
Smaller scale initiatives include payments to energy users to invest in low-carbon generation systems and renewable heating technologies e.g. solar thermal panels and heat pumps. Separate from this the government has authorised the commercial exploitation of recoverable shale gas by fracking following the 2012 review and recent report that concluded that fracking was not a “significant cause of large earthquakes”.
The Regulatory Framework
Organisations considering involvement in energy projects should consider the existing policy landscape as well as the operational and regulatory framework. Energy might be the country’s biggest infrastructure sector and essential to driving economic growth, but there are some 300 regulations which relate to all aspects of energy from extraction to generation, safety, supply and consumption.
The government wants to develop “smart regulation” that will support all the changes needed to satisfy environmental and energy policy, maintain safety standards and protect the environment and consumers. It does not want regulation to “stand in the way of business, or [act] as a barrier to generating the necessary investment, innovation and skills [needed] to build the low carbon economy”.
The Regulators
Most renewable energy initiatives are regulated by the Environment Agency in partnership with local planning authorities and the Health and Safety Executive (HSE). The EA uses “permits, authorisations and consents to set the conditions operators must comply with so that their activities do not adversely impact on the environment”, and it also advises throughout the spatial planning process.
HSE regulation relates to those who work with hazardous materials, in dangerous environments, and in energy generation. Regulation of shale gas operations is shared between the EA and the HSE with regulation and enforcement being developed on an on-going pragmatic basis.
Conclusion
The energy sector is undergoing considerable change and government policy to promote renewable energy and reduce carbon emissions is backed with a range of financial and tax incentives together with a review and streamlining of regulation. Developments in environmental regulation in 2013 include the Energy Bill, and changes to the Carbon Reduction Commitment Energy Efficiency Scheme.
If you would like more information on how the regulatory framework will affect your business, our specialist environmental lawyers can help you. Contact Julie Goulbourne by telephone 01616 966 229 or email jgo@stephensons.co.uk for more information.