Clifford Chance

Further Changes to UK Renewables Incentives

14 April 2011

The UK's renewable energy sector is facing an overhaul of the incentive schemes the Government offers to promote low-carbon power generation.

The changes, which follow the energy market reforms the Government unveiled in December 2010, include a review of feed-in tariffs, plans to launch a renewable heat incentive scheme and the final set of proposals on carbon floor pricing.

The Government has also revealed further details of how much public money it intends to use to capitalise the proposed Green Investment Bank.

It has increased the original allocation of funds to capitalise the Green Investment Bank from £1bn to £3bn. The additional £2bn will be raised from the sale of state assets.

However, the Green Investment Bank will not be given any borrowing powers until at least 2015/16, even though it is due to start operating in 2012/13.

One initiative that is starting this year is the renewable heat incentive scheme.

The scheme, which is designed to meet the UK's goal of producing 12% of all its heating from renewables by 2020, is divided into two phases. The first phase is starting from 2011 and the second phase is expected to start from 2012.

The shake-up of incentive schemes for renewables also includes a comprehensive review of feed-in tariffs for microgeneration.

The Government announced the review in February 2011 following its commitment to reduce the scheme's costs by 10% in 2014/15. The review will look at all aspects of the feed-in tariffs, such as tariff levels, eligible technologies and degression rates and methods.

In a separate initiative, the Government has also confirmed its plan to introduce a carbon floor price in April 2013 to set the minimum price payable for emitting carbon from fossil fuel use. The target floor price will work through the imposition of a special climate change levy.

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