Mitigation: key incentives regulatory and financial mechanisms
This section sets out the key regulatory and financial mechanisms (incentives) applicable to climate change mitigation. It summarises the impacts of each incentive on sustainable energy policy making as well as providing detail if you’d like to know more.
As a local planning authority, the key incentive mechanisms discussed here are likely to affect you in one of two ways. Firstly, some of them will have an impact on the type and scope of policies you might want to consider and secondly, they may affect you at a corporate level within your own operations and estate.
Summary of impacts
| Incentive | Impact on sustainable energy policy making |
|---|---|
| Building Regulations and Zero Carbon |
For you, as the local planning authority, the currently projected trajectory of the Building Regulations (i.e. ‘zero carbon homes from 2016, ‘zero’ carbon non-domestic development by 2019 etc) means that some types of policy may effectively become redundant as the targets set out in them are overtaken by the requirements of the regulations. The toolkit contains details of such a policy (see SE1 Develop area wide min LZC target for new development in the Policy Objectives section) as this approach may have at least limited value until 2016. The use of Allowable Solutions by developers to deal with their residual carbon emissions provides a mechanism that local authorities could use to fund local energy infrastructure and heat networks. The toolkit contains details on how to develop policies to support a sustainable energy infrastructure fund (see policy objective SE7). |
| Feed in Tariffs (FITs) |
The principal benefit of FITs is likely to be to encourage the uptake in existing building stock of small scale, distributed electricity generation. A key consideration for you as the local authority is that you will need to ensure there is a robust method in place for the monitoring and reporting of such installations (see Monitoring and Reviewing) so that you are able to provide adequate responses to the relevant National Indicators. You’re also likely to see an increase in the amount of applications which include systems eligible for FIT and it may be that you wish to consider making provisions for such installations in policy - see SE9 Using local development orders to support sustainable energy deployment. |
| Renewable Heat Incentive (RHI). | The key benefit of the RHI in terms of your policy making is that it can significantly improve the viability of certain sustainable energy options (particularly renewable district heating) as well as increasing the likelihood of uptake for eligible microgeneration technologies (such as solar thermal water heating). Information on testing the viability of various policy options is included in the detail of the Policy Objectives pages and information is provided on assessing viability for applications on the Viability page of the Development Management section. |
| The Renewables Obligation (RO). |
The main impact of recent changes to the RO is that it may lead to local authorities seeing more planning applications for biomass power generation or CHP, including anaerobic digestion, as well as more applications for energy from waste plants using advanced thermal treatment, such as gasification and pyrolysis. This is because these forms of technology will now receive twice the level of revenue support compared to the previous values obtainable under the RO. This in turn means that local authorities may have a greater role to play in their spatial planning, and development management, to ensure that such forms of generation are co-located with existing and new development to be able to feed any waste heat into heat networks. The improved viability of the advanced thermal treatment technologies may also influence the preferred choice of technologies that local authorities may wish to select as part of developing waste management solutions. |
| The CRC Energy Efficiency Scheme (CRC), (formerly known as the Carbon Reduction Commitment). |
The principal consideration for local authorities is a corporate one in that you may qualify for participation in the CRC scheme due to the amount of electricity you consume in your own estate. If this is the case, your authority may pay a financial penalty if it does not perform well in the CRC league table of carbon performance, as well as the potential impact on reputation. This will incentivise authorities to consider strategic options such as CHP and district heating networks that can potentially make significant reductions in carbon emission from existing public buildings as well as new development. Your estates department should by now have a strategy in place for responding to the CRC and you should talk to them about how you might be able to use the actions being taken at a corporate level to publically demonstrate the authority’s commitment in this area. |
| Community Energy Saving Programme (CESP) | This programme provides a source of funding that local authorities could secure, working in partnership with energy companies, to develop district heat networks to supply existing homes in areas of fuel poverty. More detail on this is set out in policy objective SE2 and policy objective SE7. |
Building Regulations and Zero Carbon
The current (2006) Building Regulations Part L require that CO2 emissions calculated for a new building should be equal to or less than a Target Emission Rate. Following consultation, the Government announced in July 2007 that all new homes will be zero carbon from 2016. In the 2008 Budget, the Government also announced its ambition that all new non-domestic buildings will be zero carbon from 2019 and all new schools and other public buildings will be zero carbon from 2018.
The Definition of Zero Carbon Homes and Non-Domestic Buildings consultation in 2008 sought to clarify the definition of zero carbon that will be applied. This introduced the idea of an energy hierarchy, or pyramid, to show how the zero carbon standard would cover three aspects, namely:
- A minimum energy efficiency standard
- An on-site compliance target. This means the amount of carbon reduction that must be achieved on site, or through the connection to a source of renewable heat
- Allowable solutions. This refers to a range of solutions that developers may use to deal with their residual carbon dioxide emissions
The range of “allowable solutions”, currently includes:
- Further carbon reductions on site
- Energy efficient appliances
- Advanced forms of building control system which reduce the level of energy use in the home
- Exports of low carbon or renewable heat from the development to other developments, and
- Investments in low and zero carbon community heat infrastructure
Other allowable solutions remain under consideration. The Government announced some details around zero carbon homes in July 2009 and a final announcement on the definition of zero carbon for new homes was expected at the end of 2009 but has not yet been published.
A summary of responses to the 2008 consultation can be found here.
The use of allowable solutions provides the potential for a mechanism for delivering Climate Change PPS opportunities. See Translating Evidence into Policy.
www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
The 2008 Energy Act contains powers for the introduction of FITs in Great Britain to incentivise renewable electricity installations up to a maximum capacity of 5 MW. The Government intends that FITs should be implemented by April, 2010. The impact of FITs will be significantly increased revenue for small-scale generators of renewable electricity, such as photovoltaic systems or small wind turbines. The FITs may also make it easier to obtain finance for such projects as it provides a guaranteed price for the electricity generated.
A press announcement on 1 February 2010 from Department for Energy and Climate Change sets out the tariff levels for renewable electricity generation.
http://www.decc.gov.uk/en/content/cms/consultations/elec_financial/elec_financial.aspx
The Energy Act 2008 also allows for the setting up of a Renewable Heat Incentive (RHI), which would provide financial assistance to generators of renewable heat and to some producers of renewable fuel, such as producers of biomethane. The Government aims to have this in place by April 2011.The incentive payments will be funded by a levy on suppliers of fossil fuels for heat. The proposal is that the RHI will cover a wide range of technologies including biomass, solar hot water, air and ground source heat pumps, biomass CHP, biogas produced from anaerobic digestion and injection of biomethane into the gas grid.
As with FITs, the impact of the RHI is that it will make generation of renewable heat more financially viable than it is currently.
The February press announcement from DECC also sets out initial details of the tariffs for the RHI.
http://www.decc.gov.uk/en/content/cms/new s/pn10_010/pn10_010.aspx
The Renewables Obligation (RO) is the main current financial support scheme for renewable electricity in the UK, and is administered by Ofgem. It obliges electricity suppliers in the UK to source a proportion of their electricity from renewable supplies. They demonstrate this has been achieved by showing they have the required quantity of Renewable Obligation Certificates (ROCs), which renewable electricity generators are awarded for their output.
If suppliers fail to meet their target, they have to pay a fine and also the value of the fine “pot” is, on an annual basis, split among those suppliers who do meet their targets. This creates a market for the ROCs and means that generators of renewable electricity can sell the ROCs that they receive for significantly more than they receive for their electricity output.
The CRC is a new regulatory incentive to improve energy efficiency in large public and private sector organisations. The scheme, which started in April 2010, is designed to create a shift in awareness, behaviour and infrastructure. It will be administered by the Environment Agency.
The scheme will affect approximately 20,000 organisations, with around 5,000 of these required to participate in the scheme. Participating companies will be ranked in a league table for their sector, depending on their performance in reducing carbon emissions. They will also receive either a financial penalty or reward depending on where they are ranked in the table.
www.decc.gov.uk/en/content/cms/what_we_do/lc_uk/crc/crc.aspx
On 11 September 2008 the Prime Minister announced the launch of the £1bn Home Energy Saving Programme aimed at helping families to permanently cut their energy bills. A key part of the announcement was the creation of a new £350m Community Energy Saving Programme (CESP) aimed at helping households in areas of low income.
CESP targets households across Great Britain, in given geographical areas, to improve energy efficiency standards, and permanently reduce fuel bills. There are 4,500 areas eligible for CESP. CESP is funded by a new obligation on energy suppliers and, for the first time, an obligation on electricity generators. A list of eligible areas in contained in the Communities: areas of low income document. District heating is one of the eligible measures under CESP, and this could provide a source of funding to support the development of district heating networks to supply existing homes in areas of fuel poverty.
www.decc.gov.uk/en/content/cms/what_we_do/consumers/saving_energy/cesp/cesp.aspx
