National Policy Context

The Energy White Paper

The 2003 UK government's Energy White Paper accepted the recommendations of the Royal Commission on environmental pollution of a need to stabilise greenhouse gas emissions. The white paper set an aspiration for the UK to reduce carbon emissions by 60% and create a low carbon economy by 2050. This was restated as a policy goal in the government's 2006 energy review, and the most recent white paper, published on 23 may 2007, sets out the government's international and domestic energy strategy to respond to these challenges. At the European level, an agreement was reached in march 2007 to cut greenhouse gas emissions by 20% by 2020 and source a fifth of Europe's energy requirements from renewable sources by the same date.

Research by the Carbon trust suggests that a 60% reduction in carbon emissions can be achieved by 2050 using a mixture of energy efficiency, renewable sources of electricity, replacing coal and oil with lower carbon fuels such as gas and the use of hydrogen as a fuel. The UK has had a national policy mechanism to support renewable energy since 1990. However, renewable energy policies have been strengthened in recent years as the threat of climate change has increased and government has looked for new ways to speed up the growth of renewable energy.

Subsidies: Renewables Obligation
Renewable energy technology is often more expensive to install than conventional energy generation equipment so the main focus of government policy has been to find ways of supporting investment in renewables, in a way that will encourage those costs to come down over time. The main policy used to do this is the renewables obligation (RO). The RO places a requirement on electricity companies to increase the percentage of power supplied from renewable sources every year, from 4% currently to 20% by around 2020. Companies that do not do this are fined. This policy means that each unit of renewable electricity (kfih) is worth approximately 3-5p more than conventional electricity. This extra income allows private developers to attract loans and investment to cover the higher cost of installing renewable electricity generating equipment. The RO has been very successful at stimulating new development in landfill gas and onshore wind energy, because they are established, relatively low cost technologies, but the less mature and more expensive technologies such as wave and tidal energy have not benefited. This led to the government announcing a number of proposals for changes to the renewables obligation in the 2006 energy review. These changes would provide differentiated support levels to different renewables technologies and give additional certainty on long-term renewable obligation certificate prices. These changes will require new primary legislation and so will not be introduced until April 2009 at the earliest.

National Renewable heat Policies

Renewable heat generation is not supported by the RO and government have used capital grants to stimulate new development e.g. the Low Carbon Buildings Programme. The nature of government spending means that these grant funds are short-term and not as easy to secure investment against as the RO.

Renewable Transport Fuel Obligation
The government announced in November 2005 that it is setting up a renewable transport fuel obligation (RTFO), which will include a target to increase the percentage of biofuel in UK road transport fuels to 5% by 2010 / 2011. This is likely to be delivered by selling 5% blends of biofuels with petrol and diesel. The RTFO will place an obligation on the large petrol / diesel retailers and is already stimulating investment in biofuel refining capacity in the UK. At present both biodiesel and bioethanol benefit from a reduction in fuel duty of 20p a litre.

National Planning Policy on Renewable Energy

Government also uses planning policy to stimulate renewable energy development. It has laid out guidance on how the planning system should assess renewable energy projects in planning policy statement 22 (PPS22). For most renewable energy schemes the planning system has to judge the merits of individual schemes as they are brought forward by private developers. Where new buildings are being constructed planning authorities are now encouraged to require that a minimum of 10% of the building or development's own energy use comes from on site renewable energy generation. This is often referred to as the 'Merton Rule' because it was first developed in the London Borough of Merton. In the 2006 energy review the government committed to bring forward new measures to move towards making all new developments carbon neutral. A set of policy measures, including the tightening of building regulations to make all new housing carbon neutral by 2016, are being proposed.