CCL, ROCs & Other Acronyms AL GORE I

Aspects Covered Background – climate change CCL and ECAs Renewables Obligation the RO NFFO, ROCs, LECs, REGOs CRC – the Carbon Reduction Commitment

Climate Change

Global CO2 emissions

How to tackle climate change Reduce man-made CO2 emissions Reduce fossil fuel burn Improve efficiency Encourage renewable forms of energy Incentives/Penalties

International Efforts UN Climate Change Conferences 1997 Kyoto Protocol – binding targets Bali, Poznan, Copenhagen ‘Road maps’ UK policy and objectives

UK GHG Reduction Policies 1989 Energy Act - Privatised the ESI - NFFO 2000 Climate Change Programme – CCL 2002 NETA and ROCs Climate Change Act and Energy Act 2008 Energy Act 2011 – The Green Deal

CCL - Climate Change Levy April 2001 Applied to energy supplied to businesses Charged On ‘taxable commodities’: Electricity natural gas and other hydrocarbon gases, coal and coke Non-taxable commodities: Oil, road fuel gas, heat and steam Scheme administered by HMRC

Levels of CCL Adjusted by annual inflation 2011 rates: Electricity 0.485p/kWh Natural gas 0.169p/kWh Liquid gases 1.083p/kg Coal and coke 1.321p/kg

Reliefs from CCL Domestic consumers and charities are exempt Good Quality CHP Renewable electricity generation Up to 80% relief for ‘sector agreements’ Revenue is recycled – 0.3% reduction in NI

ECA – Enhanced Capital Allowances April 2001 ECA Introduced at same time as CCL Energy Technology List on the DECC website List is managed by the Carbon Trust for Govt. Effectively a tax relief Company can write off whole of capital cost in first year

Non-Fossil Fuel Obligation 1990 NFFO 1989 Energy Act – mainly supported nuclear! Electricity Suppliers obliged to buy tranches Funded by the Fossil Fuel Levy per kWhe Emphasis shifted to renewable energies Replaced by Renewables Obligation in 2001

Renewables Obligation and ROCs NETA - new electricity trading arrangements Electricity Suppliers obliged to buy increasing proportions of their supplies from ‘renewables’ Intially 3% - rise to 15.4% in 2015/6 Scheme administered by Ofgem who: 1 Accredit ‘renewable generators’ 2 Set a ‘Buy-out Price’ 3 Issue ROCS and collect/distribute the Buy-out Fund

ROC banding – Introduced 2009 Distinguishes between ‘maturity’ of technologies: Established Band - 0.25 Reference Band - 1.0 Post-demonstration - 1.5 Emerging - 2.0

Renewable Obligation Certificates Awarded to the renewable generator ROCs carry a value separate from the electricity supplied Generator can sell direct to a Supplier or put them up for auction Also receive LECs and REGOs

Selling ROCs Generator can sell direct or put up for auction Auctions conducted monthly by the NFPA October 2011 prices have reached £46/MWh

Suppliers – Meeting the Obligation A Supplier must meet its obligation each year: Obligation = Sales (MWh) x ROCs/MWh Ofgem calculates ROCs/MWh – 0.124 for 2011/2

Suppliers – Meeting the Obligation Supplier can meet its obligation by: Buying total ROCs obligation (direct/auction) Paying a ‘buy-out price’ for its obligation A mixture of 1 and 2 above Buy-out price fixed by Ofgem - £38.69/MWH for 2011

ROCs - The Buy-out Fund & Recycling Ofgem collects monies paid for Buy-outs Size of the Buy-out Fund : (Total UK Obligation-ROCs presented) x Buy-out price Recycle Value: Value = Buy-out Fund/No. of ROCs presented Recycling payments made only to those who Suppliers who presented ROCs

ROCs and Buy-out Recycling

CRC - The Carbon Reduction Commitment Applies to large organisations not covered by Climate Change Agreements More than 6,000 MWH through ½ hourly meters Carbon footprint Original plan to recycle monies Now a simple ‘tax’ at £12 per tonne of CO2