Cogen industry issues

Reform of the Climate Change Levy (CCL)

A consultation on reforming the CCL was released in December 2010.  The Government announced that the exemption from the CCL on exports from a CHP plant would be removed.  They also plan to introduce Carbon Price Support Rates (CPSR) which would place a tax on all fossil fuels used in generation.  They have approved a floor price for 2013 of £16/tonne of carbon dioxide rising to a target price of £30/t in 2020.  However they have also confirmed there will be a reduced rate available for CHP, although exact details are not expected to be specified until Summer 2011.

EU Carbon Emissions Trading Scheme (ETS) Phase III

The next phase of the EU ETS is due to commence in 2013. Unlike the previous two phases, carbon polluters will have to buy their allocations; for mainstream UK gas and coal plants this will amount to 100% of required emissions certificates. However, CHP plants will receive free allocations for heat production, that will be scaled back over the 2013-2020 period of phase III. We are awaiting final clarification of policy detail.

Green Investment Bank

The UK Government has allocated £1 billion in funding towards the development of the Green Investment Bank (GIB). The aim of the GIB is to provide a suite of financial instruments to support investment in green and energy efficient technologies. While the GIB may provide access to capital for would-be projects it will focus on de-risking investment decisions through financial products such as insurance schemes, equity shares and similar. This is inline with the policy direction of the new Government which wants to increase investment and new build not only via increased incentives but also through risk reduction as a result of policies that increase investor confidence.

Renewable Heat Incentive

The Renewable Heat Incentive (RHI) is the proposed financial support scheme to encourage investment in renewable heat technologies.  Original plans to fund the scheme through a tax levy on fossil fuel heat suppliers have been ditched and the Government has granted £860 million to fund the scheme.  This is a positive outcome for highly efficient gas fired CHP which would have been treated the same as less efficient fossil fuel technologies and therefore may have been subject to the levy.  The Government intends to have an introductory period for the RHI that runs from 2011- 2012.