The Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023

Articles 2b and 2c inserted

14.  After Article 2a insert—

“Article 2b Free allocation in 2026-2030 allocation period: applications by incumbent installations that will not produce electricity for sale for consumption outside the installation

1.   Despite Article 2a(1)(b), an application under Article 4 for free allocation in the 2026-2030 allocation period may be made in respect of an installation that is an electricity generator as if the restriction referred to in Article 2a(1)(b) did not apply, provided that the application is accompanied by a statement by the operator of the installation that the condition in paragraph 2 will be met.

2.   The condition is that the installation will not produce any electricity (other than relevant CHP electricity) for sale for consumption outside the installation in the period beginning with the date of the application and ending with 31 December 2030 (the “relevant period”).

3.   Where such an application is accompanied by the statement referred to in paragraph 1:

(a) the regulator must assess the statement and any evidence provided and include the statement, evidence and regulator’s assessment in the information sent to the UK ETS authority under Article 15a(3) for assessment by the UK ETS authority under Article 15a(4);

(b) if the UK ETS authority considers that the condition in paragraph 2 will be met, for the purposes of determining the application, the application must be treated as made in respect of an installation that is not an electricity generator (and to which the restriction in Article 2a(1)(b) does not apply);

(c) if the UK ETS authority does not consider that the condition in paragraph 2 will be met, the UK ETS authority must inform the regulator, and the regulator must inform the operator of the installation.

4.   Paragraphs 5 to 8 apply where:

(a) an application under Article 4 for free allocation in the 2026-2030 allocation period in respect of an electricity generator is treated as made in respect of an installation that is not an electricity generator in accordance with paragraph 3(b) and is assessed as valid under Article 15a(4); and

(b) the regulator considers at any time (including on receipt of a report under Article 3 of the Activity Level Changes Regulation) that the installation has produced electricity (other than relevant CHP electricity) for sale for consumption outside the installation in the relevant period.

5.   The regulator must:

(a) determine the historical activity level (if any) of each sub-installation of the installation that the regulator considers would have been determined under this Regulation or the Activity Level Changes Regulation if the application had been treated as made in respect of an electricity generator (and to which the restriction in Article 2a(1)(b) applies);

(b) calculate the preliminary and final annual number of allowances (if any) to be allocated in respect of the installation, and of each sub-installation of the installation, for each scheme year in the 2026-2030 allocation period beginning with the relevant scheme year, that the regulator considers would have been calculated under this Regulation and the Activity Level Changes Regulation if the application had been treated as made in respect of an electricity generator (and to which the restriction in Article 2a(1)(b) applies);

(c) send evidence of the matters referred to in paragraph 4(b) and the determination and calculation referred to in points (a) and (b) of this paragraph to the UK ETS authority.

6.   If the UK ETS authority considers that the installation has produced electricity (other than relevant CHP electricity) for sale for consumption outside the installation in the relevant period, the UK ETS authority must:

(a) approve the final annual number of allowances to be allocated in respect of the installation, for each scheme year in the 2026-2030 allocation period beginning with the relevant scheme year, making any corrections to the historical activity levels or preliminary or final annual number of allowances that the UK ETS authority considers appropriate;

(b) inform the regulator accordingly.

7.   The regulator must give notice to the operator of the installation of the final annual number of allowances approved.

8.   For the purposes of Article 5 of the Activity Level Changes Regulation, the reference in paragraph 3 of that Article to the initial allocation must be read as including a reference to the initial allocation that would have been approved if the application had been treated as made in respect of an electricity generator (and to which the restriction in Article 2a(1)(b) applies).

9.   Where paragraph 4(a) applies to an installation, unless the final annual number of allowances is recalculated and approved under paragraphs 5 and 6, despite the amendment made to Article 3(2) of the Activity Level Changes Regulation by article 22 of the Greenhouse Gas Emissions Trading Scheme (Amendment) (No. 2) Order 2023, the activity level report required by Article 3 of the Activity Level Changes Regulation must contain the information referred to in section 1.4(e) of Annex 4 to this Regulation.

10.   In this Article, “relevant scheme year”, in relation to an installation, means:

(a) if the installation first produces electricity (other than relevant CHP electricity) for sale for consumption outside the installation in the period beginning with the date of the application and ending with 31 December 2026, the 2026 scheme year;

(b) if the installation first produces electricity (other than relevant CHP electricity) for sale for consumption outside the installation on or after 1 January 2027, the scheme year in which the installation first produces such electricity.

Article 2c Meaning of “electricity generator” and “relevant CHP electricity”

1.   In this Regulation, “electricity generator” must be construed as follows.

2.   In relation to a deemed application for free allocation in the 2021-2025 allocation period or an application for free allocation in the 2021-2025 allocation period under Article 5, “electricity generator” means an installation:

(a) that on or after 1 January 2005 produced electricity for sale for consumption outside the installation; and

(b) at which the regulated activity referred to in column 1 of the first entry in table C in Schedule 2 to the UK ETS Order (combustion of fuels) and no other regulated activity (apart from one referred to in Article 2a(8)) is carried out.

3.   In relation to an application for free allocation in the 2026-2030 allocation period under Article 4 or 5, “electricity generator” means an installation:

(a) that in the relevant period produced electricity for sale for consumption outside the installation; and

(b) at which the regulated activity referred to in column 1 of the first entry in table C in Schedule 2 to the UK ETS Order (combustion of fuels) and no other regulated activity (apart from one referred to in Article 2a(8)) is carried out.

4.   For the purposes of paragraph 3(a), electricity produced for sale for consumption outside the installation in the relevant period must be ignored if:

(a) it is relevant CHP electricity; or

(b) it represents no more than 5% of the total electricity (not including relevant CHP electricity) produced at the installation in the relevant period.

5.   In paragraphs 3 and 4, “relevant period” means:

(a) in relation to an application for free allocation under Article 4, the baseline period;

(b) in relation to an application for free allocation under Article 5, the period beginning with the start of normal operation and ending with the last day of the year before the year in which the application is made.

6.   In this Regulation, “relevant CHP electricity” means, in relation to an installation, electricity produced at the installation by cogeneration at a cogeneration unit certified under the standard applying from time to time for the purposes of the Combined Heat and Power Quality Assurance Programme(1) that produces electricity for consumption at the installation (and may also produce electricity for sale for consumption outside the installation).”.

(1)

Details of the Combined Heat and Power Quality Assurance Programme are available at https://www.gov.uk/guidance/combined-heat-power-quality-assurance-programme. The current and previous standards can be accessed at https://www.gov.uk/government/publications/chpqa-standard. Copies may be inspected at the Department for Energy Security and Net Zero, 3-8 Whitehall Place, London SW1A 2JP.