Chapter 4: Renewables Obligations Relating to Electricity
Section 115: Discharge of renewables obligation in Great Britain by payment
270.Section 32(3) of the Electricity Act 1989 provides that electricity suppliers must before one or more specified days provide to GEMA evidence regarding their supply of electricity generated from renewable sources to discharge their renewables obligation. The effect of section 115(1) is to make it clear that the Secretary of State may provide for more than one specified day in a year. This would mean suppliers would be required to produce evidence of their compliance with the renewables obligation before each of the days. The timing of each specified day and the associated obligation periods would be set out in an order.
271.Section 32C of the Electricity Act 1989 provides that an order made under section 32 may allow electricity suppliers to discharge their renewables obligation by making buy-out payments to GEMA, instead of producing evidence regarding their supply of electricity generated from renewable sources. Section 115(2) – (5) amends section 32C and provides for suppliers who have not discharged their renewables obligation by the specified day, to be treated as having discharged it by making a late buy-out payment. The Secretary of State is also empowered to introduce surcharges which will be added to any late buy-out payments made by a supplier. This power also allows for the surcharge to increase at a daily rate from the date on which the supplier should have complied with the renewables obligation. The Secretary of State may also specify steps under 27A of the Electricity Act 1989 which cannot be taken during a specified period following the date on which the supplier should have complied with the renewables obligation. The period during which late payments can be made, the amount of the surcharge and the manner of its calculation would be set out in an order.
272.Section 115 also provides that an order under section 32 of the Electricity Act may require suppliers to make payments to GEMA to make good some or all of any previous unrecovered shortfall in the buy-out fund. This process is known as mutualisation. Mutualisation payments can be required from either suppliers with a renewables obligation at the time the shortfall occurred, or suppliers with a renewables obligation in a subsequent specified period, and can be adjusted or repaid as provided in the order. To allow for the operation of the late payment regime described above, mutualisation will not take place until after the end of the late payment period. Section 115 also provides that an order under section 32 of the Electricity Act 1989 may provide that sections 25 to 28 of the 1989 Act apply, in relation to mutualisation, to a person who is not the holder of a relevant licence as though they were a holder of such a licence. This provision would enable GEMA to take enforcement action for breach of the mutualisation provisions against a company who had been a licensed supplier at the time of a shortfall, but who had subsequently disposed of its licence. The Secretary of State is also empowered to provide for mutualisation payments to be made where there is a shortfall in the Northern Ireland buy out fund.
Section 116: Issue of green certificates in Great Britain
273.Section 116 provides that an order under section 32 of the Electricity Act 1989 may, by virtue of section 32B, empower GEMA to issue renewables obligations certificates (“ROCs”) to Northern Ireland suppliers as well as to GB suppliers and the operators of generating stations. It also provides that such an order may provide for the issue of ROCs in respect of renewables electricity which is generated by certain generating stations and supplied to customers in Northern Ireland, and that a GB supplier may discharge its renewable obligation in GB by presentation of these certificates.
Section 117: Use of green certificates issued in Northern Ireland
274.Section 117 provides that an order made under section 32 of the Electricity Act 1989 may provide for a GB electricity supplier to discharge its renewables obligation in GB by producing a renewables obligation certificate issued under the Northern Ireland equivalent of the section 32 order (a “NIROC”).
Section 118: Distributions to Northern Ireland suppliers
275.Section 32C of the Electricity Act 1989 provides that an order made under section 32 may allow electricity suppliers, instead of producing evidence regarding the supply of electricity generated from renewable sources, to discharge their renewables obligation by making payments to GEMA. Section 32C(3) requires GEMA to distribute the amounts so received (which are known as the “buy-out fund”) to electricity suppliers in Great Britain in accordance with an order made under section 32. Section 118 amends section 32C by providing that Northern Ireland electricity suppliers shall also be potentially eligible for distribution by GEMA by virtue of section 32C(3).
Section 120: Issue of green certificates in Northern Ireland
276.Section 120 relates to the issue of NIROCs under the Energy (Northern Ireland) Order 2003 and amends that Order accordingly. The section defines Northern Ireland for the purpose of the issue of NIROCs as excluding the territorial sea adjacent to Northern Ireland. This avoids overlap between GEMA’s role and that of the Northern Ireland Authority for Energy Regulation (“NIAER”) in respect of electricity supplied to customers in Northern Ireland, by providing that NIAER will issue NIROCs for generating stations located in Northern Ireland (including its inland waters but not UK territorial waters adjacent to Northern Ireland). GEMA will issue ROCs under the Electricity Act in respect of electricity produced by all other generating stations (including electricity supplied to customers in Northern Ireland).
277.The section also inserts a new provision providing for arrangements to be made for the sale of NIROCs, relating to electricity supplied under the non fossil fuel regime as applicable to Northern Ireland, separately from that electricity. Without this provision, Great Britain suppliers are unlikely to participate in auctions of NIROCs with the underlying electricity since they would have no use for the electricity which currently cannot in practice be exported from Northern Ireland to Great Britain because of interconnector limitations. This provision therefore puts all UK electricity suppliers on an equal footing in respect of such NIROCs, and at the same time improves the liquidity of the market in any competitive auction or other sale process for those NIROCs.
278.The section also allows the Department of Enterprise, Trade and Investment in Northern Ireland (“DETI”) to direct the application of the proceeds of such sale.
Section 121: GEMA’s power to act on behalf of Northern Ireland regulator
279.This section permits GEMA and NIAER to enter into, and give effect to, arrangements for GEMA to carry out NIAER’s functions under articles 52 to 55 of the Energy (Northern Ireland) Order 2003 (S.I. 2003/419)(N.I.6) (that is, NIAER’s functions in administering the Northern Ireland renewables obligation). These arrangements are expected to be negotiated subsequently between GEMA and NIAER.
Section 122: Consultation in relation to Northern Ireland renewables orders
280.This section enables DETI to consult on a renewables obligation order in Northern Ireland as soon as possible, and if necessary before it has made the amending order that it needs to make to the Energy (Northern Ireland) Order 2003 to reflect the changes introduced to the Electricity Act by this Act.
Section 123: Modification of conditions of Northern Ireland electricity licenses
281.This section inserts a new provision into the Energy (Northern Ireland) Order 2003 that provides DETI and NIAER with a power to modify electricity licence conditions in Northern Ireland where they consider it necessary or expedient to do so in connection with amendments made to that Order either directly by section 120 of this Act or by an amending order made to take account of amendments to the Electricity Act made by this Chapter of the Energy Act.
