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Energy Act 2008

Summary and Background

153.‘Small-scale low-carbon electricity’ generation is the generation of electricity from renewable or low carbon sources such as wind turbines, solar photovoltaic panels and micro combined heat and power (micro CHP). The benefits of encouraging small scale electricity generation include:

  • Reduced transmission and distribution losses because the electricity is generated close to where it is used;

  • businesses, communities and households can move from being passive users of electricity to active users who are more aware of energy generation and usage. This can promote behaviour changes such as increased energy efficiency and reduced energy demand; and

  • the potential of the built environment can be harnessed for the deployment of renewables, such as rooftops and brown field sites.

154.Although renewable small scale electricity generators are eligible to claim Renewable Obligation Certificates (ROCs) under the Renewables Obligation (RO), key stakeholders have advised that many of these smaller generators, such as households and community players (for whom electricity generation is not their primary purpose), can be deterred by the administrative burdens of claiming and selling ROCs. To encourage these smaller generators up to a maximum capacity cap of 5MW, this element of the Act would enable a system of feed-in tariffs to be introduced. Such a system would work in tandem with the RO which is bringing forward larger scale renewable electricity.

155.The purpose of a feed-in tariff system would be to incentivise households, businesses, and community groups to generate low-carbon electricity. This can be achieved by making a fixed payment for each kilowatt hour of electricity generated from an eligible small-scale low-carbon source, to be passed onto such a generator or in some cases, potentially offering a payment up-front for the electricity ‘deemed’ to have been generated. We would expect this to encourage potential generators to make the necessary upfront capital investment in generating equipment, because they would have increased certainty of the payback from their investment.

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