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RENEWABLES INDUSTRY NEWS – JUNE 2015

Onshore Wind – Closure of the RO early for Onshore Wind

In a written ministerial statement of 18 June, the Secretary of State for Energy and Climate Change Amber Rudd MP set forth the Government’s intentions to end subsidies for onshore wind. The statement sets out the department’s plans to introduce primary legislation to close the Renewables Obligation to onshore wind projects as of 1 April 2016 (a year earlier than planned), whilst leaving details of how the Contracts for Difference and the Feed-in Tariff schemes will be dealt with for a later announcement. Included in the statement was a mention of grace periods for projects that already have planning consent, an accepted grid connection offer, and evidence of land rights, albeit only for projects that had these in place as of 18 June 2015. This was followed up by debates in both the House of Commons and the House of Lords on 22 June indicating both that support under the Contracts for Difference and the Feed-in Tariff were also under review.

PEL Note: Given the manifesto commitment of the Conservatives in regards to onshore wind this will not have come as a shock to many, although to have an announcement with very little detail, but that sets the deadline for the grace period criteria to that day, is potentially damaging to investor confidence. The lack of detail confirming the FIT and CfD scheme is certainly disappointing, although in the House of Commons on 22 June Amber Rudd MP did say “I said in my statement that, in respect of contracts for difference, we would be implementing the terms of our manifesto.” This appears to be a clear indication that the CfD budget may exclude onshore wind. The fate of onshore wind under the feed-in tariff is still unknown, but the outlook is not good. Many stories are already circulating about possible legal challenges following this announcement.

PLL Note: Whilst Prospect Law does not often directly comment in this update, this announcement has led to a number of rumours of legal challenges appearing in the press, rumoured to being brought by parties ranging from the Scottish Government through to developers. Previous challenges against sudden and/or retrospective changes to the RO/FIT schemes have all been based on changes to be introduced by secondary legislation following the release of a consultation. The difference here is that the Government is proposing using primary legislation, passed directly by Parliament, to achieve its ends, which is likely more difficult to challenge owing to Parliamentary sovereignty. Whilst we have yet to look at this in great detail, given the devastation the statement alone has had on the sector, even before any firm proposals or draft legislation is put forward, the statement itself may be open to legal challenge as a ‘decision’, especially if the final legislation does not cover projects that have been shelved owing to the announcement. The possibility of applying for a declaration of incompatibility and taking the case to the European Court of Human Rights (as a breach of the right to peaceful enjoyment of possessions, contrary to Article 1 of the first protocol, as established in earlier challenges against unlawful changes to the subsidy schemes brought by us) as an arguable route to a claim for damages remains open to consideration, given that a mere declaration of incompatibility cannot be a suitable remedy for any financial losses incurred.

 

Onshore Wind – Changes to Planning Regime

In a further written ministerial statement of 18 June, the Secretary of State for Communities and Local Government Greg Clark MP set out the Government’s intentions to impose new requirements for local planning authorities to consider when determining applications for onshore wind developments. These proposals, which take effect from the date of the statement, require that consent only be given when the development is in an area identified on the local plan as being suitable for wind development and when the planning impacts have been fully addressed and it therefore has the backing of the local community. For applications already in the system only the requirement to have addressed the planning impacts and to have the backing of the community will be required.

PEL Note: This story was somewhat overshadowed by the announcement regarding subsidies, however it could be even more important for onshore wind developers. The details of the updated guidance have not been released, however whilst the requirement for councils to have agreed (and approved) areas for wind development could prove difficult this could give potential investors useful information before money is spent – assuming such areas do materialise on local plans. The real concern seems to be the obligation for the project to have ‘the backing of the local community’ and the uncertainty as to just how easy it may be for a small group of local opposition to torpedo a project. It is not unusual, even when all local concerns have been diligently addressed, for there to be a few people who just do not want the project to go ahead, and if these individuals are allowed to prevent development the industry could have a serious problem.

 

Contracts for Difference – Consultation Response re Negative Pricing Released

On 29 June DECC released the Government response to the 9 March 2015 consultation on updates to the standard CfD contract terms. Alongside this the commissioned report on the likelihood of negative pricing events is also published. Owing to the state aid requirement the proposals regarding negative pricing (i.e. not paying generators if there is a 6+ hour negative pricing period) will be implemented, but with a promise to engage with the industry further. The negative pricing report gives low estimates for the probability of such events, with a conservative estimate of 0.5% of generation given for a ‘high renewables’ scenario.

PEL Note: The main area of interest in this response is likely to be the negative pricing issue, with the rest being small technical changes. The addition of a clause to the CfD contract stating that payments will not be made on generation occurring during a 6+ hour adds a risk to CfD generators that is difficult to quantify and price, however the published report gives relatively good news on the magnitude of this risk. It is worth noting that energy storage, interconnectors between countries and an increase in smart grids (that may also back onto an increase in the number of electric cars on the road) will all have a mitigating effect on the negative pricing risk. Whilst energy storage and interconnector projects are expected to go forward as planned, any curtailment of this type of investment will lead to this risk increasing and so is worth monitoring.

 

Capacity Market – 2015 Auction Parameters Published

On 29 June DECC published the letter to National Grid setting the parameters for the 2016 Capacity Market auction. Derating factors for interconnectors are also given as the scheme opens up to bids from such installations. The letter also sets out the parameters of the first Transitional Arrangement auction, which specifically targets demand-side response bidders.

PEL Note: Aside from the introduction of interconnectors, the December 2015 Capacity Market auction looks as if it is going to be similar to the first carried out at the end of 2014.

 

For a PDF of the June 2015 update, click here

If you would like to find out more about any of the points raised in this newsletter please contact us at updates@prospectenergy.co.uk or call us on +44 (0)20 3427 5955.

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ENERGY NEWS FROM CHINA

 

Jonathan Green, Prospect Law

The CIA estimated that in 2013 China generated 69.1% of its power from fossil fuels, 1.2% from nuclear fuel, 22.5% from hydro-electric plants, and 7.2% from other renewable sources. Although China is the world’s largest user and producer of coal and the world’s largest emitter of CO2 and other greenhouse gases, in 2013 China led the world in renewable energy production. Today that lead has increased.

Since 2009 the Chinese leadership has declared its intention to reduce its carbon emissions by 45% from 2005 levels. The common assumption is that the expansion of renewable energy generation is driven by concern over climate change. This is only partly true.

Perhaps a more important consideration is China’s goal of energy security, and reducing its reliance on imported oil and coal. China has developed the largest high speed electric rail network and is working hard to secure a viable future for electric vehicles. The need to import oil and coal are a strategic weakness which is regarded internally as incompatible with China’s status as the new superpower.

A third factor is the appalling levels of airborne pollution in the major cities. China’s official sensors measure pollution on a scale up to 500, which is known, in classic doublespeak, as the Air Quality Index. The WHO advises 25 as the safe limit, but Beijing regularly deals with levels over 400. People wear masks and schools close. Beijing is now regarded as a hardship posting for expats. Many runners dropped out of the 2014 Beijing marathon when their face masks turned grey. In January this year the readings hit 500, and the US embassy in Beijing even recorded 545. The US government (http://www.stateair.net/web/post/1/1.html) advises that when the levels are between 301 and 500 “Everyone should avoid all outdoor exertion.”

For the Asia-Pacific Economic Cooperation meeting in Beijing last year, factories were closed within a 125 mile radius, banks and schools were closed, public sector employees were sent home, half the cars in the city were banned from the roads, bodies were not cremated, no weddings were licensed, no passports issued, and no fresh produce was delivered to the city. The skies became blue, which the locals called ‘APEC blue’.

In March this year Chinese journalist Chai Jing published an online documentary in China which went from viral internet sensation to being banned in three weeks. Called ‘Under the Dome’, the documentary is a brilliant analysis of the scale of China’s problem with pollution and a clear indication of the depth of anger the new middle class feel about the damage to their health. When questioned about the documentary by a reporter from the Huffington Post, Premier Li Keqiang did not challenge the documentary, and replied:

“I want to tell you that the Chinese government is determined to tackle environmental pollution, and tremendous efforts have been made in this regard. The progress we have made still falls far short of the expectation of our people. Last year I said that the Chinese government would declare a war against environmental pollution. We are determined to carry forward our efforts until we achieve our goal.

We must get the focus of our efforts right. This year our focus will be to ensure the full implementation of the newly revised environmental protection law. All illegal producers and emitters will be brought to justice and held accountable. We need to make the cost for pollution too high to bear. More support, including capacity building, needs to be given to these environmental law enforcement departments.”

China’s energy policies will be crucial in tackling the massive pollution problem. We can expect China’s global lead in all forms of renewable and clean energy use to increase for the foreseeable future.

This is the first of a series of articles on China’s energy sector.

 

Introduction to Prospect Law and Prospect Energy

Prospect Law is an energy specialist law firm which is based in London and the Midlands of the UK. It is a sister company of Prospect Energy which is a technical consultancy company. The two firms provide advice on energy development projects and energy related litigation concerning onshore oil and gas, nuclear and renewable energy schemes for clients in the UK and internationally.

 

For a PDF of the blog click here

For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.

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COSTS UPDATE FOR ENVIRONMENTAL LITIGATION

 

Ashley Bowes, Prospect Law

Developers, environmental groups and community organisations promoting or challenging shale gas/fracking or renewable energy schemes through the planning process should be aware of the caps on costs that may apply in applications for judicial review.

The 1998 Aarhus Convention requires that access to environmental justice is not “prohibitively expensive”.

A Claimant for judicial review after 1 April 2013 which concerns  an environmental  matter  may choose to  subject the claim to the cost caps in Civil Procedure Rules 45.41 to 45.43. The caps will apply where the Claimant indicates that it  wishes the caps to apply by simply ticking the appropriate box on the claim form.

The effect of the caps is that individual Claimants cannot be ordered to pay more than £5,000 to other parties should they lose; and commercial entities and not for profit organisations cannot be ordered to pay more than £10,000 should they lose. And both types of Claimant cannot recover more than £35,000 if they win. The figures include VAT and disbursements.

The caps are likely to be attractive to environmental groups and community groups challenging planning decisions. Developers and commercial organisations challenging decisions are less likely to be interested in the caps.

Where developers and commercial organisations wish to join a judicial review as an interested party in order to oppose a challenge to a planning decision, the cost caps are likely to prevent the developer or commercial organisation recovering costs in excess of the cap from an unsuccessful Claimant.

A Defendant in a judicial review (usually a government department or local authority) may dispute whether the Aarhus Convention applies when completing the Acknowledgement of Service, but:

  • If the Court decides the claim is an Aarhus Convention claim it will make an order for costs against the Defendant on the indemnity basis (i.e. a higher level of the Claimant’s costs will be recovered).
  • If the Court decides the claim is not an Aarhus Convention claim it will normally make no order for costs (.i.e. there is no penalty for the Claimant).
  • Given this unattractive costs regime together with the Venn judgment (see below), there is only likely to be a limited number of cases where a challenge as to whether the matter is within the scope of the Aarhus Convention is going to be worthwhile.

The rules have, not surprisingly, generated satellite litigation, which has added some clarity to the application of the rules in practice:

  • The rules only apply to claims for judicial review. They do not apply therefore to statutory appeals of planning decisions (s.288/289 Town and Country Planning Act 1990 and s.113 Planning and Compulsory Purchase Act 2004) see: Venn v SSCLG [2014] EWCA Civ. 1539.
  • The rules will apply to almost any judicial review of a planning decision (see Sullivan LJ in Venn at [15]-[18]).
  • Multiple claimants (such as unincorporated action groups) could benefit from a single £5,000 cap provided they all pursue the same case (otherwise it might be appropriate to cap each case at £5,000) see: R (Botley Action Group) v Eastleigh BC [2014] EWHC 4388 (Admin.) per Collins J at [125].

Practical points for Claimants are:

  • Use individual Claimants where possible.
  • Raise the costs matter in pre-action correspondence.
  • Provide full reasons why the Aarhus Convention should apply within the claim form.
  • If not a judicial review claim, consider applying for a Protective Costs Order applying the Corner House [2005] EWCA Civ. 192 criteria.

Practical points for Defendants or developers whose planning permission is being challenged and who are thinking about joining the judicial review as an interested party are:

  • Take a realistic view (will the litigation cost more than £5,000 – £10,000 to defend?).
  • Is it worth a hearing with negative cost consequences to dispute it?
  • Remember the £35,000 cap on a successful Claimant’s recovery.

 

Introduction to Prospect Law and Ashley Bowes

Prospect Law Ltd is an energy specialist UK law firm which is based in London and the Midlands. Prospect Energy Ltd is its sister company providing technical expertise. The two firms provide advice on energy development projects and energy related litigation concerning shale gas, nuclear and renewable energy schemes for clients in the UK and internationally.

Ashley Bowes is a barrister who specialises in planning and environmental law matters at planning appeals and in statutory challenges and judicial review cases in the High Court. He is involved in energy related development projects around the UK.

For a PDF of the article click here

 

For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.