May 23, 2022

Volume XII, Number 143

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May 20, 2022

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UK Department for Energy & Climate Change Announces Early Closure of UK Renewables Obligation

In our three-part series published last week, we outlined the possibility of the UK Government closing the Renewables Obligation (“RO”) scheme to new onshore wind generating stations in 2016, a year earlier than expected.

On 18 June 2015, the UK Department for Energy & Climate Change (“DECC”) formally announced the UK Government’s intention to close the RO across Great Britain to new onshore wind generating stations from April 2016.  Energy and Climate Change Secretary Amber Rudd stated: “[…] Onshore wind is an important part of our energy mix and we now have enough subsidised projects in the pipeline to meet our renewable energy commitments”.

Details of the legislation bringing the UK Government’s intended changes have not yet been provided, but the impact on the future growth of onshore wind in the UK is potentially significant.  Last year, onshore wind generated 5% of the UK’s total electricity, with the help of “over £800m of Government subsidies”, according to DECC.  Currently, 5,500 onshore wind turbines have been installed or are under construction in the UK, and another 3,000 have planning permission.  It is not yet known how many projects will be affected by the early closure of the RO.

While DECC has indicated that up to 5.2 GW of onshore wind capacity could be eligible for grace periods, it has yet not confirmed that this will be the case.  Its current position is that the UK Government is  “minded to offer” grace periods “to projects that already have planning consent, a grid connection and acceptance, as well as evidence of land rights”.

Prior to the announcement, there was uncertainty over whether the changes would extend to Scotland.  It now appears that the UK Government intends for the changes to affect the whole of Great Britain, which has reportedly been “met with outcry” by the Scottish Government.  Scottish Energy Minister Fergus Ewing described the decision as “deeply regrettable”, adding that it “will have a disproportionate impact on Scotland”.

The Scottish Government is but one of many critics of the decision, along with industry representatives, UK media outlets and business commentators.  Michael Pollitt, professor of business economics at Cambridge Judge Business School, has described the proposed changes as “a bad mistake”, coming at a time where the costs of onshore wind technology “are coming towards grid parity”.  Katja Hall, deputy director-general of the Confederation of British Industry expressed broader concerns: “Cutting the Renewables Obligation scheme early sends a worrying signal about the stability of the UK’s energy policy framework.  This is a blow, not just to the industry, and could damage our reputation as a good place to invest in energy infrastructure.”

As outlined, there are possible legal avenues available for challenge and redress for those affected. According to Mr Ewing, the Scottish Government has “warned the UK Government that the decision, which appears irrational, may well be the subject of a Judicial Review”.

© 2022 Covington & Burling LLPNational Law Review, Volume V, Number 173
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About this Author

William Lowery, Covington, litigation attorney
Associate

As an associate in the firm’s dispute resolution practice group, William Lowery’s practice covers a range of complex international disputes, including arbitrations and cross-border litigation.  He has represented clients in ad hoc proceedings and arbitrations governed by the rules of the American Arbitration Association (AAA), International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the London Maritime Arbitrators Association (LMAA) and the United Nations Commission on International Trade Law (UNCITRAL).  Mr. Lowery advises...

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