On 7th November 2013, the Government published the consultation"RO Grace Periods" which sets out the proposed approach for the closure of the Renewables Obligation ("RO") to new generating capacity, including the arrangements for grace periods.
The short consultation stems from the Electricity Market Reform and the Government's White Paper"Planning our electric future" whereby the Government set out its intention to close the RO to generating capacity from 31 March 2017. The RO is to be replaced by Contracts for Difference which will become the main support mechanism for large scale renewable electricity.
In general, operators of large scale projects which have commissioning dates on or close to 31 March 2017, will have the option to apply for the Contracts for Difference scheme or the RO.
The consultation covers:-
- The use of the power by the Secretary of State to close the RO in Scotland, England and Wales to new generating capacity; and
- Proposals for the eligibility criteria and lengths that will apply to the grace periods to be offered at the point of RO closure to new generating capacity across the UK.
In relation to grace periods, the consultation sets out four forms of"clearly defined and limited grace periods". The grace periods would allow projects commissioned after 31 March 2017 to benefit from previous arrangements. The Government intends to offer four grace periods, namely:-
- A 12 month grace period to address radar and grid connection delays, where the project was scheduled to commission on or prior to 31 March 2017;
- A 12 month grace period for projects which have signed Investment Contracts under the Final Investment Delivering Enabling, should these contracts fall away or be terminated under certain specific circumstances;
- A 12 month grace period for projects able to demonstrate that substantial financial decisions and investments have been taken prior to 31 July 2014, where the project is scheduled to commission on or prior to 31 March 2017. To be eligible, these projects will have to undergo a notification process prior to 31 July 2014; and
- An 18 month grace period for projects allocated a place under the 400MW dedicated biomass cap.
It is intended that the proposals detailed in the consultation will be implemented via a Renewables Obligation Closure Order 2014 which will come into force in Spring 2014. The proposals are of course subject to the Energy Bill currently laid before parliament as well as parliamentary approval and State Aid clearances.
Responses to the consultation are required to be submitted to DECC by 28th November 2013.