![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
England and Wales High Court (Administrative Court) Decisions |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Tate & Lyle Industries Ltd & Anor, R. (On the application of) v Secretary of State for Energy and Climate Change & Anor [2010] EWHC 2752 (Admin) (02 November 2010) URL: https://www.bailii.org/ew/cases/EWHC/Admin/2010/2752.html Cite as: [2010] EWHC 2752 (Admin) |
[New search]
[Context]
[View without highlighting]
[Printable RTF version]
[Help]
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
The Queen on the Application of Tate & Lyle Industries Ltd The Queen on the Application of T & L Sugars Ltd |
1st Claimant 2nd Claimant |
|
- and - |
||
The Secretary of State for Energy and ![]() ![]() |
Defendants |
____________________
Mr Martin Chamberlain (instructed by The Treasury Solicitor) for the Defendant
Hearing dates: 6th-7th October, 2010
____________________
Crown Copyright ©
Lord Justice Moses :
The Renewables Obligation and Renewables Obligation Certificates
Essential Facts
The Process Leading to Banding in the 2009 Order
- "Transparency – the process for setting the bands – should be open and clear and involve consultation with industry and other key interested parties; and
- Reliability: the market should have confidence that the bands will be set on the basis of an independent and objective assessment of the commercial position and prospects of different renewable technologies." (2.11)
In deciding how many bands it should the Government proposed:-
"to assess the expected current and forward costs over the next few years for each of the technologies set out in our previous consultation document. We have found that these costs seem to fall into loose groupings which reflect at least in general terms the market and technological development that the technologies have reached to date." (2.27)
It rejected an approach which would make fine distinctions between the levels of support given to different technologies and proposed to take groups of technologies and set support levels "which reflect the general position of that group" (2.27). It identified two principal sources of costs, capital costs and fuel costs (2.28).
"It is not the Government's intention through banding to provide all projects with exactly the support level they need. This would not incentivise developers to site and build economic projects or reflect some of the natural constraints on the limits of future resource…The RO was developed as a market mechanism to pull forward the most economic and efficient projects and this remains our aim within the bands set out below."
"a) the bands should take account of the full project costs (including the costs of scoping, planning, construction, grid connection, transmission charges etc.) and incomes (for example, due to the wholesale price of electricity, the avoided cost of schemes such as the EU ETS, Landfill Tax and theClimate Change
Levy etc.);
b) the bands should aim to deliver the maximum deployment for a given level of support of renewable generation over the following 5-10 years and sustainable beyond that, recognising the risks in predicting costs and technologies over that time and that retaining the confidence of investors will be key to delivering that outcome;
c) the bands should be set taking into account the impact on the number of ROCs likely to be in the market, and aim to maintain investor confidence and ensure that consumers get value for money;
d) bands should take into account the cost effectiveness and long-term potential of different renewable technologies in delivering the Government's renewable energy targets. It is not the Government's intention that banding should restrict development of the most economic forms of renewables, or to provide permanently high levels of support for very expensive forms of renewable energy;
e) wider strategic issues, such as sustainability, carbon emission reduction, cost effectiveness and the Government strategies for waste management, and biomass." [4.4]
"2.8 We asked whether there were any other technologies which should be included in the RO. In light of the responses, we have looked at costs for four groups of technologies."
It proposed that co-firing of regular biomass should receive 0.5 ROCs/MWh (2.21).
"The Banding regimes attempted to match the predicted costs at 2010 for realistically deployable capacity for each technology against the revenues that could be expected."
It explained that it had grouped the technology in five bands for the purposes of simplicity and gave its view that it was not appropriate to try to match the level of support "too closely to a predicted technology". It added that it had limited the maximum level of support, to 2 ROC/MWh, and had not sought to match the needs of all the technologies. It gave an example of solar photovoltaic stations which, to become financially viable, would have required some 15 ROC/MWh.
"Costs
The costs that were set to use the banding regime were for the most part those in the Ernst & Young report. These reflected the range of costs that is/was (sic) believed would need to be covered if the UK was to hit its declared aspiration to achieve 20% of electricity from renewable sources. However we have taken account of additional inputs from our consultation process and from other sources which have become available. In order to be certain of achieving this target we would have needed to set bands which delivered revenues that topped the quoted cost range for each technology. In practice we decided that to avoid over-subsidy, and given the uncertainties in costs, we would set the revenue closer to the mid-point of the range."
The response continued:-
"In proposing a banding regime we aimed for a level of support towards the middle of the range of costs (for projects beginning in 2010) for those key technologies which we expected to deliver substantial volumes up to 2015. We did not attempt to sub-divide the technologies or to try and match the level of support very closely to arbitrary points on a supply curve as we believe that the uncertainties of future technology costs and electricity prices are such that this degree of precision would be unlikely to be met in practice." (my emphasis)
"To increase the support provided by the RO to less established, higher risk technologies whose costs are greater by awarding them more than 1 ROC/MWh of generation ('banding up'). In order to maintain value for money for the consumer and to prevent cheaper renewables generation technologies being over-compensated we are correspondingly reducing the support ('banding down') for those renewable technologies which are relatively mature or low risk…"
The Government noted that, despite controversy, it intended to retain a distinction between regular Co-firing and Co-firing in good quality CHP stations (see 2.22 and 2.23). The response explained that some Co-firing, for example Co-firing of small amounts of biomass, required higher levels of investment. The Government decided that the electricity generated by Co-firing of gaseous fuels should not be included in the Co-firing band (4.13). It concluded that Co-firing of biomass with CHP should be allocated 1 ROC/MWh (see page 8 of the response).
"Our banding regime is set to match the costs within the range for which we have evidence."
It noted that if operators were able to reduce their costs below those expected they would be able to capture the rewards for their first stations by being allowed to retain higher margins. It also referred to the possibility of an Early Review which would afford:-
"flexibility to adjust the level of support, for example, to take into account any unforeseenchanges
in market conditions or
changes
affecting specific technologies."
It referred, by way of example, to a significant change
in costs charged or charges imposed.
"the choice of the UK Authorities to set bands which delivered revenues close to the mid-point of the ranges for each technology in order to avoid over-subsidy."
"Before making any banding provision, the Minister must have regard to the following matters:
(a) the costs (including capital costs) associated with generating electricity from each of the renewable sources or with transmitting or distributing electricity so generated;
(b) the income of operators of generating stations in respect of electricity generated from each of those sources or associated with the generation of such electricity;
(c) the effect of paragraph 19 of Schedule 6 to the Finance Act 2000 (c. 17) (supplies of electricity from renewable source exempted fromclimate change
levy) in relation to electricity generated from each of those sources;
(d) the desirability of securing the long term growth, and economic viability, of the industries associated with the generation of electricity from renewable sources;
(e) the likely effect of the proposed banding provision on the number of renewable obligation certificates issued by the Authority, and the impact this will have on the market for such certificates and on consumers;
(f) the potential contribution of electricity generated from each renewable source to the attainment of any target which relates to the generation of electricity or the production of energy and is imposed by, or results from or arises out of, a Community obligation."
The Early Review
"Review of banding provisions
(1) In this Order, 'banding provision' means a provision of articles 27 to 31.
(2) The Secretary of State may commence a review of the banding provisions in October 2010 and at subsequent four yearly intervals.
(3) The Secretary of State may review all or any of the banding provisions at any time if satisfied that one or more of the following conditions is satisfied -
(a) the charges imposed by network operators on persons, or a class of persons, making a request for connection to and use of a transmission or distribution system have changed significantly since the Secretary of State made the banding provisions;
(b) the charges imposed by network operators on persons, or a class of persons, who generate electricity have changed significantly since the Secretary of State made the banding provisions;
(c) a way of generating electricity is being or has been developed that-
(i) is likely to be used to generate from renewable sources electricity which is supplied to customers in Great Britain, and
(ii) is not listed in the first column of Part 2 of Schedule 2;
(d) there has been achange
, since the Secretary of State made the banding provisions, in any support, whether financial or otherwise, provided under any enactment other than sections 32 to 32M of the Act to persons generating electricity from renewable sources and that
change
is likely to have a significant impact on the generation of electricity from renewable sources;
(e) the costs of generating electricity in any of the ways listed in the first column of Part 2 of Schedule 2 are significantly different from the costs of generating electricity in that way to which the Secretary of State had regard when making the banding provisions;
(f) there is evidence over a significant period that the provisions of article 13(3) to (5) are having a material effect on trade in ROCs referred to in article 13(3) and (4);
(g) in an obligation period the number of ROCs issued by, produced to or likely to be produced to the Authority exceeds or is likely to exceed the total number of ROCs required to be produced to the Authority in respect of that obligation period by designated electricity suppliers;
(h) an event has occurred which –
(i) is relevant to the matters set out in section 32D(4) of the Act,
(ii) was not foreseen by the Secretary of State when making the banding provisions, and
(iii) has had or is likely to have a material effect on the operation of this Order."
"The Government's decisions on ROC banding levels consider not only the generation costs (the subject of this analysis) but also the other matters set out in s.32D(4) of the 1989 Act" (see final paragraph).
Arguments
"Because few projects have come forward to date, we expect long-term growth of this technology to be low. Correspondingly, the effect on the ROC market and on consumers will be low, but the question of value for money to consumers remains. A balance has to be struck between encouraging deployment and ensuring cost effectiveness."
Accordingly, the Secretary of State can justify maintaining 1 ROC/MWh on a basis which distinguishes CoCHP from other technologies. That basis, he asserts, was applied both before and after the Early Review.
Conclusion