CCL, ROCs & Other Acronyms

1. CCL, ROCs & Other Acronyms AL GORE I

2. Aspects Covered • Background – climate change • CCL and ECAs • Renewables Obligation the RO • NFFO, ROCs, LECs, REGOs • CRC – the Carbon Reduction Commitment

3. Climate Change

4. Global CO2 emissions

5. How to tackle climate change • Reduce man-made CO2 emissions • Reduce fossil fuel burn • Improve efficiency • Encourage renewable forms of energy • Incentives/Penalties

6. International Efforts • UN Climate Change Conferences • 1997 Kyoto Protocol – binding targets • Bali, Poznan, Copenhagen • ‘Road maps’ • UK policy and objectives

8. UK GHG Reduction Policies • 1989 Energy Act - Privatised the ESI - NFFO • 2000 Climate Change Programme – CCL • 2002 NETA and ROCs • Climate Change Act and Energy Act 2008 • Energy Act 2011 – The Green Deal

9. CCL - Climate Change Levy April 2001 • Applied to energy supplied to businesses • Charged On ‘taxable commodities’: Electricity natural gas and other hydrocarbon gases, coal and coke • Non-taxable commodities: Oil, road fuel gas, heat and steam • Scheme administered by HMRC

10. Levels of CCL • Adjusted by annual inflation • 2011 rates: Electricity 0.485p/kWh Natural gas 0.169p/kWh Liquid gases 1.083p/kg Coal and coke 1.321p/kg

11. Reliefs from CCL • Domestic consumers and charities are exempt • Good Quality CHP • Renewable electricity generation • Up to 80% relief for ‘sector agreements’ • Revenue is recycled – 0.3% reduction in NI

12. ECA – Enhanced Capital Allowances April 2001 • ECA Introduced at same time as CCL • Energy Technology List on the DECC website • List is managed by the Carbon Trust for Govt. • Effectively a tax relief • Company can write off whole of capital cost in first year

14. Non-Fossil Fuel Obligation 1990 NFFO • 1989 Energy Act – mainly supported nuclear! • Electricity Suppliers obliged to buy tranches • Funded by the Fossil Fuel Levy per kWhe • Emphasis shifted to renewable energies • Replaced by Renewables Obligation in 2001

15. Renewables Obligation and ROCs • NETA - new electricity trading arrangements • Electricity Suppliers obliged to buy increasing proportions of their supplies from ‘renewables’ • Intially 3% - rise to 15.4% in 2015/6 • Scheme administered by Ofgem who: 1 Accredit ‘renewable generators’ 2 Set a ‘Buy-out Price’ 3 Issue ROCS and collect/distribute the Buy-out Fund

16. ROC banding – Introduced 2009 • Distinguishes between ‘maturity’ of technologies: Established Band - 0.25 Reference Band - 1.0 Post-demonstration - 1.5 Emerging - 2.0

17. Renewable Obligation Certificates • Awarded to the renewable generator • ROCs carry a value separate from the electricity supplied • Generator can sell direct to a Supplier or put them up for auction • Also receive LECs and REGOs

19. Selling ROCs • Generator can sell direct or put up for auction • Auctions conducted monthly by the NFPA • October 2011 prices have reached £46/MWh

20. Suppliers – Meeting the Obligation • A Supplier must meet its obligation each year: Obligation = Sales (MWh) x ROCs/MWh Ofgem calculates ROCs/MWh – 0.124 for 2011/2

21. Suppliers – Meeting the Obligation • Supplier can meet its obligation by: • Buying total ROCs obligation (direct/auction) • Paying a ‘buy-out price’ for its obligation • A mixture of 1 and 2 above • Buy-out price fixed by Ofgem - £38.69/MWH for 2011

22. ROCs - The Buy-out Fund & Recycling • Ofgem collects monies paid for Buy-outs • Size of the Buy-out Fund : (Total UK Obligation-ROCs presented) x Buy-out price • Recycle Value: Value = Buy-out Fund/No. of ROCs presented • Recycling payments made only to those who Suppliers who presented ROCs

23. ROCs and Buy-out Recycling

24. CRC - The Carbon Reduction Commitment • Applies to large organisations not covered by Climate Change Agreements • More than 6,000 MWH through ½ hourly meters • Carbon footprint • Original plan to recycle monies • Now a simple ‘tax’ at £12 per tonne of CO2