The DTI’s recent Energy Review, announced by Alistair Darling on 11 July, maps out the government’s vision for tackling the twin issues of climate change and energy security facing the UK at the beginning of the 21st century.

According to the Prime Minister in his foreword to the Energy Review:

… we now face two immense challenges as a country – energy security and climate change. First, we will soon be net importers of oil, and dependent on imported gas at a time when global demand and prices are increasing… Second, and even more important in the long term, is the impact that our sources and use of energy are having on our planet.

The Energy Review sets out a wide range of proposals covering policy areas such as energy efficiency, carbon pricing, the planning system, renewable energy and the renewed use of nuclear power as part of the energy mix. The government hopes that these proposals, taken together, will:

… make a substantial contribution to meeting the challenge of climate change and of providing the cleaner and secure supplies of energy we need.

The nuclear question

Whilst the Energy Review is very wideranging in its scope, one policy area in particular has attracted widespread media attention. In the run-up to publication, the review became the classic political football: hijacked by controversial speculation about a pre-ordained new nuclear-build programme amidst the backdrop of a government losing green ground to David Cameron’s new-look Conservative Party.

Post-publication, many of the substantive issues were again lost, buried by the review’s announcements on the nuclear issue.

This article is intended to look beyond the headline-grabbing issues and examine the whole range of proposals, which represent the UK’s attempt to tackle the twin challenges of climate change and energy security.

The review received a mixed reaction from commentators. Some were disappointed with the lack of substance, though the majority welcomed it as a step in the right policy direction for both environmental protection and the UK economy.

The key proposals

The review sets out key proposals to tackle climate change and energy security, and provides a first glimpse of the detail behind these proposals, with much more policy detail to come. The main points are as follows:

(1) Establishing a monetary value for carbon through providing incentives to reduce carbon emissions.

(2) Placing greater emphasis on energy efficiency through changing individual and commercial behaviour.

(3) Increasing small-scale power generation at a local ‘de-centralised’ level.

(4) Increasing competition in oil and gas markets.

(5) Increasing investment in renewable energy as an alternative to fossil fuels.

(6) Building a new generation of nuclear power stations.

(7) Encouraging new investment in UK power stations.

(8) Developing cleaner, more efficient ‘clean-tech’ for capturing carbon at coal-fired power stations.

(9) Finding alternatives to oil as an energy source for transport and reducing carbon emissions from transport.

(10) Reforming the planning system in relation to energy projects.

How will the objectives be achieved?

Valuing carbon

The Energy Review reaffirms the government’s commitment to reducing carbon dioxide emissions, both within the UK and globally, and sets a target of a 60% reduction of domestic emissions by 2050. Akey tool in achieving this aim will be the European Union Emissions Trading Scheme (EUETS).

The government has signalled its ongoing commitment to the EUETS and to simplifying and harmonising the scheme to ensure clear incentives for investment in low-carbon technologies and prevent distortion in EU internal markets.

Energy efficiency

Energy efficiency is a priority in domestic and business premises and is an area where the UK can make savings of 6- 9MtC (million tonnes of carbon) by 2020. To achieve this saving the government proposes measures including the setting of tough energy efficiency levels within the Code for Sustainable Homes and tightening the Building Regulations to assist towards the long-term goal of carbon-neutral development in England and Wales. The government will also introduce energy performance certificates for new and existing housing, and of course the new Home Information Packs will include data on home energy efficiency.

The government is keen on exploring the possibility of moving towards tradeable targets or caps for household energy demand to incentivise individuals to maximise the efficiency of their energy usage.

Distributed energy

The review highlights distributed energy as a way of improving power generation in the long-term.

The government plans to implement its microgeneration strategy aggressively by allowing access to the renewable obligation certificates for household microgeneration and making it easier to install microgeneration technologies through changes to the planning system. A report on the incentives and barriers impacting upon distributed electricity generation is due some time next year.

Oil, coal and gas

The government’s international energy security strategy is to be reviewed later in 2006. The review will focus on fostering transparency and good governance in the sector and on achieving international contingency arrangements to guard against the effects of disruption to supply. Domestically, the government will work with industry to boost investment in the UK continental shelf over the next 10-15 years and maximise exploitation of remaining North Sea oil and gas supplies. New arrangements are to be considered for the provision of forward-looking energy market information and analysis relating to supply.

The government sees a continued role for coal-fired electricity generation and will convene a Coal Forum to secure the long-term future of coal production and power generation in the UK. Support is also offered for technologies for carboncapture and storage, which has the potential to reduce the carbon emissions from coal-fired generators by as much as 90%.

Electricity generation

The current Renewables Obligation (see box, right) is to be strengthened to create greater incentives for investment in renewable technologies by extending the Obligation to 20% as this becomes justified by growth in renewable generation, and by examining the possibility of banding the Renewables Obligation to target support to newer and less tested technologies, such as wave and tidal electricity generation.

The government has signalled its support for new nuclear power stations alongside other low-carbon generation options. Proposals to support new nuclear power include a system for pre-licensing, Environment Agency authorisation, and design authorisation for reactors to speed up the commissioning of new nuclear power stations, as well as streamlining the planning process as discussed below.

Transport

The review proposes that a Renewable Transport Fuel Obligation should be introduced in 2008 along the lines of the existing Renewables Obligation for energy generation. The level of the obligation will initially be set at 5% until 2010/11, whereupon it is likely to rise as technological advances allow higher proportions of ‘green’ fuels to be blended with traditional fossil fuels. The government has also signalled that it will seek the inclusion of aviation and possibly surface transport in the EUETS.

All the substantive issues surrounding transportation and energy usage will be examined in an upcoming Transport Innovation Strategy, which will focus on current policies and explore other options such as secondgeneration biofuels and hydrogen.

Planning reform

The Energy Review highlights planning as a major barrier to the implementation of many of the other proposals to develop ‘green’ energy infrastructure. Hence, one of the most significant proposals in the review is the commitment to streamlining the planning process for major energy installations. The details of the reforms have yet to be published, but in outline the proposals will lead to new guidance on s36 of the Electricity Act 1989 and new inquiry rules for applications under the Act, as well as the introduction of timetables for public inquiries and the appointment of a high-powered inspector to ensure that planning inquiries are run to schedule. There would also be greater use of preinquiry hearings and the concurrent running of hearings on related matters to shorten the timescales involved.

The review also contains a new planning policy, ‘statement of need’, for renewables to count as a material consideration in local planning decisions. At the same time, English planning authorities are urged to set ambitious renewable energy policies. These policies are likely to have significant benefits to wind power schemes. Under the current system it can take nearly two years for windfarms to secure planning consent. The new system will speed up this process as well as providing more certainty for investors and developers.

Comment

The Energy Review has an enormous scope, covering a huge range of issues. It would be wrong to see it as championing only a few measures or a single response, such as new nuclear build. Instead, the review takes a holistic approach, presenting a range of measures, which taken together can help tackle the problems presented by climate change and energy security.

It would be equally wrong to perceive the review as the government’s final word on climate change and energy security. It is merely the first step in a process of change, a blueprint setting out the government’s vision for UK energy policy for the next 20 to 30 years. We can expect to hear much more detailed proposals over the next 12 months as the policy and legislation emerge from the various consultation processes.

For the delivery of legal services, the area of planning law and the legal work-streams flowing from the development of new nuclear power stations, ie construction, environment, health and safety and property, are most likely to see a noticeable increase in enquiries as the law surrounding the review’s proposals crystallises. In addition, the review’s announcements on valuing carbon and the long-term commitment to EUETS, the Renewables Obligation and the Road Transport Fuel Obligation will only further stimulate growing activity in renewables funds, renewables IPOs, emerging renewable technologies, the development of the biofuels industry and the growth of a global carbon-trading market.