CCL, ROCs & Other Acronyms

AL GORE I

Aspects Covered

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

Climate Change

Global CO2 emissions

How to tackle climate change

• Reduce man-made CO2 emissions

• Reduce fossil fuel burn• Improve efficiency• Encourage renewable forms of energy• Incentives/Penalties

International Efforts

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

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

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

Levels of CCL

• Adjusted by annual inflation

• 2011 rates:

Electricity 0.485p/kWhNatural gas 0.169p/kWhLiquid gases 1.083p/kgCoal and coke 1.321p/kg

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

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

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

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

ROC banding – Introduced 2009

• Distinguishes between ‘maturity’ of technologies:

Established Band - 0.25Reference Band - 1.0Post-demonstration - 1.5Emerging - 2.0

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

Selling ROCs

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

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

Suppliers – Meeting the Obligation

• Supplier can meet its obligation by:

1. Buying total ROCs obligation (direct/auction)2. Paying a ‘buy-out price’ for its obligation3. A mixture of 1 and 2 above

• Buy-out price fixed by Ofgem - £38.69/MWH for 2011

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

ROCs and Buy-out Recycling

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