RENEWABLES OBLIGATION (SCOTLAND) ORDER 2008
Statutory Consultation
Introduction
1. The Scottish government is committed to supporting the development of a wide range of renewable energy technologies. Power from these sources can help reduce greenhouse gas emissions as well as promote secure and sustainable energy supplies. Scotland is very strongly placed in this regard, with a historic legacy of large hydro stations and sufficient renewable resources to meet our demand for power several times over.
2. The key mechanism driving increases in renewable capacity across Scotland is the Renewables Obligation (Scotland), or ROS. Introduced in 2002 and in place until 2027, the ROS obliges licensed electricity suppliers to provide increasing amounts of the electricity they supply to customers in Scotland from renewable sources.
3. The ROS operates in tandem with similar instruments covering England and Wales and, more recently, Northern Ireland. These Orders provide the basis of a UK wide market in renewable electricity, as the certificates (ROCs) awarded to renewable generators and sold to suppliers for use as proof that they have met their Obligation are tradable across the UK - that is, they can be redeemed against any of the three Obligations.
Marine Supply Obligation (MSO)
4. The MSO was introduced under the ROS with effect from April 2007. It is a mechanism which requires suppliers with an obligation under the ROS to meet a proportion of that obligation by producing as evidence ROCs awarded to eligible wave or tidal generation in Scottish waters, or by paying a higher buy-out price. The Scottish government sees the MSO as providing a clear, long term market and incentive to invest in first generation commercial wave and tidal arrays around Scotland.
5. Although the ROS Order 2007 contained MSO levels from 2008/9 onwards (the 2007/8 level was set at zero), these were illustrative and based on linear progress towards the proposed 75 MW ceiling. Our intention, established at the outset, was that the precise MSO level for each subsequent period should be decided and set on an annual basis.
Setting MSO Levels
6. Our initial consultation paper proposed a transparent, annual process which took as its basis a review of actual and planned activity in the sector in order to calculate capacity forecasts and likely eligible output for the coming Obligation period. Our view was and remains that this process would need to be based on the best possible information, and that a number of boxes might need to be ticked before a marine generating station and its capacity could be considered "viable" in terms of amending the coming period's MSO level. Once agreed, that process, to be repeated annually, would culminate in the laying of an amended Order setting the new and duly arrived at MSO level.
7. Since the ROS Order 2007 came into effect, we have considered in more detail, and with a range of stakeholders, the process for setting MSO levels going forward. This process included meetings with a number of stakeholders, both as a group and subsequently on a one to one basis. We used these discussions and the feedback which followed as the basis for drawing up and circulating a summary document and final proposal setting out our decision on how MSO levels for each period should be reached and established. That document is available here.
MSO Level for 2008/9
8. The position for 2008/9 is straightforward - no eligible projects or generating capacity have come forward or been declared under the terms of the procedure set out above and which would qualify for support under the MSO during the period (although we are aware of and are encouraged by the capacity making its way through the planning and pre application stages). As a result, the wave and tidal requirements in Schedule 1 of the accompanying draft Order for the period 2008/9 have been set at zero. We would be grateful for any comments or feedback from stakeholders on this proposal.
Future Levels
9. As before, the remaining periods have been recalculated to map out an illustrative path towards the proposed 75 MW cap from 2009/10 to 2015/16. Any subsequent and actual levels for these periods will be calculated and set as a result of the procedure set out at paragraph 7.
MSO and Banding
10. The new Scottish government remains determined to get the very best from our huge renewable resource, and to establish Scotland as a world leader in marine renewables. The ROS remains a vital element in delivering these ambitions. Ministers believe that the provision of a long term market offering sufficient returns for power from these sources is essential to attract the investment which will be necessary for the sector to build the capacity and experience the success that it needs to flourish. The MSO provides this signal.
11. DBERR's consultation and proposals on banding are also of significant importance. The Scottish government welcomes the principle underlying this consultation, which is consistent with the approach already taken in Scotland embodied by the MSO, and accepts the potential value of such a mechanism being agreed and adopted consistently across the UK.
12. Our view is that a banded mechanism, offering multiple and fractional ROCs to different technologies based on cost and strategic importance, could potentially replace the MSO as a means of supporting the development of wave and tidal generation in Scottish waters. Under such circumstances, it remains possible that the MSO could be switched off at its current level. But this will depend on the level of support available, not only through the bands themselves but also in capital grant support for early projects. At the moment, there is insufficient detail around these aspects. Certainly, any changes to introduce banding under the ROS will only take place following a separate and detailed consultation with stakeholders in Scotland, and will also need the agreement of the Scottish Parliament.
13. We would be grateful for any further feedback from stakeholders regarding the potential introduction of banding under the ROS.
14. Responses to the issues and the specific questions raised by this document and the accompanying draft Order should be sent by Thursday 13 December 2007 to the following address:
James P Thomson
Renewables and Consents Policy Unit
2nd Floor
Meridian Court
5 Cadogan Street
GLASGOW
G2 6AT
Telephone: 0141-242-5895
Email: James.Thomson2@scotland.gsi.gov.uk
15. This consultation is very limited in scope. However, we recognise that there may be a number of questions which recipients may wish to discuss with us directly. We plan to engage as fully and as openly as possible with all our stakeholders during this consultation period, and are happy to be approached directly at any time.
16. We would be grateful if you could clearly indicate in your response which questions or parts of the consultation paper you are responding to as this will aid our analysis of the responses received. This consultation, and all other Scottish Executive consultation exercises, can be viewed online on the consultation web pages of the Scottish Executive website at http://www.scotland.gov.uk/consultations. You can telephone Freephone 0800 77 1234 to find out where your nearest public internet access point is.
Handling your response
17. We need to know how you wish your response to be handled and, in particular, whether you are happy for your response to be made public. Please complete and return the Respondent Information Form as this will ensure that we treat your response appropriately. If you ask for your response not to be published we will regard it as confidential, and we will treat it accordingly.
18. All respondents should be aware that the Scottish Executive are subject to the provisions of the Freedom of Information (Scotland) Act 2002 and would therefore have to consider any request made to it under the Act for information relating to responses made to this consultation exercise.
Next steps in the process
19. Where respondents have given permission for their response to be made public (see Annex A), these will be made available to the public in the Scottish Executive Library and on the Scottish Executive consultation web pages. We will check all responses where agreement to publish has been given for any potentially defamatory material before logging them in the library or placing them on the website. You can make arrangements to view responses by contacting the SE Library on 0131 244 4565. Responses can be copied and sent to you, but a charge may be made for this service.
What happens next?
20. Following the closing date, and consideration of all responses received, we will proceed with amendments to the ROS, which we plan to bring into force on 1 April 2008.
State Aid Position
21. In accordance with State aid rules, the current UK renewables obligation scheme was notified to the European Commission in July 2000 for its approval.
22. A State Aid is defined under Article 87(1) of the EC Treaty as any public resource given selectively to an undertaking that could potentially affect competition and intra-community trade. The Commission considered that the redistribution of buy-out funds to electricity suppliers, as under the Obligations at present, constituted State aid to electricity producers and potentially also to electricity suppliers. However, as the scheme met the criteria for green certificate schemes set out in the Commission's environmental guidelines, it was approved: United Kingdom Renewables Obligation and Capital Grants for Renewable Technologies - N504/2000. A number of amendments have since been made to the scheme, all of which have been notified to and approved by the Commission.
23. The provisions introducing a Marine Supply Obligation were notified to the Commission last year and approved in March 2007: United Kingdom Renewables Obligation (Scotland) - amendment to an existing scheme - N851/2006.
Comments and complaints
24. If you have any comments about how this consultation exercise has been conducted, please direct them to us using the contact details at paragraph 7.