Introduction to
Ofgem E-Serve
Contents
Introduction ... 4
Renewable Electricity
Renewables Obligation (RO) ... 6 Feed-in Tariff (FIT) Scheme ... 8 Climate Change Levy Renewables Exemption ... 10 Renewable Energy
Guarantees of Origin (REGO) ... 12
Renewable Heat
Non-Domestic Renewable Heat Incentive
(Non-Domestic RHI) ... 14
Domestic Renewable Heat Incentive (Domestic RHI) ... 16 Northern Ireland Renewable Heat Incentive (NIRHI) ... 18
Energy Efficiency and Social Programmes
Energy Companies Obligation (ECO) ... 20 Warm Home Discount (WHD) ... 22
Offshore Transmission
Offshore Transmission ... 24
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Introduction to Ofgem E-Serve
Introduction
The energy industry is at a turning point and undergoing
major change. The government is committed to the low
carbon agenda and has set some challenging energy targets.
Through teams working in distinct business areas - Renewable
Electricity, Renewable Heat, Energy Efficiency and Social
Programmes and Offshore Transmission - Ofgem E-Serve plays
an important part in delivering this change.
Our role:
We administer a number of environmental programmes, helping to deliver a low-carbon future. We are experts in developing robust and effective administration.
We design and deliver innovative regulatory regimes, such as the Offshore Transmission regime, developed jointly with the Department of Energy and Climate Change. We are responsible for tendering up to £15 billion of offshore transmission assets, with up to £8 billion1 of investment expected by 2020.
We develop and administer environmental programmes on a not-for-profit basis for less than 1 per cent of the total programme cost. We have set the benchmark for other programmes run within government and are proud of our track record in delivering around £5 billion of environmental schemes for just £32 million.
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Introduction to Ofgem E-Serve
1 National Audit Office’s (NAO) estimate of the potential investment in Offshore Transmission required by 2020
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Introduction to Ofgem E-Serve
Robert Hull
Managing Director, E-Serve
[email protected]5 Introduction to Ofgem E-Serve
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Introduction to Ofgem E-Serve
Renewables
Obligation (RO)
The Renewables Obligation scheme is the main government support mechanism for promoting large scale renewable electricity projects in the UK. The RO scheme places an obligation on UK electricity suppliers to source an increasing proportion of their electricity from renewable sources. Suppliers can demonstrate meeting their obligation by presenting sufficient Renewables Obligation Certificates (ROCs), by paying an equivalent amount into a buy-out fund, or a combination of the two. ROCs are issued to
operators of accredited generating stations for the renewable electricity they generate and can be traded on the open market.
New legislation on the rates at which ROCS are issued to different technologies came into force on 1 April 2013 for England, Scotland and Wales and on 1 May 2013 for Northern Ireland. DECC is responsible for policy. Ofgem is responsible for the administration of the scheme, the cost of which is recovered from the buy-out fund. The remainder of the fund is re-distributed to suppliers that have submitted ROCs, on a pro-rata basis. In Northern Ireland, Ofgem administers the scheme on behalf of the Northern Ireland Authority for Utility Regulation (NIAUR) under an Agency Services Agreement. Ofgem carries out the relevant functions whilst NIAUR continues to retain overall responsibility for the scheme’s administration in legislation.
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Introduction to Ofgem E-Serve
Lifetime value:
£50bn
Scheme dates:
Introduced in April 2002 in England, Scotland and Wales and 2005 in Northern Ireland
Our main responsibilities:
Ô we accredit generating stations
Ô we issue and revoke Renewables Obligation Certificates (ROCs)
Ô we monitor suppliers’ and accredited station operators’ compliance with the scheme
Ô we administer buy-out payments and redistribute the buy-out fund.
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Introduction to Ofgem E-Serve
Feed-in Tariff
(FIT) Scheme
The Feed-in Tariff Scheme aims to promote uptake of a range of small-scale renewable and low-carbon electricity generation technologies by individuals, organisations, businesses and communities.
It requires certain licensed electricity suppliers to pay micro, small renewable and micro Combined Heat & Power (CHP) generators for electricity
generated and exported to the grid. Suppliers are also required to make payments into a levelisation fund which is redistributed to those companies that have made more payments to accredited installations than they would be required to by their market share contribution.
Ofgem is responsible for the administration of the FIT scheme while DECC remains in charge of its policy.
Since its launch in April 2010, the scheme has attracted considerable interest with around 471,343 installations successfully registered in the first four years. The scheme has undergone numerous legislative amendments since its start.
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Introduction to Ofgem E-Serve
Feed-in Tariff (FIT) Scheme
Lifetime value:
£14bn1
Scheme dates:
Introduced in April 2010
Our role:
Ô we cover solar PV, wind, hydro and Anaerobic Digestion installations up to a maximum upper limit of 5MW. There is also a pilot project on micro CHP up to a maximum upper limit of 2kW.
Ô we administer the levelisation process
Ô we ensure suppliers comply with the FIT scheme requirements
Ô we are responsible for the tariff degression process
Ô we verify the status of installations applying for community or school benefits.
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Introduction to Ofgem E-Serve
Climate Change Levy Renewables
Exemption
The Climate Change Levy (CCL) is a tax on UK business energy use, charged at the time of supply. The aim of the tax is to drive energy efficiency and reduce carbon emissions. Ofgem is responsible for administering the exemptions for supplies of renewable electricity. We issue Levy Exemption Certificates (LECs) on the basis of renewable electricity generated. Ofgem is responsible for administering the scheme in Great Britain and anywhere overseas where the electricity can be delivered for UK consumption (except in Northern Ireland and the Republic of Ireland where it is administered by the Northern Ireland Authority for Utility Regulation).
Ofgem administers the scheme on behalf of HM Revenue and Customs (HMRC). Ofgem also previously administered the CCL Combined Heat and Power (CHP) exemption which closed on 1 April 2013.
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Introduction to Ofgem E-Serve
Scheme value to date:
£2.5bn
Scheme dates:
Introduced in April 2001 (Renewable exemption) and April 2003 (Good Quality CHP exemption)
Our role:
Ô we review eligibility under the scheme
Ô we issue and revoke/restrict LECs and perform annual reconciliation for CHP LECs
Renewable Energy
Guarantees of Origin (REGO)
The Renewable Energy Guarantees of Origin (REGO) scheme is an EU wide scheme, designed to provide common certification for the sale of renewable electricity across the EU. Electricity suppliers are required to disclose how the electricity they sell is generated under the Fuel Mix Disclosure (FMD) rules. REGOs are the primary evidence source used by suppliers to prove the renewable proportion of electricity supplied. Ofgem administers the scheme in Great Britain and Northern Ireland.
Amendments to the scheme took effect in December 2010 introducing a new definition for ‘renewable energy sources’ and changing the unit of energy of one REGO from kWh to MWh with effect from 5 December 2010. The amendments also introduced an expiry date of 16 months from the month of generation and amended the information requirements to request a REGO.
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Introduction to Ofgem E-Serve
Scheme value to date:
£1.2bn
Scheme dates:
Introduced in October 2003
Our role:
Ô we accredit generating stations, issue and revoke REGOs and recognise EU Guarantees of Origin (GoOs)
Ô we provide advice to generators and suppliers.
Renewable Energy Guarantees of Origin (REGO)
Non-Domestic Renewable
Heat Incentive (RHI)
The Renewable Heat Incentive is a world first. It provides financial
incentives to encourage the switch from oil and gas fired heating systems to sustainable sources such as bio-fuels, solar thermal panels, heat pumps and renewable combined heat and power systems. The scheme is government’s key mechanism for driving uptake of renewable heat to cut carbon
emissions and help meet EU renewable targets. Ofgem is responsible for the administration of the scheme while DECC is in charge of scheme policy. By the end of March 2014, the scheme had approved 3,830 applications and made payments of £43 million to participants in the non-domestic sector of business, industry and non-profit organisations.
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Introduction to Ofgem E-Serve
Lifetime value:
£20.1bn1
Scheme dates:
Introduced in November 2011
Our role:
Ô we process applications and accredit installations
Ô we monitor compliance and make payments in line with regulations
Ô we run an enquiry line for applicants and participants.
Renewable Heat Incentive (RHI)
1 This is based on the projection DECC made at the time of the launch of the scheme.
Domestic RHI
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Introduction to Ofgem E-Serve
‘The Domestic RHI scheme opened in April 2014 and covers England, Scotland and Wales. It’s targeted at, but not limited to, homes off the gas grid. Those without mains gas have the most potential to save on fuel bills and decrease carbon emissions.
Anyone who meets the joining criteria can apply, including people who own the homes they live in, social and private landlords and self-builders. Participants are paid quarterly for seven years. For most, payments are based on an estimation of the property’s most recent heat use. A minority of participants need to install meters and submit regular readings to be paid. The eligible heating systems are: biomass boilers and biomass pellet stoves, air source and ground source heat pumps and solar thermal panels.’
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Introduction to Ofgem E-Serve
Domestic RHI Lifetime value: Up to £7.9bn1 Scheme dates: Introduced in April 2014
Our role:
Ô we assess and accredit eligible applications via our online service
Ô we make payments to accredited scheme participants
Ô we monitor compliance with scheme rules
Northern Ireland
Renewable Heat Incentive (NIRHI)
The Northern Ireland Renewable Heat Incentive (NIRHI) was introduced in November 2012. Similar to the Non Domestic RHI scheme it provides financial incentives to encourage the switch from oil and gas fired heating systems to sustainable sources such as bio-fuels, solar panels, heat pumps and renewable combined heat and power systems in Northern Ireland. Ofgem is responsible for the administration of the scheme while the Northern Irish Department of Enterprise, Trade and Investment (DETI) will remain responsible for the scheme’s policy.
By the end of March 2014, the scheme had approved 88 applications and made payments of £400,000 to participants in the non-domestic sector of business, industry and non-profit organisations.
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Introduction to Ofgem E-Serve
Northern Ireland Renewable Heat Incentive (NIRHI)
Scheme dates:
Introduced in November 2012
Our role:
Ô we process applications and accredit installations
Ô we monitor compliance and make payments in line with regulations
Ô we run an enquiry line for applicants and participants
Energy Companies Obligation (ECO)
ECO is the government’s new domestic energy efficiency programme. ECO replaced the Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP), both of which came to a close at the end of 2012. ECO creates a legal obligation on Britain’s largest energy suppliers to install energy efficiency measures, such as solid-wall insulation, to households in Britain. ECO focuses on householders who require assistance to make their homes more energy efficient, for example, vulnerable and low-income households and those living in properties where it is difficult to install energy saving measures. Households in England, Scotland and Wales are eligible under the programme. Ofgem administers the scheme while DECC is responsible for the policy behind the scheme. Ofgem will serve as the Administrator for ECO until 31 March 2015. Each year we allocate Britain’s largest energy suppliers a proportion of the overall targets: this is determined by a supplier’s share of the gas and electricity supply market. Suppliers then gain credits towards their obligations for eligible energy efficient measures they install at a domestic properties. ECO is broken down into three distinct targets:
Ô Carbon Obligation
primarily targets insulation of hard-to-treat homes, including those which cannot be fully funded through the Green Deal.
Ô Community Obligation
targets specified low income and rural areas with insulation and district heating measures.
Ô Cost Obligation
targets reduction of heating costs through the installation of heating and insulation measures to households on certain means-based benefits. The government has consulted on making significant changes to the scheme later this year. The scheme values included here are reflective of those changes.
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Introduction to Ofgem E-Serve
Lifetime value:
Circa £2.2bn:
Carbon Obligation £956m per annum
Community Obligation £405m per annum
Cost Obligation £821m per annum
Scheme dates:
Introduced in January 2013, runs to March 2015
Our role:
Ô we allocate suppliers a proportion of the overall target based on their share of the gas and electricity supply market
Ô we monitor supplier progress against obligations
Ô we report supplier progress every month to the Secretary of State for Energy and Climate Change
Ô we check compliance with legislation and our guidance, and conduct audits of suppliers and measures
Ô we determine whether a supplier has achieved its obligations.
Warm Home
Discount (WHD)
The Warm Home Discount Scheme is an important element in the
government’s strategy for addressing fuel poverty. It provides electricity bill rebates, discounted tariffs and indirect support for low income consumers. The scheme is divided into four elements; the Core Group, Broader Group, Legacy Spend and Industry Initiatives. DECC administers the Core Group and is in charge of the scheme’s policy while Ofgem administers the remaining elements.
The WHD scheme represents a significant change to the previous voluntary agreement between government and suppliers. We have worked closely with suppliers in bringing forward proposals to meet their new spending obligations, and in monitoring their activity to ensure they comply with the scheme’s regulations. Suppliers have adapted well and to date, we have not rejected any applications. We will continue to work closely with suppliers and DECC to ensure efficient and effective delivery of the scheme.
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Introduction to Ofgem E-Serve
Lifetime value:
£1.13 bn
Scheme dates:
Introduced in April 2011, runs to March 2015
Our role:
Ô we administer the Broader Group, Legacy Spend and Industry Initiatives
Ô we provide advice to suppliers and enforce DECC’s regulations
Ô we approve supplier applications and monitor compliance.
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Introduction to Ofgem E-Serve
Offshore
Transmission
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Introduction to Ofgem E-Serve
Together with DECC we introduced, in 2009, a new regulatory regime for offshore electricity transmission that connects offshore electricity generating stations with the onshore network. Our role is to run the competitive tender process to appoint Offshore Transmission Owners (OFTOs) and to regulate them through long term licences.
The regime, a world first, is vital in supporting the UK to meet its domestic and European renewable energy targets and has attracted new investors to the energy sector. Offshore generation could supply electricity for more than 10 million homes. This will help the sector to play a significant part in satisfying the UK’s energy demand.
The initial two tender rounds are made up of 13 projects that, by the time all the licences are granted, will have attracted around £2.5bn of investment and will connect 3.9GW of offshore wind.
More recently, we launched a third round of tenders. This third round is worth nearly £400 million in total, and involves competition for the transmission assets connecting two offshore wind farms: Westermost Rough (205MW) and Humber Gateway (220MW).
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Introduction to Ofgem E-Serve
Lifetime value:
up to £15bn1
Scheme dates:
Introduced in July 2009
Our role:
Ô we established with DECC a competitive regime for the tendering of Offshore Transmission Owner (OFTO) licences. It encourages technical, operational and financial innovation and requires only light touch regulation
Ô we work to ensure that cables to the shore and related infrastructure are fit for purpose and provide value for money
Ô we work to ensure effective regulation of the construction and operation of offshore transmission systems
Offshore Transmission
1 Estimated value which is subject to the number of offshore wind farms that are built
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Introduction to Ofgem E-Serve
Key contacts
Renewables Obligation (RO) [email protected] Feed-in Tariff (FIT) Scheme
Climate Change Levy Renewables Exemptions [email protected]
Renewable Energy Guarantees of Origin (REGO) [email protected]
Non-Domestic Renewable Heat Incentive (RHI) [email protected]
Domestic Renewable Heat Incentive (Domestic RHI) [email protected]
Energy Companies Obligation (ECO) [email protected]
Warm Home Discount (WHD) [email protected]
Offshore Transmission [email protected]
Information featured within this brochure was correct at the time of publication. Please visit the Ofgem website at www.ofgem.gov.uk for our most recent updates.
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Introduction to Ofgem E-Serve
Key contacts
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London 9 Millbank London SW1P 3GE Tel: 020 7901 7000 Glasgow 3rd Floor Cornerstone
107 West Regent Street Glasgow, G2 2BA Tel: 0141 331 2678 Cardiff 1 Caspian Point Cardiff Bay CF10 4DQ Tel: 029 2044 4042 www.ofgem.gov.uk ES816
