More on Magic Dates

Here’s an interesting question (well I think it’s interesting): why is March 31st 2017 the cut-off date for the Renewables Obligation? Look through the consultation documents and the Energy White Paper: there are all sorts of questions considered about grace periods, transition arrangements parallel markets etc. etc. but nothing on the cut-off date itself. It just appears, floating above all the discussion.

It’s a germane question because right now there are increasing rumblings about whether the cut-off should be extended, even if we assume that we will get Contracts for Difference for low carbon energy in the end. And the rumblers have got a good point, and always did have. It doesn‘t really seem the brightest date to decide upon when you are halfway through round three offshore wind deployment; you have set a target for deployment by 2020 of 30gw of (mostly offshore) wind; when many of the wind farm schemes will inevitably cross over the pre-2017 / post-2017 period in deployment; and when the size and complexity of a number of such projects means that they will inevitably take more than the six years that DECC argued was ‘plenty of time‘ when the consultations on contracts for difference first emerged.

There is an increasing danger that larger projects will be so shrouded in uncertainty about the transition that they may just not happen at all. Do you rush forward in the hope your scheme might just make the cut, or plump for Contracts for Difference in the hope that they can be worked out, and that you won’t get your start date bumped because the Levy Cap restricts the issuing of new CFDs in any one year?  It would seem to make eminent sense to extend the period to give some certainty until – say  – 2020. In view of what we always knew about round three deployments, it would have made eminent sense to fix the end of the RO for March 31st 2020 from the word go if you were set on CFDs. Even DECC in the technical note to the White Paper only concluded that ‘the RO would not be the most cost-effective mechanism to incentivise post 2020 deployment’.

But all through these arguments the magic date of March 2017 shines on. That’s it. Decided.  So why might it be so immutable, and why was it never discussed at the time it first emerged? I think the answer is fairly simple, on reflection. It is that there was, following along behind it at the time, another magic date of 2018, which I’ve posted on previously.  This was, and technically still is, the date when the first new nuclear power stations start generating, and hence receive their allocation of Contracts for Difference. Clearly if you do not want to fall foul of EU State Aid rules, you cannot have CfDs, at any stage, apparently only going to one technology. That would look so like a subsidy it would be very difficult to defend.  But if you have your new system bedding down with more than one, even if it has caused possibly terminal difficulties for some of those technologies, then you are in the clear, aren’t you? So 2017 it is, for the end of the RO.

So is that it? Well, as it happens, no. Because we now know, don’t we, that there aren’t going to be any new nuclear power stations generating anything until after 2020. Even Vincent De Rivas, the CEO of EDF, the only developer still on track for anything at all before 2025 says so.  So if DECC decided to extend the RO until – say – 2020 – they would still be safe from EU State Aid proceedings. Straightforward really. I’m sure having established this that the way to agree the extension is now clear. Just trying to be helpful.

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One thought on “More on Magic Dates

  1. Alan, you are in danger of having us believe that logic, common sense and rational is starting to creep into the minds of our legislators! Another straight talking blog…well done and thanks!
    @Simple_Power

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