The Government is intending to remove the Climate Change Levy (CCL) exemption for renewable energy.

The Chancellor announced in the Budget Statement on 8 July that the Levy Exemption Certificates (LECs) relating to renewable source electricity generated on or after 1 August 2015 will no longer be eligible for the purposes of CCL exemption.

LECs relating to renewable electricity generated before 1 August 2015 will remain eligible for the CCL exemption and will be issued as usual according to Ofgem’s Certificate Issue Schedule. Whilst Ofgem intend to issue LECs relating to renewable electricity generated on or after 1 August 2015, they will also soon be reviewing their statutory duties and processes regarding LECs.

There will however be a transition period to redeem any eligible LECs relating to electricity generation before 1 August 2015, which will run from 1 August. The Government will be discussing the appropriate length of the transition period with stakeholders.

EU Guarantees of Origin (GoO) and Fuel Mixed Disclosure (FMD)
LECs will still be required for the being in order to be recognised under GoO for FMD. However, Ofgem are intending to review the GoO recognition process for FMD during the transition period.

Exempt Electricity Supply for FiT Levislation
For the time being Ofgem will continue to issue LECs for overseas renewable electricity generation and suppliers can still submit these under the FiT scheme. Ofgem intend to review their process for determining exempt electricity for FiT levislation during the transition period.
How will this impact on Standard Licence Condition (SLC) 21D which relates to the supply of ‘green tariffs’ to domestic customers?
The requirements of SLC 21D will remain unchanged. Section 21D.2 of the licence condition requires that suppliers:
a) Hold the requisite number of GoO’s to support the volume of claimed energy supply
b) Retire any associated LECs

How will this impact on the Low Carbon Contracts Company’s (LCCC) determination for Green Excluded Electricity (GEE) under Contract for Difference (CFD)?
The process and criteria used to determine GEE under CFD are a matter for LCCC.
LCCC’s current process and criteria for this are based on those used by Ofgem for FMD, as described in LCCC guidance.

As above, the process will not change immediately but as Ofgem conduct their review of GoO and other schemes during the transition period, they will work closely with LCCC to ensure that this remains compatible with determining GEE under CFD.

Will the Government’s announcement affect Ofgem’s consultation on LECs and market coupling?
No. Ofgem issued their consultation to obtain views on how the requirements for evidence of UK consumption of overseas renewable electricity could be met under market coupling. Ofgem have stated that the topic of their consultation remains relevant and they intend to publish a decision document in respect of Part A in due course.

Please contact Sonya Bedford of any of the Renewable Energy Team at Stephens Scown for further information and advice.