132 United Kingdom
the main source of debt financing has been commercial banks ; however , we have seen participation from export credit agencies and also new entrants to the market such as pension funds and infrastructure investors . A new development in the market has been the limited recourse financing of battery storage projects , although the ( relatively ) small scale of these projects combined with the lack of “ bankable ” long-term offtake solutions has impacted the commercial banks ’ appetite to finance these assets .
3.4 What is the legal and regulatory framework applicable to distributed / C & I renewable energy ?
Distributed and C & I renewable energy facilities are subject to the same legal and regulatory framework as utility-scale renewable energy facilities with respect to the sale of electricity , participation in the wholesale market and connection to distribution and transmission networks .
3.5 Are there financial or regulatory incentives available to promote investment in distributed / C & I renewable energy facilities ?
Available incentives include :
Feed-in Tariffs ( FiT ): the FiT scheme supports investment in small-scale renewable and low-carbon electricity generation projects up to 5MW capacity . It offers long-term support to projects and provides generation and export tariffs based on the costs of generation for the following technologies : solar PV ; onshore wind power ; hydropower ; anaerobic digestion ; and micro combined heat and power ( up to 2kW ). The FiT scheme closed to new entrants on 31 March 2019 but continues to support existing generation for up to 25 years .
Smart Export Guarantee ( SEG ): following the closure of the FiT scheme to new installations , supplier-led SEG was introduced on 1 January 2020 . Under the SEG , licensed electricity suppliers ( with 150,000 domestic customers or more ) are required to offer small-scale low-carbon generators a price per kWh for electricity exported to the National Grid . Remuneration is available to solar PV , wind , anaerobic digestion and hydro generators of up to 5MW in capacity , and micro combined heat and power installations up to 50kW . Mandated suppliers are required to provide at least one SEG-compliant tariff . They are free to determine the price and length of the contract , provided that remuneration is greater than zero at all times .
3.6 What are the main sources of financing for the development of distributed / C & I renewable energy facilities ?
The majority of smaller-scale distributed and C & I renewable energy facilities have been financed on balance sheet ; however , project finance has grown in importance for investments in this sector . To date , the majority of this project finance debt has been provided by commercial banks , either on a standalone project or portfolio basis .
3.7 What is the legal and regulatory framework applicable to the development of green hydrogen projects ?
Currently , there is no UK regulatory regime specifically tailored to hydrogen . Existing regulations pre-date the advent of hydrogen as a viable commercial energy source . However , in August 2021 , the government published a hydrogen strategy and subsequent supporting materials including , in April 2022 , the Hydrogen Investor Roadmap , which prioritises working with the government and regulators to deliver a robust regulatory framework for the hydrogen industry .
The Energy Security Bill also introduces a state-of-the-art business model for hydrogen projects and aims to enable the delivery of a large village hydrogen heating trial by 2025 to inform the government ’ s decision on the role of hydrogen in the UK ’ s heat decarbonisation .
However , the current regulations applicable to hydrogen projects consist of a mixture of more general energy regulations . As hydrogen is a gas , it is regulated by Ofgem as part of the gas network under the Gas Act 1986 . These regulations include the requirement for a licence to transport or supply hydrogen . Gas licensees must comply with a breadth of industry codes and detailed health and safety regulations .
3.8 Are there financial or regulatory incentives available to promote investment in green hydrogen projects ?
As described in question 3.7 , the regulatory incentives for hydrogen are currently under development . As to other financial incentives , the Ten Point Plan sets out the government ’ s commitment to a £ 240 million Net Zero Hydrogen Fund for the development and deployment of new low-carbon hydrogen production to de-risk investment and reduce lifetime costs .
3.9 What are the main sources of financing for the development of green hydrogen projects in your jurisdiction ?
The financing of green hydrogen projects in the UK remains at a nascent stage . However , in June 2022 the new publicly owned UK Infrastructure Bank announced its strategic plan to deploy £ 22 billion of capital to tackle climate change and boost regional growth and a central pillar of that plan was to accelerate the deployment of new technologies such as hydrogen . In addition , in July 2022 the UK government announced the opening of the Net Zero Hydrogen Fund , which will provide up to £ 240 million of grant funding for low-carbon hydrogen production projects .
3.10 What is the legal and regulatory framework that applies for clean energy certificates / environmental attributes from renewable energy projects ?
The Renewable Obligation scheme applies to large-scale renewable electricity projects in the UK creating a market for the sale of environmental attributes . The scheme obliges UK electricity suppliers to source an annually increasing proportion of the electricity supplied to customers from renewable sources .
Ofgem issues Renewable Obligation Certificates ( ROCs ) to qualifying renewable generators in respect of the electricity they generate . Such generators can then sell those ROCs to suppliers or traders as tradeable commodities . Different renewable types receive different numbers of ROCs depending on their costs and size . Suppliers are then obligated to meet individual targets by purchasing ROCs either from renewable generators directly or from traders and brokers in the ROCs market . Ultimately , ROCs are used by suppliers to demonstrate that they have met their annual obligation .
This scheme closed to all new generating capacity on 31 March 2017 . Projects that have been accredited before this date will be supported until 20 years from the date of accreditation or 31 March 2037 , whichever is earlier .
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Renewable Energy 2023