On April 1st 2010 the government launches a new scheme called ‘Clean Energy Cashback’. A lot has been written about it but, sadly, the reason for that is because, well, not a lot has been written about it. There are still several ‘i’s’ to dot, ‘t’s’ to cross but I’m sure they will be teased out in the passage of time won’t they Mr.Government?

There are a few websites dedicated to information on the Clean Energy Cashback but I wanted to give you a quick and basic understanding of how it works. For the record we (the royal green house ‘we’) think it is a great idea and we are already working with a number of our clients to find ways for them to make the transition to generating energy instead of solely using it.

The clean energy cash back system is designed as an incentive for energy producers to move away from conventional fossil fuels to renewable energy sources. Essentially, it is government legislation which guarantees a fixed, premium rate for renewable electricity fed into the national grid. The power companies are obliged by the government legislation to buy the renewable electricity, the additional costs of which are passed onto the customers. When this new legislation comes into force on April 1st 2010 it means that if you produce renewable energy you will generate revenue as well as energy, an attractive proposition to any business considering generating their own energy.

The UK government is committed to reducing its carbon emissions through the adoption of renewable energy sources, particularly in regards to the generation of power in order to combat climate change. The government has established the new department of Energy & Climate Change (DECC) headed by Ed Milliband, whose job it is to reduce carbon emissions and help the UK meet the targets set out in international agreements such as Kyoto. They will see it as absolutely fundamental that the provisions for a clean energy cash back allow the UK to have the legal infrastructure for investors to feel safe in the knowledge that any investment they make is protected in the long term as it is in other states with strong clean energy cash back systems.

Rather than regurgitate (I’m not a journalist or writer – simply a ‘sharer’) I think the best explanation is covered off on Wikipedia so I copy paste it below:

a) only 2% of Britain’s electricity consumption, by 2020, will be provided by renewable energy sources. The 2% target requires the “green generation” of only 8 billion kWh (that is 8 TWh) per year. France, thanks to its system of Feed-in Tariffs, in 2008 generated already nearly 6 TWh, and only from wind energy; in the same year Germany generated more than 4 TWh from solar PV (photovoltaic), and reached 40 TWh from wind energy.

b) The project involves only renewables sources which can produce less than 5 MW energy; so, UK’s new FiT’s project cap is 5 MW. Depending on law, only renewable energy sources and generators within this cap can benefit from tariffs: the government still prefers resorting to the Renewable Obligation Certificates mechanism for developing larger projects.
To prevent companies from moving large scale (for example big wind) projects from the ROCs to the Feed-in Tariff programme, a number of anti-gaming provisions has been inserted in the policy design; this should avoid the breaking up of bigger projects into several small ones, to fit within the 5 MW energy size cap.

c) The contract term is 20 years, 25 years for solar photovoltaic projects: this means that, starting from 2010, British providers of Wind Energy, Hydropower, Energy from Biomass and Anaerobic Digestion falling within the Renewable Sources eligible in accordance with the provisions of the proposed FiT scheme will be rewarded with a tariff rate guaranteed for the next 20 years – 25 years for Solar PV generators. In this way UK’s renewable energy industry has a somehow long-term certainty, and can advantage of the FiT over other policy options.

d) Costs for the programme will be borne by all British ratepayers proportionally: all electricity consumers will bear a slight increase in their annual rate, thus allowing electricity utilities to buy renewable energy generated from green sources at above-market rates set by the government.

e) Generators can be green fields (they do not have to be metered customers).

f) The new UK’s Feed-in Tariff Programme review is scheduled for 2013.

the full page can be viewed here: http://en.wikipedia.org/wiki/Feed-in_tariff

Much more information can also be found on the DECC Press Release from earlier this week:

http://www.decc.gov.uk/en/content/cms/news/pn10_010/pn10_010.aspx