Renewable Energy Law in the United Kingdom

Introduction

Renewable energy law in the United Kingdom has developed rapidly in response to climate change commitments and the transition to a low-carbon economy. The legal framework encompasses planning and consenting regimes for renewable energy projects, financial support mechanisms, grid connection obligations, and environmental regulation. The Climate Change Act 2008 provides the overarching statutory framework, requiring the UK to achieve net-zero greenhouse gas emissions by 2050, with renewable energy playing a central role in meeting carbon budgets.

The Climate Change Act 2008

The Climate Change Act 2008 (CCA 2008) established the world’s first legally binding long-term framework for emissions reduction. The Act requires the Secretary of State to ensure that the UK’s net carbon account for the year 2050 is at least 100 per cent lower than the 1990 baseline (the net-zero target), as amended by the Climate Change Act 2008 (2050 Target Amendment) Order 2019.

The Act establishes a system of carbon budgets — legally binding limits on greenhouse gas emissions over successive five-year periods. The carbon budgets are set by the Secretary of State on the advice of the Climate Change Committee (CCC), an independent statutory body established by the Act. The CCC monitors progress towards carbon budgets and net zero and advises the government on the appropriate level of ambition.

The CCA 2008 requires the government to publish policies and proposals to meet carbon budgets and to report annually to Parliament on emissions. The Act also requires the government to have regard to the need to adapt to climate change and to conduct climate change risk assessments.

Contracts for Difference

Contracts for Difference (CfDs) are the primary mechanism for supporting large-scale renewable electricity generation in the United Kingdom. CfDs were introduced by the Energy Act 2013 and are administered by the Low Carbon Contracts Company (LCCC), a government-owned company.

Under a CfD, the generator is paid the difference between the strike price (a fixed price agreed at auction) and the reference price (a market price for electricity). When the reference price is below the strike price, the generator receives a payment from the CfD counterparty (the LCCC). When the reference price is above the strike price, the generator pays back the difference. The CfD provides revenue certainty for generators, enabling them to finance investment in renewable energy projects.

CfDs are awarded through competitive auctions, with separate pots for established technologies (such as onshore wind and solar) and less established technologies (such as offshore wind and tidal). The auctions are held periodically by the Department for Energy Security and Net Zero. The CfD regime has been successful in driving down the cost of offshore wind, with strike prices falling significantly in successive auction rounds.

The Renewables Obligation

The Renewables Obligation (RO) was the principal support mechanism for large-scale renewable electricity before the introduction of CfDs. The RO closed to new generating capacity in 2017 but continues to support existing accredited generators.

The RO requires licensed electricity suppliers to source a specified proportion of the electricity they supply from renewable sources, or to pay a buy-out price. Suppliers demonstrate compliance by presenting Renewables Obligation Certificates (ROCs), which are issued to accredited renewable generators for each megawatt-hour of renewable electricity generated. The RO created a market in ROCs, providing an additional revenue stream for renewable generators.

The Smart Export Guarantee

The Smart Export Guarantee (SEG) replaced the Feed-in Tariff (FiT) scheme for small-scale renewable generation. The SEG requires licensed electricity suppliers to offer a tariff to small-scale renewable generators (typically households and small businesses with installations below 5 MW capacity) for the electricity they export to the grid.

The SEG provides a minimum price floor for exported electricity, ensuring that small-scale generators receive payment for the electricity they feed into the grid. Tariffs are determined by suppliers competitively, and the SEG is designed to create a market for exported electricity rather than providing a fixed subsidy.

Planning and Consenting

Renewable energy projects require planning permission or development consent. Large-scale renewable energy projects — including offshore wind farms, onshore wind farms above 50 MW, and solar farms above 50 MW — are classified as nationally significant infrastructure projects (NSIPs) under the Planning Act 2008 and require a Development Consent Order (DCO) from the Secretary of State.

The planning regime for renewable energy has been the subject of significant policy development. The Government has set a target of 50 GW of offshore wind capacity by 2030 and has introduced reforms to the planning and consenting regime to accelerate deployment, including the streamlining of the DCO process and the introduction of the Offshore Wind Environmental Improvement Package.

Grid Connection

The connection of renewable energy projects to the electricity grid is a significant regulatory challenge. The connections regime requires network operators to offer connection agreements to generators, with connection costs based on the deep connection charging methodology. The rapid growth of renewable generation has led to a substantial pipeline of connection applications and significant delays in connection dates.

OFGEM is undertaking a programme of reform to address connection delays, including the introduction of the TMO4+ framework for the electricity transmission network and the development of regional energy system plans.

Conclusion

Renewable energy law in the United Kingdom provides a comprehensive framework for the development and deployment of low-carbon electricity generation. The Climate Change Act 2008 sets the statutory ambition, while CfDs, the SEG, and the planning and consenting regimes provide the mechanisms for delivering renewable energy projects. The legal framework continues to evolve to meet the challenge of decarbonising the electricity system by 2035.