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.

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 Energy Act of November 2008 set out a series of provisions in order to help the government meet its targets. The need for a clean energy cash back system comes from the fact that it is far more expensive to produce energy from green sources than it is from fossil fuels. This of course renders the retail price of fossil fuel electricity cheaper than that from renewable producers. In order to attract renewable investors, it is therefore necessary to incentivise those wishing to invest in the installation of renewable plant.

The UK government’s Clean energy cash back proposal would fix an above market rate for utility companies to buy electricity from renewable energy producers. It could therefore mean for example that if the retail price of fossil fuel electricity were 15p per kWh, then the rate for renewable electricity could be up to 60p per kWh. In this case, the 45p difference per kWh would be spread across every customer of the relevant utility company. It is this fixed tariff paid by the utilities which makes renewable energy an attractive prospect for investors as it guarantees them a return over a long period and has been highly successful at attracting investment where it has been implemented across Europe. Germany for example now produces over 14 per cent of its energy from renewable sources, something which has been attributed to the generous and comprehensive clean energy cash back system implemented by the German government.

This clean energy cash back system has already been in place in many states such as Germany, Israel, the US, Spain and Australia for some time now and has been instrumental in the success and growth of renewable energy operations there. The recent Energy Act (November 2008) includes specific provisions for the implementation of clean energy cash backs in the UK by 2010 although at the moment the precise details of the kWh threshold and tariff price has not been set.

Despite the current lack of clarity, it is believed that as we move towards 2010, the government will set a cash back tariff which allows renewable energy to be a viable option to investors. 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.

In a December 2008 report titled The Renewable energy country attractiveness indices by consultants Ernst & Young, the UK ranks highly as a potential target for renewable investors. Indeed, citing the falling value of the Pound and the iminent introduction of clean energy cash backs, Ernst & Young now rate the UK as joint fifth in a list of countries in terms of their attractiveness to investors. Germany rates top of this report, a success which is attributed to their excellent clean energy cash back system.
 

Related posts...

• June 22, 2010 -- UK Business Energy Prices: (3)
  A new survey carried out by the Economist Intelligence Unit has revealed that over 80% of British firms expect energy and fuel prices to rise sharply and almost 50% have great concern that the UK coul...
• February 21, 2010 -- Identifying a Half Hour Meter: (0)
  How to find out if you have a half hourly meter – So how do you know if you have a half hour meter?  It’s actually quite straight forward, and all you will need to find this out is a recent copy o...
• February 10, 2010 -- UK Business Gas Prices: (0)
  Business Gas Prices can be difficult to understand, as there are many different types of pricing structures available.  You could simply ring around and obtain gas prices direct from suppliers, but it...
• February 7, 2010 -- Oil Prices Back To $70 Range: (0)
  Oil prices plunged in a busy trading session on Friday, triggering big losses across the commodities markets, as investors went back to buying into the US dollar.  Crude oil prices did have a partial ...
• February 5, 2010 -- CRC Business Lights: (1)
  The era of the 'on-all-night' illuminated high street could end, the Environment Agency is predicting. The agency says new rules will force businesses to switch off lights and displays at night to mee...
• February 3, 2010 -- Bglobal Smart Meter Deal: (3)
  Bglobal Plc said it has signed a new agreement to supply and install smart meters for British Gas Business during 2010. The contract value is anticipated at more than £12 million. In addition, the com...

RSS feed for comments on this post. TrackBack URI

Name (required)

Mail (will not be published) (required)

Website

CAPTCHA Code *