Europe / UK Energy Regulatory Update for July 2024

Our energy teams in over 30 offices across Europe and the UK provide regulatory updates to clients on a regular basis. This update contains, for each of the countries covered, a selection of recent news items of relevance to the energy transition (including its impact on the non-retail electricity markets). It is not intended to be exhaustive or detailed; it simply identifies developments of a policy or regulatory nature considered to be of interest by the contributors.

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AUSTRIA

Green gas quota for gas suppliers did not pass parliament

The Renewable Gas Act (Erneuerbares-Gas-Gesetz – EGG) did not obtain the required two-thirds majority in the National Council meeting on 4 July. The EGG?was intended to introduce a national green gas quota for gas suppliers with the aim to replace the share of fossil natural gas with domestically produced renewable gas, especially biogas, but also hydrogen, to reduce dependence on (Russian) imports and improve security of supply. Gas suppliers would have been obliged to meet a gradually increasing quota of 0,35% in 2024 up to 9,75% in 2030 of renewable gases in their overall gas supply. In light of the upcoming elections in September, it remains to be seen whether and in what form the green gas quota will come into force under a new government.

Hydrogen Subsidy Law in force

The Hydrogen Subsidy Law (Wasserstofff?rderungsgesetz – WF?G) which we reported on in May, was passed by the National Council on 4 July. The aim is to increase the production of renewable hydrogen of non-biological origin (RFNBO). Subsidies will be awarded in competitive auctions in the years 2024 to 2026 and granted in the form of a fixed premium as a supplement per unit of RFNBO produced for a period of ten years. A total of €820 million shall be made available until 2026, of which a maximum of €400 million shall be granted until the end of 2024. Funding will only be granted to the operator of an electrolyser if the?RFNBO?fulfils the requirements of the amended Directive (EU) 2018/2001?(“RED III”) and the RFNBO Delegated Act 2023/1184 and the GHG Savings Delegated Act 2023/1185. In view of the current uncertainties regarding the interpretation of the requirements under the RFNBO Delegated Act it remains to be seen how these requirements will be interpreted and implemented under the WF?G.

Obligation to prepare a security of supply concept

By amending the Gas Industry Act 2011 (Gaswirtschaftsgesetz), the National Council obliged gas suppliers to draw up a security of supply concept in order to anticipate supply shortfalls. As a result of the amendments, suppliers with more than 20,000 metering points or an annual supply volume of more than 300 GWh are obliged to draw up a concept to prepare for the immediate outage of their largest single supply source and submit it to the regulatory authority. The obligation to submit the concepts does not apply if a supplier can prove certain circumstances to the regulatory authority, such as that the gas volumes from its largest single source of supply originate in countries that are not affected by EU sanctions or that the gas volumes are not of unknown origin. The concepts must be submitted to the regulatory authority annually by 1 October for the following calendar year.

Climate Protection and Energy Ministry sets up Gas Independence Commission

The Ministry of Climate Protection and Energy is setting up a commission to scrutinise the gas supply contract between Gazprom and OMV. In the course of the investigation, individual members of the commission will be able to review the supply contracts between OMV and Gazprom within the limits of Regulation (EU) 2017/1938 ("Gas-SOS Regulation"). The Commission is also examining the political circumstances surrounding the controversial extension of the gas supply contract, which was extended in 2018 by twelve years from 2028 to 2040 with far-reaching consequences for Austria's security of gas supply.

BELGIUM

The Belgian transmission system operator has issued a warning about an impending power surplus on the power grid. This surplus is primarily due to renewable energy installations, such as solar panels and wind turbines, which are generating significant amounts of electricity under favourable summer weather conditions. The high production levels at times when demand is low could lead to an imbalance in the power grid. To address this issue, large companies are being asked to provide flexibility services by either switching off or turning on large installations as needed. The transmission operator aims to avoid this imbalance, as it can lead to negative prices, meaning the operator may have to pay grid users to consume excess electricity. By managing supply and demand effectively, the transmission system operator seeks to prevent potential disruptions, maintain the stability of the power grid, and ensure reliable electricity service.

CZECH REPUBLIC

The Ministry of Industry and Trade, in collaboration with the Ministry of the Environment and Regional Development, has drafted a new Act on accelerating the use of renewable energy sources by creating so-called "acceleration zones". Furthermore, it implements the RED III Directive (Directive (EU) 2023/2413). The draft following the "Lex OZE I" and "II" just started its legislative process as it entered the interdepartmental comment procedure at the beginning of July. This initiative, along with the Act No. 283/2021 Coll., new Building Act, aims to streamline permitting without compromising public interests.

"Acceleration zones" will be created to permit wind and solar farms quicker, including infrastructure and storage. The draft follows the government's April 2024 resolution and aligns with the goal of increasing energy security and reducing costs. Acceleration zones will be designated in areas with minimal environmental impact as the Act establishes the principle according to which it is necessary to prioritise artificial and built-up areas like roofs and facades of buildings, transport infrastructure, car parks, landfills, industrial sites, and degraded land. Project approval is expected to take less than a year within these zones.

The Ministry of Environment is currently mapping suitable locations as they will be defined as specific areas in the Czech Spatial Development Policy for facilities for the conversion of solar and/or wind energy into electricity and their direct connection to the distribution or transmission system, including possible energy storage facilities at the source location. At the same time, the government decree will set out a list of "red" limits that prevent the designation of an area to accelerate the use of Lex OZE in each territory.

New decree on agrovoltaic electricity production

Following the amendment to the Agricultural Land Fund Act ("ALFA") amending the conditions for approval of plans for agrovoltaic power generation, on which we informed you last month, a?new draft of an implementing Decree has finished the interdepartmental comment procedure and now awaits the approval of the government.

Without the conditions to be laid down in the Decree under the above-mentioned authorisation, the new scheme provided for in Section 8a of the ALFA cannot be used. The Decree lays down the conditions relating to the form of the necessary equipment of the agrovoltaic power generation plant, maximum power, technical design, reference yield, subsequent reclamation, erosion protection, maintenance of drainage and irrigation systems and other technical parameters ensuring the compatibility of the agrovoltaic power generation plant project with agricultural land management.

EU

EU Commission Communication on collaborative investment frameworks for offshore energy projects

The European Commission has released guidance (C/2024/3998) to efficiently organize investment frameworks for cross-border offshore grid and renewable projects. This document aims to assist EU countries, regulatory authorities, and system operators in forming cost-sharing agreements to achieve regional offshore renewable energy targets, as outlined in the TEN-E Regulation and last November's EU Action Plan for Grids. Commissioner Kadri Simson emphasized the necessity of offshore renewables at the Energy Infrastructure Forum in Copenhagen, highlighting their role in reducing foreign gas dependency and supporting economic competitiveness through collaborative investment frameworks. The guidance recommends that EU countries and regulators begin discussing cost-sharing principles at the early stages of identifying network needs to accelerate cross-border projects. It also encourages ENTSO-E to improve modeling tools to better support information exchange. By setting parameters for fair cost-benefit analyses and cost allocation, the guidance aims to ensure equitable investments. Initial steps will focus on sea basin-level projects, with EU countries and National Regulatory Authorities, supported by TSOs, deciding final cost allocations to secure necessary investments.

Directive (EU) 2024/1788 on common rules for the internal markets for renewable gas, natural gas and hydrogen

The Directive (EU) 2024/1788, officially adopted on June 13, 2024, establishes unified rules for the internal markets of renewable gas, natural gas, and hydrogen, replacing Directive 2009/73/EC and introducing changes to Directive (EU) 2023/1791. As part of the EU's commitment to achieving climate neutrality by 2050 and reducing greenhouse gas emissions by at least 55% by 2030, this directive aims to transform the energy sector by decreasing reliance on fossil fuels and enhancing the use of renewable energy. The directive updates the legislative framework for the gas sector to support the EU's climate goals, focusing on decarbonizing natural gas and hydrogen markets. Key provisions include consumer protection in the green gas market, the development of hydrogen infrastructure, integration of renewable gases into existing systems, and strategies for network planning and supply security. Initially proposed by the European Commission on December 15, 2021, as part of a decarbonization legislative package, the draft underwent various stages of approval, including negotiations between the European Parliament and the Council. After reaching an informal agreement on November 27, the directive was endorsed by the Parliament on April 11, 2024, and the Council on May 21, 2024, with its official publication occurring on July 15, 2024.

GREECE

Greece to impose one-off windfall tax on power producers to subsidize household electricity bills

As of July 30, 2024, the Minister of Environment and Energy is expected to submit to the Greek Parliament a legislative proposal to impose a one-off windfall tax on its electricity producers, with the proceeds to be used to subsidise the power bills for households already strained by a cost-of-living crisis.

ADMIE launches tender for new high-voltage transmission line to Corfu

ADMIE, the Independent Power Transmission Operator, is launching a tender for a new high-voltage transmission line connecting Igoumenitsa and Corfu. This project, aimed at strengthening the island's electrical grid, involves the design, procurement, and installation of 4 km of underground and 17.1 km of submarine 150 kV AC cables.

The Ministry of Environment and Energy prepares tender for Apollo Program to reduce energy costs for 127,500 beneficiaries

The Ministry of Environment and Energy is currently finalising the design of the Apollo programme, which will provide significant cost savings for the 127,500 beneficiaries across the country. According to the various sources, the relevant tender will be launched in the last quarter of the year.

Greece readies for next battery storage growth phase

Greece is promoting energy storage development through new policies. The country has already awarded 700 MW of battery storage projects through public subsidy support. The government is now planning to allow the colocation of batteries with existing solar plants and standalone, in front of the meter batteries without public subsidy support. These policies are expected to be important milestones in Greece's energy transition plan. However, further details need to be specified for the policies to prove meaningful.

Greece rushes to implement EU renewable energy law

The Greek Ministry of Environment and Energy is rushing to incorporate the new European legislation (RED III) for the acceleration of RES into Greek law, seven months after its publication. Certain key deadlines of the directive, which had an incorporation deadline up to July 1, 2024, have already expired.

Greek energy regulator approves regulated income formula on Great Sea Interconnector

RAAEY, Greece’s Regulatory Authority for Waste, Energy and Water has issued a decision with regard to the calculation of the regulated income for the electricity interconnection between Greece and Cyprus, called the Great Sea Interconnector, marking a significant step towards completing the regulatory framework governing the €1.9 billion project, according to the project promoter, the Greek Independent Power Transmission Operator (IPTO).

Auction for 4-hour batteries in second half of September

A ministerial decision for a third auction offering investment and operating support for 4-hour standalone batteries is expected to be issued soon and will be announced by RAAEY. The auction will support the installation of 4-hour standalone batteries at former lignite-dependent local economies, specifically in the western Macedonia region of northern Greece and in Megalopoli in the Peloponnese. The eastern Macedonia-Thrace administrative region will also be added. The ministerial decision will specify, among other things, an investment support for the projects, to be set at 100,000 euros per MWh, as well as a starting price for guaranteed revenues demanded by investors for their projects.

Fixed, 12-month tariffs made compulsory by Brussels approval

The European Commission has approved a directive requiring all electricity providers in EU Member States to offer fixed electricity tariffs with durations of at least 12 months. EU Member States must transpose the directive into national law by January 17, 2025. Consumers, however, may be able to invoke the provisions of the directive even sooner, in case their state experiences procedural delays. In Greece, the new framework will be adopted through legislation prepared by the Greek Ministry of Environment and Energy; legislation introducing a significant change, given that fixed tariffs are currently of shorter duration, typically around six months.

RAAEY exploring power cuts by ex-providers over arrears

RAAEY is currently considering rules that would allow electricity retailers to order supply cuts for former customers who have not arranged installment-based payback for their arrears. This potential regulation, which would address issues related to unpaid bills and ensure financial stability for electricity providers, could be included in RAEEY’s proposal to the Ministry of Energy for a new framework concerning supplier switches by consumers.

NETHERLANDS

EU Approval of €750 Million Scheme for Decarbonizing Industrial Processes: The European Commission has approved a new €750 million scheme aimed at decarbonizing industrial production processes in the Netherlands. The scheme targets custom-fit solutions for large industrial emitters, requiring companies to reduce their annual greenhouse gas emissions to at least 0.1 million tons below the national CO? tax threshold by 2030. A maximum of €200 million per company is available to help industries electrify and reduce their dependency on fossil fuels, with grants awarded by December 31, 2025, with the goal of achieving at least a 40% reduction in process emissions. The scheme is expected to launch in a few months and is open to all companies, although it primarily benefits those eligible for bespoke agreements with the government. To prevent excessive competition distortion, the scheme includes measures like claw-back provisions requiring companies to repay part of the aid if their project leads to additional net income, and restrictions on production capacity expansion.?

PORTUGAL

Public consultation on the revision of the PNEC 2030

The National Energy and Climate Plan 2030 (PNEC 2030) is the main energy and climate policy instrument in the short to medium term. The PNEC 2030 establishes the goals, objectives, lines of action and action measures in the field of energy and climate, duly related to the 5 dimensions of the Energy Union and Climate Action, namely: Decarbonisation; Energy Efficiency; Internal Energy Market; Energy Security; and Research, Innovation and Competitiveness.

The preliminary version of this revision was submitted to the European Commission in June 2023, thus meeting the deadline set for this purpose, and considered the contributions resulting from the prior public consultation held between March and April 2023.

This preliminary version has since been revised, in a process coordinated between the Directorate General for Energy and Geology and the Portuguese Environment Agency, to prepare a version which also sought to take into account the European Commission's recommendations published on 18 December 2023, in order to allow for a new public consultation, up until the 5 September 2024.

EDP Renováveis signs 24-year agreement for energy storage in the US

EDP Renováveis has signed a 24-year energy storage agreement in the United States with a capacity of 200 megawatts (MW), according to a statement sent to the Portuguese Securities Market Commission (CMVM).

The 24-year agreement was signed by the subsidiary EDP Renewables North America LLC with Salt River Project and consists of a 200 MW (800 MWh) Battery Energy Storage System (BESS) in Arizona and it is due to start operating next year.

Desalination system for the Algarve region - Declaration of public utility

Order number 8177/2024 of the Office of the Minister for the Environment and Energy was published on 23 July 2024, determining the declaration of public utility of the expropriation of 125,000 m2, necessary for the construction, operation and maintenance of the Seawater Desalination Plant and the Renewable Energy Park (photovoltaic plant) that are part of the “Desalination System in the Algarve Region”.

The Desalination System is a strategic measure to safeguard water resources in Portugal. Recognising the urgency of the expropriation process immediately grants águas do Algarve, S.A. authorisation to take administrative possession of the assets to be expropriated.

UK

Energy policy and legislation of the new government

The new Labour government, formed on 5 July, has taken a number of steps towards delivering on its manifesto mission to make Britain a clean energy superpower. As early as 8 July the new Secretary of State for Energy Security and Net Zero set out the agenda in a press release - 'Energy Secretary Ed Miliband sets out his priorities for the department'. An overview of the key energy policy and legislative announcements which have followed is given below.

Onshore wind projects

On 8 July 2024, the Department for Energy Security and Net Zero (DESNZ) and others published a 'Policy statement on onshore wind'. The headline announcement is the immediate removal of the "de facto ban on onshore wind in England, in place since 2015" and, by this revision to planning policy, the placing of onshore wind on the same footing as other energy development in the National Planning Policy Framework (NPPF). The de facto ban referred to above was, as noted in the policy statement, the result of the tests for onshore wind development that were set out in footnotes 57 and 58 to numbered paragraph 163 of the National Planning Policy Framework. Those tests are no longer to apply. These changes will be reflected in a forthcoming NPPF update.

The policy statement explains that, through the NPPF update, the new government will go further and set out its proposals for wider changes to support renewable energy development; and that alongside that, the government will consult on bringing large onshore proposals into the Nationally Significant Infrastructure Project (NSIP) regime under the Planning Act 2008, to support quick determination, followed by a revised National Policy Statement under that Act. The policy statement of 8 July also notes that local communities will play an essential part in delivering the government's clean energy mission. The government will shortly publish an update to the Community Benefits Protocol for Onshore Wind in England.

Mission Control for Clean Power

On 9 July 2024, DESNZ issued a press release headed 'Chris Stark to lead Mission Control to deliver clean power by 2030'. This informs that the former chief executive of the Climate Change Committee has been appointed by the Secretary of State for Energy Security and Net Zero to lead a new control centre (Mission Control for Clean Power) tasked with turbocharging the government’s mission to provide Britain with cheaper and clean power by 2030. Mission Control for Clean Power comes alongside Great British Energy, discussed below.

Energy legislation

The King's Speech was delivered on 17 July, setting out the new government's legislative programme for the coming months (it was published with a set of briefing notes). A number of Bills of relevance to the energy sector were included in the programme.

The Great British Energy Bill

Great British Energy (GBE) is the proposed new company to be publicly owned by the Secretary of State for Energy Security and Net Zero, but operationally independent of government, backed with ￡8.3 billion of new money over the current Parliament. It will invest in and own clean energy projects in regions across the UK, alongside private sector investment; and it will lead projects through the development stages to speed up their delivery. GBE's five intended functions are described in section 6 of the 'Great British Energy Founding Statement', published by DESNZ on 25 July 2024. In furtherance of the project development function (see section 6.2), a partnership between GBE and The Crown Estate is proposed (see the press release headed 'New Great British Energy partnership launched to turbocharge energy independence'). On the same day, the Great British Energy Bill was introduced to Parliament by DESNZ together with a set of explanatory notes.

Planning and Infrastructure Bill

The intent of the Planning and Infrastructure Bill is summarised at pages 17 to 19 of the King's Speech briefing notes of 17 July, where reference is made to the aim of (amongst more) streamlining the delivery process for critical infrastructure, including accelerating upgrades to the national grid and boosting renewable energy. Reference is also made to simplifying the consenting process for major infrastructure projects and enabling relevant, new and improved National Policy Statements to come forward, establishing a review process that provides the opportunity for them to be updated every five years, giving increased certainty to developers and communities.

The Crown Estate Bill

On 25 July 2024, the Crown Estate Bill was introduced to Parliament by HM Treasury. It was published along with explanatory notes. The purposes of the Bill are described at pages 48 and 49 of?the King's Speech briefing notes of 17 July. The press release explains how the Crown Estate Bill (which will amend the Crown Estate Act 1961) will modernise The Crown Estate (which owns the seabed around England and Wales) by removing restrictions on its activities, so it can, for example, invest in digital technologies that will further enhance its spatial mapping of the seabed. The Bill will also expand The Crown Estate’s investment powers and grant borrowing capabilities, with a view to unlocking significant investment in public infrastructure. This includes essential marine investment to help support the acceleration and growth of offshore wind capacity by 2030.

Sustainable Aviation Fuel (Revenue Support Mechanism) Bill and SAF mandate regulations

On 22 July 2024, the new Secretary of State for Transport made a written statement to Parliament headed 'Sustainable aviation fuel initiatives'. This refers both to a new Bill to be introduced to Parliament to support sustainable aviation fuel (SAF) production, and to introducing (subject to Parliamentary approval) a?SAF?mandate to start from 1 January 2025. The proposed Sustainable Aviation Fuel (Revenue Support Mechanism) Bill (the one referred to above) is discussed on pages 50 and 51 of the King's Speech briefing notes of 17 July. As regards the SAF mandate, on or around 22 July the draft Renewable Transport Fuel Obligations (Sustainable Aviation Fuel) Order 2024 was published - this draft Order (which supersedes the draft of the same title laid before Parliament on 20 May 2024) is laid to provide for the regulation of aviation fuel in the UK by placing an obligation on the suppliers of such fuel to ensure that SAF makes up an increasing proportion of that which is supplied each year. It is due to come into force on 1 January 2025.

National Wealth Fund Bill

The proposed National Wealth Fund Bill is discussed on pages 12 and 13 of the King's Speech briefing notes of 17 July 2024 – see also the press release by HM Treasury, DESNZ and the Department for Business and Trade of 9 July headed 'Boost for new National Wealth Fund to unlock private investment'. This notes that ￡7.3bn of funding will be allocated?to the purposes of the National Wealth Fund through the UK Infrastructure Bank so that investments can start to be made immediately, focusing on priority sectors and?catalysing private investment. The National Wealth Fund is intended to make transformative investments in relation to the government's industrial strategy and clean energy mission.

Solar development consent orders

A sign of the new Energy Security and Net Zero Secretary's wish to accelerate progress towards clean energy came within days of the new government being formed, with positive development consent decisions being announced in respect of three solar projects, Gate Burton Energy Park, Sunnica Energy Farm and Mallard Solar Farm. Further information on these projects can be accessed on the Planning Inspectorate's 'Find a National Infrastructure Project' page. The three development consent orders, made as statutory instruments, are: the Gate Burton Energy Park Order 2024 (2024 No. 807); the Sunnica Energy Farm Order 2024 (2024 No. 802); and the Mallard Pass Solar Farm Order 2024 (2024 No. 796).

Electricity transmission price controls

On 18 July 2024, Ofgem announced the publication of the 'RIIO-3 Sector Specific Methodology Decision – Overview Document' (and related annexes). This sets out Ofgem's decisions (following consultations) on the methodologies it will apply for the network companies in the electricity transmission, the gas transmission and the gas distribution sectors in the RIIO-3 price control, which will run from 1 April 2026 to 31 March 2031, as relevant to the setting of regulated revenues and required outputs. RIIO stands for Revenues = Incentives + Innovation + Outputs. The next price control for electricity distribution network operators, RIIO-ED3, will begin in 2028 and Ofgem will begin consulting on proposals for that sector later in 2024. On the same day, 18 July, Ofgem published its 'RIIO-3 Business Plan Guidance', which sets out the information Ofgem expects to see in network companies’ business plans for RIIO-3 (which will provide what is needed by Ofgem in order to set the regulated revenues pursuant to the RIIO-3 price control) and how Ofgem will assess those plans to arrive at its draft and final RIIO-3 determinations in 2025.

Early competition in the onshore electricity networks

On 25 July 2024, Ofgem announced the publication of its 'Decision on policy updates to Early Competition in onshore electricity transmission networks'. This document relates to the early competition (EC) regime for the onshore electricity transmission network and summarises Ofgem's decision on various supporting policy points (set out in the seven sections of the document) that were referenced for further consideration in: (i) Ofgem's?consultation entitled 'Early Competition in onshore electricity transmission networks: policy update' of 21 February 2024; and its 'Decision on early competition in onshore electricity transmission networks' of 28 March 2022.

The document of 25 July 2024 includes Ofgem's views on National Grid Electricity System Operator’s (NGESO's) proposed changes to the EC model in its 'Early Competition Implementation Update' (ECI-Update) of 1 February 2024 (available via NGESO's 'Document library' in its 'Early competition' page). The document notes Ofgem's support for NGESO’s proposal to align the scope for an EC tender with the output of the Centralised Strategic Network Plan (CSNP) optioneering process; and it contains Ofgem's decision to accept NGESO’s proposed amendments to the early competition plan (ECP) under its EC-I Update.

As noted in the conclusion to the decision document of 25 July, Ofgem will (amongst more) work on the drafting of the transmission owner licence that would be awarded to the successful competitively appointed transmission owner (CATO) in an EC tender process; and it will review and approve the final tender process, tender documentation, and commercial model ahead of the first competition. Ofgem states in its conclusion that it remains on course to identify one project as being suitable for EC (through competitive tender) by the end of 2024.

Offshore wind and licence exemption

On 25 July 2024, the Electricity (Class Exemptions from the Requirement for a Licence) (Amendment) Order 2024 (2024 No. 819) were made in exercise of powers conferred by section 5(1) of the Electricity Act 1989, coming into force on 16 August 2024 – they were published with an explanatory memorandum and are relevant to the licensing position of offshore windfarm developers. As explained in the memorandum, the 2024 Order will amend the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 to exempt high-voltage array systems (which are owned by offshore generators) from the transmission licence regime. Low voltage array systems already do not require a licence. Array systems are the electric line and other electric plant which are used to convey electricity from an offshore generating station to an offshore substation. High-voltage array systems will allow generators to install more cost-effective, energy efficient high voltage cables.

Capacity market

On 23 July 2024, DESNZ announced the publication of the Capacity Market (Amendment) Rules 2024 as presented to Parliament pursuant to section 41(9) of the Energy Act 2013. The day before, DESNZ published the two-part document 'Capacity Market: Government response: 2023 Phase 2 Consultation and 2024 Rule amendments to support auction liquidity'. DESNZ also announced on 22 July the publication of a letter from the Secretary of State to National Grid Electricity System Operator setting out the Capacity Market auction parameters for the T-1 auction for 2025 to 2026 delivery year, and the T-4 auction for 2028 to 2029 delivery year.