Europe/UK energy regulatory update for May 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

New revised draft Hydrogen Subsidy?Law

The Austrian Federal Government has introduced a new draft Hydrogen Subsidy Law (Wasserstofff?rderungsgesetz – WF?G) during a Council of Ministers meeting. This draft incorporates stakeholder feedback, which was solicited until March 25. The new WF?G proposes an allocation of €820 million until 2026 for renewable hydrogen of non-biological origin through an auction system. Key eligibility criteria include compliance with the requirements for Renewable Fuels of Non-Biological Origin (RFNBOs) as per the amended Directive 2018/2001 (RED III), the RFNBO Delegated Act 2023/1184, and the GHG Savings Delegated Act 2023/1185. However, there are current uncertainties regarding the interpretation of the detailed requirements under the RFNBO Delegated Act for the production of hydrogen via electrolysis using renewable electricity. Therefore, the practical implementation and evidence of compliance with the eligibility requirements remain to be clarified. The draft WF?G is scheduled for review by the National Council's Committee for Economic Affairs, Industry, and Energy on June 4, with plans for adoption by Parliament in the June plenary session.

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BELGIUM

Belgian cap on electricity transmission rates for large consumers

On May 8, 2024, the Belgian parliament passed a law to limit electricity transmission rates for large consumers. This move aims to encourage green investments, such as ArcelorMittal's proposed hydrogen-based steel production in Ghent. Approximately 60 industrial companies could qualify for a 60-80% reduction in transmission rates, subsidized by the government. In return, these companies are required to invest in sustainable production methods. The policy's execution depends on a forthcoming study by the energy regulator CREG, which is expected to verify the competitive disadvantages faced by these large consumers. Upon confirmation, the government can implement the price cap via a royal decree.

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CZECH REPUBLIC

Subsidy opportunities available for photovoltaic power plants

From May 15 to September 10, 2024, the State Environmental Fund of the Czech Republic is offering a new subsidy opportunity called RES+ No. 2/2024. This program supports the installation of new photovoltaic power plants with a capacity exceeding 1 MWp. It applies to standalone projects with a single transfer point to the distribution or transmission grid, as well as combined projects with multiple sub-projects and transfer points. The total installed capacity of a combined project is the sum of the capacities of the individual PV sub-projects. The program also provides subsidies and support for battery storage systems for the generated electricity and hydrogen production systems via water electrolysis. Current or future license holders in the energy sector (electricity generation) are eligible to apply.

The subsidy can cover up to 30% of the total eligible project expenditure. Supported projects must be completed within five years of the decision issuance; any costs incurred after this period will not be eligible, and the deadline is non-extendable. PV power plants should not be constructed on agricultural land fund areas with level I and II protection, as per the Agricultural Land Fund Act, except for agrovoltaic production plants.

EU

EU Council approves Net Zero Industry Act

The EU Council has approved the Net Zero Industry Act, a crucial legislation aimed at boosting Europe's production of green or "net-zero technologies," which are comprehensively outlined in the Act. This law streamlines the approval process for net-zero technology projects and establishes guidelines for renewable energy auctions and public procurement. It forms a key part of the EU's new industrial policy, which seeks to position Europe as a leader in the global green technology race. The Act also includes measures to enhance Europe's workforce skills and foster innovation by establishing conducive regulatory frameworks for the development, testing, and validation of innovative net-zero technologies, also known as "regulatory sandboxes." In line with the EU's climate change objectives, the law sets ambitious targets for manufacturing capacity (40% of the EU’s deployment needs) and the global production share of net-zero technologies (15% of world production by 2040). Following the EU Council's endorsement, the Net Zero Industry Act has been officially enacted. Once the President of the European Parliament and the President of the EU Council sign the Act, the regulation will be published in the Official Journal of the EU and will come into effect on the day of its publication.

EU Council approves Regulation to curb methane emissions in energy sector

The EU Council has passed a regulation as part of the 'Fit for 55' package aimed at curbing methane emissions in the energy sector. This regulation introduces new requirements for the measurement, reporting, and verification of emissions, as well as compulsory leak detection and repair procedures. Energy operators are required to promptly identify and rectify methane leaks, with a comprehensive repair deadline set at 30 days. The venting and flaring of methane will be prohibited at drainage stations by 2025 and at ventilation shafts by 2027, with exceptions made for emergencies. The regulation also establishes global monitoring tools to track methane emissions from EU energy imports, with a review scheduled for 2028 to evaluate progress. The regulation will come into force twenty days after its publication in the Official Journal of the EU. In 2028, the EU Commission will assess the regulation's implementation and its effectiveness in reducing emissions.

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ITALY

On May 16, 2024, Article 5 of Decree-Law 15 May 2024, no. 63, also known as the "Agricultural Decree," was published in the Official Gazette No. 112. This decree provides urgent provisions for agricultural, fisheries, and aquaculture enterprises, as well as enterprises of national strategic interest. Here are some clarifications regarding the application of Article 5 of the Agricultural Decree to photovoltaic (PV) systems:

Where are ground-placed PV systems allowed in agricultural use areas?

Such systems are permitted only in the following locations:

(a) Sites where plants of the same source are already installed, limited to modifications, rebuilding, upgrading, or complete reconstruction of the existing plants, provided they do not increase the occupied area.

(b) Quarries and mines that have ceased, have not been recovered or abandoned, or are environmentally degraded, or portions of quarries and mines not susceptible to further exploitation.

(c) Sites and plants available to companies of the Italian State Railways group, managers of railway infrastructure, and freeway concession companies.

(d) Sites and facilities available to airport management companies within airport grounds, including those within the perimeter of relevance of the airports of the smaller islands, subject to necessary technical verifications by the National Civil Aviation Authority (ENAC).

(e) Sites free of constraints under Part Two of the Cultural Heritage and Landscape Code, pursuant to Legislative Decree No. 42 of January 22, 2004, which constitute areas within industrial plants and factories, as well as areas classified as agricultural enclosed within a perimeter whose points are no more than 500 meters from the same plant or factory; and areas adjacent to the highway network within a distance of not more than 300 meters.

Where are ground-mounted PV installations prohibited in areas of agricultural use?

Such installations are prohibited in all other areas different from those indicated above. With regard to the eligible areas identified in Article 10 paragraph 8, they are no longer allowed in the following sites:

(i) Sites subject to remediation identified pursuant to Title V, Part Four, of Legislative Decree No. 152 of April 3, 2006.

(ii) Areas classified as agricultural, enclosed within a perimeter whose points are no more than 500 meters away from areas of industrial, artisanal, and commercial use, including sites of national interest, as well as quarries and mines.

The restriction also applies if these areas are not subject to protection under Legislative Decree No. 42 of January 22, 2004, or are not encumbered by civic uses under Article 142, paragraph 1, letter h), of the same decree, and also if they fall within the 500-meter buffer zone of property subject to protection under Part Two or Article 136 of the same legislative decree.

Does the limitation not apply to new PV installations in an agricultural area located in a neighboring area within the limit of 500 meters from other PV installations?

In response to this question, the MASE has clarified that a PV plant can be identified as a unitary and stable complex or industrial plant due to its composition of interconnected modules, inverters, storage systems, and monitoring systems. According to the MASE, "facility or establishment" also means PV plants or wind power plants or other installations from renewable sources.

The rule seems to allow the construction of ground-mounted PV systems in agricultural areas within a radius of 500 meters from the existing renewable plant. This introduces a kind of "contrivance" to the limitations of subparagraph (a) of paragraph 8 of Article 20 of LD. 199/2021 introduced by Article 5 of the Agricultural Decree. This provision only allows modifications/refurbishments/repowering that do not result in an increase of the area occupied. To circumvent and overcome the buffer area limitation, the rule would be sufficient to implement a "new facility" and not an intervention for modification, refurbishment, upgrading, or complete reconstruction of already installed facilities.

This poses interpretive issues and risks of redevelopment of the intervention for the purpose of its inclusion in the limitations of Article 5 of the Agricultural Decree. It is hoped that the Conversion Law can clarify this aspect.

One possible interpretation is that the provision allows the installation of PV systems with modules placed in an agricultural area enclosed within a perimeter whose points are no more than 500 meters from a plant or establishment that produces energy not from the same source and therefore not from PV systems, given that the limitation in (a) refers to "sites where plants of the same source are already installed".

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UK

?Preferred site for a new nuclear power station

On 22 May 2024, the Department for Energy Security and Net Zero (DESNZ) issued a press release headed ‘New nuclear power plant earmarked for North Wales’. This reports that Wylfa in Anglesey, North Wales is the government’s preferred site for the UK’s third mega-nuclear power station (along with Hinkley Point C and Sizewell C). The Wylfa site has been acquired by Great British Nuclear?(GBN). Further detail on the acquisition is available in GBN’s press release of 7 March 2024 entitled ‘Great British Nuclear to buy two Hitachi sites for new nuclear development’.

Fusion energy

On 8 May 2024, DESNZ announced?the launch of an open consultation intended to begin the process towards designating a new fusion energy National Policy Statement (NPS), which will become ‘NPS EN-8 on Fusion Energy’. Several documents have been made available by DESNZ on the above consultation page, including: (i) the ‘Consultation on a new National Policy Statement for Fusion Energy: The proposed approach to siting fusion energy facilities’ - this is described as being the ‘part 1’ document – it sets out and streamlines the proposed planning process for fusion power plants; and (ii) the ‘Appraisal of Sustainability Scoping Report: EN-8 on Fusion Energy’ - this is described as being the ‘part 2’ document – it supports the part 1 document. The definition of a fusion energy facility is given in section 156 (Fusion energy facilities: nuclear site licence not required) of the Energy Act 2023?– this confirms that fusion energy facilities are not to be treated as a nuclear installation for regulatory purposes, meaning that fusion sites will not be subject to the nuclear site licensing process operated by the Office for Nuclear Regulation.

Energy Act 2023 regulations / ISOP consultations

The Energy Act 2023 (Consequential Amendments) Regulations 2024?were laid in draft before both Houses of Parliament on 13 May 2024, using the draft affirmative procedure – progress can be tracked on the Energy Act 2023 (Consequential Amendments) Regulations 2024 statutory instrument page?of the UK Parliament site, which states that the instrument was approved on 24 May 2024. The regulations (as created by exercise of powers given in the Energy Act 2023) make amendments to primary, secondary and assimilated legislation, in consequence of, or in connection with, the coming into force of certain provisions of the?2023 Act.

The main areas of the 2023 Act which the consequential amendments relate to are: (i) Part 5?of the 2023 Act, which makes provision for the designation and functioning of the independent system operator and planner (ISOP), which will take over the role of the current electricity system operator and take on the role of a gas system planner; (ii) Part 6?of the 2023 Act, which introduces a new governance framework for gas and electricity codes; (iii) section 203?of, and Schedule 15?to, the 2023 Act, which make a number of amendments to the Electricity Act 1989 to add provisions concerning the competitive tendering for electricity projects; and (iv) Part 8?of the 2023 Act, which makes provision for the regulation of heat networks and the creation of heat network zones.

Solar energy

On 15 May 2024, DESNZ and the Department for Environment, Food & Rural Affairs published a press release headed ‘Solar projects must fit in with food security’ – this reports that steps are being taken to strengthen food security, including by protecting ‘Best and Most Versatile’ (BMV) land by ensuring large solar projects avoid this higher quality land where possible. Instead, the press release states, they should be developed on brownfield land, contaminated land, industrial land, and lower quality agricultural land so as not to compromise the UK’s food security. Nonetheless, more than a 4-fold increase in solar deployment is expected by 2035 (up to 70GW). To reach that goal, the Energy Security and Net Zero Secretary has “reinforced the weight of planning policy and the need for solar to be delivered in a sensible way – ensuring developers and planning authorities consider the cumulative impact solar projects can have on local communities, especially where they are facing a high volume of applications”. The Energy Secretary also announced plans to expand the Renewable Energy Planning Database?to include up-to-date data on the type of land used by existing and planned solar projects. A link is provided in the press release to the written Statement?made by the Secretary of State to Parliament on the above subject matter on 15 May, which provides further information and refers to an upcoming joint government / industry ‘Solar Roadmap’.

Carbon capture, usage and storage

On 7 May 2024, DESNZ issued a call for evidence headed ‘Carbon capture, usage and storage (CCUS): non-pipeline transport and cross-border CO2 networks’ – this aims to gather information to improve the government’s understanding of both non-pipeline transport (NPT) value chains and cross-border CO2?transport and storage networks, the costs associated with them, and the potential barriers to deployment. The above page provides the link to a 38-page call for evidence document?– the latter includes (amongst more) a section on the ‘CCUS?policy landscape’ (which in turn references the Energy Act 2023). On the same day, 7 May, DESNZ issued a press release headed ‘New plans to drive carbon capture industry forward’ – this relates to the above call for evidence which is about exploring new ways (on top of the existing network of pipelines) to transport captured CO2 that would enable more UK industries to adopt carbon capture technology. The call for evidence delivers on a commitment made in the CCUS vision published on 20 December 2023, which set out the government’s plans for a new competitive UK CCUS market by 2035.

Contracts for difference scheme – sustainable industry rewards

The Contracts for Difference (Sustainable Industry Rewards) Regulations 2024 (2024 No. 710)?(which were published in draft in March) were made on 23 May 2024 – they extend to England and Wales and Scotland, and come into force in accordance with regulation 1(1) - they have been published together with an explanatory memorandum.

UK Emissions Trading Scheme – expansion

On 23 May 2024, DESNZ, the devolved governments and others, issued a press release headed ‘Proposals to expand the UK Emissions Trading Scheme’ – this refers to the publication of two consultations on: plans to expand the UK Emissions Trading Scheme (which currently applies to the aviation, power, and industry sectors) to include the energy from waste and waste incineration sectors; and how engineered greenhouse gas removals, such as direct air carbon capture, could be integrated into the scheme, and on whether high-quality nature-based removals could be suitable for the scheme.