Navigating compliance complexity in renewables

The focus on renewable energy is of paramount importance to the UK government; however, this has led to significant regulatory complexity and risk for energy players operating in the UK, explains Malcolm Gray.

Renewable energy sources provided more electricity to the UK than fossil fuels for the first time in the third quarter of 2019 after renewables’ share of the electricity mix rose to 40 per cent.

This shift in the UK’s energy mix has been achieved by an industry that has been pushed into a state of flux. An increased focus on renewable sources of electricity has been meaningfully impacted by the introduction of policy initiatives and regulatory tools, including the Renewables Obligation support mechanism and feed-in tariffs (FIT). Similarly, the operating environment has faced increased oversight from a local impact, environment and health and safety perspective.

Various initiatives and incentives have transformed the energy landscape, opening doors for new-build generation and for larger pan-European and global companies to invest in smaller, renewable sources of electricity. Such changes have resulted in increased regulatory complexity.

Within this changing landscape, a focus on security of supply is a crucial aspect of the energy trilemma for the UK government. The introduction of Capacity Market (CM) auctions in 2014 was a bold move to address this. The first auction to secure 2016/17 supply resulted in 57 contract awards; the June 2019 auction saw 129 units awarded contracts, with reciprocal engine generators taking the largest share, and nearly 60 per cent of reciprocal contracts awarded to new builds.

Under CM rules, existing sites are awarded one-year auction contracts, whereas new builds get four-year contracts. Investors, large pan-European and even global energy businesses identified the UK capacity market as an opportunity for business growth and so established new-build sites in the UK, or even set up new holding companies in line with CM rules to maximise their proposition.

Although the CM was in a state of uncertainty for much of 2019, following its suspension by the European Commission in November 2018, the recent reinstatement of the programme provided some clarity and a continued opportunity to grow.

These changes created a boom in the construction and commissioning of new energy generation sites.

The FIT initiative encouraged renewable, decentralised energy generation, from windfarms to individuals selling their solar power back to the grid. Set up in 2010, this was identified as another stream to grow smaller, renewable energy sources while ensuring security of supply.

Decentralised power generation has added complexity to an already stringently legislated industry. For businesses trying to create environmentally responsible power generation, it is vital that the development, operation and final decommissioning of the sites themselves do not offset the positive impact the business is trying to have on the environment.

Ensuring adherence in this decentralised asset operating environment is further complicated by the growing geographical location of owners. By definition, decentralised energy is small and well-spread, and different jurisdictions have different regulations. Monitoring the changes to the UK and international initiatives to ensure a business is working within these parameters – and generating and operating in the correct way – can easily become a full-time job that requires myriad skills and experience.

A renewable energy business specialising in the integration of photovoltaic systems has been overcoming these challenges in recent months by working with Libryo. The company was struggling to track and manage the laws for its locations in Argentina, Egypt and South Africa. With the aid of Libryo’s regulatory and compliance tracking technology, it was able to obtain information at operational level with the click of a button. It now has a single, intuitive, global solution that is user-friendly and highlights any legal updates required.

As the energy industry becomes more complex, it’s clear there is a growing global legislative problem that needs to be addressed. Technology can help businesses work more efficiently and ensure all areas of compliance and legislation are adhered to.

We must not let the regulatory challenges deter the good intentions of the businesses within the energy industry.