Out-Law Analysis | 07 May 2020 | 5:12 pm | 6 min. read
It is welcome to see the UK's energy secretary take two recent decisions that indicate support for this view.
Gareth Phillips and Peter Cole are experts in renewable energy projects at Pinsent Masons, the law firm behind Out-Law.
There are three core reasons why making reference to a maximum capacity in the description of development is the wrong approach, and one we have rallied against doing for years. The reasons are:
Generating stations in the UK are typically granted development consent under The Electricity Act 1989, The Town and Country Planning 1990 and the Planning Act 2008 – some regional variations apply.
Until very recently, the long-held convention has been for those consents for renewable energy related development to express a maximum generating capacity based on the megawatt (MW) "nameplate" output capacity. In some cases this has been done to indicate the correct consenting regime, for example, the 50MW threshold for onshore generating stations to be classed as Nationally Significant Infrastructure Projects (NSIPs) under the 2008 Act, but this is not always the case.
This convention has created the odd circumstance where a developer could technically be in breach of its consent, if it were to generate even a very small amount more than the amount of power permitted. In that scenario, liability for enforcement action could arise, despite the project still being within the permitted design envelope parameters assessed by the determining authority and approved in the consent. This has consequential ramifications for the selection of available generating technology after a final investment decision has been made and pre-construction, and "red flags" in due diligence associated with the sale, purchase and financing of the projects in question.
This has created much work for lawyers, with countless opinions relating to whether or not the maximum capacity is enforceable, whether the relevant authority would enforce if so, and the prospects of such action being successful. For example, such a limitation may not have legal effect, unless secured by condition. This principle is derived from a line of case law starting with the memorably named I’m Your Man Ltd v Secretary of State for the Environment, and more recently, the decision in Cotswold Grange Country Park v Secretary of State for Communities and Local Government. Those cases clarified that the development description states what can be done, with conditions specifying what is forbidden.
We have encouraged our clients not to express a maximum capacity in the description of development accompanying consent applications, and through industry bodies such as the National Infrastructure Planning Association, we have encouraged determining authorities to take the same approach. Success in this regard has been achieved
We have also assisted many applications to vary consents, purely to increase or remove the maximum capacity. Those of us with a true project development outlook do not relish this work, because it should be unnecessary. It has been disappointing to see renewable projects constrained and delayed whilst trying to make progress with decarbonisation.
Therefore, we have encouraged our clients not to express a maximum capacity in the description of development accompanying consent applications, and through industry bodies such as the National Infrastructure Planning Association, we have encouraged determining authorities to take the same approach. Success in this regard has been achieved.
Renewable energy developers and their advisers should take note of two recent decisions of the secretary of state for business, energy and industrial strategy (BEIS) relating to the grant of Development Consent Orders (DCO) under the 2008 Act. These provide an interesting demonstration that a simple change to the standard practice could allow developers of energy projects to exploit the rapid advancements in renewable energy technology whilst saving costly and time consuming amendment applications, and unlock transactions.
The first decision relates to a non-material change application for Dogger Bank Creyke Beck Offshore Wind Farm DCO. When approved in 2015, the DCO stated in Schedule 1, Part 1, that the project would be "an offshore wind turbine generating station with a gross electrical output capacity of up to 1.2 gigawatts…"
The issue for the developer was that since the grant of the DCO, and the grant of an amendment in 2018 increasing the permitted turbine height, progression in wind turbine technology meant that more energy could be generated within the physical design parameters already assessed and approved in its DCO.
Considering the lack of environmental effects, on 20 March 2020, the secretary of state permitted the amendment application, allowing the limit to be removed and changed to permit a project of "more than 100 megawatts". This reference was simply to clarify that the project can be classified as a NSIP under the 2008 Act.
Helpfully, the secretary of state highlighted the ongoing need for renewable energy development as set out in national policy statements EN-1 and EN-3, and the UK’s commitment to a ‘net zero’ carbon target by 2050 as a reason not to restrict low carbon energy generation.
The second recent decision relates to the DCO application for Riverside Energy Park.
During the examination of the application for this energy from waste facility, this firm advocated for the applicant that a maximum output figure was not needed on the basis that this could change over time due to technological advancements, and to have the flexibility to capture additional capacity was entirely in accordance with policy.
The secretary of state, when considering this point, emphasised in the decision letter the importance of enabling the project to exploit the opportunity for greater output, provided it stayed within the parameters assessed for environmental effects. The secretary of state said: "The secretary of state accepts that for renewable energy projects, a maximum generating capacity is not required as any new technology that might be installed will be constrained by the parameters set within the Order which set the envelope within which the environmental statement was compiled such as, but not limited to, building design and maximum permitted noise levels."
On this basis, no maximum generating capacity limit was set in the DCO.
The decisions are particularly useful in the context of the 2008 Act and applications for DCOs in respect of renewable generating station NSIPs.
Legislation and guidance is not clear on the subject of maximum generating capacity, other than to set out the minimum thresholds for technologies to be considered NSIPs. The relevant advice notes 13 and 15 from the Planning Inspectorate do state that flexibility may be sought, provided that this is thoroughly justified and assessed in the environmental statement, but that is as helpful as it gets. The law has also not been entirely clear on the effect, if any, a reference to maximum capacity in the description of the authorised development in a DCO, has if there is no requirement so limiting that development.
It is therefore not surprising that that developers have played it safe on this point, and made non-material change applications to amend the maximum capacity, such as seen in Orsted's application in 2017 to amend the DCO granted for Hornsea Offshore wind Farm - Project One.
Pinsent Masons has advised the promoters of four renewable generating station NSIPs – Hornsea Offshore Wind Farms - Projects Three (Hornsea 3) and Four; Cleve Hill Solar Park (CHSP); and Riverside Energy Park – not to include a maximum generating capacity. We welcome the clarity of the secretary of state’s decision in the Riverside Energy Park case and the increased level of confidence project sponsors should take from this to retain flexibility for generation in their applications. We expect the Secretary of State to take the same approach to the determination of the DCO applications for CHSP and Hornsea 3, with decisions due by 28 May and 1 June 2020 respectively.
This new approach should not be limited to NSIPs though. The principle adopted by the secretary of state for BEIS should be equally attractive to other determining authorities, including Scottish and Welsh ministers, and local planning authorities across the UK.
Wider application and adoption of this new approach would help yield greater clean energy generation from the outset of the project and throughout its generating life. This would serve us well in managing the energy trilemma and our drive towards decarbonisation.