Out-Law News 3 min. read

Defra consults on incorporating EU cogeneration (CHP) requirements into the Environmental Permitting Regulations in England and Wales

The Government is consulting on the incorporation of EU requirements to promote high efficiency combined heat and power (CHP) and related activities into the Environmental Permitting Regulations (EPR).

The Department for the Environment, Food and Rural Affairs (Defra) is now consulting on its preferred approach, which will apply in England and Wales. The changes flow from requirements set out in the 2012 Energy Efficiency Directive (EED) to promote high efficiency CHP, efficient district heating and cooling infrastructure and heating and cooling from waste heat, and must be incorporated into national laws by 5 June 2014.

"This consultation continues the series of consultations relating to the transposition of this EU directive into the UK," said energy and environmental law expert Linda Fletcher of Pinsent Masons, the law firm behind Out-Law.com. "Last July we saw the consultation on the transposition of Article 8 on energy audits with the Government's proposal for the Energy Savings Opportunity (ESOS) scheme and  on which the Government's response it still awaited; and in December last year the Government published new regulations regarding energy efficiency targets for central government buildings."

"With the recent European Commission announcement as to its proposals for a binding target for reducing greenhouse gas emissions by 40% against 1990 levels by 2030, following on from the 20-20-20 package, but without individual member state targets being set the implementation of this directive is even more significant," she said.

The EED imposes various measures on EU member states to reduce their primary energy consumption by 20% of their 2007 business as usual projections by 2020. Amongst other measures, it will introduce rules designed to promote energy efficiency; require retrofitting of central government buildings at the rate of 3% annually; require the inclusion of energy efficient considerations in public procurement; remove barriers in the energy market; promote efficiency in energy generation; and overcome market failures that impede efficiency in the supply, transformation, transmission, distribution and consumption of energy.

Defra is now consulting on how best to implement those provisions of the EED which require developers of new or refurbished power generating installations with a total thermal input exceeding 20 MW to consider whether these can be developed as CHP facilities or otherwise use the waste heat. A CHP facility allows waste heat produced as part of the electricity generating process to be recovered and supplied to local heating and cooling networks. If these opportunities exist and are cost effective, national authorities will only be able to grant an environmental permit if the facility is developed as a CHP facility or uses waste heat recovery techniques.

The consultation proposes incorporating the new requirements, which are contained in Article 14 of the EED, into the EPR, as these currently contain similar requirements for  operators to consider CHP and waste heat recovery opportunities as part of best available techniques (BAT) for energy efficiency. BAT refers to the most cost-effective techniques available at the time to achieve a high level of environmental protection, and BAT Conclusions are used as the central EU reference point for determining and granting environmental permits to industrial facilities.

Justifying its choice on transposition mechanism, Defra said that environmental permitting was an "established process for regulating the operation and refurbishment of industrial installations in England and Wales", including "nearly" all of those that would become subject to the new rules once in force.

"Installations in any of [these] categories which are new after 5 June 2014 will in any case need to apply for an environmental permit," it said in its consultation. "The permit application process requires the operator to supply a range of information about the installation's technical characteristics. The EPR amendments proposed in this paper would add to that the supply of a CBA [cost-benefit analysis] [to assess the feasibility of new or refurbished cogeneration installations] in fulfilment of the requirements of [the EED]."

"The regulator is already required to determine, from the information provided with the application, whether a permit can be granted and, if so, with what conditions. With the proposed amendments, the regulator would determine from the CBA whether the installation can be permitted only on the basis of incorporating high efficiency cogeneration or district heating and cooling," it said.

Energy and environmental law expert Linda Fletcher said that Defra had taken a "pragmatic approach" to transposing the new requirements.

"Operators are already familiar with complying with BAT, but operators will need to add the new CBA and feasibility requirements into their plans when designing and considering new installations at an early stage," she said.

Defra's consultation sets out how it proposes to incorporate the EU provisions in England and Wales and will close on 21 March. A separate consultation is currently underway in Scotland which proposes a similar implementation as set out by Defra, through the use of the Scottish Pollution Prevention and Control (PPC) Regulations.

Article 14 of the EED also requires member states to carry out a comprehensive country-wide CBA of the potential for the national application of high efficiency cogeneration and efficient district heating, and to provide this to the European Commission by the end of 2015. They must also take "adequate measures" for cogeneration and district heating infrastructure to be developed if the CBA indicates that the benefits outweigh the costs.

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