EGL22510 - Exemption for new investments: overview and structure of legislation
The government announced at its Autumn Statement on 22 November 2023 that there would be an exemption from the EGL for new power generation projects for which there had been no substantive decision to proceed before that day.
The exemption was introduced to strengthen the incentives for investment in renewable energy generation.
HM Treasury published a Technical Note outlining the scope of the exemption which can be found here [link].
Overview
In broad terms, the exemption means that the EGL will not apply to generation resulting from an investment project where the substantive decision to proceed was taken on or after 22 November 2023. This is achieved by treating the particular generating station, or a part of it, as not being “relevant” for the EGL, F(2)A23/S280(1)(c).
The exemption will apply to completely new power generation projects, in which case the identification of the investment project involved and the application of the exemption should be straightforward. It will also apply to additional generation from a project to expand an existing generating station and also where substantially the whole of the generating plant of an existing station is replaced, known as “repowering”.
The exemption may apply to all forms of electricity generation that are currently within the scope of the EGL although it is expected to be mainly relevant to projects involving renewable sources of energy.
Structure of the legislation
FA24/S21 introduced the exemption for new investments by amending the EGL legislation in Part 5 F(2)A23.
As mentioned above, the exemption works by excluding the affected part of a generating station from being treated as “relevant” for EGL purposes by amending the definition in F(2)A23/S280. It does this by excluding the part of a generating station that meets the definition of “qualifying new generating plant”. New F(2)A23/S311A sets out the meaning of qualifying new generating plant. Broadly, this means plant that is commissioned as part of a “qualifying project” where the investment decision was made on or after 22 November 2023, F(2)A23/S311A(1).
The test for when the investment decision was made is expressed by asking whether, on the day before the exemption was announced, it would have been reasonable to conclude that there was a significant likelihood of the investment project not proceeding. This is termed the “new investment condition” set out in F(2)A23/S311A(2).
The meaning of a “qualifying project” is set out in F(2)A23/S311A(4) by reference to the provision of new generating plant for:
A new generating station,
The replacement of substantially the whole of the generating plant of an existing generating station (repowering), and,
Adding capacity to an existing station.
F(2)A23/S311A(5) & (6) then provide that for a project to add capacity to an existing station, it is only the additional capacity that will qualify for the exemption.
F(2)A23/S311A(3) provides a power to extend the meaning of the new investment condition through Regulations, should that become necessary.