On September 5th I was delighted to see the industry’s hard work receive the recognition it deserved when the Government put forward an amendment to the energy bill that grants the powers to introduce a Renewable Liquid Heating Fuel Obligation (RLHFO), similar to the Renewable Transport Fuel Obligation (RTFO). I am also pleased to report that the amendment was passed without any objections.
During the Bill’s passage through parliament, we received significant support from nearly all political parties. This gives us confidence that, regardless of the outcome of the next election, we will be able to help our rural customers decarbonise their home heating.
This amendment has been made possible thanks to the considerable amount of correspondence submitted by rural constituents to their MPs highlighting the cost and disruption of achieving the net zero challenge. Additionally, the input from local fuel oil distributors, along with the numerous meetings held by industry trade bodies OFTEC and UKIFDA with MPs and other important parties, has contributed significantly to this outcome. The Government now recognises the importance of a technology-neutral approach for rural communities.
However, this is only the end of phase one. Our attention must now turn to how, and when, this legislation can come into force. In reality, more work and influencing are probably required to achieve this.
What does the amendment actually do?
In putting forward the amendment, the Government recognised that the RTFO has been a very successful piece of legislation and it proposes to replicate it for heating oil. The amendment (detail below) grants the Government pre-ordained powers to implement an RLHFO through regulations rather than legislation, expediting the parliamentary process.
The amendment suggests that there will be a consultation. The minister was pressed in parliament regarding the timing of this, and he indicated that it would take place within 12 months, with a possibility of it being scheduled sooner rather than later. Given the upcoming general election, it is imperative that we urge the Government to set the consultation date as soon as possible.
I anticipate that the consultation will detail what an RLHFO will look like, and it will seek answers to questions about obligation levels, feedstock availability and costs. UKIFDA and OFTEC have already started work on this and will be putting together a number of different workstreams for which we are likely to require expert help from the industry. In addition, the position of Northern Ireland needs to be resolved. The legislation only applies to Great Britain, but the Government has committed to consulting with the province. This approach appears counterintuitive since the RTFO is a mechanism that applies to the entire UK. We have already communicated with our partners to address this matter.
When is a RLHFO likely to start?
It is too early to tell. Much will depend on how quickly the Government can launch the consultation and respond. We will work closely with our partners in the coming months to prepare a thorough response to the consultation.
Detailed powers provided by the amendment
The amendment provides the Secretary of State with a power to make regulations:
(i) imposing on off-gas grid heating fuel suppliers an obligation in respect of renewable liquid heating fuel that corresponds to or is similar to the Renewable Transport Fuel Obligation (RTFO) provided for in the Energy Act 2004 and:
(ii) making provision connected with that obligation which corresponds to or is similar to provision made by, or that may be made under, Chapter 5 of Part 2 of the Energy Act 2004. The RTFO obligates suppliers of relevant transport fuels in the UK to produce evidence showing that a percentage of the fuel that they supply comes from renewable sources.
It would also give the Secretary of State the following powers:
• Establishing and appointing an Administrator to administer the obligation (corresponding to sections 125-125C of the Energy Act 2004).
• Making provision about how amounts of heating fuel are to be counted or determined for the purposes of the obligation (corresponding to section 126 of the Energy Act 2004).
• Making provision for the Administrator to issue certificates evidencing supply of renewable liquid heating fuels. The regulations may authorise transfers of certificates between persons (including for consideration) (corresponding to section 126 of the Energy Act 2004).
• Making provision for a supplier to pay a specified sum to the Administrator if they do not fulfil their obligation to supply the specified amount of renewable liquid heating fuel (corresponding to section 128 of the Energy Act 2004).
• Providing for the Administrator to impose civil penalties on persons who contravene specified obligations (corresponding to section 129 of the Energy Act 2004).
• Providing for a procedure for individuals to object to penalties and appeal against penalties to the courts (corresponding to sections 130 and 131 of the Energy Act 2004).
• Providing for HMRC to disclose specified information to the Administrator, impose constraints on the further disclosure of such information and make it an offence to wrongfully disclose such information (corresponding to sections 131A to 131C of the Energy Act 2004.)