Electricity licence exemptions – not best in class

The steps that are being taken by the Department for the Economy to design a new renewable electricity support scheme for Northern Ireland have been welcomed by all in the industry. This scheme will encourage investment in renewables and it is hoped that it will be the key driver in achieving the 80% by 2030 renewable electricity consumption target set out in the Climate Change Act (Northern Ireland) 2022.

But the electricity licence exemptions regime must also now be updated to reflect the modern technologies used in the electricity industry if we are to ensure that investment in renewables is able to reach its full potential.

Regulation of the electricity industry here is principally carried out by the application of the terms of the licences issued by the Utility Regulator. The licence application procedure is fairly involved and the process can take over 12 months.

Unless they hold the relevant licence or fall under one of the exemptions where a licence is not required, market participants will be guilty of a criminal offence under the Electricity (Northern Ireland) Order 1992 if they are involved in the generation, transmission, distribution or supply of electricity. Acting as an operator of the Single Electricity Market (SEM) on the island of Ireland is also a licensed activity.

Participants in the electricity industry will not be required to hold a licence in relation to the generation, distribution or supply of electricity if they meet the criteria and comply with the conditions set out in the schedules to the Electricity (Class Exemptions from the Requirement for a Licence) Order (Northern Ireland) 2013. There is no register of those operating under a licence exemption and market participants are left to determine themselves whether a class exemption applies in a particular case.

However, the class exemption provisions are very difficult to interpret and apply and market participants face committing an offence if they get this wrong.

Referring to the fact that stakeholders find aspects of the corresponding class exemptions regime in GB to be opaque and difficult to interpret, the UK Government published a consultation on its reform in October 2020 and a Summary of Responses was published in July 2023. The consultation suggested that the class exemptions regime may no longer be fit for purpose and it also recognised the need for the regime to support the government’s commitment to bring its greenhouse gas emissions to net zero by 2050 and take into account the future development of the electricity industry.

Whilst there is currently no time frame indicated for when reform of the GB electricity licence class exemptions regime will take place, the consultation in 2020 and the responses in 2023 have identified the weaknesses that need to be addressed. But there is no indication that similar changes are contemplated in Northern Ireland in the near future.

Even when originally drafted, the provisions of the Class Exemptions Order here were difficult to interpret and apply. This issue has only been made worse by the fact that the provisions have not been updated to reflect the requirements of multi-party energy projects.

This is particularly the case in relation to sites such as ports or other industrial sites where various parties may be carrying out generation, distribution and supply activities to domestic and/or non-domestic customers via private wires.

To assist in removing all obstacles to future investment in renewables projects and meeting the 80% by 2030 target, we need to ensure that reform of the electricity class exemptions regime is also on the legislative agenda in Northern Ireland.

Alan Bissett ([email protected]) is an energy consultant at DWF Law in Belfast