UK gas and electricity regulator Ofgem, today confirmed that French state-owned power group Electricit�e France (EdF) had made applications for exemption from the newly introduced Climate Change Levy, in respect of electricity exported to the UK through the cross-channel interconnector. If successful, it poses a threat to the UK renewable energy sector, according to an industry expert.

The exemption from the levy, introduced this April 1 following the Finance Act 2000, is granted to individual power stations generating electricity using renewable energy such as wind, waste, energy crops, landfill and sewage gas and small-scale hydro production.

EdF electricity exports to the UK peak at 1900 MW during the winter – some five per cent of UK production. Although predominantly a nuclear power producer, EdF already generates or buys 15 per cent of its power from hydro-electric projects in the Alps, the Pyrenees, the Rhine and the Massif Central. Many of these hydro-dams generate less than 10 MW and are thus small enough to qualify for a Climate Change Levy (CCL) exemption in Britain.

Ofgem will issue EdF with questionnaires for completion after which they will be responsible for making a decision. A spokesman for Ofgem refused to be drawn on the time scale over which the application would be considered.

Ofgem will need to Liaise with the Environment Department and HM Customs and Excise, which is responsible for collection of the CCL. Were an exemption granted, it is likely that an application would be made for the Renewable Obligation Certificate (ROC) – a new scheme due to be introduced in October this year by Ofgem, aimed at subsidising renewable electricity production in the UK.

The climate change levy amounts to 0.43 pence per kWh and is paid by non-domestic electricity customers. The suggested subsidy level from the ROC scheme is a more substantial 3p per kWh.

An influx of cheap French hydropower “could collapse the price paid for renewable energy in the UK”, said Stewart Boyle, an expert in renewable energy, commenting in the Financial Times today.

Since the introduction of the CCL, Ofgem has granted over 400 exemptions, with small-scale Hydro power stations accounting for about 125.