Estates Gazette • 15 February 2025 • Net zero

Rob Garden completes his look at strategic planning to meet the country’s net zero targets, this time focusing on proposed changes to Habitats Regulations assessments and offshore wind

The government has put growth firmly at the centre of its agenda for this parliament, with housing and clean energy two key areas for investment. One of the main barriers to the consenting of projects in the housing, energy and infrastructure sectors has been the assessment process conducted under the Conservation of Habitats and Species Regulations 2017 (the Habitats Regulations). In the offshore energy sector, there is also a potential interaction with marine conservation zones under the Marine and Coastal Access Act 2009

In December 2024, the government issued the Planning Reform Working Paper: Development and Nature Recovery, which sets out its proposals for a new approach to how housing and infrastructure development can meet its environmental obligations and contribute to nature recovery. There are two key reasons that the government is focusing on this as an area for change.

The first is because, unlike an environmental impact assessment, a Habitats Regulations assessment is a pass or fail test which a decision-maker must take and so it poses a greater refusal risk for projects. An EIA process can culminate in a conclusion of significant adverse effects but permission can still be granted. However, from an HRA perspective, a project which has an adverse effect on a designated site cannot proceed unless there is a successful derogation case. A derogation case is necessary where it is shown that a project (alone or in combination with other projects) will have an adverse effect on the integrity of a designated site and it must demonstrate:

2. Imperative reasons of overriding public interest in the project proceeding; and

3. That compensation is secured and will be delivered. This third element has proven a real challenge, as compensation must be secured and delivered before the project can proceed. This is demonstrated by measures included in previous development consent orders, such as those included in Schedule 14 to the Hornsea Three Offshore Wind Farm Order 2020.

The second reason is that this affects both the energy sector and the housing sector. In the energy sector, this is a major issue for industries such as offshore wind because a number of projects have been through the derogation process and had to deliver compensation on a project-by-project basis, with this causing consenting delays. In the housing sector, the nitrates issue has also been a major blocker for residential development in recent years and strategic compensation has long been identified as a requirement to address this. Addressing this will help deliver two of the government’s main growth agendas.

1. Moving responsibility for identifying actions to address environmental impacts away from multiple project-specific assessments in an area to a single strategic assessment and delivery plan. This would allow action to address environmental impacts from development to be taken strategically, at an appropriate geographic scale, rather than at the level of an individual project.

2. Moving more responsibility for planning and implementing these strategic actions on to the state, delivered through organisations with the right expertise and with the necessary flexibility to take actions that most effectively deliver positive outcomes for nature.

3. In turn, allowing impacts to be dealt with strategically in exchange for a financial payment that helps fund strategic actions so development can proceed more quickly. Project-level environmental assessments would then be limited only to those harms not dealt with strategically.

1. If there was a delivery plan in place covering the impacts of development on a site, where the promoter committed to making a payment in accordance with the tariff of the applicable delivery plans, the project would only be screened for any likely significant impacts that were not covered by those delivery plans. The promoter would not need to secure their own mitigation or compensation measures to address impacts covered by the delivery plan. If the screening exercise identified impacts not of a type covered by a delivery plan, then the promoter would still need to secure bespoke mitigation and compensation to address those impacts.

2. The measures proposed in the delivery plan would be delivered and managed by a delivery body. The delivery plan would include a package of measures, such as improved site management, and the delivery body would also put in place plans for management and monitoring of compensatory habitat.

These measures are expected to be included in the Planning and Infrastructure Bill which is proposed to be issued in March of this year, but this is likely to be controversial given the importance of the potentially affected sites and the current legislative protection.

In principle, this is welcome but there are a number of challenges. The biggest challenge, in reality, is the issue of timing. This will require primary and secondary legislation, which will take time. Even if legislated for, undertaking the necessary assessments and developing a delivery plan for a site will take time. And even if delivery plans are adopted, there is a question around the timing of the delivery of the measures in a delivery plan to ensure that the measures do actually provide mitigation or compensation for any given project and that a project can rely on these measures in time.

This is not necessarily a new concept, and strategic compensation is being developed in the offshore wind sector and is legislated for in the Energy Act 2023. Recent developments in this sector demonstrate the likely approach that strategic compensation will follow.

In a written ministerial statement dated 29 January 2025, the government reiterated its commitment to use the powers conferred in the Energy Act 2023 to ensure that compensatory measures in respect of marine protection areas can be delivered strategically rather than on a project-by-project basis.

The Offshore Wind Environmental Improvement Package is being developed by the government to help offshore wind project applicants address unavoidable impacts to MPAs at a strategic level. The government has confirmed that OWEIP is being implemented through secondary legislation and guidance.

The intention is that this strategic compensation will be facilitated through one or more marine recovery funds into which applicants can choose to pay to discharge environmental compensation obligations. The Department for Energy Security and Net Zero published guidance (Strategic compensation measures for offshore wind activities: Marine Recovery Fund interim guidance) on 29 January 2025. The guidance identifies two potential compensation measures that will be appropriate for offshore wind developers.

The DESNZ guidance also recognises the ongoing timing challenge in securing the delivery of compensation. Given that it is focused on specific offshore wind projects which are to be consented through a DCO, it sets out the provisions which should be included in a DCO to address strategic compensation. This provides that developers may wish to include a provision allowing for a contribution to be made to an MRF, and confirms that any such provision should usually restrict works which give rise to the adverse effect for which compensation is required until evidence has been provided that:

◼ strategic compensation alone cannot currently be relied on at this stage, given that it is not currently established, and this must be provided alongside project-specific compensatory measures. This is an approach that we are seeing developed on emerging projects; and

◼ even where strategic compensation is established, it remains likely that this will have to be in place before the adverse effects of the given project can proceed. There is recognition within the DESNZ guidance that the secretary of state may consider circumstances where the adverse effect can occur before compensation is in place.

This demonstrates the timing and delivery challenge, even where strategic compensation is developed, and highlights that the onus of assessment and securing compensation remains with the developer. For those in other sectors, monitoring development in the offshore wind sector will be important.