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Renewables under review—HSE consults on full cost recovery

The UK Health and Safety Executive (HSE) recently issued a consultation document for a new cost recovery model for the wind and marine energy (renewables) sector. The HSE has identified wind and marine renewables as a highly specialised and high hazard industry, involving emerging technologies, and proposes a “full cost recovery” regime like that in place for COMAH and offshore safety. Once introduced, the existing Fee for Intervention (FFI) charging model will cease to apply. Whilst this may be a reasonable proposal, the consultation document leaves unanswered questions which may cause uncertainty and concern within the industry

WHY INTRODUCE A NEW COST RECOVERY MODEL?

The UK legislative framework is robust to the introduction of new technologies and the HSE is quick to point out that it will not stand in the way of innovation. When faced with a new technology, the HSE must build up organisational capabilities necessary to effectively regulate that technology. These capabilities include processes and procedures, operational guidance and competence.

Developing capabilities is an expensive exercise and without funding from government the HSE must look to industry to carry an element of the cost. This is consistent with an HSE mantra that those that hold the risk, pay for the risk. The challenge though is to find a mechanism which is pragmatic and proportionate to the magnitude of the hazards, without being so burdensome that it stifles investment and progress.

WHAT IS THE STATUS QUO?

The renewables sector is currently regulated using the FFI model. The HSE only recovers costs when a material breach of health and safety law is found. For example, if an inspector discovers that an item of work equipment does not comply to the Provision and Use of Work Equipment Regulations (PUWER) 1998, then the duty holder would be invoiced by the HSE for the time involved in the inspection, enforcement, and any follow-up. If no breach is found, then there is no cost for the duty holder.

FFI is a common cost model used by the HSE to regulate a wide range of industries, including those which are also high hazard such as construction and chemical facilities not subject to the COMAH Regulations (Ref. 1), also known as “sub-COMAH”.

IS THE NEW COST RECOVERY MODEL CONSISTENT WITH OTHER SECTORS?

In the consultation document (Ref. 2), the HSE states that offshore and marine renewables is a high hazard industrial activity. Although based on that categorisation alone, the use of a COMAH style full cost recovery model is not consistent with other high hazard industrial activities subject to FFI, for instance sub-COMAH chemical sites and the construction industry.

Sub-COMAH chemical sites can cause major accidents involving fire and explosion and multiple fatalities. Whilst the possibility of a fire and explosion may be less likely on a construction site, taken over a period of a year, the number of incidents during construction activities is more significant than those originating from COMAH sites.

On the face of it, applying a COMAH style cost model to an industrial activity based on the potential for a major accident is not a consistent policy. However, the HSE does highlight that the renewables sector is highly specialised and of national strategic importance from an economic and social infrastructure perspective. The sector may also present some new safety challenges in introducing complex and novel technologies, as well as accessing sites. As such, the HSE’s position is that it must be proactive in ensuring the sector is properly managed to minimise risks to workers and the public.

WHAT IS A FULL COST RECOVERY MODEL?

The HSE proposes a draft indicative hourly rate of £192 to recover the full cost of regulating duty holders in the sector. The rate includes all direct costs and associated overheads plus an element of indirect cost. Where the HSE engages a third-party for advice on technical issues, then the actual cost will also be recovered. Duty holders will be invoiced quarterly in arrears. There is no indication in the consultation document as to how many hours will be charged, whether in total or, for example, by type of asset.

CAN THE INDUSTRY JUDGE THE IMPACT OF THE PROPOSAL?

Unfortunately, the HSE proposal as presented leaves several important issues unaddressed, making it virtually impossible for the industry to understand the time and cost impact.

It is not possible to estimate the annual cost of the scheme to a duty holder, or how common costs would be allocated between duty holders. No information is provided on whether guidance or an approved code of practice would be produced by the HSE to support the industry, or who would bear the cost of producing guidance and implementing the scheme.

The point at which a duty holder becomes liable for the charge is not discussed. There is no discussion on how intervention planning would be performed or how the HSE would gather intelligence on the risk profile of a particular asset to ensure that the interventions are proportionate and appropriately targeted. The frequency of the inspections and how this would be determined is not discussed.

IS THE NEW MODEL PROPORTIONATE TO THE HAZARDS?

For much of the operating life of a wind or marine renewable asset the risks are benign, partly due to the assets being unmanned. Across the complete lifecycle of an offshore and renewable energy development there are discrete phases where the likelihood of harm is significantly increased, such as during construction or maintenance activities. This is significantly different to other high hazard industries such as offshore oil and gas and onshore chemical industries, where workers are always present, and the process hazard is constant and persistent.

Due to the lack of information in the HSE’s proposal, it is not possible to determine how the new model would work in practice to deliver proportionate and pragmatic regulation.

For example, continuous monitoring or annual inspections by the HSE may be disproportionate to the hazards of an offshore and marine renewables installation. A more effective approach may be to concentrate on phases and activities where the risk of harm is greatest.

Ensuring that the wind turbine generator as a product is safe-by-design would significantly reduce the risks associated with an offshore wind asset. An effective and efficient regulatory approach would be for interventions by the HSE during the design phase. The purpose would be to verify that a wind turbine generator design has reduced the risks associated with installation, operation, maintenance and decommissioning to as low as reasonably practicable (ALARP).

ARE THERE OTHER WAYS FORWARD?

One alternative way forward would be an approach along the lines of a case for safety, which would demonstrate that the duty holder has identified the risks that could arise throughout the entire life of an asset. This would include suitable evidence that these risks have been reduced to ALARP, for example through a safe-by-design approach. The case would then document how any residual risks are managed during the operational phase through processes and procedures.

Such an approach would constitute a safety report and although safety reports are normally associated with the Offshore Regulations (Ref. 3) and COMAH Regulations, a much simpler document would be needed for an offshore and marine renewables development. A simplified safety report solution would be possible within the framework of the CDM Regulations (Ref. 4).

The approach could follow the traditional format of a safety report, demonstrating that the potential major accidents have been identified and the causes understood. The report could include details on the controls that have been put in place to mitigate the hazards, how the controls were implemented and verified and how the level of risk control will be maintained throughout the lifetime of the asset.

Such an approach could be used to make a strong argument that major contributors to the through life risk profile of an asset, such as the wind turbine generators, are safe-by-design.

It is difficult to know whether a safety report regime would be more or less expensive than the proposed full cost recovery model. When first introduced in the offshore oil and gas sector in the 1990s, for instance, the safety case regime was viewed as expensive and burdensome. Today, it is far better understood and more pragmatic. A proportionate safety report model in the renewables sector would be expected to help achieve the safe design and operation of assets at a reasonable cost.

CONCLUSION

Emerging technologies will require the UK HSE to develop new organisational capabilities and competencies and the HSE cannot be expected to finance these developments from its existing budget. The funds either need to come from central government or industry. A full cost recovery model is a reasonable mechanism to enable the HSE to regulate health and safety risks effectively and efficiently.

However, any new cost recovery model should be proportionate to the risks of the industry and consistent with other industrial sectors with similar risk profiles. The consultation period should allow the proposed model to be developed between the HSE and the renewables sector in a collaborative and open way. The goal would be to shape a cost recovery model that is proportionate and pragmatic, and meets the needs of all stakeholders, without stifling investment and innovation.

References

  1. Control Of Major Accident Hazards Regulations 2015 (COMAH)
  2. Consultative Document, Health and Safety Executive Cost Recovery, June 2023
  3. Offshore Installations (Safety Case) Regulations 2005 (SCR05).
  4. Construction (Design and Management) Regulations 2015

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