U.K. awards CfDs to 2 energy-from-waste projects

By Erin Voegele | February 27, 2015

The U.K. Department of Energy and Climate Change has announced the results of its first green energy auction for Contracts for Difference (CfD). Among the 27 projects selected for CfD contracts are two energy-from-waste (EfW) projects with combined-heat-and-power (CHP).

The two EfW projects include the 49.75 MW Wren Power and Pulp project and the 45 MW K3 CHP Facility. Both projects are located in England and will receive strike prices of £80 ($123.60). In addition to the two EfW projects, CfDs were awarded to three advanced conversion technologies projects, two offshore wind projects, 17 onshore wind projects, and five solar projects. All together, the 27 projects could add 2 GW of capacity to the U.K. grid.

“This world leading auction has delivered contracts for renewables projects right across the UK. These projects could power 1.4 million homes, create thousands of green jobs and give a massive boost to home-grown energy while reducing our reliance on volatile foreign markets,” said Energy and Climate Change Secretary Ed Davey.

In a statement, the DECC indicated the budget for the second CfD auction is expected to be confirmed later this year. The DECC also specifies this budget is in addition to the significant pipeline of deployment already expected to come forward under the Renewables Obligation and small-scale Feed in Tariffs schemes, as well as funding for the eight projects that were awarded investment contracts, or early CfDs, under the Final Investment Decision Enabling for Renewables (FIDeR) process.

The CfD budget for the auction was split between several technology groups. The first, known as Pot 1, included established technologies, such as onshore wind, solar, EfW with CHP, landfill gas and sewage gas. The budget for Pot 1 was £65 million, including £50 million for projects commissioning in 2015/2016 and £15 million for projects commissioning from 2016/2017 onwards.

Pot 2 included less established technologies, such as offshore wind, anaerobic digestion and dedicated biomass with CHP. The budget for Pot 2 was £260 million, including £155 million for projects commissioning from 2016/2017 onwards, and £105 million for projects commissioning from 2017/2018 onwards.

The third category, Pot 3, included biomass conversions. No budget was been released for Pot 3 during the first allocation. However, the DECC has indicated this does not preclude a budget being allocated to this pot in future allocation rounds.

In July, the DECC announced it did not plan to offer a budget for Pot 3 during the first CfD auction beyond the funding that was already allocated through the FIDeR process for three biomass conversion projects. The Drax Group plc unit #1 biomass conversion, the Lynmouth Power Ltd., biomass conversion and the Teesside dedicated biomass with CHP project are among the eight projects selected to received subsidy under the FIDeR process. Five off-shore wind projects were also selected for early CfDs under the FIDeR process.

 In July, the European Commission granted state aid approval to the five wind projects as part of a larger announcement from the commission that indicated the U.K’s Contracts for Difference (CfD) subsidy program is in line with EU state aid rules.

In January, the EC approved the U.K’s plan to provide state aid to the proposed Teesside CHP plant, a 299 MW biomass-fired facility. The Drax and Lynemouth biomass conversion projects are still awaiting EC state aid approval.  However, in February, the EU announced it has opened an in-depth investigation to assess whether the U.K.’s plans to support the biomass conversion of the coal-fired Lynemouth power plant are in line with European Union state aid rules.