UK's DECC to grandfather dedicated biomass

By Lisa Gibson
Posted July 27, 2010, at 4:09 p.m. CST

The first-ever Annual Energy Statement of the U.K.'s Department of Energy and Climate Change includes grandfathering biomass under its Renewables Obligation, which governs what technologies receive renewable obligation certificates (ROCs). The lack of dedicated biomass grandfathering has been a point of contention for some biomass developers in the U.K. who say acquiring funding for projects is difficult when no set level of income exists to assure investors.

The statement was released in June and presents an overview of the DECC's energy policy, laying out plans for future actions. "We are taking immediate action to exploit the potential of bio-electricity and energy from waste, by grandfathering support under the Renewables Obligation for electricity from dedicated biomass, energy from waste, anaerobic digestion and advanced conversion technologies, such as pyrolysis and gasification," the document reads. "We will publish in the autumn a joint industry/Government action plan to deliver a huge increase in energy from waste through anaerobic digestion."

The measure provides certainty investors want, according to a statement by DECC secretary Chris Huhne. Support will be fixed for 20 years, subject to the end date of the RO. In the same document, the DECC proposes a jump from the current target of 20 percent reduction in greenhouse gas emissions by 2020 to 30 percent by 2020.

U.K. electricity-generation giant Drax Power Ltd. plans to build three 290-megawatt (MW) dedicated biomass power plants in the U.K. that will run on a mix of forest and agricultural residues and energy crops. Drax has been known in recent months for making the loudest and most noise about the policies. The company hopes to begin construction in early 2011 on one of its three dedicated biomass plants. Sites include: the Port of Immingham; North Yorkshire, England, on the site of the company's existing coal-fired, 4,000 MW Drax Power Station; and another location not yet disclosed, according to Melanie Wedgbury, head of external affairs for Drax.

"We welcome the recognition, by the government, of the importance of biomass to meeting the UK's renewable energy target," a spokesman for the company said. "Drax has long believed that biomass could and should make a significant contribution to both reducing carbon emissions and increasing electricity generation from renewables. Specifically, we welcome recognition of the need to grandfather dedicated biomass to encourage investment, which rightly reflects the long-term nature of this capital investment. Further, we accept that the industry is best placed to hedge against the fuel risk and believe that this is preferable to hedging against regulatory risk."

The spokesman goes on to say, however, that the company is concerned there will still be a period of uncertainty for dedicated biomass plants, which would not be accredited or ready to begin generating until after April 2013, when current RO regulations expire and new ones are implemented. The DECC reviews the RO banding, categorized by technology, every four years. The next review begins in October with changes implemented April 2013. "We trust that the DECC will take the opportunity to address this issue early in the review," the Drax spokesman said.

RO banding allows for 20-year grandfathering of all other technologies. Grandfathering for biomass support was not incorporated when the RO was banded in 2008 because, unlike other renewable technologies, a large portion of the generators' costs are ongoing fuel costs, according to the DECC.