New U.K. Regulations Could Impact U.S. Pellet Producers
Last week the U.K. Department of Energy and Climate Change released a long-term plan regarding its renewable heat scheme. The plan essentially aims to make sure the program stays on budget, as there is a fixed annual amount of funding available for the RHI.
So far, the program’s launch in the non-domestic sector has resulted in more than 1,300 applications, and more than EUR 24 million ($36 million) is expected to be paid out this year. To ensure the program remains solvent, the DECC has devised a plan where the funding awarded to new applicants will gradually decline if the program proves more popular than anticipated.
As part of the announcement, the DECC published the government response to the consultation, which was originally released in July. It is titled “Non-Domestic Renewable Heat Incentive: A Government Response to ‘Providing Certainty, improving performance’ July 2012 consultation,” and is available for download from the DECC website.
In the response, the DECC addresses several topics, including biomass sustainability requirements. The consultation asked for public comments on proposals to introduce sustainability standards into the non-domestic RHI. The standards covered two primary factors: GHG emissions savings, and land use criteria. Regarding emissions savings, the DECC drew from guidance provided by the European Commission’s 2010 “Requirements for sustainability criteria for the use of solid biomass and biogas” report. The DECC ultimately proposed requiring a 60 percent GHG savings compared with EU fossil heat average from April 2014. For wood fuel land criteria, the UK the process of producing raw feedstock corresponds to “meeting the UK procurement policy on wood and wood products, which provides rules on the purchase of wood and wood derived products.” For other biomass feedstocks, the proposal said land use criteria should correspond to those set by the EU Renewable Energy Directive for transportation biofuels and bioliquids.
According to the response document, one respondent noted a concern with the 60 percent GHG reduction threshold. That respondent was concerned that the proposed limit would significantly impact the potential transatlantic supplies of biomass, which is of particular importance to large projects. Another respondent noted a GHG calculator may need to be adapted to reflect the units in which wood chips are sold, such as weight, volume and heat.
Like most government regulations, the final rules published by the DECC are rather long and complicated. While I encourage you to read the full government document to learn the specific requirements of the program, I will attempt to summarize some of the major points, particularly those applicable to the U.S. pellet industry.
While the DECC specified that compliance regimes for the RHI and RO will be different, the department said a consistent approach will be taken to ensure RHI requirements don’t lead to burdensome double reporting for biomass suppliers.
The DECC also said it intends to link eligibility for the RHI with meeting the sustainability criteria, which needs to be notified to the EC as a technical standard. Since this can take some time, the DECC said the biomass sustainability requirements will not be included in the March 2013 regulatory changes. Rather, the goal is to have them in place by the end of the year. Starting April 1, 2014 RHI recipients will be required to demonstrate they meet GHG emissions savings to be eligible for RHI payments. Land criteria will be enforced in-line with the RO timetable, no later than April 2014 and no sooner than April 2015.
According to the DECC, the proposed 60 percent GHG savings threshold will be maintained, equating to lifecycle emissions of less than or equal to 125.28 kg CO2 equivalent per MWh of heat.
For the use of woody biomass, the DECC said it intends to follow the U.K. Public Procurement Policy for Timber and for biomass sourced from a Forest Law Enforcement, Governance and Trade partner to be considered as meeting the land criteria. The department noted it needs to complete additional work to define what would count as meeting the criteria from a non FLEGT partner and will take an approach consistent with the RO.
According to the DECC, work is currently ongoing to develop a supplier list. That list is expected to be in place by the end of the year.