DECC announces which technologies will compete for initial CfDs

By Erin Voegele | May 13, 2014

On May 13, the U.K. Department of Energy and Climate Change published several renewable energy proposals that are likely to impact the availability of support mechanisms for renewable energy technologies, including those in the bioenergy sector.

The DECC confirmed that the budget for contracts for difference (CfD) renewables spending will be divided into two main groups, one for established technologies (Group 1) and another for less established technologies (Group 2). According to information published by the DECC, a number of criteria were used to select the appropriate group for each renewable technology, including the maturity of the technology and industry, levels of U.K. and global deployment now and in the future, the potential for further cost reductions and the contribution to future decarbonization.

According to the DECC, technologies categorized as established under Group 1 will compete with each other for support from the first allocation of CfDs. Technologies included in the category include energy-from-waste with combined-heat-and-power (CHP), landfill and sewage gas, hydro projects between 5 MW and 50 MW, onshore wind greater than 5 MW and solar photovoltaic greater than 5 MW.

Information released by the DECC indicates other renewable technologies classified as less established under Group 2 will be provided support to create investment that enables cheaper competitive development in the longer term. These technologies will only move to auctions if there are more applications for CfDs than are affordable within the budget. Technologies categorized as less established include anaerobic digestion, dedicated biomass with CHP, geothermal, offshore wind, wave and tidal stream, and advanced conversion technologies.

The DECC, also announced that it is launching a consultation under the Electricity Market Reform on proposals to treat biomass conversions as a separate, third, technology group (Group 3). That consultation asks stakeholders to weigh in on whether biomass conversion would be placed in a separate grouping and subject to immediate competition through a constrained allocation process, if budget is available. Within the consultation document, the DECC explains that it is proposing that biomass conversion plants be considered an established technology and subject to competition if budget is available, but in a separate grouping from the two existing groups for established and less established technologies. The formation of this third group would ensure competition is maximized in Group 1.

According to the DECC, if biomass conversion projects were placed in Group 1 competition within that group could be distorted by lessening the competitive pressure on the other Group 1 technologies which, predominantly, have lower strike prices. Alternatively, if biomass conversion projects were placed in Group 2, the potential for competition to be distorted could also occur given the size and relative strike prices of biomass conversions.

The deadline to comment on the consultation to establish a Group 3 technology group for biomass is June 10. Addition information on how to comment can be downloaded from the DECC website in the consultation document.

The DECC has opened a separate consultation on support for community energy projects under the feed in tariffs (FITs) scheme. According to the DECC it is consulting on the possibility of increasing the maximum capacity for community anaerobic digestion, hydro onshore wind and solar photovoltaic projects from 5 MW to 10 MW under the FITs scheme. The consultation also addresses whether more can be done to allow grants to be combined with FITs payments for community projects up to 5 MW. Additional information on the consultation is available on the DECC website. Comments are due July 7.