UK energy projects sign contracts for renewable energy incentives

By Erin Voegele | June 10, 2014

The U.K. Department of Energy and Climate Change has announced eight renewable energy projects have officially signed the first contracts under the government’s electricity market reforms. The list includes three previously-announced biomass projects, including the biomass conversion of Drax Unit #1, a 645 MW facility in Selby, North Yorkshire; the biomass conversion of Lynemouth Power Ltd., a 420 MW facility in Ashington, Northumberland; and the development of the 299 MW Teesside project by MGT Power Ltd., a proposed dedicated biomass facility with combined-heat-and-power (CHP). The other five projects are off-shore wind projects.

According to the DECC, the eight projects will are expected to add an estimated 4.5 GW of renewable capacity in the U.K., accounting for approximately 14 percent of the renewable capacity expected to be brought online by 2020. The projects are also expected to lead to the reduction of about 10 million tons of carbon dioxide emissions per year.

“We have put in place a framework of sustainability criteria and reporting requirements for biomass which covers these projects. These will ensure that we only provide support for biomass plants which meet the appropriate legal requirements for low carbon generation,” said MP Michael Fallon in a written statement posted to the DECC website. “These contracts are just one of the electricity market reform (EMR) measures designed to ensure a reliable, diverse and low-carbon power market. DECC has robust plans to deal with security of supply, working jointly with National Grid and the energy regulator Ofgem.I am grateful to all applicants for their participation in the FID Enabling for Renewables process. The level of interest in the process demonstrates industry support for EMR and the healthiness of the renewables sector in the U.K.”

Last year, the DECC announced that the government had sent out draft investment contracts to a total of 16 renewable energy projects that had progressed to the next stage of the final investment decision (FID) enabling for renewables process. In mid-December, the DECC announced that only 10 of those projects had been found to be provisionally affordable under the budget caps released earlier that month. The original list of 16 included seven qualifying biomass projects, including the Teesside plant, the Lynemouth conversion, the conversion of two Drax units (Drax Unit #1 and Drax Unit #3), and the conversion of three units at Eggborough Power Ltd.

Conversion of the three Eggborough units was cut from the list when the DECC reduced the project pool to 10 provisionally affordable projects in December. A later announcement further altered that list of projects, including the elimination of the Drax Unit #3 conversion.

Drax Group plc has announced its intent to legally challenge the DECC’s decision. In an April regulatory filing, Drax Chairman Charles Berry, said “We don't understand the basis for the decision as nothing has changed as far as our plans are concerned between December and now. External legal advice confirms that we've a good case for challenging this decision in the courts. Accordingly, proceedings have commenced.”