U.K. alters RO support for new biomass cofiring, conversions

On July 22, the U.K. Department of Energy and Climate Change announced several measures that aim to deal with a projected over-allocation of renewable energy subsidies, including changes to grandfathering provisions for biomass cofiring and conversions under the Renewables Obligation. In addition, consultations have been launched on controlling subsidies for solar photovoltaic projects of 5 MW or less under the RO, and on changes to the preliminary accreditation rules under the Feed-in-Tariff (FIT) scheme.

The DECC explained that financial support for renewable technologies comes primarily from subsidies which are paid via energy bills. The total amount of subsidies available is capped using a mechanism called the Levy Control Framework.

Regarding biomass, the DECC is removing the guaranteed level of subsidy for biomass conversions and cofiring for the duration of the RO, known as grandfathering. In a written ministerial statement, Lord Bourne of Aberystwyth explained that grandfathering is a policy that specifies once a generating station is accredited and receiving RO support at a certain level, that level will not change for the lifetime of its support under that scheme.

Bourne’s statement goes on to explain that the government’s action will ensure that the support rates under the RO for future biomass cofiring and conversion projects in England and Wales will no longer be covered by grandfathering. However, exceptions will be provided to protect those who have already made significant financial commitments.

According to the DECC, its actions could reduce the risk of more allocations under the LCF by approximately £500 million ($780.58 million) annually in 2020-’21. The DECC also indicated the changes to biomass grandfathering apply only in England and Wales. Decisions regarding the operation of the RO, including the grandfathering policy, in Scotland and Northern Ireland are made by the Scottish Government and the Department of Enterprise, Trade and Investment in Northern Ireland.

“My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way,” said Energy and Climate Change Secretary Amber Rudd.

“Our support has driven down the cost of renewable energy significantly,” Rudd continued. “As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment.”

According to Bourne’s statement, DECC’s latest forecasts under the LCF to 2020-’21 have shown the cost of renewable energy schemes is expected to be higher than when the schemes under the LCF were established. The current forecast is £1.5 billion higher than the government set limit of £7.6 billion in 2011-’12 prices. According to Bourne, the increase is due to accelerated developments in technological efficiency, higher-than-expected uptake of demand-led schemes, and changes in wholesale prices. This means that the forecast in future spend under the LCF is now approximately £11.4 billion in nominal prices, or £9.1 billion in 2011-’12 prices. “The government is determined to bring these costs under control to protect consumers and provide a basis for investment in clean electricity in future,” he said, noting that the measures announced on July 22 illustrate the government’s move away from demand-led schemes while providing appropriate protection for existing investments.