UK government compromises on tariff reductions for biomass CHP

By Erin Voegele | October 20, 2016

The U.K. Renewable Energy Association has announced a government official has acknowledged that the Department for Business, Energy and Industrial Strategy will soften changes introduced to tariffs for certain biomass combined-heat-and-power (CHP) plants.

According to the REA, the U.K. government in July introduced changes to the Renewable Heat Incentive tariffs for biomass CHP plants with under 20 percent power efficiency. These changes were introduced with no formal consultation with industry and with only 21 days of notification. The REA has said it was frustrated with the changes and how they were introduced, noting that companies developing much-need heat and power infrastructure were given less than a month’s notice before the changes took effect, despite many of the projects being under development for up to two years. The REA also said its research has shown the changes put more than £140 million ($171.61 million) of low-carbon investment at risk.

The government, however, has now proposed a compromise on these previously introduced changes. The REA said that on Oct. 19, Jessie Norman MP, Parliamentary Under-Secretary for Industry and Energy, said that that a transitional period will be required as the sector moves towards a lower tariff. During the transitional period, with spans through March 31, 2017, the tariff reductions will apply only to plants that produce 10 percent power, with the remaining 90 percent being heat.

“Transparency in government decision-making is key to maintaining the confidence of investors developing the UK’s much-needed low carbon infrastructure,” said Frank Aaskov, renewable heat analyst at REA. “We welcome the proposed compromise announced today by Mr. Norman. Critically, the transition period should create a runway in which projects that have been under development or construction, some for as much as two years, can be completed. This proposal is a constructive step towards restoring the previously damaged confidence of investors in the biomass CHP sector.”