Business Green: Large biomass eyes new co-firing Renewables Obligation subsidies 20/10/2011
The biomass industry has given a cautious welcome to the new support levels unveiled by the government today as part of its consultation on proposed changes to the Renewables Obligation scheme, voicing optimism that financing for the sector can recommence now a definitive pathway has been mapped out.
In its review of the Renewables Obligation, the Department of Energy and Climate Change (DECC) has proposed maintaining current levels of support for biomass projects at 1.5 Renewable Obligation Certificates (ROCs) per megawatt hour (MWh).
However, it also proposes creating new bands for enhanced co-firing and biomass conversion projects, which could then receive 1 ROC/MWh.
The government's renewable energy roadmap, published in July, forecast that biomass electricity could provide 6GW of capacity by 2020 with an annual growth rate of nine per cent, although large biomass generators have warned higher subsidies would be necessary to achieve this.
Drax, the operator of the UK's largest coal-fired power plant, had threatened to shelve its dedicated biomass plans and said it cannot extend its capacity for co-firing coal and biomass without better subsidies to make the technology economically viable.
The new bandings could be seen as a nod to those generators lobbying for increased support and a spokeswoman for Drax admitted the company was "interested" in the new proposals.
In an emailed statement, Dorothy Thompson, chief executive of Drax, added that an additional uplift on the proposed level could "further the opportunity" for burning more biomass.
"The proposed level of 1.0 ROC/MWh for enhanced co-firing will enable us to increase our co-firing, but we would need a moderate uplift to maximise our potential for producing this low cost renewable electricity," she said.
However, Thompson was disappointed at the support for dedicated biomass, saying it made the investment case for its two planned 299MW plants "highly challenging."
Gaynor Hartnell, chief executive of the Renewable Energy Association (REA), told BusinessGreen the new bands represented "a cheaper way of doing biomass, which is what the big energy companies and Drax wanted".
She predicted dedicated biomass could see "a renaissance" now that the government had "clearly signalled" its importance to the country's future energy mix.
"This is due to its cost-effectiveness and potential for provision of baseload power," she added in a statement. "There will inevitably be tensions between competing uses for biomass - but that is not surprising given biomass is going to become an increasingly important commodity - it will eventually replace fossil fuels in all their uses."
However, Hartnell said the proposed degression rate, which will see dedicated biomass support drop to 1.4 ROCs from April 2016, would not be of benefit to developers.
"If the objective is to incentivise rapid development, it won't really help, as it adds risk with very little benefit," she said.
Adrian Bowles, chief executive of Helius Energy, a dedicated biomass generator currently planning a 100MW plant at Avonmouth, said he was pleased with the government's plans.
"We welcome the greater clarity that this provides for biomass, and will now study the consultation document in detail," he said. "Biomass generation projects... provide baseload renewable power for the grid and have a huge role to play in cutting the country's overall carbon emissions. Biomass and bioenergy have the potential to provide as much as half of the UK's 2020 renewables target."
Chris Moore, director of biomass firm MGT Power, said proposed ROC banding meant the company was now able to progress with its proposed 295MW Teesside Renewable Energy Plant - as long as the government maintained the stated levels.
"After a long wait the biomass industry finally has the combination of clarity over the future ROC band for dedicated biomass, along with agreed 20 year grandfathering of ROCS, and confirmation of robust rules governing biomass sustainability standards," he said.
"Armed with today's good news, we are now mobilising our final phase of financing negotiations with lenders and investors to achieve full financial close and start of construction within less than six months."
Under today's proposals, support for energy from waste will drop from 1 ROC/MWh to 0.5 ROCs/MWh, while the 0.25 ROCs/MWh landfill gas projects currently receive could be removed entirely.
Hartnell said the changes were a blow to what are cheap and effective renewable technologies and would result in the continuation of the status quo whereby the industry has failed to build a new energy from waste plant since 2009.
Steve Lee. chief executive of the Chartered Institute of Waste Management, told BusinessGreen the downgrading of waste ROCs could affect the industry's plans to build £10bn worth of infrastructure over the next decade.
"ROCs are not core to the business case but have a significant impact," he said. "And for some it will mean the difference between viable and non-viable."