Biomass investors given fresh incentive

Investors in biomass facilities heard today that they would not face mandatory price control reporting in order to qualify for subsidies.

Under plans set out by Energy Minister John Hayes, a voluntary system will instead be put in place whereby the operators of co-firing stations and biomass conversions will be asked to pre-notify DECC of their generating intentions in advance of each Renewables Obligation (RO) period.

The government claims that this will minimise regulatory burdens on generators and enable the Government to better forecast the amount of financial support that the schemes will require.

Hayes said that the new plans would also cut red tape for developers and encourage more investment in biomass generation.

He added: “Energy is central to our economic recovery. We must deliver investment in new infrastructure while keeping costs down for consumers.

“Converting from coal to sustainably sourced biomass is good news for both investors and consumers. It provides a new beginning for our existing power stations, enabling them to achieve radical reductions in emissions, whilst providing affordable, secure and clean energy.

Lucy Hopwood, Head of Biomass and Biogas at NNFCC, a bioenergy consultancy, said: “This appears to be a sensible and pragmatic approach to cost control and it is good to see the Department of Energy and Climate Change encouraging industry engagement on such an important issue.”

DECC says that because there will be no mandatory cost control mechanism, there will no longer be a public consultation on the issue as planned.

A fact sheet has been issued today by the government in an attempt to provide long-term certainty to investors and increase the stability of the RO budget.

Renewable Energy Association head of policy Paul Thompson, spoke to edie about the announcement:

“The way RO works is that the government has to guess how much generation there will be in the following year. If it guesses that too high the consumer ends up paying far too much money and if they get it too low then policy stops working meaning generators and project developers are stuffed. It’s important for everyone that this estimate is roughly right.

“The mandatory proposals would have been an extra layer of complexity adding extra fear and stress for everyone on the generator side. Why not treat everyone like adults and get them to write to you with their own estimates?”

Thompson implied that the government must have had reassurances from energy generators.

“The only reason government agreed to do this would be if a handful of substantial companies, all of whom have a relationship with the government would have reassured DECC that not only will we send you letters but that it is possible, 12-18 months in advance, to estimate within reason, what one might generate.”

Thompson pointed out that a lot of the fuel companies burn has already been contracted for. He said it is unlikely that huge engineering projects to convert coal into biomass, are something companies would decide on a whim. The companies would take the voluntary reporting seriously he suggested.

“If what they write to DECC is a fiction you can be assured that this will be back on the table and DECC will be very disinclined to take anything that we or they say seriously in the future.

“They have every reason to play ball assuming that they do you achieve the same level of protection for consumers and value for money but you also avoid tying everyone up in confusing regulation and anguished discussions with Ofgem or DECC as to what exactly a particular definition is,” he argued.

He also said it had been a good week for renewables after the government’s decision to continue providing support to medium scale renewables schemes was announced earlier this week.  

“I think that’s a pretty clear good outcome for everyone, particularly if you take that with the other announcement on the interaction with RO and the feed in tariff which was a very welcome change of heart.

“U turns are exactly what you should do if when considering a policy proposal you realise it’s better not to do it that way; perhaps you can meet your objectives by going down another route.”

Conor McGlone

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