UK biomethane gets subsidy certainty

The announcement comes after a Decc review of the Renewable Heat Incentive (RHI) – a Government programme that provides financial incentives to encourage the uptake of renewable heat.

The RHI supports biomethane injected into the gas grid by paying a flat rate of 7.5p/kWh to all plants (decreasing to 6.75p/kWh on 1 January), irrespective of their scale.

However, Decc started a review of the policy in May to evaluate whether larger planned biomethane plants still warranted subsidy support thanks to their increasing economies of scale. Indeed, the amount of biomethane injected to the UK grid has doubled every year since 2011 and is set to more-than quadruple in 2014.

Following the review, Decc has agreed to adopt a tiered system, with the new tariff levels as follows:

TierTariffs

In the review response, Decc stated that tiering should lead to a consistent return for suppliers as subsidies should decrease alongside production costs. The aim of this new policy is to ensure growth of biomethane injection to the grid, and ensure value for money on RHI budgets.

Industry reaction

Commenting on today’s announcement, Anaerobic Digestion & Bioresources Association (ABDA) chief executive Charlotte Morton said: “The industry will welcome this announcement, which will reassure developers and investors that they can continue to deliver the biomethane projects they have in planning.

“Although we had concerns around the original consultation document, this has been a good example of DECC working closely with industry towards a common goal. These proposals will help put the biomethane RHI support on a more secure footing.

“Biomethane is a vital weapon in the fight for lower-carbon energy. It is one of few renewable options for the gas grid and heavy goods transport, and it deserves full-throated political support.”

Once the regulations have been approved in Parliament, the new tariffs will be protected from degression until July 2015, giving existing developers certainty about tariffs if they can complete projects by then.

Projects in the pipline

Renewable Energy Association chief executive Dr Nina Skorupska added: “Biomethane is one of the success stories of the RHI and has a major role to play in greening the gas grid. From almost nowhere two years ago, we have now 10 projects operational, with more still in the pipeline.

“The current tariff rates are already competitive with many other technologies and further cost savings are likely as the industry deploys at scale.

“The industry has worked closely with Government over the last few months to ensure that these proposals drive a long-term sustainable industry, at ever greater value for money for the taxpayer.”

Brad Allen