Biomass support capped at 15MW under Scottish Renewables Obligation

Following last year's consultation, Energy Minister Fergus Ewing confirmed that biomass stations capable of generating 15MW of energy will only receive support under the RO if they operate as combined heat and power (CHP) stations. These are stations that make use of the heat produced during the generation process, for example by supplying it to local communities.

It has also confirmed that the subsidy rates which will apply to larger building-mounted and ground-mounted solar projects until the RO is replaced by a new mechanism in 2017 will mirror those elsewhere in the UK. Building-mounted solar projects will receive 1.7 Renewables Obligation Certificates (ROCs) per megawatt hour from April, falling to 1.4 ROCs from 2016. Ground-mounted solar will get 1.6 ROCs from April and 1.2 ROCs from 2016.

Ewing said that the Scottish Government was "taking action" to address finite wood supplies ahead of the Government in England and Wales. In its response to a similar consultation, published in December, the Department of Energy and Climate Change (DECC) said that it would not reduce subsidy rates until a further 400MW of generating capacity was built.

"We have made clear our concerns over competition for a finite supply of wood, and our belief that there should be a greater focus on biomass in smaller scale energy projects wherever possible, and the responses to our consultation reflected that," Ewing said.

"Sustainable biomass provides huge opportunities for the people of Scotland - jobs in construction, jobs in the plans and in the forest supply sector, reduced emissions and reduced energy bills. Providing the forest supply sector with new markets will also allow them to plant more trees. We have also proposed limited transition arrangements which will allow combined heat and power stations who lose heat clients time to replace them before losing their support," he said.

Biomass stations will remain eligible for reduced support for up to five years under the new subsidy, giving them some time to regain CHP status. In its original consultation, the Scottish Government proposed cutting off support to those stations with installed capacity over 10MW. However, Ewing said that wood supply forecasts showed that the higher limit would create opportunities for forest supply businesses without affecting existing users.

The RO is the main financial support mechanism used to encourage the development of large-scale renewable electricity generation projects. It places an obligation on suppliers to source an increasing proportion of the electricity they supply to customers from renewable sources. Banded ROCs were introduced in 2009, changing the RO from offering a single level of support for all renewable technologies to one where support levels vary in relation to the cost of developing that technology and its future potential.

The draft Energy Bill, published by the UK Government at the end of last year, proposes replacing the RO from 2017 with a new system of Feed-in Tariffs with Contracts for Difference (FiT CfDs). These will offer producers of low carbon power a fixed price for energy supplied to the National Grid, with payments made with reference to a technology-dependent 'strike price' and a market reference price.

The Scottish Government announced in September that it would provide certainty to onshore wind developers by guaranteeing financial support under the RO until 2017 "unless new evidence on costs emerges". Its position is different to that of the UK Government, which plans to carry out a previously unscheduled review of the costs of providing support in England and Wales in 2014. The Scottish Government is also retaining support for hydro-electric generation at current levels, rather than introduce cuts as will be the case south of the border.