Out-Law / Your Daily Need-To-Know

UK government plans end to 'grandfathered' support for new biomass under Renewables Obligation

Out-Law News | 19 Dec 2014 | 12:25 pm | 1 min. read

Coal power stations that are converted to biomass, or where the level of co-firing alongside coal is to be increased, would no longer be guaranteed support under the Renewables Obligation (RO) before it ends in 2017, under plans put forward by the UK government.

It has proposed ending the current 'grandfathering' policy, designed to protect biomass conversion units and other technologies accredited under the RO from future changes in support levels, to new projects accredited under the RO on or after 12 December 2014. Co-firing or conversion plants moving to a higher RO support band on or after 12 December 2014 would also be affected.

The Department for Energy and Climate Change (DECC) said that the change in policy would "protect bill payers from extra costs in the future".

"This step will help give government flexibility in deciding future allocations of funding and only applies to new biomass conversion and co-firing under the Renewables Obligation," it said in a statement.

Projects that have already been accredited under the RO will retain the same levels of support, while the new Contracts for Difference (CfD) scheme will also be unaffected. Biomass conversions are entitled to compete for support as 'established technologies' under the CfD regime , which will ultimately replace the RO when it closes in 2017, but co-firing of biomass is not eligible for support under the CfD.

The consultation closes on 26 January 2015. The government is expected to publish its response as soon as possible after the consultation closes on 26 January 2015 and it is believed that it may also develop and consult on further mechanisms to increase stability and predictability across the RO biomass co-firing and conversion bands in the future.

The RO is the main financial support mechanism currently used by the UK government 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 Renewables Obligation Certificates (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 depending on the cost of developing that technology and its future potential.

The RO is currently being phased out and will be replaced  by a new CfD mechanism for new generating capacity from March 2017. CfDs will provide guaranteed payments to operators of approved renewable generation technology, while enabling the system operator to 'claw back' money when market prices are high. Payments will be calculated with reference to a technology-dependent 'strike price' and a market reference price, and places within the scheme will be allocated to those more established technologies that bid for the lowest strike price below the maximum.