Government abandons plans for compulsory biomass reporting and cost controls

Generators in England and Wales will instead be able to report their generating intentions and expected output to the Department of Energy and Climate Change (DECC) on a voluntary basis, Energy Minister John Hayes said. DECC will use the information received to inform changes to support for the technology under the Renewables Obligation (RO) at the end of each review period.

The decision to introduce a voluntary reporting process, rather than the mandatory reporting proposed by the Government in a recent consultation, would minimise the regulatory burdens for generators, Hayes said. At the same time, the introduction of reporting would enable the Government to better estimate the amount of financial support the schemes would need.

"Energy is central to our economic recovery," he said. "We must deliver investment in new infrastructure while keeping costs down for consumers. The solution set out today means less new red tape for developers and enables Government to manage cost to consumers ... I hope that by setting a simple process, we can help safeguard jobs and encourage new investment in biomass generation."

The RO is the main financial support mechanism currently used by the 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 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 in relation to the cost of developing that technology and its future potential.

The Government  proposed new bands for conversion and co-firing biomass with coal in its review of the scheme for 2013-17, which was published in July. It proposes reducing the support for standard co-firing plants to 0.3 ROCs per MWh and for co-firing with combined heat and power to 0.8 ROCs per MWh from April next year.

In a factsheet (3-page / 47KB PDF) published alongside the announcement, DECC set out how it plans to use information supplied by generators under the voluntary reporting scheme to adjust the subsidies available for biomass as the cost of the technology falls. Plants which become eligible for support will be will be 'grandfathered' into the scheme in some circumstances, guaranteeing the level of support they will be entitled to over the lifetime of the plant regardless of future subsidy cuts.

Grandfathering arrangements will not apply to low-range co-firing projects due to the relatively low cost of the technology. Converted plants which later switch back to using some coal will not be entitled to the original rate if they reconvert. They will instead be 're-grandfathered' after each switch at the subsidy rate which applies at the time.

Energy and environmental law expert Linda Fletcher of Pinsent Masons, the law firm behind Out-Law.com, said that the proposed compulsory notification had caused "a lot of concern" in the energy sector.

"In particular, generators looking to convert existing coal-fired plants to burning sustainable biomass, which needs to be encouraged following Ofgem's prediction last week that the UK will have a 14% energy gap in 2015/16," she said. "Announcing the abandonment of the mandatory pre-registration of units in order to be eligible for support in favour of a voluntary process, and confirmation that the grandfathering policy will not be linked to meeting the request for pre-notification, is a positive development for generators and will assist in encouraging new  conversion plans to go ahead ."

However, as DECC still plans to use any information submitted on a voluntary basis to inform its budgetary decisions, the change in policy "perhaps still does not go far enough to encourage a greater rate of conversion," she said.