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AD and biomass CHP escape subsidy competition

Anaerobic digestion (AD) and dedicated combined heat and power (CHP) biomass plants will not have to compete for Government green energy subsidies under new proposals from the Department for Energy and Climate Change (DECC).

DECC is in the midst of developing its subsidy policy under the Contracts for Difference (CfD) regime, a system that funds the gap between average grid electricity prices and the price for each particular low-carbon technology.

CfDs are taking over from Renewable Obligation subsidies in 2017.

A consultation on the Contracts for Difference (CfD) in October initially proposed allocating CfDs on a ‘first come, first served’ basis for all low-carbon technologies.

But following concerns from industry, DECC has now suggested that AD, dedicated CHP biomass, gasification and pyrolysis “should not have to compete in allocation rounds against lower cost, more established technologies before they are ready to do so”.

DECC said: “We now judge that the best way to manage an orderly process for the allocation of CfDs, and to give applicants a fair chance of accessing a CfD, will be to move immediately to allocation rounds from autumn 2014.

“We also judge that we will not carry out the period of ‘first come, first served allocation’ that we had previously been considering.”

Under the proposals the allocation process for other technologies would work as follows:

  • Projects ranked by bid and ‘strike price’
  • Lowest bids allocated first CfDs
  • Allocation proceeds to next cheapest until budget reached

DECC said: “Based on the current technology costs, we would expect the technologies that could offer the lowest bids to be landfill gas, sewage gas and energy-from-waste with CHP. It is anticipated that these technologies would represent a relatively small proportion of the available budget.”

DECC is asking for comments from industry in a further consultation on CfDs.

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