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DECC: Financial support for anaerobic digestion

The Government has announced ambitious plans to provide financial support for anaerobic digestion technologies through feed-in-tariffs (FITs) and the worlds first renewable heat incentive scheme.

The schemes are designed to bring about a significant increase in the amount of locally produced green energy and help the UK meet its renewable energy targets.

FITs is a financial support system that will incentivise small scale low-carbon electricity generation by providing clean energy cashback for householders, communities and businesses. It will work alongside the Renewables Obligation, which will remain the primary mechanism to incentivise deployment of large-scale renewable electricity generation.

The FITs scheme will start from April 1 and will support new AD plants with a five megawatts limit capacity. The scheme will also support the first 30,000 combined heat and power installations with an electrical capacity of two kilowatts or less, as a pilot programme.
Under the FITs scheme AD operators [generators] will be paid for every kilowatt hour of electricity generated and metered by a generator. Farm scale AD operators, producing less than 500kW a year will get 11.5 pence/kWh per year over a 20 year period. AD operators producing more than 500KW will get 9p/kWh.

Speaking at the launch of the FITs scheme in London [February 1], Energy Minister Lord Hunt told MRW that he thought the FITs would encourage more AD plants to be built. He said: I think that we have made an adjustment in order to make small scale AD more attractive. I think that the farming community will be very welcoming of this news. I very much hope that we will see a big market growing for AD.

Energy and Climate Change Secretary Ed Miliband added: Where there is muck there is brass!
The FIT will change the way householders and communities think about their future energy needs, making the payback for investment far shorter than in the past.

The Government also launched its consultation on the RHI scheme [February 1].

The RHI scheme is a financial support mechanism for individuals, communities and businesses that aims to incentivise low carbon heating and will be introduced in April 2011.

Under the RHI scheme, the proposed tariff for solid biomass technology operators [45kW] will be 9p/kWh, biogas on-site combustion plants will get 5.5p/kWh and biomethane injection technology will get 4p/kWh.

Solid biomass can include municipal wastes and biogas can be upgraded to biomethane, which has similar thermal characteristics to natural gas and can be injected into the grid.
Where a plant can generate heat from both renewable and non-renewable fuels, the RHI tariff will only reward the renewable component of the mixed fuel load. The RHI consultation stated that this will usually involve combined heat and power using energy-from-waste.

Anaerobic Digestion and Biogas Association chair Lord Redesdale said that he was disappointed at the Governments announcements on FIT and RHI. He said the Government had horlicked the whole thing. He explained: It is unfortunate that the tariff has come in at nine pence which shows a distinct lack of enthusiasm. We thought it was going to be more than this and were hoping for 13p.

To meet our climate change and renewable energy targets we need as much AD as we can possibly muster. Both the RHI and FITS have not met expectations from industry.

The purpose of the tariff is to encourage entry in the market place but this is not going to be the case because the tariffs are too low. How many plants will be built out of this next year on this basis? If there is not enough plant going to be built you question whether the whole thing has been a success or not.

Lord Redesdale also said that the AD industry was concerned with the issue of grandfathering of Renewable Obligation Certificates (see MRW story).Government is likely to alter tariffs for new levels for new projects from time to time to respond to changes in technology costs. However, once installation of a project has been completed, investors will consider it important that its support levels are not changed. Such a guarantee not to change support for existing projects is known as grandfathering.

At the moment biomass technologies, such as AD, are not protected through grandfathering.
However, the RHI consultation states: We are nevertheless inclined to provide the RHI tariffs as grandfathered tariffs.

Box Out
* The UK currently gets around 5.5% of electricity from renewable sources and that will need to increase to around 30% to meet the 15% 2020 target for all energy.


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