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DECC forecasts ‘out of kilter’ with AD deployment

Anerobic digestion (AD) deployment supported by Feed-in-Tariffs (FiTs) has risen strongly, but an industry association has claimed that the Government’s deployment forecasts were “vastly out of kilter”.

Figures from the Department for Energy and Climate Change (DECC) for December 2014 indicate 39% (24.7MW) more AD capacity was deployed under the FITs regime than for the same period in 2013.

Subsidies for those plants can be subject to degression, which is an annual percentage reduction in tariffs, depending on whether overall capacity surpasses a trigger level set by DECC.

The degression trigger for small-scale AD (<500kW) has been set at 9MW for 2014, but the deployment was nearly six times more than that at 55MW.

Matt Hindle, policy manager at the Anaerobic Digestion and Bioresources Association (ADBA), told MRW the Government’s projection for small-scale AD “was always wildly underestimating” how large that part of the industry could be.

He added: “This emphasises from our point of view that the whole way the degression mechanism was setup was vastly out of kilter to the way the industry was likely to grow and didn’t give nearly enough capacity at the smaller scale.”

Small-scale AD will now be subject to a 20% degression on 1 April. They already suffered a 20% degressions in April 2014.

For this size, the technology cost is not coming down in the same way that the tariff is, said Hindle.

“While we’ve got a good pipeline of projects at the moment from the pre-accreditations that came in late in 2014 it will be a struggle to maintain that level of growth with the speed at which the tariffs are coming down at that scale.”

Meanwhile, the trigger for large-scale AD was set at 77MW, with actual deployment at just 54MW. This size will be subject to a smaller degression of 10% on 1 April.

A large proportion of sub-500kW plants were pre-accredited, which provides developers with greater certainty on the level of tariff they will receive for their installation.

However a far smaller proportion of large-scale plants were pre-accredited. Most of the accreditations occured in the last three months of the year.

“This suggests to me that those plants are now trying to beat the degression deadlines,” said Hindle. “They are starting to be concerned about the risks of degressing tariffs.”

DECC said it was aware of the concerns of the AD industry about the impact of the significant cuts to tariffs as a result of degression and it will be considering the level of tariffs and the policy on degression and pre-accreditation as part of the periodic FiTs review planned for later this year.

The FITs scheme has successfully supported a significant rise in the deployment of small-scale AD. It now supports 91 sub-500kW plants, which represents an 80% increase in sub-250kW and a 49% increase in 250-500kW plants compared to the previous year, according to DECC.

A DECC spokesperson said: “As the sector grows and costs come down it is right those savings are passed on to consumers.

“Our goal is for renewables to be competitive with other forms of electricity generation and that is why we are balancing Government support with the need to provide value for money to consumers and bring on essential new investment.”

RHI clarification welcomed

Earlier this month DECC also clarified the Renewable Heat Incentive (RHI) degression.

But ADBA said there was concern in the sector about whether an exemption from degressions on 1 April would result in a cumulative double degression on 1 July, following some ambigous wording in DECC’s documents.

DECC has confirmed to ADBA this will not happen. In an email to the organisation it said: “The April degression is not stored up and applied to the new tiered tariffs in addition to whatever the calculation comes up with for 1 July.”

Hindle said: “It was positive news and relief for the industry.”

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