The department for energy and climate change (DECC) has provided further details on plans to phase out the Renewables Obligation (RO) in favour of contract for difference Feed-in Tariffs (CfD FiTs) in a new white paper.
DECC’s Electricity Market Reform white paper follows a consultation in December 2010, which proposed a phase-out of the RO and its replacement with a new long term FiT that would top-up payments to the electricity generator to the agreed tariff and allow generators to be repaid if electricity prices rose above the agreed level.
According to the white paper, the new CfD FiT will be introduced in 2014 and generators of renewables will be able to choose between it and the RO until 31 March 2017.
After this point the RO will close to new accreditations, creating a closed pool of supported capacity, which will decrease as the RO approaches its 2037 end date.
Speaking in the House of Commons, energy secretary Chris Huhne said: “Through the proposed contract for difference feed-in tariff, the Government will guarantee greater revenue certainty for low carbon in the form of a top-up payment if the wholesale price of electricity is below the FiT and a potential claw-back for consumers if wholesale prices go above the contracted tariff.”
Environmental Services Association director of policy Matthew Farrow welcomed the proposals as a “vote of confidence” for the energy from waste sector.
He said: “As we have long argued, energy from waste can play a vital role in helping Britain meet its tough EU targets on renewable energy, while also helping to reduce gas imports. The measures flagged in the white paper, such as feed in tariffs should make energy from waste projects more bankable by reducing investors’ uncertainty over the energy revenue generated by plants. But the detail will be important and ESA will be monitoring this closely.”
Covanta Energy managing director Malcolm Chilton said: “The government has set challenging targets to generate 30% of all electricity from a mix of renewable sources by 2020. The Roadmap has already highlighted that Energy-from-Waste has significant potential to generate electricity and heat, which can provide power directly to a range of industries and create sustainable new jobs at the same time.”
“Covanta supports the coalition Government’s first steps to create a new generation of low carbon electricity and renewable energy developments. By working closely with industry, the Government can clarify its position, develop new guidelines and mechanisms, to ensure that investors have the confidence to commit significant levels of finance to build essential energy-from-waste infrastructure across the UK. As the White Paper makes clear, there is still a lot of work to be done.”