New rules on distributing Government subsidies under plans to reform the UK’s electricity market could benefit energy-from-waste (EfW) schemes competing with other technologies, according to a Renewable Energy Association (REA).
The Department for Energy and Climate Change (DECC) published its draft allocation process this week for Contracts for Difference (CfD) subsidies, which will come into place later this year and replace Renewable Obligation Certificates (ROCs) in 2017.
Unlike existing schemes, companies must apply for CfD support before a project is built and are not guaranteed support.
Frank Gordon, REA policy analyst, told MRW: “At current rates there won’t be enough budget to fund everyone that wants a CfD so DECC have come up with this allocation framework.”
It is possible that both established and non-established technologies may go through an auction process if there is not enough budget for every application.
Offshore wind has been classified as a non-established technology and so the competition with several EfW technologies (gasification and pyrolysis, anaerobic digestion (AD), dedicated biomass with combined heat and power) in this category may result in an auction.
During auctions, schemes can bid a price for which they are prepared to build their project, but this is capped at the Government-set strike price.
Gordon said the Government is prioritising the cheapest projects in auctions.
He said the overall approach is “in practice quite favourable” for most EfW technologies, because they have the lowest strike prices and are therefore the best placed to succeed in auctions by default.
However, he said gasification and pyrolysis has quite a high strike price.
Over the last year the REA has been calling for DECC to introduce a minima for gasification, pyrolysis and AD capacity in the allocation process.
The spokesman added: “This is to mitigate the risk of offshore wind eating up the whole budget due to high deployment levels preventing gasification, pyrolysis and AD deployment.”
Gordon also said that landfill gas projects would benefit from competing with other technologies on price due to their low strike price of £55 per MWh (see table above).
He added that there are not likely to be many landfill gas schemes coming forward so “you’d expect most landfill gas projects to be successful.”
Contracts for Difference are agreements to pay the difference between the strike price – a price for electricity reflecting the cost of investing in a particular low carbon technology – and the reference price, which is a measure of the average market price for electricity on the grid at a particular time.
DECC will publish the draft budget for the first Allocation Round in July 2014.