The issue, which has seen the development of many new plants come to a halt, relates to the principle of grandfathering of Renewable Obligation Certificates.
Grandfathering acts as a type of lock mechanism designed to protect the investment in renewable energy by guaranteeing a certain banding of ROCs for the life of the facility.
Speaking exclusively to MRW Augusta & Cos John Edwards explained: If you build a biomass plant using a technology which is relatively expensive now your business plan is reliant on revenue from ROCs.
The electricity output from an anaerobic digestion facility for instance attracts two ROCs and without such revenue many facilities would not be economically viable. Grandfathering protects that ROC banding for the life of the facility without it a facility is exposed to subsequent reductions in the ROC banding.
It is now apparent that biomass facilities unlike every other form of renewable energy are not protected through grandfathering and as a result considerable uncertainty has been introduced. The financing of such facilities has been thrown into turmoil.
While the grandfathering principle applies to all other renewable energy sources such as offshore wind farms, biomass technologies such as anaerobic digestion, pure biomass and energy from waste are all excluded.
As a result of this financiers are currently very reluctant to put any funding into biomass projects which are reliant on ROCs in case the banding goes down - meaning projects will not be economically viable.
This created a very significant issue in the waste management space, said Edwards. I do know that there are a few proposed biomass facilities where the financing process has just ground to a halt.
The Department for Energy and Climate Change is being urged by the renewable energy industry to take immediate action over this issue which seems to have arisen out of a misunderstanding relating to legislation on ROCs.
ENER-G director Andrew MacLellan told MRW that the industry has been working with DECC to try and resolve the situation.
DECC recognise that there is a problem and in fairness to them they are trying to address it and work on a solution but we need to find a way of making it stick quickly, he said. The key question is at what point can the changes that the banks need be implemented?
There seems to be a real concern that if this issue is not resolved quickly the effect on the UK biomass industry could be significant.
MacLellan said: This sector is capable of creating many jobs in the UK, which is what the Government wants. If we create a hiatus, even if it is just a temporary hiatus for a year or so, we may see smaller companies go to the wall and larger ones divert their investment elsewhere - because they have not been able to get going.
The industry and the financial sector are engaged with DECC to try and reach a conclusion but we cant deny that there is a problem and it needs solving with a good deal of clarity, in a matter of weeks rather than months or years.
MRW understands that DECC are working hard to resolve this issue with the Renewable Energy Renewable Energy Association and that both hope to find a resolution shortly