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Quick change is ill-advised

DECC’s proposal to remove the Renewables Obligation from AD plants up to 5MW has shocked parts of the biogas sector. Although subject to consultation, this change came with no prior warning – and is due to come in from 1 April 2013, affecting projects which are already in development or construction. Such a significant change at such short notice severely impacts investor confidence in future government support – something which DECC had promised to avoid.

There may appear to be logic to having the Feed-in Tariff (FIT) available below 5MW and the RO above that level but, given project development times of 12-24 months, such a change should not have been proposed with just eight months’ notice.

ROCs are still an important mode of support for the industry. As projects choose between ROCs or FIT, there is no ‘double counting’ and, as the lowest FIT level is set to be equivalent to ROCs, no financial disparity. As an obligation rather than a direct government incentive, ROCs offer support for projects which have received grants and, therefore, cannot claim FITs. The RO also allows the use of recycled rather than new renewable generation equipment, and offers developers of large or multiple projects the chance to trade their RO certificates on the market.

The announcement of the change to the RO comes, too, on the back of the government response to the consultation on the future of the Feed-in Tariff, which has put in place ‘capacity triggers’ which will degress the tariffs at rates which vary with the level of AD capacity that is installed in any year. The capacity triggers are set exceptionally low, which means that investors cannot bank on the tariff they will get. Given the uncertainty which this introduces, having the RO available as another support option is, therefore, invaluable, especially in the early stages of project development.

We will be making these points strongly to government over the coming months. They remain supportive of AD in principle, as the work on the AD Strategy and Action Plan, the Waste Review and the investment made in digestate market development demonstrate. However, to fully realise the economic and environmental benefits the industry could deliver, government needs to ensure that it supports a viable marketplace. Sufficient financial incentives – including the RO – are a key part of this.

Alongside that, we will be continuing to work with government and our members to help address the key market barriers. Securing feedstock remains arguably the greatest challenge for the industry, while markets for digestate remain underdeveloped. Grid connections, in particular, urgently need to be made cheaper and easier, as does environmental permitting. Resolving these issues would make a huge difference to the viability of AD projects of all types and scale.

Through the Action Plan and other joint work between industry and government, there has been huge progress in many of these areas. Holding back that progress through an unnecessary and hasty change to the framework of financial support for the industry would be deeply ill-advised, and would seriously damage the UK’s ability to meet its commitments on waste, emissions and renewable energy.

Matt Hindle, policy manager, ADBA.

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