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UK dedicated biomass developers question capacity cap

February 5, 2013, London, UK — UK developers of dedicated biomass plants have expressed disappointment at a new capacity cap adopted by UK policy makers, with some claiming the government's biomass policy is in disarray because of a lack of understanding.


February 5, 2013
By Argus Media

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The UK's Department of Energy and Climate Change (Decc) announced that it will implement a 400MW non-legislative capacity cap on new dedicated biomass power-only stations registered under the renewables obligation (RO) from 1 April 2013.

Around 2,500MW of dedicated biomass capacity is currently at various stages of development in the UK and the new dedicated cap has undoubtedly ended some of the projects.

The government's former expert on the Renewable Advisory Board David Williams, who is also chief executive of Eco2, which is building several dedicated plants, is critical of the government and policy.

“My view is that the government's biomass policy is in disarray stemming from a lack of understanding of the subject. The statements made regarding the cost of carbon use wildly high values from certain biomass fuels to justify the capping of all,” said Williams, who is now chair of the UK Renewable Energy Association Biomass Power Group.

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“If the cost of carbon was indeed the concern, government would exempt all fuels with low life-cycle carbon costs on the basis that they are cheaper than offshore wind and employ more rural jobs. Governments get it consistently wrong on biomass and this is another example of the same.”

The new 400MW cap represents the total new build generation capacity that can expect to be supported at 1.5 renewable obligation certificates (Rocs)/MWh or 1.4 Rocs/MWh after 1 April 2016. Once the cap is reached, this will trigger the government to consider proposals to restrict further capacity by removing grandfathering for any further generation capacity. The cap does not include combined heat and power (CHP) new builds.

Decc published the details in December following consultation aimed at ensuring affordability and sustainability for biomass under the RO.

In the consultation response, the government decided against the introduction of a supplier cap in favour of a cap based on generating capacity. This decision has found favour with MGT Power, which is set to build a 275MW dedicated biomass plant in Teesport, but the firm's acting chief executive Ben Elsworth expressed disappointment at the level of the capacity cap.

“The capacity cap mechanism is a vast improvement over the previously proposed supplier-based cap, and we are pleased that Decc has listened to the industry's concerns over that. From an industry point of view, the 400MW limit is disappointing as it means that at least one or two projects that would be viable and have been developed in good faith will not get delivered under the RO. From MGT's point of view, it's a competitive situation now and we are 100pc committed to that race.”

As part of the changes, Decc has also announced the implementation of a mandatory notification process from 1 April 2013. The process says any new build dedicated biomass capacity must join a notification register prior to seeking accreditation under the RO to receive the maximum 1.5 Rocs/MWh (1.4 Rocs/MWh from 1 April 2016). Any dedicated generation capacity that does not join the register will only be able to receive a maximum of 1 Roc/MWh support under the subsidy scheme.

Developers can join the register by providing documentation to Decc that the plant has reached financial close.

 “We have secured new development funding, we've selected strong and credible development and investment partners and we are confident both on economic fundamentals and timing that we are in an excellent position with respect to our competition,” Elsworth said.

“Obviously we won't be taking anything for granted, and we're working incredibly hard to do everything we can to be on that register come 1 October. However on the regulatory side, there is still some definition required around how to comply with the definition of the final investment decision, and we will be pressing Decc to make sure the requirements for entering the register are as stringent as possible to make sure there is no cheating and that only genuinely fully financed projects can make the register.”

Decc has still to clarify how the dedicated biomass cap register will work but is planning a series of workshops to inform the market.

“I think the naturally optimistic nature of developers will cause a false overfilling of the cap,” Williams said. “However the Decc proposal to use [energy regulator] Ofgem as arbiter is also unlikely to work.”

Please visit ArgusMedia.com or more information.

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