The Department for Environment and Climate Change (DECC) has launched two consultations on proposed changes affecting the support given to solar photovoltaic (PV) and biomass generating stations through Renewables Obligation Certificates (ROCs).
The proposals would see ROCs received by solar PV installations reduced for installations accredited or enlarged on or after 1 April 2013 and require certain biomass installations to meet more stringent sustainability criteria in order to be eligible for ROCs from October 2013. The proposals would apply only limited grandfathering of these criteria to 2020, and would introduce a cap on the proportion of their Renewables Obligation that suppliers can meet through new dedicated (not CHP) biomass.
The Government indicated in its report in July following the full Renewables Obligation Banding Review that it would consult separately on reductions in ROCs for solar projects – but many in the industry had been hoping that the reduction in support would not be as drastic.
Biomass generators were already aware that the Government intended to introduce a requirement to meet sustainability criteria for larger installations, but may have expected the threshold to be set above the 1MWe level. Coupled with the absence of 20-year grandfathering of these sustainability criteria and a cap for suppliers on ROCs from dedicated biomass, the investment climate for biomass developers remains challenging.
Solar PV installations over 5MW receive support through ROCs (and those between 50kW and 5MW can elect to receive ROCs). These medium- and large-scale installations were recently subject to a ROC banding review by DECC which indicated that support would start to fall from 2013 from the current level of 2 ROCs/MWh, down to 1.8 ROCs/MWh for installations that are accredited between 1 April 2016 and 31 March 2017 - DECC has now indicated that it wishes to cut ROC support more dramatically, in line with reductions in the Feed-in Tariffs (FITs) applicable to smaller-scale installations. The result would be that installations accredited or enlarged between 1 April 2013 and 31 March 2014 would receive only 1.5 ROCs/MWh, falling each year to 0.9 ROCs/MWh for installations accredited or enlarged between 1 April 2016 and 31 March 2017. DECC has also indicated that it intends to consult separately on excluding new sub-5MW installations from ROCs all together (leaving such installations only eligible to receive FITs).
DECC’s reasoning is that the costs for these projects will reduce in line with the predicted reductions in costs for smaller-scale projects, and that there will be considerable deployment of large-scale projects between 2013 and 2017 that will place pressure on the ROC budget. DECC does have some evidence that industry has turned to larger-scale projects in response to recent reductions in FITs tariffs for small- and medium-scale projects, citing potentially 120MW of projects greater than 5MW that are already consented. However, the consultation also acknowledges that there are to date no solar PV installations in the UK over 5MW and therefore evidence to support these views is limited. Respondents are therefore asked to provide evidence to either support or refute DECC’s views on project costs and potential deployment of projects.
Bioliquid installations are already required to meet criteria as to the sustainability of their fuel sources in accordance with the Renewable Energy Directive in order to receive ROCs. To date, biomass (i.e. solid bio-fuel) and biogas installations have only been required to report on fuel sustainability. Part A of DECC’s consultation proposes to extend the requirement to meet sustainability criteria to biomass and biogas, power and CHP installations over 1MWe. This is likely to be considered by many in the industry as a low level for these obligations to apply. The requirement would apply from October 2013 and would affect anaerobic digestion, gasification and pyrolysis plants, as well as dedicated biomass, conversions and co-firing plants. The use of waste and wholly-waste-derived biomass would not be caught, nor would landfill gas or sewage gas.
The sustainability criteria that have to met would also be tightened under DECC’s proposals. Solid wood-fuel would be required to be sourced from sustainably managed forests. Stricter carbon emissions targets would also be imposed, subject to limited grandfathering until 2020, and with an expectation that even more stringent targets would be imposed thereafter (possibly falling as low as 200kg CO2 equivalent per MWh for dedicated biomass between 2020 and 2025).
The consultation also includes a Part B which proposes capping the proportion of the renewables obligation that suppliers are permitted to meet from dedicated biomass (not CHP) plant accredited after 1 April 2013, reducing support for standard co-firing plant to 0.3 ROCs from 1 April 2013 onwards, and removing eligibility for the energy crop uplift from standard co-firing plant. The first of these changes in particular will be viewed as discouraging significant new dedicated biomass generation going forward. Further, as the cap would be introduced from 1 April 2013, plants which have incurred considerable expenditure and have taken, or are close to, an investment decision based on a different ROC modeling scenario could also be affected.
The solar consultation is open for responses until 19 October 2012, as is Part B of the biomass consultation. Part A of the biomass consultation is open until 30 November 2012. The consultations can be found on the following links: Solar PV Biomass