Changes to protect consumers from increased costs of support scheme

12 Dec 2014 02:50 PM

Changes to the Renewables Obligation (RO) for Biomass are being proposed to protect bill payers from extra costs.

Through our reforms to the energy market, we are proposing changes to the Renewables Obligation (RO) as part of the transition to the new Contracts for Difference (CFD) programme which will protect bill payers from extra costs in the future.

The proposed changes would mean that generators who carry out new conversions from coal to biomass, or who increase the levels of co-firing (which is the process of replacing part of the fossil fuel with a renewable alternative) would no longer be covered by our policy to maintain their levels of support under the scheme. Other technologies and support mechanisms would not be affected.

This step will help give Government flexibility in deciding future allocations of funding and only applies to new biomass conversion and co-firing under the Renewables Obligation.

Our new Contracts for Difference scheme would be unaffected by this proposed change. Biomass conversions will be able compete for support under this scheme should funding be made available for them in the future.

Notes to editors

Grandfathering is a policy to protect biomass conversion units and most other technologies accredited under the Renewables Obligation (RO) from future changes in support levels.

We are consulting on removing grandfathering from the support provided to particular types of biomass projects, including:

• new biomass conversions and any mid-range or high-range co-firing that may accredit under the RO on or after 12 December 2014; or
• co-firing or conversion plants moving to a higher RO support band on or after 12 December 2014.

We propose a grace period to take into account the position of generators who have already acted on the basis that the current grandfathering policy will continue.

Biomass is an important part of the UK’s energy mix, playing a central, transitional role in decarbonising the electricity grid, and a significant amount of biomass conversion has already taken place. However, market intelligence now suggests deployment of biomass will be higher than originally estimated. As a result, Government needs to take action to reduce the risk of exceeding the Levy Control Framework, which caps the cost of energy policies on bill payers. Biomass conversions can still apply for support through the new Contract for Difference system, should funding be made available for them in the future.

The consultation on changes to grandfathering policy with respect to future biomass co-firing and conversion projects in the Renewables Obligation will be open until 26 January 2015.