Utility Week

10 | 24Th - 30Th JUnE 2016 | UTILITY WEEK Policy & Regulation Analysis T he chief executive of the Anaerobic Digestion & Bioresources Association (ADBA), Charlotte Morton, accused the government of trying to dismantle the renewable energy industry last year when it announced a review of the feed-in-tariff (FiT) regime. The review came a• er a £675 million over- spend under the Levy Control Framework (LCF). Among the options being pursued is the closure of small-scale FIT schemes, which could save up to £800 million a year by 2020, according to data from Cornwall Energy. Now anaerobic digestion (AD) and com- bined heat and power (CHP) are in the fi r- ing line. Converting food and other organic waste into green gas for heat and electricity generation is a relatively new commercial sector, although the Assyrians fi rst used biogas back in 900BC, to heat their baths. Large-scale AD plants between 500kW and 5,000kW could see the current subsidy price of £7.81p/kWh whittled down to zero because the Department of Energy and Cli- mate Change (Decc) claims projects can be viable without subsidy. Small and medium- scale projects could see subsidies cut by 46 per cent and 35 per cent respectively, which would put them lower than the minimum required, according to the Renewable Energy Association (REA). CHP could suff er too, according to the Hot Water and Heating Industry Council (HHIC), which says that without government support for AD, vital investment and market demand will drop. The sector fears these cuts could have a devastating impact. The concern is that the proposed cuts would result in AD develop- ment grinding to a halt, with customers dis- suaded from investing in the technology and the UK's progress towards its renewable heat targets fl oundering. The REA has huge concerns about the proposals. "The current tariff s are already not viable. We have had developers and investors withdrawing funding and pulling out of projects because the economics don't stack up," REA head of biogas Kiara Zennaro tells Utility Week. She says that if the proposals go ahead, projects currently in the pipeline will be under threat and there is "a serious risk that the sector will be brought to a halt". The ADBA agrees and is particularly concerned about the removal of support for large-scale installations, which it says are "completely unjustifi ed" and will "kill off projects" that signifi cantly cut carbon. Growth in the sector has been generally healthy though and the Green Investment Bank reported last year that an estimated £160 million had been invested in AD in the 18 months to March 2015. HHIC director Stewart Clements says: "To achieve economies of scale at a manufactur- ing level and thus reduce costs to consumers, hundreds of thousands of pounds need to be invested, yet manufacturers are understand- ably reluctant to make this level of invest- ment until market demand increases. This is where FIT plays an important role." Decc claims many plants are now CHP installations, which makes them eligible to receive cash under the Renewable Heat Incentive (RHI). The RHI is a scheme that provides fi nancial incentives to encourage the take-up of renewable heat. The UK's tar- get is for 12 per cent of heat demand to be met by renewables by 2020. Clements says micro-CHP is particularly promising and could provide customers with a service that meets their expectations and reduces heating costs, but it needs govern- ment backing. The cuts would mean fewer projects, which would directly aff ect the government's capacity to deliver its 2020 renewable heat and transport targets and carbon budget, according to the REA. REA head of policy and external aff airs James Court says: "There's an opportunity here with AD to signifi cantly reduce green- house gas emissions, to repurpose unavoida- ble food wastes, and to provide dispatchable low-carbon heat and power. Despite this, our ambitions to grow the sector remain frustrated." Aside from the obvious, what do AD com- panies want? Those aff ected are not only urging the government not to reduce tariff s, they also want a FIT scheme developed that encourages homeowners to consider renew- able heat. More broadly, the sector is calling for a joined-up strategy across the diff erent gov- ernment departments concerned, such as Decc and the Department for Environment, Food and Rural Aff airs, in order to fully understand the range of benefi ts attached to AD, including increased resilience for farm- ers in the UK. The FIT cuts could come into eff ect as early as January 2017, leaving the sector with little time to convince the government of its carbon-cutting, cost eff ective, customer- friendly credentials. FIT cuts could decimate AD The government says many anaerobic digestion projects would do fi ne without public subsidy, but the industry says cutting support now will virtually kill off the sector. Saff ron Johnson reports. installeD CapaCity of aD in the UK Source: ofgem data 160 140 120 100 80 60 40 20 0 MWe May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Renewables Obligation Certifi cate accredited (estimated) FIT accredited 160 140 120 100 80 60 40 20 0 MWe May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 May 13 Aug 13 Nov 13 Feb 14 May 14 Aug 14 Nov 14 Renewables Obligation Certifi cate accredited (estimated) FIT accredited

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