London, 27 July (Argus) — The UK government announced today that all costs associated with dedicated biomass projects will receive “grandfathering” support under the renewable obligation (RO).

The move, which will also provide support to anaerobic digestion and energy from waste schemes, was introduced as part of the government's timetable for reform in the first ever annual energy statement (AES).

Most renewable generation facilities already receive fixed banding under the RO scheme, which exempts them from future banding reviews while guaranteeing the level of support they receive. The practice, known as grandfathering, applies to other renewable energy sources such as offshore wind farms, but biomass had previously not been included.

Industry had urged the government to introduce grandfathering for biomass projects for some time, with an estimated 5GW of proposed investment in new biomass plants said to have stalled because the uncertainty. New projects will now receive the same level of support for 20 years under the new measures.

“This provides the certainty that investors have been looking for for electricity from dedicated solid and gaseous biomass, energy from waste, anaerobic digestion and advanced conversion technologies such as gasification and pyrolysis,” the government report said. “Support will be fixed for 20 years, subject to the 2037 end date of the RO.”

The Department of Energy and Climate Change (Decc) had previously intimated introducing a policy to grandfather the proportion associated with the non-fuel cost for dedicated biomass, but not to provide support for costs associated with paying for the ongoing fuel costs.

But following discussions with industry, Decc confirmed that all of the costs for dedicated biomass projects, including the fuel element, will be grandfathered, starting from April 2013.

Welcome news
UK generator Drax has actively pursued the introduction of grandfathering for some time and welcomed today's news but said it hopes Decc will introduce the measures at an earlier date. “We welcome the recognition, by the government, of the importance of biomass to meeting the UK's renewable energy target. Drax has long believed that biomass could and should make a significant contribution to both reducing carbon emissions and increasing electricity generation from renewables,” a spokesperson said.

“Specifically, we welcome recognition of the need to grandfather dedicated biomass to encourage investment, which rightly reflects the long-term nature of this capital investment. Further, we accept that the industry is best placed to hedge against the fuel risk and believe that this is preferable to hedging against regulatory risk.

“However, we remain concerned that there will still be a period of uncertainty for dedicated biomass plants which would not be accredited, and so ready to begin generating, until after April 2013. We trust that Decc will take the opportunity to address this issue early in the review.”

The UK's Renewable Energy Association also welcomed the news. “Today's announcement will come as a great relief and follows many months of intense discussions between the industry and government. This brings most bio-energy projects into line with other technologies such as wind. Levels of financial support (Rocs) for completed projects are now guaranteed for 20 years, even if the rules change in the future,” the association's chief executive Gaynor Hartnell said.

“This should unlock some £13bn [$20.2bn] of much-needed private investment in the sector. For this to happen, lenders must have confidence in the support mechanism. This had been lacking, but today's announcement gives clarity.”

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