Energy probe “creates uncertainty”
14 May 2014
The government was yesterday accused of introducing further uncertainty into the UK energy market as it launched its latest consultation on the contract for difference (CfD) price support scheme for renewables such as biomass.
Under CfD, which is being phased in this year to replace the existing Renewables Obligation Certificates (ROCs) scheme in 2017, generators will receive a top-up payment when the wholesale electricity price is below a pre-agreed “strike price”, and pay money back when the price rises above it.
The Department of Energy and Climate Change (DECC) announced yesterday the technologies that would be classed as “established” or “less established” under the CfD scheme.
Established technologies, including landfill gas and sewage gas, will be forced to compete for long term CfD contracts via auction, with the aim of bringing down strike price levels and the overall cost of renewable energy price support.
The piecemeal approach to the CfD scheme leaves a lot of questions still unanswered
REA chief executive Dr Nina Skorupska
Less established technologies, which includes new combined heat and power (CHP) biomass projects, will not be subject to auction and will be awarded CfD contracts at the rate already set out by DECC; the strike price for new biomass projects with CHP has been set at £125 per MWh (wholesale electricity spot prices are currently trading at between £42 and £45 per MWh).
However, despite this announcement representing good news for the developers of new biomass CHP plants, developers of biomass conversion plants such as Drax were left in limbo after the government announced a further consultation on whether they should also be subject to auction.
Rather than being included in the “established” technologies auctions, which will also include onshore wind and photovoltaic solar, biomass conversions would be placed in a third category whereby they would only be able to bid for CfD support via auction if there was enough money left in government budgets after the established technology auctions had been held.
By stating CfD support for biomass conversions would be “subject to budget” without stating what that budget is, trade body the Renewable Energy Association (REA) accused the government of introducing “new instability and confusion” into the energy market.
“Clear, stable policy attracts investment, creates jobs and drives growth and cost reductions in renewable energy technologies,” said REA chief executive Dr Nina Skorupska.
“However, there is not much clarity or stability on show today. The piecemeal approach to the CfD scheme leaves a lot of questions still unanswered, and the lack of capacity ring-fencing for most technologies compounds that uncertainty. Without knowing what DECC intends to do in terms of setting out the budget, making sense of CfD proposals is like trying to complete a jigsaw puzzle without seeing the picture on the lid.”
