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UK government proposes to compromise on tariff reductions for biomass CHP plants

Published 21 October 2016

The UK Government has proposed a compromise deal to the biomass industry, which would soften the impact of changes to incentives for several biomass combined heat and power (CHP) plants which were unveiled in July this year.

Jessie Norman MP, Parliamentary Under-Secretary for Industry and Energy acknowledged that the Department for Business, Energy, and Industrial Strategy would soften changes introduced to tariffs for certain biomass CHP plants.

The Renewable Energy Association (REA) noted that the industry had not been consulted and companies in the renewable heat and power industry were given only 21 days of notice for the effect to take place.

But in reality, there are projects which are still under development for the next two years. Jessie Norman at the Seventh Delegated Legislation Committee Debate on the Renewable Heat Incentive (RHI) Scheme (Amendment) Regulations noted that a transitional period is needed as the sector moves towards lower tariff levels.

Norman said: “We recognise that this revised approach will not remove all the impacts of the change from all projects, but we feel it achieves the right balance between delivering value for money and ensuring the efficiency benefits that CHP is supposed to deliver, and making sure that those benefits are indeed delivered, while also reducing the impact on projects that are under way.

“In particular, it reduces the impact on those projects that aim to deliver higher power efficiencies rather than lower ones.”

The transitional period has been extended up to March 31, 2017. Reductions in tariff would apply only to plants which produce 10% power (power efficiency) and the remaining 90% in heat.

But, tariff reductions would immediately apply to projects which with 20% power efficiency and have qualified for the scheme since August, 2016.

Renewable Energy Association renewable heat analyst Frank Aaskov said: “Transparency in Government decision-making is key to maintaining the confidence of investors developing the UK’s much-needed low carbon infrastructure. We welcome the proposed compromise announced today by Mr. Norman.

“Critically, the transition period should create a runway in which projects that have been under development or construction, some for as much as two years, can be completed.

“This proposal is a constructive step towards restoring the previously damaged confidence of investors in the biomass CHP sector.”