Regulatory Winds Of Change Won’t Swipe Biomass Out Of The UK Market
On September 29, 2011, the UK government recalled the launch of its Renewable Heat Incentive (RHI) scheme for non-domestic generators, which was due the following day. Announced in March 2011, the £860 million subsidy scheme’s aim is to incentivize the installation of renewable heat technologies, including biomass, solar thermal, and ground source heating, to cut a tentative ten of the 38% of the UK emissions that the Department of Energy and Climate Change (DECC) ascribes to heat. The RHI was delayed as the European Commission expressed concerns about the tariff for biomass being too high, which is currently placed at 2.6 pence per kilowatt-hour for the next twenty years.
These are nervous times for investors, as the RHI is one of a string of commercially sensitive environmental regulation to be delayed. For example the CRC has been reviewed and modified numerous times, and further modifications are currently under review. The biomass market in particular has suffered a series of legislative hiccups by the UK government, notably as the Renewable Obligation Certificates (ROCs) value for biomass co-firing was cut in half in 2009, while subsidy levels over the lifetime of dedicated biomass generation were not settled until July 2010. Every time the market reacted very sharply, halting co-firing operations and generation investment plans. DECC aims to respond to the European Commission with lower tariffs and launch the RHI in two months, putting it back until the end of November. The UK government has taken investors on a bumpy ride while fixing the methodologies and incentives packages to drive the biomass market, but its persistence suggests biomass has a dedicated place in delivering the UK’s renewable energy targets.
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