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Blog

UK Energy Strategy and Renewable Obligation Certificate Banding

October 15, 2012
Author: Suz-Anne Kinney

Some of the new requirements set out by the UK government for Renewable Obligation Certificates (ROCs) have created uncertainty among investors in biomass power projects, a fact evidenced by an announcement by the government on October 5, 2012 that they would institute a voluntary reporting process for facilities converting coal plants to biomass and for those that co-fire at high levels. The voluntary process, outlined in a fact sheet titled, "Grandfathering and cost control for biomass co-firing and conversions," will reduce the regulatory requirements on these projects and assure investors that the same level of ROC support will be available throughout the life of a project. In addition, the policy explains in greater detail how the grandfathering process will work.

Background

Under the European Commission’s Renewable Energy Directive, the UK is required to produce 15% of its overall energy from renewable sources by 2020. According to the UK’s Department of Energy and Climate Change (DECC), bioenergy has the potential to provide about 30% of that target.

To drive electricity suppliers toward that goal, the UK issues Renewables Obligation Certificates (ROCs) to operators of accredited renewable generating stations for the renewable electricity they produce. When suppliers do not have sufficient number of ROCs to meet their renewable obligation, they are required to pay an amount equal to the value of the ROCs into a ‘buy-out’ fund, which is then distributed back to suppliers on a proportional basis.

This program has been in effect since 2002 when each MWh was awarded one ROC. This approach led suppliers to focus on established quick-to-market technologies, however. In 2009, the DECC introduced the concept of banding, which provides different levels of support to types of technologies based on their potential long-term benefit and considers the maturity, development costs and risks inherent in each.

In July 2012, DECC announced the results of its most recent banding review of the program, which will cover the 2013-2017 period. For plants that intend to use wood pellets or other forms of wood feedstocks, the banding and support levels are generally grandfathered; that is, a project is eligible for the banding level in effect at the time it is accredited for the entire life of the project.

Dedicated Biomass Power--Grandfathered

Dedicated biomass power plants will continue to be awarded 1.5 ROCs per MWh through 2013. This will drop to 1.4 ROCS after March of 2016. Because of the higher rate at which dedicated biomass plants are subsidized, DECC is concerned that too many suppliers will opt for this strategy. While they decided on these higher numbers in order to get shovel-ready projects through to completion, it is proposed to place a cap on the number of these plants, perhaps 800-1,000 MW of capacity. Biomass power plants using energy crops will receive 2 ROCs per MWh from April 2013, 1.9 ROCs/MWh in 2015 and 2016 and 1.8 ROCs per MWh in 2016 and 2017.

Converting Coal to Biomass--Grandfathered

Coal burning power stations will receive 1 ROC for every MWh generated. Because no large scale coal-fired plant can flip a switch and convert 100 percent of its capacity overnight, a facility will be eligible for ROCs on a unit by unit basis. As the facility completes 100 percent conversion of each unit, that unit will be eligible for 1 ROC per MWh for its entire production. Each unit can also use up to 10 percent fossil fuels for ancillary processes without endangering its eligibility.

Co-firing Coal with Biomass

The new rules set three levels of banding for co-firing: standard, mid-range and high-range. An additional 0.5 ROC per MWh is awarded with CHP. Unit by unit conversions are allowed.

  • Standard (<50%)—0.3 ROC per MWh in 2013 and 2014, 0.5 ROC starting in April 2015.
  • Mid-range (50% to 85%)—0.6 ROC from April 2013 (grandfathered)
  • High-range (85% to <100%)—0.7 ROC from April 2013 and 0.9 ROC from April 2014 (grandfathered)

Overview of All Renewable Sources of Energy A review of all banding changes shows that the following technologies received higher levels of support:

  • Offshore wind
  • Wave and tidal stream
  • Mid- and high-range co-firing with biomass, with or without CHP
  • Standard co-firing with biomass, with CHP

These technologies will receive lower levels of support during the 2013 to 2017 period:

  • Onshore wind
  • Solar (further consultation is planned)
  • Tidal range
  • Landfill gas
  • Energy from waste
  • Biomass conversion from coal
  • Standard co-firing with biomass
  • Dedicated biomass

A further explanation of the new banding policy and the voluntary reporting process can be found on the DECC website.


Comments

US Industrial Wood Pellet Industry Announcements |

10-15-2012

[...] F2M Market Watch   The Wood and Fiber Supply Chain Experts   Skip to content HomeAboutContributorsForest2MarketForest2MillMarket2MillForest2FuelMill2Market     ← UK Energy Strategy and Renewable Obligation Certificate Banding [...]


Comments

UK Biomass Power Station Announcements | F2M Marke

10-15-2012

[...] F2M Market Watch   The Wood and Fiber Supply Chain Experts   Skip to content HomeAboutContributorsForest2MarketForest2MillMarket2MillForest2FuelMill2Market     ← Biomass Power Generation in the United States UK Energy Strategy and Renewable Obligation Certificate Banding → [...]

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