U.K. Abandons Plans to Cap Financial Support for Biomass Plants

The U.K. dropped a plan that may have led to a cap on the amount of power plants converting to burning biomass or using a mixture of the feedstock and other fuels if too many companies applied for funding for the developments.

The earlier plans would have allowed “triggered reviews” on the level of subsidies received by operators of so-called biomass conversions and co-firing facilities, the Department of Energy and Climate Change said today in a statement.

“The sword of Damocles has now been removed from the enhanced co-firing band, which is good news for the industry,” said David Hostert, an analyst at London-based Bloomberg New Energy Finance. “Developers had to fear that signaling their intentions on biomass co-firing could lead to an unscheduled change in banding. It’s time for utilities to show their hand and decide whether they want to play the biomass game or not.” Banding is the range of subsidies for different technologies.

The government pulled the proposals as it seeks to lure investment to meet growing demand for power without adding to pollution. U.K. energy regulator Ofgem said today electricity margins, or the amount of spare capacity on the grid, may drop to 4 percent in 2015 to 2016 from 14 percent now, risking shortfalls in electricity as aging coal plants are closed.

Eggborough Power Ltd., based in Yorkshire, northern England, said the shift would have a “major” effect on its plan to convert a coal power station to biomass early next year.

‘One Step Closer’

“Today’s announcement by DECC removes one of the major barriers for biomass conversion projects like ours, which is now one step closer to making a significant contribution to energy security, growth and jobs, and renewable power” Chief Executive Officer Neil O’Hara said today in a statement.

The original plan, known as a cost-control mechanism, aimed to curb prices for consumers, who pay for subsidised co-firing or conversion of biomass plants through their energy bills. The plan required generators to register units to receive Renewable Obligation Certificates, or ROCs. It included the possibility of reviews should too much generation capacity be registered and the prospect of reduced support, deterring investors.

The proposal was replaced with a “voluntary” requirement to report intended co-firing or conversion generation. That won’t trigger reviews of subsidies, or ROCs, DECC said.

To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net Louise Downing in London at Ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.