Morocco’s Renewable Energy Association has slammed the new changes made by the government that could damage investor confidence and put new CHP biomass projects at risk.
The Renewable Energy Association has hit out at “surprise” changes to the Renewable Heat Incentive (RHI) scheme which it says will mean a reduction in support for new biomass combined heat and power (CHP) facilities and put £140m of investment at risk.
According to the REA, the government laid an amendment to the RHI before Parliament earlier this month without warning or consultation, yet the changes – which adjust the way subsidy support is calculated – could affect all biomass CHP plants applying for subsidy support from as soon as next Monday, when the amendment is set to come into force.
Neither the Department for Business, Energy & Industrial Strategy (BEIS) nor its predecessor, the Department for Energy and Climate Change (DECC), formally consulted prior to laying out the amendment “surprising many in the industry and putting a number of projects at risk”, the REA claims.
However, a spokesperson for BEIS said the changes were being made to close a loophole in the regulations, but that affected projects could be better off if they produced more electricity as well as heat.
Published on July 7, the legislative document states that “a full regulatory impact assessment has not been produced for this instrument as no impact on the private or voluntary sectors is foreseen”.
However, the REA believes many biomass CHP developers could now be facing a reduction of up to 35 per cent in their anticipated tariff, and has urged BEIS to withdraw the proposed RHI amendment until a full consultation over the impact of the changes has been carried out.
The government’s changes to the way in which RHI support is calculated are specifically targeted at biomass CHP plants that use less than 20 per cent of their fuel for electricity production and the remainder for renewable heat.
Under the changes, renewable CHP plants would only receive the higher CHP tariff under the RHI for certain proportions of its renewable heat, according to the REA. The renewable heat elements not supported by the higher CHP would then instead receive the relevant non-CHP biomass tariff, which is lower than the CHP tariff.
In response to the amendment, the REA carried out a survey of 36 companies developing biomass CHP projects in the UK, of which it said 25 reported the changes would have a “very negative” impact on their project alongside a further eight which reported a “negative impact”.
More than a third of the companies surveyed had already made major equipment orders for the construction of their facilities or put down non-refundable deposits, the REA said.
Head of policy and external affairs at the REA, James Court, said the survey showed the cut in support would significantly impact on the biomass CHP industry, despite the government’s claims to the contrary.
“It is the suddenness and the lack of consultation that is the core issue here,” he said in a statement. “Over £140m worth of investment is affected by this change, with a planned renewable energy capacity totaling 203MW heat and 20MW power.”
The amendment comes as the industry prepares for a new tariff structure to the RHI scheme from spring next year, but Court explained that a recent consultation over the new tariffs made no mention of the changes to biomass CHP support, which he said could “damage investor confidence”.
“This significantly reduces the likelihood that many companies and investors will be keen to invest in this low-carbon technology in the future,” he said. “We are therefore calling on BEIS to withdraw the amendment until a proper consultation has been launched to examine the impact on these projects, or introduce a grace period for those who can demonstrate that they have already made a significant financial commitment.”
In a statement, BEIS said the amendment would close a loophole in the existing regulations as “RHI subsidies are paid for by the taxpayer and it is therefore only right that they are fair and give good value for money”.
“Previously, companies could get double the amount of subsidy by generating electricity as well as heat, even if the amount of electricity they were producing was very small,” said the statement. “The changes will mean that companies will receive payments that better reflect the amount of electricity they actually produce.”
CHP developers will be hoping for clarity on how the changes will work and whether or not they should have been given more notice through a full consultation.
