The government has proposed scrapping the Feed-in Tariff (FiT) for anaerobic digestion installations of between 500kW and 5000kW from January 2017, saying many are now economically viable without the subsidy.
According to the government “market intelligence and anecdotal evidence” suggests an increasing number of these installations are taking the form of combined heat and power (CHP) projects, which are also able to take advantage of Renewable Heat Incentive (RHI).
There has also been an uptick in the number of installations being accredited for the both the FiT and the RHI. The government said analysis had shown that a typical project of this kind could expect to generate a return on investment of more than nine per cent a year even without the support of the FiT. Accordingly it plans to cut the FiT for projects of this size from 7.81p/kWh to zero.
It has also proposed cutting the tariff for smaller anaerobic digestion projects, reducing it from 8.21p/kWh to 5.98p/kWh for installations of zero to 250kW, and from 7.58p/kWh to 5.52p/kWh for installations of 250kW to 500kW. It said this would be a continuation of the “current price trajectory”.
However, it said it planned to tweak the default degression going forward, to take account of changes to both the cost of the technology and the expected energy bill savings from using it.
The government has been battling to keep the cost of the FiT in check after the Office for Budget Responsibility (OBR) forecasted in July that the cost of low-carbon subsidies was on course to exceed the budget contained within the Levy Control Framework by £1.5 billion by 2020/21.
In February it reduced the FiT rates for a number of technologies, with solar photovoltaics taking the biggest cut. It also placed a £100 million limit on additional spending under the scheme up to March 2019, introducing quarterly deployment caps to ensure the limit is kept to.
The FiT for micro-combined heat and power (mCHP) is expected to remain at its current level. Despite only 501 installations being in place by the end of 2015, the government has proposed bringing the cost of the tariffs within the £100 million limit and introducing an annual deployment cap of 1.6MW as a “precaution” against an overspend.
It said the caps would be annual and not quarterly because of the “low level of deployment to date” and “the seasonality of deployment”. A consultation is now underway into the proposed changes.
Chief executive of the Anaerobic Digestion and Bioresources Association Charlotte Morton said: “This consultation does nothing to address Decc’s fundamental lack of ambition for AD and community scale renewables.
“Removing support for new plants above 500kW is completely unjustified and will kill off projects which could otherwise have delivered Decc’s objectives while representing good value for money.
“We will be working with our members to put together a strong response to this consultation, and making the wider case for supporting anaerobic digestion to cut carbon, deliver energy security and recycle critical nutrients.”