17 February 2011
Chris Huhne, the Secretary of State for Energy and Climate Change announced his intention to start the first review of the feed-in tariff (FIT) scheme for small scale low carbon electricity generation, with immediate effect.
But what does this mean for the anaerobic digestion (AD) industry, waste contractors, farmers and landowners?
WYG’s anaerobic digestion expert, Dr Kevin Monson, gives his view on the early feed-in tariff review and how he sees this benefiting the AD industry.
“I have been involved with many AD projects over the past ten years, and whilst the introduction of the FIT system was very welcome, it was immediately apparent that the AD FIT was too low, especially considering the high capital costs and the cost of securing feedstock for farm scale AD plants where accepting non-farm wastes is not a desirable option.
Whilst Huhne acknowledges that de-centralised renewables are vital to green growth, and that industry needs a long term plan for investment in which it can have full confidence, he expressed concern at the volume of large scale solar projects claiming (or hoping to claim) FITs, and expressed his disappointment at the lack of farm based anaerobic digestion plants currently accessing FITs.
The low uptake of AD FITS to date is no surprise, as the tariffs were set too low to provide an attractive return on the capital costs of an AD plant. This is particularly the case for rural AD plants looking to co-digest energy crops (as energy crops have an associated cost to produce). Whilst the industry realises that it is more beneficial (and more lucrative) to digest organic wastes, many projects require a ‘Plan B’ in case anticipated waste contracts do not materialise, or turn out to be short-term. Similarly, many farm scale AD plants need to supplement slurries and small volumes of organic wastes with energy crop to boost energy output and make investments viable. The existing AD FIT is too low to support this model and a higher AD FIT should ‘tip the balance’ and make many more AD projects viable. This will provide investors with the security they need, and benefit the country as a whole by reducing pollution, diverting organics from landfill, improving soil quality, producing renewable electricity and heat, reducing carbon emissions, and reducing our reliance on foreign fuel imports.
The review is expected to be completed by the end of the year with tariffs remaining unchanged until April 2012. (Unless the review reveals a need for greater urgency.) All aspects of the scheme will be assed including tariff levels, administration and eligibility of technologies and a fast-track consideration of large scale solar projects (over 50kW) with a view to making any resulting changes to tariffs as soon as practical, subject to consultation and parliamentary scrutiny as required by the Energy Act 2008.
Alongside the fast track review of large scale solar PV, is a short study into the take-up of FITs for farm based anaerobic digestion plants. Only two such projects have been accredited so far and by this point at least six were expected. A review of the tariff rates inherited from the previous administration is to be undertaken to see if they are enough to make farm based anaerobic digestion worthwhile.
I am convinced that this is great news for all involved (or hoping to be involved) in the AD industry in the UK.
An upward review in the AD FIT (and a favourable Renewable Heat Incentive) will make AD in the UK much more attractive. A generous increase in the FIT for AD would make many more projects viable, stimulating private investment and enabling the UK to make serious progress towards challenging European and national landfill diversion and renewable energy targets. Whilst not (yet) providing certainty for investors, this announcement brings the review forward, and provides the clearest indication yet that the government is committed to making AD happen, and that AD FITs are unlikely to be decreased in the upcoming review.”
The full announcement is available on:
Dr Kevin Monson,
Anaerobic Digestion Expert, WYG