Government Incentives for AD
There are several policies that can benefit AD:
- Feed-in Tariffs
- Renewables Obligation and accreditation for Renewables Obligation Certificates
- Renewable Heat Incentive
- Levy Exemption Certificates
- Renewable Transport Fuel Obligation
Feed-in Tariffs (FITs)
Since April 2010, Feed-in Tariffs (FITs) have provided a guaranteed price for a fixed period to small-scale electricity generators. FITs are intended to encourage the provision of small-scale low carbon electricity. Only AD facilities with less than 5MW capacity, completed after 15 July 2009, are eligible for FITs. The Government offers preliminary accreditation for AD, with a guarantee that the project will be eligible for the tariff payable at the time of accreditation. Each tariff runs for 20 years.
There are two elements to the scheme; the generation tariff for every kWh of electricity generated, and the export tariff for every kWh of electricity exported to the national transmission network. The current generation tariffs for AD are as follows (until March 31st 2013):
- Facilities of less than or equal to 250kWe are entitiled to 15.16 p/kWh.
- Facilities of between 250 and 500kWe are entitled to 14.02 p/kWh.
- Facilities of between 500kWe and 5MWe are entitled to 9.24 p/kWh.
The export tariff is currently 4.64 p/kWh; a generator can claim either this or the market value payable by their electricity company.
Tariffs are Retail Price Index (RPI) linked, see the Ofgem website for a table of annual RPI linked increases to FITs. From April 2014, there will be a baseline degression in tariff rates of 5% per year, which would accelerate or decelerate based on annual deployment numbers.
Ofgem has recently announced the new Feed-in Tariffs to take effect from April 2014. Small and medium scale bands will see a 20% reduction applied to their respective tariffs due to the annual deployment in the sub-500kWe sector far exceeding expectations. The new generation tariffs for AD, to take effect from April 1st 2014, are as follows:
- Facilities of less than or equal to 250kWe will be entitiled to 12.46 p/kWh.
- Facilities of between 250 and 500kWe will be entitled to 11.52 p/kWh.
- Facilities of between 500kWe and 5MWe will be entitled to 9.49 p/kWh.
The export tariff will increase to 4.77 p/kWh. See the DECC pages on the Feed-in Tariffs for more information and historic rates.
The Government announced in July 2012, that they will monitor the use of purpose grown crops; accepting they are important for co-digestion, but not ruling out limiting future FITs eligibility to plants treating waste, if voluntary measures to limit their use prove ineffective.
Renewable installations using “generating equipment” that has previously received support under the Renewables Obligation or Feed-in Tariff schemes are not entitled to receive support through the FIT scheme. Generating equipment is defined by Ofgem for the purposes of claiming FITs as "all equipment required to convert gas formed by the anaerobic digestion of material (which is neither sewage nor material in a landfill) into electricity". Ofgem go on to state that "we will view all engines, turbines and alternators (or any part thereof) of an eligible installation to be generating equipment. We will not consider any gas blowers, anaerobic digestion vessels, gas clean-up equipment and any associated pipe work to be generating equipment."
Renewables Obligation (RO)
The Renewables Obligation (RO) is the main support scheme for large-scale (>5MW) renewable electricity projects in the UK. A Renewables Obligation Certificate ( ROC) is a green certificate issued to an accredited generator for eligible renewable electricity generated within the United Kingdom and supplied to customers within the United Kingdom by a licensed electricity supplier.
Anaerobic digestion is among the technologies that receive additional support in the form of multiple ROCs. An anaerobic digester will receive 2 ROCs/ MWh until April 2015, this will then fall in line with DECC estimations of costs to 1.9 ROCs/MWh in 2015/16 and 1.8 ROCs/MWh in 2016/17. The value of ROCs varies - an indication of values can be found here.
Generators are accredited by The Office of Gas and Electricity Markets (OFGEM). All information including application forms and guidance notes can be found on the OFGEM website.
In 2014, the Feed-in Tariff Contracts for Difference (FIT CFD) will be introduced as part of the Electricity Market Reform and new generators will have the option to claim the RO or the new FIT CFD. After 2017 the RO will close to all new generators. For more information on the FIT CFD visit the DECC webpage on the forthcoming Electricity Market Reform.
ROCs or FITs?
- Schemes between 50kW and 5MW will get a one off choice between support under ROCs or FITs.
- FITs offer fixed long-term security.
- RO potentially higher returns but value of ROCs varies.
Renewable Heat Incentive (RHI)
The RHI provides a fixed income (per kWh) to generators of renewable heat, and producers of renewable biogas and biomethane. AD facilities completed after 15 July 2009 are eligible for the RHI. The lifetime of the tariff is 20 years.
The current RHI for AD (Phase 1) is as follows (from April 2013):
- Biogas combustion up to 200 kW scale receives 7.3 p/kWh.
- Biomethane injection to the grid receives 7.3 p/kWh.
Useful information on how to apply for accreditation can be found on the Ofgem website.
Phase 2 of the RHI is expected to be introduced in Spring 2014 following the UK Government consultation published in September 2012. Phase 2 of the RHI will support larger scale biogas combustion (above 200 kWth).
- Biogas combustion of between 200 kWth and 600kWth will receive 5.9 p/kWh.
- Biogas combustion of between 200 kWth and 600kWth will receive 2.2 p/kWh.
Details of the consultation can be found on the DECC pages on renewable heat
along with all other information on the RHI.
Levy Exemption Certificates
Combined heat and power ( CHP) generated from eligible renewable resources is exempt from the Climate Change Levy (CCL). CHP Levy Exemption Certificates ( LECs) are the primary evidence that suppliers use to demonstrate to HM Revenue & Customs the amount of electricity supplied from certified 'Good Quality' CHP sources to non-domestic customers in the UK. For more information on CCL CHP exemption, see the relevant pages of OFGEM's website. For information on getting certification for quality CHP, see the CHP Quality Assurance programme.
Renewable Transport Fuel Obligation
The Renewable Transport Fuel Obligation (RTFO) requires suppliers of fossil fuels to ensure that a specified percentage of the road fuels they supply in the UK is made up of renewable fuels. Biomethane is eligible for Renewable Transport Fuel Certificates provided that it is dutiable and produced wholly from biomass. The guaranteed buy-out + duty incentive was 30p in 2012/13.
More information can be found from the Department for Transport, who administer the RTFO.
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