Biomass suppliers face new fees

Industry on hold until details confirmed on new tariffs.

The latest Renewable Heat Incentive changes came into force on 1 August
The latest Renewable Heat Incentive changes came into force on 1 August

Biomass suppliers will have to pay fees to cover the costs of running the Biomass Suppliers List (BSL) from January 2017. The BSL is for Renewable Heat Incentive (RHI) eligible wood fuel and biomass suppliers.

RHI users are required to ensure that their fuel meets certain sustainability criteria such as life cycle greenhouse gas emissions. A requirement of 60 per cent savings compared to fossil fuel must be averaged and then demonstrated to Ofgem so that members can claim RHI.

The incentive is funded and budget managed by the Department for Business, Energy & Industrial Strategy. Ofgem's latest forecast puts the current expected costs of the RHI scheme at £550m, £63m above its overall expenditure threshold.

BSL is asking for feedback via an online survey (see, open until 4 September.

The latest RHI changes, which came into effect on 1 August, targeted biomass combined heat and power systems that use less than 20 per cent of the fuel for electricity production. This means companies that invested in the scheme now receive a much lower tariff alongside members of the renewables industry.

Pentland Biomass director Shiona Macmillan linked "reduced incentives and uncertainty over tariffs to a downturn within the industry". Sister company Pentland Plants found it hard to source burn material so created Pentland Biomass.

"It was a great investment at the time and is still providing our heating requirements," said Macmillan. "We're glad we did it at the time as we're now locked in to the same rates for our 20-year payments. On recent tariff rates it would not have been possible."

The Department for Energy & Climate Change published The Renewable Heat Incentive: A reformed and refocused scheme on 3 March, outlining the new tariff structure that comes into place in April 2017. McMillan said the industry is on hold until then. "We are waiting to find out whether the level of support continues or has further cuts made."

The report provides an overhaul of the domestic and non-domestic RHI. The Government was expected to announce its response to the consultation before summer recess, along with numerous other clean energy documents, but failed to do so. It continues to review feedback that could see a reduction of non-domestic biomass boiler support by 98 per cent, alongside complete removal of support for solar water systems.

The reduced biomass level is aimed at reducing installations of biomass boilers from 3,000 last year to just over 50 by 2021. This comes alongside a planned removal of support for energy crops used in anaerobic digestion.

Pentland said: "These changes could be seen as making it harder for small companies to invest in renewables," because eligibility precludes installations funded by grants.

Matt Baxter, technical director of Core Biomass, the company that installed a large industrial biomass boiler at Hill Brothers in 2014, said: "There isn't such a threat of tariff degression for the large boilers we are installing. The tariffs are reasonably stable for larger industrial boilers so far so we have been reasonably unaffected."

He added: "The smaller end of our market under 200kW has all but disappeared completely and this has already caused a number of suppliers in this bracket to cease trading."

Although larger boilers are well off with tariffs, there are other problems, said Baxter. "Longer lead times and installation requirements have us focusing on deadlines and we find ourselves working to complete before the next degression trigger date. Our orders have changed in that now nearly all orders are 1MW or at least 750-999kW, sometimes much bigger. This is due to the tariff banding."

Tariff levels are assigned to installations based on the technology and size. Payments are in turn made based on the actual heat output of the installation with any tariff being affected by the retail price index or consumer price index, dependent on installation date.

Baxter added: "Previously the focus was on sub-200kW boilers. In fact, many customers were choosing multiple 200kW boilers instead of a single 999kW boiler. Now they have switched to a single larger boiler, which has benefitted us as we focus on this area.

"Actually, in my opinion this is also a benefit to the customers - large-scale boilers are more robustly designed and therefore have longer life, lower operating costs/maintenance costs etc. The cost of installation is lower because you only have a single boiler to install and they are also capable of burning a wider range of fuels, including straw and recycled waste woodchips. This flexibility allows cheap fuel to be utilised now and in the future.

"It is also a benefit to the taxpayer who funds the RHI scheme because the amount of subsidy paid is significantly lower to reflect that the overall cost of installing one 995kW against five 200kW is much lower. The cost per kilowatt-hour of CO2 saving is therefore far better."

He added: "RHI should be rebalanced to reflect these facts in the future and therefore larger plants will be incentivised compared to smaller installations as they offer better value to the customer and RHI scheme."

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