EU approves U.K. state aid for Teesside biomass CHP plant

By Erin Voegele | January 22, 2015

The European Commission has approved the U.K.’s plan to provide state aid to the proposed Teesside combined-heat-and-power (CHP) plant, a 299 MW, biomass-fired facility.

The Teesside project is one of eight renewable energy projects selected for the first contracts under the U.K.’s electric market reforms. In 2013, the U.K. Department of Climate Changed announced that the government had sent out draft investment contracts to a total of 16 renewable energy projects that had progressed to the next stage of the final investment decision (FID) enabling for renewables process. In mid-December, the DECC announced that only 10 of those projects had been found to be provisionally affordable under the budget caps released earlier that month. The list of projects was later reduced to eight. Those projects, including the Teesside project, a Drax biomass unit conversion, and the Lynemouth Power biomass conversion signed contracts in June 2014, along with five off-shore wind projects. 

According to information released by the commission, the Teesside plant will be located in the Tees Valley in northeast England and is scheduled to begin operations in July 2018. It will provide electricity to the national grid and heat to local customers. The project is expected to save approximately 32 million tons of carbon dioxide over its 30-year lifetime and supply about 2.1 TWh of electricity.

In a statement, the commission said it has found that U.K. plans to support the plant are in line with European Union aid rules. The aid given would be granted to the operator of the plant in the form of a variable premium above the market price for electricity to compensate for the higher costs of biomass energy.

The European Commission has now approved state aid for six of the eight renewable energy projects. In addition to the Teesside project, which received approval Jan. 22, the five off-shore wind projects were granted European Commission approval in July 2014 as part larger announcement from the commission that indicated the U.K’s Contracts for Difference (CfD) subsidy program is in line with EU state aid rules. The Drax and Lynemouth biomass conversion projects are still awaiting EC state aid approval.