Tariff level reduced for large-scale biomass technologies in RHI

By Lisa Gibson | October 26, 2011

The U.K.’s Department of Energy and Climate Change got approval from the European Commission Oct. 26 to launch its Renewable Heat Incentive with a sizeable reduction in the tariff for large biomass technologies.

Under the stipulation that it reduce the tariff level from 2.7 pence (4 cents) per kilowatt hour to 1 penny (2 cents) per kilowatt hour, the DECC hopes to open the RHI program to applications by the end of November. “Revised regulations have now been re-laid in Parliament to reflect the required amendment to the tariff for large-scale biomass,” the DECC said in a statement, adding that the amendments are still subject to Parliamentary approval.

The RHI program offers long-term support to compensate for capital and operating costs and reduces barriers and financial costs for thermal technologies classified as renewable under the Renewable Energy Directive. Support will be distributed in the form of tariffs based on technology and size.

When the program made its way through Parliament in July, it was still subject to approval from the European Commission. The DECC was ready to launch the first step of the program, dealing with nondomestic generators on Sept. 30. But the commission came back to the DECC with an approval hinging on a reduction of the tariff for large biomass technologies.

“After last month’s delay to the Renewable Heat Incentive, today’s news is a much-needed injection of confidence for the U.K.’s renewables sector,” said Tim Minett, chief executive of U.K. wood pellet supplier CPL Distribution. “But it is even better news for those businesses and organizations wishing to take advantage of this scheme. Our view has always been that the Renewable Heat Incentive, and the financial ‘carrot’ it represents for businesses and organizations, will be a game-changer for the U.K.’s transition to a low-carbon economy.”

The rate revision removes barriers to implementation of the RHI in November, he continued, allowing businesses and the public sector to plan their switches to biomass in confidence and ensure they are the first in line to benefit when the program is open for applications.

“While the tariff reduction for larger users might seem to be a negative, the incentive will remain and they will still benefit,” Minett said. “We calculate that with a revised tariff level of 1 penny per kilowatt hour an average-sized hospital could still save more than £140,000 ($223,861) per year, alongside a fuel saving for biomass compared to oil of £190,000, giving an overall benefit of £330,000 every year for 20 years.”