DECC to review FiTs for small-scale AD plants

The Department of Energy and Climate Change (DECC) has announced it is to review Feed-in Tariffs (FiTs) for small-scale anaerobic digestion (AD) plants in January.

The announcement follows on from a letter written by several stakeholders – including the Renewable Energy Association (REA) and Anaerobic Digestion and Biogas Association (ADBA) – to Energy Minister Greg Barker, which warned that the government’s capacity-triggered tariff reductions and preliminary accreditation for developers could make small-scale AD ‘uneconomical for farmers even though hardly any on-farm plants have been built’.

The current system has two capacity triggers – for plants that produce more than 500 kilowatts (kW) of electricity, and for ‘small-scale’ plants that produce less than 500kW. They were designed to ‘prevent an unsustainable boom in the market’ by reducing feed-in tariffs once a certain level of capacity has come online.

However, the AD industry has warned that the system needs to be reviewed. An REA briefing explained: ‘Most on-farm AD is below 250kW. Preliminary accreditations are currently counted towards capacity triggers at the time of registration rather than the time the plant comes online. This is artificially breaching the sub-500kW capacity trigger and causing a 20 per cent tariff reduction in April 2014. This will make AD uneconomical for farmers even though hardly any on-farm plants have been built!’

According to the REA, farmers have been increasingly looking to AD to generate an income from farm wastes and residues by converting them into renewable biogas and biofertiliser. However, this would be made harder by a reduction in tariffs.

Consultation announcement

Writing in response to these concerns, Barker told ADBA, REA, NFU (National Farmers Union), CLA (Country Land & Business Association) and RASE (Royal Agricultural Society of England) that the department will be consulting on ‘measures, including a tariff review, in January’ to ensure that the small-scale AD sector is not ‘unfairly disadvantaged’ (by the anticipated degression of FiTs in April 2014 for plants that produce less than 500 kilowatts of electricity).

He added that the consultation will ‘have the aim of closing the current loopholes and providing a long term, stable investment framework for small-scale AD, as well as the sector as a whole.’

He concluded: ‘It is essential that we maintain a robust and stable FiTs scheme, so any potential amendments will require careful work to avoid unintended consequences.’

Decision ‘saves a hugely important sector from disaster’

Speaking in reaction to the consultation announcement, REA Chief Executive Dr Nina Skorupska said: “Industry has been united in calling on Greg Barker to commit to a review of the AD FiT before Christmas, so we warmly welcome this letter from the minister. It is very encouraging ahead of the Autumn Statement to see ministers and officials really listening and responding to industry concerns.”

She added: “The simple fact is that if this situation isn’t resolved, the on-farm AD industry will grind to a halt. The timely announcement of the review gives government a good chance of fixing the situation quickly enough to preserve the majority of existing projects and keep the door open for further growth.”

Charlotte Morton, Chief Executive of ADBA,also welcomed the letter, saying: “Greg Barker has taken the opportunity to correct flaws in the FiT mechanism and save a hugely important sector from disaster.

“Smaller-scale anaerobic digestion has [a] huge amount to offer – using slurry and farm wastes mitigates methane emissions on farms, generating employment in rural communities and creating a UK manufacturing sector with strong export potential.

“We look forward to continuing to work closely with our members, DECC, REA and the farming associations in responding to this consultation to help set a long-term supportive framework which ensures all scales of AD are able to prosper.”

Read more about the feed-in tariff for small-scale AD plants or find out more about how feed-in tariffs work.