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DECCs U-turn on Anaerobic Digestion

February 24th, 2014 | 12:23 pm

In the latter part of 2013, the small scale Anaerobic Digestion (AD) sector was unsettled by an impending 20% cut in the Feed in Tariff, mainly resulting from a higher than expected deployment. To allay industry concerns, Greg Barker MP released a statement in November explaining that DECC would launch a consultation in early 2014; assessing the need to revisit the Feed in Tariff and potentially prevent an artificial degression for projects less than 250kW. On 19th February however, DECC reversed their position and announced that the consultation would no longer happen. As a result, April 1st will see FiT rates for all AD projects under 500kW reduced by 20%.

A key point to remember is that deployment (for the purposes of the degression mechanism) not only includes installed capacity but also takes account of pre-accreditation. Though they have reserved a place on the FiT register in one year, pre-accredited projects have 12 months to become operational. High levels of pre-accreditation can therefore skew deployment figures and contribute towards artificial degression. In 2014 this is likely to become a more significant issue. January 2014 alone has seen almost 3MW of AD deployment under 500kW, 3kW from triggering a 5% degression in October. At this pace, the end of 2014 will see over the double the deployment of 2013, bringing further significant cuts, heavily influenced by pre-accredited rather than installed projects.

Pre-accreditation isn’t the only issue. All AD deployment less than 500kW is aggregated together and measured against one degression threshold. This is despite the fact that there are two technology bands (one less than 250kW, and another 250kW to 500kW) which receive different tariffs, and are suited towards different types of sites. Aggregating these bands together has been seen as illogical for some time; especially since high deployment in one band can disproportionately breach the trigger threshold for both. To illustrate this point, we can take a look at deployment levels for 2013. In that year just over 1MW of small AD (less than 250kW) was installed, but 13.4MW of projects between 250kW and 500kW in size were installed. The larger band represented almost 93% of total AD capacity under 500kW, yet tariffs for both bands will now decrease by 20%.

Many larger developments have also had a negative impact on degression. Smaller projects receive a more attractive tariff than larger projects. Hence it is not uncommon for developers to build a plant at or under 500kW, only to install additional capacity later. This way, a major portion of the plant will benefit from the higher rate; whilst the additional capacity receives the lower rate applicable to projects over 500kW. Significant numbers of such projects can distort figures further.

As a result of these issues, the consultation was announced with the intention to save rates for genuine small scale AD (less than 250kW) and nurture the industry’s growth. It now appears the industry will have to wait until 2015 to see any changes in the current system.

We hope that small AD will continue to play a part in the UK’s renewable energy mix as the technology allows many farmers to use their own farm waste and slurry beneficially, whilst also reducing methane emissions that would otherwise be released into the atmosphere. But with high pre-accreditation and distorted deployment figures creating large tariff cuts so early on, the industry is being stifled just as the sector was starting to realise its potential.

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