Saying Yes But Meaning No

We do want biomass CHP generation don’t we?

And government really does mean it when it says that its 2010 CHP targets are for 10,000 MW CHP capacity and that 15% of energy used by it will come from CHP?

If the answer to both those questions is yes, it’s hard to see why up to 5GW of biomass development in course at the end of last year was frozen by government and why any development of new projects is to be seriously limited by it for the foreseeable future.

In December DECC announced that support for biomass plants would not be grandfathered – so the biomass plant you build now might not get the same/any support post-2013. That news pulled the rug from under projects which were to start to generate post-April 2013.

It appeared to be news to DECC that changing investment rules and removing investment props undermines the market. Extraordinary though it may seem, the DECC officials who have been in place for some time seem simply not to have known the basic rules of markets, investments and government support, despite that being their main job in life.

With a cock-up on that scale one expects immediate action. What did we get? Nearly two weeks later Lord Hunt announced that he would make an announcement at a future date, but not now. Then just over two months later we were told that an announcement would be made later, but not now. Why the delay?

There are two possible answers. The ‘good’ answer is the one that makes us think government is devious and investors can’t trust it but it nonetheless knows what it’s doing. The ‘bad’ answer is that they’re out of their depth. It isn’t simple deciding which it is.

DECC said that the 2010 Renewables Order (the Order that dealt with the biomass issue) had already gone to the Joint Committee on Statutory Instruments and they couldn’t now change things until the next Renewables Order in April 2011. That is a ‘good answer’: it is clearly nonsense, so must be designed to do no more than deflect us all. These people are irritating, yes, but not stupid.

But there is now a consultation paper out and in it one is really hard pressed to find any reason for the problem except the inability to sort out how to allocate costs and subsidies so the two match up. It appears that DECC decided not to grandfather biomass plant “precisely” because it couldn’t manage to fathom a scheme to ensure that the biomass plants with cheaper feedstock got less support than the biomass plants with more expensive feedstock or that as feedstock changed, prices changed.

Why should that matter? According to DECC, grandfathering could result in future market distortion if bands were changed for new entrants. On the basis of such future perhapses, possibilities and mights, DECC has thrown in the towel and decided that it can only deal with non-fuel costs as the basis for the RO allocation – and it is asking us how that will work.
Why not look at what other countries do so much more successfully than us? Why not copy the rules in Germany where they will meet their targets, even if we won’t? Why not do anything other than pull the plug on current projects?

It’s worse than that. For other kinds of biomass – waste from energy and anaerobic digestion – government is to defer a decision until the next review of the Renewables Obligation. There is no possible glimmer of light here for the future.

The message has to be that although government says it wants biomass, it doesn’t.

But if that’s wrong, they’re going about it in the wrong way and I will arrange that they be given free entry to the conference run by the Energy & Utility Forum on 1st June which tells them what funders and developers need: www.fundingrenewables.co.uk/ and I will go out of my way to ensure that the investment community engages with them.

Sally Barrett-Williams
Partner - The Carbon Catalysts Group
Chairman - Energy & Utility Forum

(© Sally Barrett-Williams)