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Energy decisions leave landowners confused

View profile for Edd Johnson
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In recent years, many farmers and landowners have been able to take advantage of the growth in renewable energy by leasing their land to energy companies.

For many, this has become a vital source of income, however, two recent decisions have left many in the agricultural community scratching their heads about the Government’s energy policy.

In July, with little notice, the newly-formed Department for Business, Energy and Industrial Strategy (BEIS) made an amendment to Renewable Heat Incentive Regulations 2011 dealing with non-domestic installation, which may lead to a cut in the level of tariffs that operators of solid biomass combined heat and power installations will be able to claim.

This continued the trend established by the now defunct Department of Energy and Climate Change (DECC) which, for many years, had been looking to put the brakes on deployment of renewable energy schemes.

Insofar as it is possible to identify the reasons for this, they seem to mainly relate to the take-up of subsidies far out-stripping DECC projections and, secondly, public opinion and some negative press coverage relating to the amount subsidies are seen to add to consumers’ energy bills.

The action by government has been widely criticised by the renewables industry as being highly reactive and uncertain. These decisions are also very short term in that some technologies, notably solar, were quite close (between say 6-18 months) from being genuinely capable of subsidy-free deployment.

Following the BEIS amendment to the regulations, new solid biomass CHP installations, with a date of accreditation on or after 1 August 2016, will have their tariff payments adjusted and reduced if they have a power efficiency of below 20% on their CHPQA certificate.

In simple terms, this means that at least 20% of their fuel must be used for electricity production. This does not take into account the fact that the remaining in 80% may still be used for the production of renewable heat.

Where the power efficiency of the installation is less than 20%, the tariff will be adjusted using the formula set out in regulation 39D (2), which takes into account the power efficiency value of the site.

The potential reduction in the level of tariff available is likely to lead to landowners being much more reluctant to invest in new solid biomass CHP installations. Of the 36 companies surveyed by the Renewable Energy Association, 33 indicated that the changes would have a negative or very negative effect on their projects.

Given what many would see as attacks on renewable energy perpetrated by DECC and now by BEIS, it came as a shock to the industry that the government has recently indicated that they will be postponing making a final decision about the construction of a new nuclear power station at Hinkley Point C until the early autumn. It was widely expected the Hinkley Point C would be signed off by the government last week, paving the way for what is expected to be the most expensive building in the world.

Some commentators believe that the last minute review may just be the preface for abandoning the project altogether, given the concerns which have been raised about EDF’s ability to deliver the project on time and the potential increase in cost to the consumer as a result of the "strike price" of £92.5 per MWh which the Government has agreed to pay EDF for 35 years. Renewable project developers would gladly take £92.50 per MWh (or indeed less) with the risk of delay/overspend being borne by the developer.

Since 2006, successive governments have taken the position that nuclear power is necessary as part of an electricity generation mix to ensure that the country is not reliant on imported power. For instance, it was envisaged that Hinkley Point C would deliver up to 7% of our electricity when in operation.

Given that the remaining coal fire power stations are due to close over the next few years and in light of the cuts which have already been made to the subsidies that were available to the developers of wind and solar power projects, if the Government does choose not to proceed with Hinkley Point C and BEIS does not reconsider their amendment to the Renewable Heat Incentive Regulations 2011, it arguably calls into question not only the consistency of the Government’s energy policy but also the future energy security of the country. We do need electricity; where does the government see it coming from?