A new set of UK Feed-in-Tariff (FIT) reductions known as "degressions" will come into force from 31 March 2016. This has led to companies rushing to complete existing projects and starting new ones early, to ensure that their anaerobic digestion (AD) projects get the last of the high subsidy rates.
Rates will only drop 5% to 11% at the start of April, but there is widespread concern that the mechanism known as degression, which it is hoped will soften the run-down of this subsidy, will deter the commencement of a large number of projects due to start later this year, and result in a high level of UK AD Plant Installation Contractor bankruptcies.
The idea of degression is that as the target spending level approaches, the FiT will be reduced more rapidly. This should minimize government overspending if the uptake of the FiT is rapid, but the uncertainty it introduces into predictions of anaerobic digestion plant project profitability could simply stifle demand for new biogas plants. If that happened it would set-back the UK's biogas industry for years, and cause widespread job losses.
How The UK Got UK AD Plant Installation Contractors Into This SituationThis has been explained by CooperOstlund's Johan Ostlund in the January 2016 edition of Wet News, as follows:
"Feed-in Tariffs (FITs) were introduced by the government in 2010 to help increase the level of renewable energy generated in the UK. The subsidy outlined that renewable generation systems, up to a capacity of five megawatts (MW), were eligible for financial support for producing green energy.
Alongside helping the UK towards its legally binding EU target of 15% of total energy from renewables by 2020, the incentives aimed to drive long-term investment in renewable technology and innovation.
Since its introduction, the scheme has been hugely successful. In 2014 alone, the anaerobic digestion (AD) industry installed 89 new plants in the UK, a high percentage on site at water companies, food manufacturers or recycling businesses to turn organic waste, wastewater or sewage into renewable energy.
Energy targetsIn fact, such has been the success of the financial support for AD installations that the industry now exceeds 500MW of total capacity across 411 plants nationally, making a significant contribution to the UK's renewable energy targets.
FITs have transformed the way the UK generates its power over the past three years, with more than 22% coming from renewables in the early part of 2015.
However, this has come at a price and the Department of Energy and Climate Change (DECC) admits spending on clean energy support is projected to be as much as £1.5bn over budget by 2020/2021.
In a bid to keep the budget under tighter control, the government introduced the FITs degression mechanism, which automatically reduces the level of subsidy available to new projects once a certain level of deployment is reached. Now, as part of the latest review, DECC wants to cut expenditure on the FITs scheme to between £75M and £100M, from January 2016 to 2018/19 and has significantly reduced the rates it will pay.
As part of these latest FITs degressions, financial support for AD sites will decrease significantly from the end of March 2016. In fact, the tariff for facilities under 500KW will reduce from 10.54 to 936p/Kwh, while facilities greater than 500KW will drop from 9.16 to 8.68p/Kwh." via WWT Online-WetNews
OpinionIt would be foolish of any government to continue to damage the UK'S renewable energy industry/UK AD Plant Installation Contractors in the way it has the solar panel and home insulation industries over the last 6 months, since the current Conservative Government got into power in May 2015.
For a party which is says it is both keen to introduce measures which will reduce climate change, and provide employment/support businesses, while improving the UK's housing stock, it is hard to fathom why they would jeopardize the biogas industry in this way, with all its beneficial spin-off's.
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