Incentivising full conversion of coal plants to biomass is among the main thrusts of revisions to the UK's Renewables Obligation banding scheme announced on 25 July. Proposed revisions were announced in October 2011, followed by a consultation period culminating in the finally adopted banding arrangements (for full details see:
http://www.decc.gov.uk/en/content/cms/consultations/cons_ro_review/cons_ro_r
eview.aspx).
The banding scheme prioritises support to the various renewables technologies and the review has strived to be "evidence-based".
Fully converted coal plants will earn 1 ROC/MWh but there is also a new provision that allows support on a unit by unit basis, and not, as previously proposed, on a power station wide basis. Drax says that the new measures provide the basis for it to fully convert three of its six 660 MWe units to biomass.
Other changes to the banding scheme include reduction in onshore wind support by 10% to 0.9 ROC/MWh from 2013 to 2017 (subject to further review of onshore wind costs between autumn 2012 and early 2013) and increase in support for certain marine energy technologies from 2 to 5 ROC/MWhs. There is a very slight increase in offshore wind support, 2 MWh/ROC in 2013/14 degressing to 1.8 in 2017 onwards (currently 2 ROC/MWh, degressing to 1.5 ROC/MWh from 2014/15 onwards).
While there will be no immediate reduction in support for large-scale solar, there is to be a further consultation this year on reduced support levels "given recent dramatic falls in costs."
ROCs are tradeable, providing additional income for renewable generation over and above revenues from electricity sales, thereby creating an incentive. The buyers of ROCs are electricity suppliers who need to have a mandated number of them per MWh supplied, reflecting government renewables targets, with costs passed on to consumers. Suppliers that have insufficient ROCs must buy them, at a "buyout" price, currently about £40 per ROC. Proceeds from ROC buyouts are recycled back to suppliers, in proportion to the number of ROCs they hold.
But the days of ROCs are numbered. By 2017 they will be phased out and replaced with a new support scheme (which will run in parallel with the ROC regime from 2014 onwards) based on a "feed in tariff with contracts for differences." This aims to incentivise other low carbon generation technologies (eg nuclear and CCS) as well as renewables.
In announcing the new Renewables Obligation bands, the government took the opportunity to re-emphasise the importance of gas, confirming that it "sees gas continuing to play an important part in the energy mix well into and beyond 2030...Through the 2020s, and beyond if gas proves cheap, we expect it to continue to play a key role ensuring that we have sufficient capacity both to meet everyday demand and complementing an increasing amount of relatively intermittent and inflexible generation. We do not expect the role of gas to be restricted to providing back up to renewables, and in the longer term we see an important role for gas with CCS." The government plans to unveil its strategy on gas in the autumn, setting out how it hopes to ensure investment in gas generation plant.
At the press conference announcing the new RO bands, Edward Davey, secretary of state for energy and climate change, noted that currently in the UK there is about 15 GW of combined cycle capacity in the UK that has been consented but not yet built.
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