Biomass and small solar pay price for LCF overspend

Biomass and small scale solar projects will pay the price for a £1.5 billion overspend on green subsidies, Decc announced today.

A total of £500m of support for biomass and an unconfirmed amount for small scale solar has been withdrawn, following the revelation that Decc overspent its £7.6 billion budget for the Levy Control Framework by £1.5 billion.

Customers will have to meet the extra cost of the LCF through levies on their bills. To compensate, Decc has withdrawn grandfathering support for biomass projects. This support gave a guaranteed level of support for the duration of the Renewables Obligation (RO) to conversion and co-firing projects.

Decc said the move will reduce the risk of more allocations being added under the LCF by £500 million per annum in 2020/21. The changes to the biomass subsidies will be back-dated to 12 December 2014.

The government has also cut the support available to small scale solar projects (5MW or below). The grandfathering support for small scale solar is also set to be removed, and Decc plans to end the support for the scheme under the RO a year early.

The move follows similar action on subsidies for onshore wind, which saw support under the RO ended a year earlier than planned. The changes to the RO support for small scale solar would be backdated to today following a consultation on the changes, which closes on 2 September.

Decc is also seeking to remove pre-accreditation for renewable projects under the Feed-in Tariff (FiT) regime. This would mean that developers would not be awarded a guaranteed level of support in advance of the project being commissioned as is currently the case.

Developers would only know what level of support they will receive once accreditation for the project has been received by Ofgem.

Decc has admitted this will limit developers’ ability to secure funding under similar terms as are currently available in the market, but that it will not prevent them from going ahead.

The consultation on the changes to the FiT runs until 19 August.

Energy secretary Amber Rudd stated the cuts to subsidies are aimed at reducing the impact of green levies on energy bills.

She said: “Our support has driven down the cost of renewable energy significantly.

“As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment”.