Projects that receive Renewables Obligation Certificates (Rocs) are barred from capacity auctions, which the government has designed primarily to bring on new gas power stations.
Biomass and hydro are as available on demand as gas but receive Rocs. They will suffer the wholesale price of power falling by an estimated 6 to 10 per cent because of the effect the capacity mechanism will have on peak prices.
Eco2, which has four biomass CHP projects in different stages of development in the UK, has ditched all further plans. Chief executive David Williams said he was “pretty fed up with the way the biomass industry has been treated over the past 12 months”. The capacity market was “just another nail in the coffin”.
Williams said it was “bonkers” to exclude renewables from the capacity market, because it would prevent renewables developers getting signals to provide capacity.
Tim Rotheray, head of policy at the Combined Heat And Power Association, said the impact “looks very serious” for CHP schemes.
“By excluding biomass plant, you are effectively reducing their value,” he said. “In a worst case scenario, it could be that your project does not stack up any longer.”
A spokesman for the Department of Energy and Climate Change said plants getting Rocs were excluded from the capacity market to avoid “overpaying” renewables.