The Energy Bill going through Parliament introduces a guaranteed power price for each renewable technology, topping up the wholesale market price as required, through contracts for difference (CfDs).
A report by law firm Brodies for Scottish Renewables found that while some investment risks are reduced under the CfD regime compared to its predecessor, others are increasing.
Keith Patterson, renewable energy expert at Brodies, explained: “Projects with a fuel input such as biomass or waste-to-energy are more at risk because, while the reforms introduce stable revenues, they don’t introduce stable costs. If that cost base varies and you are not able to respond to it, that potentially makes these projects uninvestable.”
The Renewable Energy Association has proposed linking support levels to the Argus Biomass Markets index.
In its consultation response to the government’s Electricity Market Reform draft Delivery Plan, the REA also warned the withdrawal of all support from dedicated biomass power plants could put off investors.
Biomass combined heat and power (CHP) plants are supported under the regime but face a “precipitous cliff edge” in revenue if, for example, a heat customer goes bust and leaves only power output.
The trade body said to get significant biomass CHP deployment, the guaranteed “strike price” would need to be around £140/MWh – an uplift of £20/MWh on the government’s draft price.