Update on banding of the renewables obligation

Government response (36 pages, PDF) to the May 2007 consultation on proposed arrangements for banding the renewables obligation so that different technologies receive different levels of support.

Update, 15 January 2008: A modelling update (12 pages, PDF) and the responses to the consultation have been added to the website. Summerleaze AnDigestion's response (24 pages, 10.8M scanned PDF) includes a paper prepared by Reckon LLP on the competition assessment of the proposed grandfathering rules for biomass technologies other than co-firing.

The Government's response on the treatment of technologies for which support is to be increased (relative to support for onshore wind) includes:

3.13 Because of the need to ensure compliance with State Aid rules we still intend to take a power allowing generators who wish to be banded up to repay the relevant proportion of the grant they have received. As this would need to be done on a case by case basis, the detail will be worked out with individual companies at the time of their decision, although the broad principles and mechanism will be consulted on in the statutory consultation accompanying the Renewables Obligation Order later this year.

3.14 Some respondents raised the concern that dedicated biomass plants and those using fuels created through an advanced conversion technologies should be banded up. They argued that by banding up new dedicated biomass plants and those plants supplied by advanced conversion technologies while leaving existing plant at one ROC per MWh, the latter’s ability to compete for fuel will be significantly eroded. This, they argued, unfairly prejudices first movers in this market segment. While we recognise the argument we have not yet got enough evidence on which to base a decision and are currently gathering further evidence from generators. We expect to issue a decision by Spring 2008.

No details are given on progress with obtaining State aid clearance from the European Commission.

For further information or advice please contact Franck Latrémolière.

Filed under DTI/BERR, Electricity, State aid.

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