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 UK Considers Extending Subsidies For Large-Scale Biomass Power Producers
[Jan 19, 2024]

The U.K. government is considering extending subsidies for biomass power producers that plan to develop bioenergy with carbon capture and storage (BECCS) capacity. A public consultation is open through Feb. 29.

The U.K. Department for Energy Security and Net Zero launched the public consultation on Jan. 18. The agency is proposing to implement transitional subsidies to support large-scale biomass electricity generators in their planned move to implement BECCS. In addition to supporting the move the BECCS, which supports the U.K.¡¯s net-zero goals, the proposed transitional subsidies would also support the U.K.¡¯s energy security.

Within the proposal, the ESNZ explains that while significant work in support of the transition to power BECCS is already underway, there will be a gap between the date existing support arrangements for some large-scale biomass generators ends in 2027 and their potential transition to power BECCS, which is unlikely to take effect until 2030 and later. Biomass power generation is typically subject to relatively high fuel prices, the ESNZ said. In the absence of transitional support, biomass plants could be retired, which would also result in the loss of associated fuel supply chains and logistics. Without those biomass power generators, the U.K. could lose out on the optionality of having significant volumes of negative emissions capacity through the use of power BECCS, the agency added. Large-scale biomass generators make up approximately 7 percent of the U.K.¡¯s total power generation capacity. Loss of that capacity would negatively impact the U.K.¡¯s power network and increase costs.

¡°The government is therefore considering whether a transitional support mechanism is required to facilitate the move from large scale biomass generation to power BECCS,¡± the ESNZ said in the consultation documents. ¡°This would apply in certain circumstances where there is an interim period between the relevant generators¡¯ existing support ending and potential future power BECCS arrangements beginning.¡±

The consultation document sets out four models of transitional support, including two variations of a contracts for difference (CfD) model. One CfD option would be a contract similar to existing arrangements for biomass generators with a strike price set for generators and generators having flexibility over the volume of generation. The second CfD model would included a generation collar that includes minimum and maximum volumes for generators. A third option would include a payment in return for the assets maintaining availability, but with no subsidy for generation activity itself. Finally, the fourth option is an open-book arrangement in which support would be given such that there is a minimum profit level for the assets, but with the consumer then sharing in the profit above that level.

Drax Group plc is welcoming the consultation, noting it recognizes the important role that biomass can play in delivering the U.K.¡¯s plans for both net zero and energy security. ¡°The Government¡¯s announcement is a welcome step forward in facilitating the deployment of large-scale BECCS and the development of CCUS Clusters in the U.K.,¡± said Will Gardiner, CEO of Drax Group.

¡°BECCS is currently the only credible large-scale technology that can generate renewable power and deliver carbon removals," he continued. ¡°The consultation is necessary to develop an appropriate mechanism that will ensure biomass power stations, like Drax Power Station, continue to play an important role in the U.K¡¯.s energy security while transitioning to BECCS and helping the U.K. to meet greenhouse gas reduction targets. We will be responding to the consultation in due course.¡±

The U.K. Association for Renewable Energy and Clean Technology (REA) also applauded the consultation. ¡°We welcome today¡¯s consultation on transitional arrangements for large-scale biomass generators,¡± said Frank Gordon, director of policy at the REA. ¡°The U.K.¡¯s biomass power sector is exceptionally placed to deliver BECCS at scale, while also being regulated through existing stringent sustainability governance arrangements. The technology for BECCS is ready to go at a wide range of scales but, like all infrastructure projects, it takes time to secure final investment decisions and be built. Ensuring that these existing low carbon generation stations have a clear market signal beyond 2027 is essential for the timely and cost-effective delivery of BECCS, a critical technology for meeting our Net Zero targets. Given this importance, Government will need to consider how to ensure similar arrangements are brought forward for bioenergy generators at all sizes who also provide low carbon power and important environmental services. This will provide confidence to the market and will deliver real returns, including reducing the cost of investment, help build supply chains, deliver thousands of jobs, and further extend the U.K.¡¯s world leading expertise.¡±

Additional information is available on the ESNZ website.

Source world-energy.org