While the full outcome of the consultation is yet to be published, the Government has this week announced its decisions around the eligibility of energy from waste schemes deployed with CHP. Our principal risk manager Matt Osborne explains what this could mean for generators.
“CfD support will continue for biomass and energy from waste schemes if they are deployed with CHP. However, those applying for new CfD contracts will now be required to have a minimum 70 per cent overall efficiency (net calorific value), as well as a primary energy saving of 10 per cent (gross calorific value) and 10 per cent heat efficiency (gross calorific value). These minimum requirements now apply to plants under 25MWe as well as larger plants (in previous allocation rounds, smaller plants had no overall efficiency requirement).
“The changes are designed to ensure projects are more efficient; the existing design of the CfD scheme has meant that generators could qualify to receive support even if they were only producing a low level of useful heat and achieving low levels of overall efficiency.
“Generators that want to continue participating in the CfD scheme will need to meet the minimum efficiency requirements. Those that are unable to do this risk losing out on the financial rewards available, and should therefore look at other ways of optimising their revenue. For example, joining a virtual floor portfolio with a risk-managed strategy will allow them to budget against a protected minimum anticipated income.
“With future CfD auctions and participants likely to be dominated by more efficient generators, we could see auction results being constrained – even dampened – potentially meaning lower CfD costs for consumers. We can’t assume this will be the case however, and therefore advise all of our customers to continue to implement appropriate risk management strategies – especially in light of recent rises in commodity costs.”