UK reaching a ‘tipping point’ for biomass
UK biomass is at a “tipping point” and set to rival wind and solar power over the coming years if the trend of banks gradually loosening their purse strings continues.
Gerard Madden, chief executive of Irish developer Kedco, told BusinessGreen that banks are realising the opportunity biomass offers now that there is more certainty around government incentives for the technology.
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“There’s been a lot of uncertainty in the biomass sector over the last few years and, in fairness, the UK government has looked to address it,” he said in an interview. “We’re at a tipping point in biomass. We’ve had wind, we’ve had solar. I think it’s biomass’ time.”
Kedco announced last week that it has secured up to £9.44m from Ulster Bank to help build a 4MW biomass electricity and heat producing plant in Newry, Northern Ireland.
The facility will be built in two 2MW chunks, and the first is due to be completed by the middle of next year. Kedco has deals in place with four local wood suppliers as well as a power purchase agreement for the electricity.
The company has also secured planning permission for a £45m gasification plant in Enfield, north London estimated to be capable of generating 12MW of electricity and 10MW of heat, and has secured a supply deal with a company processing waste wood from construction and demolition.
“We’re in a sweet spot for biomass. We operate small plants that we can position in places that have existing feedstocks,” Madden said.
Credit is still tight, but Madden insisted that the clarification of biomass subsidies as part of last month’s review of support under the Renewables Obligation and the long-delayed Renewable Heat Incentive (RHI) have made the business case more appealing to lenders.
The Renewables Obligation consultation document proposed maintaining current levels of support for biomass projects at 1.5 Renewable Obligation Certificates per megawatt hour and created two new bands of support.
A week later the RHI was finally given clearance by the EU after initially falling foul of state aid rules. However, Brussels demanded a fall in the tariff for biomass installations over 1MW of capacity from the 2.7p per kilowatt hour (kWh) agreed in March and approved by Parliament in July, to just 1p/kWh.
Barring unexpected post-consultation changes, these schemes are all but confirmed. But Madden said that, as the company’s financial modelling takes only electricity and not heat into account, the drop in support does not affect its plans.
The two support mechanisms, along with the fact that biomass heat and electricity are also included as part of eight key technologies listed in July’s Renewables Roadmap, offer investors more certainty in the biomass market than in many other sectors, he said.
Madden listed the recent approvals of large plants in Yorkshire, Anglesey and Port Talbot as examples of the current positive attitude towards biomass.
“[Raising capital] is still a challenge – let’s not under-exaggerate it. Getting the money for Newry was an achievement in itself,” he said.
“But I think the government understands the issues and is trying to address them. The government is beginning to create an environment that promises a very positive outlook for biomass.”