Once again, the current British government intends to cut support for clean energy. This time, the target is bioenergy, with a proposal to revise support levels for anaerobic digestion (AD) and micro-Combined Heat and Power (CHP) technologies currently eligible for the Feed-in Tariff (FiT). The government’s actions with regard to energy policy thus far have attracted criticism from right around the world, its behaviour showing clear signs of bias in favour of fossil fuels and nuclear and a derisory attitude to renewable energy. Unsurprisingly, the industry has condemned the proposed changes, fearing they will threaten the future of the sector. So what are the likely impacts on the AD sector?
REM talked to Matt Hindle, Head of Policy at the Anaerobic Digestion & Bioresources Association (ADBA) to find out more.
Can you give me a quick overview of the biogas sector in the UK, e.g. how many plants there are, how much biogas they produce and how much power etc
The anaerobic digestion (AD) sector has grown very strongly in the last five years or so. We’ve gone from a position around 2010 where the sector was dominated by the sewage plants, the long-standing treatment of sewage sludge with AD with very little use of the technology on farms or for food waste recycling, to a sector with about 480 plants and a huge growth in both the agricultural and the food waste AD sectors. That growth has been supported by government, which made a commitment in 2010, both to being the “greenest government ever” and also, specifically, to supporting a huge increase in AD. That was delivered through some policy measures around waste, but mainly through the availability of renewable energy support in the form, firstly, of the Renewables Obligation (RO) but then principally of the Feed-in Tariff and the Renewable Heat Incentive (RHI). Those incentives helped us to go from just under 200 plants in 2010, largely sewage, to 480+ now. A big level of growth supported by those incentives.
To what extent does the sector help the UK to decarbonise?
We think anaerobic digestion has a particularly important role in decarbonising the UK. First, it’s much more than just a renewable energy technology. You’re getting carbon benefit from treating waste that would otherwise go to less carbon-efficient treatment options, if they’re degrading in landfill you’re losing the recycling benefit though you might get a bit of gas. The same applies to generation – you might get a bit of energy but you don’t get nutrient recycling. If food waste is composted then the nutrients are recycled but you miss out on the energy and AD gives you both the energy and the nutrient recycling benefit.
On the farm, it has a really important role in reducing the carbon footprint of farming, both from treating waste that would otherwise degrade, so manure and slurry that’s in open storage emits a lot of methane. AD can capture that, and it provides a low carbon source of fertiliser. Artificial fertilisers are an enormous part of the carbon emissions of farming and indeed the UK as a whole, of our food production. Replacing those fertilisers with the organic material from AD brings real carbon benefits and that is something the Committee on Climate Change (CCC) recognised in their advice to government on the 5th Carbon Budget for example.
Within the energy system, biogas has a really significant role to play too. We’re already delivering a large amount of capacity, getting on for 600 MW, putting everything in electrical equivalent terms. Where biogas really stands out is its flexibility. You can decide, when you produce biogas, whether you want to combust it for electricity and heat or whether you want it to upgrade it to biomethane and inject it into the gas grid or use it for transport fuel. That flexibility is very important, because it can decarbonise difficult areas like the gas grid, so decarbonising home heating without the need to change the boilers and heating systems that people use. It can decarbonise heavy goods transport where there aren’t too many alternatives and it can provide efficient electricity and heat for on-farm or on-site use. On the electricity side, it’s particularly important that the biogas is produced constantly, 24 hours a day, 365 days a year, meaning it can help to balance the intermittent renewables, providing that baseload capacity which helps avoid capacity constraints on the electricity network. Potentially, if it was well incentivised, it could also provide dispatchable power and meet peak demand power.
Ideally, how would you like to see the sector grow over the next ten years or so?
We think there is room to grow in all the different areas of AD. We’re expecting to see continued investment in sewage gas - the water companies need to continue getting more out of the sewage they need to treat and meet their onsite energy demands, which are obviously quite high, also generating revenue from the energy they can produce. There is enormous potential still on UK farms. We want to see a set of policies that recognise the carbon savings I mentioned earlier from treating farm wastes, which aren’t well recognised in UK policy at the moment.
There is still an awful lot of food waste to go for as well. If you look at the different constituent parts of the UK, Scotland, Wales and Northern Ireland all have waste policies which ensure that food waste is segregated and made available to treat through AD but England doesn’t. That means that almost half of English local authorities are providing a food waste collection service which supports the AD sector, so we think there is an awful long way to go across all those sectors, alongside the industrial plants on food waste production sites, breweries, distilleries, anywhere that produces a high volume of organic waste. There is a lot still to do there, but delivering it will require a policy framework that includes a good level of renewable energy support to recognise the value and benefits of this low carbon and flexible energy source.
What level of support is currently provided for the sector, and what is the government proposing in this consultation?
There are two primary mechanisms of support at the moment. There is the Renewable Heat Incentive (RHI) and the Feed-in Tariff. The RHI, the government announced last year, will be funded out to 2021. They consulted on some of the detail of the policy earlier this year and will be providing us with their response later in 2016. There are some really important issues there, particularly around ongoing support for bioenergy through AD. We think there is a real role for crop-based biomethane, but in general that mechanism has funding and support, particularly for biomethane for the grid but also for biogas heat projects.
The current proposals are around the Feed-in Tariff, and this is where we really are concerned that the government’s attitude will hold back developments which would have otherwise taken place. What the government have said last year is that they are going to very, very heavily restrict the budget available for new Feed-in Tariff installations across all technologies over the next three years or so. For AD, that means a total budget each year which would only allow for 20 MW of new development. To put that in context, in 2014, the industry delivered about 140 MW of new plants. In 2015, it was about 100 MW, so it’s a really significant cut in what the government is expecting the industry to deliver in terms of new capacity. The new consultation does absolutely nothing to address that new level of ambition. What’s more, it makes some of the rules around the scheme even more restrictive than they are already. It says there will be no generation tariff for plants over 500 kilowatts, which will restrict ability, particularly for food plants that government has stated it wants to prioritise, because they need to be at slightly larger scale in order to justify investment in the upfront pre-treatment for food waste - they generally have higher capital and operational costs. And they are continuing to very aggressively reduce the tariffs. The tariff plants below 500 kilowatts stood at around 14 pence, just over two years ago and by January 2017 it will be around 6 pence. So it’s a really fast reduction in renewable energy support. While we agree with the government’s view that renewable energy needs to reduce its costs over time, the industry is putting a lot of work into delivering that. We simply, as a sector, can’t establish a supply chain and a stable base with that speed of reduction and with the sort of constraints on overall deployment that the Feed-in Tariff now has.
If enacted, how would these cuts in support affect the sector and its potential to help Britain decarbonise?
What you see very clearly is that 20 MW a year limit on new electricity plants puts a very clear cap on the most that we can deliver. We think that we could have been building around 100 MW of capacity each year for the next few years with the right level of support. We will be doing less than a fifth of what we think we could be doing towards decarbonisation and low-carbon energy bills and, as I mentioned earlier, that will also be affecting security of supply because we would be providing baseload electricity capacity and there aren’t too many renewable sources of that around. What that is doing as well is that it’s really harming the supply chain. Part of the intention of supporting renewable energy through policy mechanisms like the Feed-in Tariff was to establish supply chain industries that can ultimately reduce costs and deliver over time which can be part of global markets. There is billions of pounds of potential for AD technology around the world if we deliver it here. What we are seeing already from ADBA members is that they are going to really struggle in an environment where support is really constrained to really grow their businesses and in some cases we would be likely to see businesses that rely on new development shrinking. That is not only failing to deliver what we could on UK energy and carbon targets but it’s also holding back some UK businesses that could otherwise be delivering projects here and around the world.
What would be the economic costs? Are we looking at business failure and job losses, that kind of thing?
It is certainly plausible. We think around 4,000 people are employed in the UK industry at the moment and quite a lot of those are in the construction of these plants. Where there are constraints on plants that are going to be built, we’re not going to see those jobs being filled. It’s absolutely certain in opportunity costs. If the industry was building up to its potential to grow, we think we could be employing somewhere in the region of 35,000 people, from 4,000 today. That’s what we’re potentially missing out on this consultation and the government’s general reluctance to support the industry.
Do you think this is the government just being careful or do you think they are actively hostile to clean energy?
I think there is a lack of recognition of the potential in our sector. I think there is a very clear focus on costs in the short term, which is doing two things. One, it’s not taking into account the long-term economic and energy benefits of building a low-carbon energy delivery system. It is also not taking into account the wider benefits to the economy and society. It’s also about the wider benefits to individual projects and the AD industry as a whole, so saving carbon through waste, air quality, reducing emissions from farming, helping farmers better manage their land and their resources, reducing the amount of artificial fertilisers used, reducing imports. There are a whole street of benefits there that aren’t necessarily taken into account when you reduce the amount of renewable energy support, but should be looked at when you’re talking about the future of an industry like AD.
If the Tories lose the next election, what policies would you like to see a new government put in place to ensure the sector recovers and fulfil its potential with regard to decarbonisation?
Well I’d like to think that a government of any colour would recognise the benefits and go for the sort of policies that we’d like to see, such as a new budget and a new focus for renewable electricity. I think the way DECC have approached the RHI is very sensible, which is to look at the carbon benefits of individual technologies on the ground. I think a sensible way to approach electricity support should take into account not only the wider benefits of AD like treating food waste, farm waste, reducing emissions, but also what it delivers is a baseload technology, where at the moment you’ve got renewable energy support and capacity markets to ensure that we have sufficient baseload as two completely separate mechanisms. We’d like to see more holistic thinking about our electric systems. We would like to see separate food waste collections in England, following what the devolved administrations have done on food waste is really crucial to ensure we have the feedstock there to deliver the next stage of AD growth. We would like to see farming policy that recognises the low carbon benefit of the technology, particularly where it’s treating manures, slurries, farm waste. There is an enormous energy potential that can bring enormous carbon savings. There is a really strong argument that that should be supported through farm policy alongside energy policy. There is a lot of opportunity for a government to do that, not only help stabilise farming businesses, which are under a lot of pressure at the moment, but also help make to help the rural economy stronger and greener.
In terms of this consultation, we are expecting a lot of discussion with a lot of members to get information about the impact that this will have on businesses, and we will be, no doubt, discussing that in a lot of detail in private but also publicly in our show on the 6th and 7th July, with the consultation closing on the second day of the show, so the timing is going to be quite interesting. I think the industry will have a lot of full and frank discussion there.
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