WILL 2016 BRING MORE STABILITY FOR ON-SITE RENEWABLES?
Despite continued uncertainty about the future of support mechanisms for on-site renewables, from a Government that does not understand the opportunity for smaller scale decentralised energy generation, I am looking forward to a positive year for Clearfleau in 2016. The launch of our new website will help raise our profile, and show the benefits of our proven technology to the industry. We’re excited about the new projects that will be getting started in 2016.
There is significant potential for on-site anaerobic digestion (AD) across the food and beverage sectors. But, for this market to take off, policy makers in DECC need to recognise the benefits of supporting the generation of decentralised renewable energy. If they fail to do so, British manufacturing (including food processors) will struggle to play its part in meeting our national carbon reduction targets. Government should work with British business to help decarbonise industrial sites, following the lead of enlightened companies like Nestle, Diageo and First Milk.
Although DECC has persuaded the Treasury to continue supporting renewable energy through the established FIT and RHI incentive mechanisms, we are still waiting for details of the 2016 incentive regime. British AD companies do not know what support will be available from the incentive regime. Other renewables sectors, such as solar and wind, have not had an easy time either (more jobs were lost in renewables in the final quarter of 2015 than in the steel industry) but at least companies in these sectors know what to expect for the next few years.
Moreover, FIT rates for smaller on-site AD plants (sub 500kW electrical output) have fallen by over 50% since 2013. For larger plants the decline was just 15%. Hence the incentive rate for over 500kW plants is now higher than for sub 500kW, which is bonkers. DECC’s failure to address this is hitting AD deployment on SME food sites. Uncertainly from the inability to predict revenue from FIT incentives (due to the removal of pre-accreditation which helps investors to predict rates before building a plant) is undermining confidence. While larger multinational companies, such as Diageo or Unilever, can afford to invest in on-site energy generation, this is not always the case for smaller food businesses that are being pressed to cut their carbon emissions. Smaller companies in the agri-food industry need continuity of support to encourage them to turn production residues into green energy.
SME food and beverage manufacturers need a stable incentive regime to help them invest and an incentive rate that is commensurate with the risk. There are real benefits in converting bio-degradable process residues into biogas that can supply base load to the factory, unlike other more weather dependant renewables. Companies that invest in low carbon technology will also benefit the wider UK economy but they need to be assured of a return on their investment.
Hence, the British AD sector is asking for more support for smaller on-site plants that convert residues into energy, but do not produce more than 100kW hours of electricity. With support at this level we could see hundreds of on-site AD plants being built each year for the next 5 years to supply energy (heat and power) on farms, on factory sites and in rural communities.
If DECC is inclined to listen there are other changes that need to be made to renewables policy:
Restoration of full pre-accreditation for technologies that supply base load electricity,
Correcting the imbalance in FIT rates for smaller (sub 250 kW) and larger AD plants,
Greater recognition that decentralised energy generation is good for jobs and growth.
On-site energy from AD provides baseload power and peak lopping capabilities. The UK needs decentralised energy, at the point of use on industrial sites. Following the Paris Climate Change Agreement, it is recognised that the UK agri-food sector and other businesses can do more to decarbonise production processes by making better use of their processing residues. Yet DECC Ministers are failing to support development of decentralised energy production systems. Why?
This is even more galling because the British renewables sector is asking for relatively modest support from the taxpayer. Meanwhile very significant levels of taxpayers funding have been allocated to the development of nuclear power by French and Chinese investors. The price of nuclear energy (in both financial and lifecycle terms) will be higher than for more efficient renewables technologies that deliver baseload power – including on-site Anaerobic Digestion.
This imbalanced approach to low carbon and renewable energy will not deliver. DECC policy must take account of the opportunities for smaller localised systems (including the appropriate incentive rates, caps and degression.) The food industry will respond if DECC is seen to do more to promote smaller scale on-site renewables and faster decarbonisation of our industrial sites.