Renewable energy incentives not enough for AD

Farmer interest in certain small-scale renewable energy projects has surged over recent weeks following the launch of a government incentive scheme.



Feed-in Tariffs came into effect on 1 April, targeted at smaller-scale wind, hydro, solar and anaerobic digestion projects less than 5MW in size. FiTs offer index-linked payments of up to 41.3p per kWh for generated power and an additional 3p per kWh for exported surplus power.


Payments are guaranteed for a maximum of 25 years and vary depending on the type and size of system used (see table). There is also a potential saving on energy purchased from the electricity supplier.



“The launch of the Feed-in Tariffs is really stimulating the market with farmers wanting to do their bit for the environment,” said David Williamson-Jones from Savills. “We’ve seen really strong interest in small wind turbines and photovoltaics [solar] in particular.


“For a small 1.5-15kW Gaia wind turbine, the 26.7p/kWh payment makes it a viable option and should give a payback of three to eight years depending on the site’s wind speed. For bigger turbines of 100-500kW, I think 18.8p/kWh is about right.”














































































































Energy Source


Scale


Generation Tariff (p/kWh)A


Duration (years)


Anaerobic digestion


≤500kW


11.5


20


Anaerobic digestion


>500kW


9.0


20


Hydro


≤15kW


19.9


20


Hydro


>15-100kW


17.8


20


Hydro


>100kW-2MW


11.0


20


Hydro


>2kW-5MW


4.5


20


Micro-CHPB


<2kW


10.0


10


Solar PV


≤4kW newC


36.1


25


Solar PV


≤4kW retrofitC


41.3


25


Solar PV


>4-10kW


36.1


25


Solar PV


>10-100kW


31.4


25


Solar PV


>100kW-5MW


29.3


25


Solar PV


StandaloneC


29.3


25


Wind


≤1.5kW


34.5


20


Wind


>1.5-15kW


26.7


20


Wind


>15-100kW


24.1


20


Wind


>100-500kW


18.8


20


Wind


>500kW-1.5MW


9.4


20


Wind


>1.5MW-5MW


4.5


20


Existing generators transferred from RO


9.0


 


Notes: A: Tariffs are index-linked for inflation. B: Tariff is available only for 30,000 micro-CHP installations, subject to a review when 12,000 units have been installed. C: Subject to conditions. “Retrofit” means installed on a building which is already occupied. “New Build” means where installed on a new building before first occupation. “Standalone” means not attached to a building and not wired to provide electricity to an occupied building.



Energy consultant Josh Pollock reported similarly strong interest in wind and solar projects. “We’ve been inundated with people looking into small-scale wind and PV – we’re even hearing that there are shortages of the inverter kit required due to the increased demand.


“The government set the FiT level where they did with the intention of it providing a 10% return on investment – the level that’s generally needed to attract new investors. Some people are saying they can get a 20% return for small wind turbines. I don’t think it’s that high, but it’s certainly in the mid-teens.”


Anaerobic digestion payment disappoints



But the figures for anaerobic digestion projects are much less convincing. “The FiT for AD has been set far too low,” Mr Pollock said. “When the AD level was set the government assumed there’d be a gate fee for people bringing waste in, but in reality most on-farm AD relies on growing crops and doesn’t benefit from gate fee income.”


Indeed, for some small on-farm AD projects there can be a gate cost as farmers try to balance the feedstock supply – typically manure, slurry or silage – throughout the year to keep biogas plants running, Dorset farmer and Biogas Nord UK director Owen Yeatman said.


“The government has just failed to recognise this. For 500kW plants the extra 11.5p is tolerable, but for smaller projects the government has got it completely wrong. Also, fixed costs such as grid connection and feasibility studies are similar no matter what size plant you’re building.”


He reckoned tariffs for smaller AD projects up to 250kW should be double their current level at nearer 18p/kWh. “I think there is still a chance to get it changed, hopefully within the next 12 months or so.”


Richard Barker, CEO of Biogen Greenfinch, agreed that small-scale on-farm units reliant on slurry and/or forage crops would struggle to be profitable at the current FiT level. “If the government wishes to reach its stated target to get 1000 AD plants up and running by 2020, then the current FiT levels are not going to be sufficient.”


Potentially the viability of AD plants could be improved by claiming Rural Development funding alongside the Feed-in Tariff, but this may be prohibited if it means European funding is being “double counted”, Mr Pollock noted. “The situation is very unclear and industry is still trying to get clarity on this issue.”





How to claim FiTs



If you already have a qualifying renewable energy system check whether it meets the date criteria and if you need to register for the Renewables Obligation, act quickly. If your system complies, register it with the FiT scheme.


If you are thinking of getting a system find a company that is able to supply a tariff-eligible system that is suitable for your business. Ownergy has been set up for this purpose. They take full responsibility for selecting, designing, supplying, registering, managing and if necessary helping finance renewable energy systems under the Feed-In Tariffs and Renewable Heat Incentive.