Biomass electricity generators and smaller solar projects are the latest renewable energy providers to face cuts to their subsidies. Following the government's consultation in December, biomass conversions and co-firing projects will no longer receive a guaranteed level of subsidy under the renewable obligation scheme. The changes will take effect from the date the consultation was published on 12 December 2014.
There will be exceptions applied for companies that have already made significant financial commitments. This will include any station or combustion unit that has generated electricity eligible for ROCs under the mid-high bands in any month before December last year. Drax's (DRX) biomass conversions are unlikely to be affected by the changes, with its share price holding steady following the announcement. Two of its conversions are currently operational, while a third is awaiting European state aid clearance.
The government has also launched a consultation on whether to cut back subsidies for solar projects of 5 megawatts or below under the renewable obligation. This would include removing the guaranteed level of subsidy for these types of projects. The government asserts that cutting back renewable subsidies will help control energy costs for consumers. It estimates that limiting biomass subsidies could prevent a £500m rise in the Levy Control Framework, the amount of money available for renewable subsidies.
