Renewables incentives to fall as farmers move to CHP and biogas technology

Leading renewables firm Earthmill has welcomed the latest announcement that the Renewable Heat Incentive (RHI) biogas tariff category has beaten targets by almost 90%, triggering a 10% degression in the incentive from April 2016.

The move, which demonstrates the rapid growth in popularity of biogas and combined heat and power (CHP) systems in recent months, will trigger more landowners and farmers to evaluate the technology as a new source of income and cost reduction on UK farms.

The announcement this week by the Department of Energy and Climate Change (DECC) that the take up of non-domestic RHI incentives for biogas – now forecast to top £18.6m in 2016 – has exceeded a key trigger point, will bring in a 5% reduction, in addition to a 5% cut in RHI incentives across the board.

“The fact that the incentive target for 2016 was smashed by £8.8m, almost doubling it, clearly signals the take up rate of the technology is accelerating across the UK, just as we are seeing on the ground at farms in the North of England and Wales,” said Steve Milner of Earthmill.

The gradual reduction in incentive, much the same as the successful sliding tariffs for wind power through the FITS scheme that were cut last year, is intended to drive early adoption of renewable technology and kick start the industry whilst it is in its early years.

The recent growth in take-up of CHP is credited in part to advances in technology that have made commercial CHP systems increasingly practical, generating a return of 15%-20% per annum for some agricultural users of heat and power.

Wetherby-based agricultural renewables specialist Earthmill, the UK’s largest operator of farm-scale wind turbines with a fleet of over 250, entered the CHP market in 2015 after striking a deal with the leading manufacturer of biogas generators, Volter. In the last six months the firm has started to work with more than 50 farmers and land owners in the North of England and Wales who are keen to install systems to generate power, heat and revenue.

The CHP technology is eligible for two government subsidies: the Renewable Heat Incentive (RHI) and double Renewable Obligations Certificates (ROCs), to support businesses in reducing their carbon footprint.

The systems run on woodchip and use specially designed reactors which heat the fuel to extremely high temperatures in excess of 1,000 degrees centigrade. This produces a flammable gas to drive an engine and generator, producing electricity. The heat produced in the process is transferred into water, which can then be used by high energy using farms to heat dairies, or pig or poultry sheds. The process is more than 88 per cent efficient.

“The Government targets seem to have got the balance just about right,” said Mr Milner. “The incentive has done the job of stimulating interest from technology suppliers to create more efficient systems that improve returns, and create demand from farmers and landowners – and so is rightly being tapered back. There are still good incentives to act quickly, and although the returns will be a little less after the 1 April deadline, we expect to see this reduction trigger a lot of interest in getting on board with CHP ahead of the next wave of reductions, which could come later in 2016,” he added.

The 10% reduction in the tariff will take place from 1 April 2016, triggering a rush for installations by would-be users of Earthmill’s Finnish-made Arbor ElectroGen combined heat and power systems that were already close to installation and grid connection.

“If farmers hadn’t started working to install a unit, it’s now too late to get on board before April, but it will encourage many to look at the technology now before the next degression, while the incentives are still very good, and the returns are attractive,” he added.