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EUROPEAN COMMISSION

Brussels, 02.04.2013 C(2013) 1892 final

PUBLIC VERSION

This document is made available for information purposes only.

Subject: State aid No SA.35565 (2013/N) – United Kingdom Amendments to the Renewables Obligation (RO) scheme

Sir,

1. PROCEDURE

(1) Following pre-notification contacts, on 25 January 2013, the UK authorities notified to the Commission, in accordance with Article 108(3) of the Treaty on the Functioning of the European Union (TFEU) and under the Notice on simplified procedure1, in particular under points 5(b) of it, certain amendments to the existing Renewable Obligation (RO) scheme to support the generation of electricity from renewable sources.

(2) A summary of relevant features of the notified measure can be found in the summary of the notification published on the website of the Commission http://ec.europa.eu/competition/elojade/isef/dsp_simple_notif.cfm and annexed to the present Decision (Annex 1).

1 OJ C136, 16.06.2009, p. 3-12.

The Rt Hon William HAGUE Secretary of State for Foreign Affairs Foreign and Commonwealth Office King Charles Street London SW1A 2AH UNITED KINGDOM Commission européenne, B-1049 Bruxelles – Belgique Europese Commissie, B-1049 Brussel – België Telephone: 00-32 (0) 2 299 11.11.

http://ec.europa.eu/competition/elojade/isef/dsp_simple_notif.cfm

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(3) The scheme was originally approved by the Commission Decision of 28 February 2001 in case N504/2000. By Decision of 11 February 2009 the Commission approved the introduction of a banding mechanism in the RO scheme (case N414/2008). The scheme was subsequently amended by means of Decision of 26 March 2009 in case N590/2008, Decision of 29 July 2009 in case N22/2009, Decision of 30 March 2010 in case N65/2010, Decision of 30 March 2010 in case N76/2010, Decision of 22 July 2010 in case N259/2010, Decision of 1 February 2011 in case N557/2010 and Decision of 9 February 2011 in case N556/2010.

(4) By e-mail of 30 January 2013 the UK authorities provided clarifications on the budget of the scheme. On 6 February 2013 the Commission informed the UK authorities that the simplified procedure is abandoned2. By letters of 8 February and 28 February 2013 the Commission requested additional information on the notified measure. The UK authorities submitted additional information by letters of 7 February, 15 February and 6 March 2013.

2. DESCRIPTION OF THE MEASURE

(5) The RO support scheme aims to incentivize deployment of large-scale renewable electricity generation, through a market-based instrument. It is one of the core mechanisms by which the UK authorities intend to meet their 2020 renewables target. Following its introduction in 2002, the RO contributed to increasing the level of renewable electricity in the UK from 1.8% to 9.5% of overall electricity generation in 2011.

(6) Under the RO scheme the UK electricity suppliers have the obligation to source a specified and annually increasing proportion of electricity they supply to customers from renewable sources, or pay a penalty. The RO scheme is administered by Ofgem who issues Renewables Obligation Certificates (ROCs) – which are green certificates – to renewable electricity generators, in proportion to the amount of eligible renewable electricity they generate. Generators sell their ROCs to electricity suppliers or traders. The revenues from the selling of ROCs constitute a premium in addition to the wholesale price of their electricity. ROCs can be sold with or without the electricity they represent. Suppliers present ROCs to Ofgem to demonstrate their compliance with the obligation. Suppliers failing to present enough ROCs to meet their obligation in full have to pay a penalty (‘the buy-out price’) into a fund (‘the buy-out fund’) for each ROC that they have not presented. The money collected by Ofgem in the buy-out fund is recycled on a pro-rata basis to suppliers who presented ROCs. Suppliers that do not present ROCs pay into the buy-out fund at the buy-out price, but do not receive any portion of the recycled fund.

(7) The RO scheme works on the basis of three complementary obligations: one covering England and Wales, and one each for Scotland and Northern Ireland (as the Scottish Government and Northern Ireland Executive have devolved powers in this area).

2 The notification documents contained many changes as compared to the information provided by the UK authorities during the pre-notification contacts. Most of these changes were highlighted in the notification documents. However, some changes were not highlighted and the new data on costs and revenues did not clearly demonstrate lack of overcompensation for one of the technologies receiving support under the scheme.

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(8) As part of the operation of the banding mechanism approved by the Commission in 2009 in the case N414/20083, the support levels were subject to periodical reviews every four years, to allow adjustments of the support level to the evolution of costs and revenues. The first scheduled review of the support levels was scheduled for 2013. In case the costs of some technologies change significantly the UK authorities may review the support levels at any time.

(9) The current notification covers the proposed amendments to be made to the RO scheme as a result of the first scheduled review, aimed to ensure that support levels remain appropriate. According to the UK authorities, the proposed amendments are expected to deliver 32 TWh/y of additional generation from new build over the 2013-2017 period, compared to 21 TWh/y under the current bands. Overall, the proposed amendments reduce the average subsidy cost per MWh of renewables by around 11%.

(10) The review led to no changes to current support levels for the following technologies: • Co-firing of bioliquids (from 2015) • Energy from waste with CHP • Geopressure • Sewage gas • Low range co-firing of energy crops under existing contracts (from 2015) • Low-range co-firing of energy crops with CHP under existing contracts (from

2015) • Low-range co-firing of solid or gaseous biomass (from 2015) • Low-range co-firing of solid or gaseous biomass with CHP (from 2015)

(11) The support is being reduced for the following technologies: • Advanced gasification (from 2015) • Advanced pyrolysis (from 2015) • Anaerobic digestion (from 2015) • Biomass conversion using regular biomass or energy crops (in some cases) • Biomass conversion with CHP using regular biomass or energy crops (in some

cases) • Co-firing of bioliquids (from 2013-15) • Dedicated biomass (from 2016) • Dedicated biomass with CHP (from 2015) • Dedicated energy crops (from 2015) • Mid-range co-firing of energy crops • Mid-range co-firing of energy crops with CHP • High-range co-firing of energy crops • High-range co-firing of energy crops with CHP • Geothermal (from 2015) • Hydroelectricity • Landfill gas • Microgeneration (from 2015) • Offshore wind (from 2015) • Onshore wind

3 See recitals 64, 83-84, 91 and 93.

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• Solar PV • Low-range co-firing of solid or gaseous biomass (from 2013-15) • Low-range co-firing of solid or gaseous biomass with CHP (from 2013-15) • Low-range co-firing of energy crops under existing contracts (from 2013-15) • Low-range co-firing of energy crops with CHP under existing contracts (from

2013-15) • Low-range co-firing of energy crops (not under existing contracts) • Low-range co-firing of energy crops with CHP (not under existing contracts) • Tidal range (from 2015)

(12) The support is being increased for the following technologies: • The standard gasification and standard pyrolysis elements of the new

Advanced Conversion Technology (ACT) band. • Wave. • Tidal stream. • Fossil derived bioliquids (in some cases). • Mid-range and high-range co-firing of biomass. • Mid-range and high-range co-firing of biomass with CHP. • Biomass conversion (in some cases). • Biomass conversion with CHP (in some cases).

(13) There are also several modifications proposed in the banding structure: • Splitting the landfill gas band into three bands: o to end support for new generating capacity using gas from open landfill

sites (except for waste heat to power); o to reduce support for new generating capacity using gas from closed landfill

sites; o to reduce support for new waste heat to power generating capacity using gas

from open or closed landfill sites. • Splitting the co-firing of biomass band into five bands: o low-range co-firing of biomass; o mid-range co-firing of biomass; o high-range co-firing of biomass; o co-firing of regular bioliquids; o biomass conversion.

• Similarly splitting the co-firing of biomass with CHP, co-firing of energy crops and co-firing of energy crops with CHP bands.

• Changing the dedicated biomass band so that some stations fall into the new biomass conversion band.

• Making similar changes to the dedicated biomass with CHP and dedicated energy crops bands.

• Changes to the definition of the standard and advanced gasification and pyrolysis bands.

• Splitting the solar PV band into two bands, one for ground-mounted solar PV and one for building-mounted solar PV.

(14) The new support levels are expected to deliver revenues close to the mid-point of the cost ranges by technology to avoid over-compensation in the aggregate, just as was the case with the previous levels. The current and proposed support levels are presented in Annex 2, while the data on the costs and revenues for the supported technologies are presented in Annex 3.

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(15) The UK authorities have provided an overcompensation analysis for all the technologies where increase in support is proposed, explaining the reasons for increasing the support level. For some technologies (mid-range and high-range co-firing of biomass, biomass conversion, fossil derived bioliquids) the increased support level applies also to existing stations. The UK authorities explained that for the existing stations the proposed amendments (increase in the support level) have an incentive effect (leading to an increased use of biomass) since otherwise the respective station would use cheaper fossil fuels instead.

(16) In the table below are indicated the hurdle rates (defined here as the minimum expected internal rate of return at which investors will decide to proceed with a project) considered by the UK authorities when establishing the support level for each technology.

Table 1 – Hurdle rates per technology Technology Hurdle rate (%)

Commissioning years 2010/11-2016/17 Advanced Conversion Technology (ACT)

12.7

Anaerobic Digestion (AD) 13.2 Bioliquids 12.7 Biomass 12.7 Energy from waste with CHP 12.9 Geothermal 22.7 Hydro 7.5 Landfill gas 9.6 Offshore wind 11.6 Offshore wind R3 13.2 Onshore wind 9.6 Sewage gas 9.6 Solar PV 7.5 Tidal barrage 7.5 Tidal stream 13.2 Wave 8.0

Source: DECC (2012) RO banding levels from 1 April 2013 to 31 March 2017: Impact Assessment (final stage).

(17) There are also some modifications that constitute administrative changes (modifications of definitions and rules for the level of support for technologies covered by the scheme). The list of these administrative changes is presented in Annex 4.

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(18) The UK authorities have indicated that the other features of the RO scheme, such as methodology of calculation of the support levels, and the rules on cumulation of aid, remain unchanged4 (the UK confirmed that no cumulation with other State aid would be allowed where such a cumulation would result in overcompensation).

(19) The budget for the scheme for the period 2011-2015 amounts in total to GBP 1.158 billion5.

(20) The UK authorities intend to apply the notified amendments to the scheme as of 1 April 2013. They confirmed that the RO scheme will be opened to new beneficiaries until 31 March 20176. After that date the scheme is intended to be replaced by a new system of support based on Contracts for Difference.

(21) The proposed amendments currently notified will apply to the UK, with the exception of hydroelectricity in Scotland, where support is maintained at 1 ROC; landfill gas in Northern Ireland, where support is maintained at 1 ROC; and support rates for small-scale onshore wind, hydro, solar PV and anaerobic digestion generation in Northern Ireland. Where either or both of the Scottish Government or Northern Ireland Executive proposes to introduce a new band, or a support level that is higher than previously notified, the respective proposal will be subject to a separate notification from the relevant administration.

(22) The UK authorities have indicated that, in their view, the notified amendments are the result of the scheduled review and are therefore covered by the previous approval of the Commission in the case N414/2008. Nevertheless, full information on the results of the banding review was provided to the Commission and the UK authorities undertook not to implement the proposed increases in the support level without prior Commission approval.

3. ASSESSMENT OF THE MEASURE

3.1. Existence of aid within the meaning of Article 107(1) TFEU

(23) The changes presented in the notification do not alter the prior conclusion of the Commission in the case N 504/20007 that the measure constitutes state aid within the meaning of Article 107(1) TFEU.

4 There is however one new element concerning the potential cumulation of aid – the UK has introduced the Renewable Heat Incentive (RHI) support scheme, which provides support for heat generated from renewable resources. The UK authorities allow new accredited CHP and additional capacities added between 1 April 2013 and 31 March 2015 to choose to receive either the support under the relevant CHP band under the RO, or the support for electricity only under the RO and support for their heat output under the RHI. From 1 April 2015 new generating capacity will not be eligible for CHP bands under the RO, unless RHI support is unavailable for the heat element of their energy generation.

5 Initially the UK authorities indicated an overall budget of the scheme of GBP 1.144 billion. In their letter of 15 February 2013 an updated figure was provided.

6 Once entered into the scheme, the beneficiary receives support for 20 years (i.e. payments under the notified scheme will cease by 31 March 2037), in line with the Decision adopted by the Commission in the case N 65/2010.

7 Commission Decision of 28 February 2001 in case N504/2000, section Existence of aid (p. 10-13).

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3.2. Compatibility of the aid

(24) The Commission's analysis did not imply any serious difficulties and confirms that the amendments made do not modify the original compatibility assessment regarding the approved measure N 414/2008 as further amended8. The Commission has carried out the compatibility assessment on the basis of the Environmental Aid Guidelines9, and in particular its Chapter 3.1.6 Aid for renewable energy sources (operating aid, option 2).

(25) The notified amendments do not alter the main characteristics of the RO scheme as previously approved by the Commission. The UK authorities have confirmed that the objectives and the overall set-up of the measures remain the same as in the previous notifications. They have also confirmed their commitment to ensuring that there is no overcompensation, to maintaining the incentive effect as required by point 142 of the Environmental Aid Guidelines, and to ensuring compliance with the rules on cumulation. In particular, the UK demonstrated that there is an incentive effect for applying the increased support level to existing stations for specific technologies (as indicated in recital 15 above) and provided details on the possible interaction of the RO scheme with other support schemes, such as RHI (see recital 18 above).

(26) The proposed amendments concern mainly the support level for certain technologies, aimed to provide a level of compensation appropriate to the new economic realities. In particular, tariff reductions reduce the risk of overcompensation in the context of a cost reduction trend for certain technologies. On the other hand increases in the support level are sometimes necessary in view of ensuring the viability of the renewable energy sources concerned, in particular where the operating costs constitute an important part of the overall costs.

8 Commission Decision of 11 February 2009 on the introduction of a banding mechanism in the RO scheme (case N414/2008), section Compatibility of the aid (recitals 26-94), as well as the Commission Decision of 26 March 2009 in case N590/2008 (section Compatibility of the aid, recitals 22-43), the Commission Decision of 29 July 2009 in case N22/2009 (section 3.3), the Commission Decision of 30 March 2010 in case N65/2010 (section 2.2.), the Commission Decision of 30 March 2010 in case N76/2010 (section 3.3.), the Commission Decision of 22 July 2010 in case N259/2010 (section 2.3), the Commission Decision of 1 February 2011 in case N557/2010 (section 2.3) and Commission Decision of 9 February 2011 in case N556/2010 (section 2.3.).

9 Community guidelines on state aid for environmental protection, OJ C 82, 1.4.2008, p. 1. With reference to point 50 of the Environmental aid guidelines, the Commission reminds the UK authorities that the development of hydropower installations should be in accordance with the requirements set out in the Water Framework Directive (2000/60/EC).

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(27) As regards the level of the rates of return, the information provided by the UK authorities shows that, for most of the technologies, the expected rates of return (hurdle rates) are lower than the ones approved by the Commission in the case N414/200810, not exceeding 13.2%11. The Commission therefore considers that the information on the rates of return, as presented in the notification, is consistent with the original Decision in case N 414/2008 as subsequently amended12.

(28) For two of the technologies, the data initially presented by the UK authorities were insufficient to demonstrate the lack of overcompensation.

(29) For the Energy from Waste with CHP the initial data on the costs and revenues seemed to indicate that costs could be lower than the revenues. The UK authorities have clearly indicated that the respective calculations do not fully capture a number of barriers which add to the overall risk and indirect costs of this type of projects (such as difficulties in securing long-term heat customers, significant costs with investment in infrastructure to deliver heat to the customers, fuel costs and gate fees that vary greatly). At the request of the Commission, the UK authorities have quantified the above-mentioned barriers and provided updated data on costs and revenues (as presented in Annex 3). In the light of the updated data provided by the UK authorities the Commission considers that there is no overcompensation for Energy from Waste with CHP, since the mid-point of the costs is higher than the mid-point of the revenues, and the UK authorities have provided sufficient and credible arguments supporting these updated data.

(30) Similarly, for the Anaerobic Digestion (AD), the initial data provided by the UK authorities in the notification seemed to indicate that costs could be lower than the revenues. At the request of the Commission, the UK authorities provided updated calculations (as presented in Annex 3). They have explained that the initial data related to AD with CHP and considered an average value of the gate fees. There are 34 AD plants accredited under the RO in the UK (with a combined total capacity of 51.2 MW). The UK authorities indicated and provided evidence to support that most of the AD plants cannot find a heat customer and cannot therefore access heat revenues (the heat generated being used to warm the digester) and 40% of the AD plants might be in a position of not receiving gate fees at all, being situated on farms or factory sites. Furthermore, the UK authorities provided data demonstrating that in 2013 gate fees are expected to have higher levels than before, reaching an average level of £85/MWh, but they are expected to decrease to £48/MWh in 2015 and to zero as from 2020. Finally the UK authorities provided information showing that most of the costs faced by AD plants are operating costs, expected to increase in time. Considering these explanations, the updated data

10 A small increase is noticed for Energy from Waste with CHP (from 12% to 12.9%). 11 With the exception of geothermal (hurdle rate of 22.7%), for which the UK authorities have explained

that there are considerable higher risks than for other technologies, having substantial financial implications. The UK authorities have also provided evidence and several reports to justify the level of the hurdle rate for geothermal. The Commission notes that support for geothermal is being reduced as from 2015 and the data on costs and revenues indicates there is no overcompensation in the aggregate.

12 Commission Decision of 11 February 2009 on the introduction of a banding mechanism in the RO scheme (case N414/2008), table 6 on page 15, as well as the Commission Decision of 26 March 2009 in case N590/2008 (recital 32), the Commission Decision of 29 July 2009 in case N22/2009 (recital 45), the Commission Decision of 30 March 2010 in case N65/2010 (recital 11), the Commission Decision of 30 March 2010 in case N76/2010 (recital 44) and Commission Decision of 9 February 2011 in case N556/2010 (recital 14).

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provided by the UK, and the confirmation received from the UK that emergency reviews will be initiated in case the costs will prove to be lower than currently forecasted, the Commission considers that there is no overcompensation for Anaerobic Digestion.

(31) Considering the above, the Commission sees no reason to depart from its previous positive compatibility assessment in the Decision in case N 414/2008, as subsequently amended13. The Commission's assessment confirms that the notified measure fulfils both the substantive and procedural requirements laid down in the Environmental Aid Guidelines.

(32) The Commission has examined all the amendments to the scheme and considers that the respective modifications are covered by the review mechanism set out in the original scheme or represent administrative changes that need not be notified. In fact, the respective modifications result from the implementation by the UK authorities of their obligation to review the support levels in line with the reviewing mechanism described in the case N414/2008 (recitals 64, 83-84, 91 and 93).

(33) In particular, the Commission considers that, the modification of the banding structure reflects the more detailed level of information currently at the disposal of the UK authorities, which allows them to better differentiate the support for different types of beneficiaries, based on their specific costs. The Commission notes that the existing data on costs and revenues justify the new band structure and ensures that there is no overcompensation in the aggregate for any of the new bands.

(34) As for changes mentioned in Annex 4, the UK provided detailed description of all the respective changes and the Commission considers them as administrative modifications that have no impact on the evaluation of the compatibility of the aid measure with the internal market.

(35) The Commission further wishes to clarify that alterations to the scheme, resulting from and in compliance with the regular review process (in particular adjustments of the support levels aimed at maintaining the same rate of return for the beneficiaries in the light of updated data on their costs and revenues), are considered to remain within the scope of the decision approving the aid scheme and need not be notified, as long as the data clearly shows that the mid-point of the costs range is lower than (or close to) the mid-point of the revenues range.

(36) Nevertheless, in case of doubt (e.g. when the updated data on costs and revenues does not clearly show the lack of overcompensation), the notification of the proposed modifications is recommended.

(37) The Commission did not receive any comments from third parties upon publication of a summary of the notification on its website, within the 10 working days period14.

13 As detailed in footnote 8 above. 14 The summary of the notification was published on 30 January 2013. The Commission received two

submissions from third parties: on 6 March 2013 and on 7 March 2013, i.e. after the expiry of the time-

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(38) In the light of the above, the Commission considers that the aid granted on the basis of the amendments to the RO scheme, as presented in the notification, is compatible with the internal market in accordance with Article 107(3)(c) TFEU.

4. CONCLUSION

(39) The Commission has accordingly decided to consider the aid to be compatible with the Treaty on the Functioning of the European Union.

(40) If this letter contains confidential information which should not be disclosed to third parties, please inform the Commission within fifteen working days of the date of receipt. If the Commission does not receive a reasoned request by that deadline, you will be deemed to agree to the disclosure to third parties and to the publication of the full text of the letter in the authentic language on the Internet site: http://ec.europa.eu/competition/elojade/isef/index.cfm

Your request should be sent by registered letter or fax to:

European Commission Directorate-General for Competition Directorate for State Aid State Aid Greffe B-1049 Brussels Fax No: (0032) 2-296.12.42

Yours faithfully,

For the Commission

Joaquín ALMUNIA Vice-President

Annex 1 – Summary of the notification based on the information provided by the Member State according to the standard form provided in Annex to the Notice on simplified procedure

Annex 2 – Current and proposed RO bands

Annex 3 – Cost and revenues calculations for the supported technologies

Annex 4 – Administrative changes to the RO scheme following the banding review

limit to comment. These submissions did not provide information that affects the compatibility assessment of the scheme under the Environmental Aid Guidelines.

http://ec.europa.eu/competition/elojade/isef/index.cfm

Annex 1 - Summary of notification

On 25/01/2013, the Commission received a notification of an aid measure pursuant to Article 108 of the Treaty on the Functioning of the European Union. On preliminary examination, the Commission finds that the notified measure could fall within the scope of the Commission Notice on a simplified procedure for treatment of certain types of State aid (JO C136, 16.06.2009, p. 3-12). The Commission invites interested third parties to submit their possible observations on the proposed measure to the Commission. The main features of the aid measure are the following:

Observations raising competition issues relating to the notified measure must reach the Commission no later than 10 working days following the date of this publication and include a non confidential version of these observations to be provided to the Member State concerned and/or other interested parties. Observations can be sent to the Commission by fax, by post or email under reference number SA.35565 to the following address: European Commission Directorate-General for Competition State Aid Registry B-1049 Brussels Fax (32-2) 296 12 42 [email protected]

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mailto:[email protected]

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Annex 2 – Current and proposed RO bands

Renewable electricity technology

Current band, ROCs/MWh

Proposed band, ROCs/MWh, for new accreditations and additional capacity added between the dates shown below:

2013/1415 2014/15 2015/16 2016/17 Advanced gasification and advanced pyrolysis

2.0 2.0 1.9 1.8

One advanced conversion technology (ACT) band supporting advanced and standard gasification and pyrolysis at the same ROC level

Anaerobic digestion 2.0 2.0 1.9 1.8

Biomass conversion (using regular biomass)

Currently supported under the dedicated biomass band at 1.5

ROCs or supported under the co-firing of biomass

band at 0.5 ROCs

1.0

Biomass conversion with CHP (using regular biomass)

Currently supported under the dedicated

biomass band with CHP band at 2 ROCs or

supported under the co-firing of biomass with CHP band at 1 ROC

1.5

Biomass conversion (using energy crops)

Currently supported under the dedicated energy

crops band at 2 ROCs or supported under the co-

firing of energy crops band at 1 ROC

1.0

Biomass conversion with CHP (using energy crops)

Currently supported under the dedicated energy

crops band at 2 ROCs or supported under the co-

firing of energy crops with CHP band at 1.5 ROCs

1.5

Dedicated biomass 1.5 1.5 1.4 Dedicated biomass with CHP

2.0 2.0 1.9 1.8

Dedicated energy crops

2.0 2.0 1.9 1.8

Energy from waste with CHP

1.0 1.0

Mid-range co-firing of solid or gaseous biomass (50% to less than 85% co-fired in a unit)

Currently supported under the co-firing of biomass

band at 0.5 ROCs 0.6

High-range co-firing of solid or gaseous biomass (85% to less than 100% co-fired in a unit)

Currently supported under the co-firing of biomass band at 0.5

ROCs

0.9 (0.7 for electricity generated between 1 April 2013 and 31 March 2014)

Mid-range co-firing of solid or gaseous biomass with CHP


with CHP band at 1 ROC 1.1

15 Years refer to obligation periods under the RO. For example, 2013/14 refers to the period 1 April 2013

to 31 March 2014.

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2013/1415 2014/15 2015/16 2016/17

High-range co-firing of solid or gaseous biomass with CHP

Currently supported under the co-firing of

biomass with CHP band at 1 ROC


Mid-range co-firing of energy crops

Currently supported under the co-firing of energy crops band at 1 ROC

0.6

High-range co-firing of energy crops



Mid-range co-firing of energy crops with CHP

Currently supported under the co-firing of energy

crops with CHP band at 1.5 ROCs

1.1

High-range co-firing of energy crops with CHP




Geopressure 1.0 1.0 Geothermal 2.0 2.0 1.9 1.8 Hydroelectricity 1.0 0.7

Landfill gas 0.25 0 for open landfill sites

0.2 for closed landfill sites 0.1 for new waste heat to power band at open and closed sites

Microgeneration 2.0 2.0 1.9 1.8 Offshore wind 2.016 2.0 1.9 1.8 Onshore wind 1.0 0.9 Sewage gas 0.5 0.5

Solar PV 2.0

Ground-mounted solar PV 1.6 1.4 1.3 1.2

Building-mounted solar PV 1.7 1.6 1.5 1.4

16 In December 2009 the UK authorities announced that offshore wind would receive 2 ROCs until

March 2014. This proposal received State aid clearance in March 2010 (C(2010)2211, case N65/2010). The proposed support for offshore wind in the current notification relate to April 2014 to March 2017 only.

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2013/1415 2014/15 2015/16 2016/17 Low-range co-firing (less than 50% co-fired by energy content) of solid or gaseous biomass


band at 0.5 ROCs


Low-range co-firing of solid or gaseous biomass with CHP


with CHP band at 1 ROC


Low-range co-firing of energy crops


Same level of support as low-range co-firing of solid or gaseous biomass, except under existing contracts which are supported at 0.8 ROCs from 1 April 2013 to 31 March 2015, and then at 1 ROC (support provided until

31 March 2019 or the life of the contract, whichever is earlier).

Low-range co-firing of energy crops with CHP



Same level of support as low-range co-firing of solid or gaseous biomass with CHP, except under existing contracts which are supported at 1.3

ROCs from 1 April 2013 to 31 March 2015, and then at 1.5 ROCs (support provided until 31 March 2019 or the life of the contract, whichever is

earlier). Standard gasification and standard pyrolysis

1.0 2.0 1.9 1.8

One advanced conversion technology (ACT) band supporting standard and advanced gasification and pyrolysis at the same ROC level

Co-firing of bioliquids Currently supported under

the co-firing of biomass band at 0.5 ROCs


Co-firing of bioliquids with CHP


with CHP band at 1 ROC


Tidal range 2.0 2.0 1.9 1.8

Tidal stream 3.0 in Scotland; 2.0

elsewhere 5.0 up to 30 MW generating station cap; 2.0 above the cap

Wave 5.0 in Scotland; 2.0 elsewhere

5.0 up to 30 MW generating station cap; 2.0 above the cap

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Annex 3 – Cost and revenues calculations for the supported technologies

Advanced Conversion Technologies 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 67-301 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 65-296 Total 120-150

Anaerobic digestion – initial data provided 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 16-143 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 52-170 Total 120-150

Anaerobic digestion – updated data provided, reflecting full capex sensitivities, heat revenue sensitivities and gate fee sensitivities 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 16-245 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 52-234 Total 120-150

Bioliquids 2013: Proposed support: 0.3, 1.0 or 1.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 12-60 Levy Exemption Certificates 4 317-391 Total 56-129

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2015: Proposed support: 0.5, 1.0 or 1.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 20-60 Levy Exemption Certificates 4 312-386 Total 64-134

Bioliquids with CHP 2013: Proposed support: 0.8, 1.5 or 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 32-80 Levy Exemption Certificates 4 304-383 Total 76-149 2015: Proposed support: 1.0, 1.5 or 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 40-76 Levy Exemption Certificates 4 299-378 Total 84-150

Biomass conversion 2013: Proposed support: 1 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 40 Levy Exemption Certificates 4 111 Total 84-109 2015: Proposed support: 1 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 40 Levy Exemption Certificates 4 111 Total 84-114

Dedicated biomass 2013: Proposed support: 1.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 60 Levy Exemption Certificates 4 111-176 Total 104-129 2015: Proposed support: 1.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 60 Levy Exemption Certificates 4 110-174 Total 104-134

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Dedicated biomass with CHP 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 179-233 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 177-231 Total 120-150

Dedicated energy crops 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 142-215 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 141-213 Total 120-150

EfW with CHP – initial data provided 2013: Proposed support: 1 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 40 Levy Exemption Certificates 4 45-74 Total 84-109 2015: Proposed support: 1 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 40 Levy Exemption Certificates 4 44-73 Total 84-114

EfW with CHP – updated data provided, reflecting full range of capex and fuel cost sensitivities 2013: Proposed support: 1 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 40 Levy Exemption Certificates 4 27-195 Total 84-109

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2015: Proposed support: 1 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 40 Levy Exemption Certificates 4 26-194 Total 84-114

Mid-range and high-range co-firing 2013: Proposed support: 0.6 or 0.7 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 24-28 Levy Exemption Certificates 4 111 Total 68-98 2015: Proposed support: 0.6 or 0.9 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 24-36 Levy Exemption Certificates 4 111 Total 68-110

Geothermal 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 80 Levy Exemption Certificates 4 84-357 Total 124-149 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 76 Levy Exemption Certificates 4 69-322 Total 120-150

Hydro 2013: Proposed support: 0.7 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-61 ROC value 28 Levy Exemption Certificates 4 65-114 Total 69-93 2015: Proposed support: 0.7 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-65 ROC value 28 Levy Exemption Certificates 4 67-117 Total 70-98

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Landfill gas 2013: Proposed support: 0.2 ROCs/MWh (closed sites only) Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 8 Levy Exemption Certificates 4 39-89 Total 52-78 2015: Proposed support: 0.2 ROCs/MWh (closed sites only) Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 8 Levy Exemption Certificates 4 39-89 Total 52-82

Offshore wind 2013: Proposed support: 2 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 41-67 ROC value 84 Levy Exemption Certificates 5 148-193 Total 129-155 2015: Proposed support: 1.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 41-71 ROC value 80 Levy Exemption Certificates 5 136-231 Total 125-156

Onshore wind 2013: Proposed support: 0.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-61 ROC value 36 Levy Exemption Certificates 4 77-112 Total 77-101 2015: Proposed support: 0.9 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-65 ROC value 36 Levy Exemption Certificates 4 76-111 Total 78-106

Sewage gas 2013: Proposed support: 0.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 20 Levy Exemption Certificates 4 61-128 Total 64-90

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2015: Proposed support: 0.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 20 Levy Exemption Certificates 4 57-118 Total 64-94

Solar PV 2013: Proposed support: 1.6 or 1.7 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-61 ROC value 64-68 Levy Exemption Certificates 4 119-165 Total 105-133 2015: Proposed support: 1.3 or 1.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 37-65 ROC value 52-60 Levy Exemption Certificates 4 92-150 Total 93-129

Low-range co-firing 2013: Proposed support: 0.3 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 12 Levy Exemption Certificates 4 88-94 Total 56-82 2015: Proposed support: 0.5 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 20 Levy Exemption Certificates 4 88-94 Total 64-94

Low-range co-firing with CHP 2013: Proposed support: 0.8 ROCs/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-65 ROC value 32 Levy Exemption Certificates 4 109 Total 76-102 2015: Proposed support: 1.0 ROC/MWh Total production costs (£/MWh) Total revenues (£/MWh) Grey electricity price 40-70 ROC value 40 Levy Exemption Certificates 4 108 Total 84-114

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Annex 4 – Administrative changes to the RO scheme following the banding review

A non-legislative cap on the total new build dedicated biomass generating capacity that can expect to be supported under the RO.

Removal of the cap on the proportion of ROCs that suppliers can source from electricity generated from co-firing.

Support for dedicated wood-fuelled biomass stations, where the installed capacity is above 10 MW, to be restricted to stations which are also qualifying CHP stations (Scotland only).

A cap on the proportion of ROCs that suppliers can source from electricity generated from bioliquids, with exemptions for microgenerators (below 50kW declared net capacity), for CHP stations below 1 MWe, for fuel produced from gasification or pyrolysis of waste or biomass, and for Energy from Waste with CHP stations. The cap will apply to electricity generated by both new and existing stations.

Removal of the energy crop uplift for co-firing, except under existing contracts

Narrowing the definition of energy crops.

Corrosion control and fouling reduction will be added to the list of permitted ancillary purposes for which limited amounts of fossil fuel can be used without affecting eligibility of the station for ROCs or for the biomass bands. The change will apply to both new and existing stations. It will continue to be the case that support will not be given for electricity generated using fossil fuel.

The introduction of a limited and strictly defined grace period in circumstances where accreditation is delayed due to delays to grid connections or certain radar works.

Changes to the definitions of the co-firing and dedicated biomass and dedicated energy crops bands

Changes to the definition of the standard and advanced gasification and pyrolysis bands

Changes to the eligibility for the CHP uplift

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