Brussels, 24/07/2014 (Agence Europe) - On Thursday 24 July, the European Commission gave the go-ahead to a British aid scheme for generating electricity from renewable sources.
In June 2014 the UK notified plans to support renewable electricity production through market-based mechanisms. The scheme will run for 10 years starting in April 2015, with a budget of £15 billion (around €19 billion). Selected individual projects will be able to receive support for up to 15 years.
“Established” technologies (such as onshore wind, solar photovoltaic, energy from waste with combined heat and power, small hydropower, landfill gas and sewage gas) will compete against each other for support in a common auction.
“Less established”, new and innovative technologies (such as offshore wind, wave, tidal stream, anaerobic digestion or geothermal energy) will initially benefit from allocated budgets in order to promote their further development but will also be subject to competitive auctions with some degree of cross-technology competition.
Biomass conversion plants will be supported through dedicated tenders up to 2017. After that, the UK will evaluate whether biomass can be included in the common tenders for established technologies.
Aid granted under the scheme will be paid out as a variable premium on top of a reference electricity (wholesale) price, and up to a pre-defined strike price, based on a so-called “Contract for Difference” (CfD). Generators will earn money from selling their electricity into the market as usual. When the average wholesale price of electricity is below the strike price, generators will receive a top-up payment. In case of high wholesale electricity prices, revenues for the generator will be capped at the strike price to ensure that there is no overcompensation. In addition, as of 2016, no support will be paid in case of periods of negative prices longer than six hours.
The payments will be financed through a tax imposed on energy suppliers. To ensure that the tax does not discriminate against overseas generators, imported renewable electricity will not be subject to the tax. In the long run, overseas generators will be allowed to compete for CfDs on the same terms as national generators.
Following separate investigations, the European Commission also authorised an aid scheme for five big offshore wind farms that will provide 3.3% of the UK electricity generation capacity. Support will be based on Contracts for Difference. (EL)