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5 UK enabling Legislation Renewable Energy Strategy

6 a) Renewable Electricity Financial Incentives b) Renewable Heat Incentive

7 a) Renewable Electricity Financial Incentives Implementation date April 2010 b) Renewable Heat Incentive Implementation date April 2011

8 Renewable Electricity Financial Incentives Consultation Period closed Early November 2009

9 What I think are some of the important points Likely to have similar themes between FIT and FHI I have talked to Government Office people and consul tees I have read the FIT consultation paper

10 Transitional arrangements We want to ensure that projects can start building with confidence before FITs and RHI become operational, so it is important to provide certainty and support to the market in the period between the publication date of the RES (15 July 2009) and the start-up dates of the FITs and RHI (the interim period). The start dates of the new support schemes are expected to be April 2010 (for the FITs) and April 2011 (for the RHI). We will do this by continuing to fund existing grant schemes in the interim period, particularly through £45 million of new funds for the Low-carbon Buildings Programme. Small-scale renewable electricity installations will, during the interim period, still be eligible for support under the RO. In particular microgeneration is now entitled to double the previous support level – 2 Renewable Obligation Certificates (ROCs) per MWh. As announced in the RES we will also allow any eligible installations, built during this interim period, to benefit from FITs and RHI as if they had been installed on the start-up dates of the schemes, although some exceptions will apply where installations first receive ROCs under the RO and then switch to the FITs.

11 The Renewables Vision 1.1 The UK Renewable Energy Strategy (RES) 3 and the UK Low Carbon Transition Plan (published alongside this document) 4 set out the UKs 2020 vision for the switch towards a low-carbon economy and society. By 2020, we want to be firmly on track towards achieving an 80% reduction in carbon emissions by 2050. Renewable energy from wind, water, sun and sustainable biomass will play a crucial part in making this happen. 1.2 The effort to increase renewable energy consumption is shared across the EU. The 2009 EU Renewable Energy Directive has set a binding target of achieving 20% of the EUs energy consumption from renewable sources by 2020. Our share of the EU Target commits the UK to sourcing 15% of our energy from renewable sources by 2020, an eight-fold increase in a decade. The Renewable Energy Strategy sets out the overarching policy framework for how we will achieve this and suggests a lead scenario of where this renewable energy will come from. It suggests that: Over 30% of our electricity may come from renewables compared to 5% today. This could be made up from large scale electricity generation (29%) and small-scale electricity generation (2%); 12% of our heat may come from renewable sources compared to 0.6% today; and 10% of road fuel may come from sustainable biofuels.

12 Renewable Heat Incentive (RHI) 1.17 We need to develop new ways of generating renewable energy in all sectors, including heat, to meet our 2020 15 % renewable energy target. Currently heat generated from renewable sources accounts for only 0.6 % of total demand. Estimations in the RES suggest that this may need to rise to around 12% by 2020. 1.18 We will not be able to expand renewable heat without some form of financial assistance because other forms of heat are currently cheaper. Such assistance will allow more people to afford renewable heat and, by expanding the market, help bring costs down more quickly. 1.19 The Energy Act 2008 (Section 100) allows for the setting up of a Renewable Heat Incentive (RHI), which would provide financial assistance to generators of renewable heat and to some producers of renewable heat, such as producers of biomethane. 1.20 Our aim is to make the RHI as simple, accessible and user-friendly as possible to encourage potential investors in renewable heat at all scales, from industrial to domestic. We expect that different levels of support will be provided to different types of technology and at different scales. 1.21 The incentive payments will be funded by a levy on suppliers of fossil fuels for heat. These include gas suppliers and suppliers of coal, heating oil and liquefied petroleum gas (LPG).

13 Discussions taken place for setting Fossil fuel Levy and would appear to be set about 7% rising after 5 years to 15% Initially being set on Gas as 85% of houses on gas in Scotland so should raise at least £150m. Also likely to be paid out to depreciate your boiler over twenty years and at 7% interest will have an effect of multiplying by close to 10 or an effect of having a fund of £1,500m!! The Government really want us to change our heating habits!!!!

14 Table of generation tariffs for first year of FITs (2010-11) Technology Scale Proposed initial tariff (p/kWh) Annual degression (%) Anaerobic digestion Electricity only 9 Anaerobic digestion CHP 11.5 Biomass <50kW 9 Biomass 50kW-5MW 4.5 Biomass CHP 9 Hydro <10kW 17.0 Hydro 10–100kW 12.0 Hydro 100kW–1MW 8.5 Hydro 1-5MW 4.5 PV <4kW (new build) 31.0 PV <4kW (retrofit) 36.5 PV 4-10kW 31.0 PV 10–100kW 28.0 PV 100kW–5MW 26.0 PV Stand alone system 26.0 Wind <1.5kW 30.5 Wind 1.5–15kW 23.0 Wind 15–50kW 20.5 Wind 50–250kW 18.0 Wind 250–500kW 16.0 Wind 500kW–5MW 4.5

15 Tax issues 3.139 Sections 20 and 21 of the Finance Act 2007 36 set out the current income tax exemptions for domestic microgeneration in respect of the sale of electricity and the income from ROCs. 3.140 The treatment of FITs with regard to tax is a matter for the consideration of HM Treasury.

16 Discussions about RHI consultation paper

17 Wood Pellets Wood Pellets are made from sawdust which until recently was a waste product The sawdust is first dried they pelletised by exerting huge pressure on the pellet and self made heat from the friction reactivate the natural glues 5 Wood Pellet mills started recently or will be operational shortly In Scotland Producing about 200,000 tonnes – very competitive market Average house should use about 5 TPA so currently enough to supply 40,000 houses. Huge increase in wood supply in North East of Scotland from plantings in 70s and 80s over next decade Major potential for expansion in view of above and also saws getting thicker Dont need best quality trees so shelter belts become valuable and poor quality trees like Lodgepole Pine

18 Advantages of Wood Pellets over Wood Chips ( you should know by now about global warming and why we need to move a large amount of heating to alternative carbon neutral technologies from fossil fuels) Wood Pellets are an engineered product capable of being blown, pumped, screwed (Archimedean) etc They do not contain shads of wood like you can get with wood chips jamming mechanisms Require one third the volume for same amount of energy Should be a lower cost installation

19 Take note that in countries such as Sweden and Austria that have been into biomass for some time under 100 kw Wood Pellet boilers out sell Wood chip boilers 10 to one Ask your self why Part reason why Bryan Harper - partner in Wood Pellet Puffin Pellets plant – invested in wood pellet plant yet he is one of largest wood chip making facilities with over 400,000 manufactured each year.

20 Advise Try and understand exactly what you are getting or not getting eg (a) Automatic cleaning of tubes from Fly ash, (b) Weather compensation, (c) Store of pellets (important dont make less that 10 Cu meters !!), (d) Self loading of pellets into day hopper in case of new house or bulk bags (e) Rolls Rolls Royce versus Citroyn (f) Likely life – often more than gas and oil boilers!! (g) Ask Wood Pellet suppliers which boilers they would recommend

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