Non-Domestic RHIScheme information & upcoming

sustainability requirements

Nicola Percival08/07/2015

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• The RHI scheme• What is it?• How can you benefit from it?

• Summary of sustainability requirements• Coming into force 5th October 2015

• Q&A

Agenda

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The Non-Domestic RHI-

An Overview

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Heat is an issue for the UK• 47% of UK energy use is for heat, and the UK spends around £32bn on heat

• Around 1/3 of UK’s carbon emissions come from energy used to produce heat

• Binding commitment to increase renewable energy use to 15% by 2020

Prepare for mass rollout in 2020s

Build sustainable supply chains

Improve performance Reduce costs Reduce barriers to

uptake

Legally binding targets from EU Renewable Energy Directive 2009 mean that the scheme is here – once in the scheme full payment is guaranteed

Incentivise roll out of renewable heat systems

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Technologies• Biomass

• Biogas

• Biomethane injection

• CHP

• Deep geothermal

• Ground/Water/Air Source heat pumps

• Solar Thermal

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Customer satisfaction

93% would recommend their renewable heat technology to others

92% believe their renewable

heating system is reliable

90% are satisfied with

their new installation

Data from Non-domestic RHI Evaluation, published August 2014

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Scheme Performance

ND J FMAMJ J A SOND J FMAMJ J A SOND J FMAMJ J A SOND0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2.2 TWh of renewable heat now generated

Small Biomass752

Medium Biomass

345

Large Biomass104

Other15

Over 1,200 MW of Installed Capacity

2011 2012 2013 2014

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Uptake by Industry

Accommodati

on

Farm

ing

Educa

tion

Office admin

Sports

& re

creati

onReta

il

Wood m

anufac

ture

Fores

try &

loggin

g

Residen

tial ca

re activiti

es

Food m

anufac

ture

Other

0

500

1,000

1,500

2,000

2,500

3,000

Capacity of accredited installations by SIC Code, November 2011 to December 2014

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Budget Management - Degression

Established methodology

Triggers set in legislation

Monthly updates & quarterly statements

• Gradual reduction of tariffs to control spend

• If forecast spend on a technology exceeds trigger – risk of tariff reduction

• Overall scheme spend must also exceed 50% of budget

• Reductions of 5% to 20%, with extra 5% added if total scheme trigger hit

• Last announcement for July 2015 – small biomass and biomethane tariffs degressed

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Anaerobic digester has been producing heat since 2009 and electricity since 2011

Produces enough energy for all buildings on the farm and more

Waste output from digester is rich fertilizer

Benefits from energy savings and incentives of £37,000 per annum

“Installing the new plant was without doubt a worthwhile undertaking. It wasn’t only about the financial return, but also protecting our environment.”

Norfolk dairy and grain farm turns waste into heat and power with biogas plant

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Companies House slashes gas billsin pioneering move

• Gas boiler replaced by 500kW biomass boiler plus silo to store its fuel – locally-sourced sawdust pellets

• The biomass boiler has helped reduce carbon footprint by 25% - ahead of schedule

• Gas heating bills down from around £55,000 year to £10,000 a year

• 250 tonnes of carbon saved each year

“The organisation has been impressed with the performance of the system and it provides clear evidence that effective environmental management is also good business management.”

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For those intending to applyOnly the owner of an eligible heating system can apply. Requirements are:

Rules of scheme complex – always check with Ofgem regarding eligibility

Equipment must be new at time of purchase

Heat transfer must be by water or steam (i.e. - not direct air heating)

MCS or equivalent EN45011 if ≤45kW, for biomass, heat pumps and solar thermal

Biomass boilers must meet air quality requirements & designed as primary fuel source

Metering – must have the right type of meters calibrated and in correct locations

Cannot ‘double fund’ system though public grants – may be able to repay grant to be eligible

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The application processApplications are subject to the detailed scheme rules: www.ofgem.gov.uk

Prepare in advance – check guidance material before starting application process – be ready for technical questions and evidence that’s required

Owner decides to install renewable heating system

Owner & installer understand RHI eligibility requirements

Owner & installer plan for requirements as part of design /

installation process

Owner uses guides to prepare for application and gathers

evidence

Owner completes online application form on Ofgem

website & provides necessary evidence

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What happens then?Once you are accredited onto the scheme:

Owner regularly submits meter readings and periodic data

Ofgem makes regular financial incentive payments

Owner is aware of their responsibilities to remain compliant with scheme & signs

annual declarationOfgem selects installations for audits and

inspections on an ongoing basis

Submit meter

readings &

periodic data to receive paymen

ts

Maintain &

service equipm

ent – keep a log &

receipts

If biomass installation, start

a fuel log and

keep fuel

receipts

Inform Ofgem of any

changes to your

installation

Sign an annual

declaration

Submit meter

readings &

periodic data to receive paymen

ts

Maintain &

service equipm

ent – keep a log &

receipts

If biomass installation, start

a fuel log and

keep fuel

receipts

Inform Ofgem of any

changes to your

installation

Sign an annual

declaration

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Is there anything else I can do?

Common issues with applications to date

• Lack of fuel records

• Meter component installed incorrectly

• Heat losses not being measured appropriately

• Undeclared contaminated fuel

Proper installation, operation and maintenance can make all

the difference

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New sustainability requirements• Minimum 60% GHG emission

saving relative to EU fossil fuel heat average

October 2015

• Land criteria introduced: UK Timber Standard for woody biomass; RED for other types

October 2015

Biomass Suppliers List (BSL) provides an easy way for participants to comply

All existing & new applicants MUST comply with criteria, from 5 October 2015.This will impact any fuel purchased now but intended for use later

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The Non-Domestic RHI-

Upcoming sustainability requirements

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Policy vs Implementation

Policy examplesResponsibility: DECC

Implementation examplesResponsibility: Ofgem

Value of lifecycle greenhouse gas (GHG) emissions limit

Definition of consignments

Requirements for calculating lifecycle GHG emissions

Methodology of demonstrating consignment measurement

Eligibility requirements Evidence requirements for eligibilities

The BSL as an ‘approved suppliers list’ and how it works as an entity

Evidence requirements to demonstrate fuel is BSL approved

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• Due to come into force in October 2015 for both domestic and non-domestic RHI

• Applies to all new and existing participants generating heat (or heat and power) from biomass or biogas and to those producing biomethane for injection

• Will only apply from the date the regulations come into force - 5th October 2015

• Fuel being sustainable is based on lifecycle greenhouse gas (GHG) emissions and land criteria

•The Biomass Suppliers List (BSL) is open for registrations from suppliers. Most RHI participants will be able to demonstrate compliance with the sustainability requirements by sourcing their fuel from this list.

Summary of Sustainability

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Summary of GHG & Land CriteriaCompliance with the sustainability regulations is based on meeting the requirements for lifecycle GHG emissions and land criteria:

• The greenhouse gas (GHG) emissions limit is 34.8 gCO2(eq) per MJ of biomass heat generated. The methodology for calculating the GHG value is aligned with the RED.

• For woody biomass fuel the land criteria requirement is aligned with the Timber Standard.

• For non-woody fuels the land criteria requirement is aligned with the RED.

Further information can be found in our draft guidance (on our website soon) and the woodfuel advice note.

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• At application stage, applicants will need to confirm how they intend to comply with the biomass sustainability requirements

• Declaration or information requirements every quarter with periodic data

• Annual reporting requirements for some

• Payments dependent on the required information/declarations being provided

• Audits will include checks of sustainability information

• Enforcement powers can be used for non-compliances related to sustainability requirements not being met such as withholding or re-couping of payments

Non-Domestic RHI key points

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Delivering the requirements

Four routes of compliance:

• Buy fuel from a supplier listed on the Biomass Suppliers List

• Register as a self-supplier on the Biomass Suppliers List (installations under 1MW whose fuel is woody biomass)

• Self-report on the criteria

• CHP plant which is satisfying the sustainability criteria on the RO scheme

Each route involves a different process and requirements to demonstrate the criteria have been met

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Types of Supplier on the BSL

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Which type of supplier are you?

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BSL and Ongoing Obligations• The BSL is a scheme that enables suppliers to register fuels that will be checked to

ensure they meet the GHG and land criteria• Open to all traders, producers and self-suppliers of biomass which is wood or

wholly derived from wood, including waste-wood• Does not include energy crops or agricultural residues • Is managed through an electronic application process

Use fuel listed on the BSL

• Provide quarterly declaration• Provide BSL authorisation number

Submit with Periodic Data

• At audit, receipts will be checked to ensure fuel used is listed on the BSL, so all receipts would need to be retained for the duration of the scheme.

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Self-Supply

Register with

the BSL

• Provide quarterly declaration• Provide BSL authorisation

number

Submit with Periodic Data

• This is “self-supplied” according to the Regulations. If you supply your own fuel but not registered on the BSL, you must self-report and are not a self-supplier as defined in the Regulations.

• Installations <1MW only

• Log book recording fuel use must be kept for audits

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Compliance for self-reporting• To be used for those not either sourcing from the BSL, self-supplying, or RO compliant

• The UK Biomass and Biogas Carbon Calculator can be used to generate GHG emission figures which may be checked by Ofgem. Other tools can be used but must be independently verified as following the calculation methodology outlined in the RED

Self reporting <1MW

• Provide quarterly declaration • Provide annual sustainability audit

report

Self reporting over ≥1MW

• Provide quarterly declaration • Provide quarterly Schedule 2

information and GHG emission figure• Provide annual sustainability audit

report

Submit with Periodic Data

• Sustainability audit reports would need to be submitted no later than 3 months after fourth quarterly declaration

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Sustainability audit reports• Must be prepared by a person who is not the participant and is not a connected person.

• Submitted annually, no later than 3 months after fourth quarterly declaration

• Who?• Biomass and biogas self-reporting and ≥ 1MWth (including waste)

• Biomethane producers

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Compliance for CHP and RO Interaction

• CHP installations are not permitted to demonstrate compliance by using listed sustainable fuel

• Biomass CHP installations ≥1MW which are accredited on the RO and meeting their sustainability requirements are deemed to be compliant with the RHI sustainability requirements

• A declaration of compliance must be submitted when and how Ofgem requests it

• Any heat generated by a CHP station that is accredited under the RO that did not meet the sustainability criteria on the RO must be able to evidence that the RHI sustainability criteria have been met instead

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Voluntary period

• We are currently running a pilot programme asking participants to complete a survey on how they intend to comply with the criteria come October

• The aim is to promote awareness of the sustainability criteria and to get a measure of how people will be reporting

• RHI payments will not depend on this survey being completed

• We intend to reach all 10,000 participants & applicants in four batches between April and August 2015

• 6931 sent already – have you received yours?

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Further Information

1. BSL Guidance, info and applications http://biomass-suppliers-list.service.gov.uk/

2. BSL Helpdesk: halhelpdesk@gemserv.com 020 7090 7769

3. Ofgem Enquiries: RHI.Enquiry@Ofgem.gov.uk 0845 200 2122

4. DECC Renewables Delivery Team: deccbiomass@decc.gsi.gov.uk 0300 068 6184/6194

5. Draft guidance out for consultation in the coming days – this will be on our website: https://www.ofgem.gov.uk/environmental-programmes/non-domestic-renewable-heat-incentive-rhi/policy-and-regulations

6. The woodfuel advice note: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/390145/141222_Woodfuel_Advice_Note_-_Guidance_final.pdf

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Additional information-

Biogas & Biomethane-

Self-reporting

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Biogas and Biomethane• Biogas is a “sustainable biomass” if:

• it meets the GHG criteria and is made from feedstock which meets the land criteria

• it’s made from feedstock which is waste or excreta produced by animals• a combination of these

• “consignment” in relation to biogas means the quantity of biogas attributable to the consignment of feedstock from which that biogas was made

• All biomethane installations must provide quarterly declarations, quarterly schedule 2 information and GHG emission figures, and annual sustainability reports

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Waste and excreta• ‘Waste’ means any substance or object which the holder discards or intends or is required to discard (which will be consistent with the proposed 2014 amendment to the RO Order)

• Waste and “excreta produced by animals” is considered a sustainable biomass

• Waste wood can be registered on the BSL, but if self-supplied, the installation must be <1MWth

Waste or excreta ≥1MW• Provide quarterly declaration • Provide annual sustainability audit

report

Waste or excreta <1MW • Provide quarterly declaration

Submit with Periodic Data

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Demonstrating complianceSelf reporting (biogas installations <1MW)

• quarterly declaration that the sustainability criteria has been met and submission of the GHG emissions figure for each consignment

Self reporting (biogas installations ≥1MW and biomethane producers)

• quarterly declaration that the sustainability criteria has been met and submission of the GHG figure submission for each consignment

• required to provide annual sustainability audit report

Everyone will be required to retain evidence of land criteria compliance and the GHG emissions calculations for the annual audit or to submit to Ofgem upon request.

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Application stage• All biogas and biomethane applicants submit an FMS• Agree how each consignment will be determined

Periodically• Declaration of sustainability criteria compliance and submit GHG figure (per

consignment)• Retain GHG emissions calculations and land criteria compliance evidence• Annual (within 3 months of accreditation date anniversary) submission of an

independent audit report if biogas ≥1MW or biomethane

Demonstrating compliance

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Demonstrating compliance with GHG emissions criteria:

• ‘default value method’ or ‘actual value method’

• Actual value method will involve assessing the carbon intensity of each consignment of feedstock (if not exempt)

• Example from RO guidance of lifecycle considerations:

• The carbon calculator is available on our website

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Definition of Consignment

• Based on the definition used by the RO

• One consignment could be based on the sustainability characteristics of the material(s) if they are of the same:

• Feedstock type• Country of origin• Biomass form (solid biomass only);• Fuel classification (waste, residue, product, etc)• Compliance with the land criteria• Compliance with the GHG criteria

• A consignment of biogas is the quantity of biogas attributable to the consignment of feedstock from which that biogas was made

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Feedstock type: maizeCountry of origin: UKClassification: product

Feedstock type: strawCountry of origin: UKClassification: agricultural residue

Feedstock type: food wasteFrom Supplier 1Country of origin: UKClassification: waste

AD Plant

Biogas composed of:

Consignment A: biogas from maize

Consignment B:biogas from straw

Consignment C:biogas from food waste

In this example, each feedstock meets the land and GHG criteria

Feedstock type: food waste from Supplier 2Country of origin: UKClassification: waste

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Reporting per Consignment

• Quarterly declaration that the land criteria has been met and the GHG figure per consignment

• participant would be required to retain all evidence to show upon request

• Biomethane participants and biogas installations ≥ 1MWth wiill need to submit information in accordance with Schedule 2 every quarter

• A biogas apportioning tool for use with AD to apportion volumes of resultant biogas to the consignments of feedstock will be available

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Schedule 2 information - per consignment:

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Mixed consignments

Proportional mass balance Non-proportional mass balance

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