Degression Announcement for January 2015 lower than anticipated

Great news — the latest degression announcement for small biomass (up to 200kw) says the rate is only going to drop 10%.

The 150% trigger was not reached, so the anticipated 20% reduction came out at only 5%, but because the overall scheme exceeded its budget an extra 5% reduction was applied to all technologies that reached their triggers. Had the 150% trigger been reached this would have resulted in the 20% reduction, plus another 5% for the overall scheme.

The new rate for small biomass non-domestic from 1st January 2015 is:

  • Tier 1: 6.8p/kw
  • Tier 2: 1.8p/kw

Frankly, I think the only reason the higher trigger was not reached is that OFGEM are bogged down in a backlog of applications caused by the rush to install systems at the last degression. My guess is the next review will show a massive increase in installations if the biomass boiler sales figures are anything to go by.

For those interested in the current announcement, here is the crux:

The total forecast expenditure is £209.1 million. This represents the amount we anticipate we will pay out between 31 October 2014 and 30 October 2015, based on current application data.

This figure exceeds the 100% overall scheme expenditure threshold which can trigger a tariff reduction (as set out in regulations):

  • The “50% trigger” for the scheme as a whole as at 31 October is £103.6m – total forecast expenditure at £209.1m is £105.5m higher than this trigger.
  • The “100% trigger” for the scheme as a whole as at 31 October is £207.2m – total forecast expenditure at £209.1m is £1.9m higher than this trigger.

As at 31 October 2014 the Small biomass tariff category had exceeded its individual trigger:

Forecast expenditure over the next 12 months for small commercial biomass is £89.1m. This is £21.9m above its individual technology trigger.

The small biomass tariffs will be reduced by 10% effective 1 January 2015. This is because expenditure levels for small biomass have met the following conditions (as set out in regulations):

  • The small biomass tariff was degressed last quarter.
  • Small biomass expenditure exceeded its individual technology trigger this quarter.
  • The anticipated growth for small biomass in the quarter ending 31 October was £8.7m, and at £11.2m, the growth rate for small biomass was 129% of the anticipated growth rate.This exceeds the 50% growth rate trigger necessary for a further 5% degression but has not exceeded the 150% growth rate trigger which would have resulted in a 20% degression.
  • The 100% total scheme trigger was also hit, which requires that all technologies with forecast spend above expectations receive an additional 5% degression.

Small biomass had exceeded the requirements for a 20% technology specific degression at last month’s monthly forecast; however since then our load factor assumptions have reduced, and this coupled with very few new applications having been received and a number of applications now no longer contributing towards forecast expenditure (where the applicant has either actively withdrawn their application or been non-responsive over an extended period of time), has resulted in the drop to forecast expenditure experienced this month.


The rest of the announcement can be found here

Sadly, the domestic tariff is also reducing by 10%

Further reading can be found here