Marybeth Collins
With the
UK’s commitment to achieving net-zero emissions by 2050, the role of biomass in the energy mix remains a topic of debate. Large-scale biomass generators currently contribute approximately 5% of the
UK’s electricity supply. Still, as existing government subsidies phase out in 2027, concerns have risen over whether these generators can continue operating without financial support.
To bridge this gap, the government has announced a Transitional Support Mechanism (TSM) aimed at maintaining energy security, ensuring supply resilience, and facilitating the shift toward Power Bioenergy with Carbon Capture and Storage (BECCS). While the decision has been met with mixed reactions, the policy’s pragmatic approach offers a path forward for biomass generators, balancing economic viability with sustainability.
Why Government Intervention is Necessary
The UK energy sector is undergoing a major transformation. As coal-fired plants have been phased out, nuclear plants near the end of their operational lifespan, and renewable energy expansion continues, maintaining a steady and dispatchable power supply remains critical. Biomass is one of the few scalable, low-carbon solutions that provide dispatchable electricity, making it an important player in the near-term energy mix.
Key Justifications for the Transitional Support Mechanism:
- Energy Security: Without continued operation of biomass plants, the UK risks increased reliance on fossil fuel-based power or intermittent renewables without sufficient backup.
- Carbon Reduction Strategy: Biomass, when sourced sustainably, is considered carbon neutral since emissions from combustion are balanced by forest regrowth. The government’s long-term strategy includes transitioning from traditional biomass power to Power BECCS, which captures and stores emissions.
- Limited Alternatives in the Short Term: While offshore wind and solar are rapidly growing, they do not yet provide the reliability required during periods of low generation. Biomass helps fill that gap.
- Investment Protection: Many large-scale biomass generators have already made significant capital investments under prior subsidy schemes. Allowing these plants to shut down before transitioning to BECCS would waste these investments and hinder future carbon capture integration.
The Transitional Support Mechanism: A Targeted Approach
The government has opted for a Contract for Difference (CfD) with a Generation Collar as the preferred support mechanism.
What This Means for Biomass Generators:
- Generation Minimum and Maximum: Biomass operators will have a floor and cap on generation output to prevent overcompensation while ensuring continuous energy supply.
- Cost Control for Consumers: Unlike previous subsidy schemes, support will be limited to lower volumes of biomass generation, reducing the overall financial burden on energy consumers.
- Stricter Sustainability Standards:
- Greenhouse Gas (GHG) emissions cap reduced to 36.6 gCO2e/MJ, aligning with EU standards.
- 100% of woody biomass must be from sustainable sources, up from 70%.
- More rigorous monitoring, reporting, and verification (MRV) to prevent unsustainable practices.
- Potential Overcompensation Measures: The government has introduced an Excess Returns Mechanism, ensuring generators return a portion of profits if revenue exceeds predetermined thresholds.
Alternative Policy Options Considered and Rejected
Before finalizing the CfD with a Generation Collar, the government reviewed other potential support mechanisms:
- Unconstrained CfD: Allowed unlimited biomass generation but was rejected due to higher consumer costs and risk of distorting the energy market.
- Availability Payment: This would have provided funding only for plant availability, not actual generation—ultimately dismissed as it would not guarantee sufficient biomass-generated power.
- Regulated Margin: Aimed to guarantee profits for generators while limiting excessive returns, but deemed too complex for short-term implementation.
- Mothballing Plants: Suggested as an alternative to subsidies but rejected because it would undermine energy security and disrupt biomass supply chains.
Implications for Businesses and the Energy Sector
For Biomass Operators:
- Short-term financial certainty allows businesses to plan investments in BECCS retrofitting.
- Greater compliance obligations will require enhanced sustainability reporting and sourcing transparency.
- Opportunity to transition to BECCS, maintaining long-term viability while aligning with net-zero goals.
For Energy Consumers:
For Renewable Energy Advocates:
- Concerns over biomass sustainability remain, especially regarding carbon accounting and deforestation risks.
- The policy signals a shift toward BECCS, ensuring biomass generation contributes to negative emissions targets rather than prolonging carbon-intensive operations.
Future Considerations: What Comes Next?
- Legislative Amendments: The government will finalize necessary regulations to implement the transitional support mechanism.
- Review of Power BECCS Feasibility: Further assessments will determine the economic and technical viability of large-scale BECCS deployment in the 2030s.
- Supply Chain Strengthening: The focus will be on ensuring sustainable biomass sourcing and reducing reliance on imported wood pellets.
- Integration with Other Low-Carbon Technologies: Biomass generators will need to align with broader decarbonization strategies, including hydrogen, battery storage, and flexible grid solutions.
A Balanced Path Forward
The Transitional Support Mechanism represents a pragmatic compromise—supporting existing biomass generators while imposing stricter sustainability requirements and paving the way for Power BECCS.
For businesses in the energy sector, this policy presents both challenges and opportunities. Those who can adapt to enhanced sustainability expectations and position themselves for BECCS deployment will emerge as key players in the UK’s net-zero energy landscape.
