The byzantine regulation surrounding the replacement of AD generating equipment is leaving the most experienced operators confused. The ADBA team investigated in AD & Bioresources News Spring 2020 Edition.
Question: Can I replace my CHP?
Answer: The short answer is yes! Unless, it is no. Helpful? Absolutely not.
But under current rules and regulations that is the situation, especially
in regard to FIT accredited installations. As the scheme’s administrator Ofgem says, “We can provide no comfort or certainty”. That means under FIT you will only discover if your accreditation has been adversely impacted after an installation has taken place and that is a high risk and costly game. Make a mistake and you could lose your accreditation and income. The situation is far clearer for those operators receiving RHI.
Feed In Tariff (FIT)
As administrators of both the FIT and RHI schemes on behalf of BEIS, which sets the terms to be complied with, Ofgem is obliged to assess and, where appropriate accredit, eligible applications and amendments that have been made to them for full and preliminary accreditation. For the FIT scheme, FIT licensees – the purchasers of the electricity generated, such as Bulb – are responsible for making FIT payments to generators/nominated recipients.
The repair or replacement of components of an accredited FIT installation which do not affect its total installed capacity should not affect its accreditation. However, should all components of generating equipment be replaced, this could impact the accredited status and the FIT support received by the installation. For AD specific installations, Ofgem considers ‘generating equipment’ to be all equipment required to convert gas formed by the anaerobic digestion of material (which is neither sewage nor material in a landfill) into electricity. Generating equipment includes all equipment required to convert gas formed by the anaerobic digestion of material, such as all engines, turbines and alternators (or any part thereof). Any gas blowers, anaerobic digestion vessels, gas cleanup equipment and any associated pipe work are not considered generating equipment.
Ofgem, however, assess applications, amendments and changes on a case-bycase basis, based on the supporting evidence submitted with the application and the circumstances specific to the installation in question. Given the scope of Ofgem’s role, they can only provide comfort through the preliminary accreditation process which, before closure, was only available to installations that had not commissioned. They do not have the powers to assess planned changes to installations before that change is complete and provide comfort. So Ofgem’s hands are tied.
At the point that changes are made to an AD installation, it would be the FIT generator’s responsibility to notify Ofgem of the change. This is the point at which Ofgem would consider whether the changes made to the installation have any implications for the FIT accreditation. If the total installed capacity has increased then the additional capacity would be considered an extension and not eligible to any support; support for FIT extensions closed in 2016.
In some cases, where your generation capacity increases, you will still be able to operate under the same accreditation but only the original capacity will be eligible. It is possible to retain the generation tariff for the previously agreed FIT capacity and, if you opt out of the FIT export tariff, you could apply for a Smart Export Guarantee (SEG) tariff on all exported electricity. Please note that this will need to be discussed with your energy supplier/distributor/FIT licensee.
From the SEG perspective, the SEG Licensee will check the central fit register (CFR) to make sure that the installation does not also receive FIT export payments. The CFR is an electronic, web-based system used to manage the FIT scheme that Ofgem and FIT licensees administer on behalf of the Department for Business, Energy and Industrial Strategy.
Ofgem publishes guidance on the FIT scheme for renewable generators. The guidance focuses on the underlying legislation. Where Ofgem has had experience of a scenario and set precedent under the scheme, they update their guidance to support future generators and provide greater clarity. Ofgem have told us that they have not yet assessed an application for an AD installation where all of the equipment has been replaced.
Ofgem told ADBA, “We cannot provide advice or comfort, nor is it for the Authority to provide advice in respect of future changes at an accredited installation. At the point where a change has occurred, we would make a formal determination in line with our duties.
“We appreciate that you are seeking certainty. However, we are unable to provide advice or comfort on the basis of theoretical scenarios. We would encourage generators to seek such advice independently if they are concerned that planned changes may jeopardise their accreditation. We assess amendments and changes on a case by case basis, based on the supporting evidence submitted with the application and the circumstances specific to the generating station in question.”
ADBA has made BEIS and Ofgem aware of our members concerns and disappointment that Ofgem does not have powers to provide comfort. We understand that BEIS are considering this now that we are at a point in the scheme where equipment needs replacing.
Further resources: Chapter 8 of the FIT Supplier Guidance (v11) provides guidance on how changes to installations are managed. Ofgem’s Feed-in Tariffs: Guidance for Renewable Installations (Version 11) sets out that the Statement of FIT Terms, which must be agreed prior to FIT payments commencing, includes a term that requires FIT Generators to notify the FIT Licensee of anything that may affect the eligibility of an eligible installation.
Renewable Heat Incentive (RHI)
In comparison, regulatory reform of the RHI in 2018 updated the rules on equipment replacement for RHI accreditation and set out guidance for how this works in simple terms. Participants are allowed to replace their accredited plant provided they use the same source of energy and technology and meet all the eligibility requirements of the original plant.
Replacements that increase capacity will be able to accredit and maintain their original RHI tariff for any capacity up to that of the original plant. Any capacity beyond that of the original RHI accreditation will not be eligible to receive support payments. Participants are required to inform Ofgem within 28 days of the installation of a replacement as part of their ongoing obligations. Changes to RHI systems should be communicated to RHI.firstname.lastname@example.org
Further resources: Information on the eligibility requirements, potential consequences and applying for a replacement plant can be found in Chapter 12, Volume 2 of the Non-Domestic RHI Guidance.
Overhaul or Replacement
This question of replacement is becoming an area of concern for ADBA members as they get closer to the 7- to 14-year point of their plant’s operation. A major overhaul of a gas engine typically occurs at each 60,000 hours of operation, every 6-7 years, with an engine typically having an overall life of 14 to 15 years.
Operators have two options, to replace or overhaul. As we have seen, replacement under FIT is fraught with uncertainty. But an overhaul is costly in terms of revenues lost during down time.
Alex Marshall from Clarke Energy, authorised distributor of INNIO’s Jenbacher gas engines, said, “There are two options at 60,000 hours: 1) rebuild of the originally FIT-accredited engine retaining the serial number, 2) replacement of the whole gas engine to the same technical specification but having a different engine number, but with a significantly lower down-time.”
Option 1 would comply with section 8.13 of the FIT guidance “Replacing and/ or Repairing Generating Equipment” but would incur greater downtime. Option 2 is faster and would comply with the spirit of the legislation, retaining both the electrical output and efficiency.
However, under section 8.12 you must notify your FIT licensee and it would be their responsibility to determine if this fits with the original FIT accreditation. At this point, the FIT licensee may approach Ofgem for guidance and they would consider whether the changes made to the installation have any implications for the FIT accreditation. Both options will be seen as a scheduled servicing and will require you to inform your FIT licensee in order to provide them with timelines of the plant’s down times.
While the current rules and regulations offer little certainty, especially for plants receiving FIT, this has been acknowledged by BEIS which is currently conducting a review into the situation following consultation on the closure of FIT. On a more positive note, the department is also currently in the process of appointing a person exclusively responsible for Replacement Equipment, which should stimulate progress in this important policy area.
Continue this discussion at The World Biogas Expo 2020 where we will explore CHP maintenance and replacement in the UK on 6th October in the Engine Room Theatre. Register for your free delegate pass today.