Non-Domestic RHI Scheme information & upcoming sustainability requirements Nicola Percival 08/07/2015

2 The RHI scheme What is it? How can you benefit from it? Summary of sustainability requirements Coming into force 5 th October 2015 Q&A Agenda

The Non-Domestic RHI - An Overview 3

4 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

5 Technologies Biomass Biogas Biomethane injection CHP Deep geothermal Ground/Water/Air Source heat pumps Solar Thermal

6 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

Scheme Performance TWh of renewable heat now generated Over 1,200 MW of Installed Capacity

Uptake by Industry 8 Capacity of accredited installations by SIC Code, November 2011 to December 2014

Budget Management - Degression 9 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

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 10 “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

Companies House slashes gas bills in pioneering move 11 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.”

For those intending to apply 12 Only 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

The application process 13 Applications are subject to the detailed scheme rules: 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 Ofgem accredits installation (subject to rules) and owner becomes RHI scheme participant

What happens then? 14 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 declaration Ofgem selects installations for audits and inspections on an ongoing basis Submit meter readings & periodic data to receive payments Maintain & service equipment – 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 payments Maintain & service equipment – 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

Is there anything else I can do? 15 Can submit plans & evidence demonstrating that, once built, an installation would meet the eligibility criteria of the RHI scheme A form of ‘in principle’ agreement and may include conditions Is not a tariff guarantee – but eases the application process Preliminary accreditation available for larger, more complex and bespoke installations Geothermal Biogas & Biomethane Solid biomass > 200 kW 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

New sustainability requirements 16 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 This will impact any fuel purchased now but intended for use later

17 The Non-Domestic RHI - Upcoming sustainability requirements

18 Policy vs Implementation Policy examples Responsibility: DECC Implementation examples Responsibility: Ofgem Value of lifecycle greenhouse gas (GHG) emissions limit Definition of consignments Requirements for calculating lifecycle GHG emissions Methodology of demonstrating consignment measurement Eligibility requirementsEvidence 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

19 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 - 5 th 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

20 Summary of GHG & Land Criteria Compliance 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. woodfuel advice note

21 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

Delivering the requirements 22 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

Types of Supplier on the BSL 23

Which type of supplier are you? 24

25 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 Provide quarterly declaration Provide BSL authorisation number Use fuel listed on the BSL 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.

26 Self-Supply Provide quarterly declaration Provide BSL authorisation number Register with the BSL 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

27 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 Provide quarterly declaration Provide annual sustainability audit report Self reporting <1MW Provide quarterly declaration Provide quarterly Schedule 2 information and GHG emission figure Provide annual sustainability audit report Self reporting over ≥1MW Submit with Periodic Data Sustainability audit reports would need to be submitted no later than 3 months after fourth quarterly declaration

28 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

29 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

Voluntary period 30 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 sent already – have you received yours?

31 Further Information 1.BSL Guidance, info and applications 2.BSL Helpdesk: Ofgem Enquiries: DECC Renewables Delivery Team: / Draft guidance out for consultation in the coming days – this will be on our website: renewable-heat-incentive-rhi/policy-and-regulationshttps:// renewable-heat-incentive-rhi/policy-and-regulations 6.The woodfuel advice note: /141222_Woodfuel_Advice_Note_-_Guidance_final.pdf /141222_Woodfuel_Advice_Note_-_Guidance_final.pdf

Additional information - Biogas & Biomethane - Self-reporting 33

34 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

35 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 Provide quarterly declaration Provide annual sustainability audit report Waste or excreta ≥1MW Provide quarterly declaration Waste or excreta <1MW Submit with Periodic Data

36 Demonstrating compliance Self 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.

37 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

38 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 websitewebsite

39 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

40 Feedstock type: maize Country of origin: UK Classification: product Feedstock type: straw Country of origin: UK Classification: agricultural residue Feedstock type: food waste From Supplier 1 Country of origin: UK Classification: 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 2 Country of origin: UK Classification: waste

41 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

42 Schedule 2 information - per consignment:

43 Mixed consignments Proportional mass balanceNon-proportional mass balance