UK biomass project halted, developer blames govt policy

Fri Mar 7, 2014 4:03am EST

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* RES had planned to build 100-MW biomass power plant

* Firm says government subsidies, policy inconsistent

LONDON, March 7 (Reuters) - Renewable energy developer RES has stopped a 300-million-pound ($500 million) project to build a biomass plant in Northumberland, northeast England, due to what it called inconsistent government subsidies.

The 100-megawatt (MW) plant was scheduled to be built at the Port of Blyth, creating 300 construction jobs and 50 operational jobs, RES said.

The company received permission to build the project from the government last year.

"It's bitterly disappointing for RES that we are unable to bring this exciting project forward, and deliver the significant boost it would have represented for the Blyth and Northumberland economy," RES Chief Operating Officer Gordon MacDougall said in a statement.

"However, the gradual erosion of support for dedicated biomass leaves us with no other option," he added.

The British government rewards renewable energy plants, including biomass stations, through a subsidy scheme and plans to replace it with a guaranteed power price programme from next year.

The government introduced a 400-MW capacity cap last year on new biomass projects under its main renewable energy subsidy scheme, the Renewables Obligation mechanism.

"The cap represents a radical downsizing in government ambition for the technology from a target of 4,000 MW in 2011 to a cap of 400 MW in 2013, long after the industry had invested significant sums in developing projects," RES said.

Sources of biomass include wood, plant-based materials or municipal solid waste, which are burnt to produce heat or electricity.

Other utilities, such as German power company E.ON , have shelved biomass investments over the past year due to unfavourable regulation and biomass policy.

E.ON scrapped plans to build a 150-MW biomass-fuelled power plant last year in southwest England.

Rival utility RWE also decided to close its converted biomass power plant at Tilbury, east of London, due to a forecast drop in power prices and a lack of investment from the Germany-based parent group. ($1 = 0.5982 British pounds) (Reporting by Nina Chestney; Editing by Dale Hudson)

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