RHI Provisional Tariff Guarantee Notice and Financial Close

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Amongst the very first companies to be approved for the tariff guarantee were EnviroSense clients. 

The Renewable Heat Incentive is a government scheme providing financial support to non-domestic renewable heat generators and producers of biomethane.
A tariff guarantee secures a tariff rate for applicants prior to their installation being commissioned and fully accredited on the RHI. 
Do I qualify?

Tariff Guarantees are available for solid biomass CHP, geothermal and biomethane applications of all sizes, as well as for biomass over 1MWth, biogas over 600kWth and ground source heat pumps and water source heat pumps over 100kWth.

How do I apply?

There is a 3-tiered application process to Ofgem for tariff guarantees;
1. Stage 1 – Application Submitted
2. Stage 2 – Financial Close Information
3. Stage 3 – Full Application Details

Download Ofgem Guide To Tariff Guarantees

What is “financial close”

This has no interpretation within the Renewables Heat Incentive 2018. The meaning is described in Part 3, Article 33 as, “the date on which the applicant has entered into all financing agreements in relation to all the funding required for the construction of the proposed plant, or the production and injection of biomethane“.

At completion of Stage 1, applicants receiving a Provisional Tariff Guarantee Notice (PTGN), will have 3 weeks to supply necessary evidence that they have reached financial close. Applications failing to provide evidence within 3 weeks will be rejected.

Financial close evidence needs to prove two main factors;

1. That funds are available to cover the complete construction of the proposed project.

2. That these funds are formally committed to the project.

How do I obtain financial close evidence?

That’s where we come in. Financial close evidence must be verified and supported by a report from an independent auditor who is not a ‘connected person’ (this means any person connected to the applicant and/or investors as defined in section 1122 of the Corporation Tax Act 2010).

How long is the financial close process?

Ofgem have not set time frames for responding to applicants for Stage 1. The verification work can be performed in 1 to 2 days. The most practical process is to:

1. Apply for the Provisional Tariff Guarantee Notice

2. Whilst the above is in application, contact a firm that can conduct the audit (EnviroSense) and liaise to plan the verification work. There is nothing preventing the verification work to commence prior to receiving any acknowledgement of a pending application response.

3. Prepare the information to be verified well in advance to maximise available time.

4. Submit the Financial Close information immediately after a request from Ofgem in order to maximise time available within the 3 week period.

What happens next?

Once financial close evidence has been approved by Ofgem, the applicant will move to stage 3.

With a tariff guarantee confirmed (pending conditions), the final stage is for the installation to be commissioned (within 183 days of the estimated commissioning date and before 31 January 202) and for the final details of the application to be completed in the application form and submitted to Ofgem. A Stage 3 submission cannot be submitted before this expected commissioning date otherwise the applicant will not receive the tariff guarantee rate.

Do contact us with any questions on what information is required to demonstrate financial close
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No Deal EUTR

Shipping (container and hoist)

Defra have published guidance on “Buying and selling timber if there’s no Brexit deal”.[1]  It should be noted that the guidance emphasises that the negotiations are ongoing and that this guidance is just a result of the government preparing for all eventualities.

To summarise, although EU law will no longer apply the UK Government will implement their own UK timber regulation and UK FLEGT regulation, which will have the same requirements as the EUTR and EU FLEGT regulations.

The main difference to the existing system that in a ‘no deal’ scenario, businesses importing timber from the EU and EEA and placing it on the UK market would have to exercise due diligence to demonstrate that they are importing legally harvested timber. This requirement will be an addition to the current situation where businesses have to carry out due diligence checks when they import timber from the rest of the world.

So while there will be no changes for businesses importing from outside the EU, UK producers first placing on the market, and internal UK trade, additional due diligence checks will be needed for all timber imported from EU and EEA into the UK.

Similarly to continue to comply with the EUTR, EU and EEAbusinesses would be required to apply due diligence to imports from the UK. Therefore it is likely that UK-based exporters would need to provide relevant documentation about the source and legality of their timber exports to EU and EEA-based importers to enable their customers to meet their due diligence obligations under the EUTR.

[1]https://www.gov.uk/government/publications/buying-and-selling-timber-if-theres-no-brexit-deal/buying-and-selling-timber-if-theres-no-brexit-deal

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EnviroSense Addresses PEFC Tech Conference

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As part of PEFC Forest Certification Week in November an international conference was held in Helsinki exploring the potential of data, innovation and technology within forest certification. Blockchain technology was one topic. Director of EnviroSense Robin Askey was one of the keynote innovation speakers at this conference that covered everything from satellite monitoring of forest resources with your smartphone to auditing using drones. Not only were the lectures an excellent way to increase your knowledge but  it added a great surprise at the end of the conference.  Directors from the participating organizations decided to give out three free iPhone x as part of a raffle to promote the importance of having advanced technology at your fingertips. Robin’s address ‘Demystifying blockchain’ was very well received by attendees from all sides of the industry – from forestry management to government organisations and led to lively debate on what the future holds. EnviroSense’s work with PEFC International and investigating blockchain and distributed ledger technology puts us at the forefront of these advances. With the potential to revolutionise the way certification operates staying informed and primed to exploit any technological advantages is vital. You can see the slides from Robin’s presentation here PEFC Forest Certification Week and learn more about options for new technology including blockchain.

Other speakers at the conference included,  “Eyes on the Forest’ by Dr Lopatin from the Institute of Forestry in Finland to achieving better transparency and assurances with bespoke approaches by  Darren Thomas CEO of Double Helix. The breadth of the topics ranged from mapping, technological innovations, augmenting chain of custody system systems to creating peace and prosperity through the convergence of ecology and economy (David Plattner – Rantrust). PEFC ran workshops on SMART solutions for strengthening trust and traceability throughout value chains, SMART solutions for engaging and leveraging society for sustainable forestry and SMART solutions for activity efficient and accessible sustainable forest management certification.

EnviroSense continues to work with organisations on exploring what blockchain might mean for the industry and the implications it may have.

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The RHI and Biomethane Growth

Modern state of art biomethane plant

Biomethane growth has been significant in 2016 after an initial slow start following the introduction of the Renewables Heat Incentive in 2011 that served to galvanise the market. In the last two years this has recently led to a surge in gas to grid.

According to REA information based on 2015 figures and plants planned in 2016 that now appear to  have been completed, in the UK there are now some 65 projects that are operational. The consequences of this in real terms are outstanding, approximately 3.5 TWh/year of energy has been from the generation of green gas. That is around 240,000 tonnes of LNG that will not require importing from the Middle East. Overall, gas use has increased in the UK in 2015 and 2016 proportionally greater than electricity for residential use (see link). Growth in sustainable ‘green gas’ is in accordance with rising residential gas demand and green gas could not come at a better time.

DECC went on record stating, “Biomethane-to-Grid is a key renewable technology that has the potential to make a significant contribution to the UK’s 2020 renewable energy commitments”. Long may this support continue with BEIS.

Waste to energy is unquestionably renewable and the use of products or residues should not be considered otherwise provided the RHI sustainability criteria are met.  The simple fact is that importing LNG from other countries is not secure. Many Operator’s have not shied away from crop residues or local whole crops and have still managed to ensure their feedstocks are eligible to receive RHI payments. Risks to Operators are reductions in the greenhouse gas threshold which will be scaled down in future.

The eligibility of feedstocks used in claiming the RHI are verified as part of the Ofgem Sustainability Audit. This must be performed in accordance with ISAE 3000 (Revised) and has to be conducted by an independent party. Though wastes are exempt from the sustainability criteria, this fact does require verifying within the Ofgem Sustainability Audit in addition to other aspects.  The audit period covers the previous years RHI submissions since the accreditation date and the Sustainability Report is required to be submitted within three months of the annual accreditation date.

Contact EnviroSense should you wish to discuss the Ofgem Sustainability Audit.

robin@envirosenseltd.co.uk

m: 07799 032253

t: 01531 637396

 

 

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RHI and RO Ofgem Sustainability Audit

RHI sustainability criteria and crops

The RHI Ofgem sustainability audit is required annually though some installations may be fortunate enough to not have to report until mid-July 2017.

It has become evident that many companies still have not planned the Ofgem sustainability audit, mostly in the case of the RHI. The RHI audit guidance may not be expressively clear when the sustainability audit report is due. In summary, this is one year from the RHI accreditation date covering the preceding twelve months. The audit report must be submitted to Ofgem within a maximum of three months after the annual accreditation date. The audit must be conducted by an independent third-party that is competent and experienced to perform the audit in accordance with the ISAE 3000 (Revised) standard.

The exception, as stated in Ofgem’s RHI audit guidance is a grace period if the accreditation date falls between the start of the sustainability reporting obligation period of the 5th of October 2015 and before the 6th of April 2016. If the accreditation date falls between those dates then the audit report is not due until after the next accreditation period.

The sustainability criteria are the same for the RO as the RHI. The sustainability criteria consist of the land criteria and the greenhouse gas emissions. The major difference being the limit of carbon dioxide equivalent for heat generation under the RHI is 34.8 MJ / CO2e. For more information on the requirements visit Ofgem’s website designed https://www.webdesign499.com/seo-marketing-3-key-goals-every-consultant-should-meet/:

 

Ofgem RO sustainability guidance

Ofgem RHI sustainability guidance

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Biomass Suppliers List Changes

Biomass Suppliers List

EnviroSense was involved in the Biomass Suppliers List (BSL) workshop on the 10th February 2016 at DECC (now the department of Business, Energy & Industrial Strategy (BEIS)) and it was evident that a faster and more effective registration service was required.

A series of changes are now planned with the Biomass Suppliers List. The most significant for business is the planned introduction of registration charges. This is proposed from January 2017 though listed companies have the opportunity to comment via survey monkey. BEIS have issued a Consultation Supporting Document . Before commenting, we suggest you read the BSL fee overview document and the supporting document.

In summary, the BSL fee overview document does not contain any proposed costs and only that the cost of administering BSL is to the borne by registrants of the BSL. In principle this makes sense, though it is not clear if this will increase Gemserve’s and partners profits (HETAS and Woodsure) who are the commercial organisations that won the contract for the BSL.

As many companies claiming the Non-Domestic Renewables Heat Incentive (RHI) use wood biomass listed on the Biomass Suppliers List, it is clear that the List is ingrained in the heat market. Therefore not electing to continue to be listed is not an option for many companies.

Additionally, as Non-Domestic Renewables Heat Incentive (RHI) claimants that have a feedstock’s which include a large proportion from BSL registered companies may find that some suppliers are reduced as they simply cannot afford to be listed.

The Ofgem Sustainability Audit (ISAE 3000) is a significantly simpler audit if the installation is sourcing BSL listed fuels and whether BSL registered companies decrease is at the moment only speculation. For more information on the RHI Ofgem Sustainability Audit (ISAE 3000) please click this link.

 

 

 

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RHI Ofgem Sustainability Audit

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The grace period for the relatively new sustainability criteria that came into effect on the 5th of October 2015 has now ended.  Many companies have expressed a degree of confusion when they are required to submit their independent Ofgem sustainability audit as part of their compliance with the Renewables Heat Incentive Scheme (Amendment) Regulations 2015.

In summary, the report must be submitted within 3 months of the end of the installations annual accreditation date. The audit period is for the preceding twelve months. This may be longer if the due period falls in the grace period. If the Ofgem sustainability audit report is not submitted within the due period, RHI payments will be withheld.

If your installation uses whole crops or residues then we certainly advise the audit is undertaken sooner rather than later. The reason is that the greenhouse gas threshold (GHG) is significantly lower than the Renewables Obligation Order 2015 (ROO). The threshold is 34.8 grams of CO2 equivalent per MJ of heat produced. The B2C2 calculations for whole crops are not the easiest feedstock to calculate. The risk exists that crop feedstocks can be ineligible for RHI payments as they are above the threshold value.

The reason we advocate undertaking the Ofgem sustainability audit sooner rather than later is that it enables the installation to address any audit findings and ensures the audit and report are completed on time without outstanding issues. Neither the auditor nor the installation wish to have any unforeseen problems. Engaging with an audit firm and planning well in advance of the cut-off period for the submission of the Ofgem sustainability audit report prevents unforeseen problems.

EnviroSense conducts attestation engagements performed in accordance with ISAE 3000 (Revised) as required by the RHI and ROO. This is often referred to as the ‘Ofgem sustainability audit’. We conduct the audits for many companies in the biogas, biomethane and biomass sector for both the RHI and the ROO.  Please do conduct us if you wish to know more about what is involved in the audit.

Contact: Robin Askey on robin@envirosenseltd.co.uk  or 07799 032253.

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Ofgem Sustainability Audit – RHI

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As many generating stations are aware, the government introduced mandatory sustainability requirements and associated third-party verification for participants using solid biomass, biogas or producing biomethane which are claiming the RHI on the 5th of October 2015 onwards.   Participants claiming the RHI are required to submit an annual sustainability audit report demonstrating compliance with the sustainability criteria. The report must be independently verified and submitted by the operator of the generating station to Ofgem. It is the operators’ responsibility to ensure the report is correct and submitted on time and not the verifiers.  The engagement performed by the verifier must indicate each organisations responsibilities, the operators’ being the submission of the report.

The question that is not wholly clear to many is when the report is required. In brief, this is three months after the tariff start date each year. With regards to biomethane procedures, it is the annual date when the participant first registered as a producer of biomethane. The report applies to the preceding twelve months and the submissions made.

As with new legislation, a grace period has been applied from the 5th October to the 5th April. Any participants claiming the RHI with greater than 1 MWth with their tariff start date do not have to be audited in that period.  Thereafter they do within three months of their specific tariff date.

The purpose of the audit, which can be found in greater detail on our website here , is in basic terms to ensure tax payer’s money is not used by claimants using fuels that do not meet the sustainability criteria, this is both the land criteria and GHG threshold except in the case of wastes which are exempt but still require verifying within the Ofgem sustainability audit.

 

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DECC Biomass Suppliers List (BSL) Workshop

Biomass Suppliers List

The Department of Energy and Climate Change (DECC) held a workshop on the 10th of February to  consider the future of the Biomass Suppliers List.

The option of retracting the BSL does not seem a viable option. The BSL, functional or not, seems to be  ingrained into the process for indicating compliance with the RHI sustainability criteria wood fuel for biomass.

The workshop which EnviroSense attended showed that DECC is open to ideas and more than willing to engage with a variety of stakeholders.  Two points that EnviroSense has been keen press are:

1. What constitutes Category A evidence.

A failure of the BSL is that if a receiver of FSC or PEFC material sold by a supplier with valid FSC or PEFC certificate, for example a farmer receiving roundwood or chip to burn from UPM Tihill in their accredited installation, according to the BSL the farmer must hold FSC or PEFC chain of custody in order for this to be classified as “Category A”. This is incorrect as the farmer is essentially the end of the chain, not breaking the chain and receiving Category A sustainable wood. This point has been clearly shown by CPET guidance (Central Point of Expertise on Timber).

The consequence is that BSL require a Regional Based Risk Assessment (RBRA) preformed on that FSC or PEFC wood. submitted by the farmer. The fact is exacerbated by the fact that example of the “the farmer” is in fact any non-domestic applicant to BSL which receives FSC or PEFC fuel and does not have FSC or PEFC certification.  This indicates the lack of understanding of Category A evidence and how the industry operates.

2. Payment for an audit in order to speed up the approval process.

Opposed to a length administration process, the application and RBRA (if applicable) could be approved at an audit and authorisation given at the end of the audit.

As users of the BSL know, application can take months. Participants at the workshop stated there is a lack of industry and product specific knowledge within the BSL.  Unfortunately is was not pointed out that there appears to be a few key persons within BSL keeping it together and being as responsive as they can under the circumstances.

 

 

 

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1st December 2015 ROCs Formally Linked to Sustainability Criteria

Is this sustainable wood or not?

Relatively short notice from Ofgem perhaps. Though this was anticipated before the end of the year. However, Ofgem have allowed suitable time to enable power stations to amend their Fuel Management and Sampling procedures, gain approval and manage feedstocks sustainability accurately in addition to account ing for GHG intensities.

The finer details of what evidence is required for Category B evidence of sustainability, how sustainability can be evidenced, compounded by the problem of many small woodland owners not having forest management plans and certification, may leave some installations exposed. Too many assumptions could be made within the Risk-Based Regional Assessment, of which an auditor conducting the ‘Ofgem Sustainability Audit’, may take exception to (see EnviroSense webpage and paragraph regarding applying caution to Category B evidence). This scenario presents a risk.

Conversely Category A evidence, which an auditor conducting the annual ‘Ofgem Sustainability Audit criteria’, can easily understand, will not cover all fuels for all installations. This will mean the installation having to manage their mass-balance system carefully to ensure fuels are categorised correctly. Caution is required and installations should not sail too close to the ’70/30′ sustainable / legal threshold (see Woodfuel Advice Note). Next Spring 2016, when installations are audited under the RO obligation, could indicate incorrect categorisation of fuel which may tip one month below this 70/30 rule. In fairness, it is unlikely that an auditor will spot cases of incorrect categorisations of fuels as many auditors conducting the audits are basically auditors without wood industry or forestry experience. The number of feedstocks received by installations can mean managing a lot of feedstock data and this presents a notable amount of information for an auditor to verify. The negative consequence of formal linking in a market where eligibility of wood fuel is unfortunately subject to debate in some situations, ultimately may lead to revoking of ROCs payments by Ofgem. Hopefully this theoretical situation will not arise.

 

 

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