The Department for Energy & Climate Change (DECC) has announced that Wheelabrator Technologies’ proposed energy recovery facility, K3 CHP, has been awarded a Contract for Difference (CfD).
The company says this is an important milestone for the project, which when built will provide a state of the art combined heat and power facility, providing power to the grid and steam to the DS Smith paper mill at Kemsley in Kent.
CfDs aim to provide long-term revenue stabilisation to low-carbon generators, allowing investment to come forward at a lower cost of capital and therefore at a lower cost to consumers.
They aim to will support new investment in all forms of low-carbon generation (renewables, nuclear power and Carbon Capture and Storage (CCS)) and have been designed to provide efficient and cost-effective revenue stabilisation for new generation, by reducing exposure to the volatile wholesale electricity price.
Paul Green, Wheelabrator Technologies’ – “Wheelabrator is delighted to have been awarded a Contract for Difference for our proposed energy recovery facility in Kemsley. This allocation, along with the planning consent and environmental permit, make the K3 CHP Energy Recovery Facility a very real and deliverable project”
CfDs require generators to sell energy into the market as usual but, to reduce this exposure to electricity prices, CfDs provide a variable top-up from the market price to a pre-agreed “strike price”.
At times of high market prices, these payments reverse and the generator is required to pay back the difference between the market price and the strike price thus protecting consumers from overpayment.
Paul Green, Wheelabrator Technologies’ director, business development, said: “Wheelabrator is delighted to have been awarded a Contract for Difference for our proposed energy recovery facility in Kemsley. This allocation, along with the planning consent and environmental permit, make the K3 CHP Energy Recovery Facility a very real and deliverable project.
“We expect construction work to begin later this year which will create hundreds of jobs and supply chain opportunities. Once K3 CHP is operational, it will supply large volumes of steam to DS Smith’s Kemsley paper mill and provide renewable electricity to the national grid.”
The Environment Agency awarded an Environmental Permit in 2011 and the facility was granted planning permission by Kent County Council in March 2012.
K3 CHP will be able to process 550,000 tonnes per year of waste derived fuel. This is waste that will be diverted away from UK landfill sites or pre-treated and then exported to European waste to energy plants.
It will “help safeguard” 800 jobs at the paper mill by diversifying DS Smith’s long-term energy requirements. Construction of the facility will also create hundreds of additional jobs and dozens of operational roles at the plant.
Wheelabrator expects construction of the facility to start in 2015 and the plant operations will begin during 2018.