In 2014 the government introduced the Contracts for Difference (CfD) scheme as a partial successor, but this overwhelmingly favours large-scale electricity generation. It provides very little support for smaller biomass energy producers and wood waste processors.

This announcement from the government confirms that no provisions will be made for small biomass operators – a decision that has drawn great criticism from many industry groups, such as the Wood Recyclers Association (WRA). 

Why Was the Renewable Obligations (RO) Scheme Introduced?

In 2000, the UK generated just 2-3% of its electricity from renewable sources. Under the 2001 EU Renewables Directive, the UK committed to increasing this figure to 10% by 2010. The RO scheme was the government’s primary method of incentivising electricity suppliers to use renewable energy sources, and to increase this use each year. 

The scheme focused on three things:

• Renewable Obligation Certificates (ROCs): Ofgem awarded ROCs to energy generators for every megawatt-hour (MWh) of green electricity they produced.
• Supplier quotas: Electricity suppliers then bought these ROCs to satisfy annual renewables quotas or faced heavy financial penalties. 
• Commercial Viability: ROC trading provided a reliable second revenue stream, making small-scale biomass energy generation commercially viable.

Why is the UK Government Ending Small Biomass Subsidies?

The announcement was made in a formal letter from Energy Minister Michael Shanks to Bill Esterson MP, Chair of the Energy Security and Net Zero Committee. The government concluded that continuing the scheme for small-scale biomass generators does not offer sufficient value for money relative to the cost to taxpayers and consumers. 

Since 2002, the percentage of UK electricity generated from renewable sources has increased from 2-3% to 30%. So while biomass remains a critical part of the UK’s energy system, ministers maintain that small plants under 100 MW generation capacity no longer contribute a large enough share of the total electricity output to justify dedicated state funding.

The Impact on Small Biomass Producers & Wood Recyclers

The loss of RO subsidy support creates severe structural and financial challenges for small independent biomass energy producers:

1. Priority Shift Toward Combined Heat and Power (CHP): Government support has specifically shifted towards high-efficiency CHP units that feed waste heat to industrial users or local district heating networks, alongside electricity generation. Many smaller biomass operations would simply not be able to afford to do this.
2. Disadvantage in CfD Bidding: Small biomass generators struggle to compete in Contracts for Difference (CfD) auctions against large scale energy producers that benefit from economies of scale, higher financial capital, and lower operating costs.
3. Unrealistic BECCS Mandates: In line with the UK Net Zero strategy, government policy prioritises Bioenergy with Carbon Capture and Storage (BECCS). Retrofitting carbon capture technology to a small-scale biomass plant is financially and thermodynamically unviable. This would require a higher level of energy usage, decreasing power output and increasing financial costs. 

Industry Leaders Call for Re-Evaluation of Policy

The WRA has called for an urgent re-evaluation of the decision not to continue subsidies for small biomass producers. As highlighted by Wood & Panel, the WRA’s “fundamental concern is that the Government is looking at biomass primarily through an energy-policy lens rather than considering its interconnected role across energy, waste and resources.” 

There is also concern that without sufficient processing capacity at biomass sites, the issues the industry has been facing since March 2025 will only increase and vast quantities of wood waste may end up going to landfill or even illegal waste sites.

Landfill Tax Rises Contribute to the Problem

For manufacturing, woodworking, and joinery businesses, sending off-site wood waste to landfill is becoming prohibitively expensive:

With off-site biomass facilities reducing capacity and landfill operators passing on tax increases, businesses producing offcuts, sawdust, and pallet waste face steep rises in waste handling costs through 2027 and beyond.

Take Control of Your Wood Waste with Ranheat On-Site Biomass Systems

Relying on external waste disposal sites or biomass energy plants leaves your business vulnerable to the unpredictability of transport fees, gate fees, and the simple fact of these sites reaching their capacity and no longer being able to accept wood waste.

So how can businesses producing wood waste take control?

The answer is a Ranheat biomass system. By utilising your own wood waste on-site to produce clean energy you eliminate external waste disposal costs and logistics while reducing your heating and electricity bills.  

At Ranheat we design, manufacture, and install biomass heating systems that work specifically for your waste stream and your site.

• Our MSU range of high-efficiency hot water boilers are designed for continuous industrial heating
• Our WA range of warm air heaters can be adapted to suit your needs and heat your workshop efficiently
• Our special M range can be even more bespoke, meeting complex requirements of heating or materials
• We also design, manufacture, and install a variety of silos to store the wood waste before it goes into the boiler or heater system. 

The energy produced goes directly to heating your premises and providing hot water, saving you money on your electricity and gas bills. You take control of your wood waste and your energy efficiency, reducing downtime and disposal costs at each stage of the process. 

Ready to Reduce Your Waste Disposal and Heating Costs?

See how much money you could save, depending on your level of wood waste and energy requirements, with our industrial biomass energy calculator.

Contact our team today for information, advice, or a no-obligation quote.