BIOMASS ENERGY AND THE CASE FOR A BANDED
The CLA notes the Government proposes to reject
banding. This is deeply to be regretted. It is the wrong decision,
and the arguments used in its support are weak. There is no difference
in the nature of the choice the Government must make in order
to choose the recipients of the grand aid, and the choice the
Government should make to include non convergent renewable technologies
in a separate band. Moreover, the grant aid will come from general
taxation, which impacts even on those who create no greenhouse
gases at all, whereas under a banded obligation the polluter pays.
Furthermore the capital grants proposed, whilst
welcome, and perhaps appropriate for offshore wind where the capital
costs are the major impediment, are always likely to remain wholly
inadequate to address the key issue for biomass power. Whilst
biomass provides significant additional benefits that other renewables
cannot, such as habitat creation, biodiversity, the potential
for good quality CHP and embedded generation, it has, and always
will have a fuel cost.
For a policy to fail to address this issue is
for it to be doomed to fail in its objective: as "Bringing
development of offshore wind and energy crops forward will be
particularly important if the 10 per cent target is to be met
" (Consultation on Renewable Energy Obligation, DTI, 2000,
The CLA calls for Government to review the question
of banding at the earliest date, and in any case no later than
MAFF currently aim for only 125,000 hectares
by 2010, and the grant support announced so far is expected to
cover about 24,000 hectares of short rotation coppice and up to
5,000 hectares of miscanthus. Even this relatively limited amount
offers huge opportunities for wildlife and the environment.
But all this, together with the opportunities
for UK business in export markets in areas where we have the capacity
to lead the world (with all the jobs and opportunities that that
entails) is set at risk by the Government's decision to lump biomass
power in the same pot as other, more advanced renewable power
Under the previous Government's regime, the
Non Fossil Fuel Obligation, contracts for the construction of
nine power stations were made, at competitive prices reflecting
the costs of generation. The latest round of competition averaged
5.79p per unit, or a little bit less than the amount that domestic
consumers pay for electricity. These contracts were effectively
guaranteed by the state, so power station developers could use
them as security for the long term loans required to build the
Under the new proposals for the support of all
renewable energy, the Government has said that one size fits all.
Biomass will have to compete with other renewable power sources,
with no guaranteed long term contracts, and in a fiercely competitive
market. Onshore wind farms can (by using free wind power) produce
electricity for 3.1p per unit, and energy from waste plants an
produce electricity (from burning rubbish, which people will pay
them to take away) at 2.49p per unit.
It is self evident that no new biomass power
stations, beyond the ones supported under previous regulations,
will be built at this price. Yet research and development can
and will bring down the costs of electricity generated from biomass,
and recognition of the special role that biomass power stations
can play in reinforcing that national grid, providing local reliable
power where it is wanted, rather than having to extend the march
of electricity pylons across the landscape can reduce the relative
cost compared to both other renewables and fossil fuel power.
The Government's own figures show that energy
from biomass will be required to meet the 10 per cent target for
renewable energy. It will not happen unless the policy is changed,
and at the very least the Government should agree to a formal
policy review after 12 months of the renewables obligation coming
into force. If, by then, no new biomass power stations are in
prospect, then a new banded obligation should be introduced.
The CLA has seen no estimates or calculations
that would lead us to believe that the additional cost to consumers
that might result from banding would be anything other than infinitesimally
low. Moreover, any such increase in costs would be absolutely
in line with Government policy, ensuring that the correct pricing
signals about the use of energy were sent: the "polluter
The Government argues in its consultation paper
that banding involves "picking winners", but fails to
say how the choice involved in establishing the size and composition
of two or more bands can be distinguished from the choice involved
in picking who are to be the recipients of the grant schemes proposed
by DTI as an alternative. We can see no distinction.
"Banding" is simply dividing the renewables
obligation into market sectors in recognition of the different
economics and stages of development of different renewable resources.
A renewables order that made such a distinction would simply create
two or more separate markets, with competition between the different
technologies and operators in each.
The concept that biomass should be put on the
back burner while cheaper resources are developed is both simplistic
All renewable resources other than biomass are
contstrained, for example by total availability in the case of
landfill gas and energy from waste, or by planning constraints
in the case of onshore wind. The Government's target of 10 per
cent electricity generation by 2010 will require a significant
contribution from biomass.
Industry representatives have emphasised the
importance of a stable regulatory framework and a secure market
in order to encourage the development required. The effect of
the proposed unbanded renewable energy policy is that on current
predicted prices there will be no economic opportunity for biomass
power generation for an indefinite number of years. This will
damage both the confidence of the farmers and growers, who are
needed to provide the feedstock, and make nonsense of MAFF policies
which are designed to encourage them. Current DTI policy risks
there being no UK biomass industry to fall back on when it is
needed, particularly as there are significant opportunities abroad.
Biomass schemes are likely to be required to
meet targets in the period 2005-2010. They take many years to
develop: For instance, biomass fuels require four years from the
date of planting before coming into production, and without contracts
for the sale of crops the proposed MAFF assistance will not be
made available. Accordingly, unless banding is introduced to jump
start the industry, growers will be in no position to meet the
demands likely to be placed on them.
DTI has suggested the shortfall in industry
R&D might be made through a capital grants scheme. Regrettably
the sums required are significantly beyond the ability of the
funding available under the Comprehensive Spending Review. Capital
grants may be suitable for other renewables, such as offshore
wind, but biomass has a different cost structure. Banding enables
the industry to cover its own R&D costs, and ensures a competitive
industry for the future.
There are huge opportunities for both UK industry,
the rural sector and the environment in this issue. Without banding
these opportunities will be put off for seven years or more, and
may never achieve the potential that now exists: we may end up
importing the technology which at present is owned by the UK.
TWh: Terawatt Hour (1012 watts) MW: Megawatt
(1 million watts) DTI: Department of Trade and Industry MAFF:
Ministry of Agriculture, Fisheries and Food hectares: 2.471
BACKGROUND TO BIOMASS ENERGY
THE NFFO POWER
Currently only five of the 10 biomass power
stations supported under NFFO are expected by MAFF to create demand
for biomass crops:
Ambient energy is building two similar
sized 5.5MW power stations at Eye Airfield in Suffolk and Kingshill
Farm, Cricklade, Wilts and requires 3,000 ha of energy crops from
a 30 mile radius of each.
Arbre is building an 8MW power station
at Eggborough, North Yorkshire, and has already contracted almost
all of the 2,000 ha of energy crops it requires.
EPR Ely Ltd is building a 36MW power
station at Ely in Cambridgeshire, which will be largely fired
by surplus straw from arable cropping but has the potential to
create a market for miscanthus and other biomass fuels.
Border Biofuels is building a 20MW
power station at Carlisle in Cumbria. It will largely be fuelled
by forest by products, but offers an opportunity for new bio energy
ETSU renewable news report total NFFO contracted
output is 132.7MW: British Biogen confirms that of the total,
only some of the 85MW is to be fuelled from energy crops, the
remainder being run on chicken litter and other biomass wastes.
||Capacity MW (DNC)
||No.||Capacity MW (DNC)
The best estimate available is that the NFFO power stations
are all built (and there is some doubt after Border Biofuels ran
into significant problems with planning consent at Newbridge),
the total demand for biomass crops is likely to be sigificantly
less than 20,000ha.
This represents a substantial shortfall for the amount MAFF
intends to grant aid, of more than 5,000ha. It represents a risk
to farmers who may find the market price for the crop is reduced
by grant-supported over-production, and /or a waste of MAFF resources
in that if the grant aid is allocated and not taken up, the money
is effectively lost as the expenditure saved cannot be carried
forward under Treasury rules.
A 10MW biomass power station producing combined heat and
save at least 50,000 tonnes of carbon dioxide
emissions annually*; create 50 full time jobs; put
£2 million into the local economy; provide electricity
for 20,000 homes; require an investment of £15
million in the plant; require an investment of £15
million in developing the fuel supply chain.
(*replacing coal fired generation)
If biomass is given the right incentives, it could without
difficulty provide 10 per cent of the renewable energy required
for the UK by 2010, providing both electricity and heat.
Industry estimates this would create 13,000 jobs in manufacturing,
biomass fuel supply, plant operation and servicing, plus the potential
for substantial exports.
It would reduce the UK's annual carbon emissions by 2.7 million
It would provide biomass heating for 176,000 homes and both
electricity and heat energy (1,000MWe and 900MWt) for homes and
It would provide significant habitat creation and wildlife
benefits on more than 125,000 hectares.
It would provide a new, and welcome income for hard pressed