Select Committee on Environmental Audit Memoranda

Annex 1


  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, P.17).

  The CLA calls for Government to review the question of banding at the earliest date, and in any case no later than 2003.


  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 sources.

  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 capacity.

  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 pays" principle.

  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 and impracticable.

  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 acres



  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 crops.

  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.

Contracted Projects
Live Projects
Capacity MW (DNC)
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 power will:

    —  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 tonnes.

  It would provide biomass heating for 176,000 homes and both electricity and heat energy (1,000MWe and 900MWt) for homes and businesses.

  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 farmers.

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