Memorandum from the Department for Environment,
Food and Rural Affairs (DEFRA)
DEFRA welcomes the Environmental Audit Committee's
decision to conduct an enquiry into renewable energy and the future
development of a sustainable energy strategy.
This Memorandum provides information about DEFRA's
contribution to policies relating to renewables and sustainable
energy issues. In addition, it provides some indication of how
we intend to consider the outcome of the PIU Energy Review in
developing future policies and strategies.
The Government has placed the environment at
the heart of policy making and is committed to combining environmental
sustainability with economic and social progress. Prudent use
of resources, including energy, is a key part of the UK's sustainable
development strategy. The Government is committed to moving the
UK down a more sustainable energy path, including by harnessing
the major potential that renewables and energy efficiency offer
to reduce carbon emissions and other environmental impacts.
This approach to energy policy contributes to
the Government's social and environmental objectivesit
can help to reduce fuel poverty and makes a key contribution to
the achievement of climate change objectivesand it helps
to increase the diversity of our energy supplies and technologies,
contributing to our economic development and security of supply.
DEFRA welcomes the fact that PIU Energy Review
has initiated a wide-ranging public debate on the future of the
UK's energy systems. We therefore welcome the EAC's timely contribution
to this debate.
The Government will consider the findings of
the Review and will respond in the form of a White Paper, to be
jointly produced by DTI and DEFRA, towards the end of the year.
1. What responsibilities does DEFRA have with
regard to achieving the Government's targets for renewable energy?
To what extent are you responsible for the Government's sustainable
energy strategy? Do you have any plans to produce such a strategy?
The Secretary of State for Environment, Food
and Rural Affairs has overall responsibility for policy on sustainable
development, climate change and environmental protection, as well
as energy efficiency, including combined heat and power, and fuel
poverty. DTI and DEFRA work very closely together on issues relating
to the environmental and social impacts of energy supply and demand,
especially on energy efficiency, renewable energy, CHP and fuel
DEFRA also has specific targets for particular
sustainable energy measures and related issues. These include:
Improve the environment and the sustainable
use of natural resources, including by reducing greenhouse gas
emissions by 12.5 per cent from 1990 levels moving towards a 20
per cent reduction in carbon dioxide emissions by 2010 (PSA TARGET).
Reduce fuel poverty among vulnerable
households by improving the energy efficiency of 600,000 homes
between 2001 and 2004 (PSA TARGET).
To stimulate business energy savings
of £200 million per year, saving about 1 million tonnes of
carbon by 2003-04 (SDA TARGET).
To increase domestic energy benefits
by £305 million per year by 2003-04 for the lifetime of the
energy efficiency measures (SDA TARGET).
To stimulate savings to industry
of £200 million per year by 2003-04 through waste minimisation
20-22,000 hectares of energy crops
to be planted under the Energy Crops Scheme (SDA TARGET).
Part of the Government's consideration of PIU's
Energy Review will be to address the extent to which environmental,
social and economic goals are properly aligned to ensure that
the UK's future energy system is sustainable. This will lead to
a White Paper towards the end of the year.
2. Does DEFRA consider that the current split
of responsibilities for energy between departments is rational?
A split of responsibilities between departments
is not unusual, especially for policies which have a broad sustainable
development focus, such as energy. The current arrangements reflect
the strong links between renewable energy, energy policy and markets
as a whole, and the wider business competitiveness agenda of the
DTI, and between energy efficiency, climate change and the wider
environmental agenda of DEFRA.
Links with other key players, such as DTLR are
also maintained. Whilst alternative division of responsibilities
could be envisaged, there is a risk that the current linkages
into wider policy areas may be diluted or lost altogether.
The current division of responsibilities is
therefore rational and logical in achieving the Government's objectives
in these areas. An example of the interdepartmental approach to
energy is the establishment of a cross-departmental working group,
with representatives from Her Majesty's Treasury, DEFRA, DTI,
DTLR, the National Assembly for Wales, the Scottish Executive,
the PIU and Ofgem, to develop the Renewables Obligation.
3. A key recommendation of the PIU Energy
Review is that the Government should aspire in the long term to
bring together in one department responsibilities for climate
change, energy policy and transport policy. What view do you take
on this recommendation? If implemented, would DEFRA any longer
be able to play a central role in promoting sustainable development?
The Government recognises that energy policy
needs to incorporate a wide range of policy interests. The Government
will be consulting on the PIU Energy Review. DEFRA and the DTI
will then co-ordinate the Government's response in preparation
for the publication of a White Paper later this year. As part
of this work the Government will be considering whether any changes
are needed to the present institutional arrangements.
The critical functional aim is for policy integration,
leading to coherent and efficient policy development and reliable
policy outcomes. That is not automatically achieved by re-organising
or centralising policy responsibility, nor indeed, by creating
Policy integration across Government is essential
to the achievement of sustainable development. We do not believe
that the organisation of policy functions for climate change,
energy and transport have any necessary bearing on DEFRA's ability
to play its central role in promoting sustainable development.
4. What key steps and initiatives do you consider
need to be taken immediately in the light of the PIU report? Is
there a need, for example, for any alterations to existing policy
The Government welcomes the PIU report as a
valuable contribution to the debate on how best to meet Britain's
future energy requirements. It provides a good basis to stimulate
the public consultation we intend to hold leading to an Energy
White Paper later in the year. This process will permit full consideration
of the PIU's recommendations and their implications for future
energy policy, initiating the need for new policy instruments.
5. What view does DEFRA take on the balance
between techology push (in the form of R&D support) and market
pull (eg the RO, EEC, ECAs etc)? Is the current balance right,
and do market pull incentives currently provide a sufficiently
direct mechanism to stimulate the longer term investment which
This question requires some discussion of basic
market transformation strategy in order to address the question
of the balance of policy measures. The first issue is whether
or not any intervention or market correction (push or pull) is
required at all and whether that is required in the short term
or the longer term. Longer term, non-speculative investment in
energy and resource-efficient technologies, products and services
depends on investors being able to make a favourable assessment
of the likely returns and risks.
The more uncertain the future outcome of policy,
the less likely is the investment on which those outcomes depend.
In some areas, as illustrated by the specific scenarios that are
being produced by the Market Transformation Programme, it is clear
that there is only a weak consensus on what Government policy
means for projected volume sales of goods and services. In those
areas, it is unlikely that the necessary investment will occur
to secure the desired outcome. A crucial Government role therefore
is to establish the information that investors need and to maintain
confidence in the projected market outcome. That is not achieved
by exhortation or pressure but by ensuring the pre-requisites
for investmentestablishing competitive environments, regulation
or other incentives to bring forward new products and to support
volume sales. The existing measures are required to meet 2010
targets. In the longer term, a sustainable policy may aspire to
a self-sustaining market in which confidence in market development
and growth is sufficient, in itself, to ensure innovation.
6. Please summarise briefly the outcome of
the work DEFRA has been undertaking on carbon pricing (PIU Energy
Review, page 48 footnote). How will this work be reflected in
the development of policy instruments?
A DEFRA officials' working paper titled "Estimating
the Social Cost of Carbon Emissions" was published as a Government
Economic Services working paper in January this year. This paper
is available at http://www.treasury.gov.uk/documents/taxation
work and welfare/taxation and the environment/tax env geswp140.cfm.
This paper is a thorough review of the literature produced on
the social cost of carbon emissions. The paper suggests that a
point estimate of £70/tC, increasing by £1 per year
in real terms (to reflect the increasing value of damage costs
over time) and a sensitivity range of between £35/tC and
£140/tC be used in policy appraisals as an illustrative value
for the social cost of carbon emissions. This range does not take
into account the full uncertainty associated with estimating the
social cost of carbon emissions, but it does provide a useful
sensitivity analysis that reflects the disproportionate upside
risk associated with climate change damages. Qualitative analysis
should be used for those impacts, such as socially contingent
effects, that are currently too uncertain to be valued.
The government will consider how to further
incorporate these shadow prices into the development of policy
instruments in due course, as part of its response to the PIU
energy review. In the meantime, guidance is available from DEFRA
for anyone wanting to incorporate these illustrative values into
7. The PIU review suggests that DEFRA and
HMT should give early consideration to carbon pricing through
taxes or tradable permits to cover as much of the energy market
as possible. What approach do you intend to adopt in response
to this recommendation? How would any initiative be integrated
with existing policy instruments? To what extent will carbon pricing
incentivise energy efficiency measures rather than the development
The Government's approach is based on the recommendations
of the Marshall Report of 1998. Lord Marshall recommended a mixed
policy approach based on both a tax and a trading scheme if businesses
of all sizes and from all sectors were to contribute from an early
stage to meeting the UK's targets. The Government accepted this
recommendation, recognising that emissions trading in greenhouse
gases was not yet a tried and tested policy instrument. In addition,
the administrative costs for small and medium-sized enterprises
entering into a trading scheme are not yet known.
To this end, the UK has introduced the climate
change levy to encourage businesses of all sizes to be more efficient
in their use of energy, and has also set up the voluntary UK Emissions
Trading Scheme (ETS) to help deliver greenhouse gas emissions
reductions in a cost-effective way. Thirty-four organisations
of varying sizes have entered into the trading scheme, and the
experience gained through implementing this policy will benefit
not only policymakers, but also businesses in preparation for
international emissions trading from 2008 onwards. To extend the
same carbon dioxide pricing signal across as wide a market as
possible, the climate change levy and the emissions trading scheme
have been integrated. The just under 6,000 operators which have
taken on Climate Change Agreements will be able to trade with
each other, as well as with organisations joining the scheme through
other routes, in order to meet their agreed target.
Emissions trading allow participating organisations
to implement the most cost effective measures in order to meet
their target at least cost. The market will therefore determine
which energy efficiency measures are most effective in terms of
value for money. However, the development of renewables will take
place irrespective of the implementation of energy efficiency
measures through the trading scheme, since energy suppliers with
a renewables target under the Renewables Obligation cannot use
the trading scheme to meet their target, and are restricted to
only being able to use the market to sell any over-achievement
of their target.
8. Is DEFRA concerned about the number of
different policy instruments in the energy area (CCL, RO, UKETS,
a possible carbon tax)? In the longer term is there scope to rationalise
the number of policy instruments?
The number of existing policy instruments reflects
the number of co-ordinated and complementary objectives that the
Government has in the area of energy. For example, the Climate
Change Levy covers all energy inputs used by business, the Renewables
Obligation focuses on increasing the take-up of renewable energy,
and the emissions trading scheme is an innovative new policy which
has been designed to allow any cost effective emission reductions
to be made by participating organisations at least cost.
However, there may well be scope to rationalise
policy instruments over time. Any rationalisation would need to
balance the differing policy objectives across the different strands
of climate change policy against the efficiency gains from reducing
emissions at least cost.
9. Figure 8.1 of the PIU report sets out the
main bodies involved in delivering energy efficiency (cf para
8.29). Is this table complete? Are there any other relevant sources
of funding such as, perhaps, the National Lottery? Does DEFRA
consider that the present multiplicity of funding sources creates
any difficulties for business? What difficulties would there be
in creating a single funding agency for energy efficiency?
We believe that the identifies the main stakeholders
involved in delivery of energy efficiency measures and programmes.
The National Lottery also contributes to various
aspects of sustainable energy delivery. For example, the New Opportunities
Fund is working with DEFRA and DTI on the co-ordination of funding
for biomass-fuelled CHP schemes and community heating projects.
We do not believe that the perceived multiplicity
of funding sources gives rise to any specific problems for business.
There is ongoing dialogue with key stakeholders, including trade
organisations and individual businesses to ensure that the funding
sources are readily accessible and deliver policy objectives.
10. Has DEFRA analysed the impact of recent
developmentsincluding the effects of NETA on renewable
energy sources, the fall-off of investment in CHP, possible reductions
in the expected contribution to be provided by energy from waste,
and the non-realisation of NFFO 4 and 5 projectson greenhouse
gas emissions? What impact will such changes have on the UK climate
The carbon savings figures included in the UK's
climate change programme were reviewed in 2001 during preparation
of the UK's Third National Communication to the United Nations
Framework Convention on Climate Change that was published on 31
October 2001. At that time, the analysis showed that the issues
identified by the Committee would not affect emission projections
to 2010. However, the Government plans to keep the programme and
its emission projections under close review. DEFRA plans to carry
out an interim review of the programme and its implementation
in 2003 and a formal evaluation in 2004-05. As part of this work,
data will be compiled and analysed, in liaison with DTI, to assess
the impacts of developments in the energy supply sector, including
the effects of NETA on the UK's actual and projected greenhouse
gas emissions. Updated emission projections will also be produced
11. The Energy Review recommends that DEFRA
should develop energy efficiency indicators, targets, and monitoring
mechanisms for each sector of the economy by the end of 2003.
To what extent is DEFRA already doing so in developing resource
productivity indicators and targets? When does DEFRA expect to
produce the latter?
In November 2001 the Government's Performance
and Innovation Unit (PIU) published a report on resource productivity
and its role in the achievement of sustainable development (Resource
productivity: making more with less). DEFRA has overall responsibility
for taking forward the report, with other Departments leading
on some of the individual recommendations.
Key recommendations for DEFRA in the PIU report
assessing the case for long term
targets and indicators of environmental and resource productivity;
encouraging sustainable procurement
practices throughout Government;
leading on a programme to improve
understanding of the role of natural resources in the economy.
DEFRA will also be working closely with other
Departments on key recommendations on promoting innovation and
helping small businesses.
We have already started work in response to
the PIU's recommendations, and a summary of Government action
on the recommendations will be prepared by the end of 2002.
For energy efficiency, each of the relevant
programmes, including Climate Change Agreements, Enhanced Capital
Allowances, Energy Efficiency Best Practice Programme, Energy
Efficiency Commitment, will monitor and report on progresssome
annually, some every two to three years. There are several indicators
already available but possibly not well publicised or widely used.
DEFRA will be developing these and others if necessary over the
next few months to show the contribution of energy efficiency
to climate change targets.
The Government, meanwhile, has already set a
number of energy efficiency targets or indicators for the public
sector, which should take a lead in cutting emissions, both from
its activities and its buildings. Specific commitments to action
were set out in the UK's Climate Change Programme, published in
November 2000. Key targets and activities for the Government Estate
are also set out in the Green Minister's Second and Third Annual
Reports, published in November 2000 and November 2001. Progress
towards achieving all of these targets is kept under review.
Key targets in the Climate Change Programme
for the public sector are:
Government estatean interim
target to achieve a one per cent CO2 reduction per
annum on 1999-2000 levels. We plan to develop new targets for
reducing energy consumption based on an assessment of the estate's
performance against national standards during the course of this
financial year, with a longer-term view to setting new energy
All departments will ensure that,
by 31 March 2003, at least five per cent of their electricity
comes from renewable sources that are exempt from the climate
change levy, or from self generation, provided this does not entail
excessive cost. This will rise to at least 10 per cent supply
from such sources by 31 March 2008, but will be reviewed after
31 March 2003 to take account of market conditions following the
introduction of the Renewables Obligation.
Hospitalsbenchmark over the
next three years and then for all hospitals to meet the average
benchmark by 2010.
Schoolsbenchmark over the
next three years; improve performance over the next five years;
and aim to reduce energy consumption by 10 per cent by 2010.
NHS Estates have since set mandatory energy
targets for Trusts:
To reduce primary energy consumption
by 15 per cent on 2000 levels by 2010.
For all new capital developments
and major refurbishments to meet prescribed energy performance
12. What specific targets and delivery mechanisms
will be required to achieve the energy efficiency targets recommended
by the PIU? Where will responsibilities lie in terms of key departments
and non-departmental organisations? Can we expect any DEFRA/DTLR
and/or DEFRA/DTI shared targets within SR2002 PSAs relating to
energy efficiency? What is the baseline against which progress
on the energy efficiency targets recommended by the PIU will be
The Government recognises that the cross cutting
nature of energy policy needs to bring key players together and
underpin policy making with analysis. Recent developments, such
as the Interdepartmental Analysts Group's report on long term
reduction in greenhouse gas emissions, provide clear examples
of increased cross-departmental working. The wide nature of the
PIU Energy Review means that taking the issues it raised forward
to a White Paper will necessitate further close interdepartmental
DEFRA and DTI are aware of the benefits of joint
targets as a useful way of underpinning our shared interests.
However, work is needed to sort out the technical details and
to ensure that robust data is available to enable us to monitor
progress. Hence we are unlikely to be able to proceed with a joint
target for SR2002.
13. What view does DEFRA now take on the long-term
prospects for supporting CHP, in the light of the reduced commercial
incentives to invest in this technology and the drive for big
increases in space heating efficiency? What justification would
there be for providing specific support to one particular energy
efficiency technology such as CHP (perhaps through a CHP obligation)
and not others?
The CHP industry is currently under pressure
due to energy market conditions, especially high gas prices and
reduced electricity prices. This will make achievement of the
Governments 10,000 MWe target more challenging. Nonetheless, CHP
remains one of the most cost-effective options for reducing carbon
emissions in the Governments Climate Change Programme. It also
helps to reduce fuel costs. We remain committed to and confident
in our UK target of at least 10,000 MWe of good quality CHP capacity
by 2010 and to the delivery of policy measures to support that
target and lay the foundation for CHP beyond 2010. The Government's
Strategy for CHP to 2010 (to be published shortly) will set out
The Chancellor has announced the completion
of exemption of exports of electricity from Good Quality CHP from
the climate change levy. Electricity generated from combined heat
and power stations that is within the Qualifying Power Output
limit is to be fully exempt ie the "direct" supply condition
is removed. We very much welcome the Chancellor's announcement.
This is a key measure which will help improve the economics of
CHP in order to meet the Government's target of at least 10,000
MWe of Good Quality CHP capacity by 2010. At present fuel inputs
to Good Quality CHP are levy exempt, as is electricity used on
site or sold direct to other users. The Budget announcement ensures
that good quality CHP used on site, sold direct and sold indirect
will be exempt from the climate change levy.
The Community Energy Programme, managed jointly
by the Energy Saving Trust and the Carbon Trust, with funding
of £50 million in 2002-04, will help reduce carbon emissions,
tackle fuel poverty and provide low cost heating and electricity.
The Carbon Trust can also help fund feasibility studies for market
development of CHP.
14. To what extent are existing targets in
Climate Change Levy negotiated agreements predicated on the implementation
of CHP schemes? What effect will the reduced incentive to invest
in CHP have on both the achievement of existing negotiated agreement
targets and the renegotiation of those targets by the end of 2004?
The targets for 28 sectors take account of the
feasibility of introducing CHP in the sector processes. Of these
28 sectors, the targets for two (paper and chemicals) are more
dependent than others on increased CHP deployment. The remaining
16 sectors are in the process of assessing the contribution that
CHP can make to their energy efficiency. When this assessment
is complete, their targets will be re-considered.
We do not expect the impact of the current economic
climate for CHP to have a significant impact at sector level for
the first two milestones. Renegotiation of the targets following
the second milestone will of course take into account the prevailing
economic conditions for CHP at the time.
15. Can DEFRA describe the likely contribution
that micro-CHP can make to reductions in energy demand? What barriers
need to be overcome to promote the take-up of this technology,
and what steps now need to be taken?
Micro-CHP is a new technology, defined as all
schemes below 5-kWe capacity. It is basically a gas-fired central
heating system which also generates electricity to meet the basic
household needs. By doing so it offers the potential to reduce
household energy bills by £150 to £200 a year, thus
helping many fuel poor households out of difficulty. Manufacturers
claim up to half a tonne of carbon savings in the average household's
annual emissions as well as an overall energy efficiency level
of 85 per cent.
Connecting micro-CHP units to public electricity
networks is probably the single most important issue to be resolved
before the technology can significantly penetrate the domestic
market. Access to gas and electricity networks is key for micro-CHP
developers. To ensure fair and equal access to electricity networks,
the recommendations of the Embedded Generation Working Group (EGWG)
are being taken forward by the Office of Gas and Electricity Markets
Ofgem have recently proposed a package of both
short and long term measures for a fair and transparent regulatory
regime for distributed generation, which will play an increasing
role in meeting the Government's environmental targets.
The proposals for immediate action include:
allowing generators the option of
spreading the cost of connecting to the distribution network;
making it easier for domestic CHP
customers, who have a heating system which can generate its own
electricity, to connect to the networks by establishing a standard
set of procedures;
providing full and comprehensible
information for prospective distributed generators.
A key issue is to ensure micro-CHP units make
energy and environmental savings compared to conventional means
of satisfying energy requirements. The Government is working with
industry to facilitate the certification of micro-CHP based Schemes
under the CHP Quality Assurance programme (CHPQA).
The Government announced in the UK Fuel Poverty
Strategy that it intends to invite micro-CHP manufacturers to
take part in a large-scale pilot to test the suitability of the
technology for fuel poor households. In total up to 6,000 installations
are expected to be carried out over a three-year period beginning
later this year. If successful, the intention is to offer micro-CHP
through the Home Energy Efficiency Scheme (now marketed as the
Warm Front Team) from 2005. The Chancellor's announcement in his
recent Budget of a 5 per cent rate of VAT for grant-funded installations
of micro-CHP will provide a helpful boost to this pilot.
16. What is your understanding of the relationship
between the long-standing UK 10 per cent target, the RO 10.4 per
cent target, and the EU indicative target of 10 per cent. It would
be helpful, in particular, to clarify the treatment of energy
from waste under each target.
The Government's target is that 10 per cent
of licensed electricity sales in Great Britain should come from
renewable sources eligible for the Renewables Obligation. The
Renewables Obligation target for 2009-10 is 9.7 per cent and for
2010-11 10.4 per cent, thereby averaging 10 per cent for the calendar
year 2010. The UK indicative target under the EU Directive on
the promotion of electricity produced from renewable energy sources
in the internal electricity market will be 10 per cent of gross
domestic electricity consumption. Gross domestic consumption equates
to domestic production, plus any imports, minus any exports from
the UK, and is estimated to be 380TWh in 2010. The EU target,
therefore, will be 38TWh, compared to a Renewables Obligation
target of 33.6TWh.
There are two essential differences between
the EU target and the national target:
Large hydro (over 20MW) counts towards
the EU target but not the domestic target.
The non-fossil derived element of
energy from mixed waste incineration can also be counted towards
the EU target.
The Government believes that the development
of new Energy for Waste technologies such as pyrolysis, gasification
and anaerobic digestion should be encouraged. All energy from
waste is excluded from the Renewables Obligation (including the
mass burn incineration of waste) unless the waste is biomass (ie
at least 98 per cent non-fossil derived) or advanced conversion
technologies are used. "Advanced conversion technologies,"
means gasification, pyrolysis, anaerobic digestion, or any combination
17. Does DEFRA have any views on the development
of regional targets for renewable energy and on how more positive
incentives to promote renewable energy can be incorporated within
the planning system?
Planning policies and guidance can impact upon
renewable energy schemes. We are therefore working closely with
DTLR and DTI to improve planning guidance. In our view guidance
needs to have a broad sustainable development focus and a more
positive, proactive approach. Projects should be evaluated in
the context of the national/global environmental benefit that
the project delivers, as well as on local impacts.
DEFRA has already been working with DTLR on
the development of new guidance Planning for Climate Change
which pulls together a range of sustainable energy issues in a
more strategic approach.
DEFRA is of the view that local planning authorities
should identify the local renewable potential and encourage the
development of the full range of renewable energy technologies
that are appropriate to their area. Where possible they should
identify locations where the development of particular technologies
will be welcomed and the local impacts that will be material to
any planning decision.
Regional assessments have been undertaken in
all parts of the UK to establish regional and local targets for
the development of renewable energy and these are available from
the Scottish Executive, Government Offices in England, and the
Welsh Assembly. Some of these have included the creation of GIS
map based databases of renewable resources.
18. Please describe the current position on
the extent of biomass energy production, and provide information
on support schemes for land managers/farmers including financial
expenditure (budget and outturn) and extent of uptake (area, applicants).
The Energy Crops Scheme (ECS), part of the England
Rural Development Programme, was introduced in October 2000. The
ECS provides planting grants for growers of short rotation coppice
(SRC) and miscanthus, the crops considered closest to commercial
development. Grant rates for SRC are £1,000 or £1,600
per hectare depending on land type and for miscanthus £920
per hectare. The Scheme also supports the setting up of producer
groups for SRC growers with grants of 50 per cent of eligible
costs. The total funding for the Scheme is £29 million over
the life of the ERDP. Limited support for energy crops had previously
been available through the Forestry Commission Woodland Grant
Scheme. New support to encourage active management of existing
woodlands, which would include biomass production for energy uses,
is being considered by the Forestry Commission.
Currently around 1,500 ha of energy crops have
been planted. There have been 61 applications under the ECS. 234
ha of energy crops have been planted under this Scheme and a further
268 ha will be planted in Spring 2002. In addition, there are
1.1m ha of woodland in England.
Uptake under the Scheme has been disappointing
due to slow progress with projects approved under the Non Fossil
Fuel Obligation. The Government has now allocated £70 million
of funding from the New Opportunities Fund and following the PIU
review of renewables. This is expected to stimulate end markets
in the heat, combined heat and power and electricity generation
There are also a number of other schemes under
development. The Countryside Agency's Community Renewables Initiative
will help local support teams facilitate market development.
19. The PIU Energy Review suggests that the
cost of electricity generated from biomass is currently about
8 p/kWh and that the scope for future cost reductions is difficult
to assess but may be in the order of 2.5-four p/kWh. Does DEFRA
agree with these cost estimates? Could you clarify whether or
not such cost estimates (either the PIU's or DEFRA's own) include
any subsidy payments which might be available to farmers? Do you
have any data on the costs of biomass energy in other EU states?
The PIU Energy Review estimates of the cost
of electricity generation from biomass are consistent with average
figures provided to DEFRA by industry. Potential cost reductions
are difficult to assess. The type of generating technology will
affect the figures. For purpose grown energy crops the yields
achieved will be a significant factor. These figures include the
cost of the fuel supply, which takes account of agricultural subsidies
paid to farmers. The use of energy crops in Europe is limited
and cost data for other EU states are not available. In the absence
of cost data from established industry across the EU, a benchmark
figure of 50 Euro/t biomass (ca £30) is widely regarded as
the minimum price to producers required to deliver significant
quantities of biomass from crop residues and purpose grown energy
crops. Other Member States primarily use biomass from woodlands
rather than purpose grown energy crops. There are good links between
industry in the UK and in Sweden although the latter did suffer
from speculative planting some years ago.
Dedicated heat production is an important end
use not considered in depth by the PIU Energy Review even though
around 40 per cent of electricity is used to create heat. Use
of biomass to generate heat can be extremely efficient. Modern
systems installed for small-scale district heating are achieving
over 85 per cent conversion efficiency; minimal energy is necessary
to pre-dry fuel.
20. What technological and other obstacles
need to be overcome to make biomass competitive and increase the
rate of uptake? Do you consider that present policy mechanisms
offer sufficient incentives to overcome these obstacles? What
contribution do you anticipate biomass will now make to the achievement
of the 2010 target?
The biomass sector is at an early stage of development.
Demonstration plant needs to move towards commercial deployment.
The energy crops sector has yet to achieve critical mass, the
point at which costs will begin to fall. There is significant
potential for utilising material from existing forests given that
developers will require diversity in fuel supplies in order to
secure project finance and that it can be delivered at a cost
comparable to coppice. There is increasing concern that the support
available through the Renewables Obligation and capital grant
support will not be sufficient to ensure deployment of biomass
electricity generation. This is being kept under review. The market
development funding now available should see around 20-22,000
ha of energy crops planted which will provide about half of the
fuel supply for individual projects, with the remainder sourced
from existing woodlands.
There is no target for biomass within the Renewables
Obligation and we expect to see only a small contribution, about
100MW of capacity from the new market development funding, to
the 2010 target. This will be in addition to capacity developed
through the Non-Fossil Fuel Obligation.
21. How much land is required for biomass
energy production? Have you carried out any overall assessment
of the maximum contribution which biomass could make to renewable
energy production by 2050?
Market development through New Opportunities
Fund/PIU Capital Grant funding will require about 20,000 hectares
of energy crops plus material from existing woodlands. Availability
of land for biomass energy production is not seen to be a problem.
There has been no assessment of the contribution
biomass might make by 2050.
22. Can DEFRA confirm that biomass energy
is neutral in terms of greenhouse gas emissions? What appraisals
or evaluations have been carried out of the impact of the total
cycle? What controls are necessary in order to ensure that production
is truly sustainable?
Biomass is carbon neutral as these sources give
out, when used, only the carbon dioxide they took in to grow.
Biomass crops are fast growing and few chemical inputs are needed.
A wide range of life-cycle studies conducted in the UK and elsewhere
in the EU show that net energy yields are high over the whole
system. It is important to minimise emissions within the system
from sources such as transport. The ECS aims to ensure crops are
grown as near to the end use as possible.
23. What are the likely environmental impacts
of promoting biomass on a larger scale?
Studies indicate that the cultivation of biomass
is environmentally beneficial and that species diversity increases.
Ongoing studies on impacts on specific species indicate no negative
impacts on biodiversity compared with the cropping systems replaced.
The ECS, developed in consultation with the environmental organisations,
incorporates a thorough assessment of environmental impacts. The
main environmental impacts of energy crops relate to land use,
particularly in respect of landscapes and archaeology. Biomass
energy crops may also affect hydrology, both positively (flood
protection) and, if inappropriately sited, negatively in terms
of aquifer recharge. Environmental assessments are carried out
on an application-by-application basis. Comments are invited from
statutory bodies and from interested individuals before decisions
on applications are made.
24. Energy from waste is not eligible under
the Renewables Obligation (except for advanced techniques such
as pyrolysis and gasification). What impact will this have on
the extent of electricity available from this source, compared
to the amount originally envisaged in forward projections?
Energy for Waste is eligible under the Renewables
Obligation only if the fuel is at least 98 per cent (non-fossil
derived) biomass or uses any combination of the advanced conversion
technologies defined as gasification, pyrolysis and anaerobic
digestion. These advanced conversion technologies are not yet
considered to be fully commercially established in the UK. For
this reason it is not possible to estimate what proportion of
the UK's renewable energy may come from these sources.
8 The Committee asked a number of questions to the
Department and these are in italics. Back