Memorandum submitted by Calor Gas Ltd
This submission responds to elements of the
questions below posed by the Committee:
— What is the potential role for public
procurement and policies such as the 2016 zero carbon homes
target in driving investment, development and job creation?
— How realistic are the Committee on Climate
Change's projections for the use of different types of new technologies?
— What opportunities exist for the creation
of a green new deal whilst pursuing a low carbon economy? Which
technologies have the biggest potential?
NEED FOR
DEFINITIONAL ACCURACY
OF ZERO
CARBON
1.1 We accept the objective of zero carbon
new homes by 2016, but zero carbon needs an accurate, scientific
definition. Imagining the zero carbon target can simply be met
by the installation of biomass risks making a big mistake. The
Government's Biomass Strategy (May 2007) states that, "For
all biomass resources no net emissions during production assumed".
What has happened to the emissions produced during planting, harvesting,
sawing up and delivery of these bulky and heavy items? The low
emission scores for wood logs/chips/pellets appear to derive from
a "Paper by Christine Pout, Building Research Establishment
CO2 Figures for Policy Analysis" where a
footnote reads that the estimates were "notional and not
based on detailed assessments". Besides, using wood as a
fuel does not always equate to reducing the impact of climate
change. In order to comply with Article 3.3 of the Kyoto
Protocol we need to measure the biomass footprint by means of
assessing net verifiable changes in carbon stocks. If waste wood
is used for fuel then the footprint is indeed low. But, if net
carbon stocks in the forest are depleted then the biomass carbon
footprint is substantial. This fundamental difference needs to
be properly recognised otherwise, we risk coming to absurd conclusions,
for instance, thinking that the climate change impacts of preserving
a forest are the same as burning the same forest. In this way,
we can avoid making similar mistakes with biomass as were made
for biofuels. Unless the zero carbon definition is watertight
then the problem is carried forward into the Code for Sustainable
Homes and the Eco-Town definition.
JOB CREATION
V JOB
DESTRUCTION
2.1 We believe the Government needs to evaluate
the collateral damage of its policies. Decarbonising the electricity
grid will produce business opportunities for some sectors of industry,
but it will be the death-knell for others. We accept that any
substantive technological change will create losers and our history
is littered with them—the telegram, canals, fax machines
etc. As a fossil fuel company ourselves we cannot pretend to be
ecstatic at the prospect of being phased out within a generation.
However, we do not believe the Government has taken full account
of the significant part that clean fossil fuels such as LPG will
be able to play in generating significant CO2 reductions.
In our case these can be easily as high as 50% where an LPG mCHP
unit is used to displace an existing oil boiler; at the fraction
of the cost of deploying ground source heat pumps or biomass.
2.2 We agree with para 1.19 of the
Heat and Energy Saving Strategy (HESS, February 2009): "We
need to begin to establish a path that will get us to that radical
long-term objective". Such plans need to consider the benefits
as well as the disbenefits of change, and allow affected businesses
time (whilst not compromising any practical emission reduction
targets) to trade their way to a new future, minimizing their
job losses and capital investments, which otherwise would be severely
negative for the UK economy. While the Government sought to highlight
the job creation potential of the low carbon future in the 2009 Budget,
once again policy makers need to balance this with honesty and
clarity about the jobs they intend to remove in other sectors
and the timescales.
2.3 There are clear tensions here between
what HMG wants to achieve for climate change reasons, and what
may be deliverable economically and practically. For instance,
while climate change policies may predicate an effective shut-down
of the oil industry as we know it the Budget on 22 April
2009 announced measures to promote the extraction of an extra
two billion barrels of oil and gas in a bid to make the North
Sea an energy hub for the future.
2.4 Lest it be thought we are fighting a
rearguard action against solutions to climate change, we are not.
Indeed, we have advanced plans during the period of the transition
to the lower carbon future of sustaining the viability of our
business while helping the Government to deliver its targets.
While LPG presumably has no place in a pure zero carbon setting
(ie when fossil fuels cease to be used altogether) it can nonetheless
be a realistic and practical bridging technology in the interim.
THE POTENTIAL
OF ALTERNATIVE
TECHNOLOGIES
Biomass
3.1 The Committee on Climate Change has
high hopes of biomass: "Burning of biomass in boilers could
substitute for current fossil fuel and electrical heating systems,
which would be particularly attractive for properties that are
currently off the gas grid. Up to four million off gas grid households
could potentially move to biomass heating, resulting in emissions
reduction of 21 MtCO2, at a cost of just under
£60/tCO2" (P 235).
3.2 At up to £14,000 biomass boilers
are expensive; they are obtrusively large; and, they require a
significant area of storage space for the volumes of wood required.
Our view is that their drawbacks will prevent widespread uptake.
3.3 Para 4.3.6 of "The UK Renewable
Energy Strategy" (June 2008) admits, "That imports of
woody biomass fuel may be necessary…" No-one has made
an estimate of the level of such imports, and the carbon emissions
involved in their transport. We suggest that it could be a significant
figure, and should be known. After all, one might otherwise presuppose
that the UK's charcoal needs would be supplied largely from national
resources: in 2006, UK charcoal production was 5,000 tonnes
against a consumption of 50,000 tonnes mostly imported from
outside the EU: UK charcoal production was only 10% of usage (Paper
by Eric Johnson, Environmental Impact Assessment Review, May 2009).
80% of the charcoal imports arise from LDCs—a point which
highlights the need to ensure that wood-based fuels are being
sourced from carbon neutral sources. If heavy imports of biomass
displace native sources of supply then the net effect does not
enhance security of supply.
3.4 "The UK Renewable Energy Strategy"
goes on to say:
"4.6.14 The potential cumulative
effect on air quality of fine particles and nitrogen dioxide emissions
from a future large-scale deployment of biomass appliances or
plant is not yet well understood…In rural areas the impact
on air quality, and public health, is likely to be lower, due
to both lower population densities and 'background' levels of
pollution.
4.6.15 The results from preliminary analysis
undertaken by AEA Energy and Environment on behalf of DEFRA indicates
that if high levels of solid combustible biomass were used in
dense urban areas, where heat demand is highest, the impact on
air quality would be likely to be very significant. Stringent
emission controls on individual plant would mitigate this effect.
4.6.17 There is currently no clear advice
about the locations, types and sizes of boilers that would not
cause air quality issues, and there is currently no agreed European
test procedure.
4.6.18 In response to these issues we
are considering possible measures that will allow the deployment
of biomass-fired plant, in both rural and urban areas, at the
maximal sustainable rate that does not compromise our objectives
on air quality or public health.
4.6.25 Given that equipment deteriorates
over time and needs to be operated properly, we may need to update
regulations to ensure that installed equipment continues to be
run in a way that meets emissions standards."
3.5 In sum, biomass boilers will cause significant
pollution in urban areas without stringent controls. The pollution
they cause to rural areas is apparently more acceptable because
of lower existing levels of pollution in the countryside. We do
not yet know the effect of particulates and NOx from biomass boilers—and,
as the boilers age they will pollute more. On 26 March 2009,
in a Written Answer (col. 695/6W) to Graham Stringer MP the Government
quantified the social (=health) costs caused by emissions from
biomass plants under various scenarios. For an uptake of 52TWh
of biomass the social costs were estimated as £2,803,000,000 and
for 38TWh the comparable costs were £557,000,000.This is
on the basis of current technology boilers. Unless stringent controls
which are effective over the life of the boiler can be maintained
this risks being a heavy price to pay for an already expensive
technology.
3.6 Para 5.17 of the Government's "Biomass
Strategy" states that, "Substitution of natural gas
with biomass, on the other hand, generally leads to increases
in emissions of all major pollutants". LPG has a similar
emissions profile to natural gas. So, insofar as the renewables
policy and RHIs manipulate a switch from natural gas or LPG—as
is the apparent intention—increases in all major pollutants
are to be expected. The Government's Consultation on Draft Local
Air Quality Management Guidance" (July 2008) states, "In
the light of current Government policy, it is particularly important
that climate change and air quality policies are joined up".
The danger is that without stringent controls the Biomass Strategy
will subvert the Air Quality Strategy.
3.7 "Biomass—carbon sink or
carbon sinner?" published by the Environment Agency (EA)
on 22nd April 2009, finds that using energy crops or waste materials
as fuel for generating electricity and heat could play an important
role in meeting the UK's renewable energy and greenhouse gas emission
reduction targets but "only if good practice is followed…worst
practice can result in more greenhouse gas emissions overall than
using gas.".
3.8 The EA urges HMG to ensure all generators
publicly report the greenhouse gas emissions from producing, transporting
and using biomass fuels and be ready to set minimum standards
if required, for as the Executive Summary of the Report reads:
"How a fuel is produced has a major impact on emissions:
transporting fuels over long distances and excessive use of nitrogen
fertilisers can reduce the emissions savings made by the same
fuel by between 15 and 50% compared to best practice."
It also states, "GHG emissions from energy generated using
biomass are generally, but not always, less than from fossil fuels.
For example, using short rotation coppice chips to generate electricity
can produce 35 to 85% less emissions, whereas using straw
can, in some cases, produce over 35% more, than a combined cycle
gas turbine power station per unit of energy delivered".
3.9 Tony Grayling, Head of Climate Change
and Sustainable Development, at the EA said: "The biomass
heat and power sector can play an important role in helping the
UK meet its renewable energy and greenhouse gas commitments but
only if it meets high standards. We want to ensure that the sector's
growth is environmentally sustainable and that the mistakes made
with biofuels are avoided, where unsustainable growth has had
to be curbed. Biomass operators have a responsibility to ensure
that biomass comes from sustainable sources, and is used efficiently
to deliver the greatest greenhouse gas savings and the most renewable
energy. The Government should ensure that good practice is rewarded
and that biomass production and use that does more harm than good
to the environment does not benefit from public support."
We agree.
Wind
4.1 The Committee has high hopes of wind:
"Despite the inherent intermittency of wind power supply,
wind generation could make a significant contribution to total
global electricity generation, and be a major source of electricity
in the UK (eg 30% by 2020 and more beyond)." The UK
Renewables Strategy predicted a 32% share for onshore and offshore
wind by 2020 equivalent to 83TWh" (p xv).
4.2 Paras 31 and 32 of "The
UK Renewables Strategy" suggest that the totality of offshore
and onshore wind could be 28GW by 2020. According to the British
Wind Energy Association the total capacity installed to date is
3330MW—8.4% towards target; 890MW were built in 2008 and
18MW so far in 2009. We are on record as regarding fulfilling
the target as being heroic. If the UK continues to construct wind
farm capacity at the 2008 rate it will take us 31 years
to reach the 2020 target.
4.3 Since that Consultation wind seems to
have lost momentum. In March 2009, Shell pulled out of its investments
in wind, solar and hydro on the basis that they were not economic,
and The Times reported that Iberdrola Renovables planned to cut
wind power investments in the UK by over 40% or £300 million.
In April, Vestas announced the closure of Britain's only wind
turbine plant which employs 600 people—the order intake
had dropped significantly.
4.4 It is important not to continue to hold
to impossibly optimistic forecasts of the contribution of wind.
If as a result, we are not going to meet our carbon reduction
commitments, or there is going to be a significant contribution
to unserved electricity demand particularly after 2015, it is
better to make provision now rather than in emergency conditions:
new power stations cannot be built on an emergency basis.
Heat pumps
5.1 The Committee on Climate Change's verdict
is: "Around nine million properties with gardens could be
fitted with ground source heat pumps with an associated emissions
reduction of 3 MtCO2 at a cost of £190/tCO2.
There may be additional opportunities for emissions reduction
from air source heat pumps, particularly where space constraints
preclude ground source heat pumps" (p 235).
5.2 We endorse the sentiments in para.1.34 of
HESS: "We need to minimise the disruption from installing
energy saving and low carbon energy measures, which can discourage
households from taking action". This is one reason why we
are sceptical about the widespread domestic installation of biomass.
Similarly, ground source heat pumps are disruptive to fit and
at up to £14,000 to install are a very expensive way
of addressing the problem, particularly in rural areas which would
also require a very significant investment in electricity infrastructure.
Much of the electricity in rural Britain is single phase, limiting
the power available for electric powered heating systems to approximately
3.5kW. In turn, this limits the applicability of ground source
or air source heat pumps which suffer restricted output on single
phase electricity; moreover, they have limited practicality in
older properties. If Government subsidies are to be applied to
encourage a switch to less carbon intensive fuels then we suggest
that the level of such subsidies should be linked to the amount
of carbon saved per £ invested. There should be value for
money to the taxpayer, and the consumer. Calor proposes a cost-effective
bespoke solution for rural areas (see 6.2) in contrast to technologies
such as biomass, which are effectively acknowledged as requiring
significant subsidy via "very substantial" RHIs.
Fuel cell technology
6.1 The Committee is guarded on the potential
of fuel cell technology: "A device that can be used to convert
hydrogen or natural gas into electricity. Various types exist
that can be operated at temperatures ranging from 80 degrees
Celsius to 1,000 degrees Celsius. Their efficiency ranges
from 40% to 60%.For the time being, their application is limited
to niche markets and demonstration projects due to their high
cost and the immature status of the technology, but their use
is growing fast" (p 469)
6.2 One problem with HMG choosing winners
such as biomass over LPG via the RHI system is that it ignores
the contribution that the cleaner fossil fuels—such as natural
gas or LPG—could make to resolving the Government's problem
largely through normal market mechanisms. The combination of LPG
(or natural gas) and fuel cell technology in a boiler can reduce
emissions by up to 50%. Combined with greater insulation and solar
technology fuel cell boilers will be able to achieve 80% emission
reductions that government is seeking by 2050. It makes no sense
to place levies on fossil fuels via the misconceived RHI system
if those fossil fuels are part of the solution, and a cost-effective
one at that.
6.3 LPG is the lowest carbon-emitting fossil
fuel available in rural areas (0.265Kg CO2/kWh) and
LPG technology continues to develop quickly in response to the
UK's low carbon requirements. Calor are investing with the UK
company Ceres Power to bring the next generation of boilers to
the UK rural market by 2012. The Calor LPG Fuel cell boiler will
heat the property with a high efficiency condensing boiler, but
will also generate up to 80% of the electricity required in a
domestic rural property. Generating electricity at the point of
use avoids the wasted energy associated with power stations and
transmission systems. The local generation will provide a measure
of black-out protection since the system can keep the power running
during power cuts. A distributed element of electricity generation
will thus help the UK cope with possible shortages of generation
capacity. The acknowledged risk of unserved electricity demand
becomes substantively higher as from 2015. This fuel cell boiler
will cut carbon emissions on an average property by up to 50%
through an investment of only approximately £2,000 more
than a modern condensing boiler. These boilers will be able to
be serviced by engineers with existing skills. We believe that
fossil-fuel powered mCHP is practical, can use the current electricity
and fuel supply infrastructure and will be very cost-effective
per tonne of carbon saved.
6.4 We regard the current CERT scheme as
an effective incentive to support low-carbon technology. Gas or
LPG fuelled micro Combined Heat and Power (mCHP) should qualify
under CERT until 2011. "The Growth Potential for Micro-generation
in England, Wales and Scotland" (June 2008) showed that a
post-2011 CERT-style supplier obligation would help stimulate
rapid growth to nearly 300,000 units sold per annum in 2020.
We regard feed-in tariffs for micro-generation to be a cost-effective
method of stimulating adoption and helping meet carbon reduction
and renewable targets. Consideration should be given to allowing
the tariff to be deemable in order to allow companies to stimulate
adoption by reducing the capital costs of mCHP units.
EXECUTIVE SUMMARY
— The automatic assumption that biomass
is zero-carbon is questioned. We agree with the Environment Agency
that the Government should ensure all generators publicly report
the greenhouse gas emissions from producing, transporting and
using biomass fuels and set minimum standards.
— Closing down the fossil fuel industries
will have costs which should be transparent, and very substantial
levies to encourage switch to renewables risk closing them down
prematurely because cleaner fossil fuels can play a part in bridging
technology that can deliver significant CO2 reductions.
In our case these can be easily as high as 50% where an LPG mCHP
unit is used to displace an existing oil boiler at the fraction
of the cost of deploying ground source heat pumps or biomass.
— Biomass and ground source heat pumps
are expensive and cumbersome technologies to install. If they
require RHIs set at "very substantial" levels to encourage
take-up, the contribution fossil fuels could make in a cost-effective
manner using bridging technology will be threatened.
— The Committee's projections for wind
appear to be heroic. If the UK continues to construct wind farm
capacity at the 2008 rate it will take us 31 years to
reach the 2020 target.
— The Committee is too guarded about the
potential of mCHP to contribute to the solution. Our assessment
is that the market for gas or LPG-fuelled mCHP could grow rapidly
to nearly 300,000 units sold per annum in 2020.
May 2009
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