Energy and Climate Change CommitteeWritten evidence submitted by GB Railfreight (BIO16)
Chapter 1: Summary of Response
1.1 Rail freight is one of the most effective ways to transport goods across the country. It is crucial to the transportation of biomass from a wide range of countries, helping to guarantee security of supply benefits and reduced price volatility. GB Railfreight (GBRf) is the only freight company with regular contracts to move biomass on the UK railway.
1.2 Over the past three years we have worked hard to investigate the potential for carrying biomass by rail and secured contracts to supply the Drax power station in Selby and the E.ON’s power station in Ironbridge. As part of our work with E.ON, we shift 1.5 million tonnes of biomass per year between Liverpool Docks and the Ironbridge Power Station. As part of our contract with Drax, we move 1.5 million tonnes of biomass from the Port of Tyne to Drax power station in Selby.
1.3 GBRf welcomes this inquiry as a means to consider what conditions are needed in order to best support the growth of the biomass sector. GBRf strongly believes that the biomass industry can only be as strong as its supply chain. With this in mind, we have proposed a series of recommendations for developing the supply chain, particularly the transportation of the biofuel.
1.4 GBRf believes that:
1.4.1
1.4.2
1.4.3
1.5 GBRf recommends the following:
1.5.1
1.5.2
1.5.3
1.5.4
Chapter 2: What contribution can biomass make towards the UK’s decarbonisation and renewable energy targets? Are the Government’s expectations reasonable in this regard?
2.1 The Department of Energy and Climate Change estimates that biomass could contribute 21% of the UK’s target of generating 15% of the UK’s energy from renewable sources by 2020. Companies such as Drax and E.ON are taking major steps in converting their units to burn biomass and have expressed intentions of becoming fully or partly biomass burning operations. We understand that several other existing power stations are considering doing likewise. Clearly, the possibility for biomass to contribute towards renewables energy targets shows promise.
2.2 Figure 1 below, taken as an extract from a ,3Biomass: the Fourth Energy Source, has .
and help the UK reach its targets
Chapter 3: How well have the Government’s bioenergy principles (set out in the 2012 Bioenergy Strategy) been translated into policy?
Are genuine carbon reductions being achieved?
Is bioenergy making a cost effective contribution to carbon emission objectives?
Is support for bioenergy maximising the overall benefit to the economy?
Is sufficient attention being given to potential impacts in other areas, such as food security and biodiversity?
3.1 The UK’s commitment to an ambitious renewables target makes a powerful case for biomass to become an increasingly significant part of our future energy mix. The accompanying policy framework must facilitate this.
3.2 GBRf welcomes the recent commitments which DECC has shown to developing the biomass market. However, this display of support is not being filtered into other policy and regulatory areas. There are mixed signals coming from the transport regulator, which puts a question mark over whether Government is truly committed to biomass.
3.3 Recent proposals being put forward by the ORR threaten to produce policy in direct conflict with DECC’s principles. The regulator is proposing to introduce a freight specific charge on the transportation of biomass by rail.4 GBRf believes that such changes, set to be introduced in April 2014, would add £1 to £1.50 per tonne to the price of biomass. With a lower density than coal, biomass is already more costly to transport: proportionately it needs two wagons for every one of coal.
3.4 GBRf’s view is that an increase in the transportation of biomass by road is not the only likely effect of higher access charges. It is also likely to lead to some potential biomass projects being abandoned. Government has confirmed that the Renewable Obligation biomass subsidy levels do not take account of the charge.5 Unless the rail freight sector absorbs the charge itself and does not pass it on to biomass customers, the biomass sector would need to be subsidy free and profitable at the start date of the introduction of any freight specific charge. GBRf considers this highly unlikely.
3.5 This policy seemingly stands in direct conflict with Principle 3: “support for bioenergy should aim to maximise the overall benefits and minimise costs across the economy.”
3.6 GBRf recommends that the introduction of charges be stalled for at least ten years to ensure that the biomass market is allowed time to develop. During this time, and the DfT and the ORR must co-ordinate policy with DECC to ensure that the inter-relationship between biomass subsidies and any potential rail freight charge is explored in detail in advance of any decision being taken.
Chapter 4: What challenges are there to scaling up the use of biomass in the UK (ie regulation, feedstocks, sustainability, supply chain and financing)?
4.1 In a 2012 report, Deloitte identified five key challenges for biomass developers: regulation, feedstock, sustainability, supply chain, and financing.6 GBRf’s interest in this area specifically relates to the supply chain. We believe that the biomass market cannot reach its full potential if an efficient, cost-effective and sustainable supply chain is not built from the early stages.
4.2 Where possible, rail freight should be the transporter of choice for the biomass lifecycle. This is beginning to be the case for delivery of biomass from port to power station, however it also has potential to be the case for the feedstock delivery process. Rail freight has a number of benefits, including the following:
4.2.1
4.2.2
4.3 Whilst there are some elements already in place to assist the rail freight industry in its delivery of biomass, the level of capital required to invest in the full conversion of infrastructure from coal transportation to biomass transportation is still very significant. In particular, there are serious gaps in the availability of funding to do so and existing rail corridors do not offer enough capacity. There are a number of ways in which the rail freight sector can be supported:
4.3.1
4.3.3
4.3.4
4.4 There are also other ways to support the wider supply chain:
4.4.1
4.4.2
4.4.3
Chapter 5: To what extent will the UK be able to provide its own biomass and how much is likely to be imported?
5.1 The European Climate Foundation highlighted that a substantial amount of biomass fuel would need to be imported in order to meet EU targets.11
be in a place toducere
Chapter 6: What factors will have to be addressed to ensure that biomass is sustainable and to what extent is it possible to assess the sustainability of imported biomass?
6.1 Transportation plays a crucial role in ensuring that the biomass market is sustainable12 and the mode of transport is crucial to ensuring sustainability.13 The rail sector has strong environmental credentials and should be viewed as the transporter of choice in order to help the UK meet its carbon reduction targets (see 4.2.1).
April 2013
1 See Office of Rail Regulation, Periodic Review 2013: consultation on a freight specific charge for biomass, February 2013. Found at: http://www.rail-reg.gov.uk/pr13/PDF/biomass-consultation-feb-2013.pdf.
2 Indeed, in the ORR’s consultation paper, they state: “there is greater uncertainty than there is for other commodities about its prospect and about the impact of increases in track access charges on demand for it.” See Office of Rail Regulation, Consultation on freight specific charge for biomass, February 2013, p.6
3 Drax report, Biomass: The fourth energy source, 2010
4 The ORR consulted on this charge at the beginning of 2013. The consultation has since closed and the ORR intends to announce the access charge level in October 2013. Please note that this contradicts ORR’s previous plans to not introduce an access charge on biomass until Control Period 6. See Office of Rail Regulation, Consultation on freight specific charge for biomass, February 2013.
5 See House of Lords, Railways: Freight Charges, 25th March 2013.
6 Deloitte, Knock on Wood – Is biomass the answer to 2020?, November 2012.
7 Limatel, Biomass: Strategic Issues in Supply Chain Logistics.
8 Office of Rail Regulation, Consultation on Biomass Access Charge, February 2012.
9 Telegraph, Traffic congestion costs UK economy £4.3 billion a year, 10 December 2012.
10 Rail generates benefits in terms of reduced road congestion, equivalent to 28 pence per HGV mile avoided. See Office of Rail Regulation, Consultation on freight specific charge for biomass, February 2013, p.5.
11 Joint report by European Climate Foundation, Sodra, Sveaskog and Vattenfall, Biomass for heat and power: Opportunity and economics, 2010. See: http://www.europeanclimate.org/documents/Biomass_report_-_Final.pdf.
12 Graham Backhouse, Commercial Manager at Drax said: “Our commitment to reducing the carbon footprint of our electricity generation through the use of sustainable biomass extends to the transportation of this renewable fuel source. With a focus on moving biomass by rail we are able to make a meaningful saving in emissions of CO2”. See http://www.truckandtrack.com/news_item.php?wnID=2271.
13 In their Bioenergy Strategy, DECC said “the energy and mass density of the feedstock, distance transported and mode of transport all influence the energy, carbon and economic cost, with road transport over large distances (eg.400km) and shipping from distance sources (eg. 5000km) having particularly large energy and carbon impacts.” DECC, UK Bioenergy Strategy, April 2012, p.23.