Energy and Climate Change CommitteeWritten evidence submitted by Drax Group plc (BIO21)
Overview
Drax Group plc (“Drax”) is a FTSE250 company and one of the largest independent generating companies in the UK, responsible for meeting some 7–10% of the UK’s electricity demand. Drax owns and operates Drax Power Station, the largest, cleanest and most efficient (primarily) coal-fired power station in the UK, but we are transforming it into a predominantly biomass-fuelled power station. By doing so we are evolving from being the largest single source of carbon emissions in the UK to one of the largest renewable generators in the world.
We also have a retail business selling power to business customers and a presence in the US focused on developing and building plants to process wood into pellets for use as a source of biomass electricity.
Executive Summary
Biomass has a critical role in the UK’s transition to a low carbon economy not only because it is the world’s fourth largest energy resource, but also because of the flexible role it plays in the renewable energy mix.
Carbon balance is maintained at all times if biomass comes from areas of forest where overall growth is at least equal to harvest and carbon stock is therefore maintained. In purely carbon terms this is what is meant by sustainable. Biomass used in electricity generation can therefore deliver substantial carbon savings relative to fossil fuels if it is harvested, processed and transported in a carbon efficient way.
Sustainability should encompass more than just carbon balance. It also covers biodiversity, maintenance of soil quality and productivity, water quality, land use change (indirect and direct) and social well-being.
Drax strongly supports and advocates the introduction of transparent, stable and mandatory sustainability criteria, based on well established, sustainable forestry practices. They must apply equally to domestic and imported biomass and be audited by independent third parties.
What contribution can biomass make towards the UK’s decarbonisation and renewable energy targets? Are the Government’s expectations reasonable in this regard?
1. Biomass from sustainable sources can and must make a substantial contribution to decarbonisation in the UK. It is unlikely the UK can meet its decarbonisation targets without the use of biomass for energy production at scale. This is due to its abundance, the unique role it will play renewable energy mix, and the speed with which bioenergy can come on stream, for example, in the case of renewable power through the conversion of existing power stations. It can also operate flexibly to deliver both base-load and peaking power when required—a dual function that no other renewable can deliver on a comparable scale in the UK.
2. Attempting to decarbonise the UK economy without the use of a despatchable power resource such as generation from sustainable biomass would mean locking in a dependency on fossil fuels because, in the absence of sufficient opportunities for large-scale pumped storage, fossil fuels are the only power sources which share biomass electricity’s characteristic of being available on demand.
3. The Government’s expectations are reasonable. As the fourth most abundant energy resource on the planet, after oil, coal and gas there is no shortage of sustainable biomass. The challenge is not whether there is enough sustainable biomass available but rather to develop the infrastructure to process and get the biomass to where it is needed and to ensure that all the biomass used comes from genuinely sustainable sources.
How well have the Government’s bioenergy principles (set out in the 2012 Bioenergy Strategy) been translated into policy?
4. Each principle is explored in answer to subsequent questions but in general the policies and support levels being implemented by Government are set at an appropriate level to encourage the conversion of the most efficient coal-fired power stations to biomass, but without unduly extending the life of less viable, less efficient plant, and also supporting the development of CHP biomass facilities.
5. By using the conversion of existing coal-fired plant as a transitional technology we are already seeing the creation of a supply chain that ultimately other bioenergy technologies will be able to benefit from. Furthermore, in the case of power, when combined with Carbon Capture and Storage there is the tantalising prospect of a carbon negative technology.
6. DECC deserves significant credit for the principles they have produced and the way they are delivering on these principles with the delicately balanced support regime being implemented. DECC is expected to announce its proposed new sustainability criteria for biomass in the period between this paper being submitted and the Committee’s planned oral evidence session. We welcome the commitment to appropriate, transparent and mandatory sustainability criteria. However, it is imperative that the resulting sustainability criteria are based on carbon accounting procedures which reflect established forest practices and the actual balance of carbon sequestered in forests relative to the amount being removed rather than abstract modelling or arbitrary rules regarding the proportion of a given tree which can be used to produce bioenergy.
Are genuine carbon reductions being achieved?
7. Generation of electricity from sustainable biomass delivers substantial carbon savings relative to the fossil fuels it replaces. The savings are even larger in converted units of existing coal power stations. Put simply, burning fossil fuels releases carbon that would otherwise have remained locked in the earth’s crust. Whereas, when biomass is burnt it is the carbon that is absorbed during the growth cycle of the biomass material that is released. Therefore there is no net increase in atmospheric carbon and that sustainable cycle continues. Further, sourcing only from sustainably managed forests ensures that the carbon stock of the area is at least maintained because the overall rate of tree growth uptake is greater than removals.
8. Clearly, over its entire life cycle biomass electricity is not carbon neutral because there are emissions associated with the harvesting, processing and transporting of biomass. However, through carbon life cycle analysis those emissions can be measured and with appropriate mandatory limits the UK can ensure that all biomass used in electricity generation will deliver major savings relative to even the most carbon efficient fossil fuel alternative. For example, even including the carbon emissions associated with harvesting, processing and transporting the use of biomass at Drax Power Station in 2012 delivered carbon savings of around 80%, relative to the coal it replaced. These are real savings, measured and delivered in the real world and encompassing the full biomass supply chain.
9. Some recent studies do question the ability of biomass to deliver carbon savings before 2020, but it would be inappropriate for the Committee to extrapolate general conclusions from these studies which are based on very specific scenarios and assumptions. For example, on examination these studies generally rely on models based on assumptions and counter-factuals which do not reflect established, sustainable forest practices.
10. A particularly misleading conclusion is based on the idea that a tree burns in seconds, but takes years to grow. This is a misguided perspective because it is inappropriate to focus on a single tree or even a single stand of trees; the important thing is that the whole forest area is considered (for example the sourcing radius around a processing plant) is managed in a sustainable way and that it contains at least the same, and ideally an increasing amount of, carbon at all times. In well managed forests there will typically be stands of trees of different ages which are harvested in sequence as they reach maturity. Any assessment of carbon stock has to look at the whole forest because for every mature tree which is removed there will be many others at different stages of growth. Younger trees will be growing fast and absorbing carbon at a correspondingly fast rate, while those closer to maturity and ready for harvesting will be absorbing carbon at a much slower rate. Provided the overall rate at which carbon is absorbed by the forest exceeds the rate at which it is being removed there can be no “carbon debt”.
11. A good way to envisage this is the catchment area around a pellet plant, the plant’s so-called “fibre basket”. Pellet plants would only ever be built in an area with a sustainable raw material resource.. In order to maintain continuous production the pellet plant it must be located an area where the growth-drain ratio is greater than one.
12. It is important to acknowledge that demand for wood facilitates forest management. Many of the world’s production forests are in “carbon credit” because of active forest management and reforestation, but this is only the case where there is demand for the products of those forests. There is an old and relevant adage that says “a wood that pays, stays”.
13. For example, US forest growth has exceeded harvest for the each of the last 50 years. Standing volume increased 49% from 1952 to 2006 even though there has been an increase in harvest level to feed industrial demand over the same period. The US forest estate now stands at 751 million acres of forest with net volume per acre increasing by 94% since 1953. This is the result of sustainable forestry which depends on predictable long term demand for wood. Arbitrary rules which reduce long term demand for wood products and therefore the very forest management which has resulted in these increasing carbon sinks (in 2012 the US EPA reported that forest carbon sequestration in the US had increased 31% since 1990)can prejudice forest management activity. Damaging this virtuous circle of demand and increased supply is the trap DECC’s sustainability policy must avoid when published.
14. Our life cycle analysis shows that even when imported from as far away as the west coast of north America biomass delivers significant carbon savings relative to fossil fuels. In fact the carbon footprint of a bulk transport from the US is approximately the same as transporting the equivalent amount of biomass in lorries from Scotland.
Is bioenergy making a cost effective contribution to carbon emission objectives?
15. Full conversion of units within existing coal-fired power stations to burn biomass is one of the most cost effective renewables for two reasons. Firstly, the capital costs of developing the capability and connecting it to the grid are lower than most other renewables because the plant already exists. For UK plc the extension of service of existing (relatively modern) power assets is cost effective. Secondly, because converted units are despatchable, there is less need for additional back up stations to be on standby. Some of these cost savings are not transparent in the UK where grid connection and stability costs are socialised rather than met by the individual generator. The lower capital, connection and stability costs should be balanced against an on-going need for feedstock but for these reasons Drax agrees with the Energy Technology Institute’s ESME modelling that it would cost £44 billion more to decarbonise the economy without biomass. It would not be possible to reliably decarbonise the economy without the vital role envisaged for biomass.
Is support for bioenergy maximising the overall benefit to the economy?
16. A cost effective, low carbon fuel which is available when required is the essential answer to the energy trilemma the UK faces and is therefore important in UK wide economic terms. The economic importance of managing the transition to a low carbon economy in a cost effective, reliable way is hard to overstate.
17. It will also support a number of jobs through the supply chain. The Forestry Commission estimates that the woodfuel industry could generate £1 billion and support more than 15,000 jobs in the UK. Drax alone employs over 800 people at the Drax Power Station site with at least that number again benefiting as contractors and our biomass investment creates jobs across the supply chain, including at UK ports and rail. The £650 million—£700 million investment Drax is making includes new facilities and plant modifications at Drax Power Station and upstream investment in processing plant as well as investment in new rolling stock.
Is sufficient attention being given to potential impacts in other areas, such as food security and biodiversity?
18. These are important issues that need to be addressed as part of a robust sustainability regime. For example, Drax has developed a comprehensive sustainability policy founded on seven key principles. These principles give sufficient attention to other potential impacts and Drax would welcome more widespread and mandatory adoption of similar principles across the UK and the EU. The key objectives of our policy are as follows:
Policy Principle 1: Significantly reduce GHG emissions compared with coal-fired generation.
Drax calculates GHG emissions using the DECC/Ofgem Biomass and Biogas Carbon Calculator and aims to improve its understanding of GHG emissions in the supply chain by reviewing data and discussing inputs to the calculator with biomass suppliers. The calculator describes and includes all supply chain stages, where applicable, from cultivation and harvesting, to processing and transportation.
Policy Principle 2: Not result in a net release of carbon from the vegetation and soil of either forests or agricultural lands.
The issue of carbon stock removal and replacement has recently been referred to as the “carbon debt” of harvesting feedstock. Below ground carbon stock is equally important with respect to carbon storage, as well as biological actions which occur, maintaining soil quality and biodiversity. To determine if above and below ground carbon stocks are conserved, the principle looks at “new” cultivation and harvesting operations (from 1 January 2008). Methodologies to determine the implications of harvesting operations on carbon stocks and recovery periods for different crop rotations in different climatic regions may be considered but the basic requirement is that the area from which biomass is extracted will be continuously replanted.
Policy Principle 3: Not adversely affect protected or vulnerable biodiversity and where possible we will give preference activities that enhance biodiversity.
Drax ensures that cultivation and harvesting operations do not adversely impact biodiversity and endangered species and assesses measures taken to prevent and/or mitigate potential impacts or enhance biodiversity through a land management planning regime. Valid certification for environmental quality assurance or sustainable resource management plays a key role in this assessment which also focuses on meeting applicable legislation, performing appropriate environmental studies and incorporating results into planning and practices, and having suitable qualified/experienced personnel on staff. The RSPB recently concluded that sustainably managed forests are the best way to protect biodiversity in the UK and we would endorse that finding and note it extends to genuine sustainable management elsewhere too.
Policy Principle 4: Deploy good practices to protect and/or improve soil, water (ground & surface) and air quality.
Drax ensures that operations throughout the supply chain protect soil, air and water quality. For cultivation and harvesting, issues such as valid certification, meeting regulations, soil salinisation, burning wastes, irrigation, agrochemical use, nutrient balance in soil, erosion and protecting water bodies are taken into consideration. For processing, meeting regulations, water use reduction, burning wastes, preventing/controlling emissions and effluents are considered and, for transportation, monitoring and reducing emissions to air and water are considered.
Policy Principle 5: Not endanger food supply or communities where the use of biomass or land used for growing biomass is essential for subsistence (eg food, heat, medicines, building materials).
Drax ensures that biomass or land used for growing biomass does not adversely affect those that may have or are still relying on the biomass or land for subsistence living. This principle assesses whether measures have been taken to prevent and/or mitigate potential impacts.
Policy Principle 6: Contribute to local prosperity in the area of supply chain management and biomass production.
Drax ensures that operations throughout the supply chain have a positive economic contribution to the local community. This principle applies to all supply chain stages including cultivation, harvesting, processing and logistics. Direct economic contributions include value generated and distributed in community (revenues, operating costs, employee compensation, community investments/donation, payments to capital providers/governments). Indirect economic contributions include the use of local suppliers and contractors, local hiring and local senior management.
Policy Principle 7: Contribute to social well-being of employees and local population in the area of biomass production.
Drax ensures that cultivation and harvesting operators are upholding basic human rights, protecting community health and safety, and implementing fair labour and ethical business practices. This principle takes into account cultivation and harvesting operations located in countries or regions with active and functional justice systems and legislation addressing business ethics, fair labour practices, fundamental human rights, and health and safety. Key issues include underage workers or forced labour, breaching fundamental human rights, not engaging in illegal activities such as corruption, bribery, fraud, extortion or money laundering, providing a safe/healthy working environment for employees (training, personal safety equipment) and not violating official property/use and customary law.
What challenges are there to scaling up the use of biomass in the UK (ie regulation, feedstocks, sustainability, supply chain and financing)?
19. One constraint on scaling up the use of biomass in the UK is the development of the world-wide supply chain and providing third party investors in that supply chain with the certainty they require. The contractual nature of DECC proposals for a FIDe CfD should provide more certainty and mitigate this risk.
20. Gaining stakeholder confidence in the acceptability of large scale bioenergy projects is critical, not just for Government, the interested public and environmental NGOs, but also for investors and banks who have an interest in the longevity of the fuel stream. The key risk to biomass development would be the use of biomass which does not provide the anticipated GHG benefits or that has unwanted negative environmental impacts (directly or indirectly). This risk will only be effectively mitigated by compliance with strict sustainability standards which are appropriate, comprehensive, legally binding, and demonstrably implemented, so that concerns can be allayed and sustainable biomass accepted in the energy mix. This is why Drax has been a strong advocate of robust sustainability criteria (which apply wherever the biomass is sourced) at both a UK and EU level.
21. To mitigate this risk, the implementation of robust and mandatory sustainability criteria across the bioenergy sector therefore depends on gaining credibility for monitoring and verification systems across the full length of the supply chain, with both suppliers and end-users developing the necessary management and auditing systems.
To what extent will the UK be able to provide its own biomass and how much is likely to be imported?
22. While Drax can and does make use of the by-products of farming and energy crops which can grow on marginal land in the UK, the vast majority of the wood pellets burnt at Drax Power Station will be imported. The UK’s size and other land use pressures does not lend itself to a large forest industry in world terms and the current harvest has existing domestic markets. Because Drax requires wood pellets as a fuel to substitute in our coal boilers and requires fuel in large quantities sourcing and logistics can be more effective from overseas sources and then utilising the existing coal import routes to the power station. Effectively we will be replacing imported coal with imported biomass. Carbon life cycle analysis outlined above does still show substantial life cycle carbon savings including transport and processing relative to fossil fuels.
23. Most UK sourced wood tends to be used by other industries, including domestic heat, wood panels , construction and paper.
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?
24. The factors are addressed in detail in the principles quoted in paragraph 18 which explains the background to Drax’s policy and how it is enforced. In 2008, in the absence of recognised and suitable standards for the procurement of sustainable biomass, Drax developed its own policy and implemented comprehensive sustainability criteria into its biomass procurement activities with the aim of assuring the sustainability of its biomass supplies whether in the UK or abroad. Since 2008, suppliers have had to comply with these sustainability criteria as a condition of contract and the systems implementing them have been subsequently improved because of their linkage to regulatory compliance.
25. The policy is regularly reviewed and was last updated in 2011 to reflect the changing regulatory requirements. The next review will consider the implications of the forthcoming DECC sustainability standards.
26. Supplier response to this policy to date has been positive. Independent third party audits to ISAE3000 standards were introduced to supplement the high level policy and to assess the sustainability information provided by the supplier to Drax, in particular, to identify factual accuracy and evidence to support the supplier’s assertions.
27. The Committee therefore should not allow other users of biomass to claim that the sustainability of imported biomass cannot be measured. It can be, in a similar way to which other wood and wood product supply chains currently function, and responsible wood biomass users have a long history of doing so. It takes effort and investment but it can be done and it is essential to maintain confidence in the sustainability policy.
April 2013