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Select Committee on Science and Technology Minutes of Evidence


Examination of Witnesses (Questions 240 - 259)

WEDNESDAY 10 MARCH 2004

The Earl of Selborne and Mr Chris Day

  Q240  Lord Tombs: What about seasonal variations?

  Earl of Selborne: Well, the packhouse operation, which is a great energy user for refrigeration, that is now becoming pretty well all the year round because we are taking southern hemisphere fruit as well as our own. But of course the requirement for heat of its nature is a seasonal requirement, so even though we would have been seeking to offer heat to the church, the village hall, the school and other users within the community, I think they would have only been in the market for heat when we wanted it.

  Lord Tombs: Quite, yes. Well, that is life. Were you relying on a standby supply at all or were you hoping to be wholly independent?

  Earl of Selborne: No, we would always, I think, have had to rely on standby.

  Q241  Lord Tombs: Did you have a figure? Were you negotiating a figure for either standby or imported units?

  Mr Day: That is a factor. You still have to pay for your standby capacity but in these instances even going for the gas-fired CHP or buying capacity you still have to address the fact that you have a relatively low and seasonal load factor. In this case it was probably less load factor than the cost being paid for fuel which was the most sensitive factor. The projects which have progressed have tended to be negative cost fuels where you have a proportion of very low cost or even negative cost wood fuel and in the case of the managed woodland there would be a positive cost with wood fuel.

  Earl of Selborne: In our example, although we are very heavily wooded we do also have the benefit of the Forestry Commission as our neighbours. The Alice Holt research station is very close and so I was hoping also that they would have been interested enough to look at this as a by-product from their forestry estate and close to their research station. Of course rightly, and I think absolutely appropriately, they insisted that the costs must be comparable to other outlets. Now, you have to compare that with the cost of wood stacked on the side of the road. It may be a negative charge when it is in the wood but by the time you have extracted it to a hard surface it has clearly got a value and I think with some of the projects I have seen the prices do not compare with firewood, which would be the alternative crop. I think that is unrealistic. You cannot expect woodland owners, the Forestry Commission or anyone else, not to sell to the highest bidder.

  Q242  Baroness Perry of Southwark: You mentioned the initial capital cost of half a million to set up the plant. If one could leave that on one side for the moment, I am just trying to understand exactly what your motives were. You were going to use a considerable amount of biomass material for free, so to speak, from your own farm and you wanted to use the heat and light largely on your own farm and in the nearby village, is that right?

  Earl of Selborne: Yes.

  Q243  Baroness Perry of Southwark: If you had been able to be completely independent of the National Grid, again leaving aside the capital cost—and I understand that obviously you wanted a return on that—would that have been a complete system in itself? Would you have been able to provide enough power to provide for your own needs and for the community's needs—the school, the church and the village hall and so on?

  Earl of Selborne: That would have been a much bigger project. It is rather like Woking did when they built out. That, I think, would be my vision but I have to admit I bottled out before I got to that stage because I think you have always got to recognise that while our neighbours would be delighted to receive electricity from us at a lower cost than the grid I would always advise them to have the alternative supply still there. So we would effectively have been double-wiring. With our own refrigeration requirements with other people's fruit from the southern hemisphere, I would not dare rely on our own plant, it would always have to be belt and braces because it is a very valuable crop and you would not get insurance, I am sure, without it. So there is a lot of costs which you put into it, but I do believe one has to think incrementally on this. I start perhaps with a slightly idealist concept that we are all trying to understand what we mean by "sustainable development" and if we are generating waste materials such as from the dairy, such as from the arable farm and such as from the woodlands, it is logical to try and think sustainable as to how that could help the community. Everyone is saying it is highly desirable and everyone is encouraging us to do it by a pilot scheme but I think Mr Day's experience is that where industry (unrelated to government usually and without support) simply get on and do it, particularly when they have fuel coming in at a low price, in practice we could never see what is happening on the Continent where, quite frankly, to get these exemplar schemes, these pilot schemes within a community up and running, complicated as they are, I think realistically you do need a bit of subsidy or some sort of encouragement, if only to try and demonstrate that it can be commercial ultimately. I think this is happening in Germany. It is happening in Denmark. You see plants which do come in at a completely different cost structure. They get more for their power, of course. There are all sorts of factors. Having taken an overview on this, I would simply take the view that we are probably overdone with schemes to give us advice and what you really need is to roll these all up into something which was a bit more commercially relevant.

  Q244  Baroness Platt of Writtle: Have you met any other schemes of the same size of yours or the same potential in this country which have been made to work commercially?

  Earl of Selborne: I think I could ask Mr Day to give examples of what schemes he has been involved in.

  Mr Day: That is a good question. In five years, having done a lot of studies supported by Government on projects for local authorities using short rotation coppice, miscanthus, wood fuels, we have never built one project. However, I am not negative because in that time we have built a number of projects for industry and all the projects for industry are there because industry is taking the low cost wood from its own operations and putting the CHP back into their own factories. There seems to be a substantial contrast here between in the UK looking for a somewhat academic environmentally correct approach to using only the quite high cost short rotation coppice, £45 per dry tonne, and so they are never economic so we never build them. In comparison with, for example, Austria, Denmark and Sweden—I take Austria as an example where my European partners there have built a lot of projects of this scale but they are allowed to take the wood from the furniture factories, the saw mills, which are "waste wood", which are not admitted in this country. So why we build the projects for industry is because we are allowed to take the furniture factory and the saw mill wood. Perhaps another comment is that while in the regional, national and even local authorities there is an impression that we have not built any wood fuel power plants in the UK, we often in fact have difficulty bringing those parties to see industrial projects. In the south of England we have two very nice wood fuel power plants on industrial sites. It has taken over a year to have parties come to see those because they are in industry, while the same parties are very happy to go to see a project in Austria or Denmark where it is seen to be with the local authority. I think there is an unfortunate disconnect in a way between what is seen to be in the public domain here and what is in industry.

  Q245  Lord Lewis of Newnham: Can I be clear. You are saying that in industry they get no monies from government at all?

  Mr Day: No support at all.

  Q246  Lord Lewis of Newnham: Your point simply is that in other areas of the Continent they are indeed getting the subsidy from their government?

  Mr Day: Yes.

  Q247  Lord Lewis of Newnham: It is this argument that you are not allowed to subsidise industry from the point of view of the EU rules and it is really the interpretation of that that is at fault.

  Mr Day: Exactly, yes.

  Q248  Lord Lewis of Newnham: Your argument, if I understand it correctly, is that some countries are quite clearly able to do this and other countries cannot. Why is it that we are in that latter group of people?

  Mr Day: The argument in this country is that that wood is a waste under the Waste Incineration Directive and under the Waste Directive, while in Austria and Scandinavian countries they have interpreted those rules to say that wood which has come from the saw mill, from shavings, from saw dust, from furniture factories is as clean a wood as it is coming from the forest and therefore is admitted as a fuel, as a clean biomass. Now, where we have built those projects therefore on saw mills and furniture factories in the last five years those have been negative cost fuels and of course that means there is a dramatic difference in the economics if you are dealing with a negative cost fuel for clean waste wood or in government's and particularly Defra's expectation you will pay £45 a dry tonne for short rotation coppice, which is uneconomic.

  Chairman: We have come across this problem of definition before when we found that a plant operating in East Anglia on chicken litter was allowed to use chicken litter but not the feathers from the chicken because they were regarded as a waste product and that would have actually made that operation rather better.

  Q249  Lord Turnberg: I want to ask Lord Selborne to clarify exactly what the rate limiting step was that stopped you going ahead. Was it the initial start up support subsidy you might have had to set the thing going or was it the continuing price?

  Earl of Selborne: The latter fundamentally. I think I came to the conclusion quite quickly that we could not make the "P" work. Heat could work but it would have to be scaled down considerably from my original proposal, which was to take not just heat but refrigeration and power. But the economics of it appeared to be difficult to justify. Having said that, had there been some support from the Regional Development Agency, as I hoped there might have been, to try and get an exemplar scheme to demonstrate to rural based communities and rural based industries that you could bring together these different strands and take some funding from social cohesion funds for the village hall and the school and something else from elsewhere, you might just have been able to put a package together. But my experience was that there was any number of people who would give you advice on feasibility but when it actually came to putting together a business plan because we are essentially a commercial and not a not-for-profit village hall association or housing association then it was not appropriate to support it. I understand that and recognised that it was not going to break even so I have backed off for the moment.

  Q250  Lord Turnberg: You would have needed a continuing subsidy?

  Earl of Selborne: Yes.

  Q251  Lord Flowers: How experienced was the advice given?

  Earl of Selborne: Well, I think I will ask Chris Day. I asked Mr Day to give me advice and he has a lot of experience, but would I be correct in saying that you find it frustrating very often in dealing with some of the organisations that you are required to deal with because not all of them do have much experience?

  Mr Day: Yes. It has to be said that quite a number of the organisations providing the advice placed a greater emphasis on the strategy, on the climate change objectives and they often do not address the matters within an economic feasibility study. It is a matter of trying to satisfy policy rather than developing economic projects.

  Q252  Lord Wade of Chorlton: Clearly from both your experience and the experience we have had generally in the rural economy this could be a very valuable thing. You would be able to do it on your own property and from your own services but if it was feasible to do it is there no reason why it should not be done with a group of farmers coming together and dealing with it? What recommendations might we make that would make it much more likely to happen?

  Earl of Selborne: I think instinctively the scheme should work. If you have woodland and you have cows, straw and waste materials coming into the packhouse and you still cannot make it work you feel something is wrong somewhere. I say that first and foremost the price of electricity at the moment, if you have to sell to the National Grid, is an absolute killer. It is a complete and utter killer. Now, Woking have got around this and I think that is probably the only way to do it. You build your own effective local grid and you supply alongside the National Grid. That seems to me to be sensible but it is not an easy one for a farm to do. There are all sorts of complications in going into the business of being a local grid. It would be hard enough to supply your own buildings let alone your neighbours. But I do think that NETA is extremely unfair to renewable energy suppliers who are providing locally into the National Grid and I think that does need examination. Secondly, I would encourage somebody, I think probably at the regional level, the RDA level, to look at community based schemes and not be frightened if it is being led by a commercial animal. I do not think they are so frightened if it is led by a local authority. It is just that, as Mr Day explained, local authorities never seem to deliver. They talk about it but they do not actually deliver. Woking is an exception and I should not be rude about local authorities because they have done precisely this. But very often it will be a mixture of a local business, a farm business, for instance, but supplying the community and there has got to be a bit of give and take. They should not be frightened of the word "profit" or "commercially viable". My experience is that as soon as you mention profit everyone has to give up.

  Q253  Lord Wade of Chorlton: If you had been able to have netted up your movement of electricity, in other words so that you only paid for what you used, and if you put it back into the grid and that was netted against what you were buying, that would have been the same as selling it and that would have made the whole thing stand up?

  Earl of Selborne: That would be much more sensible from our point of view, yes.

  Q254  Chairman: Would net metering have made it work?

  Earl of Selborne: I think we could have put together a scheme which would have worked. It would not have been the one I originally drew out.

  Q255  Baroness Sharp of Guildford: Yes, I was going to ask you about whether net metering would have helped you. We have covered that but I have a couple of other questions. Am I right in thinking that what you are saying about the distinction between the Austrian experience and this is that actually in Austria and in other European countries they are actually interpreting the Waste Directive totally differently?

  Mr Day: Yes.

  Q256  Baroness Sharp of Guildford: Secondly, am I also right in thinking that with quite a number of the industrial projects which you have advised on which have been successful that has had integrated wiring? This does happen sometimes, does it not, as with Woking, that they have established their own internal wiring system and therefore the fuel they generate (whether it is methane or whether you turn it into electricity) becomes internal to the system and this would obviously helped you quite a lot had you in fact been able to do that?

  Mr Day: The best of the projects which we have done are done in that mode. It is called island mode and your power plant is powering your own site and from the grid it is import only. You can imagine there is special protection and metering arrangements and it has been my opinion, expressed in workshops with OFGEM and others, that that should receive a lot more support but it is extremely difficult (only through virtual companies and various contrived arrangements almost) to obtain ROCs in the UK under that arrangement.

  Baroness Sharp of Guildford: Thank you.

  Q257  Lord Lewis of Newnham: Do I really understand the difficulty here is a matter of definition as to whether you are talking about a thing being disposed of or being re-cycled?

  Mr Day: Yes.

  Q258  Lord Lewis of Newnham: I think that is ostensibly the ruling that was placed on this when it was applied to waste. This applies to a number of features of definition, which I think ought to be cleared up at a very early stage by the European Union. What is happening to that particular commodity, the slurry for instance? What are you having to do with that now, John?

  Earl of Selborne: Well, we are spreading it on the soil in the normal, traditional way. We are not using it as a fuel. It has a value obviously as a nutrient so it is not totally wasted. A packhouse inevitably has packing materials. We are packing apples from the southern hemisphere. All this has to go into skips at the moment and taken off. I would think logically this is clean waste, the palettes and the cardboard for that matter, and I would have seen that as a sensible source for a CHP plant. It would have all been local and I am advised that the modern incinerators are extremely efficient and quite different from the old generation of incinerators so I would have hoped that that would have been also allowable, but it is dead wood. It is another problem we have which I think other European packhouses would not have.

  Q259  Lord Tombs: Just two questions for Lord Selborne, if I may. First of all, a fairly straightforward one. How long would it have taken to clean up your derelict woodland? What are your plans?

  Earl of Selborne: Well, I do not see it so much as cleaning up as getting a rotation going, because we are talking about coppicing. We are also talking about sort of catching up with ourselves. We have got 400 acres of woodland and I would like to think that from our own woodland we could have done 40 acres a year. That actually may not all have been available for access reasons and I did say, I think, that I would have also liked to have seen other local landowners invited to participate in what would have been a profitable market, including the Forestry Commission. So I did not see it as relying totally on our own woodland. But 40 acres a year I think probably would be enough.


 
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