Examination of Witnesses (Questions 240
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
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
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 costand I understand that
obviously you wanted a return on thatwould 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
needsthe school, the church and the village hall and so
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 SwedenI 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
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
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
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
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
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
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
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,
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.