Written evidence submitted by E.ON (BIO08)

  1. E.ON has a number of biomass activities within the UK as part of a balanced mix of generation which includes onshore and offshore wind, gas, coal and marine technologies.
  2. In 2008 we commissioned our first dedicated biomass plant, Steven’s Croft, located in Lockerbie with a capacity of 44MW. This uses predominantly sawmill residues (sawdust and chips), chipped small round wood and recycled waste wood, all from UK sources and generates enough electricity to power the equivalent of 70,000 homes every year.
  3. Since our initial investment in Steven’s Croft, we have invested in a CHP retrofit, providing steam to an adjacent saw mill owned by James Jones & Sons. Our second dedicated biomass plant, Blackburn Meadows, will have a capacity of 29MW and is currently in construction in Sheffield. It will use UK-sourced recycled waste wood. We are also using our Ironbridge plant, which has opted out of the Large Combustion Plant Directive (LCPD) and will close at the end of 2015, to trial the conversion of two coal units to run on biomass imported predominantly from North America. This biomass is in the form of wood pellets, densified to improve both carbon savings and cost efficiencies.
  4. In addition to our current biomass operations, we also have the potential to develop Portbury Dock, a consented 150MW coastal biomass development located in Bristol and are exploring other potential biomass opportunities within the UK and other parts of the EU.
  5. We believe Biomass can make an important contribution in meeting the UK’s legally binding renewable energy targets, both in the production of heat and power. However, to encourage heat, sufficient incentives need first to be in place to encourage investment in district heating networks.
  6. EON supports a credible, robust, independently auditable biomass sustainability policy for the UK. We have had such a sustainable policy in place for our biomass sourcing activities since 2009, and believe that this is essential for underpinning wider support for the sector.
  7. Whilst smaller inland biomass facilities will use indigenous sources of biomass, larger scale coastal plants and co-firing/conversion units will by their very nature require large quantities of biomass, mainly wood pellets. The UK supply chain will only be able to provide a small fraction of the required quantity, and thus importation will be the main source of sustainable fuel for these developments.

Q1. 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 will play an important role in decarbonising the electricity sector and meeting the 2020 renewable energy targets.
  2. As DECC’s Renewable Energy Roadmap update recently highlighted, during the 12 months to the end of June 2012, almost 40% of UK renewable electricity was generated from bioenergy. At the end of June 2012, bioenergy accounted for 3.4GW, or approximately a quarter of the total installed renewable capacity in the UK. Projects coming on line in 2013 will increase that figure to nearly 5GW. We agree with the Impact Assessment that accompanied the recent RO Banding Review and which concluded that enhanced co-firing and conversion could deliver an additional 4GW of capacity and potentially more.  This is a cost effective, baseload and dispatchable renewable technology which, as the Committee on Climate Change has recognised, is important in substantially decarbonising the electricity sector by 2030.

Q2. How well have the Government’s bioenergy principles (set out in the 2012 Bioenergy Strategy) been translated into policy?

  1. Are genuine carbon reductions being achieved?
  1. Yes. In order to be eligible for support under the Renewables Obligation, biomass plants, both new build and co-firing/conversion, have to meet sustainability standards which include Green House Gas (GHG) savings. The fuel life-cycle GHG emissions cap (which includes production and transportation of the fuel) is currently set at 285g CO2 eq per kWh, which compares favourably with the current UK average grid emissions of around 480gCO2/kWh.
  2. It is also worth noting the type of generating plants that new build and co-firing/conversion plants displace in the merit order. Whereas new build biomass schemes will typically displace existing gas plant with grid emissions of around 450gCO2/kWh, co-firing and conversion units are displacing coal, and thus are providing a greater carbon benefit given that coal generation typically emits around 900gCO2/kWh.

b. Is bioenergy making a cost effective contribution to carbon emission objectives?

  1. Yes. Last year’s Renewables Obligation (RO) banding review demonstrated that bioenergy developments provide one of the cheapest and most dispatchable forms of renewable generation available to the market today. Onshore wind is widely recognised as one of the cheapest forms of renewable generation available to the market today, with a levelised cost of electricity of around £100/MWh. Against this benchmark, DECC’s analysis last year suggested that the cost of biomass co-firing was around £90/MWh, biomass conversion around £105/MWh and new build dedicated biomass plants around £115/MWh.

c. Is support for bioenergy maximising the overall benefit to the economy?

  1. Biomass cannot afford to compete with buyers of high-quality wood. Instead, the industry makes direct use of lower value residues and by-products of the other industries (i.e. forestry, sawmills, agriculture) and, in the case of recycled waste wood, diverts away from landfill an excellent source of renewable energy that otherwise would have been lost. In this way, the use of biomass minimises waste, adds value and supports green jobs and growth in other industries.

 

 

d. Is sufficient attention being given to potential impacts in other areas, such as food security and biodiversity?

  1. It is crucial that biomass support is accompanied by robust regulatory standards that ensure that biomass not only makes a genuine contribution to reducing carbon emissions but originates from clearly demonstrable sustainable sources.
  2. The UK government is leading the way in Europe in introducing sustainability criteria, and should be congratulated for taking this course of action. E.ON has had a Group Wide sustainable policy in place for our biomass sourcing activities since 2009, and believe this is essential for underpinning wider support for the sector.
  3. With specific reference to food security, our policy states, “We will not use human food as a biomass fuel. Animal feed, crops grown for energy use and agricultural residual products, can only be used as a biomass fuel if:

 

  1. With reference to biodiversity, our policy states, “Biomass production shall avoid negative impacts on biodiversity, ecosystems, and areas of High Conservation Value”.
  2. DECC has recently consulted on amending the sustainability criteria in this area by moving to a sustainable forest management regime which is more applicable for biomass. This will help address the key land use change issues of sustainable harvest rates and carbon stocks, deforestation, biodiversity and social concerns. We support the policy intention but believe that the current proposals need to be revised in some areas such as around Mass Balance to ensure that it can be implemented and delivered by the industry.

Q3. What challenges are there to scaling up the use of biomass in the UK (i.e. regulation, feedstocks, sustainability, supply chain and financing)?

  1. Under current market conditions, most renewable technologies including biomass require financial support, primarily through policy mechanisms such as the Renewables Obligation. Investment in renewable capacity is contingent on forward visibility of such policy mechanisms. The risks associated with the ongoing uncertainty around support levels, sustainability criteria, grandfathering of targets and methodology and the approach taken by the European Commission makes securing investment in biomass projects challenging.
  2. DECC is proposing to limit the amount of new build dedicated biomass capacity which it will support to 400MW. This proposal directly affects the available growth in this biomass technology. Sustainable feedstock availability is not generally viewed as a constraining factor in the growth of the UK biomass sector so long as there are long-term drivers in place which support the necessary development in the sector.
  3. There are other secondary constraints such as the required investment in new UK infrastructure to transport, store and process biomass fuel. However, should there exist a robust policy framework that provides certainty to investors, then industry and the market has indicated its commitment to working together to overcome these logistical issues

Q4. To what extent will UK be able to provide its own biomass and how much is likely to be imported?

  1. For smaller scale inland biomass projects, typically less than 50MW in scale, indigenous local supplies will primary provide the fuel to the site. However for larger scale new build projects over 100MW and co-firing and conversion schemes, the UK market will be unable to provide the large quantities of biomass required. Importation of biomass, predominantly wood pellets, will therefore make up the overwhelming majority of the fuel for these schemes.

Q5. 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?

  1. We believe that DECC has already taken a major step forward in providing confidence to stakeholders that biomass used in power and heat projects originates from sustainable sources.
  2. The latest consultation proposals on sustainability criteria significantly tighten the social and economic criteria that operators will be required to meet around issues such as legality, life cycle GHGs and biodiversity. Such information will need to be verified and provided to Ofgem in order to qualify for support from the RO. We welcome this development provided there is sufficient grandfathering protection for long term investment decisions that have already been made. There also needs to be appropriate transitional arrangements to reflect the fact that it will take time for fuel providers to comply with the new regime. For example, the predominant source of wood pellets is the US, where forest ownership is mainly private and highly fragmented and where the primary, industrial users of wood fibre are not from the energy sector. Where there is clear evidence that a region has a robust sustainability framework in place, an appropriate regulatory response would be to deem the region as being compliant with the sustainability policy, as opposed to requiring individual supply chain audits to be undertaken to verify compliance.  

 

April 2013