Debate Pack: Biomass as a source of renewable energy

Biomass as a renewable source energy is used to produce electricity and heat in the UK. It is also used as feed stock for the production of fuels used toward meeting the EU renewable transport fuel obligation (RTFO). This brief focuses on the production of electricity and heat.

The Renewable Energy Roadmap, published in 2011, identified non-domestic biomass heat and biomass for electricity as two of the seven technologies that would make significant contributions to meeting the UK’s 2020 renewable energy target of 15%. The Government also published a Bioenergy Strategy in 2012 in which it set out its intention to focus on the more resource efficient uses of biomass. This included technologies that generate heat, especially combined heat and power (CHP), or make use of residual wastes. In addition, the conversion of existing coal power stations to biomass was identified as a transitional, low cost means to rapidly reduce the carbon intensity of the electricity grid.

Financial Support – electricity

Support for renewable electricity generated from smaller anaerobic digestion (AD) installations, generating biogas or ‘green gas’, and CHP is supported through Feed-in Tariffs, which have been recently reviewed by the Government. Lower levels of support have been introduced from February 2016 which include cap on quarterly levels of supply.  The first round of applications for AD reached the 5.8WM first quarter cap in 15 minutes. 

Larger installations are supported through the Renewables Obligation until it closes in 2017. After that it will be supported through Contracts for Difference (CfD). CfDs were introduced by the 2010 Coalition Government to replace the Renewables Obligation. They are a system of reverse auction intended to give investors the confidence and certainty they need to invest in low carbon electricity generation.

The Government’s original stated intention was that the second contracts for difference auction would take place in autumn 2015. However in the energy policy reset announcement in November 2015 the Minister stated that the Government would make funding available for three auctions in this Parliament, with the intention of holding the first of these auctions by the end of 2016. There has not been any indication as yet as to whether any future auctions would include biomass.

The EU has investigated the support provided to the conversions of coal fired power stations to biomass which have all been cleared. More recently the award of a CfD contract to Drax in the first round of actions has attracted the Commission’s attention. It announced in January 2016 that it “has opened an in-depth investigation to assess whether the United Kingdom’s plans to support the conversion of part of the Drax coal power plant to operate on biomass are in line with EU state aid rules”

Financial support – heat

The Renewable Heat Incentive (RHI) is similar to the Feed-in Tariffs. In 2011 the first phase of the Renewable Heat Incentive, non-domestic RHI, came into force. On 9 April 2014 domestic RHI was opened to homeowners, private landlords, social landlords and self-builders. The policy paper “2010 to 2015 government policy: low carbon technologies”, provides further background.

While the Renewable Heat Incentive is similar to the Feed-In Tariffs, there are some important differences, and in particular:

• It will be paid for by the Treasury not by energy users.

There is no ‘National Grid for Heat’ and so importing and exporting heat is not relevant.

Sustainability of biomass

For electricity generation, there is mandatory reporting but not mandatory criteria for measuring the sustainability of biomass use by larger generators, although DECC did publish Life Cycle Impacts of Biomass Electricity in 2020 in 2014. Concerns raised by the potentially significant carbon impacts of the large imports of biomass pellets by Drax from the US have led to DECC commissioning a further report from Ricardo AEA This is not due to be completed until the next session of Parliament, later this year.

New Direction for UK Energy Policy Announcement

The Department of Energy and Climate Change (DECC) introduced new sustainability criteria for non-domestic installations using biomass and biogas fuels, and producers of biomethane under the Renewable Heat Incentive (RHI) on 5 October 2015. To continue to receive RHI payments participants must now use fuels that meet the sustainability criteria.

Following its commitment to increase funding for the RHI to £1.15 billion in 2021, the Government published are series of RHI review documents in February 2016, in advance of an expected review of the scheme in 2017. The Government concluded that “the RHI had been wholly positive in its influence on the renewable heat technology market”.

The Summer Budget included an announcement on the removal of the Climate Change Levy Exemption that applied to renewable electricity supplies. Drax challenged this decision in the courts but was not successful.

The Government announced on July 22 that DECC’s latest forecasts under the Levy Control Framework, set up to limit cost to consumers of renewable energy, had shown that forecast spend on renewable energy subsidy schemes would be higher than expected and needed to brought under control.^[1] At the same time DECC announced a package of measures, to “control the cost of renewable energy”, including controlling subsidies for biomass and solar PV under the Renewables Obligation and changing accreditation rules under the Feed-in Tariff. The Secretary of State for Energy and Climate Change, Amber Rudd, also set out why renewable energy subsidies were being reviewed:

My priorities are clear. We need to keep bills as low as possible for hardworking families and businesses while reducing our emissions in the most cost-effective way.

“Our support has driven down the cost of renewable energy significantly. As costs continue to fall it becomes easier for parts of the renewables industry to survive without subsidies. We’re taking action to protect consumers, whilst protecting existing investment”^[2]

The Secretary of State set her vision out in a speech on 18 November 2015 for “an energy system that puts consumers first, delivers more competition, reduces the burden on bill-payers and ensures enough electricity generation to power the nation”. This included:

• Consultation on ending unabated coal-fired power stations by 2025
• New gas-fired power stations a priority
• Commitment to offshore wind support completes commitment to secure, low-carbon, affordable electricity supplies
• Move towards a smarter energy system

The Secretary of State did refer to district heating and biogas specifically as to areas of potential:

There are technologies which have great potential, such as district heating, biogas, hydrogen and heat pumps. But it is not yet clear which will work at scale. So different approaches need to be tested. We need a long-term plan that will work and keeps down costs for consumers. We will set out our approach next year, as part of our strategy to meet our carbon budgets..

Failure to meet the renewables target

A leaked letter from the  Secretary of State to colleagues stated that the UK is on track to miss its legally binding obligation to achieve EU targets on renewable energy by an estimated 50TWh (terawatt hours), or 3.5% of its 15% obligation. The Secretary of State subsequently gave evidence to the committee setting out how the shortfall in meeting the renewable energy targets should be filled by renewable heat, and by more biofuels in petrol and diesel:

“I am concerned about the work that is being done on transport and on heat to make the additional targets. That is why I have been writing to other Ministers in other departments, particularly in transport, to urge them to work across Government to make sure that we do make these targets.

We have made our interim target—in fact, we have just exceeded it—but it is going to be challenging to make the rest of the target. I remain committed to making good progress towards that target and it is because I am so committed to that that I am encouraging other Secretaries of State to take action. This is, after all, a cross-Government target; it is not just for my Department. I am going to be working with Transport and internally I am going to be putting together policies on heat to try to address the shortfall that we currently have in order to achieve that 2020 target.”

And

“It’s my aim we should meet the 2020 target. I recognise we don’t have the right policies, particularly in transport and heat, but we have four to five years and I remain committed to making the target.”

[1] There are currently three components to the LCF: Renewables Obligation; Feed-in-tariffs scheme (FITs); and Contracts-for-Difference (CfDs).

[2] DECC, Controlling the cost of renewable energy, 22 July 2015