Biomass Pellet Fuel Development in the UK

1. The Britain biomass pellet market drives and obstacles
The UK provides various incentives to generate electricity from biomass pellet such as the Renewable Obligation, the Electricity Market Reform and the Feed in Tariff, briefly discussed here. It is expected that by 2020 biomass could contribute up to a total of 6 GW, compared to 2.5 GW capacity in 2010 (DECC, 2011a). To achieve these objectives the electricity market needs significant institutional support. The UK government is currently drawing up legislation to address these issues, namely: long-term contracts for both low-carbon energy and capacity as well as institutional arrangements to support electricity from biomass, continued grandfathering, and supporting the principle of no retrospective change to low-carbon policy incentives within a clear and rational planning cycle; and to create a market that allows existing energy companies and new entrants to compete on fair terms. In 2010 the UK government decided to provide further support to feedstock and energy waste plants from the RO and there were also plans to review the RO for further technological development up to 2013. The new Renewable Obligation came into force in April 2013 and paid a particular attention to waste use e.g. by setting up new landfill regulations on waste wood use (DECC, 2011a). 


 
Policies on co-firing have changed over the past or so decade. A ROC review came into effect in October 2011 which could have a significant impact particularly on co-firing and hence on bioenergy use. Coal-fired + biomass generation currently provides security of supply benefits in terms of availability, reliability and flexibility. Hence, unlike any other large-scale renewable technology, biomass-fired generation can respond flexibly and quickly to changes in electricity supply or demand and can provide large scale, reliable, and predictable power. In addition, conversion and enhanced co-firing biomass plant will also reduce the need for transmission investment, which, depending on the location, can be significant. A study (Arup, 2011) has considered a range of different options for biomass usage, including dedicated biomass plants as well as existing coal plants in a variety of regimes. The report recognizes that small biomass plants, (<50 MWe) tend to use locally sourced biomass fuel delivered by road. The Arup study estimated that the UK could host 50-60 dedicated biomass plants distributed around the country. In addition, large plants, up to 350 MWe, could be located near ports specifically to access a wide range of imported fuels. The study indicates that “up to 1.8 GWe of high capacity factor, low planning risk of conversion capacity could be feasible (ARUP, 2011). 

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Limited co-firing can be achieved in most UK coal plants with little modification, by pulverizing the coal and biomass simultaneously in the existing coal mills, a technique usually termed ‘co-milling’. It is now considered that co-firing at rates of 20-50% (currently to benefit from ROC support co-firing must represents at least 15%), biomass throughput (or more) is possible, though there are still important technical challenges. Many generators have concluded that large volumes of biomass can be successfully sourced, transported and burnt in conventional power stations, replacing coal, which represents a significant shift from early years. Consequently, current co-firing/conversion programs are focusing on setting up supply chains capable of sourcing and transporting biomass in larger volumes (DECC, 2011). The Market Electricity Reform (MER) is an important institutional step whose aim is to address the electricity market stakeholders concerns e.g. to safeguard demand and ensure the best value for investments throughout the whole power chain; and create a flexible and competitive electricity market, enhance the market capacity to finance large investment in low carbon electricity for further details.


 
The FiT, introduced in April 2010, is another option to attract new investment into biomass-based electricity generation and to reduce CO2 (DECC, 2011c). The incentive consists of payments for every kWh of electricity generated, depending of the size, technology type and date of installation.  Small electricity generators also receive a payment for the surplus electricity sold to the grid, “paid over and above the generation tariff, either at a guaranteed flat rate of 3p/kWh or at the open market value. Tariffs are exempted from income tax but subjected to Corporation Tax” (Carbon Trust, 2011b). As such, profitability is guaranteed for the generator, reducing investment risk in renewable technologies. In 2010 heat from RE accounted for 1% of UK’s heat demand; the target for 2020 is 12% (Carbon Trust, 2011). The most important scheme to promote heat from RE is the RHI, introduced in March 2011. The aim is to achieve 57TWh of heat and save 44 million tons of carbon by 2020 (DECC, 2011a). This is the first scheme of its kind to foster the provision of renewable heat, providing long-term financial support for up to 20 years (Buckinghamshire County, 2011).
 
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The RHI will be implemented in two phases, phase 1 dealt with non-domestic users and commenced in July 2011. Phase 2 addressed the domestic residential sector, starting in October 2012. It had been predicted that Phase 1 would result in around 13,000 renewable heat installations in industry and a further 110,000 in commercial and public sectors (Hawkinks Wright, 2011). To achieve the expected capacity by 2020, will require an annual growth rate of 9% in the next decade. DECC anticipates that demand will be mostly from the conversion of coal plants, dedicated biomass generation, biomass waste combustion, and anaerobic digestion. Landfill and sewage gas are not expected to increase as it is already largely exploited. Biomass electricity prices are expected to remain stable according to the DECC scenario, ranging from £70 to £173/MWh in 2020, compared to £75-£194/MW in 2010. These ranges are large due to the different technologies considered. Prices are more stable for mature technologies with no major improvements expected e.g. combustion technologies; there is, however, potential for improvement in several other processes such as anaerobic digestion, gasification and pyrolysis (DECC, 2011a).
 
However, the deployment of new capacity is not assured as there are many challenges ahead, i.e. minimizing the investment risk, de-risking the supply of sustainable feedstock, planning issues, and the regulatory framework. To overcome such challenges some priority actions are being proposed by the government, including Electricity Market Reform to increase projects revenue, expand supply chains for waste wood and solid recovered fuel, better information on available waste, or incentives to feedstock (DECC, 2011a). According to the DECC predictions, non-domestic biomass for heat could contribute up to 50TWh of renewable energy by 2020, mainly from biomass boilers and biogas injection to the gas grid.  Other sources identify a market potential ranging from 27 to 55 TWh of non-domestic biomass for heat by the same year. Imported biomass heat prices ranged between £22 to £156/MWh in 2010 and are expected to remain more or less unchanged in real terms, between £22 to£159 per MWh in 2020. Capital and installation costs are projected to fall slightly due to the learning effects, whilst operating prices are projected to raise with increasing feedstock prices (DECC, 2011a).

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2. Production capacity and feedstock
Updated data on the current capacity and actual production of the pellet industry in UK are scarce; in 2009 a report of the Pellets@las project indicated an estimated production capacity of 218,000 tons and reported also a number of new additional plants that had started operations in 2009. However, for 2008 the estimated actual production was only 125,000 tons.
Most plants are located in close proximity of timber supplying areas and existing sawmills, with the largest existing and potential capacity in Scotland. Feedstock used are sawdust, clean waste wood (diverted from landfill), energy crops (such as willow grown on short rotation coppice) and forest thinning. According to a report of the UK Forestry Commission, in 2010 a total of 197,000 tons of wood pellets and briquettes were produced, compared to 118,000 tons in 2009.
 
3. Consumption
In the absence of official statistics, it was possible to extrapolate the consumption of wood pellets for 2010 by adding net imports (imports minus exports) to the estimated production level of 2010. Pellet imports for 2010 were estimated at 550,000 tons in 2010 by the UK Forestry Commission (UF FC, 2011), while exports were in the range of 65,000 tons. On this basis, we conservatively estimated an overall consumption of about 683,000 tons for 2010. This represented a significant increase compared to the estimation of only 125,000 tons of the Pellets@las project for 2008. This increase is strongly driven by the growing demand of industrial wood pellets for co-firing at power plants, which are stimulating imports. Since it is not easy to trace such flows as this is regarded as confidential information by power utilities and independent importers, it is possible that the actual consumption level might be even higher. As a matter of fact, according to Drax Environmental Performance Review, Drax alone consumed over 1 million tons of wood pellets in 2009.

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4. Trade and logistic aspects
This difficulty in finding coherent data from different sources on wood pellet imports to UK also appears when looking at Eurostat statistics. Indeed, for 2010 Eurostat shows a much higher import volume than reported by the UK Forestry Commission e.g. 884,000 tons, of which 510,000 tons came from outside the EU e.g. Canada, U.S., Russia and South Africa, while the remaining 374,000 tons were imported from EU member states, mainly Portugal, Germany and Estonia. On the other hand, exports from UK in 2010 were much lower than imports, around 65.000 tons, mainly exported to Denmark, Sweden and Ireland.