We believe combined heat and power (CHP) projects using UK waste wood should have a long-term beneficial role as part of the UK’s future energy mix, as is the case in Scandinavia and other parts of Europe.
An abundance of raw materials for CHP plants
As an energy source, waste wood is not dependent on sun or wind and has the potential to provide consistent, sustainable, low-cost heat and power for industry and domestic use. Not only that, but with 10 million tonnes of forest thinning’s, stumps and bark being wasted or transported overseas, recycling low-grade waste wood as a cheap energy source to power local CHP in the UK seems an obvious solution.
CfD has a negative effect on investors confidence
However, as we move from Renewable Obligations to Contracts for Difference (CfD) investor confidence is suddenly faltering at the very time when biomass renewables in the UK seemed to be gaining ground. This is likely to have a damaging effect on the take-up of biomass EfW projects, especially the more beneficial small- to medium-size plants where local industries and communities can benefit. This is a great shame, particularly when companies such as ours have been so successful in pioneering the technology to generate sustainable biomass energy which is already delivering returns on investment.
CfD process is “another reason not to”
The complexity, length and opaque nature of the CfD process is the root of the problem. Already this is sending a signal to potential investors who will be unwilling to invest time, energy and capital in planning potential biomass investments if the CfD process remains unsupportive. A bidding process that pitches biomass against alternative technologies in this way clearly needs re-evaluation.
CfD obscures the reality & benefits
The way that funding is split under CfDs into three pots is partly to blame. Biomass Energy with CHP for example shares Pot 2 for ‘Less Established Technologies’ with Offshore Wind. But experience so far however has seen the dominance of Offshore Wind completely denying awards to biomass schemes. This seems ludicrous when waste wood is such an abundant resource in the UK. It is a resource we are squandering, much of it being exported for the benefit of biomass projects in Northern Europe.
The data tells the story
The results from the first CfD auction were quite striking. Of the 27 contracts awarded, none were to Biomass Energy and only 5 were waste-related. Of the Pot 2 allocation it was totally dominated by two Offshore Wind Projects totalling 1,162MWe. In addition there were three Advanced Conversion Technology (ACT) projects awarded totalling 62MWe. However, it meant that no CfD’s were awarded to Biomass CHP projects which were effectively squeezed from the Pot. Albeit at an early stage, it appears that the current process favours big business and this is something we would like to see being re-evaluated to ensure an even playing field.
CfD postponement send the wrong message
Further doubts were sown in July when DECC announced the postponement of the next CfD auction round as this can create further uncertainty for investors. If the government believes that biomass energy solutions using waste wood and other renewables should play a part in a balanced and secure UK energy future then the CfD process should needs to be more supportive.
Read my comment in MRW’s November issue full article…HERE
Matt Drew – Managing Director
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