Planning for biomass

4.54 Government policy (and the Renewables Obligation in particular) has failed to take account of the time that is required to establish an energy crop. Using the example of a 2,000 MW station that currently co-fires 5% of its fuel as biomass, by 2009, 25% of this biomass proportion must be from dedicated energy crops (1.25% of total fuel); if the generator chose to continue to fire the same proportion of biomass, this would require 30,000 odt of willow SRC. At current yields of 7 odt/ha/y over a three-year harvest cycle (i.e. 21 odt/ha over 3 years), this means that the generator would require the willow from around 1,500 hectares of land in 2009.

4.55 These crops would take 4 years to grow, so to be ready for harvesting by the 2009 deadline they would need to be planted in the spring of 2005. Farmers plan their land-use ahead of time because they need to order seeds (or cuttings for willow SRC) and prepare the land (rabbit proof fencing can be expensive and time consuming to erect). This would need to begin in mid-2004 for everything to be in place for a spring 2005 planting date.

4.56 Willow SRC is eligible for a Defra planting grant, which farmers need to know is guaranteed before they order the plants and fencing. The paperwork for these grants takes around 3 months. In order to reach the 2005 planting date, applications for planting grants would need to have been submitted no later than April 2004.

4.57 Farming co-operatives may have needed to be established to ensure that enough land was available to produce the wood required. This could easily take 2 months or more to organise, which means they would have had to start making arrangements in early February 2004.

4.58 Once this process has begun it would need to be repeated for at least three years to ensure a harvest every year in the SRC cycle. This could bring a farmers' co-operative's total planting area to almost 5,000 hectares, and possibly more as the energy crops percentage of co-firing increases between 2009 and 2016. A land commitment on this scale would require assurance from the generator that they would purchase the fuel, otherwise farmers would not be eligible for the Defra grants that are dependent on end-user contracts and they would not be confident to commit that area of land to a crop for an uncertain market.

4.59 Farmers are therefore unable to proceed without a contract from a generator, yet the generator is able to benefit from the Renewables Obligation system without any commitment to a grower. The fear among growers is that generators will co-fire for as long as they are unrestricted in their use of biomass (and can use imports) and then will stop as soon as the energy crop requirement is introduced in 2009.

4.60 The situation is further complicated by the fact that generators are reluctant to offer contracts to growers because they are concerned that the Large Combustion Plant Directive (LCPD) may severely curtail the long-term future of some power stations. Until they know how the Directive will affect them, they cannot offer a contract to a biomass supplier. If this took too long it would be too late for the farmers to plant their coppice. Growers would have required a contract or letter of intent by the end ofJanuary 2004 to enable them to supply sufficient fuel to enable the generator to meet their 2009 RO deadline. As far as we have been able to establish, this has not happened and the future of energy crops for co-firing is consequently now in doubt. Generators are likely to comply with the LCPD through some combination of the fitting of flue gas desulphurisation (FGD) equipment, use of low sulphur coal and adjustment of power-station load factors. It may be that the income from ROCs gained from the use of co-firing in a number of power stations would help the generators to fit FGD in one of them. It would then be important, if FGD power stations had to close, for the FGD station to be able to honour all the contracts to growers that were outstanding. We recommend that the required methods of accounting and administration for the ROCs should ensure that this can and does occur.

4.61 The purpose of co-firing is to stimulate the energy crops market; it is currently failing to do so. With the added security of compulsory contracts, supply of energy crops would increase (paragraph 4.7), which in turn should encourage the uptake of biomass schemes other than co-firing. This will only happen if, as we recommend, the restriction on materials for co-firing is combined with a requirement that the generators confirm their intention to co-fire by awarding long-term contracts to growers without which they should not be able to qualify for ROCs.

4.62 The combination of policies from different government departments and from Whitehall and Europe are hence working against each other and causing a deadlock in the biomass industry. We recommend that the government introduce an integrated strategy that incorporates every part of the supply chain to support and promote a biomass energy industry in the UK.

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