FORUM FOR RENEWABLE ENERGY DEVELOPMENT IN SCOTLAND - PROMOTING AND ACCELERATING THE MARKET PENETRATION OF BIOMASS TECHNOLOGY IN SCOTLAND
FUEL SUPPLY ISSUES
(a) Wood Fuel
14. We expect that fuel supplies will be derived from the Scottish and GB standing forestry resource. In practice, the forestry resource creates opportunities to supply wood fuel from each of the following three sources:
- Forest residues and small round wood direct from the standing forestry resource.
- Secondary products from the forest processing industries
- Recycled timber
Forestry supply and demand forecasts demonstrate that the development of a biomass energy market will not be constrained by the availability of the fuel resource, although additional resources, such as energy crops, may be necessary as the industry becomes established. Ultimately however, the quantity of wood fuel used by the energy market will be driven by the price that users are capable of paying.
15. Scotland is uniquely positioned to provide large quantities of wood fuel for an emerging biomass energy market since the GB wide forestry resource is predicted to grow well in excess of demand over the next 3 decades; around 60% of that resource is located in Scotland. The following table shows GB wide supply and demand scenarios and illustrates that total supply is expected to exceed total demand by around 5 million cubic metres (or tonnes) within 15 years (even assuming a major new pulp mill investment.)
16. The following table illustrates in greater detail Scotland's significance in this predicted increase of supply.
17. The following diagram shows where the resources are located in Scotland, and confirms that the future harvest level is likely to be around 5.5 million cubic metres above current use.
The resources are in place and ready for harvest.There are 'concentrations' of resource in the North and South of Scotland, which can be supplemented by drawing wood from N.England. Average 'smoothed' future harvest level is around 9.5 Million M3 (5.5 Mn M3 above current use)
18. The size of the biomass energy market that this amount of resource could support is 440 megawatts 1. This forecast uses the predicted resource available above current use and takes no account of market factors or the fact that much of the resource will be ideal for wood fuel (with a sustained excess of small round wood and defect sawlogs), or that the Scottish Forest Strategy envisages growing the current and predicted resources above these levels. This means market based factors and additional resource growth will provide the potential for a significantly larger biomass energy market than that estimated by simply looking at the unused biomass resource.
19. It can be concluded that the minimum size of the biomass energy market in Scotland based upon the forestry fuel resource could be as much as 450 megawatts of installed capacity, and that other factors, such as the growing of energy crops may greatly increase the supply of wood fuel and hence the installed capacity of the biomass market in Scotland.
20. It would be useful to the biomass sector for further work to be undertaken to refine the wood fuel resource estimates in Scotland and to provide more detailed information. It will also be necessary to put systems in place that will allow 5-yearly review / updating of the data.
21. In making proposals for the development of a predominantly wood fuel based biomass industry, the interests of other users of forestry materials must be taken into account. BEG met with the Wood Panel Industries Federation and also received views from the United Kingdom Forest Products Association. The panel sector had particular concerns that competition for the same raw material could undermine existing markets and increase costs to levels that could result in UK panel board production becoming less competitive.
22. BEG has considered these representations carefully. We believe - and the Wood Panel Industries Federation has confirmed - that it is only in the next few years that competition for secondary sawmill products between themselves and the small number of co-fire biomass end users may result in supply issues. The processing of small round wood for the biomass / co-firing market may release additional material and thus also reduce this potential conflict. There may however be exceptions when considering the use of small round wood for Orientated Strand Board (OSB) production.
23. BEG does not believe that development of new biomass plant will in the short term threaten the resource currently accessed by other wood users. Thereafter, Scotland's forestry resource will increase to a level sufficient to meet the continuing needs of both established wood-using industry and the expanding biomass sector. This conclusion was also reached by the Royal Commission on Environmental Pollution, which stated in its report that "the supply of forestry materials is increasing [on a GB basis] much faster than demand and a significant increase in prices is unlikely to materialise".
(b) Energy Crops and Other Biomass
24. BEG has considered, and taken independent advice on, the potential for energy crop production in Scotland. Solid biomass may be produced from Short Rotation Coppice (SRC) or from giant grasses. There is a considerable literature on growing SRC for biomass production and it is known to grow in Scotland, however there is uncertainty over its sustainable yield on commercial planting here. Of the giant grasses, Miscanthus has been widely tested in England, but its viability in Scotland is limited due to its preference for higher temperatures and light intensities than those found in the Scottish climate. Other grasses, such as reed canary grass, derived from Scandinavia, may be better suited with economic advantages for establishment, but further testing is required to ascertain likely yields and appropriate growing practices. The perennial nature of these crops means that the grower must make a long term commitment of land to the production of these crops; therefore confidence in the availability of a market over this period is needed.
25. Straw is produced as a by-product of arable crop enterprises. Sufficient quantities to offer the potential of developing large straw fired energy plants are generated in two areas of Scotland; Aberdeenshire and the Borders. However, Scottish farmers currently have a good market for their straw as animal bedding or feed and it is probable, therefore, that straw heat and power will not generate any significant interest for farm, local community or large scale uses. Logistics of supply also constrain development, with straw for a power station needing to be sourced from within a 50 mile radius of the plant (and preferably as near as possible) to avoid excessive transport costs.
26. With the requirement under the GB Renewables Obligations (GBROs) for an increasing proportion of co-fired biomass to be derived from purpose-grown energy crops (from 2011, 75% of the biomass component will have to be from energy crops), biomass crops will play a role in co-firing projects. Taken with the European aid for energy crops as an area payment, this could be a major driver to encourage planting of energy crops.
27. The land capability classification for agriculture classifies land in Scotland according to the limitations imposed on it by physical and biological factors which impact on its use for agriculture. Scotland has very little class 1 & 2 land which is the best land, capable of growing a full range of crops. The area of class 1 & 2 land in Scotland is 112,600 hectares (1% of Scotland). Class 3 land is capable of producing good yields of a moderate range of crops (cereals, oil seed rape, potatoes, some vegetable crops and grass). The area of class 3 land in Scotland is 1,179,000 hectares (15% of Scotland). Potentially, there are no technical /agronomic reasons for the majority of the class 3 land to be unsuitable for growing biomass energy crops. Class 4 land can only support a narrow range of crops and is primarily used for grass; however, potentially some of the class 4 land could support biomass energy crops where machinery operation is not restricted. Clearly, crop yield would be lower on class 4 land compared to class 3, and there may also be restrictions to access for winter harvesting. In conclusion, from a technical /agronomic perspective, over 15% (all class 3) of the agricultural land in Scotland could support biomass energy crops. The main obstacle to achieving this potential is the development of a viable profitable market, which would encourage farmers and land owners to grow these crops. And of course attention would need to be paid to the environmental and visual impacts involved if large areas of countryside were planted with a monoculture comprising rotation coppice and/or grasses.
28. Recent CAP Reforms with the decoupling of subsidies and the introduction of the single farm payment (SFP) from 1 st January 2005 will allow farmers more flexibility and arguably free up land for alternative uses. For many farm businesses, traditional farm production will be unprofitable without subsidy support. Therefore many farmers will either have to radically restructure their business, use their SFP to support their operations, or look for viable alternatives. The renewable energy industry is still in its infancy; however, if viable renewable energy markets emerge, the agricultural sector is likely to be quick to respond to any commercial opportunity.
29. Although not within the remit of the group, we believe that the importance of energy crops grown for bio fuels and animal husbandry by-products from which energy can be economically recovered should not be underestimated by the Scottish Executive when developing sustainable integrated energy policies. There are circumstances where the use of locally produced primary and secondary products for heat recovery (not covered by this report) are the best environmental practice, while generating local jobs and reducing regulatory burdens.
The Wood Fuel Requirements of Biomass Fired Plant
30. Wood fuel requirements for biomass plants will vary according to the type of conversion facility, its size of operation and the moisture content of the delivered biomass fuel. However, as a rule of thumb most plants fall into the range of 4500 - 5000 oven dry tonnes per year required per megawatt of electricity generating capacity. The lower the efficiency of operation, the greater the amount of feedstock required. Size of plant will, to a large degree, be influenced by the catchment area necessary to source the fuel and hence transport distance and delivered cost of the fuel. The size of a viable project is a balance between being large enough to take advantage of economies of scale (in terms of capital cost) whilst limiting fuel demand to match the fuel supplies from within a local area, therefore avoiding excessive transport costs.
31. BEG believes that a range of sizes of plant could be developed in the biomass sector. Developments scaled to meet local needs and fuel supply offer opportunities to develop the sector in Scotland and to create local fuel supply chains. Small power only generation plants are affected by dis-economies of scale. However, if there is heat recovery and cogeneration, then there is the possibility of additional income from heat sales to aid the overall project viability. The larger plants (over 10 MW installed capacity) are likely to be either for electricity generation or for CHP at industrial sites where there is continuous process heating demand with complimentary demand for electricity. There is scope in future for smaller plants that match local conditions, especially as the technology and market infrastructures develop, and provided that project financing risks can be overcome. Such plants would offer the opportunity to create local supply chains, to provide continuity of employment across a number of sectors and to make a significant contribution to sustainable rural development.
Financial Support for the Supply Side
32. A report produced for BEG by Future Energy Solutions (FES) has identified the availability of a number of financial support schemes to assist production of biomass fuel. These are summarised at Annex C. As identified earlier by the RCEP report, the breadth of available support is both complex and incomplete.
33. As mentioned above, the reform of the Common Agricultural Policy will lead to changes in existing payments to the agricultural sector. Current interpretation suggests that on set-aside land while no additional payment will be offered, there will be no penalty to current set-aside support payments or to future set-aside entitlement payments if land is used for the purpose of growing energy crops. On other land eligible for support, growers will be eligible for 45 Euros per hectare support payment for energy crops up to a limit of 1.5million hectares at an EU level, after which there will be a scale back.
34. As indicated in the previous section of this report, it may be unlikely that energy crops will be grown on a significant scale in Scotland, at least in the short term. Nevertheless, there is already some interest, and the rules under the GBROs applying to co-firing may stimulate more. Financial incentives for growers are likely to be important if this initial interest is to be carried through to action on the ground. We have noted that the current level of support for growing energy crops in Scotland is less than that available in England and Wales. While BEG is not making a specific recommendation as to the level of support that should be available in Scotland, we recommend that this is a matter that should be kept under close review.
- Further work should be undertaken by the Forestry Commission to refine the wood fuel resource estimates in Scotland and to provide more detailed information to wood users and the biomass energy sector. This information should be reviewed/ updated every five years.
- The Forestry Commission should keep under close review, in consultation with the industry, the level of support that it provides to the growers of energy crops in Scotland.