Transcript Scottish Forestry Industries Cluster Conference

www.stevelukerassocaites.co.uk
MOBILE TEL: 07970 522160
EMAIL: [email protected]
Wood energy use – where are
markets and policy taking us?
Regional Cluster facilitators
South Scotland – Charlie Fulton [email protected];
07831 476441
Mid Scotland – Steve Luker,
[email protected];
07970 522160
North East Scotland – Claire Glaister [email protected] ;
07957 175909
Highlands and Islands – Stewart
Meikle - [email protected]
07733 894829
RENEWABLES IN CONTEXT
Use of Renewable Energy Across the
1% EU
3%
c100M t wood
Wood
Fuels
Solar/PVs
4%
33%
59%
Wind
Geothermal
Hydro
Biomass
Other bioenergy
8% of EU total energy comes from renewables
1.5% of UK total energy comes from renewables
Policy drivers:
UK renewable energy strategy
In Spring 2009 the UK set a target of 15% of energy to be
renewable by 2020. At the moment it is 1.5%. A step change
is required.
10 times bigger!
How is this to
be delivered?
What is role of wood energy in delivering
the UK RES target? (......around 20% planned)
Scottish Renewable
Energy Targets to 2020
Heat looks small...........?
Markets and market share
in Scotland – the
importance of heat
Renewable
heat
Renewable
electricity
Scottish renewable heat
policy for wood energy?
• The Scottish Government has indicated it will set a
target of 11% for renewable heat (9TWhs) by 2020
• SRF (April 09) Report – Renewable Heat in Scotland:
2020 Vision suggests 50% of this 9TWhs is wood fuel
• But 97% of EU’s renewable heat is wood fuel
• So between c2million and c3.9million tonnes of wood
fuel use by 2020 to meet 11% Scottish target.
What are the implications for
Scotland in the heat market in
meeting policy targets?
Target to
2020
Million
tonnes pa
of wood
fuel use
Installed
capacity
required
Total
investment
required in
£Millions
Annual no. of
schemes
required (e.g.
hospitals, large
schools, leisure
centres)
UK target
applied by
pop proxy
0.55m
tonnes
690MW
£412.5M
140 (£41M pa)
Scottish
target - low
2m tonnes
2500MW
£1,500M
500 (£150M pa)
Scottish
target - high
3.9m
tonnes
4875MW
£2,900M
975 (£290M pa)
The most important market driver?
The Renewable Heat Incentive
What it is
New financial support mechanism which will be created for renewable
heat projects
UK national scheme driven by UK Government
Powers in the Energy Act 2008 allow the setting up of RHI
System Design
The system design is being studied by UK government and so is not
determined
Timescale
Introduced by April 2011
Potential elements
Payment to generators of renewable heat
Payment levied on those not using renewable heat
In principle, similar to Renewable Obligation for electricity
The Renewable Heat Incentive
Unclear issues
How payments will be made
How payments fund will be gathered/levied
How payments will be administered
Through a central administration e.g. OFGEM as per ROCs?
Relationship with existing grant schemes
Can recipients of grants gain access to scheme? Can they keep
grant?
Level of payment
Level required to be an incentive that will support target achievement
Size Limit
Currently no size limit
Currently no indication if payment level could be related to size
What might the RHI mean for market
development?
Bulk delivered fuel costs in £\MWhs
oil
£TAX
RHI?
gas
pellets
RHI subsidy £15MWh
Chips
Chips
Chips
£0.00
£10.00
£20.00
£30.00
£40.00
£50.00
£60.00
£70.00
The markets -heat energy use
Typical energy use in MWhs per year
4000
2500
1500
250
10
1
Paybacks –
500KW boiler in secondary school
Gas without RHI:
Gas + RHI (@£15MWh):
£200,000 capital cost
£200,000 capital cost
Saves £10,500\year over gas
Saves £48,000\year over gas
20 year payback
4year payback
A key policy driver - ROCs
One tonne of green wood = c 2MWhs, but only 40% used
One ROC is worth around £40
Driven by ROC and RHI what is the
market doing or planning in Scotland ?
Development
Status\comments
Use green tonnes
44MW electricity – Eon Lockerbie
Operational
500,000
25MW CHP – UPM Shotton
Operational
400,000 (e)
8MW CHP – Balcas Invergordon
Under development
20,000 (e)
25MW electricity – Scottish Power
Longanett
Charlesfield First CHP - Borders
Planned
70,000 (e)
Planned
70,000
Northern Energy Developments
Longanett and Cockenzie – co-fire
Planned
85,000 (e)
Formerly operational
?
15MW Scottish public sector heat
Puffin Pellets - Banffshire
Operational
15,000 (e)
Under development for 25,000t of pellets
75,000 (e)
Brites Pellets - Balcas Invergordon
Under development for 100,000t of
pellets
Under development for 15,000t of pellets
300,000 (e)
FCS figures using population proxy
40,000 (e)
Planned cofire
1,500,000 (e)
SSE\Forth Ports
Announced £1billion x 4 100MW plants –
Dundee, Rosyth, Grangemouth, Leith
4,000,000 (e)
Scottish heat market by 2020
Forecast at mid range
2,000,000 (e)
Arbuthnott Wood Pellets Kincardinshire
Domestic logs
Hunterston - Ayrshire
Combined total
45,000 (e)
9,115,000
UK biomass power plant plans?
UK biomass power plant plans? =
- 12million tonnes of pellets pa (or)
- 20 million tonnes of green wood chips pa
Conclusions
• Policy expects the renewables sector to be TEN times larger by 2020
• Policy expects wood energy to provide a fifth of UK renewable energy
• Policy expects the Scottish heat market to use between 2million and
3.9million tonnes a year of wood fuel by 2020 – at a good price?
• Policy expects a massive (undefined) expansion in the use of wood
fuel for electricity – at a lower price?
• ROCs, RHI, carbon trading and rising fossil fuel costs may drive this?
Conclusions
• Policy targets are rarely met – especially 10 years ahead!
• Most of the wood (biomass) for electricity could be imported
• The RHI is a tax and must survive -intact -a change in Government
• Even the smallest policy target for (Scottish) heat requires £150
million capital investment per annum for 10 years – this swamps the
capacity of the installers and is not likely at present
• The cost of fossil fuel will be the key determinant in rates of market
growth – not policy targets
• Growth in wood energy use will not be as massive as
predicted and should be sustainable in the heat market