north east biomass mapping exercise for environmental ... · appears that if the biomass heat...

NORTH EAST BIOMASS MAPPING EXERCISE

For Environmental Industries Federation on behalf of One NorthEast

January 2003

Prepared by Nicola Smith, Helen Nisbet and Matthew Lumsden

North Energy Associates Ltd TNEI Old Queens Head Yard Kelburn House 7B Oldgate 7-19 Mosley Street Morpeth Newcastle on Tyne Northumberland NE11 1YE NE61 1PY

Tel 01670 516949 Tel 0191 233 9300 Fax 01670 510300 Fax 0191 233 9309 email [email protected] email [email protected] file NEA3/mydocs/biomass mapping/report final

January 2003 North Energy / TNEI 1

North East Biomass Mapping Exercise 1. Executive Summary Objective The objective of the regional biomass mapping exercise has been to understand the current activity, knowledge and interest in the use of biomass for energy production. The report presents the results which will then form a baseline from which a strategy for the emerging biomass industry can be developed and progress measured. The study The focus of the study is defined as, ‘The use as fuel of sawdust, wood shavings, wood off-cuts, waste wood, chipped or pelletised wood, logs, energy crops or straw.’ The study was carried out in the context of growing national support for biomass fuels for both economic development and environmental reasons. The work was commissioned by One NorthEast and has been delivered by The Environmental Industries Federation, North Energy Associates and The Northern Energy Initiative. The principle research tool was a questionnaire circulated to over 2000 organisations within the region and a consultation seminar which encouraged stakeholders to share their experience, their hopes and their disappointments. The results of these have been interpreted and supplemented by the knowledge of the study team. The questionnaire The questionnaire was structured to investigate the current pattern of biomass fuel usage in the region and to apply this to developing the potential market for biomass. It also investigated the structure, size and growth potential of the region’s existing biomass industry. The respondents A response was received from 10% of the questionnaires mailed out. Approximately half of those (ie 56% of the total respondents) expressed an interest in biomass. Respondents were spread fairly evenly across the region and represented all aspects of the emerging supply chain. There are a preponderance of organisations who are involved in handling or processing biomass and have the potential to supply fuel. Interestingly, many of them simply want to sell fuel but do not appear to want to add value by diversifying into heat sales or using biomass heat themselves. Users of biomass heating There are over 20 users of biomass as a heating fuel for automated systems in the region along with thousands of log burners and open fires. The biomass user are mainly identified small organisations but encouragingly include three schools in County Durham previously heated with coal now burn clean waste wood pellets. More are planned. Public sector commitment of this nature is felt to be an essential requirement if the industry is to prosper. Information collected suggests that there is growing opportunity for biomass fuel sales in relation to potential boiler conversions and also that producers of waste wood are not fully capitalising on its commercial potential as fuel. Market development Awareness raising, technical dissemination and technical support will be essential to future market growth. There must also be security of fuel, and equipment, supply coupled with a


reliable installation and aftercare service. Biomass fuelled systems must be economic, low maintenance, clean and convenient for the user. Some of these issues can be addressed by a marketing communications strategy. Energy Supply Companies (ESCOs), starting in off-gas areas, also need to be set up to deal with end user needs, wants and prejudices. It appears that if the biomass heat market is to grow, a skill shortage will become evident quite quickly with few trained design consultants or installers available nationally. Electricity from biomass There are no biomass fuelled combined heat and power (CHP) or electricity generating systems in the region, and in fact only one CHP plant in England. Seven questionnaire respondents indicated that they investigated installing CHP systems but decided against doing so. The principle barrier to uptake is the maturity of technology and the high capital and running costs. Technology development presents an opportunity for the region’s universities and NaREC in conjunction with industrial partners. There is currently an application to construct a 30MW wood burning electricity generating plant on Teeside. This would require some 170,000 oven dried tonnes of wood per year, equivalent to 160% of the total annual output of chipwood from Forest Enterprise’s Kielder Forest District (chipwood is normally used by the chipboard industry). The power station is perceived as a potential springboard for the region’s wood suppliers and for energy crops. Supplying wood to co-fire with coal is identified as having even greater potential to generate a market for woodfuel if it could supply Alcan power station or export outside the region. Again R&D could be the key. Industry structure The analysis of the current embryonic industry structure is encouraging. There appear to be a selection of organisations spanning the full supply chain from raw material producer to those hoping to establish ESCOs. Whilst these may not be perfectly aligned they represent an ideal basis upon which to seed a new industry. Respondents indicated a combination of optimism in the future of the industry and frustration that they do not feel they have been given the support they need to progress. Future development In terms of future growth, feedback indicates that many organisations are at least considering entering the market in the future and that those already positioned are taking active steps to develop. The industry currently suffers from a lack of established customers and this is an area upon which public support should focus. It is clear that woodfuel producers will not produce fuel until they have a confirmed demand at satisfactory market price. With the present economics of fuel production, large supplies of cheap or free waste wood and relatively low fossil fuel prices, it looks likely that intervention will be necessary to develop an effective market for farm energy crops. Convincing large numbers of customers to convert to biomass boilers or power generation systems will depend upon there being a convenient service at an attractive price for delivered heat and power. The development of biomass ESCOs is essential to managing the interface and ensuring a good fit between customer wants and producer services. Public support and funding is needed to assist in the development of local markets in order to give fuel suppliers the confidence to produce feedstock. Conclusions The biomass mapping exercise has produced encouraging signs of life in the emerging biomass industry in the north east. With the right public sector support and demonstration it has good potential to establish itself, create jobs, growth and diversification opportunities.


Contents page 1. Executive Summary .....................................................................................................................1 2. Introduction...................................................................................................................................5

2.1. The background .......................................................................................................................5 2.2. The brief and definit ions...........................................................................................................5 2.3. The approach ...........................................................................................................................5 2.4. Division of w ork between the study team and EIF ..................................................................5 2.5. The w ork programme...............................................................................................................6

3. The UK and regional context .......................................................................................................7 3.1. The UK context ........................................................................................................................7 3.2. The north east regional context ...............................................................................................7

4. The questionnaire ........................................................................................................................8 4.1. Distribution of the questionnaire ..............................................................................................8 4.2. Interpretation of the responses................................................................................................9

5. Respondents ..............................................................................................................................10 5.1. Number and distribution of respondents ...............................................................................10 5.2. Not interested responses.......................................................................................................12 5.3. Non respondents ....................................................................................................................12

6. The Biomass Market ..................................................................................................................13 6.1. Biomass heating.....................................................................................................................13 6.2. Heat market opportunities ......................................................................................................23 6.3. Conclusions on heat markets ................................................................................................24

7. Electricity Generation and the Co-firing Market ........................................................................25 7.1. Electricity generation and fuel supply ....................................................................................25 7.2. Questionnaire responses.......................................................................................................25 7.3. Biomass CHP, co-f iring and fuel supply ................................................................................25 7.4. Organisations rejecting biomass CHP...................................................................................26 7.5. Biomass trading and co f iring w ith coal.................................................................................26 7.6. Electricity generation and Co-firing market opportunities .....................................................27 7.7. Conclusions on electricity generation, CHP and co-f iring.....................................................27

8. Biomass Supply Industry ...........................................................................................................29 8.1. Current service providers.......................................................................................................29 8.2. Interested service providers...................................................................................................29 8.3. Rejection of biomass services...............................................................................................31 8.4. Biomass Supply Industry Structure .......................................................................................32 8.5. Supply sector conclusions .....................................................................................................36

9. Biomass Consultation Seminar..................................................................................................38 9.1. The seminar ...........................................................................................................................38 9.2. The presentation ....................................................................................................................38 9.3. Summary of main points (upon w hich there was consensus) from break-out groups..........39 9.4. More detailed points...............................................................................................................39

10. Conclusions ................................................................................................................................41 11. ANNEXES ..................................................................................................................................43 Figure 1 Three pie charts showing distribution of respondents.................................................................10 Figure 2 Typical fuel prices (p/kWh) .......................................................................................................14 Figure 3 Factories with on-site wood waste used for heating....................................................................16 Figure 4 Map showing existing biomass boilers by fuel type.....................................................................18 Figure 5 Respondent’s knowledge of biomass heating systems...............................................................19 Figure 6 Sites being explored for biomass heating ..................................................................................21 Figure 7 All sites for biomass heating – existing and potential..................................................................22 Figure 8 Reasons for rejecting biomass as a source for electricity generation ...........................................26 Figure 9 Companies indicating capability to supply fuel ...........................................................................30 Figure 10 Reasons for not providing services to the biomass industry ......................................................31 Figure 11 Biomass Industry Supply Chain Structure (ESCO model).........................................................32


2. Introduction

2.1. The background North Energy Associates Ltd (North Energy) and The Northern Energy Initiative (TNEI) were commissioned by the Environmental Industries Federation (EIF) on behalf of One NorthEast to undertake a biomass mapping exercise of the north east region. The aim of the exercise was to assess the current and potential future activity in the region’s biomass sector. The reason for undertaking the mapping exercise was to provide baseline information prior to working up a practical strategy for developing the biomass industry in the region. It was proposed that the strategy and action plan should respond to the findings of the mapping exercise and follow immediately afterwards. The biomass industry in the region has been struggling to grow for almost ten years. It was acknowledged to be important that practical actions and projects should follow on quickly so that commitment and goodwill are not lost.

2.2. The brief and definitions The brief for the mapping exercise was confined to a study of the industry involved with wood, wood related materials and straw. The remit was to look at the potential for biomass within the context of rural regeneration and wood waste industries. It excluded the processing of biomass materials (e.g. rape and sugar beet) for use as transport fuels and other biomass materials (e.g. animal slurries and organic household waste) used to provide gas through anaerobic digestion. The brief specified that biomass heating, combined heat and power (CHP) and electricity generation should be covered. The final definition of biomass within the context of this mapping exercise was agreed at a meeting with the EIF on 17th September and is as follows: ‘The use as fuel of sawdust, wood shavings, wood off-cuts, waste wood, chipped or pelletised wood, logs, energy crops or straw’.

2.3. The approach The brief proposed that the main source of data for the mapping exercise should be a questionnaire survey of those already involved in the biomass industry and those in associated industries who might want to be involved in future. Data collected from the survey would be amplified by holding a seminar during North East Business Environment Month and holding discussions with key stakeholders at the seminar and if necessary by telephone. This information would be augmented by the extensive regional knowledge held by the study team. A new database would be developed and held by the EIF to hold the information gathered. The EIF already held a database of the environmental sector and the study team had internal databases of their own. In addition to this the names of key players in the sector and a large number of landowners and farmers whom it was felt might have an interest in wood fuel supply would be added to the database.

2.4. Division of work between the study team and EIF EIF are experienced in undertaking mapping exercises and in devising and managing databases. For these reasons and because of confidentiality of databases, aspects of the


biomass mapping exercise were shared between EIF, and TNEI. In particular the EIF lent their expertise to the formulation of the questionnaire and the setting up of the database on which all the data was recorded. EIF staff undertook the majority of the mailout although, because of confidentiality, TNEI and the Northumberland and Durham Machinery Ring also carried out some of the mailing. All data entry was done by EIF with some data verification being undertaken by North Energy after the data had been initially input. (With hindsight it was realised that it would have been preferable to verify the data before the initial inputting took place. The short time scale had prevented this.) A list of data requests was prepared by the study team and formulation of queries on the database was undertaken by EIF who also produced a summary document, which is available in Annex 4 .

2.5. The work programme The work started on 13 September and was carried out in the autumn of 2002. The questionnaire was prepared with guidance from the EIF. It was completed and agreed by the end of September and sent out at the beginning of October. Preliminary results were available for the North East Business Environment Month Biomass Seminar at the end of November. Following the seminar, the remaining new data was input by EIF and a final analysis made of the findings. The views expressed at the seminar and experience of the study team were added to the data to give a fuller picture of the industry in the region. The report was drawn up in December and early January 2003.


3. The UK and regional context

3.1. The UK context The embryonic biomass industry in the UK incorporates a range of biomass users from small scale log burning room heaters to large automated wood chip or pellet space-heating plant through to multi-megawatt electricity generating plant. In some parts of the country it also incorporates all those activities required to enable the fuel supply chains to operate such as biomass supply, processing, drying and haulage. Technical advisory activities and consultancy enable and assist project development. There is a small but developing infrastructure of equipment suppliers and manufacturers, installers and maintenance engineers. In parallel, research and development work is ongoing in universities and workshops around the country aiming to ensure that technology keeps up with the demands being made upon it. A national trade organisation, British Biogen, based in London, plays a valuable role in co-ordinating lobbying, advising government, disseminating information and providing support to members. It is perhaps pertinent that in 2003 it still has only 150 members, of whom five are in the north east, with a further two nearby in the Scottish Borders. In the last three years UK government policy has begun to focus on renewable energy, including biomass, as one of the ways to reach the Kyoto carbon dioxide reduction targets. DEFRA and government regional offices have seized the opportunity to promote biomass to aid the ailing rural economy. The Climate Change Levy has been introduced along with enhanced capital tax allowances for energy efficient and renewable equipment and a number of (limited) national funding opportunities have been announced which aim to kick start the use of biomass for heat and power. It appears that the tide is turning for biomass.

3.2. The north east regional context In the north east a small core of organisations have worked to bring to birth and to support a local biomass industry since the early 1990s. These encompass; electricity generation; woodfuel supply; consultancy; supply and installation of heating plant and a significant heat user. Progress has been slow but steady and was helped by a number of regional projects, for example (See Annex 1 for more details): • Durham County Council work on woodfuel supply and utilisation • North Energy’s EU Woodfuel Promotion Project, funded by the EU, which provided

study tours and visits to working wood fuelled plant in the UK and Denmark • TNEI’s renewable energy advisory unit, Renew North In 2002 the main regional company aiming to generate electricity from biomass has ceased trading and the most experienced biomass fuel supplier has lost his contract with Project Arbre in North Yorkshire. However, to balance that, several positive steps have occurred: • the UK’s first pellet supplier has set up in County Durham • three schools have been converted to burn wood pellets • two woodfuel trading organisations have begun to operate • Teesdale has started on a route to 100% of energy production from renewables • the Countryside Agency’s community renewables initiative has been established and is

encouraging communities to use renewables including biomass • several well attended seminars have been held to promote biomass • Northumberland County Council have set up a Biomass Forum.


4. The questionnaire The extensive and varied nature of the existing and potential biomass industry in the UK, meant that the questionnaire had to attempt to cover all aspects of the industry and yet be kept as short and simple as possible. A copy of the final questionnaire is attached in Annex 2. It was designed to assess four key areas.

Section 1 – Heat, fuels and current interest or involvement in the biomass industry.

Section 2 – The current use of (primarily modern automated) biomass heating and biomass CHP systems

Section 3 – Current and future involvement in providing services to the biomass heat and power industry

Section 4 – The future interest in generating electricity from biomass.

Together, the four sections give an insight into the potential biomass market and emerging industry within the region. Each section asked a series of questions which allowed respondents to outline their current activity whilst not requiring them to give a great deal of detail. In addition to this, a section was included to assess any future interest that there may be in the biomass sector. Again, by necessity, the degree of detail required in response was kept to a minimum. In light of this, ‘future interest’ can range from those considering a future in the sector but have not yet taken any action, to those who are actively assessing markets, investing in equipment or growing crops. This variety was borne in mind when analysing the responses and it is at this point that the knowledge and experience of the study team were key to the analysis process. The questionnaire also allowed for organisations with no interest in biomass to register this and return the form. In addition to the questionnaire and because biomass fuel is a relatively new concept, an explanatory brochure was produced to introduce the recipients to biomass and its potential (Annex 3). This was sent out with the questionnaires and a covering letter (Annex 2) to all potential respondents. The questionnaire has provided a ‘snap shot’ of the region’s involvement in the biomass industry, but the detail has been completed through follow up telephone calls and the in-house knowledge and experience of the consultants. The intention is that the second stage of work, formulating the action plan, should include one to one consultations with the key stakeholders to ensure that their valuable experience is taken into account.

4.1. Distribution of the questionnaire The questionnaire was distributed to 2,048 organisations and companies from a wide variety of databases i.e. EIF members, TNEI Energy Managers, North Energy contacts, Northumberland and Durham Farm Machinery Ring, Country Land and Business Association, sawmills, woodland management firms, timber importers/exporters, furniture companies and Local Agenda 21 contacts. In addition to this, personal contacts, not covered above but who are active in the biomass sector were contacted and asked to complete the questionnaire. In some cases the questionnaire was completed over the telephone by a member of the study team to ensure a good level of participation. In this


way the objective was achieved of establishing as complete a picture as possible of the current involvement in the biomass sector and the potential for future activity.

4.2. Interpretation of the responses As mentioned above, the interpretation of the responses has been key to the results of this survey. The sectoral knowledge of the study team has influenced the interpretation of the results. For instance, interpretation of the interest shown in future activity has been undertaken with knowledge about the respondent companies’ existing activities. In the same way the comments received have been expanded and further information provided.


5. Respondents

5.1. Number and distribution of respondents Approximately 10% (248) of the questionnaires have been returned. Just over half of these (138) indicated that they are ‘interested’ in biomass – this group of respondents is henceforth referred to as the Interested Group. The study team would regard this as a relatively high positive response and an encouraging indicator. Forty-nine of the Interested Group are farmers or forestry/timber firms with a smaller grouping of firms connected with the wood manufacture and wood waste industry (7 - 5%). The remainder of this group are from a wide range of organisations including local authorities, environmental charities, technical consultants and landowners. The sectoral and geographical distribution of the respondents is illustrated below. Figure 1 Three pie charts showing distribution of respondents

Geographical distribution of respondents

26%

26%22%

13%

13%

Co Durham

Northumberland

Tyne & Wear

Teeside

Scot land/ Cumbria/ NYorks


3

Catego ries of respondants according to core bu siness activity

20

11

5

25

42214

10

5

9

5

2

7

16 Consultancy

Diversified farming

Education & Training

Farming

Forestry

Horticulture

Logistics

Manufacturers (non timber)

Manufacturing (timber related)

Plant supply, installation&maintenancePublic Sector

Recycling

Timber related services

Woodland related services

Other

Categorisation of respon dants by biomass related activities

8

5

17

6

48

23

5

4

7

HeatingSystemsHeat Supply

Fuel Supply

Haulage

Maintenance

Research &DevelopmentConsultancy

Drying

Installation

Other


An investigation of the respondent companies to see how their core activities relate to their biomass services show that under 5% consider biomass services to be their core activity. Considering this, it seems hugely significant that so many others are now offering some biomass service or looking to do so in future. The size of positive response and the diversity of the respondents’ activities sends three important signals: • It appears that future activities focussed on the development of a biomass industry in

the region will be positively received by a receptive and eager audience. • It is evident that there is an existing interest in biomass throughout the region and the

responses indicate that there are a number of entrepreneurs and individuals working to progress the industry.

• The breadth of biomass related activity currently underway covers many key elements

of a potential industry. This suggests that future activity should at least partially focus on the consolidation and development of existing organisations and businesses.

5.2. Not interested responses

In a typical questionnaire survey, parties who are not interested in the subject rarely return the form. In this case many of the questionnaires were sent to members of the EIF who may not have any relation to or interest in the biomass sector. The indication is that those companies who did return their questionnaire but are in the Not Interested Group may have responded out of loyalty to EIF and because they were requested to.

5.3. Non respondents 90% of the questionnaires were not returned and while this is not unusual for this type of investigative survey it suggests a low level of awareness of biomass. It may also reflect the fact that many in the environmental and landowning sectors do not yet see any direct connection between their core activities and the biomass industry. Certain anecdotal evidence exists to suggest that a small number who have been involved in the industry in the past and withdrawn, were too frustrated with the perceived slow progress to respond. There was a lower than expected level of response from factories whose activities produce wood waste and sawdust. This is probably due to lack of personal contact names and the person receiving the questionnaire not immediately seeing any direct benefit to the company of responding. One of the leading UK wood boiler manufacturers did offer to mail the questionnaire to their contacts list, but it was too late for any findings to be included in this study, and so the offer was not taken up. It may be useful in future to carry out some more detailed research, via the wood heat boiler manufacturers. This could identify firms who are or could use wood heat to replace fossil fuels or who may have a source of waste wood to dispose of in summer when space heating is not needed.


6. The Biomass Market There are several market sectors to be considered when reviewing biomass as an industry, e.g. the market for raw materials, processed feedstocks, capital plant etc. The core driver for the development of the various sectors is the market for heat or power. However there is known to be “chicken and egg” situation whereby fuel suppliers will not set up without a market and woodfuel users will not install plant without fuel suppliers. This section of the report documents some of the characteristics of the existing and potential market for biomass as revealed by the mapping exercise.

6.1. Biomass heating Heating requirements 89 (64%) of the Interested Group had some requirement for heating. The balance, 49 (36%), of companies indicated that they do not require space or process heating. Whilst it is possible that many of them use open sheds or work outside, this result may suggest that several respondents have failed to recognise their need for energy to provide heat and therefore the total requirement for heating may be greater than the survey results suggest. Annual heating bills Those respondents who provided figures show that costs for heating range from £200 - £920,000. The vast majority of firms have bills below £1001.

Table 1 The cost range of annual heating bil ls of the 89 respondents

who acknowledged a requirement for heating

Cost range No. of Companies Percentage £0 - £1000

47 53%

£1001 – 40,000

27 30%

£40,001 and over

5 6%

Types of fuels used in heating systems Many of the rural areas in the north east do not have mains gas (they are referred to hereafter as off-gas) and are reliant on fuels such as oil, coal, LPG, biomass and electricity for all their energy requirements. Many of the organisations responding to the survey are located in these rural areas and as a result of lack of mains connection, over half use fuels other than gas for heating. Some respondents use several fuels for heating. For this reason the questionnaire responses show that a breakdown of fuels used for heating which is not typical of the north east region as a whole. The questionnaire responses show that of the 89 respondents providing sufficient information, 34 (38%) spend over £100 per month on oil, LPG or electricity to meet heating requirements.


Table 2

The breakdown of fuels used in the 89 existing heating systems

Fuel Number Percentage Gas 37 42% Oil 38 42% Electricity 29 33% Coal 13 15% LPG 8 9 % Biomass* 20 22%

* See table 3 overleaf for breakdown As identified above the questionnaire responses show that 34 organisations spend over £100 per month on oil, LPG or electricity for heating requirements. The prices associated with these fuels make biomass a favourably alternative in terms of running costs and therefore these organisations could represent market opportunities. The following graph provides an indication of the current (January 2003) prices of fuels for a typical small to medium SME or public sector user in the region. This illustrates the competitiveness of biomass fuels, particularly in off-gas areas. What should be noted in relation to these figures is that the price of local wood fuel will be relatively constant compared to fossil fuels which are of course subject to international trading fluctuations, world politics, availability of supply etc. Figure 2 Typical fuel prices (p/kWh)

Twenty organisations report currently using biomass fuels for heating, including ten with log burning room heaters. This figure is 15% of the 138 respondents in the Interested Group. Although this may seem a small percentage it is consistent with the national picture and presents an operational starting point indicating that there are embryonic fuel networks and markets that can be developed.

Typical fuel prices (p/kWh) with Climate Change Levy paid by small to medium user, allowing for boiler efficiencies

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Coal Domesticheating oil

Gas Oil Kerosene Electricity Gas LPG Wood Pel lets Wood Chips

Fuel Types

Cos

ts p

/kw

h


Types of biomass fuels used in heating systems in north east Twenty of these were reflected in the responses to the questionnaire. Approximately 31 organisations are known to be using biomass fuels for heating in the region with some operating at multiple sites. (The sites are illustrated on Figure 4) Waste wood The waste wood users are in two categories: • those factories for whom wood heat is part of a commercial waste disposal process,

shown in Figure 3 • smaller organisations who produce or acquire waste wood off-cuts, broken pallets etc

and use them to fire small heating boilers, which are included in the map of existing biomass boilers in Figure 4.

The use of waste wood, MDF and plywood indicates that the source of wood is free to the user, usually as a by-product of other on-site activities. Using waste wood heat even gives substantial savings from avoided waste disposal costs as well as reducing fuel costs. The study team are aware of several furniture manufacturers who did not respond to the questionnaire and are known to be using waste wood as a heating fuel. An interesting point to make here is that in work carried in 1991 by FOE, (FOE (1991) Energy without End, Friends of the Earth, London). The British Furniture Industry was estimated to use 35,000 tonnes (one third of its total production) of wood residues (sawdust and offcuts) per year on space and water heating and process heat. This sector has therefore been using its ‘waste’ wood for heat for many years, and there is still scope for expansion. One firm responding to the questionnaire actually incinerated waste wood on-site without using the heat whilst indicating that they spend £1,700 pa on gas for heating. This one firm may indicate an area of development work required to encourage biomass boilers. Straw Response from straw users was quite low, considering the large arable areas of the region. However discussion with the main UK supplier of straw fired boilers indicates that the sales of straw boilers tend to go hand in hand with high oil prices. Quite a large number (20-30) of straw boilers were installed in the region in the 1970s and early 1980s and are now no longer in use. If oil prices rise there may well be a resurgence of interest in straw as a fuel – this being particularly relevant now that the demand for straw for animal bedding has dropped due to reduced animal numbers after Foot and Mouth Disease. Straw boilers are marked on Figure 4.

Table 3 The breakdown of biomass fuels used in the 20 indicated heating systems

Fuel Number Percentage Clean waste wood 11 55% Logs 10 50% Forestry chips 9 45% MDF and plywood 7 35% Straw 5 25% Multi-fuel 5 25% Waste wood pellets 3 15% SRC1 chips 1 5% *NOTE: Several users burn more than one type of biomass fuel

1 SRC – Short Rotation Coppice


Figure 3 Factories with on-site wood waste used for heating


Pellets The responses confirm that only two organisations (three sites) currently use wood pellets [15% of biomass fuel users] for heating fuels and it is known that two or three more are planned. However, this small number is known to be partly due to the relatively embryonic nature of the pellet industry, the short time that pellets have been available locally and their costs in comparison to gas. The buildings that are heated with pellets are marked on the map Figure 4. The pellet boilers already in operation are installed in three schools in County Durham and have had their boilers converted from coal firing to use wood pellets. Historically County Durham has used coal imported from Columbia. Over the past two years the authority has put in place a conversion programme to modify existing coal fired boilers to use locally manufactured wood pellets. Durham County Council are also actively planning to install new pellet boilers as replacements for some redundant boilers. There are other schools and local authority buildings in the north east region that use coal and oil for heating fuel i.e. there are 28 schools in Northumberland that use coal fired boilers and more than nine schools in Teesdale are using oil. Though not all buildings will be suitable for converting to the use of biomass pellets, the successful conversion of coal boilers in the Durham area demonstrates that it is possible and this may be able to be replicated in other areas of the region. Only one private sector company indicated that they use wood pellets and this is to supplement their own on-site waste wood. Short rotation coppice Only 5% of respondents were found to be using short rotation coppice chips and they are using them on their own site. This is probably due to the abundance of other wood available, often at lower prices, given the market situation. The long-term commitment required to grow short rotation coppice is also a deterrent while the markets are so limited. Logs The use of log burning stoves for heating has been included by some respondents as biomass heating. About half of the biomass users currently use log stoves. The study team would argue that unless the stoves are fitted with a back boiler supplying heat to radiators, they would be classed as room or space heaters. There is already an existing and healthy niche market in this sector. The responses do give a somewhat inflated view of the number of biomass central heating systems but confirm that log stoves are a significant aspect of the current and future biomass industry, again reflecting the varied nature and potential of the biomass industry in the UK. It is important to recognise that there are fuel supply chain issues relating to supply of fuel for log stoves. To a certain extent also there could in future be competition for low grade or waste wood to be converted into either logs or woodchips or pellet fuel. This will affect market prices in the long term. Suppliers and distributors of biomass fuels are likely to want to supply a range of products, various sizes of logs, chips and pellets. Availability of biomass fuel It is significant that the majority of the respondents using biomass fuels for heating had a readily available or potential source of biomass material available to them. This is usually already on site, i.e. waste wood, their own forestry and/or straw. The only users buying in biomass fuel are buying logs or pellets. Waste wood users with boilers for small offcuts (rather than factories with large wood heat/waste disposal systems) tend to be given the waste wood at no charge or simply pay for delivery.


Figure 4 Map showing existing biomass boilers by fuel type (linked coloured squares mean a multi-fuel boiler using the fuels shown)


Awareness of biomass heating The following pie chart gives an overview of the level of knowledge and experience the respondents claimed in relation to biomass heating systems. Figure 5 Respondent’s knowledge of biomass heating systems

Just under half of the Interested Respondents indicated that they had some knowledge of biomass heating systems. This is encouraging as it suggests that there are already companies and other organisations that have experience and capability in relation to this sector. Most of these are using biomass as a fuel or are providing some sort of service to the biomass sector. Conversely there is a considerable lack of awareness of the potential for wood heating with over half of the respondents indicating that they know little or nothing about biomass heating. This confirms first hand experience that many individuals, companies and organisations in the region do not understand the potential for using wood as a fuel for automated heating systems. An important benefit of the questionnaire survey is that a significant number of respondents have asked for further information on biomass heating systems. This demonstrates that awareness does lead people to investigate alternatives to their current heating system and/or potential business areas. Rejection of biomass heating Seven respondents indicated that they had installed biomass systems in the past, but have now taken them out or ceased to use them. The reasons cited are convenience, labour, costs of fuel supply and environmental problems. Other work nationally, and experience within the region, indicates that convenience is indeed a major factor influencing the use of biomass heating systems. For example of ten buildings assessed for biomass heating systems during September 2002 in Teesdale by North Energy, the managers of nine insisted that they would only consider wood heating if it was operated by an outside body and was “hassle free” for the user. The tenth preferred the system to be run by an outside body but was prepared to consider running it in house.

12

7222

7

20

7Never heard of it

Limited knowledge

Explored the option and nowplan to ins tallExplored the option butrejected itAre current ly using it

Previous ly used it but nolonger do so


Future use of biomass fuels Twelve sites where biomass heating is proposed or being considered were identified in the responses to the questionnaire and this constitutes 9% of the 138 Interested Group. The study team has identified a further 29 sites for which 22 organisations in the region are investigating the possible use of biomass heating systems. These 41 sites are marked on Figure 6. The list and maps cover those who are in the very early stages of thinking about the possibility through to those who are actually in the process of installing heating systems. However telephone discussions with some of the respondents plus comments on the questionnaires indicate that most are in the early stage of assessing the technical and economic feasibility of installing a biomass heating system. They have not yet decided to progress with an installation, neither are they clear which biomass fuel they will be using. Of those organisations investigating the use of biomass, six are from local authorities, ten from community groups/charities and the remainder are private organisations.

Table 4 Breakdown of organisations interested in install ing biomass heat plant

Type of organisation Number of heat systems

being explored Local authorities/public sector 16 Community Groups/charities 11 Private companies 9 Farming estates/forestry organisations 3 Individuals/farms 2

This list and the map overleaf (Figure 6) reflect a much more encouraging picture than similar map prepared in late 1999 by North Energy which showed only 14 proposed installations (five of which have come to fruition, two are in progress and the rest have since been dropped). It is extremely significant that this number of biomass heating installations are being explored and reflects both the changing climate towards sustainability and renewable energy and the beginning in 2002 of public sector financial assistance with such energy systems. The great majority of sites being investigated for biomass heat are either owned by Durham County Council or are linked directly to three publicly funded projects: TREC - the Teesdale Renewable Energy Challenge, (funded by EU Altener programme). REALL - Renewable Energy at Local Level (funded by the Countryside Agency, RDP and SEED and instigated by North Energy with the Northumberland Community Council). Thus showing the importance of public sector and funded projects. More detail of these and other projects are given in the Regional Context in Annex 1. The map overleaf (Figure 7) shows both the existing biomass boilers (excluding factories burning their own waste wood) and the sites being explored for biomass heating. The geographical distribution reflects the historical involvement (mainly public) of organisations in County Durham but it is encouraging to see that Northumberland is beginning to catch up.


Figure 6 Sites being explored for biomass heating


Figure 7 All sites for biomass heating – existing and potential


Respondents rejecting biomass heating Nine of the respondents have already investigated the potential of biomass heating but have rejected the idea. The reasons cited are the comparatively high capital cost of the equipment, convenience and running cost issues. This reinforces the view that financial assistance with capital cost, and ESCOs would be an important catalyst for action.

6.2. Heat market opportunities Development of Energy Supply Companies (ESCOs) Anecdotal evidence as well as research has indicated nationally that a key driver in the growth of the biomass industry is the ESCO (Energy Supply Company). ESCOs can operate on a national or regional scale. Their purpose is to interface between the supply side of the industry and the market. They provide a relatively comprehensive service in order to convert customers. Typically they also control both the installation of boiler plant, its operation and the fuel supply, and simply sell heat to the consumer. Thus heat can be delivered with as little involvement by the consumer as a gas or liquid fuel. ESCOs address many of the concerns expressed by potential end users of biomass fuels. Schools and public sector buildings There are substantial development opportunities for biomass fired heating schemes within the region’s existing schools and public sector buildings. This potential particularly exists in rural areas off the gas grid, where alternative fuels such as oil compare best with woodfuel prices. The scale of potential could be significant. Many public buildings in the region, particularly in Northumberland, have old boiler systems which will shortly be due for replacement. They provide a significant opportunity to install modern fully automated biomass heating plant. District heating schemes There are a number of small scale developments that have the potential for biomass fired district heating schemes. It is generally cited that district heating schemes under 200 houses are not economically viable. However, in remote and rural areas clusters of properties are unlikely to reach 200 and economic and practical investigations are required to identify means of delivering and operating smaller district heating schemes. Fuel Poverty and Warm Front Programmes The potential for biomass heating systems to address fuel poverty and to provide affordable warmth in the off-gas areas is also an area of work that can be developed in the region. The region is home to a number of Warm Zones (Northumberland and Stockton), in addition to this there are also areas that suffer significantly from Fuel Poverty. Again many of these areas are rural and the housing stock is classed as hard to heat. Whilst energy efficiency measures can ensure efficient use of energy, investigating the potential for easy to use individual biomass boilers in these properties may address both affordable warmth issues and the development of the rural biomass sector. New build properties / updating existing building stock An information and awareness raising campaign focussing on architects, developers and local authority planners can target the new build sector. This information is particularly needed in off-gas areas to encourage developers to look at biomass as an alternative to oil and LPG.


6.3. Conclusions on heat markets Of those surveyed it would appear that there is a latent opportunity to promote the use of biomass heating systems, particularly to off-gas areas and to those with wood waste. This is particularly true where home produced (free) biomass fuel is available i.e. from manufacturing/process activities, forest management and crop production. The cost of running biomass fuelled heating systems compares reasonably well with the running cost of oil, LPG or electric heating but less well to gas at today’s prices. The relatively frequent use of such fuels suggests that from a running cost point of view, wood heat could be made attractive in rural areas. The disincentives identified such as capital cost, convenience and security of fuel supply, would need to be addressed as well as a considerable need for awareness raising. There are a number of ways that this can be done from provision/identification of grant schemes, establishment of heat Energy Supply Companies and the establishment of a certified fuel supply network.


7. Electricity Generation and the Co-firing Market

7.1. Electricity generation and fuel supply The Chris Blandford Associates (CBA) Study (Proposed Targets for the Development of Renewable Energy in the North East to 2010, October 2000) suggested that the target for electricity generation from biomass in the north east is between 15-40MW. This relatively low figure reflects a number of important factors, transport distances from fuel production to power station, types of biomass fuels available in the region, the type of technology available and costs for establishment of energy crops and power plant. Whilst in Europe and Scandinavian countries biomass fired power stations are common, to date there has been little development in this sector in the UK. Highly publicised ‘failures’ such as the Arbre project in South Yorkshire have made both developers and potential fuel producers cautious. In addition to the liquidation of Arbre, other planned power stations have been put on hold whilst the gasification technology is further developed. Anecdotal evidence informs us that many farmers hope that growing energy crops is the ‘way forward’ as a means of farm diversification. The Energy Crop Scheme in the England Rural Development Plan was introduced in 1999 to encourage the planting of 25,000ha of new energy crops nationally until 2006. The intention of this scheme was to have a ready fuel supply for the new generation of biomass fired power plants. However only a few hundred hectares have been planted to date. The CBA Targets Study estimated that the north east could produce around 3,000ha of grant-aided energy crops if markets were available. There is also a considerable resource of forestry and woodland material in the region which could be used to fuel electricity or heat plant.

7.2. Questionnaire responses The questionnaire responses identified six companies that have a current involvement with electricity generation from biomass. Two companies are developing prototype wood gasifiers fired with waste wood and another provides maintenance to a wood CHP system in Northern Ireland. One company has been (until recently) supplying forestry chips as fuel to the Arbre project and two are aiming to trade in large quantities of woodfuel for power stations. A fifth company based in Middlesbrough is currently in the process of securing funding for biomass fired power plant. This company has submitted an application to the DTI Bio-energy Capital Grants Scheme for £10 million of a £38 million development. This 30MW power plant could single-handedly meet the Chris Blandford Associates’ regional target of electricity generation from biomass and provides scope for the target to be reassessed. If successful it will require 170,000 oven dry tonnes of wood per year which will be sourced locally, with an emphasis on short rotation coppice with three years of the plant being commissioned. This amount of wood is half as much again of the annual output of chipwood and small roundwood from the Forest Enterprise, Kielder Forest District, which covers all the Forestry Commission forests in north east England. This wood is used by the chipboard industry at present.

7.3. Biomass CHP, co-firing and fuel supply The questionnaire responses suggest that there are no wood fired CHP or co-firing plant in the north east. This is not surprising as the technology is not yet well developed for use with biomass and there are only a very small number of prototype biomass CHP plants in the UK, (two or three).


Seven organisations indicate that they are planning to install biomass CHP, however comments suggest that most are still at the investigative stage and final decision have not yet been made. Two of the nine respondents are consultants working on schemes for CHP sites elsewhere in the country.

7.4. Organisations rejecting biomass CHP Ten organisations report having investigated the use of biomass CHP plant but have rejected it, mainly on grounds of capital and running costs. A further interesting point to note is that the Teesside 30MW development investigated the possibility of CHP but also rejected it on economic grounds. The company advised that by solely focussing on electricity generation they are able to benefit from the tradable Renewables Obligation Certificates (ROCs) and the finance that these provide. Only the electricity from a Combined Heat and Power plant would qualify for ROCs and therefore the economics of large scale biomass fired CHP plant is poor compared with an electricity only plant. There is no equivalent ‘Green Heat’ trading scheme Figure 8 Reasons for rejecting biomass as a source for electricity generation

7.5. Biomass trading and co firing with coal Two respondents reported that they have tried to set up a biomass fuel trading base in order to make regular large amounts of wood fuel available to users such as electricity generators planning to co-fire wood with coal. This is currently being explored around the UK and could have great potential for the region. Co-firing of wood in even one conventional coal power station requires very large amounts of wood (upwards of 250,000 tonnes per year, three times more fuel than was required by Project Arbre). Sourcing this amount of wood, transporting it and ensuring a regular supply is a challenge but would provide a very significant outlet for wood in the region.

Electricity generation from biomass/cofiring rejected due to:

Capital costs

Fuel supply

TechnicalissuesRunningcostsPlanningissuesOther


The only coal-fired power station in the region is at Alcan on the Northumberland coast, but it does have reasonable access via the A189 SE Northumberland Spine Road and a rail link. The next nearest coal power stations are in the Vale of York and the amount of lorry movements required to these would be a disincentive. (Woodfuel is roughly twice the bulk of coal for the same heat output.)

7.6. Electricity generation and Co-firing market opportunities Electricity Generation If successful in its application to the DTI Bio-energy Capital Grants Scheme, the Teesside power plant would require a range of biomass fuels totalling approximately 170,000 oven dry tonnes (odt) per year. The biomass fuels would include short rotation coppice/energy crops, forestry materials, residues and recovered timber. The intention is to source this locally. If this one power plant went into operation it would have a significant impact on the development of the biomass industry in the north east. Investigations have been made into the possible location of other small scale electricity generation plant. There are a number of sites in the region that provide good infrastructure links, access to fuel supply and good grid connections. Further opportunities may exist for other electricity generation plant in the north east and work with local planning authorities to identify sites might be fruitful. Co-firing coal plant With the onset of the Renewables Obligation power generators are obliged to provide 10% of their power from renewable energy sources. Co-firing biomass with coal produces a percentage of renewable energy that is eligible for tradable Renewable Obligation Certificates. Some of the larger biomass fuel providers in the region have been approached by large power generators investigating this potential further. Fuel producer groups can address this need as can an increase in output from existing and potential fuel production plant but need to work together in order to guarantee the relatively large supplies of woodfuel.

7.7. Conclusions on electricity generation, CHP and co-firing There are currently no electricity generating plant fired with biomass in the north east, or indeed anywhere in the UK, with the exception of one straw fired plant in East Anglia and two poultry litter fired plant. The region (and Cumbria) however, has been the focus for investigation into potential sites for smaller scale (8-10MW) power plant in the past which could be revisited. One regional company did spend many years promoting the north east as an area for progressing smaller power plant using the pyrolysis technology. They identified a number of sites that could have been developed. Unfortunately the economics and immaturity of this technology prevented the realisation of these plans. For these and other reasons, the company was wound up after 10 years of intense activity and investment. Others made attempts over a more concentrated period to take biomass power schemes forward but were prevented from progressing by the terms of reference of the (now extinct) Non Fossil Fuel Obligation.


There is considerable interest in biomass CHP but the economics and the technical development required to bring equipment to the commercial stage are the two main barriers to use of wood CHP. Interest is being expressed in co-firing wood with coal but again there are barriers and more research may be needed. It would be fruitful to undertake some desk study of large power producers to identify in detail the perceived barriers to co-firing with coal. Experience exchange with European partners could be helpful as there are some plant in mainland Europe where coal and wood are co-fired.


8. Biomass Supply Industry A matrix was devised for the questionnaire to assess the current and future business involvement in providing biomass and biomass Combined Heat and Power related services. Some of the following information is provided graphically in the previous chapter.

8.1. Current service providers Forty-two companies indicated that they currently provide a service to the biomass industry, (although in many cases this appears to be embryonic). Over half of the companies identified consultancy as their main area of activity. Nineteen companies indicated that they are able to supply or produce biomass fuel. These provider companies and organisations are predominantly from the waste industry sector and forest management. A small number of farmers indicated their current involvement (on their own sites) and two groups of farmers are being established to provide biomass fuels. Twenty companies can provide more than one service to the biomass industry and the questionnaire identified three companies, who indicate that they are able to provide all the services listed.

8.2. Interested service providers Sixty-four companies indicted that they were interested in providing a service to the biomass industry. A large number of firms (54) consider that they are already able to supply a variety of biomass fuels or express an interest in becoming biomass fuel suppliers. They are plotted on Figure 9 overleaf. A large number of these are farmers or landowners who are interested in potential diversification from traditional cropping activities. In addition to this, organisations such as the Forestry Commission are interested in biomass fuel production and supply. This is motivated by the current crisis in the timber industry and a need to diversify from the traditional timber production activities. It is worth noting that, despite wanting to supply fuel, few respondents have shown any interest in utilising biomass fuel themselves. This may be because they are accustomed to traditional market trading arrangement for crops being sold in bulk to outside purchasers. Growing fuel crops is viewed as a replacement or an addition to traditional crop production activities on farms rather than as an opportunity to diversify into local energy production. A number of companies contacted the study team to get further information about the potential of offering services to the biomass sector. Two solid fuel supply companies expressed interest in expanding their activities to provide a supply service for biomass fuels products. Both companies currently deliver coal to the domestic and commercial sector and are interested in delivering biomass fuels in addition to this. One company was interested in providing a delivery service for the pellet manufacturer in Durham. Twenty-three companies are interested in two or more services to the biomass industry. There are five companies who are interested in supplying all the services listed.


Figure 9 Companies indicating capability to supply fuel


Ten companies expressed an interest in establishing heat supply companies (ESCOs) in the future rather than simply fuel supply1. Within the UK biomass industry this is seen as a preferred option for stimulating the growth of wood heating as it removes the maintenance responsibility from the heat user. This addresses the issues relating to convenience that have been cited above.

8.3. Rejection of biomass services Fourteen companies indicated that they had explored the potential of supplying a biomass service but had rejected the idea. The main reasons given were lack of markets and high capital costs. (High capital costs are chiefly caused by the need for mechanical handling of woodchips plus the fact that biomass boilers are generally imported, supplied in small numbers and cost considerably more than the fossil fuelled alternatives.) A range of other issues were cited as secondary factors. One company said the their insurance company had rejected their idea of using wood fuel for heat. The reason was not clear from the questionnaire but may be the perceived fire danger of storage of wood for fuel. If it is the case that some schemes are not being progressed because of insurance issues it is important carry out further investigation with organisations such as the Association of British Insurers. Figure 10 Reasons for not providing services to the biomass industry

1 Heat supply companies are known as ESCos (Energy Supply Companies) and they typically operate by owning the heat equipment, running the boilerhouse, supplying fuel and carrying out maintenance. Heat is metered and the consumer pays for the heat used. One attraction of this method is that the supplier can often offer a guaranteed price for the heat for a fixed term, as long as five years, in exchange for a supply contract. This gives the heat user security of heat supply at fixed price and it enables the ESCo to raise finance from a bank to install the heat plant on the basis of the guaranteed heat sales.

Decision taken not to provide services to the biomass industry due to:

Capital costs

Technical issues

Planning issues

Other

Lack of market


8.4. Biomass Supply Industry Structure It is constructive to review the findings in relation to an industry structure. Figure 11 below illustrates the key sectors within the biomass industry supply chain from the growers/producers through to the consumers. It shows how an ESCO can take responsibility for a range of activities in the delivery of heat to the customer. Whilst activity in the north east region is embryonic the analysis of the results indicates activity in all areas of the supply chain. It is felt by the study team that the industry has been driven forward by perceived opportunity and can only reach its potential as a result of market demand being stimulated. Figure 11 Biomass Industry Supply Chain Structure (ESCO model) The tables below present the findings of the questionnaire within a very basic industry structure but the value is immediately evident.

Table 4 Those indicating existing activity in the biomass supply industry

SUPPLY CHAIN

Feedstock Processing/

Handling of wood & straw

Biomass Equipme

nt

Biomass Fuel

Biomass for traditional

non energy markets

Boilers etc ESCOs

All Waste Dom Com Supply 12 12 3 16 2 5 4 Manufacture 6 5

13 2 3 3 2 2

4

Consultancy 8 9 6 3 6 3 5 10 8 O&M 2 2 2 2 2 1 2 4 1 System Design

1 1 1 2 1 0 2 3 2

R&D 4 2 3 3 4 1 1 3 2

SERV

ICES

Haulage 13

Customer Crop Harvest Fuel Processing

Fuel supplier

Timber & Forest

Management

Agricultural Energy Crops/

straw

Waste wood

Services

Operation & Maintenance Transport

Installer

Equipment Supplier

System design

Equipment Manufacturer

ESCO


Table 5

Those indicating an interest in future activity in the biomass supply industry SUPPLY CHAIN

Feedstock Processing/

Handling of wood & straw

Biomass Equipme

nt

Biomass Fuel

Biomass for traditional

non energy markets

Boilers etc ESCOs

All Waste Dom Com Supply 18 15 8 23 7 2 3 Manufacture 12 8

11 4 5 5 1 2

10

Consultancy 11 11 7 8 11 5 9 13 9 O&M 2 3 4 4 3 1 5 8 3 System Design

2 2 2 3 3 1 5 6 3

R&D 8 6 5 6 7 4 2 6 4

SERV

ICES

Haulage 15 (The activities presented in italics are non core but important to the development of a competitive local industry.) The two tables above reveal some important information: Broad capability The region clearly has capability and knowledge spanning the length of the supply chain. e.g. in relation to biomass related equipment there are suppliers, manufacturers, consultants, operation & maintenance providers, system designers and research and development experts. This shows that the region already has a suitable base from which the biomass industry could be further developed. Predicted growth The figures suggest that whilst the industry is in its infancy, some organisations from which it is composed are committed to its development and others considering entry see sufficient opportunities to explore their own future involvement. Balanced growth A comparison between the two tables suggests that there will be consistent growth across all sectors of the supply chain. The study team has received expressions of frustration relating to the slow growth of the industry within the region. However the figures may reflect an industry whose growth, although slow, is balanced and sustainable. Development of ESCOs Anecdotal evidence as well as research has consistently suggested that a key driver in the growth of the industry is the ESCO (Energy Supply Company) and this applies on a national as well as local scale. Regionally, there are no biomass ESCOs but they are key in that they are the interface between the supply side of the industry and the market. Information about the potential market also suggests that ESCOs may need to be relatively comprehensive service providers in order to convert customers. It is therefore extremely encouraging to see some predicted activity in this area. Great potential for such companies exists within the rural off-gas parts of the region. ESCOs address many of the concerns expressed by potential end users.


University capability The region’s universities are already involved in R&D in the biomass sector. The development of a proven technology for producing electricity from biomass (particularly gasification technologies) offers the universities potential research avenues. In addition to this the use of biomass in CHP both large scale and small scale and co-firing still requires further research and development. In this respect NaREC may assist in providing development capacity and links into the region’s businesses. Greater opportunity for waste wood Limited research has been undertaken investigating the potential for waste wood in the region. However, whilst little quantitative research has been carried out in this area it is common knowledge that there is still a significant proportion of clean waste wood going to landfill, costing companies disposal charges and increasing the burden on landfill sites in the region. Much of this wood can be diverted out of the waste stream and into other sectors. Recycled wood has a large number of uses in a wide variety of sectors i.e. animal bedding, toy manufacturing, reclaimed building materials, chipboard manufacture. One of the competing markets with waste wood is using it as a fuel. However, one can argue that burning wood as a fuel can be seen as the final use in the disposal line of activity. Work can be undertaken with organisations such as Waste and Resources Action Programme (WRAP) to investigate the competing requirements for different sectors with regard to waste wood and to assess the most effective use of waste wood at different stages of its useful life. Included within this work, research could be undertaken to assess the impact of competing markets on prices and costs for example, the way in which the chipboard market affects the fuel and forestry markets. Fuel producers It is evident that the number of fuel producers is likely to increase and since biomass development is essentially locally focussed, this increase in fuel production is essential to growth within the region. At least one fuel producer group has been established in the south of the region. Whereas the majority of the group are located outside the region, the administrative centre is in the north east and the group is actively seeking markets within the region. Experience in this area indicates that the main barrier to the establishment of new groups is the lack of the end user. Financial assistance is available to assist in the establishment of fuel producer groups. However, the group must identify and have the backing of an end user to qualify for assistance. At a regional level the establishment of new producer groups needs to go hand in hand with the development of clusters of heat users. Intervention may be needed to ensure that the critical factors of quantity and quality and location are all taken into account. Regional support The view of the Central Science Laboratory who are researching biomass activity at a national level is summed up as follows: “Where the north east region stands out is in the co-operation and involvement of the public funded organisations who together are working hard to drive biomass development forward.” National experience shows that support from regional and public sector organisations for both large and small biomass projects is vital for the successful implementation of projects. Capital support from National and European funding programmes also provides the crucial financial impetus for many demonstration projects. Regional bodies and public sector organisations have a role to play in providing opportunities for forestry and agricultural companies and other to help promote and encourage the growth of the rural economy.


For example:

• Weobley School, Herefordshire, part funded through Objective 5b • Durham Schools, funded through County Durham Environmental Trust • Lee Moor Farm, Northumberland, partly funded through the LEADER 2

programme • Hereford County Hall – part funded through the BioEnergy Capital Grant

scheme • National Botanical Garden of Wales, greenhouse/visitor centre, part funded

under Objective 1/2 • Strathmore Farm, County Durham – part funded by DEFRA’s Rural Enterprise

Scheme. • Benburb CHP Northern Ireland, part funded under Objective 1 • Forest Enterprise new boiler grant scheme in Wales – funded by Objective 1

and 2 and the Welsh Assembly Workforce skills It is important that the region can react quickly to any growth in the market. To this end it is essential that a skilled and experienced workforce be in place. The north east region is better off than many parts of the UK but will soon have a shortage of people able to undertake feasibility studies, skilled biomass system designers and plant installers and maintainers. There is no formal practical training available other than a short course in a technical college in Devon and some CDrom based training materials. Geographical distribution and clustering Table 6 and the maps, Figures 3 and 4 show the geographical distribution of organisations currently involved in biomass. Several areas within the region have already emerged as having sufficient activity as to present the potential to form integrated clusters of organisations involved in biomass. Areas such as Teesdale, central Durham, Tynedale and some parts of Tees Valley have started investigating the biomass sector in terms of the development of manufacturing capability, rural regeneration, and the promotion of biomass technologies in the domestic, commercial and industrial sectors.

Table 6 Geographical Distribution - of those

indicating their existing areas of interest

Co Durham N/land Tyne & Wear

Teesside Scotland/Cumbria/ N Yorks

Boiler people 1 4 4 2 3 Haulage 6 4 3 1 1 Inv olv ed with wood/ straw /src/energy crops/forestry

13 10 8 5 3

Waste wood 9 4 7 4 2 Equipment people 5 1 1 2 ESCOs 3 2 1 2 Promotion / training 1


Biomass supply industry opportunities Co-operatives/machinery rings Because of the embryonic nature of the biomass sector in the north east many there are many organisations and companies who have not yet got the confidence to invest finance into equipment and machinery. There are a number of possible alternatives to this that have been successful in other sectors. The establishment of a machinery ring such as the Northumberland and Durham Machinery Ring provides farmers with access to agricultural equipment. The inclusion by an existing ring to include equipment such as chippers, grinders and dryers will enable potential biomass fuel producers to start up with minimum investment in the first instance.

A similar approach would be the establishment of a co-operative. A group of farmers can set up a co-operative and invest in equipment and machinery.

Delivery A similar arrangement can be established on the delivery and transportation sector of the industry. Energy supply companies (ESCOs) As mentioned in the above sections the establishment of an ESCO provides customers with a ‘one-stop-shop’. This allows issues such as costs, fuel prices, fuel availability, quality and quantity, choice of equipment and convenience to be addressed in one company. There are a number of models for ESCOs and the establishment of a regionally based company with the support and backing of regional agencies and public sector organisations would address many of the concerns of the potential marketplace. Clustering As the mapping has indicated there are a number of geographic clusters that are beginning to emerge within the region. These require consolidating and awareness raising activities to promote the current players. A cluster of companies providing the services required throughout the supply chain enables members to promote their strengths and provide more efficient services.

8.5. Supply sector conclusions The responses from the questionnaire have shown a positive level of interest in the supporting and supply industry. There are a significant number of companies who are already service providers but perhaps even more encouragingly there are more companies indicating a future interest in the sector. Analysis of the structure of the supply chain indicates that there is a core of companies who have been providing services to regional and national companies. The north east’s predominantly rural sub-regions, Durham and Northumberland, are already emerging as areas of activity in the biomass industry. The existing companies require integration and support in a regional structure to allow them to grow and thus promote rural regeneration. There are also a large number of companies and organisations who are interested in the potential diversification of activities that the biomass sector has to offer. The existing biomass infrastructure is starting to form a well balanced foundation upon which to build and it is optimistic in terms of the perceived opportunities for the industry. There also


seem to be perceived prospects for organisations who have not yet made a commitment to the industry enabling them now to make the most of emerging opportunities. However, years of experience of the embryonic biomass industry reinforce the view above that the two main barriers for the lack of development of the biomass sector are high capital costs and lack of markets, and in mains gas areas, the relatively low cost of alternative heating fuels. In addition to this, anecdotal evidence obtained during the survey period indicates that some local companies are too disillusioned and frustrated with trying to move forward in the sector over a period of 8-10 years to even complete the questionnaire. A fundamental problem is the ‘chicken and egg’ situation of few suppliers because of unconfirmed markets and little demand because of poor supply infrastructure. The development of Energy Supply Companies will be a key factor in driving the industry forward and resources need to be committed to the establishment of these in order to give the customers confidence. In terms of heat/fuel markets, public sector buildings such as schools already form an embryonic market and indications are that there are a significant number of other buildings that could increase the market size. There would clearly be value in establishing a mechanism to enable the conversion of as many of these buildings as possible to biomass heating systems. Similarly there seems to be a considerable volume of waste wood that could be utilised as a relatively low cost fuel thereby providing additional income and savings for several companies and helping to get demonstration projects on the ground. A marketing communications initiative would be valuable in raising awareness within the appropriate business networks.


9. Biomass Consultation Seminar

9.1. The seminar A seminar was held on 29 November 2003 as part of the North East Business Environment Month. It was hosted by Northumberland County Council at County Hall and was attended by 70 people (attendance list attached as Annex 6). A number of talks were given: An introduction and welcome - Ian Burdon of PB Power An introduction to the UK biomass scene - Adrian Hull of the EAGA Partnership The drivers behind the renewables and development of a north east biomass sector Frances Rowe of One NorthEast The North East Biomass Mapping Exercise Helen Nesbit of TNEI Summary of key issues and discussion starter Nicola Smith of North Energy Conclusions of points raised in discussion and break out groups and ONE response Frances Rowe ONE

9.2. The presentation A presentation (Annex 7) of the initial findings of the questionnaire survey was given by Helen Nisbet of TNEI and contained much of the information which is presented in this report. Nicola Smith of North Energy provided a discussion starter by briefly rehearsing the issues that had arisen from the survey. The main points arising from the survey can be summarised as listed below. • Biomass is being seen as an excellent opportunity for rural economy and for business

development and there is considerable interest in being part of it. The embryonic industry in the north east reflects the opportunities and drivers nationally.

• Electricity generation could create a huge demand for biomass fuel, but not immediately.

• In the short term the main driver will be biomass heating. • Plenty of fuel suppliers are available in the region but need co-ordination and access to

clusters of consumers in order to develop. • Market needs practical demonstrations to encourage more heat users. • Awareness raising and public perception is important to raise confidence and interest. • Some form of network or collaborative group of the supply sector would be useful. • The public sector need to be advocates and lead by example. • Current public funding is not adequate to enable enough clusters of heat projects. • Economics of wood heat work best with waste wood or on-site wood supply, scope will

widen as fossil fuel prices rise. • Technical and practical help is needed for public and private organisations to explore

biomass energy. • There are some national lobbying issues regarding for eg PFI, ROCs for CHP, level of

grant support etc. The attendees were divided into three break-out groups chaired by Frances Rowe of One NorthEast, Pam Jose of EIF and Joanne Bennison of EIF. Participants were encouraged to comment on, change or add to the initial pointers in the break-out groups: After the group discussions each group reported back and Frances Rowe then summed up the feedback.


There was a general consensus between the groups on the main points. These points, listed below were also very much in line with the findings of the survey and experience of those involved in the industry. A number of detailed points were also raised and are noted below the summary list.

9.3. Summary of main points (upon which there was consensus) from break-out groups

• There is a clear interest in seeing the biomass industry go forward and some parties are showing considerable time and financial commitment to it.

• The industry needs a champion and a local co-ordinating/advisory/promotional body to help change perceptions and raise the profile.

• The public sector needs to be advocates and to walk the talk with demonstration plant in their own buildings (even if it costs more!).

• A high level of co-operation within the industry is essential to speed the process and to give end users confidence in new technology and methods.

• The economics of wood energy are best in off-gas areas, or with industrial waste wood but the high capital cost is a definite disincentive to installation.

• At a local level biomass heating has good potential, To get it started urgently needs: • Simple working demonstrations • Financial help with capital cost • Feasibility studies • Advice, encouragement and technical input.

• Establishment of ESCOs would give a very positive signal and comfort to potential heat users.

• The different economics and practical issues involved with waste wood and forestry or agricultural wood will need different responses.

• There are a number of policy, legislative and funding issues to be addressed nationally.

9.4. More detailed points In more detail the variety of points raised in the breakout groups can be grouped under public perception, economics and practical issues. They are as follows: Promotion and public perception • The industry needs a champion to promote the sector. • A central source of information on technology, grants, sources of supply etc. is needed. • Education and awareness raising for the industry, general public and potential users is

essential. • Promotional work should target specifiers of new buildings. • Local demonstration projects are essential. Seeing is believing. • Local authorities and public sector need to be advocates and to demonstrate by

example. • Political will to include renewables is needed for eg public sector could have green

procurement policies. • More familiarisation with what is happening in Scandinavia and Europe would help to

raise confidence in the technology. • Must promote proven technology which is simple to operate and maintain. • Investigate feasibility of small local schemes in clusters so fuel suppliers can get going. • Promote the added value i.e. sustainability or green energy. • Perception of wood heating needs to change – with awareness of availability of fuel

and boiler equipment.


• Need to ensure that all uncertainty in the supply chain is avoided to give confidence to potential users.

Economics and financial issues • High capital cost compared with fossil fuel alternatives is a definite deterrent and to get

demos started will need financial support. • Government grants are inadequate and limited. The application process needs

simplification and increasing funds for grants are essential to get enough systems installed.

• Some sort of regional grant scheme would be a great help but must be simple and flexible.

• Be aware of the cost differential between new wood and waste wood. Waste wood can be obtained for free. (Editorial note – beware waste wood contaminated with preservatives, glues, paint etc which is not suitable for local scale heat plant.)

• Other countries use taxes and incentives to encourage the use of waste wood – why doesn’t the UK?

• Competition for waste wood with the chipboard industry affects price and availability. • Investigate the inability of forestry and agricultural wood to compete on price with

cheap fuels such as gas. • Investigate Packaging Recovery Notes for waste wood converted to fuel. Practical issues that need to be smoothed out • It is a diverse industry and needs co-operation between sectors to ensure smooth

operation • Clear supply chains need to be developed including growers, transport, wood

processors/pelletisers and heat and power end users. • Public sector would be more interested if the biomass heat could be made hassle free

and cheaper to run than fossil alternatives. Biomass heat needs to be as easy to use as gas! (ESCOs could be the answer to this.)

• Research and development is required to produce mixtures of different woods or wood and other material mixes to provide pellets to a specific grade and calorific value.

• At large scale (heat and electricity generation) there are some legislative barriers and Environment Agency issues which act as deterrent to investors.

• Waste Incineration Directive limits how waste wood can be burnt – complying makes it very expensive!

• Renewable Obligation Certificates alone are not sufficient incentive to set up wood energy plant, and are only available for electricity.


10. Conclusions The mapping exercise has demonstrated that there is already an embryonic biomass industry in the north east with all sectors of the supply chain represented. There is extensive interest in future involvement with the industry, particularly from potential fuel suppliers and consultants. The fact that 70 individuals attended the consultation seminar is a good indicator of practical involvement. The industry offers significant opportunities for rural diversification and new markets for the forestry and waste industries, as well as important environmental benefits. It has been confirmed by the study that the key drivers to expanding the industry are fuel prices and providing markets. Markets could be both electricity generation and heat supply. Previous efforts to develop power stations have been thwarted by factors including electricity purchasing arrangements, planning issues and available technology. There is now a proposal for a biomass power station in the region although this will take time to build and commission. This proposal could provide the greatest injection of opportunity for the industry that the region has yet experienced. In the short term however, developing a market for biomass heat would boost the industry and provide valuable experience for all sectors of the supply chain in producing, storing and transporting biomass fuel. Indications are that heat can be provided from forestry material to rural buildings at a lower cost than oil or LPG and this could help to address issues of fuel poverty and hard-to-heat homes. It is however currently hampered by a “chicken and egg situation” in which few fuel suppliers are readily available because the markets are so limited and biomass heat plant is not installed because fuel is not available at suitable price and specification. The best potential for developing heat markets in the short term lies with those who have access to free or cheap wood waste and in the off-gas rural areas where fuel prices are higher than in areas with mains gas. The survey records seven firms using their own wood waste for heating and in the off-gas areas there are already 14 sites with biomass boilers. Encouragingly an additional 37 sites are currently being investigated for wood heating. The chief obstacles to implementation of these and other potential biomass heating schemes are high capital costs and the need for a convenient heat supply to be provided with minimum effort by the consumer. High capital costs are chiefly caused by the need for mechanical handling of woodchips plus the fact that biomass boilers are generally imported, supplied in small numbers and considerably more expensive than the fossil alternative. The establishment of some type of biomass energy supply company (ESCO), is key to providing biomass heating with maximum convenience, and therefore acceptability, to the user. The views of the seminar attendees, plus experience elsewhere in the UK, identifies that the crucial issues of capital cost and developing heat markets can best be resolved in the short term through intervention by the public sector. The consensus was that UK government grant schemes are not extensive enough, nor geographically targeted enough, to enable the development of the necessary clusters of wood heat plant. Clusters are required to give fuel suppliers or ESCOs a realistically sized market. Commitment by the public sector in the north east to both install wood heat in public buildings and to assist with the capital cost of a range of biomass projects would help to break into the “chicken and egg situation” in which the industry finds itself. More public sector involvement is vital in order to establish demonstration wood heat sites and to give consumers confidence.


A further factor to emerge is the need for a champion for the industry and for effective local dissemination of information, awareness raising and technical support to those interested in biomass heating. Some research and development work is already underway in the region’s universities. There appear to be opportunities for further study, particularly concerning electricity and CHP technology and co-firing wood with coal. This could perhaps be linked into the operations of NaREC. During the mapping exercise other detailed information and suggestions, plus requests for help to take biomass projects forward in the region, have been collected. These, together with the information from the survey summarised in this report, provide a good foundation for the preparation of a strategic action plan for the biomass industry in the north east. The findings are highly encouraging. Together with the growing national commitment to renewable energy they suggest that, with the right support, the next few years will see a marked growth in opportunities within the biomass industry in the region. This should result in creation of jobs, business start-ups and expansion.


11. ANNEXES 1. The regional context 2. Copy of explanatory letter 3. Copy of biomass factsheet and questionnaire 4. Summary of statistics from questionnaire 5. Summary of comments from questionnaire 6. Seminar attendance list 7. Seminar presentation

north east biomass mapping exercise for environmental ... · appears that if the biomass heat...

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