wood energy use – where are markets and policy taking us? mobile tel: 07970 522160 email:...
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Wood energy use – where are Wood energy use – where are markets and policy taking us?markets and policy taking us?
www.stevelukerassocaites.co.ukwww.stevelukerassocaites.co.ukMOBILE TEL: 07970 522160MOBILE TEL: 07970 522160
EMAIL: EMAIL: [email protected]
Regional Cluster facilitatorsRegional Cluster facilitators
South Scotland – Charlie Fulton South Scotland – Charlie Fulton - - [email protected]; ; 07831 47644107831 476441
Mid Scotland – Steve LukerMid Scotland – Steve Luker, , [email protected]; ; 07970 52216007970 522160
North East Scotland – Claire GlaisterNorth East Scotland – Claire Glaister [email protected] ; ; 07957 17590907957 175909
Highlands and Islands – Stewart Highlands and Islands – Stewart Meikle Meikle - - [email protected] 07733 89482907733 894829
RENEWABLES IN CONTEXTRENEWABLES IN CONTEXT
8% of EU total energy comes from renewables8% of EU total energy comes from renewables
1.5% of UK total energy comes from renewables1.5% of UK total energy comes from renewables
Use of Renewable Energy Across the EU1%
3%
4%
33%
59%
Solar/PVs
Wind
Geothermal
Hydro
Biomass
Wood Fuels
Other bioenergy
c100M t wood
Policy drivers:Policy drivers:UK renewable UK renewable energy strategyenergy strategyIn Spring 2009 the UK set a target of 15% of energy to be renewable by 2020. At the moment it is 1.5%. A step change is required.
10 times bigger!
How is this to be delivered?
What is role of wood energy in delivering the UK RES target? (......around 20% planned)
ScottishScottish Renewable Renewable Energy Targets to 2020Energy Targets to 2020
Heat looks small...........?
Markets and market share Markets and market share in Scotland – the in Scotland – the importance of heatimportance of heat
Renewable heat
Renewable electricity
Scottish renewable heatScottish renewable heatpolicy for wood energy?policy for wood energy?
• The Scottish Government has indicated it will set a The Scottish Government has indicated it will set a target of 11% for renewable heat (9TWhs) by 2020target of 11% for renewable heat (9TWhs) by 2020
• SRF (April 09) Report – Renewable Heat in Scotland: SRF (April 09) Report – Renewable Heat in Scotland: 2020 Vision suggests 50% of this 9TWhs is wood fuel2020 Vision suggests 50% of this 9TWhs is wood fuel
• But 97% of EU’s renewable heat is wood fuelBut 97% of EU’s renewable heat is wood fuel
• So between c2million and c3.9million tonnes of wood So between c2million and c3.9million tonnes of wood fuel use by 2020 to meet 11% Scottish target.fuel use by 2020 to meet 11% Scottish target.
What are the implications for What are the implications for Scotland in the heat market in Scotland in the heat market in meeting policy targets?meeting policy targets?Target to 2020
Million tonnes pa of wood fuel use
Installed capacity required
Total investment required in £Millions
Annual no. of schemes required (e.g. hospitals, large schools, leisure centres)
UK target applied by pop proxy
0.55m tonnes
690MW £412.5M 140 (£41M pa)
Scottish target - low
2m tonnes 2500MW £1,500M 500 (£150M pa)
Scottish target - high
3.9m tonnes
4875MW £2,900M 975 (£290M pa)
What it isNew financial support mechanism which will be created for renewable heat projectsUK national scheme driven by UK Government
Powers in the Energy Act 2008 allow the setting up of RHI System DesignThe system design is being studied by UK government and so is not determined
TimescaleIntroduced by April 2011 Potential elementsPayment to generators of renewable heat
Payment levied on those not using renewable heatIn principle, similar to Renewable Obligation for electricity
The most important market driver?The Renewable Heat Incentive
Unclear issues
How payments will be made
How payments fund will be gathered/levied
How payments will be administeredThrough a central administration e.g. OFGEM as per ROCs?
Relationship with existing grant schemesCan recipients of grants gain access to scheme? Can they keep grant?
Level of paymentLevel required to be an incentive that will support target achievement
Size LimitCurrently no size limitCurrently no indication if payment level could be related to size
The Renewable Heat Incentive
What might the RHI mean for market What might the RHI mean for market development?development?
Bulk delivered fuel costs in £\MWhsBulk delivered fuel costs in £\MWhs
£TAX RHI?
The markets -heat energy useThe markets -heat energy use
Paybacks – Paybacks – 500KW boiler in secondary school500KW boiler in secondary school
Gas without RHI:Gas without RHI:
£200,000 capital cost£200,000 capital cost
Saves £10,500\year over gas Saves £10,500\year over gas
20 year payback20 year payback
Gas + RHI (@£15MWh):Gas + RHI (@£15MWh):
£200,000 capital cost£200,000 capital cost
Saves £48,000\year over gas Saves £48,000\year over gas
4year payback4year payback
A key policy driver - ROCsA key policy driver - ROCs
One tonne of green wood = c 2MWhs, but only 40% used One tonne of green wood = c 2MWhs, but only 40% used
One ROC is worth around £40One ROC is worth around £40
Driven by ROC and RHI what is the Driven by ROC and RHI what is the market doing or planning in Scotland ?market doing or planning in Scotland ?
Development Status\comments Use green tonnes
44MW electricity – Eon Lockerbie Operational 500,000
25MW CHP – UPM Shotton Operational 400,000 (e)
8MW CHP – Balcas Invergordon Under development 20,000 (e)
25MW electricity – Scottish Power Longanett
Planned 70,000 (e)
Charlesfield First CHP - Borders Planned 70,000
Northern Energy Developments Planned 85,000 (e)
Longanett and Cockenzie – co-fire Formerly operational ?
15MW Scottish public sector heat Operational 15,000 (e)
Puffin Pellets - Banffshire Under development for 25,000t of pellets 75,000 (e)
Brites Pellets - Balcas Invergordon Under development for 100,000t of pellets
300,000 (e)
Arbuthnott Wood Pellets - Kincardinshire
Under development for 15,000t of pellets 45,000 (e)
Domestic logs FCS figures using population proxy 40,000 (e)
Hunterston - Ayrshire Planned cofire 1,500,000 (e)
SSE\Forth Ports Announced £1billion x 4 100MW plants – Dundee, Rosyth, Grangemouth, Leith
4,000,000 (e)
Scottish heat market by 2020 Forecast at mid range 2,000,000 (e)
Combined total 9,115,000
UK biomass power plant plans?UK biomass power plant plans?
UK biomass power plant plans? =UK biomass power plant plans? =- 12million tonnes of pellets pa (or)- 12million tonnes of pellets pa (or)- 20 million tonnes of green wood chips pa- 20 million tonnes of green wood chips pa
ConclusionsConclusions
• Policy expects the renewables sector to be TEN times larger by 2020Policy expects the renewables sector to be TEN times larger by 2020
• Policy expects wood energy to provide a fifth of UK renewable energy Policy expects wood energy to provide a fifth of UK renewable energy
• Policy expects the Scottish heat market to use between 2million and Policy expects the Scottish heat market to use between 2million and 3.9million tonnes a year of wood fuel by 2020 – at a 3.9million tonnes a year of wood fuel by 2020 – at a good price? good price?
• Policy expects a massive (undefined) expansion in the use of wood fuel Policy expects a massive (undefined) expansion in the use of wood fuel for electricity – at a for electricity – at a lower price?lower price?
• ROCs, RHI, carbon trading and rising fossil fuel costs may drive this?ROCs, RHI, carbon trading and rising fossil fuel costs may drive this?
ConclusionsConclusions
• Policy targets are rarely met – especially 10 years ahead!Policy targets are rarely met – especially 10 years ahead!
• Most of the wood (biomass) for electricity could be importedMost of the wood (biomass) for electricity could be imported
• The RHI is a tax and must survive -intact -a change in GovernmentThe RHI is a tax and must survive -intact -a change in Government
• Even the smallest policy target for (Scottish) heat requires £150 million capital Even the smallest policy target for (Scottish) heat requires £150 million capital investment per annum for 10 years – this swamps the capacity of the installers and investment per annum for 10 years – this swamps the capacity of the installers and is not likely at presentis not likely at present
• The cost of fossil fuel will be the key determinant in rates of market growth – not The cost of fossil fuel will be the key determinant in rates of market growth – not policy targetspolicy targets
• Growth in wood energy use will not be as massive as predicted and Growth in wood energy use will not be as massive as predicted and should be sustainable in the heat market should be sustainable in the heat market