“Staggering” was the word Lord Browne, chief executive of BP, used to describe his company’s cash flow in the last couple of years.
And he should know. As one of the world’s leading energy providers, BP has benefited from the consistent hikes in energy prices that have bushwhacked UK businesses.
A recent survey by the Construction Products Association found that companies had been hit by a 37% rise in gas prices over the last year and a 42% increase in electricity prices. Compounded by the continued rise in the price of oil – which has nearly doubled in the last three years – it’s little surprise that energy-intensive industries are finding the going tough. “The costs have been substantial,” Scott Shiells, BSW Timber group operations manager, told TTJ. Asked whether he thought the company could modify its kilns to reflect a change in usage, he said: “We could change Carlisle onto oil instead of gas relatively easily, however, anything else would require significant investment.”
There’s no doubt the kilning process uses significant amounts of energy, which probably explains why some companies are taking matters into their own hands. James Jones & Sons, for example, has recently been given the green light to build a biomass-burning plant at its Aboyne facility to supply the heat for the six kilns there.
It represents an investment of a minimum of £750,000 and will provide enough power to fuel the plant’s kilns, as well as some extra capacity for use in the plant.
“What we were finding is that, at sites like Aboyne, which is purely oil-based, we’ve been hit really hard by rising energy prices,” said joint managing director John Kissock. “Gas oil prices have doubled in the space of three years: the average for 2003 was 18p a litre, the average for last year was 36.5p. These costs are very significant, and we have had to absorb them.”
The new wood-fuelled power plant is expected to reduce these costs significantly. James Jones operates 17 kilns across four sites – six at Aboyne, four at Dumfries, four at Mosstodloch and three new ones at Lockerbie – powered by oil or gas or a combination of both.
“There is a more compelling case for changing the oil-powered kilns,” said Mr Kissock. “While gas is quite expensive, it is still relatively efficient. The other thing we’ve put onto the newer Bollman kilns are energy monitoring systems so we can see just what our costs are.”
Another cost-saving innovation has been the installation of a heat recovery system at Lockerbie – believed to be the first in the UK. “Instead of just expelling the waste heat out into the atmosphere, we are actually trying to get that heat out of the expelled air that can then be re-circulated back into the kiln,” said Mr Kissock.
“We are still trying to prove the cost benefits to us over kilns where we don’t have that, but for the future this must be the right thing to do. We think that we will be able to demonstrate this over the next 12-18 months.”
Howie Forest Products says it too has been affected by rising electricity costs, but the nine kilns at its Dalbeattie facility are already powered by a wood-fuelled boiler. “While the fans are still powered by electricity, relative to the total energy use, this cost is pretty modest,” said sales director Keith Ainslie. “We are probably unique in terms of UK construction sawmills that the rising energy costs haven’t directly impacted on our business.”
The boiler is fuelled by a mixture of sawdust, woodchips and bark generated by the sawmilling process. It’s a purpose-built plant at the site. The original three oil-fuelled kilns were installed around 12 years ago; another two kilns were added; and most recently four large Bollman kilns were installed in 2000.
“It means we were not quite so in thrall to the energy companies: we are miles away from the gas supply here, which would have meant more fuel oil or electricity, neither of which were palatable options,” said Mr Ainslie.
He believes the challenge for those thinking of following suit is that the capital costs of a wood-burning plant are significantly greater than an oil-burning plant. “The wood-fuel plant at Dalbeattie is on a different scale altogether, something akin to a small power station,” he said. “At the time we installed it, it’s certainly worked for Howie Forest Products: whether someone installing one today would reach the same decision, I couldn’t say.”
But, with energy prices expected to continue to rise, companies may be forced to move away from traditional energy sources to renewable forms like wood-fuelled boilers. Whether the capital costs outweigh the energy price hikes, only time will tell.
