The burning issue

Summary
¦ The RHI will pay companies for using wood-burning boilers.
¦ Biomass competition for raw material is concerning the timber industry.
¦ The government predicts biomass heat installations will soar.

The biomass issue is becoming bigger news by the week.

Last week the government unveiled its £860m Renewable Heat Incentive (RHI), which will pay both consumers and industry a regular tariff for using renewable heating systems, including wood biomass.

The week before that a new £550m partnership between the Carbon Trust and Siemens Financial Services was launched to provide funding for biomass installations.

Then there’s the rapidly increasing cost of oil and gas, and the increasing appreciation of wood as a renewable fuel.

Some of this will be welcome news to a joinery manufacturer or timber engineering company thinking of installing a biomass boiler. They could use their wood waste as fuel and cut out considerable skip and oil/gas costs in the process.

Other timber companies are now moving into the importation or production of wood pellets and briquettes, while at the end of the supply chain the merchant may look to offer the fuels to domestic consumers.

Pressure on raw material

But it’s a complicated issue and the biomass incentives are seriously worrying panel, fencing and pallet manufacturers, who say they’re putting pressure on raw material availability and causing timber prices to rise.

You can see what they mean when you consider nine biomass power stations are being proposed in the UK, 16 are currently in planning, while 14 others are already approved. And with eight plants currently operational, that adds up to a serious amount of wood, much of it virgin fibre.

“Overall the RHI is only going to add to the pressures already being exerted on UK wood supply,” said Alastair Kerr, director-general of the Wood Panel Industries Federation.

“In practice, the only realistic fuel option for the majority of first-phase large biomass energy plants will be wood.

“Government has consistently ignored the data that demonstrates that even with initiatives to bring to market wood from under-managed sources, that domestic wood availability cannot possibly meet the demand from the cumulative impact of wood-fired energy projects of all sizes and that, due to the subsidy, there is a very real risk that displacement of existing wood processors will occur.”

Mr Kerr said existing government incentives – in the form of the Renewables Obligation (worth about £82 per mW/hr for electricity-only power stations burning wood) – should be removed to restore a more balanced wood market.

He said in the future energy companies may possibly take better quality wood out of a tree, putting it in conflict with other sections of the timber industry.

A recent report by the Association for Environment Conscious Building even suggests increasing biomass use will push timber prices up to the extent that brick and steel will be specified in place of timber in construction.

CO₂Sense, an organisation which helps businesses find sources of low-carbon energy in the Yorkshire and Humber region, believes the RHI will provide a “big stimulus” in the woodfuel sector.

Creating certainty

“It creates a lot of certainty in the market,” said Gordon Watts, programme manager at CO₂Sense. “There have been many installers of wood-burning boilers with orders sitting on their books but clients have been holding off making the final commitment because of the uncertainty surrounding the RHI.”

Fears that biomass procurers will eventually compete even for sawlogs seems an unlikely scenario, for the moment at least.

And economics will have its say. The recent price of wood pellets has meant some energy companies are finding they can get more economic heat from burning coal, as they need to buy more wood pellets to generate the same amount of heat.

Last year, power company Drax announced it was shelving its £2bn plans for three major biomass power stations because of the government’s plans to review subsidies in 2013.

The biomass facility at the existing Drax Power Station (which co-fires coal and biomass), is underutilised, as the economics favour burning coal and paying the price of CO₂ emissions allowances.

One biomass business which says it is not competing with the panels sector is Stobart Biomass Ltd – set up last year by haulier Eddie Stobart and AW Jenkinson Forest Products.

It is sourcing mainly life-expired timber – post-consumer wood waste that ends up at the tip. This constitutes a huge resource, albeit a fair bit of it needs processing to use as woodfuel.

Typical customers

Stobart Biomass managing director Paul Davenport said typical customers were large energy companies, but sizeable volumes were also being exported into more mature biomass markets in Europe. It also takes some brash from forestry operations.

Stobart Biomass has handled 250,000 tonnes in its first year. “The business has expanded over the last 12 months and we see good opportunities for growth over the next 12 months,” said Mr Davenport.

“Biomass installations require different types of woodfuel material, depending on their technology. Our job is to satisfy those needs.”

Importer Romex Productions has diversified into woodfuel, but managing director Derek Harris had a warning for traders looking to jump into the sector. “This is not a five-minute thing,” he said. “I think biomass will create more and more interest and it will be used a lot more in the future. A lot of people have got on the bandwagon, but they may have jumped the gun.”

He pointed out that it was largely a seasonal trade and profits on the commercial side were weaker than the domestic market.

And rising oil prices had increased the cost of shipping pellets and briquettes into the UK, while unsold stock represented a rental cost in the warmer months.

A further complication is the fact that not all boilers can take the same sort of woodfuel, so it’s not a matter of just selling to anyone.

Verdo Renewables, which has two pellet manufacturing plants with a total capacity of 110,000 tonnes per year using virgin wood fibre, said the RHI would lead to significant growth in the woodfuel and wood heating boiler market.

“Currently, 90% of the wood pellet output at our two plants in Grangemouth and Andover is exported,” said managing director Richard Smith. “The RHI will allow us to start using UK wood pellets in UK boilers, as it will unlock significant commercial investments in our sector.”

Even brick maker HG Matthews is investing in a wood-fired kiln because of high oil fuel costs. It will use wood from 90 acres of adjoining woodland and thinks it’s possible its entire 2.5 million bricks-a-year production may be switched over to wood-firing in the future.

Manufacturers of biomass boilers have mostly warmly welcomed the latest incentives and expect that orders could now multiply, with many new customers in the wood-processing sector.

“The renewable heat incentive is going to be positive for our industry,” said Amy Fielding, commercial director of Talbott’s Biomass Energy Systems Ltd. “Clearly biomass has been recognised by the government as a big contributor to meeting renewable energy targets.

Positive results

“A key point is the inclusion of wood waste as a fuel. This again is a very positive result for the wood industry.”

She said wood-burning boiler manufacturers had also been concerned that higher RHI payments might only be for domestic users and other small installations, but larger commercial installations have also been included.

Chris Franklin of Ranheat said the wood boiler market in the woodworking and timber sector was vast and largely untapped.

“I don’t think there is 10% of companies in the industry that burn their wood waste,” said Mr Franklin. “In Germany and Austria you won’t find a woodworking company that doesn’t burn its waste wood.”

For woodworking companies that produce more waste than they can use for heating, he said there was the potential to make it into a saleable fuel.

“It’s the start of a whole new industry. It’s not just the woodworking industry anymore, but the ‘woodfuel supply industry’.”

He also raised the issue of a possible ban on landfilling wood as another driver to biomass boilers.