Earlier this month, in what some are calling a “blow to Britain’s renewable power industry,” RWE npower announced that it would close its aging Tilbury power station. The German electricity generator, a key player in the United Kingdom’s power market, cited a lack of investment capacity and challenges associated with converting the plant to use wood, waste oil, and other biomass materials in place of coal.
In a separate development, the U.K. government confirmed in its most recent draft Energy Market Reform (EMR) delivery plan that facilities dedicated to exclusively burning biomass for power generation would not qualify for subsidies. The exclusion from EMR’s Contracts for Difference (CfD) subsidy scheme is a nail in the coffin for an industry that was bursting with proposals for new-build large-scale projects just a few years ago.
The timing of Tillbury’s closure and the exclusion of dedicated biomass under EMR are in part coincidence, but together they bring the challenges facing biopower in the United Kingdom – ranging from environmental concerns to feedstock access to economic feasibility – into sharp focus.
In its short quest to convert from coal to biomass, the antiquated Tilbury plant had overcome a fire in early 2012 that consumed nearly 6,000 tonnes of stored wood pellets as well as stiff resistance from those who challenge the environmental sustainability of burning organic resources in place of fossil fuels. In particular, the backlash against biomass stations has been widespread across the United Kingdom, forcing the abandonment of several proposed plants in recent years.
Although it is classified as renewable, the carbon impact associated with burning biomass remains an unsettled issue among policymakers from Washington to Brussels to London. Campaigners also argue that the scale of demand for dedicated biomass fuel in the United Kingdom, mostly in the form of imported wood pellets, is unsustainable on two fronts.
First, the availability of biomass at home and abroad in sufficient quantity to meet the U.K.’s energy supply needs remains highly dubious. The country currently supplies roughly 15 million tons of biomass from within its own borders, mostly in the form of agricultural residues and biogenic wastes. Estimates, meanwhile, put total biomass demand at 102 million tons to meet an aspirational target of 6 GW of dedicated biomass power capacity by 2020, vastly exceeding domestic supplies. With domestic biomass availability constrained by the U.K.’s limited land area, a rapid expansion of biomass importing capacity from North America and Russia would be needed. The Tilbury plant alone would have burned more than 3 million tons of wood pellets per year – compared with 13 million tons burned in the entire European Union (EU) in 2012.
Second, biopower opponents cite the negative impacts associated with burning more biomass on the world’s forests, a key carbon sink in the fight against climate change. While the EU has proposed sustainability policies for the use of solid biomass to generate electricity, ensuring global compliance remains a challenging proposition.
Meanwhile, the U.K. government has embarked on an ambitious effort to overhaul its incentive structure to spur investment in renewables. With subsidies for dedicated biomass scrapped altogether, effectively eliminating a key price support mechanism necessary to drive project viability, the government has sent a clear message that it favors cogeneration (CHP), coal-to-biomass conversion projects like Tilbury, or co-firing of coal and biomass over new-build dedicated biomass facilities.
The uncertainty surrounding the future of biopower subsidies under proposed EMR schemes, combined with sticky environmental concerns, has already led to the abandonment of 2 GW of biopower development projects in recent years. The absence of dedicated biomass in the EMR, alongside Tilbury’s closure, is likely to spark a biopower exodus in the United Kingdom.
Tags: Biofuels, Biopower, Finance & Investing, Policy & Regulation, Smart Energy Program
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