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What now for UK biomass?
What now for UK biomass?
Overview
• The early years of biomass • The impact of Renewable Heat Incentive • Industry evolution • Prospects under a reformed RHI from April 17 • An industry without subsidy
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Off grid market • Vast majority of activity in log and chip boilers • Free or cheap source of wood over rising oil prices • machinery and labour to handle log and chip • Perceived customer base: 1. Visionary farmers 2. Astute estate owners 3. Log enthusiasts 4. Anxious oil customers
The Low Carbon Conscious
• Drive for low carbon buildings • Public buildings • Publically funded institutions • District heating for community projects and housing associations • Some regulatory pressures for using renewable heat sources • Emergence of grant funding for low carbon heating systems
Early Market Players
Log boiler for off grid residence
• 2006 installation • Exposed location – high and rising oil bills • Homeowner with access to free logs • Annual fuel savings of £2,500 per annum • Justifies up front cost
Royal Mail – New Distribution Centres
• Northampton Binder chip boilers 2009 – Installed by Wood Energy
• Twickenham Herz pellet boiler – Installed by Rural Energy 2010
• No grant funding received • Low carbon building requirement – regulation
played its part
Hoathy Hill Community Wood Chip Boiler • Community district heating system 2006/2007
serving 27 residents – 300kW boiler • Carbon neutral ambitions, use of local natural
resources, cost saving over LPG • Total cost of £400,000, £160,000 secured from:
• Bio Energy Capital • The High Weald AONB Sustainable Development Fund • EDF Green Fund • SEEDA Rural Initiatives Fund • Community Renewables Grant
Maidstone Borough Council - 2009
• Wood chip boiler serving offices • Reduce carbon emissions • Use wood fuel within 10 mile radius • 37% Bio Capital Grant contribution
The Living Rainforest - 2006
• Eco Centre • Educate on threatened eco systems • Econergy carry out feasibility in 2004 • Chip sourced through local estates • Funding from SEEDA • Clear Skies Community Fund
Importance of the UK distributor
• Lynch pin between established manufacturers and a fledgling UK market • Trained in Austria and Germany • Educated us on biomass • Drove public demand and trade interest for biomass • Took the funding pots to the customer • Created markets for biomass
Forestry Commission Survey – Biomass Installs 2009 2010
Area Number of Installations
Number of Installations
North West 237 283North East 133 161Yorkshire and the Humber 288 308East Midlands 262 292East of England 182 225South East 230 282London 94 174South West 284 368West Midlands 245 279
England 1,955 2,372
Introducing… the RHI
• November 2011 sees the introduction of the Government’s non-domestic RHI
• First tariff based scheme in Europe for renewable heating • Designed to drive take up of renewable heating systems • Includes: biomass, air source, ground source, solar thermal, biogas
and biomethane • Only non domestic properties with the exception of residential
district heating systems • The domestic scheme from April 14
Investment potential
• Offers generous tariffs for biomass in particular • Owners double or treble their money back over 20 years • ‘Investment’ potential fuels demand • Demand moves beyond local authorities, farms and estates • Pellet boilers by far the most suitable biomass system
Installation types– Non Domestic
Accelerated Market Activity Non Domestic Nov 11 - Dec 15
12,631
1,231
41
Domestic Apr 14 - Dec 15
11,832
Total Biomass Installations
25,735
Large Biomass (over 1000kW)
Medium Biomass (200kW - 1000kW)
Small Solid Biomass Boiler (under 200kW)
Capacity beyond the Distributors
• Accelerated growth drove demand for biomass beyond the distributors
• Actively recruited UK installers • Set up training centres to offer technology training for their installers • On site commissioning training for quality control
Local installer networks: Our Story
• Established heating company • Successful gas and wood burning stove business • Company with an itch • Surveyed a lot of potential GSHP and ASHP jobs • Technology was not suitable; biomass was.. • We start to research the market and attend Ecobuild
Richmond Park Log Boiler 2014
• Off grid toilets in middle of Richmond Park • Specified small log boiler • Using estate logs • No RHI, grant funding used
Lee Valley Regional Park Authority 2013
• Tendered for 80kW biomass system • Serves old listed building • Basement installation • Old cranky radiator system • RHI payback 8 years as on mains gas
District (two neighbours) log boiler 2014
• Tree surgeon • 100kW log boiler • Heated own house + neighbour • Log enthusiast! • RHI payback 7 years
Kenward Trust – Large Off Grid Estate
• 400kW pellet boiler • 3 separate boilers • Each under 200kW • Maximised RHI payments • Payback 5 years
Installation Standards
• HETAS provide some building control based guidance for domestic • Little regulation for non-domestic biomass systems • Manufacturers instructions and some distributors commission • Not always followed or check up on • Early horror stories resulted in biomass boiler going unused
CIBSE standards
• CIBSE: Chartered Institute of Building Services Engineering • 2014 introduce comprehensive installation standards for biomass • Cover system sizing, chimney design, buffer sizing and fuel store
construction • No regulatory requirement to follow this guidance but is best practice
Fuel supply
• Around 20 wood pellet manufacturing plants in the UK
• Prices risen from £180 per tonne to £240 per tonne over 15 years
• More stable than oil prices • National distribution network for pellet to
heating customers • Fuel standards introduced for log, chip and
pellet in 2015
By 2015 – Beginnings of sophistication!
HETAS/CIBSE standards
Established Distributors
Experienced installers
New fuel standards
Growing pellet supply network
By 2015 – Beginnings of the decline
• Tariffs for small biomass are cut heavily over 2015 • 6.99p at the start of 2015 • 4.23p by the end of 2015 • Domestic fell from 10.89p to 6.43p by end of 2015 • Oil prices also fall heavily over the year • Slump in activity over 2015 – 60% drop in installation numbers • RHI retained in Chancellor's Spending Review (Oct 15) • Market uncertainty for future support
Ofgem’s consultation – non domestic
• Move away from small – medium biomass • Single low tariff – focus on larger projects • Projected take up to be 60 large installations per annum Non Domestic Peak Tariff Current Tariff April 17
onwards
8.63p 3.81p
5.56p 5.24p
2.05p 2.05p
2.03-2.9p
Small Solid Biomass Boiler (under 200kW)
Medium Biomass (200kW - 1000kW)
Large Biomass (over 1000kW)
Large biomass activity Non Domestic Nov 11 - Dec 15
12,631
1,231
41
Domestic Apr 14 - Dec 15
11,832
Total Biomass Installations
25,735
Large Biomass (over 1000kW)
Medium Biomass (200kW - 1000kW)
Small Solid Biomass Boiler (under 200kW)
Ofgem’s consultation - domestic
• Domestic scheme • Tariff degression will continue • Cap of 25,000kWh per household • Projected take to be 1,000 installations per annum
Financial impact of reform – non domestic
Rough cost Peak Tariff Current Tariff
Small Solid Biomass Boiler (under 200kW) £ 0.0863 £ 0.0381 £ 0.0203 0.0290£
50kW boiler £ 45,000 ### £ 113,398 £ 50,063 £ 26,674 £ 38,106
199kW boiler £ 150,000 ### £ 451,325 £ 199,252 £ 106,163 £ 151,662
Medium Solid Biomass Boiler (200kW - 1000kW) £ 0.0556 £ 0.0524 £ 0.0203 0.0290£
500kW boiler £ 400,000 ### £ 730,584 £ 688,536 £ 266,742 £ 381,060
Post April 2017
Financial impact of reform – domestic
Rough cost Peak Tariff Current Tariff Post April 17
Domestic RHI £ 0.1220 £ 0.0514 £ 0.0514
RHI Return 25,000kWh £ 20,000 £ 21,350 £ 8,995 £ 8,995
RHI Return 60,000kWh £ 40,000 £ 51,240 £ 21,588 £ 8,995
Ofgem’s new priorities
• Large scale biomass and district heating • Large scale biogas and biomethane • Heat pumps • Inclusion of reversible heat pumps – heating and cooling • Removal of solar thermal from scheme
Market Impact
• Reformed RHI will no longer incentivise in the same way • Return to ‘natural fit’ customer focus
• Log enthusiasts • Visionary farmers • Astute estate owners • Anxious oil customers • The low carbon conscious
• Will encourage more natural fit customers to proceed • Still gives a better funding contribution than pre-RHI grants
RHI contributions
Rough cost
Small Solid Biomass Boiler (under 200kW) £ 0.0203 £ 0.0290
50kW boiler £ 45,000 ### 59% 85%
199kW boiler £ 150,000 ### 71% 99%
Medium Solid Biomass Boiler (200kW - 1000kW) £ 0.0203 £ 0.0290
500kW boiler £ 400,000 ### 67% 95%
Post April 2017
Return to other factors: Oil UK Heating Oil Prices
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Prices rising March 16
Community projects
• Rise in support for community energy projects • Most local authorities have received funds to carry out feasibility
studies into community heating potential • Funding pots - E.ON grants for community projects
What now for the UK Distributors?
• Market will shrink back - return to natural fit activity • Distributors are diversifying their businesses: heat pumps, gas CHP • Some can supply 1MW + boilers for Ofgem’s 60 big installations • Most are building their service and maintenance business
What now for us?
• Increased focus on others areas of our business – gas boilers & stoves • Drive up heat pump installations for which we are already qualified
and active • Still getting enquiries for biomass work – where it is a natural fit • Balance biomass against other heating system services
Normalising Biomass
• No longer a boom/cash cow industry • Must find market equilibrium • Find the right customers and the right projects • Coordinate the funding and finance opportunities that still exist • Create minimum qualifications for design and installation • Incorporate the skills and knowledge into apprenticeships • Localise pellet production in the UK?
For our customers
• Benefit of an evolved, skilled, well resourced industry • Improving fuel supplies • Better installation standards • 5-7 year warranties – in line with gas and oil installations • Long term support for their installations
For the future
• No choice but to be weaned off subsidy • Confident there is a sustainable industry at the end of it • Raised awareness of the technology • Build on what we have achieved • Confident there is a long term market for biomass
Thank You
