Biomass Heating a Success

Feeling The Heat

Feeling The Heat

The last three years have seen the most significant uptake of commercial and domestic wood heating since it died out as a meaningful source of space and hot water heating over 200 years ago in this country. While wood burning stoves have seen a resurgence over the last 10 years, largely due to rising oil costs and lifestyle choices, the most significant growth has been in the past 3-4 years, driven almost exclusively by the Government’s 2011 introduction of the RHI (Renewable Heat Incentive) to help meet its 2020 carbon reduction commitments. With heat contributing 40% of UK carbon emissions, the UK is aiming for renewable heat to deliver 12% of total heat demand. Wood heating has been the most successful of the varied renewable heat technologies, taking 95% of the RHI budget to date. The scheme has driven £1.5 billion of investment in wood heating and created over 14,000 jobs. It has seen the installation of over 13,900 commercial and 11,000 domestic automated wood heating systems with total capacity of 2.3 GW, and a supply chain now delivering about 1 million tonnes of wood chip and 500,000 tonnes of wood pellet annually. A success by any measure, yet renewable heat meets only 1/3 of the 2020 target.

A New RHI budget – status quo till Spring 2017

In November 2015, the scheme was ‘saved’ against all odds in the governments’ comprehensive spending review and a new budget announced to carry it through to 2020. Looking at the details of the biomass proposals under a new consultation by DECC however all is not rosy in the wood heat garden. The good news is that the reprieve means ‘business as usual’ until government restructures the scheme sometime in the spring or summer next year.  However, given that the previous budget protection mechanism (degression) has all but killed off the areas of most significant growth in both the domestic and smaller non-domestic schemes, growth in new biomass systems has already slowed and much of the installer base has either disappeared or retrenched.  While there has been increased interest in systems between 200kW and 1MW, this has by no means replaced the previous growth. New RHI applications now average about 50 per month against a peak number of over 1000.

DECCs Confused RHI Proposals

So what about the future? The government released its RHI consultation last month for all supported renewable heating technologies.  The Government rightly wants to get the most ‘bang’ for its subsidy buck in terms of supporting the technologies which are going to give it the best value for money going forwards.  They also want to focus support on what they regard as ‘strategic technologies’ i.e. Those which they believe will be providing the bulk of renewable heat in 20-30 years’ time. Within this context, wood heating is currently seen by DECC as a ‘transition technology’, and not a strategic technology. This means they want to incentivise other renewable heat technologies such as heat pumps by refocusing the budget towards these. Second, while the government continues to see a role for wood heating it wants to focus the subsidy being on bigger industrial systems with high heat loads which deliver the most value. It is even willing to put in place a pre-application process to provide bigger investors with tariff certainty for the longer investment cycles these projects need. As proposals currently stand, this new approach would make investments in new installations below about 1.5-2MW with standard seasonal heat loads unattractive. Realistically most of this market would go. At a time of low oil and gas prices, there is also increasing concern that there are simply not enough larger systems out there which could be converted to deliver the renewable heat target the government wants biomass to achieve.  All told it could lead to a massive reduction in new biomass heat capacity. This begs the question – if biomass won’t meet its renewable heat target how will the government fill the gap?  The answer seems to be heat pumps.  Under the current scheme, and despite high RHI tariffs, heat pumps have not fared well.  A key factor is the more limited number of applications for heat pumps in old buildings with radiator based heating which make up the majority of the UKs existing domestic and commercial premises.  It could be argued that RHI tariffs have not been attractive enough to support conversion of these premises through underfloor heating and larger radiators for example, and allow heat pumps to make a return. Despite many positive words about heat pumps in the consultation, DECC offer very little increase in tariffs, nor do they provide any subsidy for building conversions.

Biomass has delivered – and can deliver more

In terms of £/tCO2 saved and installed heat capacity, biomass at any size provides better value for the governments subsidy buck than any other renewable heat technology. It can and should be part of the UK’s ongoing portfolio for renewable heat. If the government is serious about even attempting to meet its heat targets then it needs to re-look at the role of wood heating as part of this and the level at which it needs to support it.  The DECC assumption that the UK has very modest sustainable wood fuel resources is misplaced. The sector believes it can easily double current wood fuel supplies with increased biodiversity benefits, with much more available if energy crops are considered. The WHA and REA are strenuously lobbying DECC to make changes in their proposals.

Do it Now!

The clear message for anyone looking at biomass heating (and small scale power) as a potential long-term carbon and cost reduction strategy, is that now is the time for investing in a wood heating (or small-scale biomass CHP – see partner article) if you are looking at a system between 200 and 999kW.