The Energy Act 2008 provided powers for the establishment of a Renewable Heat Incentive scheme. The RHI, as currently envisaged, will encourage the deployment of renewable heat by providing payments to those who generate heat from renewable sources from new installations. The Department of Energy and Climate Change has proposed that these payments include a calculation for return on initial investment. The scheme is designed to reward those prepared to pay for installing a range of equipment, including biomass boilers and renewable combined heat and power.
In dialogue with the Government, the wood panel industry has demonstrated that it is the single largest industrial generator of renewable heat at present – around 2.4TWh in 2008, falling to 1.6TWh in 2009, on account of reduced manufacturing output during the economic downturn. Currently, around 55% of the industry’s heat demand is satisfied by its own renewable process-derived fuel. Under favourable conditions, this could be increased to 90% or more, a significant increase in its contribution to the UK’s renewable heat targets.
However, the industry claims that its competitiveness is being undermined by RO-subsidised electricity generators, which can comfortably outbid existing consumers of UK-sourced wood.The recently published report from John Clegg Consulting, Wood fibre availability and demand in Britain, 2007 to 2025, has confirmed the forest industries’ fears – UK wood demand will exceed potential supply from as early as 2011. This is calculated before potential increases in demand as a result of the RHI.Also excluded were five large electricity biomass projects.
Biomass is unlike other renewable sectors in that there is significant potential for market distortion because of existing demand for the feedstock. By providing RHI support to new installations and excluding the existing contribution by the wood panel industry, there exists a risk that the industry would be denied the opportunity to compete for its basic feedstock.The wood panel industry fears for its survival in the UK under these circumstances. This would be a highly undesirable economic and social outcome; it would also be a significant loss to carbon abatement and renewable heat generation efforts. In 2009 the European Commission and Parliament identified the wood panel industry as being at risk of “carbon leakage” and as such should be subject to special measures.[1]
The industry’s environmental contribution should be taken into account.It is well established that wood products make a significant contribution to carbon abatement, as noted by the European Commission: “Carbon storage in harvested wood products can extend the carbon sequestration benefits provided by forests; their role in mitigating climate change should thus be developed.”[2]
In order to ensure the continued contribution of the wood panel industry to the UK’s renewable heat targets, the industry is continuing to press for inclusion in the RHI.
- [1] 2010/2/: Commission Decision of 24 December 2009 determining, pursuant to Directive 2003/87/EC of the European Parliament and of the Council, a list of sectors and subsectors which are deemed to be exposed to a significant risk of carbon leakage (notified under document C(2009) 10251) ↩
- [2] Communication from the Commission to the Council and the European Parliament on innovative and sustainable forest-based industries in the EU: A contribution to the EU’s Growth and Jobs Strategy {SEC(2008) 262} ↩
