Biomass Supply Chains in South Hampshire. Biomass Supply Chains in South Hampshire

Transcription

1 Biomass Supply Chains in South Hampshire Biomass Supply Chains in South Hampshire July 2009 i

2 Cover picture: Wood4heat chipper at Ipley Manor, New Forest Courtesy of wood4heat This document was written for and is intended for use by the Partnership for Urban South Hampshire. Whilst CEN Services has endeavoured to ensure that all information contained within is correct, it cannot be held responsible for any inaccuracies within or problems arising out of the use of this document. No liability will be held by CEN Services Ltd towards any third party. CEN Services Ltd Ambassador House Brigstock Road Thornton Heath CR7 7JG Tel Fax: ii

3 1 Executive Summary This report provides an analysis of how biomass supply chains could be developed within the area covered by the Partnership for Urban South Hampshire (PUSH). Previous studies have identified that the region is resource rich and has a growing energy demand. The aim of this study, then, is to identify ways in which this resource can be accessed or diverted to form a renewable energy supply, and to identify potential projects that could be suitable for biomass heating or combined heat and power. The study largely focuses on the wood fuel market, but other forms of biomass such as agricultural residues and municipal waste streams are also considered. 1.1 Supply and demand of biomass The potentially available sustainable resource from wood streams in the PUSH area and a 10km buffer zone is around 550 GWh per annum. To give this figure some perspective, a large secondary school might be expected to use in the region of 1 GWh of energy for heating each year. It is important to recognise that 550 GWh is not the currently available resource but the potential resource as demand grows and as supply chains mature. New development and retrofitting projects could lead to around 250 GWh of demand for biomass energy by In addition to this, a number of medium to large scale biomass combined heat and power (CHP) facilities are likely to develop over the coming years, significantly increasing demand. Due to the small scale of the biomass industry at present (only around 5 GWh of wood fuel supplied p.a.), few companies are servicing the fuel needs of the area at present. There is clearly a lot of potential for the biomass industry in the PUSH area to grow. It is also important, however, to understand the limitations of the wood fuel resource in terms of meeting the PUSH area s energy requirements. The 550 GWh potential wood fuel resource identified is only around 3.5% of the PUSH region s energy demand Additional sources of biomass Energy crops grown on long term set-aside land in the PUSH area and buffer zone could generate around 34 to 56 GWh p.a. This is a small but significant fraction of the total potential wood resource from existing sectors (up to 10%). Indeed the potential is even greater than this if energy crops are grown on currently cropped land. Indeed, the type of land on which energy crops are grown can seriously affect the overall carbon savings achieved. Growing short rotation coppice on grassland, for instance, can actually result in a net increase of atmospheric carbon compared to using natural gas. High setup costs mean that energy crops are unlikely to become popular in the PUSH area until a source of secure demand appears such as a medium to large scale biomass CHP plant. Agricultural residues give a combined energy potential of only around 10.8GWh p.a. This is largely due to the fact that existing markets such as animal feed and animal bedding mean a lot of the straw is not available for biomass. Crop residues are unlikely to be an area of focus for PUSH. Regarding waste streams besides woody waste, Hampshire is a leading county in terms of utilising its Municipal Solid Waste (MSW) to generate energy. There are three Energy Recovery Facilities (ERFs) in the county, two of which are in the PUSH area Marchwood and Portsmouth. As well as generating around 30MW of electricity which is exported to the grid, these two ERFs produce more heat each year than could be generated from the entire wood fuel resource in the sub region. This heat is not currently used and it must be a priority to find ways of utilising this valuable energy source. 1.3 Financial and barrier analysis of demand sectors Energy data for a range of market sectors was used to allow financial assessments to be carried out for different types and scales of biomass system. The main results of this analysis are shown in 1 Total PUSH energy consumption figure is for 2006 and includes all electricity, gas, oil, coal and manufactured fuels for the domestic, commercial and industrial sectors. It does not include transport fuels. iii

4 Figure 1.1 on the next page. More detailed financial results can be found within the body of the main report. The results shows a greater level of opportunity for small to medium and medium to large scale chip boilers across most market segments. Other drivers are normally needed where wood pellet heating is to be utilised due to the higher cost of the fuel. Regarding very large scale chip boilers and biomass CHP units, few users have a high enough heat demand to make such systems practical, but in the right situations such as at the Strategic Development Areas these schemes can be very financially attractive. Site Type Existing average primary school Existing average secondary school Mid sized LA office block Mid sized leisure centre 40 units sheltered housing dev't Large hospital site Mid sized prison site Small new build residential (30 flats) Medium new build residential (2 blocks of 70 flats each) Large new residential development (800 units) Very large residential development (5,000 units) New mid sized office block (4,000 sqm) Large new hotel (15,000 sqm) Small - medium pellet boiler (<500kW) Small - medium chip boiler (<500kW) Medium to large chip boiler (500kW - 3MW) Very large chip boiler or CHP (>3MW) New retail development (10,000 sqm) Key: Not suitable / low potential Reasonable potential / good potential but with problems Good potential Figure 1.1 Opportunities matrix sector analysis for different biomass technologies Critical barriers preventing the installation of more biomass systems include: Real and perceived weaknesses in the supply chain; Technical / logistical difficulty in delivering and storing fuel; Higher capital and running costs of biomass systems. Particular ways in which the PUSH authorities can make a major difference are: Developing the supply chain in strategic partnership with initial demand. When a few mid-scale projects are installed by a single party, they have the opportunity to enable investment in any required infrastructure by guaranteeing a long term contract Developing an energy services company (ESCO) which could be used as a vehicle for sourcing and channelling finance to certain projects, coordinating fuel contracts with the supply sector (adding confidence) and even taking on the operational burden of systems at some sites. 1.4 Financial and barrier analysis of supply sectors Financial models were built to investigate the business opportunities within each of the biomass wood fuel sectors of pellet production, chip production from forestry wood and chip production from tree surgery wood. Five scales of operation were modelled: 500 tonnes per annum, 2,000 tpa, 5,000 tpa, 20,000 tpa and 50,000 tpa. See Figure 1.2. It is generally the case that wood fuel production needs to take place at 5,000 tpa and above in order to be financially stable. iv

5 Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5 Production tonnage 500 2,000 5,000 20,000 50,000 Pellet production: Approximate CAPEX ( ) - 120, , , ,000-1,500,000 Profit (using dry sawdust) ( ) - 23,205 81,485 N/A N/A N/A Profit (using wet chip) ( ) - 44,566-3,959 88, ,402 1,534,920 Chip production from forestry: Approximate CAPEX ( ) - 65,000-65,000-85, , ,000 Profit (30% moisture) ( ) - 54,314-44,594-20, , ,832 Chip production from tree surgery: Approximate CAPEX ( ) - 65,000-65,000-85, , ,000 Profit (50% moisture) ( ) - 52,654-33,964-8, ,806 N/A Profit (30% moisture) ( ) - 58,528-39,606 2, ,378 N/A Commentary Not usually economic unless cooperative / partnership approach allows lower costs. Likely to have a few local customers. High price achieved for all fuel sold. Becoming economic. Local markets are still likely to be the focus. Figure 1.2 Overview of the economic analysis of wood fuel production The organisation is likely to need professional sales, marketing & management to sell full production. Likely to have to accept a lower price for some of production. Commentary Requires consistent, clean feedstock at low cost Requires economies of scale or growth in high-value demand Requires a change of existing practice Key: Net project loss 0-100,000 profit > 100,000 profit The critical barriers preventing the growth of biomass supply in the PUSH area are lack of local demand, lack of space for storage and processing and the high cost of specialist equipment (chippers, delivery vehicles etc). These barriers could be overcome to allow supply of biomass fuel to increase more rapidly, via a combination of measures: Supply and demand must be tied strategically to give supplier confidence to invest Under-utilised plots of public land should be converted to wood storage and processing facilities. These plots could be at Household Waste Recycling Centres (HWRCs), composting facilities or other sites. The facility is likely to receive wood from multiple sources but be managed by a single contractor. Partnership / cooperative approach could be taken by the wood fuel suppliers in the PUSH region to reduce the various costs of supply 1.5 Increasing demand for biomass energy The following opportunities for increasing the demand for biomass were identified during the study: Major developments due to take place in The PUSH area present a key opportunity for biomass CHP or using waste heat. They may form the baseline demand for heat networks that can then also incorporate smaller developments. A regional ESCO with the role of building and operating the heat network could overcome some of the major barriers to biomass heating infrastructure, expertise and capital Mapping the heat demand and sources of waste heat could be a useful tool for planning the route, length and density of sites served by the heat network PUSH authorities buildings should be assessed for biomass heating and in particular should take advantage of the renewed Low Carbon Buildings Programme grants Implementing strong sustainable energy policies will have a major impact upon the rate of uptake of low and zero carbon technologies, especially given the volume of development due to take place in the sub region to Developing the wood fuel supply chains An opportunity exists for a 30,000 tonne per annum wood pellet plant to be developed in the sub region using by-products from sawmills. Roughly half of the capacity could be used within the PUSH area in the long term, but other local demand also exists. An active role for PUSH here is somewhat limited due to the commercial nature of the project. The PUSH authorities could have a key role to play in developing the supply of wood chip from tree surgery sources but are unlikely to have as much direct involvement in the forestry sector. This is v

6 partly because local authorities control a portion of the tree surgery arisings and partly because local authority land likely to be closer to the source of tree surgery material than forestry material. PUSH should look seriously at developing tree surgery chipping facilities in line with local demand for fuel. Exceeding 5,000 tonnes annual production is likely to lead to stable long term operation. A pilot site could provide a contractual and logistical model that could be replicated in other boroughs. With regard to developing supply from the forestry sector, PUSH should not focus on this directly, but give attention to the growing demand which will indirectly benefit the forestry sector. Consideration should be given to the desirability of a biomass energy plant in the PUSH area. Support for such a project could lead to a very high fuel demand and have the effect (via cooperatives and forestry contract aggregation) of bringing many (even smaller) woodlands back into management. 1.7 Utilising waste heat from the ERFs The amount of heat currently wasted by the ERFs in the PUSH area is more than the total heat generation capacity of the same area s entire wood fuel resource. All possible opportunities discussed have one thing in common: the opportunity for a heat network infrastructure requiring substantial capital investment. In particular, heat could be used to dry wood chip or to provide heating and hot water at some of the sub region s major new developments. 1.8 Linking mainland Hampshire fuel supply chains with the Isle of Wight While the potential wood fuel resource on the Isle of Wight is significant, the cost of shipping wood to the mainland is high. Bulk shipping and ferry costs have been shown to add between 16 and 24/tonne respectively. This is likely to make the overall process too expensive unless economies of scale can be exploited to bring the cost per tonne down to an acceptable level. 1.9 The role of utility companies With regard to answering the specific question posed within the project brief What role could utility companies play in the biomass energy market? three potential roles have been identified: Funder Community Energy Saving Programme (CESP) funding will be available in certain priority areas of the PUSH region and could be used to deliver or connect to heat networks. User Some companies and individuals in the PUSH area are trying to persuade utility companies to build a 25MW biomass energy plant in the area. If a project such as this goes ahead, the operator would become the largest buyer and user of biomass fuel in the sub region. Infrastructure provider this key role is likely to be played out as the delivery arm of a regional ESCO. Utility companies could give the financial stability required for major investment in infrastructure and have the experience necessary to operate and maintain a heat network The role of an ESCO in the PUSH area biomass market The establishment of a regionally focussed ESCO could enable some significant energy projects to go ahead by providing a vehicle for their development. Local Authorities would need to be fully involved in steering the ESCO while relying upon an experienced (possibly utility) company of sufficient size to give customer confidence. At the same time, community involvement should be explored to take advantage of local buy-in to projects and to provide an additional source of project funding. The community aspect may be particularly relevant to new developments where shareholders live in proximity to and directly benefit from specific projects Recommendations In light of the further resource assessment work, financial and barrier analysis and investigation into numerous individual opportunities, six strategic recommendations have been formulated for developing biomass supply chains in the PUSH area. vi

7 1. Form strategic links between the supply and demand sides of the biomass market: An individual within PUSH or one of its members should be appointed the biomass coordinator for the PUSH area The biomass coordinator should create and chair a PUSH Biomass Group made up of key parties from both the supply and demand sides of the market Up to date GIS data should be used to track points of potential biomass (or other heat) demand and overlaid with points of waste heat supply. One method would be to create an online tool that each local authority can log into to update. It is envisaged that the Biomass Coordinator would oversee the system, interpreting the data and ensuring it is updated and used effectively. 2. Create demand by increasing the uptake of biomass systems with the PUSH authorities own buildings stock: The first step is to undertake biomass feasibility assessments of key buildings (for example Hampshire County Council recently undertook an assessment of 40 of their highest carbon emitting sites for biomass and other renewable energy and energy efficiency measures). One tool for assisting initial investigations is CEN s Financial Viability Tool available here. Make use of available grant money such as the newly recommissioned Low Carbon Building Programme which now funds biomass boilers up to 300kW in community buildings 3. Encourage demand through policy framework by: Ensuring each PUSH planning authority has implemented strong, clear policy on the expectations of new developments to deliver sustainable energy on site or link into available heat networks. A hierarchy of policy options could be created for developments to encourage the use of heat waste heat, biomass CHP and biomass heating. For an example of the policy hierarchy approached found within the London Plan, see the case study box in Section 11.1 This hierarchy could be applied within major development s Area Action Plans to ensure the prospects for waste heat, biomass CHP and biomass heating are fully considered during master planning and development of the energy strategy 4. Enable demand by establishing a PUSH ESCO with the primary remit of delivering large scale infrastructure such as heat networks. This should increase the financial viability of biomass boilers by creating larger base loads of heat requirement. Continuing to explore opportunities to use the heat from the two ERFs in the PUSH region must be a priority for the ESCO GIS mapping of sources of waste heat and proximity to future developments, could be used by the ESCO to identify business opportunities and to develop details of future networks (see Recommendation 1) 5. Create supply of wood chip from tree surgery sources: PUSH authorities should consider amending their contracts with tree surgeons when it is next renewed to be more prescriptive about the use of the resulting material. In particular councils may wish to specify that material is taken to a particular site for storage and processing PUSH authorities with low levels of council tree arisings or without suitable plots of land, could partner with neighbouring authorities. Twin authority tree surgery contracts could be established to tie greater amounts of material into processing at a single site Processing sites should only be implemented in full coordination with the PUSH Biomass Coordinator to ensure a relevant quality and quantity of demand exists 6. Support supply by supporting the development of a medium scale wood pellet plant in the western end of the sub region offering political support to the idea, letters of support to funders and coordination with the PUSH biomass group vii

8 Table of Contents 1 EXECUTIVE SUMMARY... iii 2 INTRODUCTION BACKGROUND TO THE STUDY ABOUT BIOMASS THE STUDY AREA METHODOLOGY... 3 SECTION A: EXISTING DATA AND FURTHER RESEARCH REVIEW OF WOOD FUEL DEMAND DATA REVIEW OF WOOD FUEL SUPPLY DATA AND INFRASTRUCTURE SUMMARY OF WOOD FUEL RESOURCE REVIEW OF FUEL SUPPLIERS AND INFRASTRUCTURE ANALYSIS OF ADDITIONAL SOURCES OF BIOMASS ENERGY ADDITIONAL BIOMASS SUPPLY FROM AGRICULTURE: ENERGY CROPS ADDITIONAL BIOMASS SUPPLY FROM AGRICULTURE: CROP RESIDUES ADDITIONAL BIOMASS ENERGY FROM WASTE STREAMS SECTION B: ECONOMIC AND BARRIER ANALYSIS SECTORAL ANALYSIS OF BIOMASS HEATING AND CHP COLLATION OF EXAMPLE SITE ENERGY DATA CATEGORISING THE TECHNOLOGY ANALYSIS OF THE EXAMPLE SITES BY TECHNOLOGY MARKET OVERVIEW OF THE SECTORAL ANALYSIS: OPPORTUNITIES MATRIX BARRIERS PREVENTING THE INSTALLATION OF BIOMASS SYSTEMS SUPPLY CHAIN BARRIERS TECHNICAL BARRIERS FINANCIAL BARRIERS LEGISLATIVE BARRIERS OTHER BARRIERS SUMMARY OF BARRIERS PREVENTING GROWTH IN DEMAND ECONOMIC ANALYSIS OF BIOMASS SUPPLY OPPORTUNITIES PELLET PRODUCTION MODEL WITH SCENARIOS FORESTRY CHIP PRODUCTION MODEL WITH SCENARIOS TREE SURGERY CHIP PRODUCTION MODEL WITH SCENARIOS WASTE CHIP PRODUCTION SUMMARY AND CONCLUSIONS FROM THE FINANCIAL ANALYSES BARRIERS PREVENTING THE DEVELOPMENT OF BIOMASS FUEL SUPPLY CHAINS DEMAND BARRIERS TECHNICAL BARRIERS FINANCIAL BARRIERS LEGISLATIVE BARRIERS viii

9 10.5 OTHER BARRIERS SUMMARY OF BARRIERS PREVENTING GROWTH IN SUPPLY SECTION C: EXPLORING THE OPPORTUNITIES GROWING THE DEMAND FOR BIOMASS ENERGY STRATEGIC DEVELOPMENT AREAS AND OTHER MAJOR DEVELOPMENTS SMALLER SCALE DEVELOPMENTS BIOMASS ELECTRICITY AND CHP FACILITIES BIOMASS WITHIN PUSH AUTHORITY BUILDINGS DRIVERS AND RESOURCES FOR INCREASING DEMAND ESTABLISHING BIOMASS SUPPLY FACILITIES IN THE SUB REGION ESTABLISHING A WOOD PELLET PLANT ESTABLISHING TREE SURGERY WOOD CHIP FACILITIES ESTABLISHING FORESTRY WOOD CHIP FACILITIES OPPORTUNITIES ARISING FROM THE PORTSMOUTH AND MARCHWOOD ERFS LINKING BIOMASS FUEL SUPPLY CHAINS WITH THE ISLE OF WIGHT ANALYSING THE ISLAND S FORESTRY RESOURCE OTHER SOURCES OF BIOMASS FUEL ON THE ISLE OF WIGHT TRANSPORTING WOOD TO OR FROM THE ISLE OF WIGHT UTILITY COMPANIES FUNDER USER DELIVERY PARTNER OF A REGIONAL ESCO THE ROLE OF AN ESCO IN THE PUSH AREA WHAT IS AN ESCO? WHAT ROLES COULD AN ESCO PLAY IN THE PUSH AREA? SECTION D: RECOMMENDATIONS RECOMMENDATIONS APPENDICES APPENDIX A GLOSSARY APPENDIX B POTENTIAL SITES FOR CHIP PRODUCTION & STORAGE APPENDIX C METHODOLOGY OF ECONOMIC ASSESSMENT USED IN THE SECTOR AND TECHNOLOGY ANALYSIS APPENDIX D LIST OF SUPER OUTPUT AREAS ELIGIBLE FOR CESP FUNDING APPENDIX E FURTHER DETAIL ON THE SITE REQUIREMENTS OF A CHIP PROCESSING FACILITY FOR TREE SURGERY MATERIAL ix

10 2 Introduction This report provides a detailed analysis of how biomass supply chains could be developed within the area covered by the Partnership for Urban South Hampshire (PUSH). Previous studies have identified that the region is resource rich and has a growing energy demand. The aim of this study, then, is to identify ways in which this resource can be accessed or diverted to form a renewable energy supply, and to identify potential projects that could be suitable for biomass heating or combined heat and power. The study largely focuses on the wood fuel market, but other forms of biomass such as agricultural residues and municipal waste streams are also considered. 2.1 Background to the study In 2007, PUSH commissioned a feasibility study into Energy and Climate Change 2. This work has recently been completed and PUSH now wishes to investigate in more depth if opportunities for Biomass based energy networks in the area are technically and commercially viable. The Arup study paints a picture of how the PUSH area might look in terms of energy in This visualises that a local stewardship approach will be necessary to reduce the call on fossil fuels and so reduce the areas carbon footprint, and that business as usual is not an option for a future dominated by scarcity and climate change. In March 2007, the Forestry Commission published A Wood fuel Strategy for England which outlines a target of bringing an additional 2 million tonnes of wood to the market by This strategy has now filtered down to the regional level with each area of the country holding their own share of the 2 million tonne target. For its part, the South East is expected to bring an additional 500,000 tonnes of wood to market per year. Figure 2.1 below, shows how this half million tonnes of timber is split by county. Hampshire has by far the largest share of the South East s woodland resource (nearly 30%) and if the SE target were split down to a county level might be expected to produce 147,000 tonnes. W Sussex E Sussex Kent Hants Berks Bucks Oxon Surrey Figure 2.1 Breakdown of potential wood fuel resource in the South East by county (Based upon Forestry Commission research, McKay 2003) To put these figures in perspective, a Hampshire County Council study 3 found that at present only around 5GWh of energy is currently generated from biomass in the PUSH area equal to around 2,000 tonnes just over 1% of the total target from Hampshire s woodlands. There is clearly a long way to go before the available resource is fully utilised. In terms of growing demand 80,000 new homes are expected to be built in the PUSH area by 2026 as well as much commercial space. With this level of development, there is a lot of potential for the biomass demand to grow rapidly over the next two decades. 2 The report Feasibility of an Energy and Climate Change Strategy for South Hampshire was completed by Arup and is available to download from the PUSH website here. 3 The report Woodfuel: a technical study for South Hampshire, was completed by CEN and is available to download from the CEN website here. 1

11 2.2 About biomass Biomass is considered a source of renewable energy since the same amount of carbon is absorbed during growth as is emitted during combustion. Apart from the small amount of carbon expended during harvesting, processing and transportation, the use of wood or other plants as a fuel is carbon neutral. Modern biomass boilers are highly efficient with automatic fuel feed, ignition and de-ashing. Flue gas recirculation, cyclones and oxygen monitoring ensure very clean emissions. Integrated modems can also be included to allow remote monitoring and control of settings. The benefits of using wood as a fuel are numerous and impressive: generating a renewed market for woodland products, increasing rural employment and maintaining rural skill sets, bringing woodland back into management, improving biodiversity and keeping the energy pound in the local area. And this is just considering the benefits on the supply side. For those installing and operating wood fuel boilers (the demand side) benefits include reducing carbon emissions, potentially reduced heating bills, protection from fossil fuel shortages and possibly meeting legislation regarding sustainability and renewable energy. A distinction must be drawn between wood fuel and biomass more generally. Wood is one type of solid biomass. Technically biomass can be any plant or animal matter of recent origin, and could include straw, grain husk and animal waste as well as energy crops and traditional forestry material. This study focuses largely on wood fuel as one of the most practically useable sources of biomass, but other parts of the biomass spectrum are also considered. 2.3 The study area The area of study has been defined to include only the PUSH area (outlined in dark in Figure 2.2) with regard to energy demand but extended by 10km in all directions when assessing biomass supply (shown in red). This has been done primarily because the sub region itself is largely urban and contains relatively little woodland or agricultural land. By including a 10km buffer, a significant amount of resource has been captured while keeping the distance that the fuel would have to be transported to a minimum. The only exception to the 10km rule was the decision to include the whole of the New Forest, as transport links to the PUSH area are good and it represents a major resource. Despite the buffer area drawn, opportunities outside of Hampshire have not been quantified. For example, West Sussex has not been included in the study in order to avoid double counting of resource (similar demand and supply studies are also taking place in West Sussex). In addition to the area shown, the Isle of Wight has been included in the study but only with regard to the potential for linking its wood fuel resource with the mainland. Figure 2.2 Area of study PUSH area shown in black and buffer zone in red 2

12 3 Methodology Biomass Supply Chains in South Hampshire The methodology can be summarised within the following five streams of work and is further represented in Figure 3.1, below. 1. Drawing together existing data and conducting further research into supply and demand capacity within the PUSH area and buffer 2. Economic and barrier analysis of supply and demand in the sub region to produce matrices of best the opportunities for development 3. Working On the Ground to identify and develop key areas such as the wood pellet plant 4. Addressing further questions that particularly impact the PUSH area 5. Developing a set of recommendations for PUSH Existing data & further research DEMAND Review of Arup study Review of HCC study Collation of benchmark data for existing and new developments of different types to produce example sites SUPPLY Review of HCC wood fuel study Research capacity of agricultural sector (e.g. grain husks, SRC) Energy from Waste Economic and Barrier Analysis On the Ground Further Questions Economic analysis of demand thresholds for different sectors, levels of heat and electricity demand and fuel type Analysis of barriers preventing the installation of biomass and CHP Specific outputs: Matrix of heat & electricity thresholds to make a development suitable to different types of biomass technology Simple summary sheet of which types of development are suited to biomass Using matrix (above) to locate specific sites that are likely to be suited to biomass energy Contacting key sites to develop opportunities and strengthen later recommendations, including the region s Strategic Development Areas Analysis of supply prices and quantity thresholds for different fuel types What barriers prevent the development of wood fuel and other biomass supply chains? Specific outputs: Matrix of fuel type, supply volume and profit margin Practical considerations for the establishment of a fuel supply or processing plant Visit RF Giddings and other sawmills to investigate the idea of a pellet plant and develop the business case for investment Identification and analysis of other suitable wood processing facilities Analysis of opportunities at the Portsmouth and Marchwood Waste Facilities Could mainland Hampshire work together with the IoW to develop biomass supply? How could existing energy companies assist the development of biomass energy? What has happened so far and how well has it worked? How might an ESCO work? RECOMMENDATIONS Drawing together all of the above research, CEN will conclude with robust, locally informed recommendations to include the following key questions: What policies should PUSH authorities consider to maximise the growth potential of biomass energy networks? What funding streams should be exploited? How could an ESCO or other coordination body be established and what would be its remit? How can the major opportunities such as a wood pellet plant in the NW of the sub region or biomass CHP within the SDAs be developed and taken forwards? Figure 3.1 Schematic representation of the methodology 3

13 SECTION A: EXISTING DATA AND FURTHER RESEARCH 4 Review of wood fuel demand data Previous studies examining energy demand and wood fuel supply and demand in the PUSH area have been consulted to gather data on the likely growth in demand for wood fuel over the coming years. Arup s study 4 has indicated that the PUSH area can expect a 15% increase in gas consumption to 2026 in the domestic and commercial & industrial sectors. This sub regional increase is more than reflected in the projection of potential increase in demand for wood fuel over the same period. Figure 4.1 has been replicated from the HCC study 5, and shows a rapid increase in the potential wood fuel demand to One scenario modelled as part of that study indicated that the wood fuel market has the capacity to grow by up to 25% per annum, though admittedly, this fast growth rate is partly a reflection of the small initial market size that exists at present. Under that scenario, the size of the wood fuel market could reach around 250GWh p.a. by 2026, though this could easily be exceeded if some of the larger biomass CHP projects currently being considered are actually implemented Potential demand (GWh) HQ Chip LQ Chip Pellet Figure 4.1 Projection of potential demand for different wood fuels between 2011 and 2026 The data gathered during the HCC study included forestry data which was used to calculate sustainable yield, sawmill residue, tree surgery arisings and clean waste wood from domestic and commercial streams. The classifications of high quality wood chip (HQ Chip), low quality wood chip (LQ Chip) and pellet relate to the breakdown in the various sectors of demand. Large developments will use bigger boilers which can accept lower quality fuel (higher moisture content and larger particle size), while smaller developments will require high quality wood chip or wood pellet. 4 Feasibility of an Energy and Climate Change Strategy, Arup (commissioned by PUSH) 5 Woodfuel: A technical study for South Hampshire, CEN (commissioned by Hampshire County Council) 4

14 5 Review of wood fuel supply data and infrastructure 5.1 Summary of wood fuel resource Forestry resource Table 5.1 shows the forestry resource that could be directly available for biomass energy and a conversion into available gigawatthours (GWh). This is based upon the land area, woodland type and growth rate of forests within the PUSH area and the buffer region. Table 5.1 Summary of forestry biomass resource Available forestry resource (ODT) 31,498 31,210 33,202 29,295 Total forestry (available proportion) (GWh) Arboricultural resource The data gathered regarding tonnes of arboricultural material produced in the PUSH area is presented below in Table 5.2. Table 5.2 Summary of arboricultural survey data Company Total fresh material (tonnes) HQ Chip (MC30) (tonnes) HQ Chip (MC30) (GWh) LQ Chip (MC50) (tonnes) LQ Chip (MC50) (GWh) Tree surgery total 25,972 11, , Sawmill resource Table 5.3 summarises the tonnes of slab wood or woodchip and sawdust produced by saw mills within the study area and buffer zone, and the potential energy generating capacity of this material. RF Giddings and East Bros Ltd were by far the largest, though the contribution from the smaller sawmills is not insignificant. Table 5.3 Summary of sawmill by-product created in the SHSR buffer Company Slab wood or wood chip (MC50) (tonnes) Energy content of air dried wood chip (MC30) (GWh) Sawdust (MC50) (tonnes) Energy content of wood pellet (GWh) Total 60, , Waste wood resource Table 5.4 summarises the results of the investigation into waste wood availability in the PUSH area. The wood is mostly untreated pallets, construction & demolition timber and various types of household wood. It is mostly very dry (estimated at average 20% moisture). Table 5.4 Summary of waste wood available in the PUSH area and buffer Total clean waste wood Forecasted tonnages of dirty wood for 2009/10 Approximate Annual Tonnage Energy Value (GWh) 14, , It is important to remember that although waste wood is a possible energy source, it is also a waste and must be treated as such, and its use comply with the Waste Incineration Directive (WID). Clean waste wood could potentially be monitored to prove its cleanliness that it has not been treated with or become contaminated by paint, varnish, preservative or other substances and in this way, it may be possible to use the material in non WID appliances. If waste wood is dirty, or cannot be proved to be clean, it can only be burned within WID compliant appliances. 5

15 The available wood resource data for the forestry, tree surgery, sawmill and waste sectors have been amalgamated into a single table. The total potential resource from all sectors is seen to be in the region of 567GWh. It is important to recognise that this is not the resource that is currently available but the resource that could be available if the demand grew, the supply chains matured and the economic situation was favourable. Table 5.5 Summary of maximum theoretical wood resource per annum and energy generating potential Sector Source wood Forestry MC50 virgin logs Annual Tonnes (source) Wood fuel produced Annual Tonnes (wood fuel) Likely /tonne delivered Max Energy GWh Potential Market 58,590 G30,W30 41, High quality wood chip: suitable for small to large wood fuel boilers Carbon Saving (tco2) Revenue ( ) 25,000 3,348,000 Sawmill MC50 sawdust 15,437 8% Pellet 8, Pellet fuel suitable for small to large wood fuel boilers 7,100 1,384,300 Sawmill MC50 slab wood / chip Tree Surgery MC50 branch wood 60,402 G30,W30 43, Med-high quality wood chip: potentially suitable for small to large wood fuel boilers 9,762 G50,W50 9, Low quality wood chip: suitable for co-firing or large scale wood fuel boiler / CHP 25,900 3,451,500 3, ,200 Tree Surgery MC50 stem wood 16,210 G50, W30 11, Med-high quality wood chip: potentially suitable for small to large wood fuel boilers 6, ,300 Clean Waste Wood Dirty Waste Wood MC20 various MC20 various 14,640 G50,W20 14, Low quality wood chip: suitable for co-firing or large scale wood fuel boiler / CHP (WID 6 28,500 Variable classification (W20) appliances only unless proven clean) 28,500 Variable 121 Very low quality wood chip: suitable only for co-firing or large scale boiler / CHP (WID appliances only) 11, ,400 21,700 n/a Total 175, , ,500 9,817,700 Note: The tonnes quoted in columns 3 and 5 relate to the source material and wood fuel produced from that material respectively. The two effectively differ by the amount of water dried off (either naturally or forced) during fuel preparation / processing. At present, most of the potential forestry resource simply isn t harvested. That which is harvested specifically for wood fuel serves small, local boiler systems. All of the sawmill and tree surgery material represented here is already generated and is currently utilised for a mixture of board and paper manufacture and power generation. Slough Heat and Power is probably the largest single source of demand for this material, although a lot of it travels much further. If more local demand were created (especially medium to large scale facilities), much of the material that is exported to Slough and other energy plants in the Midland and the North could be diverted with the associated carbon and costs savings from reduced haulage. 6 Waste Incineration Directive 6

16 5.2 Review of fuel suppliers and infrastructure Table 5.6 provides a list of the wood fuel producers who contributed to the study. All of the wood fuel producers in the table currently operate in, or near to, the PUSH area. The wood fuel producers vary in scale with some of the companies providing wood fuel to a growing client base whilst other wood fuel producers simply generate enough wood chippings to satisfy the demands of their individual biomass boilers. Table 5.6 List of existing fuel producers and suppliers within Hampshire Wood fuel Producer Wood fuel Type Chipper Model Chipper Diameter Chipper capacity (m 3 /hr) Day rate if rented ( ) Storage Facility Chip Store Capacity (tonnes) Hampshire Price on Barn Wood Chip TP270 K Wood Chip request Buildings 400 Southern ~ 1,150 with Barn Wood Chip Ahwi EC Wood Energy operator Buildings 2,700 Round Wood Barn Wood Chip n/a n/a n/a n/a Estate Buildings 120 Wood4heat Wood Chip Heizohack ~ 400 with Garage HM 6-300VM operator Buildings 15 Hampshire & IoW Wildlife Wood Chip - 4 unknown n/a - - Trust In addition to those companies listed in Table 5.6, a number of other companies either play active roles in the biomass supply chain but are based outside the PUSH area, or own items of equipment that could be classed as biomass infrastructure but do not see it as a core part of their business to produce and supply biomass fuel (e.g. most tree surgeons have chippers but use them for volume reduction rather than production of high quality wood chip for fuel). 7

17 6 Analysis of additional sources of biomass energy 6.1 Additional Biomass Supply from Agriculture: Energy Crops Introduction to energy crops in the PUSH region Energy crops are fast growing plant species, specifically chosen to be suitable for use as fuel and offering high yields per hectare. They can be tree species such as willow and poplar, grasses such as miscanthus or more traditional agricultural crops such as sugar beet, wheat or rapeseed. This section of the report looks at the potential for energy crops to contribute to biomass energy production in the PUSH area. Two questions are asked: How much energy could be generated if all of the agricultural land currently designated as set-aside in the PUSH area and buffer were used for planting short rotation coppice willow? And how much agricultural residue from existing crops could be diverted towards energy supply e.g. wheat straw? The growth of energy crops is currently supported by Natural England who administer the Energy Crops Scheme (ECS2) as part of the Rural Development Programme England (RDPE) which runs from Funding is provided towards the establishment of Short Rotation Coppice and Miscanthus at 40% of eligible costs. Natural England have not received any applications in Hampshire for this scheme to date. The previous Energy Crops Scheme (ECS1) was funded under the England Rural Development Programme (ERDP) and paid 1000 per hectare for SRC and 920 per hectare for Miscanthus. Natural England have indicated that there are currently 3 live agreements in Hampshire under this scheme, with a total of 32 hectares, but none within the PUSH area or the 10km buffer area. ECS agreements run for 5 years from the date of planting, after which there is no obligation for the agreement holder to continue to grow the crops. However, it is likely that many of the agreement holders will continue to grow the crops after this time as they are generally a long term commitment due to the high set up costs. The data provided by Natural England relates to the area of crops funded by the Energy Crops Scheme only. Both schemes have a minimum application area of 3 hectares so there may be small areas of crops which are not receiving funding, particularly for own use Area and quality of set-aside land The land classification set-aside is no longer used by DEFRA so data on this type of land area is only available up to The trend under the Single Payment Scheme (SPS) between 2005 and 2007 was of an annual reduction of 14% of the amount of land left un-cropped long term. This trend has been used to predict the amount of land in the PUSH area and buffer zone that is currently long-term un-cropped (see Table 6.1 below). Table 6.1 Land classed as set-aside in and around the PUSH area (*Extrapolated data) * 2009* Total HCC set-aside (ha) (exc. IoW) 15,464 13,351 11,133 8,969 6,804 PUSH wards set-aside (ha) PUSH & 10km buffer wards set-aside (ha) 2,256 1,948 1,624 1, The expected yield of the various energy crops will vary largely with the quality of the agricultural land on which the crops are grown. Figure 6.1 shows that inside the PUSH area, the agricultural land class (ALC) largely falls into Grade 4 with some Grade 3 and Grade 5. Just outside the PUSH area, but within the 10km buffer zone, land class appears to be mainly Grade 3. 8

18 Figure 6.1 Agricultural Land Classification in the PUSH study area (Source: Calculating the potential contribution of energy crops in the PUSH area Given the range of agricultural land classification within the PUSH area and buffer zone, it is important that the expected energy crop yield reflects this. Table 6.2, below, describes the expected variance of crop yield for short rotation coppice with ALC. Table 6.2 Variation of SHC yield with ALC Grade 7 ALC Grade Assumed SRC yield t/ha/yr Grade 1 14 Grade 2 12 Grade 3 10 Grade 4 8 Grade 5 0 A similar variation of yield has been modelled for miscanthus crop growth (but reflecting the higher overall yield rates) and used to calculate the potential for energy crops to contribute to biomass supply in the PUSH area, see Table 6.3 below. 7 Source: A South East Regional Study into Wood and Energy Crops as a Source of Bioenergy (TV Energy, 2006) 9

19 Table 6.3 Estimation of possible energy production from energy crops in the PUSH area SRC Willow Miscanthus SHSR SHSR & buffer SHSR SHSR & buffer Estimate set-aside land area in Estimated annual yield (oven dry tonnes) 1,768 7,942 2,653 11,913 Equivalent actual yield at 55% moisture (tonnes) 3,930 17,649 5,895 26,473 Equivalent actual yield if dried to 30% moisture 2,526 11,345 3,790 17,018 (tonnes) Potential energy yield if burned wet (55% moisture) (GWh) Potential energy yield if allowed to dry to 30% moisture (GWh) If all of the set-aside land within the PUSH area and the 10km buffer zone was planted with energy crops, around 34 to 56 GWh of energy could potentially be generated, depending upon the crop and moisture content when burned The potential impact of land use change It is important to note that while the growth of energy crops on agricultural land may form a worthwhile contribution to the total biomass energy supply in the PUSH area, there are complications if a change of land use is involved. When land lies fallow for many years, as with long term set aside, or has never been ploughed for the planting of agricultural crops, as with permanent grass land used for grazing, the soil will hold a far higher level of carbon than regularly or recently ploughed soil. Ploughing the fallow land or permanent grass land in preparation for the planting of energy crops, can lead to an emission of this soil carbon to the atmosphere in the form of carbon dioxide the very gas that it is the intention to offset through the use of the energy crops. It is very important, therefore, to understand the degree to which this affect may impact the overall carbon balance of growing and burning energy crops. In April 2009, the Environment Agency released a report which summarises the results of an investigation into this overall carbon balance, the headline results of which are shown, below in Figure

20 Figure 6.2 Potential impact of land use change on GHG savings [Minimising greenhouse gas emissions from biomass energy generation, Environment Agency] Figure 6.2 shows that the amount of green house gas emissions saved by the use of energy crops (compared to natural gas) is widely variable depending on what the land was used for before energy crops were planted. In the best case, where land was previously cropped, savings can be as high as 90%. In the worst case (where energy crops are planted on what was previously undisturbed grassland), the green house gas emission savings can be totally negated or lead to a net increase in emissions. Another way of considering the impact of land use change is to calculate the time that it takes for the carbon debt incurred by ploughing up the land to be repaid from the carbon savings made by using the energy crop. In the case of conversion from fallow land, the carbon debt is repaid in 3 to 5 years depending on the energy crop. But in the case of conversion from grassland, the carbon payback time can vary from 14 years for straw and miscanthus chips to 23 years for SRC chips and 35 years for SRC pellets: well beyond the expected 20 year lifetime of the plantation 8. For more information, see the Environment Agency report, which can be viewed via their website Energy crops in protected landscapes A further source of debate surrounding the planting of energy crops is to do with the impact on sensitive or protected landscapes. Commonly raised objections to energy crops include: Possible damage to previously undisturbed archaeology Possible impacts on biodiversity (depending on what crop is being replaced) High visual impact (crops reach around 4m high) It must be recognised that energy crops will increasingly have a role to play in our energy future. Most of the objections listed above can be overcome if the siting and planting is approached sensibly. Those who voice concerns over energy crops are not usually campaigning against energy crops altogether and indeed they accept that these crops have an important contribution to make. However, they would argue that energy crops need to be the right crop in the right place. 8 Minimising greenhouse gas emissions from biomass energy generation, Environment Agency, April

21 Figure 6.3 Map to show areas of special protection and conservation (Source: Figure 6.3 shows the location of Special Protection Areas and Special Areas of Conservation within the PUSH area and buffer zone. These areas may be considered less suitable for growing energy crops. There may be other types of designation which are also unsuitable (check designations with Natural England). Mostly, the areas shown are already wooded regions and so would not impact on the growing of energy crops. Key Findings Energy crops grown on long term set-aside land in the PUSH area and buffer zone could generate around 34 to 56 GWh p.a. depending upon the crop and moisture content when burned. This is a small but significant fraction of the total potential wood resource from existing sectors (between 6 and 10%). The type of land upon which energy crops are grown can seriously affect the overall carbon savings achieved. Growing SRC on grassland, for instance, can actually result in a net increase of atmospheric carbon compared to using natural gas. There is currently no known energy crops grown within the study area. Lack of planting to date has probably got a lot to do with the distance to a major user. The initial cost of planting means that in most cases, farmers need a guaranteed demand before they are willing to invest. The lack of growth in the PUSH area is therefore unlikely to change unless a medium to large scale facility is built. If this did happen, energy crops could make a significant contribution to the supply (potentially more than the 56GWh calculated if land was converted from other crops). Farmers would have to be involved at the planning stages as from planting to first harvest is usually around 3-5 years. 12