TECHNICAL APPENDIX Investment in the Forestry Sector

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1 TECHNICAL APPENDIX Investment in the Forestry Sector Introduction The appendix relates solely to an application for funding under the Forestry priority within the RDPE Rural Economy Grant (REG). REG is a demand led competitive grant process that aims to reflect Government priorities and specific issues that have been identified as priorities for investment in different areas of England, through grant support. It is intended to help guide the applicant to provide the level of supporting documentation and evidence to allow an application to be considered by Defra. This priority within REG can offer a range of support to help the forestry and timber sector (the sector) to significantly transform their business competitiveness, productivity and environmental efficiency, whilst better utilising forest resources to strengthen and respond to market demand for products such as woodfuel. Projects in woodlands with significant local importance where active management can positively increase its sustainability and develop its economic potential will also be eligible for support. Support for primary processing associated with the above must demonstrate significant increases in economic and environmental efficiencies in forestry and timber micro-enterprises (businesses with less than 10 employees with an annual turnover or annual balance sheet total of under 2 million). The focus will be larger scale projects (projects with a total investment above 62,500 and grant request of at least 25,000) that can demonstrate that the investment will move the business significantly beyond current practice. Grant investment is available to support: The creation and development of new businesses in the forestry and timber sector; The modernisation of primary processing; The use of new technology in micro-enterprises; Product and market development and product substitution in favour of timber and promotes great use of locally sourced timber; Developing business capacity in micro-enterprises producing high quality woodfuel. Investment through RDPE does not substitute grant opportunities that should be pursued through other existing grant schemes such as the Woodfuel WIG or the Renewable Heat Incentive (RHI). Primary Processing is defined as all activity post felling but before industrial processing (for example logs, rough planked or chipped timber or simple enhancements to the quality of that product through drying/seasoning). Industrial processing is defined as anything that changes the primary product (for example lamination, pelletising, jointing etc). Three main themes are being considered under the Forestry Priority for REG: A. The Modernisation of Supply Chains B. The Development of New Products and Markets C. The Development of the Market for High Quality Woodfuel. 1

2 Across England, locally determined priorities can also influence the decision making process. Please contact the Theme lead for Forestry in your area (contact details for areas are given in the REG Handbook). A. The Modernisation of Supply Chains Up to 40% of eligible costs can be supported to improve the co-operation and collaboration in the sector leading to more effective and sustainable supply chains. Support will facilitate: Co-operation and collaboration to improve supply chains; The development of ideas and initiatives that improve the effectiveness and sustainability of supply chains; The development of new or established supply chain relationships that increase the environmental efficiency and sustainability of the business; An increase in the sector s ability to address major forest health issues increasing where needed, processing capacity locally. The benefits of this priority activity Building strong links across the sector will help improve the value of our woodlands. Around half of England s woodlands are not under active economic management. A large percentage of that resource is on farm and this presents an opportunity for both business diversification and/ or new joint businesses development. One reason for lack of economic management is the high cost of extracting timber and need for the specialist equipment to bring it to market in a resource efficient way. It will also help support the industry to enable active and economic management of Phytophthora ramorum to allow the wood processing sector in particular to process timber taken out through control measures. Supporting stronger supply chains also helps businesses to link with and complement the Forestry Commission s England Woodland Grant Scheme priorities such as the Woodfuel Woodland Improvement Grant to help make supply chains operate effectively. The effectiveness of the chain is not always in the number of links but their robustness. Applications from businesses under this priority should demonstrate that the activity supported will strengthen links across businesses. Who can apply? Existing micro-enterprises; Persons wishing to set up a new micro-enterprise in the forestry or timber sector (including farm diversification); Collaborative projects that have at least one primary processing business partnering with another business involved in the project; Project Examples Support to establish new businesses with the intention of operating within a particular part of the supply chain to address for example, a demonstrable gap in the supply of a particular service that significantly improve a primary product such as woodfuel. 2

3 A project to modernise a small wood yard business that is classified as micro-enterprise, to introduce equipment to significantly improve the quality of a product up to the point of industrial processing without it being a straight forward replacement or model upgrade that performs the same basic function. A micro-enterprise investing in specialist processing equipment (outlined below) required to bring under-utilised woodlands into management. B. The Development of New Products and Markets Up to 40% of eligible costs can be applied for to support businesses that want to work together to develop new products, processes or technologies with the aim of strengthening the sector. Support will facilitate: Increasing the use of timber as a substitute for less sustainable materials; Increasing the number of products that use lower grades of timber; Increasing the contribution of timber products in adapting to climate change. The benefits of this priority activity Innovative use of forest products processes or technologies by small businesses can create differentiation in the market place (through innovation, quality etc) represents an important first step or intermediate step in the development of new enterprises. Innovation requires support and cooperation that allows novel or pioneering processes to be explored (possibly linking with research establishments). Timber is predominantly a local material and the UK has a successful forest products industry. Substantial investment has been made to allow producers to move progressively into higher value markets. For example the use of non-stress grade timber in the building industry has the potential to increase a preference for UK timber products particularly where more broadly, timber can replace less sustainable materials. Collaborative ventures could arise where for example larger businesses offer to undertake larger scale design and testing work in collaboration with primary producers who can produce a component part of a more technical product. The future sustainable management of forests will also require nontimber products from forests to be an increasing part of the mix of commercial activity. There is now a wide range of businesses generating significant economic activity, which deal in a variety of products from forests. This priority does not support forest based recreation projects. Applicants should look to the Tourism strand to support such activity. Who can apply? Existing Micro Enterprises For collaborative projects at least one business in the primary processing industry and a partner from another business (no limitation in business size where this activity is preproduction) including research establishments; 3

4 Project Examples The development of a product that promotes greater use of timber by substituting a less sustainable product or material in favour of timber such as the development of new markets for non-stress graded usable timber products particularly in the construction industry. A collaborative venture between the design/technical team within a specialist industrial processor that uses primary timber components; and a primary processing business or woodland owner to supply a primary product that has specific physical qualities, processing uses or origin attributes to the specialist processor. This can include larger businesses and partners involved in the collaboration, providing design, technology development and testing. Support for the development of non-timber products derived from woodlands. C. Development of the Market for High Quality Woodfuel Up to 40% of eligible costs can be applied for to support woodland owners and woodfuel businesses to produce a clean, efficient and renewable energy source, Support will facilitate: Increasing the supply and quality of both wood chip and fire log woodfuel; Increasing the use of wood fuel sourced on and for use on farm/holdings; Increasing the amount of woodland in sustainable management. Generating sustainable and energy efficient woodfuel businesses The benefits of this priority activity Production of woodfuel can aid the management of woodland and give woodland owners an incentive to manage woodland productively as well as provide a renewable source of fuel. It is a sustainable, low carbon, source of energy that works best on a sub-national scale using locally grown fuel in efficient, modern boilers to provide heat for business and community buildings, saving money and CO2. Supporting the sector can help build confidence in the supply chain and facilitate uptake of a woodfuel system. There has been uneven development of the supply chain for woodfuel, it being a relatively new market with strong competition from traditional fuel markets. Users of woodfuel systems are currently faced with a complex supply chain that does not provide a consistent level of quality. In some areas there is evidence of a poor quality product reaching users which undermines the potential of this industry. Investment should focus on improving existing woodfuel supply chains and should only support investment in new enterprises where there is evidence of undersupply in the planned operational area. In all cases investment should directly lead to the producer adopting recognised standards for product quality. Who can apply? Existing micro enterprises Farm and forestry businesses. 4

5 Social enterprises; charities/other formally constituted groups where the project delivers basic services to rural populations. Persons wishing to set up a new micro-enterprise in the forestry or timber sector (including farm diversification) in areas where this is a local priority. Project Examples A farmer who is a woodland owner buying primary processing equipment to increase use of small scale woodfuel technology for non-domestic use exclusively on farm. Support for collaborative ventures between primary processors and other businesses (which can be larger businesses) in product development in advance of industrial production. Increase in the capacity of wood fuel businesses to put in place steps that help build the quality of the product and increase the volume and regularity of supply. Support for Primary Processing Equipment to deliver against the themes. The minimum REG grant award is 25,000 and a maximum of up to 40% can be applied for. In all cases applicants for primary processing equipment must be able to demonstrate that they are micro-enterprises, seeking to significantly transform their business and that the project can clearly demonstrate it is addressing a high level/strategic need within REG. Following appraisal, a lower grant rate may be offered than that originally applied for should Defra s assessment conclude that your project will not deliver significant transformation of the competitiveness, productivity or environmental efficiency of your business, sector or area in which you are operating. Applications should be for the minimum level of intervention that is required for the project to proceed as proposed and not simply the maximum grant rate available. A lower intervention rate can generate a greater return on public funds and demonstrate the applicant s commitment to the project and indeed make limited public funds reach more businesses across the sector. If you are applying for support for machinery that is self propelled (E.g. a forwarder or self propelled chipper) you must demonstrate that you have undertake the relevant manufacture recommended training before we will pay your grant claim. Please note grant funding is NOT available for the purchase of chainsaws, maintenance and repair of equipment or structures, tree felling equipment or simple replacements. Eligible Primary Processing Equipment Timber processors and harvesting heads for primary processing use (Note 1) Tractor mounted chippers (Note 2) Self propelled chippers (Note 2) Tractor mounted firewood processors (Note 2) Mobile saw bench (Note 3) Tractor mounted forestry grabs/tongs 5

6 Low impact equipment and equipment that addresses difficult terrain (Note 4) Forwarders Forestry trailers (Note 1): the cost of the felling blade and its drive mechanism will be deducted from the preferred quote as RDPE cannot be used to support the costs associated with the actual felling of the tree. (Note 2): you are considering applying for funding on any of these items you will need to provide evidence the size of machine is commensurate with the amount of wood you have available to you and evidence that you have a market for the woodfuel you are intending to produce. (Note 3): If you are considering applying for funding on this item you will need to provide evidence you have a market for the timber you will produce or service you may offer. (Note 4): Examples include items such as Mini-Forwarders or Winch systems. Outputs The REG is a competitive process and those projects offering the greatest return on grant investment will be successful. Delivery of the following will inform the assessment of your application and should be referred to in the Fit with Theme and Outputs section of your Outline application: Increase in Gross Value Added in supported enterprises; Number of enterprises supported; Total volume of investment; Number of enterprises introducing new products or techniques; Number of cooperation initiatives supported; Number of jobs created; Extra tonnage of green wood handled. Application Requirements In addition to the application requirements set out in the main body of the REG handbook, Forestry applications will need to provide information specific to the proposal including: Outline Application: Applicants are required to demonstrate (where appropriate) the following; A summary of anticipated level of improvement performance and business; Profitability and a baseline of where the business is currently operating; A summary of new markets targeting and products; Need for public funding. 6

7 Full Application In addition to the above, the detailed full application will need to provide (where appropriate): A Current Business Plan; Confirmation that you have a current woodland management plan for your woodland in the form of the unique reference number associated with your management plan generated by the Forestry Commision EWGS; Clear evidence of privately sourced match funding for the RDPE investment; Evidence of need/ market demand for the project; Clear case for the need for public investment in the project; Evidence of collaboration; Evidence of environmental improvements; A statement on your project s impact on existing businesses (displacement); Information on the impact of plant health issues on the forestry sector in your area; An accurate estimate of the extra tonnage of green wood handled so that we can assess the likely value of carbon savings from your project. 7