Biomass Supply Chains in South Hampshire

Transcription

1 Biomass Supply Chains in South Hampshire 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. 1.2 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

2 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 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.

3 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 midscale 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.

4 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

5 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 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

6 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

7 new developments where share-holders 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. 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

8 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