About Bioenergy
Bioenergy Market UK
The UK Government’s Department of Energy and Climate Change (DECC) was established in October 2008 and tasked with overseeing a range of ambitious targets for the transition to renewable energy across Britain.
The UK’s overall target is for renewables to contribute to 15% of final energy demand by 2020, from a present level of 2%. The target is further broken down as follows:
- 32% renewable electricity (5% at present)
- 14% renewable heat (0.6% at present)
- 10% transport (2% at present)
Based on current understanding of relative costs and constraints, the key growth areas in the UK’s renewable energy strategy are expected to be wind (on- and off-shore) and biomass. The following sections will cover the market for Heat and Electricity as the two primary applications for biomass.
RES-H
The DECC has identified renewable heat as a particular priority. Heat accounts for over 40% of the UK’s primary energy consumption, yet less than 1% of the heat market is currently sourced from renewable fuels. A study commissioned by the Government and conducted by Ernst & Young in 2007 concluded that biomass has the greatest market and technical potential for renewable heat delivery within the UK (close to 40TWh, both at 11% and 14% renewable heat targets).
The E&Y study estimates the market potential for biomass heat for Commercial and Industrial purposes alone to be between 10TWh and 17.5TWh (1TWh = 1,000,000MWh), which is equivalent to between 1.5% and 2.4% of the current UK total heat requirement.
| Residential Biomass TWh/y | Commercial Biomass TWh/y | Industrial Biomass TWh/y | AD CHP TWh/y | EfW TWh/y | Solar TWh/y | GSHP/ ASHP TWh/y | Total TWh/y | |
|---|---|---|---|---|---|---|---|---|
| ‘Business as usual’ (2020)* | 2.4 | - | .0.0 | 0.2 | 0.4 | 1.2 | 0.11 | 4.31 |
| Current Contribution | 2.4 | - | 1.8 | 0.6 | 0.4 | 0.3 | 0.03 | 5.53 |
| Market Potential (low) | 13.5 | 2.1 | 7.9 | 1.5 | 1.7 | 4.9 | 4.9 | 36.5 |
| Market Potential (low) as a percentage of technical potential (low) | 69% | 35% | 43% | 38% | 11% | 14% | 6% | 20% |
| Market potential (high) | 23.6 | 3.7 | 13.8 | 3.4 | 5.7 | 17.1 | 20.1 | 87.4 |
| Market potential (high) as a percentage of technical potential (low) | 121% | 62% | 76% | 85% | 38% | 19% | 25% | 49% |
| Technical potential (low) | 19.5 | 6.0 | 18.2 | 4.0 | 15.0 | 35.1 | 80.3 | 178.1 |
| Technical potential (high) | 84.1 | 24.9 | 75.5 | 91.0 | 22.8 | 25.1 | 80.3 | 413.7 |
On the back of this study, the DECC has consulted on a range of regulatory measures to help achieve the target of 14% renewable heat by 2020, and has committed to introducing a range of measures in Spring/Summer 2009 covering RHI (renewable heat incentive) and/or RHO (renewable heat obligation).
The current preference appears to be for RHI measures, which would give support to generators of renewable heat at a set price of per MWh thereby providing a predictable income stream which would be paid for by a levy on fossil fuel heat generators.
RES-E
In terms of renewable electricity, the UK Government operates a scheme called Renewable Obligation Certificates (ROCs) which is the main policy instrument used to encourage generation from renewable sources through statutory requirements on electricity suppliers.
In essence, ROCs provide a financial incentive above electricity commodity prices for developing renewable generation. In fulfilment of their obligation, each electricity supplier has to either surrender ROCs or pay a buy-out fee for the total shortfall between renewable energy supplied and the minimum requirement of renewable energy. The buy-out price for 2008/09 is £35.76/MWh with the total sum of buy-out payments in any year being paid back to electricity suppliers in proportion to how many ROCs they have presented in the compliance period. The traded value of ROCs is based on buyers’ and sellers’ views on the value of the buy-out fund in any year. From the 1 April 2009, ROCs will be banded according to the type of renewable energy with positive discrimination towards efficient use of indigenous resources such as biomass.
| Band Support | Technologies | Level of ROCs /MWh |
|---|---|---|
| Established I | Landfill gas | 0.25 |
| Established II | Sewage gas; co-firing of non-energy crop (regular) biomass* *(subject to a 10% cap on the number of co-fired non-energy crop ROCs which can be presented by a supplier in any one year) | 0.5 |
| Reference | Onshore wind; hydro-electric; co-firing of energy crops; energy from waste with combined heat and power; other not specified | 1.0 |
| Post-demonstration | Offshore wind; dedicated regular biomass | 1.5 |
| Emerging technologies | Wave; tidal-stream; advanced conversion technologies (gasification, pyrolysis and anaerobic digestion); dedicated biomass burning energy crops (with or without CHP); dedicated regular biomass with CHP; solar photovoltaics; geothermal | 2.0 |
Source: Reform of the Renewables Obligation, Statutory Consultation on the Renewables Obligation Order 2009, BERR, June 2008
