UK Biomass Heat: Ready for Takeoff?

The United Kingdom biomass heat sector is experiencing turbulent times, due to a near-perfect storm of market factors, subsidy review and fallout from dramatic growth in the industry since the introduction of the Renewable Heat Incentive in November.
By Neil Harrison | September 17, 2015

The United Kingdom biomass heat sector is experiencing turbulent times, thanks to a near-perfect storm of market factors, subsidy review and the fallout from dramatic growth in the industry since the introduction of the Renewable Heat Incentive in November 2011.  The industry is now experiencing an equally dramatic slowdown, with significant numbers of redundancies and a marked drop in business confidence, despite biomass having barely scratched the surface of the U.K.’s multibillion-pound annual heat market and our 2020 renewable heat targets still looking well out of reach.

The impact that currently low global oil prices are having on biomass market growth will be well-understood by readers wherever they are on the planet, but when taken with the conditions prevailing in the domestic U.K. market, the biomass heat industry could well be facing an existential threat.

Since its introduction, the RHI has helped the U.K. biomass heat industry deliver some 13,000 commercial and 10,000 domestic projects, and biomass boilers have far outstripped all the other technologies that have been eligible for support under this tariff-based scheme, with pellet systems dominating within the overall product mix. 

Whilst this is good news for a government with legally binding renewable energy targets to meet, the rapid deployment of biomass boilers has meant triggers to trim back the levels of support have been regularly exceeded, with permanent reductions in payment levels the result.  In fact, the rate of deployment has been so great that the support available for “small biomass” schemes (less than 200 kilowatts, or 680,000 Btu) has dropped by 48 percent in the past nine months.  Taken with the drops seen in heating oil and propane prices over the same period, the economic case to switch to biomass heating has been dramatically undermined.

However, of most concern to the industry is the shift in U.K. policy, since the advent of a wholly conservative government in May 2015.  We all know that current low oil prices will rebound close to previous levels in the short- or medium-term, which will help the competitiveness of biomass, but since securing a majority in the general election, the U.K. renewable energy industry has suffered shock after shock at the hands of a government, which increasingly appears opposed to the concept of generating energy from renewables.

By any measure, a staggering array of negative steps has been taken in a very short time by the U.K. government, toward curbing the deployment of renewable energy technologies, often accompanied by rhetoric around “reducing energy bills for hard working families and businesses.”  These steps range from proposing budget caps on support for anaerobic digestion and solar PV (meaning a reduction in support of as much as 87 percent for this particular technology), abandoning the decade-long plan to implement the Zero Carbon Homes policy in 2016, to taxing green electricity at the same level as that produced from fossil fuels and removing the guaranteed level of RO subsidy for biomass power stations.

So what does this mean for wood pellet producers and the biomass heat industry?  Well, there’s been some good news from the biomass-to-electricity market over the summer, with Drax announcing its third coal-to-pellet boiler conversion will be completed imminently, but the general direction of travel observed in renewables policy has most realistic observers expressing serious concerns about the outlook for biomass heat. Only when the next government comprehensive spending review is unveiled at the end of November will the future of the industry become clear. But one thing is certain: Treating biomass heat the same way other renewable energy technologies with status and far-better established supply chains have been lately means the U.K. runs a serious risk of pushing this still-fledgling industry off a cliff, well before it’s ready to spread its wings and take flight.


Author: Neil Harrison
Board Member, Wood Heat Association
neil@reheat.uk.com
44 (0) 7917-632-171