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Consultation on UK biomass rail charge ends

By Anna Simet | April 01, 2013

The United Kingdom Office of Rail Regulation’s month-long consultation period on implementing a freight-specific biomass charge has ended, and the Rail Freight Group is urging the ORR not to proceed with proposals to increase charges paid for the transport of biomass by rail.

The RFG said the proposed charge of at £4.04 ($6.15) per 1,000 gross metric tons per mile (kgtm), could undermine the case for biomass generation in the country, and that the proposed date for increased charges—April 2014—is too late to be included in the support mechanisms being developed by government to encourage renewable generation. That risks leaving a funding gap for electricity generators and the rail supply chain, according to RFG.

The February biomass freight charge proposal came with a similar freight-specific charge for coal, spent nuclear fuel and iron ire.  It suggests setting the cap on biomass traffic at £4.04 kgtm, the same as coal is set at, as the the ratio of train kilometers to gross metric ton kilometers for biomass is very similar to that for coal.

Currently, Network Rail freight operators pay £55 million in charges a year, or less than 1 percent of the network’s revenue, according to the ORR. Most infrastructure associated with rail freight is paid by for by U.K. governments, and new track access charges would recover costs associated with some rail freight market segments.

The ORR launched a periodic review (http://www.rail-reg.gov.uk/pr13/PDF/biomass-consultation-feb-2013.pdf) to address two main issues associated with implementing a biomass freight charge: the impact on competition with road transport, and the effect on the electricity generation market. Initial consultation indicated that even with an additional charge of £5 kgtm for a number of existing and potential biomass flows by rail, from port to large existing power stations, road transport remains more expensive, and would still be so with much higher charges.

The ORR noted that, with a freight-specific charge levied, the associated increase in dispatch cost per MW-hour may be higher than that for coal, because biomass has a lower calorific value than coal. Biomass, however, is less dense than coal, and ORR consultant NERA estimated that increased cost would be offset by an increase in electricity prices associated with the introduction of a freight specific charge for coal, which is also subject to an additional charge to purchase a carbon permit. NERA also argued that the potential variable cost of biomass generation may be less than zero when the Renewable’s Obligation subsidy is taken into account, meaning there are very substantial differences in the variable costs (net of ROC subsidy) of coal and biomass, in the absence of a freight-specific charge.

The freight-specific charge for biomass would be phased in from April 2016, using the same profile for all market segments to which the charge applies.

 

 

 

 

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