Nigel recently delivered the keynote speech to the 4th United States Industrial Pellet Association (USIPA) Conference. Also attending the conference were two of the largest local employers, Drax and Eggborough Power stations.
Full text below:
“I am delighted to have been invited back to give the keynote at this years USIPA Conference.
The wood pellet industry has made steady progress with exports of sustainable biomass from USIPA members increasing and global demand developing.
This can only be good news, not just for this emerging industry, but also for the global environment as we see coal begin to be replaced for the much lower carbon sustainable fuel you are producing.
As pointed out by the Minister, using forest residues as raw materials together with substantial planting programmes of new trees, means that US Forests are now being managed even more effectively than ever.
We are all aware that this progression has continued in the face of increasingly vocal campaigning from a number of well funded, well meaning NGOs who tend to focus on the most extreme scenarios, scenarios that simply don’t exist in the world in which you operate.
Demonstrations before the UN Climate Change Summit in New York last week showed a clear desire amongst NGOs for a reduction in the use of fossil fuels, particularly coal. Consequently any substitution of coal for a low carbon fuel must be in the interests of all – and please note my emphasis on the words low carbon fuel.
I think it is worth remembering the benefits of such substitution.
For example, each Drax unit converted to biomass reduces carbon emissions by over 3 million tonnes per year.
As we are all only too well aware, this industry is required to comply with rigorous sustainability criteria and rightly so.. and I believe that it is now indisputable that the use of sustainable biomass as a replacement for coal provides the lowest cost solution for the provision of flexible, dispatchable and fully controllable renewable generation.
As mentioned by the Minister, The Department of Energy and Climate Change – DECC – believes that by 2020, 10% of all UK demand could be met from bioenergy and it recognises that ‘fully reliable non-intermittent bioenergy will contribute to UK’s energy security’.
I am aware that DECC has a genuine vision for bioenergy. They see the development of a robust and enduring biomass supply chain as key to the development of 2nd and 3rd generation biofuels from all forms of biomass with market mechanisms pulling through investment in line with prioritised uses of biomass.
The European Union has also recognised the importance of biomass. In the latest Staff Working Document (from late July this year) entitled –wait for it: “The State of play on the sustainability of solid and gaseous biomass used for electricity, heating and cooling in the EU” – They state that;
‘When sustainably produced and used efficiently, biomass can lead to significant greenhouse gas savings compared to fossil fuels’.
The paper goes on to mention the effectiveness and low cost benefits realised through co-firing of biomass with coal and in the complete conversion of coal plants to biomass.
If you look at what DECC and the EU are saying, then extending the life of our old coal plants, makes complete sense, albeit within specific budgetary constraints,
This approach will help facilitate the transition to higher efficiency biomass fed units possibly with Carbon Capture and Storage; creating the prospect of a negative carbon cycle using the residues or non-commercial components of the forest products industry.
Consequently, I can confidently say that biomass has an important role to play in the renewable energy mix as we go forward.
Whilst this should provide you with a positive vision of a long term future for this industry extending beyond just the heat and power generation markets.. I do have some caveats; and indeed some targeted warnings that the industry must align expectations particularly around the potential market size for wood pellets, the speed of progress towards this and importantly the obligation to meet certain regulations – specifically sustainability,
However I feel I should refer to the policy developments mentioned by the Minister….Keen observers of the UK energy market and DECC, will have heard the use of a wide range of acronyms; targets to be met; budgetary restrictions and policy mechanisms –
early FIDs, enduring CFDs, the Levy Control Framework – LCF – , EU State Aid clearance, Electricity Market Reform – EMR, various consultation processes and subsequent decisions regarding sustainability, the Biomass Emissions and Counterfactual model – BEAC – the capacity market and related payments.. the list goes on.
To try and simplify all of this and importantly for you; and the growth of this industry; biomass is recognised as the lowest cost, dispatchable, flexible and controllable form of renewable energy;.. it is also, as mentioned by the Minister, an important component of DECC’s realisation of mandatory 2020 carbon reduction targets.
So from the policy perspective, the biomass industry continues to have a great deal going for it.
Also according to recent research, UK public support for biomass is rising, over 63% strongly support or support its use (up from 60% in Feb) and only 7% of people strongly oppose or oppose its use.
As you have heard, UK policy support and the support structures for biomass remain steadfast. Whilst some generators prefer or may have preferred support under one regime rather than another, the RO and the CFD support regimes are still in place.
Nevertheless, I know from talking to some delegates here last night, some of you may have been alarmed by recent budgetary announcements from DECC.
In reality – and remember the UK is in the run up to an election – this simply reflects a prudent approach to budget management, (DECC having already committed to spent well over 50% of what is available);
You should remember that the UK has already made a firm commitment to 2Gigawatts of conversion (under both the RO and CFD mechanisms) and the RO for conversion is staying open through to the end of March 2017.
In the UK, DECC’s focus is on achieving its 15% of energy from renewables target for 2020, and of course on keeping the lights on… No government is likely to remain in power if the lights start going out.
DECC is aware that conversion of plants from coal to biomass is the best solution on affordability and reliability grounds, but they are also aware that such projects take very large ‘chunks’ out of their available budget, and there remains the desire for a balanced portfolio of renewable generation…
Some of you are aware that I requested an urgent meeting with the Prime Minister to discuss the future for Eggborough, which is in my constituency, following the recent CFD announcements and I can tell you: that he supports the expansion of sustainable biomass generation, which he knows is reliable and cost effective and he also knows biomass will help us meet our renewables targets.
So the bottom line is – there is continued support for biomass as a renewable fuel – – in fact biomass is doing quite well amongst political leaders and regulators – but let me be clear.. no renewable technology did well out of the recent funding settlement and I am certain there was no intention to penalise biomass.
I can’t emphasise enough – biomass is the only renewable power source we currently have, which can provide both flexible and baseload power in the UK, it’s an important part of our generation mix and in my opinion, it is a tragedy that so much of the UK’s support for renewables has been spent on technologies which are far less reliable and ultimately more expensive.
We now also know the technology of converting coal power stations to biomass actually works. Not very long ago, no one could be sure that was true and even the most optimistic, predicted significant reductions in efficiency and output. Drax’s first conversion, which has been running for well over a year now, proves efficiency and output are not significantly impacted and that conversion is reliable. However, I feel I must add that every converting station is unique and consequently the route to successful conversion of individual plants is substantially different – conversion cannot be considered an ‘established’ technology.
I do also feel that I should add some realism about the overall size of the market. In the UK the biomass power generation market is close to being as large as it will get, given the budgetary constraints DECC has to work under. Drax is committed to three units and is looking at the possibility of converting a fourth, Lynemouth and Drax are awaiting EU state aid clearance, and we await news from other stations..
Looking at all stations likely to convert; DECC’s maximum target for biomass conversion of around 3.4GWe will be reached.
I don’t know about the demand in the rest of Europe, but whilst I know that there are some positive noises coming from The Netherlands, Belgium and Scandinavia; and that the heat market is growing at pace, overall progress is being made against a backdrop of significant concerns over the global availability of sustainable fibre and significant budgetary constraints regarding support for renewables across the EU.
As a result, I do get slightly concerned when I see reports of a global industrial biomass pellet demand reaching 50 million metric tonnes by around 2024. I wonder whether it is more as a result of an industry which is by nature optimistic; and whether we are in danger of getting slightly carried away.
I am also concerned that the mention of what, to the uninformed; would appear to be a very large increase in demand for forest fibre; soundbite headlines are being offered on a plate to the critics.
The rapid growth phase for industrial pellet use by generators in the UK and Europe is likely coming to an end and we would be wrong to extrapolate future growth projections in this sector from past experience.
This is a policy driven industry and I see no signs of new generation policy coming from the UK or the EU which will stimulate much further growth from that which we can already see.
I accept that there is increasing demand from South East Asia and Japan, but on the European side; the coal to biomass conversions you already know about are likely to be pretty much it… – the heat market will most certainly increase in size; but there are no million tonne per year individual drivers in this market – at least not yet.
However, by nature I’m a.. positive sort of chap; and I don’t want to put a downer on proceedings, let me be more upbeat and bring this address to a close by focusing on what I believe is needed for the current first generation technology use; and what will be required to create the foundations for continued prosperity.
From what I hear the demands are quite simple:
• You must prove and continue to prove that you are sourcing your fibre from sustainable sources.
• You must ensure that a clear and transparent audit trail is created for all your fibre – and that it is available to the required external scrutiny.
• You should continue to improve the quality of your product and processes – your pellets, their durability, heat content and chemical characteristics and reduce the energy required in the production process.
• It may also be wise to develop a product which is and can be interchangeable between the heat and power sectors – at least the industrial and commercial heat and power sectors.
• And finally you must ensure that your supply chain is both resilient and reliable with a reducing carbon footprint.
If you meet these demands I believe that you may feel confident for the realisation of DECC’s second and third generation vision and a long term future.
However, as a British politician it’s not really for me to tell you how to organise your industry; or maybe not even what messages you need to focus on; but I can give you a glimpse of how the industry is perceived in the UK.
From where I stand, the US forest industry continues to look fragmented and the pellet industry too isolated… This is a problem because the only messages we hear about US forestry in the UK, are about how biomass, and therefore US forestry in general, is not sustainable. There is constant media coverage of this.
Over the last year, USIPA in particular has done much to counter this perception. Seth and his team have spent considerable time and effort meeting Politicians, policy makers and interest groups in the UK and Europe.
This time and effort spent over the past year by sector experts, US trade representatives and your own politicians all co-ordinated by USIPA have been extremely beneficial and has no doubt been crucial to the progress made over the year – Seth.. you and your team and all those involved; deserve recognition and I salute your efforts on behalf of this industry
However, this conference must be aware, the attacks will keep coming;
Today it’s biomass pellets which are being criticised on the basis that large scale production might cause a local carbon debt; however, similar arguments could, perhaps equally wrongly, be readily applied to other forest product activities.
It might be a convenient soundbite for academics to report that a single tree, or a single hectare, will take years to re-grow but you need to get the message across that none of you deal in single trees or single hectares.
We all know that the managed forests from which fibre is taken are in a constant state of growth and re-growth and therefore; at scale sequester more carbon year-on-year not less, because it is in everybody’s interest to manage them in that way.
If the critics ever manage to persuade policy makers that improving the management of forests is actually contributing to climate change then it is not just the pellet industry which will lose; but everyone engaged in forestry.
We need to be clear and to press this message home – sustainably managed forests do not lead to higher accumulations of carbon in the atmosphere whatever the fibre involved is ultimately used for.
The real threat is that sustainable forests become uneconomic; and are put to other uses or that we remain wholly dependent on fossil fuels for dispatchable power.
It may be that other industries which are not presently in the firing line – or perhaps they are no longer in it – may be taking comfort from the fact it is the pellet industry, not them, which is currently attracting criticism from NGOs. They might do well to realise that the very concept that sustainable forestry is good for the carbon balance is just as important to them.
Demand for wood products keeps forests as forests; that means US forests are growing, they contain a third more carbon now, than in 1990.
We need to speak with one voice and be clear that sustainable forests form part of the solution to climate change: not part of the problem.
In conclusion, Ladies and gentlemen, I hope that I have set the scene appropriately for this year’s conference – this is a great industry with truly long term prospects and an industry, which, if done correctly, can only be good for the renewables sector and the environment.
It is an honour to have been asked to provide this keynote address and I hope that you all make good use of this great conference; and I very much look forward to meeting up with many of you over the next few days – and thank you once again.”