Richard Burrell, CEO, AMP Clean Energy
With the UK’s sights set firmly on the green recovery, decarbonising heat, which accounts for more than a third of annual UK emissions, is crucial to meeting our net zero targets. Over the last few months the Government has launched a number of support schemes for low carbon heat along with an announcement that a new bioenergy strategy will be developed by 2022.
However, our first-hand experience in helping businesses switch from fossil fuels to low carbon alternatives, tells us there is a huge risk of disappointment.
Firstly, there is a major emphasis on hydrogen and Carbon Capture and Storage in support schemes for industry, technologies seen to be key to meeting net zero, but unlikely to be deployed at scale for at least a decade. There is also a strong focus on electrification, either through direct heating or through the installation of heat pumps, but this is simply not an option for most industrial processes – or in hard to heat homes and businesses which need a more concentrated heat load.
For example, the £315m Industrial Energy Transformation Fund, which is designed to help manufacturers switch away from fossil fuels, will fund all of the above, but only support the use of biomass in niche applications or where sites are moving away from solid fuels.
Secondly, the majority of support schemes launched to date provide grants to reduce the level of up front spend, but don’t recognise the higher ongoing costs from moving away from fossil fuels to cleaner alternatives.
With gas prices at a 20-year low, any low carbon alternative has a high bar to beat when it comes to businesses’ decisions on their future heating sources. All the more so with the highest industrial power prices in Europe! Even if we take a generous assessment of the performance of heat pumps, these would still cost a quarter more to run than a gas boiler operating at 90% efficiency. While business decisions are not purely dictated by financial considerations, a 25% increase in any overhead is a big ask, particularly in the current business climate.
Finally, it is also important to recognise that there will be no support of any kind for non-manufacturing businesses at the end of the Non-Domestic RHI, other than a flat rate payment of £4,000 through the Clean Heat Grant. This a significant gap in policy, with no apparent future revenue support scheme in place which incentivises leisure facilities, hotels, and larger offices to switch to a low carbon fuel source.
So, what could we do differently? Our message is simple: keep biomass as part of the mix and recognise the ongoing costs of low carbon fuels – both biomass and heat pumps – through a new decarbonisation CfD or alternative revenue based support scheme.
If we want to make an impact on heat decarbonisation during the next ten to fifteen years, we should embrace biomass as one of the key drivers of short-term change, and ensure its use is encouraged in all support schemes. Installations typically have a 20-year life, meaning they would be decommissioned before 2050, and could either be fitted with CCS during their lifespan or replaced with CCS or hydrogen at the end of it. Any change in fuel would obviously allow their feedstock to go to the priority areas identified by the Committee on Climate Change, such as aviation fuel. As such, short term investment in biomass for heat needn’t be at odds with the long-term vision for net zero; indeed, it can help build the pathway.
Likewise, government should accelerate the development and implementation of its proposed industrial decarbonisation CfD, aiming to have this in place by April 2022, and allow biomass projects to compete with other options which can deliver now, such as electrification and demand reduction. That would ensure that the necessary infrastructure is in place when CCUS is ready to bid, and establish useful benchmarks around cost. This new intervention could also be widened from its intended target of industrial and manufacturing sites to cover the commercial sector, and air quality standards and sustainability of feedstocks could be controlled as part of the eligibility criteria.
Lastly, we should be doing everything we can to promote greater production of sustainable biomass at home and abroad. The UK has a target to plant 30,000 hectares of new trees every year until 2025, reflecting the significant scope to increase tree planting and energy crops.
These steps would not only deliver meaningful carbon reduction in meaningful timescales, but they would stimulate investment in green recovery projects; supporting and creating jobs in the supply chain. They would also sustain and grow the infrastructure required to deliver bioenergy with carbon capture and storage (BECCS). With the potential to add value in both the short and longer term, now is the time to empower biomass to accelerate our net zero heat ambitions.
This week I visited two large scale biomass facilities which are either under construction or have just been completed. Both these facilities will provide low carbon heat and power from biomass to the food manufacturing sectors. These very large developments are creating jobs during the COVID crisis and will provide decarbonised heat and power to the maltings sector and for UK-grown tomatoes and peppers. Both will contribute to our net zero ambitions and a green recovery, but the lack of support for these types of projects from March 2022 leaves massive questions about future business investment in clean heat.