BY MARK APPLETON
Biomass energy covers a very wide range of renewable fuels and is an essential part of the worlds transition away from fossil fuels.
In the UK, there are two main areas of use for biomass – these being large volumes of industrial wood pellet being used by Drax for electricity production and relatively smaller volumes of premium wood pellet being used for boilers owned by customer and producing heat. Both are important – Drax centrally increasing the renewable element of UK electricity production alongside wind energy and local biomass boilers giving an excellent alternative to heating oil. These smaller boilers (generally less than 1MW) were supported by the governments Renewable Heat Incentive (RHI) which ran from 2010 to 2019 for new installations, supporting non-domestic boilers for 20 years.
Biomass is recognised around the world as being low carbon because of the short cycle of time from trees growing and absorbing carbon to it being released when burnt in comparison to millions of years for fossil fuel to form and then release carbon in a very short space of time. However, sustainability is critical and biomass used in the UK and under the RHI scheme has very stringent criteria for sustainability, legality and quality as well as maximum CO2e emissions through the supply chain.
The RHI scheme played a critical role in developing the UK market and around 17,000 non-domestic systems were installed with a capacity of circa 4,500MW. This also developed a UK biomass supply chain for the two main types of fuel, which are wood pellet and wood chip.
WHAT IF I HAVE AN RHI BOILER?
For those 17,000 boiler owners, getting the best out of your system and buying your fuel are critical to gaining the highest efficiency and value for money from your system. How you maintain and operate your boiler is central to how efficiently it operates and buying the right quality of fuel at the right price is also critical – cheap fuel doesn’t mean cheap heat, often it’s quite the reverse.
WHY HAVE WOOD PELLET PRICES SPIKED?
Wood pellet prices are not directly connected to fossil fuel but they have been hit by the same factors that have pushed energy prices up because a lot of the supply chain into Europe for wood pellets came from Russia and the Ukraine. Supply was already struggling to keep up with demand, which has gradually increased prices and the war in the Ukraine has created a hole in supply, which will take time to replace.
WHERE WILL PRICES GO NOW?
As always, it’s impossible to say with any certainty. However there are several factors which impact on this and understanding these can help:
- Long-term Supply & Demand: The trend has been for increased demand and this continues. Countries like Germany and now France are supporting small scale biomass and manufacturing capacity isn’t keeping up at the moment.
- Short-term Supply & Demand: In other words, “the weather”. Pellet plants run year-round but the demand is very seasonal so stock builds up in the summer in anticipation. An unusually warm winter can have a big impact on prices in season and vice-versa.
- Raw material prices: The cost of fibre from the UK forest really spiked during covid but is now dropping back and returning to more normal levels.
- Exchange rates: Because much of the UK pellet market is imported from Europe, exchange rates always have a part to play.
- The Industrial pellet market: This article really focusses on the UK premium pellet market to EN+ A1 standard but this is dwarfed in size by the international industrial pellet market and changes here always impact on UK customers eventually.
All of these things have been further impacted by the war in Ukraine so UK premium pellet prices have reached an all time high. However, this has already dropped back due to milder weather and that trend continues into the spring of 2023. Some suppliers may be trying to push contracts at the moment to lock customers in at these high prices. We believe this would be a mistake at the moment and better deals may well be available in the summer of 2023.
HOW CAN AUDITEL HELP?
The Auditel team have renewable energy specialists, who have extensive experience of wood pellet and wood chip procurement and can definitely help you to get the right fuel at the best price. As with other forms of energy, knowing when to lock prices in with a longer-term supply and how best to negotiate with UK suppliers is critical. In addition to this, we can work with you to understand and improve the efficiency of your boiler so you can measure and significantly reduce the actual cost of your heat in p/kWh. Your biomass boiler is an important asset but it is very different to a gas or oil boiler and needs specialist knowledge to get the best out of it.
SHOULD I BUY A BIOMASS BOILER?
Biomass remains an important option alongside heat pumps for heating offices and buildings and can complement solar, which provides the electrical supply. There is currently a £5,000 UK grant available for properties, which are off the gas-grid. This can help with the costs but is a relatively small proportion. We can help you assess your property and advise on the best solution for your specific circumstances if you’re looking at reducing your carbon or heating costs.
The UK government was due to publish its biomass strategy in 2022 but this has been delayed and is now expected in the summer of 2023. Indications are that large scale biomass will be supported if it is combined with Carbon Capture and Storage to make it “carbon negative” and smaller systems will be helped for “difficult to heat” projects where other solutions aren’t appropriate. Heat pumps and hydrogen are emerging as the favoured technologies in the UK but biomass still has an important role to play. The RHI created a really strong market for biomass boilers and other countries across Europe continue to support this technology very extensively as part of their efforts to decarbonise heat. With almost half of the final energy consumed in the UK being to provide heat, de-carbonising it is a huge task and many would argue that biomass must be part of the solution.