A new European Energy Union25th September 2015
Renewable incentives under review25th September 2015
Sustainable biomass supply solutions are our business. In the current economic climate, Irish business cannot afford to ignore the high cost of energy. Many are exposed to the volatile nature of traditional oil-based fossil fuel prices. However, unlike oil or gas, biomass is carbon neutral and Coillte is playing a key leadership role in the supply of sustainable biomass energy solutions to Irish industry and business. Coillte provides long-term, secure biomass-fuel supply contracts to its clients and assists in the evaluation of both the technical and commercial viability of projects for large-scale energy users.
The Government White Paper on Energy Policy set a target of 12% of thermal energy to come from renewable energy sources by 2020. However, the renewable heat sector remains largely undeveloped, having grown slowly to 5.7% (2013) mainly as a result of wood waste utilization in the timber processing sector. Based on our current heat from renewable energy sources (RES-H) trajectory, Ireland’s 2020 target will not be achieved (Figure 1) and we face significant EU fines. SEAI has estimated the cost to Ireland may be up to €150 million for each percentage point Ireland falls short of the overall combined RES target of 16%.
Under the EU Tracking Roadmap prepared for the European Commission in 2014, it was noted that Ireland had no programs for the development of certain technologies such as biomass or high efficiency CHP. One of the recommendations from that report was to introduce a reliable RES-H strategy with appropriate support schemes. It stated that Ireland was deploying less biomass than planned and that previous support programs had expired. In response, the Department of Communications, Energy and Natural Resources (DCENR) published a draft Bioenergy Plan in October 2014 whereby they acknowledged a gap in meeting our 2020 RES-H target of up to 200ktoe and announced the intention to introduce a Renewable Heat Incentive (RHI) in 2016.
Renewable Heat Incentive
This demand-led incentive should provide the much needed catalyst to stimulate new investment in the bioenergy sector. Investor confidence is critical to shift investments towards renewable technologies and any renewable heat policy should aim to accelerate market growth by removing the economic barriers currently preventing major capital projects from proceeding. While the announcement of a RHI is welcome, an unintended consequence is that it has impacted investor confidence and created market uncertainty in the short term. Any party considering a renewable heat investment has deferred the project until further clarity is given on the RHI qualifying criteria and the proposed tariff banding.
Lead times for many of these large scale projects are of the order of 10 to 20 months to allow for feasibility, capital approval, planning permission, environmental permits and the project design, construction and commissioning phases. The market uncertainty created may now result in many of these new installations not beginning to avail of a RHI until the period 2017/18 thereby limiting the potential uptake to 2020 thus increasing our exposure to EU fines. SEAI estimate that the shortfall could be in the region of 2 to 4% points of the 12% RES-H target without the introduction of a support mechanism.
Coillte are of the opinion that the shortfall will be closer to the higher end of this scale even with the introduction of a RHI scheme for the reasons stated and the fact that the resources required to design and administer the scheme have yet to be put in place.
The first of three consultations to frame the design of the RHI was launched by DCENR in July 2015 . This ambitious fast track approach is intended to conclude with a State Aid submission in early 2016. It is imperative that a heat incentive is introduced in 2016 and the Government should attempt to engage early with the European Commission as there are already precedents for similar schemes operating in Europe. It is anticipated that additional resources; technical, financial and administrative; will be required to design and administer the scheme and these would need to be put in place immediately to facilitate the intended launch in 2016. One thing that is very clear, irrespective of the support mechanism introduced, Ireland will not achieve its 2020 RES-H target.
Developing the bio-energy sector
The introduction of a targeted focussed RHI aimed at the industrial heat sector will stimulate further demand for wood fibre resulting in the increased mobilisation of the private sector timber resource and further investment in the biomass supply chain. Its introduction is critical to the sustainable development of the sector beyond 2020. There are many additional social benefits which are outlined in the Irish Bioenergy Association’s socio-economic study, in SEAI’s bioenergy roadmap and also restated in DCENR’s draft bioenergy plan. One of the more important benefits is the value to both the agriculture and forest industries. There are many private forest plantations now approaching thinning stage. Many farmers have invested also in energy crops, and in some cases are left with no local market for the harvested crop. It can be expected that the growth of a renewable heat sector would stimulate regional demand for forest thinning’s, energy crops and other sources of biomass. Optimising our indigenous biomass use in large scale highly efficient boilers and matching local supply with local demand will support the creation of new jobs in our rural economy. The bio-energy sector stimulates rural development and local job creation through the many jobs required in the processing and logistics of wood chip and in the design, installation and maintenance of the boiler technology. In summary, a RHI would deliver the following benefits;
• Reducing Ireland’s reliance on fossil fuel imports, reducing our greenhouse gas emissions and improving domestic fuel security;
• Improving and strengthening the competitiveness of Irish industry by minimising carbon taxes, reducing fuel costs and protecting against fossil fuel price volatility;
• Stimulating rural development and local job creation in the biomass supply chain;
• Providing a viable outlet for our growing private timber resource and a channel to market for growers of short rotation energy crops;
• Reducing the level of EU fines for not achieving our 2020 renewables target;
• Stimulate a new, vibrant, indigenous industry and enhance the attractiveness of Irish industry.
Coillte biomass supply model
Coillte is already at the forefront of developing the bio-energy sector. Coillte now underpins the future sustainable energy supply of a range of customers through its regional biomass-supply hubs. Our long-term biomass supply contracts displace several thousand litres of imported fossil-fuel per week by providing more competitive energy costs for the businesses concerned. Through our regional hubs, biomass is supplied to our clients in the pharmaceutical, textile, industrial and hotel sectors on a euro per gigajoule (€/GJ) delivered basis. Coillte is committed to a strategy that matches renewable energy requirements with local biomass supply. Small diameter pulp logs are sourced from both state and p
rivate sector sources within the region and delivered to our local supply hubs on a pre-planned basis several months in advance. Logs are systematically stacked for open-air drying to the required moisture contents specific to each customer’s boiler requirements. Through our investment in the supply chain and the establishment of a regional biomass processing hub network we are providing the security of supply necessary and therefore confidence for large scale energy users to make the capital investment required. We expect more of these projects to progress when the RHI is eventually introduced.
For more information contact
Des O’Toole, Business Development Manager, Biomass, Coillte
Unit 3.1, Woodford Business Park, Santry, Dublin 17, Ireland
T: 00 353 86 230 1234