Biomass and Sustainability Standards

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24 November 2009

The introduction of banding in the Renewables Obligation from April 2009 has created huge interest in the biomass power sector. With dedicated biomass generating stations now attracting 1 ROC for every 2/3 of a megawatt hour of electricity produced (and 1 ROC for every ½ MW/h  produced where the plant uses CHP) a large number of developers are seeking to develop generating stations powered by biomass.

There are currently more than ten proposed biomass plants in the course of development with a capacity of over 50MW and the largest of these is proposed at over 300MW. Fuel demand for some of these projects can exceed 2 million tonnes per year and in most cases, the source of fuel will be wood chip. In view of the quantities involved, much of the fuel will need to be sourced outside the UK and therefore developers are needing to tap into foreign markets to ensure that this demand is met.

The importance of the sustainability of biomass has been underlined at both UK and European level in recent times. The Renewables Obligation Order 2009 provides that a biomass generating station will only attract ROCs if prescribed information in relation to the sustainability of the fuel is provided. Currently, the RO does not actually require that fuel to be from sustainable sources in order to attract ROCs, although when the reporting requirements were introduced, the UK Government promised further action if the fuel being used by generators was found to be unsustainable.

The sustainability of biomass has been caught up with concerns about the sustainability of bioliquids and biofuels, in the context of the Renewable Energy Directive, and this has contributed to demands for sustainability criteria to be attached to biomass used for power generation. The European Commission has consulted on a sustainability scheme for biomass and plans to publish a report on the requirements on a sustainability scheme for biomass in December 2009. Early indications at the time of writing are that binding sustainability requirements are unlikely to be introduced at this stage, with Member States instead being 'recommended' to adopt sustainability criteria similar to those for biofuels. This will need to be monitored closely when the report is published.

Whilst developers have been eagerly awaiting the Commission's proposals in terms of sustainability requirements, there have been recent developments at a UK domestic level which have advanced the sustainability debate. In late September the Environment Agency issued an environmental permit in respect of Prenergy's proposed 350MW Port Talbot plant, containing a condition that all wood must be certified to a standard approved by the government's Central Point of Expertise on Timber Procurement. A similar condition was imposed in the plant's planning consent.

For generators, building and operating a biomass power station only works from a financial perspective if the plant meets the criteria for obtaining ROCs. A biomass plant (without CHP) would lose almost two-thirds of its income in any month when it failed to qualify for ROCs.  Many would argue that this is likely to be a sufficient driver for generators to ensure that fuel is obtained from sustainable sources.

By introducing requirements into an environmental permit, a generator is also faced with the threat of committing a criminal offence as a result of breaching the conditions of its permit, which could lead to criminal enforcement action against the company and/or directors of the company, and in a worst case scenario, closure of the plant if the permit is withdrawn. Opponents of the double regulation approach point to the fact that fuel sustainability requirements backed up by criminal penalties are not required for other types of fuels, the sourcing of which can also lead to environmental damage, such as fossil fuels and uranium.

In reality, most, if not all developers are already seeking to develop supply chains which will secure wood from sustainable sources. However, the robustness of those supply chains and the ability to demonstrate sustainability through certification systems are likely to become increasingly important if an obligation for wood fuel to be from sustainable sources is imposed through the Renewables Obligation and also through the environmental permitting regime. It remains to be seen how imposing sustainability requirements through two separate regimes would work in practice and how the two monitoring regimes would interrelate. For developers of biomass generating stations working hard to put in place supply chains, it is hoped that the picture on sustainability will become clearer sooner rather than later.

We are known for our work in the biomass area and has been working with Prenergy and with Helius Energy on these types of issues. Our work helped us secure the award of Infrastructure/Energy Team of the Year at The Lawyer Awards 2009. For further information and to discuss biomass sustainability issues with one of our expert team please contact Ross Fairley on +44 (0)117 902 6351 or ross.fairley@burges-salmon.com, or James Phillips on +44 (0)117 902 7753 or james.philips@burges-salmon.com.

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