Industry Spotlight: Delivering renewable heat – a 2020 vision…
In my previous column, I looked back on the renewable energy targets that were set across the UK in 2009 and looked ahead to consider the likelihood of these being met by 2020.
The biomass heat sector is experiencing low growth at present, primarily due to the collapse in fossil fuel prices and continuing RHI (Renewable Heat Incentive) uncertainty; so until this changes our renewable heat target won’t be met. Arguably, there is an inadequate appreciation of the current situation and its impact on progress to meeting renewable heat targets.
The good news is the biomass heat sector is willing and able to respond to demand and can grow its capacity. But ideally, demand needs to grow at a sustainable pace and in line with realistic targets.
Those of us involved in the sector are looking for some clear policy direction and support. Surely it would be in the interests of government to offer this if they want to deliver anything like the targets set for 2020, let alone anything more after that.
With fossil fuel being so cheap at present, the initial financial carrot (to biomass investment) has been reduced for the time being. Clearly government policy can’t and shouldn’t force up fossil fuel prices (though a strong argument for this approach could be made), but the public sector does buy a massive amount of fossil-sourced heat for its building estate. Maybe it’s time to mandate that a small percentage of this is renewable? The stick rather than the carrot.
There are 32 local authorities in Scotland, each owning many schools, sheltered housing complexes, leisure centres and civic offices. There are also 14 health boards, numerous housing associations (with high rise flats especially), prisons and a range of other public sector buildings (courts, MOD, higher education sector etc). The development of new public buildings under the Hub process also represents renewable heat investment opportunity.
To put some metrics around this, a typical council spends about £3 million a year on heating and owns, say, 100 buildings. If 20 of those buildings were converted to renewable heat over four years by our 32 councils, that becomes 160 installation contracts a year. Add in the rest of the public building estate and the new builds described above, and it is possible to imagine 300 to 400 installs a year are achievable although still representing a very small percentage of the total public sector building estate. Only the ‘low hanging fruit’ would need to be addressed.
A mandated process would mean that biomass heat would contribute an important percentage of the remaining 6,420GWh 2020 target. Without this, demand seems unlikely to pick up ‘naturally’ until fossil fuel prices rise for several consecutive years. In that period, the installation capacity gained in the sector could be permanently lost, so I think there is a need to act now or lose any opportunity to grow the amount of renewable heat in our energy mix.
The methodology for mandating public sector renewable heat targets would need to be developed and structured to ensure that only appropriate and viable projects are developed. At the moment (with current fossil fuel prices and RHI tariffs), a simple biomass heat install will show a 10 to 15 year payback. That has risen from a six to eight year payback three years ago, when fossil fuels were more expensive and RHI rates were higher. Based upon clear financial guidance, the public building estate might well be looked at in terms of any project with a sub-15 year payback, backed with prudential borrowing limits to enable the capital investment.
The long term economic and carbon benefits are especially strong with biomass heat (it creates many more jobs than other forms of renewable investment and saves more carbon), so mandating a target delivers not only on renewable energy policy, but also saves money long term. So the only question remains, why not?
Steve Luker is principal consultant at re:heat, specialists in biomass heat with offices in North East England and Scotland. Before entering consultancy, Steve worked for Scottish Enterprise as a renewables and sustainability consultant. Steve is a recognised expert in bio-energy, advising local and national government, development agencies and the private sector in the UK and overseas on supply chains, energy contracts, tendering and procurement. For further information, please visit www.reheat.uk.com.
Read part one of Steve’s column here