Biomass role in achieving the Climate Change & Renewables EU policy targets. Demand and Supply dynamics under the perspective of stakeholders . IEE 08 653 SI2. 529 241

Outlook on Market Segments for Biomass Uptake by 2020 in the UK

Calliope Panoutsou; Arthuro Castillo (Imperial College)

December 2011

Acknowledgments: The Biomass Futures team would like to thank Katherine White (Committee on Climate Change Secretariat), Ausilio Bauen (Imperial College), Andrew Lamb (SSE) & Bettina Kretschmer (IEEP) for their support throughout the study and for sharing their valuable knowledge for the country.

Contents Introduction ..................................................................................................................................................... 3

Demand ......................................................................................................................................................... 5

Supply ............................................................................................................................................................ 7

Comparison with Biomass Futures cost/supply curves for 2010 and 2020 ................. 8

Key Factors ................................................................................................................................................ 10

Quantitative assessment of the heat, electricity and CHP sectors in the UK for 2020 . 13

Key influencing factors and potential market volume of the transport sector ............... 15

Quantitative assessment of biofuels for transport in the UK for 2020 .............................. 16

Analysis and Recommendations ....................................................................................................... 18

Annexes ....................................................................................................................................................... 20

Annex I .................................................................................................................................................... 21

Heat; Electricity/ CHP ....................................................................................................................... 21

Transport ............................................................................................................................................... 22

Annex II Cases modelled in the heat, electricity/ CHP sectors ......................................... 24

Annex III Key figures of selected biofuels chains ................................................................... 25

Introduction

This section provides background to the overall renewable energy targets and the most

significant support mechanisms, with emphasis on biomass energy in electricity, heat/cooling

and transport sectors. The aim is to provide an overview of the aims and expectations by

2020 for renewable energy – as expressed by national government, in particular in the

recently submitted National Renewable Energy Action Plan (NREAP).

The UK’s use of renewable energy sources is low in comparison to most other European

Member States. As a proportion of total energy use, the contribution from renewable sources

was 1.5% in 2005 though this had doubled to 3% in 2009. The 2009 Renewable Energy

Directive sets a target for the UK to achieve 15% of its energy consumption from renewable

sources by 2020. Clearly, the challenges to achieve this are considerable, requiring intense

deployment of renewable energy technologies within a period of less than ten years. The UK

NREAP suggests that that the 15% target could be reached by achieving contributions from

renewables in three main sectors as follows:

Around 30% of electricity demand, including 2% from small-scale sources;

12% of heat demand;

10% of transport demand.

The NREAP stresses that the above is the lead scenario; the 15% target from renewable

energy by 2020 could be achieved by different weighting among the three main sectors.

The use of biomass is limited. NREAP figures for total biomass use in electricity, heat and

transport sectors in 2010 are as follows:

305ktoe solid biomass used in the heating sector;

18ktoe biogas used in the heating sector;

861ktoe biodiesel (91% of which imported);

135ktoe bioethanol (83% of which imported);

580MW solid biomass installed electrical capacity, or 5500GWh of generation;

1340MW biogas installed electrical capacity, or 6830GWh of generation.

Despite the relatively low penetration of renewable energy including biomass, the UK

government is committed to rapid growth of the whole range of renewable energy

technologies. Foremost among the technologies is wind energy, both on and offshore. The

latter has particularly high profile. The expected installed capacity is 15GW onshore and

12GW offshore by 2020, out of total renewable energy capacity 38GW.

Figures provided by the NREAP show the relative importance of the targets in all three main

sectors as follows:

30% of electricity demand, equates to 49% of renewable energy;

12% of heat demand, equates to 21% of renewable energy;

10% of transport demand, equates to 30% of renewable energy.

UK policies and measures have, historically, supported the electricity sector. However, in

recent years, measures that support the renewable energy sector have diversified and

multiplied. It is also evident that the strength of these measures (both in terms of obliging

action and monetary rewards) has increased sharply. This does mean that renewable energy

industry development is moved to a different trajectory. Key mechanisms with relevance to

biomass energy are the following:

Renewables Obligation (RO): an obligatory system of tradeable certificates in the

electricity sector. Aim is to increase generation of renewable electricity from a range

of technologies across all scales to 30%. Started in 2002 with support available to

2037.

Feed in Tariffs (FITs): financial incentives for generation of low-carbon electricity

from a range of small scale technologies. Participants include households,

communities and small businesses investing in projects up to 5MW. Introduced in

2010, this will close to new entrants in 2021 (although these new entrants will be

eligible for 20 years support).

Renewable Heat Incentive (RHI): equivalent to feed in tariff but for renewable heat

technologies. Aim is to increase renewable heat generation from a range of

technologies to 12%. Involves individuals, communities and businesses investing in

renewable heat at all scales. Introduced in 2011, with RHI terms typically extending

20 years.

Biogas feasibility study and demonstration projects: grant support to construct new

composting and anaerobic digestion facilities to process food waste. Introduced in

2011.

Woodfuel Implementation Plan: Forestry Commission led plan to deliver a

sustainable biomass industry based on English suppliers of woodfuel – such as chips,

pellets and logs. Aim is an additional two million green tonnes of material per annum

by 2020 from under-managed woodlands. Introduced in 2010.

Energy Crops Scheme (ECS): aims to increase the amount of perennial energy crops

grown in England in appropriate locations for use in heat and electricity generation. It

offers grants to farmers in England for the establishment of energy crops such as

miscanthus and short rotation coppice. Initiated in 2007 and will continue until 2013.

Renewable Transport Fuel Obligation (RTFO); an obligation on transport fuel

suppliers to supply an increasing proportion of renewable road fuel. Initiated in 2008.

Demand This section defines the market segments in the heat, electricity and transport sectors and

characterises them in terms of user type and user needs. These biomass energy market

segments are commonly recognised by government and industry. There may be specifically

targeted support mechanisms and active monitoring via collection of statistical data for these

segments. Using available data and forecasts – for example data published in the NREAP –

this section describes the current status of segments and expected development by 2020.

The table below lists segments, their user types and needs, and relevant support mechanisms. Table 1. Summary of policies that foster bioenergy

Segment User type / needs Support mechanism

Cofiring Operators of large coal power stations require

fuel with specification meeting their

conversion technology needs, usually imported

pellet

Renewables Obligation; banded with

specific level of support for cofiring

(attracts a relatively low level of

support versus most other forms of

renewable power generation)

Electricity – dedicated

biomass

Developers of dedicated power stations fall

into two categories. Larger stations (50-

100MW) built near marine ports that require

secure supplies of imported wood chip.

Smaller sites (5-50MW) sourcing local wood

chip, energy crop or agricultural residue. Some

use of heat possible.

Renewables Obligation; banded with

specific levels of support for:

dedicated biomass; dedicated

biomass using energy crops;

dedicated biomass with CHP.

Electricity – energy

from waste

Developers of dedicated power stations (30-

50MW) requiring biodegradable fraction of

waste from municipal and other sources. Some

use of heat possible.

Renewables Obligation; banded for

energy from waste with CHP (no

support for energy from waste with

electricity-only).

Biogas electricity Landfill gas developers require suitable sites

for landfill gas capture.

Historically supported (in particular

the Non Fossil Fuel Obligation) but

no support measures for any plant

being developed now.

Biogas heat Operators of anaerobic digestion facilities

require sewage sludge or biodegradable

fraction of waste from municipal and other

sources, notably food waste. Require the

possibility to inject biomethane into national

gas grid. It is considered that this gas will be

primarily used for heat, though may also be

used for electricity.

Renewable Heat Incentive; launched

in 2011, banded with specific level

of tariff for biomethane injection and

biogas combustion (landfill gas

excluded).

Biomass heat –

domestic

Stoves and domestic scale boilers. Residents

require a range of fuel types, from local chips

or logs to pellets.

Renewable Heat Incentive; launched

in 2011, intention is to support

domestic sector from 2012.

Biomass heat –

commercial

Boilers in commercial, industrial or public

authority buildings and facilities. Operators

require range of fuel types, from local chips or

logs to pellets.

Renewable Heat Incentive; launched

in 2011, banded including specific

levels of tariff for commercial

installations at different scales.

Biomass heat –

community / district

heat

Local energy centres with district heat

networks providing heat to residential and non-

residential users. Operator of energy centre

requires pellet or wood chip; end users require

reliable, competitively priced heat.

Renewable Heat Incentive; launched

in 2011, intention is to support the

district heat sector from 2012.

Liquid biofuels Suppliers of road fuel require either biodiesel

or bioethanol, much of which is imported to

UK.

Renewable Transport Fuel

Obligation; no distinction made

between different liquid biofuels.

The following tables show the estimated contribution of biomass in 2010 and 2020 in the

heat, transport and electricity sectors. These data are extracted from the recently published

NREAP. There is unfortunately no data disaggregated by the segments described above.

Figure 1 Estimated contribution (ktoe) in 2010 and 2020 by biomass to heat (left) and

liquid biofuels (right)

Figure 2 Estimated contribution in 2010 and 2020 by biomass to electricity (MW and

GWh)

Supply

This section is focussed on the supply of biomass feedstock that supports the market segments

described in the above section. The section provides data on current supply from all major

sources of feedstock, both indigenous and imported. The potential supply by 2020 is

described, using data from NREAP and comparing to the supply curves developed under

Biomass Futures.

Delivering the UK renewable energy target 15% by 2020 will clearly increase the demand for

biomass feedstocks in all the energy sectors. Analysis undertaken for the NREAP suggests

that there could be sufficient biomass resource potential in the UK to meet this demand in

2020, if the supply potential is fully developed. This assessment assumes:

1) rapid increase the production of energy crops in the UK

2) increase wood fuel supply from sustainable forestry

3) better use of agricultural residues

4) full exploitation of waste biomass currently going to landfill.

The NREAP also recognises that biomass, specifically woody biomass, will increasingly

become a globally traded commodity and imported biomass products are likely to continue to

play a role in the UK’s use of bioenergy.

The Forestry Commission’s Woodfuel Strategy for England aims to bring an additional 2

million tonnes of woodfuel to market annually by 2020 – equivalent to 4 TWh (around 2% of

the renewable energy needed to meet our 2020 target) – by improving woodland

management.

Figure 3 Actual biomass supply in 2006 and estimated biomass supply in 2015 and 2020

(ktoe)

There is a theoretical potential for around 700,000 hectares of perennial energy crops (such as

short rotation coppice willow and miscanthus) to be planted by 2020. NREAP suggests that

around 5500ktoe of fuel will be derived from energy crops by 2020 – this is hence foreseen to

be by far the biggest source.

Waste biomass is an under-used resource which could provide a significant contribution to

UK renewable energy targets as well as reducing waste that is land filled. Figures from 2009

estimate that 6 million tonnes of waste wood and 9 million tonnes of waste food are land

filled each year. Despite efforts to minimise this waste, it is clear that a supply of waste food

and wood will exist.

Currently 6 TWh of heat and power is generated from biomass municipal solid waste

collected by Local Authorities, and about 18 TWh from landfill gas. If all the food and wood

waste sent to landfill were used for energy it would generate 42 TWh, or approximately 18%

of the UK renewable energy target.

Total biomass supply from indigenous sources in 2006 was 3000ktoe, the break down for

which is shown in the graph above. In addition to this, around 500ktoe was imported.

According to the NREAP, indigenous supply of biomass is expected to reach 9500ktoe by

2015 and 17000ktoe by 2020. This growth is expected largely from three sectors which are,

in descending order of importance: energy crops; industrial biodegradable waste; sewage

sludge.

Land currently used for short rotation coppice and miscanthus is reported to be 10000ha.

Comparison with Biomass Futures cost/supply curves for 2010 and 2020

The Biomass Futures project within the framework of the Intelligent Energy Europe

Programme has combined modelling efforts and data across leading bioenergy research

institutions (see http://www.biomassfutures.eu/). Amongst other objectives it assessed the

potential supply of biomass for bioenergy across Europe. By collating cost and availability

data, cost/supply curves were generated for each member state. The NREAP forecasts that

domestic supply will reach 17000ktoe.

Figure 4 UK biomass cost (Euro per GJ) and supply (ktoe) for 2010

The cost/supply curve for 2010 suggests availability of domestic biomass totals 13000ktoe

with costs up to around Euro 11 per GJ. As noted above, the NREAP reports that 3000ktoe

biomass was supplied from domestic sources in 2006.

The Biomass Futures cost/supply curve for the RED 2020 scenario (which applies RED

criteria only to liquid biofuel feedstocks for transport) suggests availability of domestic

biomass may reach above 30000ktoe with costs up to around Euro 14 per GJ with 13600ktoe

at costs lower than Euro 6 per GJ. The total figure is reduced slightly in the RED+ when the

criteria are applied to all bioenergy carriers and the respective supply can reach around

27000ktoe- with prices to around Euro 14 per GJ.

The RED+ cost/supply curve indicates that the quantity 12000ktoe should be available at

costs lower than Euro 6 per GJ. Such a price level is close to that which industry at the time

of writing is able to pay – and indeed much higher for small applications such as pellets in

domestic-scale boilers.

Figure 5 UK biomass fuels cost (Euro per GJ) and supply (ktoe) for 2020 for the two

scenarios; RED & RED+

Comparing the latter figure of 12000ktoe available biomass at costs below Euro 6 per GJ it

would seem reasonable that actual supply potential for 2020 is less than one quarter of

current available supplies, given the biomass energy sector is relatively undeveloped in the

UK (as currently stated by NREAP around 3000ktoe). The table below shows major sources of biomass feedstocks and their cost points, in 2010 and 2020.

Table 2 Key biomass feedstocks under the UK cost / supply curves

2010

2020

Biomass feedstock Cost point

€/GJ

Contribution

ktoe

Cost point

€/GJ

Contribution

Ktoe

sludges / wet manures 0.5 957 0.6 893

post consumer wood 0.8 1539 1.0 1621

dry manure 1.9 1550 2.9 917

perennial grassy crops not significant 2.9 2446

municipal solid waste no data 2.9 1981

paper and card 6.3 2142 7.7 10215

additional roundwood 8.8 1405 11.1 1277

current roundwood 11.0 1744 13.8 1585

Key Factors

This section provides analysis of key influencing factors on market segments. Key factors

within three categories – technical, economic and organisational – were extensively

described in Biomass Futures Report D2.2 and were used to analyse the EU27 bioenergy

market segments and described in Biomass Futures Report D2.3. This section uses the same

influencing factors and the same methodology at the national level.

The matrix below lists key factors and market segments in columns and rows respectively.

Scores are assigned based on whether the factor is a driver, barrier or neutral, as follows: 3

very strong driver; 2 strong driver; 1 weak driver; 0 neutral; -1 weak barrier; -2 strong barrier;

-3 very strong barrier; na not applicable.

Summary percentage scores by each of the categories – technical, economic and

organisational – are shown below. Percentage scores are based on the maximum attainable

score, making an allowance for factors that are not applicable to any particular segment.

Finally, the results are described graphically showing overall total percentage score.

Influencing Factors and Market Segments – Summary Percentage Scores

Table 3. Summary scores for influencing factors by heat & electricity segment

Figure 6 Influencing Factors and Market Segments – Total Percentage Score

The segment that scores highest on all categories of factor is biogas – electricity. This

segment comprises landfill gas and sewage gas industries. Landfill gas was the first

renewable energy market to develop in the UK. It developed rapidly during the late 1980s

and early 1990s. The sector is now fully mature and there are no opportunities for additional

capacity. There are now strong incentives and measures in place to drive the waste industry to

reduce, recycle and use for energy. Landfill gas is explicitly excluded from recently

established support mechanisms, such as the RHI. Existing landfill gas sites are delivering

less renewable energy year on year (as methane production drops). There are considered to be

opportunities to better exploit sewage gas.

Cofiring is scored favourably, particularly with regards technical and economic factors. The

solution is now widely proven. It is an attractive investment, due to emissions trading and

support via RO – albeit the latter was reduced in recent years when banding was introduced

to the RO. However, the concept suffers from low public acceptance, being viewed by some

as a means of supporting the coal industry and with doubtful carbon savings. Also, support of

Cofiring

Electricity -

dedicated

biomass

Electricity -

energy from

waste Biogas electricity

Biomass heat -

domestic

Biomass heat -

commercial

Biomass heat -

community /

district heat Biogas heat

Technical Score % 52% 29% 10% 73% 14% 43% 5% 14%

Economic Score % 33% 25% 25% 71% 17% 21% 25% 25%

Organisational Score % 33% 12% 9% 55% 61% 61% 30% 15%

Total Score % 37% 20% 14% 61% 33% 42% 21% 17%

0%

10%

20%

30%

40%

50%

60%

70%

this segment does not develop advanced low carbon industry or technology with wide

application for the future. Policy makers are wary and have put in place mechanisms (caps

etc) to avoid cofiring expanding too greatly. Most UK coal power stations co-fire biomass,

although at lower percentages now than some years ago when RO support was financially

more rewarding.

Electricity – dedicated biomass shows mixed scores. The business case for dedicated biomass

is reasonably strong, due mainly to RO support and emissions trading. The technology is

proven, particularly in Scandinavia. The indigenous supply of wood or agriculture residue

fuels is rather limited in the UK and fuel supply chains have emerged in recent years but are

still immature and may always remain rather localised. Larger plants require imported fuel,

which is a challenge to obtain with secure long term price stable contracts. Notwithstanding,

several large power plants are being developed and several may be granted planning

permission in the near future. There are also many facilities being planned at smaller scale,

from 5MW to 50MW. Those at the smaller end are likely to be combined heat and power

sites, with heat supplied to local residents and commercial / industrial users. Large power

plants may also supply some heat locally but these are fundamentally power generation sites

and their contribution to renewable heat will be limited.

Electricity – energy from waste is a segment that could show considerable growth in coming

years, although from very low levels. As noted above, there is considerable focus on reducing

waste being disposed in landfill. An important factor has been introduction of landfill tax,

which is being steadily increased year on year. While the role of energy from waste is low in

the “waste hierarchy”, being below reduction and recycling, there are nonetheless many

opportunities. There are a considerable number of sites coming forward through the planning

system.

There are three solid biomass heat segments. The biomass heat market was practically non-

existent some ten years ago. It showed steady growth over the last ten years - in parts of the

UK with a history of solid fuel heating (coal mining areas), in certain local authorities with

individual “champions”, and in particularly attractive niches (large country houses with own

fuel supplies). These segments are all poised for rapid growth over coming years, with the

introduction of the RHI. This is a feed in tariff for heat, and is arguably the first measure of

its kind in the world. Commercial premises show the most promise, partly because these are

larger single investments and owners will also gain green credentials. Domestic sites and

district heat may be provided a further boost from RHI modifications expected in 2012.

The most recent segment to emerge is biogas – heat. There is considerable interest in

injecting biomethane into the national natural gas grid. The gas then becomes

indistinguishable and is used for heating or cooking by households or by industry or

commerce. Biogas could be produced from sewage sludge and food waste, with agricultural

and industry wastes also contributing. The technology is largely proven and the RHI provides

a financial incentive. According to the NREAP, total biomass contribution to heat sector is

expected to reach around 3500ktoe by 2020 of which biogas is expected to contribute around

10%.

Quantitative assessment of the heat, electricity and CHP sectors in the UK for 2020 Based on the selection of sub segments that are promising for biomass applications in the

2020 timeframe, a quantitative assessment has been undertaken by evaluating the most

promising applications in each sub- segment in the following two scenarios:

a reference scenario based on the initial market segment selection from the Biomass

Futures qualitative assessment and the figures stated in the British NREAP, and

a RED based scenario based on results from the Biomass Futures qualitative

assessment and the cost supply curves estimated within the project for the UK in the

timeframe of 2020 (section 3.2).

a RED plus scenario based on results from the Biomass Futures qualitative assessment

and the cost supply curves estimated within the project for the UK in the timeframe of

2020, extending the sustainability criteria to all feedstocks.

Reference RED RED+

Supply NREAP Biomass Futures supply

with RED criteria on

liquid biofuels related

feedstocks only

Biomass Futures supply

with RED criteria on all

feedstocks

Demand Biomass Futures/

NREAP

Biomass Futures Biomass Futures

Technical potential Based on feedstock and plant scales (e.g. straw is not considered for small scale

heat/ domestic, etc.)

Economic Potential strictly limited for applications where the cost of producing 1KWh heat/ electricity

is ≤ to the respective selling price in the country (accounting for subsidies and

FITs)

Table 4 Scenario assumptions

Heat (TWh) Electricity (TWh)

Feedstock type

Biomass heat - domestic

Biomass heat - commercial Cofiring

Biogas electricity

Wood direct from forestry 1.69 2.33 0.82

Wood byproduct from industry 2.59 3.57 1.26

Crops direct from agriculture 15.23 20.98 7.40

Agriculture byproducts / residues 1.31 1.80 0.63

MSW (biodegradable fraction) and landfill gas 10.95

Industrial waste (biodegradable fraction) 18.78

Sewage sludge 9.20

Totals per segment 20.82 28.68 10.12 38.94

Total heat & electricity 98.56

Table 5 Reference scenario (based on national figures from NREAP)

This scenario uses the biomass potentials estimations that are projected by the British REAP

and performs economic modelling for a set of promising applications per segment. The

economic modelling allows an analysis of which market segments are potentially the most

profitable under the current policy and price level conditions, and based on the economic

parameters and assumptions in Annex II.

Heat (TWh) Electricity (TWh)

Feedstock type

Biomass heat - domestic

Biomass heat - commercial Cofiring

Biogas electricity

Post consumer wood 9,48 13,06 4,61

Landscape care wood 5,07 6,98 2,46

Perennial grassy 6,83 14,77 5,21

Straw 3,11 4,29 1,51

Sawmill by-products (excl saw dust) 2010 2,48 3,41 1,20

Other industrial wood residues 2010 1,44 1,98 0,70

Primary Forestry Residues 4,52 6,23 6,28

Common sludges 15,07

Animal waste 10,79

MSW (landfil) 14,54 Totals per segment 32,94 50,74 21,99 40,39

Total heat & electricity 146,06

Table 6 RED scenario (based on sustainable biomass supply curves from Biomass Futures project)

This scenario uses the sustainable supply curves based on RED criteria for biofuels only

estimated in this project and performs economic modelling for a set of promising applications

per segment.

Heat (TWh) Electricity (TWh)

Feedstock type

Biomass heat - domestic

Biomass heat - commercial Cofiring

Biogas electricity

Post consumer wood 4,53 6,24 2,20

Landscape care wood 1,37 1,89 0,67

Perennial grassy 7,14 9,84 3,47

Straw 0,00 1,21 0,43

Sawmill by-products (excl saw dust) 2010 1,18 1,63 0,58

Other industrial wood residues 2010 0,69 0,95 0,33

Primary Forestry Residues 1,32 1,82 1,83

Common sludges 3,63

Animal waste 2,60

MSW (landfil) 7,33 Totals per segment 16,23 23,57 9,51 13,56

Total heat & electricity 62,87

Table 7 RED+ scenario (based on sustainable biomass supply curves from Biomass Futures project)

All data presented in the tables are aligned with the modelling and scenario work within the

Biomass Futures project.

Key influencing factors and potential market volume of the transport sector

Using the same methodology as explained above, the most promising transport market

segments have been identified and are presented below. The assessment of their potential

according to categories of influencing factors is shown below.

Table 8. Summary scores for influencing factors by transport segment

Figure 7 Overall percentage scores by segment

The use of biofuels in private vehicles (buses, cars, motorbikes) is considered an attractive

option. Biodiesel and bioethanol behave almost identically to conventional diesel and petrol

respectively at low concentrations of up to around 5%. Motor manufacturers warrant their

vehicles to run on the fuel at low concentrations. Biofuels can therefore be sold as low blends

to the public in the current fuel market, without any changes in fuel infrastructure, vehicle

technology or customer fuel price. Indeed, this is now underway in UK, with all fuel

suppliers gradually increasing the amount of biofuels, and without the general public being

impacted or indeed aware. By 2013 all diesel and petrol sold in the UK will contain a

Road bus

private

Public/ private

fleet

Road cars

private

Road

Motorcycle

private

Aviation Rail Marine

Technical 76% 67% 71% 48% 62% 24% 24%

Economic 58% 17% 58% 33% -33% -11% -20%

Organisational 83% 11% 44% 67% 72% 39% 33%

Total Score % 75% 35% 59% 51% 35% 18% 15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

minimum of 5 per cent biodiesel and bioethanol respectively, as required by the

RenewableTransport Fuel Obligation.

Higher blends of bioethanol (85% blend, or E85) are available at only a very limited number

of forecourts (only some 20 Morrisons supermarkets in UK). 100% biodiesel is available at a

few specialist retailers in UK. This remains a specialist niche market in the UK.

Public and privately owned fleets (cars or buses) may be able to use higher blends. There are

a few examples in the UK. However, this requires high capital investment both in vehicles

and fuelling infrastructure. Also, the ongoing costs are high relative to fleets using

conventional fossil fuels. Most organisations would consider other environmental actions to

be more financially rewarding and therefore more attractive.

Aviation, is considered a promising application; however high costs prevent its rapid

adoption by the air companies.

Marine and rail may ultimately offer promising options but at present these three market

segments score low across all categories of factor.

Quantitative assessment of biofuels for transport in the UK for 2020

The British NREAP projects that the biofuel market will comprise of 2462 ktoe biodiesel

from which only 222 will be indigenously produced & 1743 ktoe bioethanol (from which

indigenous supply is estimated at 296 ktoe). Imports have the major share in the NREAP,

accounting for almost 88% of the total supply.

As presented in the qualitative assessment road is expected to be the major market segment

for biofuels in the 2020 timeframe, with private vehicles having the major share. Aviation is

also considered a promising option, despite the high costs.

In order to proceed to the quantitative assessment, the three scenarios have been framed by

the following assumptions:

Reference RED RED+

Supply NREAP Biomass Futures supply

with RED criteria on

liquid biofuels related

feedstocks only

Biomass Futures supply

with RED criteria on all

feedstocks

Demand Biomass Futures/

NREAP

Biomass Futures Biomass Futures

Technical potential Based on feedstock and plant scales (e.g. straw is not considered for small scale

heat/ domestic, etc.)

Economic Potential Strictly limited for applications where the cost of producing1lt of biofuel is ≤ to the

respective prices for oil in the country.

Table 9. Scenario assumptions for the use of indigenous biofuels in transport in the UK

Three different cases for the interpretation of the above mentioned scenarios have been

considered, taking into consideration the present biofuel market conditions and the projected

trends for UK; i) the combination of biodiesel and bioethanol in the total fuel mix, as

projected by NREAP ii) the use of only biodiesel, and iii) the use of only bioethanol.

As indicated in the qualitative assessment the major share of indigenously produced biofuels

consumption is expected from road transport private fleets, accounting for 518 ktoe in the

NREAP/ reference scenario; for 1243 ktoe in the RED and 955 ktoe in the RED+.

From the above figures it is clear that the NREAP reference scenario for the indigenous

biofuel production would cost approximately 622 million € and result in CO2 savings in the

range of 850 thousand tonnes/ year. Assuming that the total amount would be first generation

biofuels (from oilseeds- sunflower, rapeseed, cereals) if their production was indigenous this

would require almost a million ha of cultivated land.

The RED scenario, based on the Biomass Futures estimations for sustainable indigenous

supply, can only reach up to 1243 ktoe for the 2020 timeframe. The fuel mix would be a) first

generation biodiesel from oilseeds & used oils as well as bioethanol from cereals and b) 2G bioethanol is taken into account (in the analysis it is assumed that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in the UK). The respective figures for land requirements are one million ha while

the cost rises up to 1.6 billion € and the CO2 savings are in the range of 2.1 million tonnes/

year.

The most interesting results for indigenous biofuel production derive from the RED+

scenario. Based on the cost supply analysis, indigenous first generation biodiesel will only be

produced by used oils (256 ktoe) while no indigenous first generation bioethanol production

could occur as the respective supply chains cannot meet the high mitigation targets (of above

70%). The 2G bioethanol production is estimated at 699 ktoe assuming that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in the UK. The respective figures for cost rises up to 1.2 billion € and the

CO2 savings are in the range of 1.6 million tonnes/ year.

Table 10. Impacts from the use of indigenous biofuels in transport in the UK under the various scenarios

Scenario for year 2020

Biofuel (ktoe)

Investment required

(million €)

Land required (million

ha)

CO2 (million

tCO2/m2)

Bio

fue

ls

mix

Reference 518 622 1.0 0.85 RED 1243 1592 2.6 2.1 RED+

955 1209 1.8 1.6

10

0 %

b

iod

iese

l Reference 222 214 0.3 0.3 RED 291 280 0.1 0.5 RED+

256 247 0 0.4

10

0%

b

ioe

tha

no

l Reference 296 408 0.76 0.5

RED 952 1312 2.4 1.6

RED+ 699 963 1.8 1.2

Analysis and Recommendations

This section provides an analysis of the market segments, taking into consideration current

status, predicted growth, available feedstock, the role of influencing factors and hurdles to

development. The aim is to assess whether or not government expectations – as stated in the

NREAP – are realistic. This section provides recommendations for policy makers and

industry.

Supply

The UK NREAP cost/supply curve for 2010 suggests availability of domestic biomass

totals 13000ktoe with costs up to around Euro 11 per GJ. As noted above, the NREAP

reports that 3000ktoe biomass was supplied from domestic sources in 2006.

The Biomass Futures cost/supply curve for the RED 2020 scenario (which applies RED

criteria only to liquid biofuel feedstocks for transport) suggests availability of domestic

biomass may reach above 30000ktoe with costs up to around Euro 14 per GJ with

13600ktoe at costs lower than Euro 6 per GJ. The total figure is reduced slightly in the

RED+ when the criteria are applied to all bioenergy carriers and the respective supply can

reach around 27000ktoe- with prices to around Euro 14 per GJ.

The RED+ cost/supply curve indicates that the quantity 12000ktoe should be available at

costs lower than Euro 6 per GJ. Such a price level is close to that which industry at the

time of writing is able to pay – and indeed much higher for small applications such as

pellets in domestic-scale boilers.

The increased use of sewage sludge for energy production seems to be also rather high,

given that this is a fairly mature industry.

The figures for biodegradable waste that is still landfilled are striking. Clearly there is

potential resource here. However, businesses, local authorities and residents are all

making considerable efforts to reduce and recycle. This material will become increasingly

scarce, and that may happen quicker than forecast.

Heat & Electricity

The Biomass Futures analysis estimates that an additional of 23- 62 TWh bioelectricity can be generated by 2020 with cofiring presenting a substantial increase.

Regarding bioheat, the analysis presented in this report forecasts that an additional of 40- 84 TWh can be generated by 2020 with district heating (incl CHP) and heat for households & buildings being the market segments with the higher shares.

Co-firing is expected to increase significantly after 2013 (due to ETS).

Biofuels

The British NREAP projects that the biofuel market will comprise of 2462 ktoe biodiesel

from which only 222 will be indigenously produced & 1743 ktoe bioethanol (from which

indigenous supply is estimated at 296 ktoe). Imports have the major share in the NREAP,

accounting for almost 88% of the total supply.

In the biofuels for transport sector, the major shares of consumption are expected from

the road fleets The RED scenario, based on the Biomass Futures estimations for

sustainable indigenous supply, can only reach up to 1243 ktoe for the 2020 timeframe.

The fuel mix would be a) first generation biodiesel from oilseeds & used oils as well as

bioethanol from cereals and b) 2G bioethanol is taken into account (in the analysis it is

assumed that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in the UK). The respective figures for

land requirements are one million ha while the cost rises up to 1.6 billion € and the CO2

savings are in the range of 2.1 million tonnes/ year.

The most interesting results for indigenous biofuel production derive from the RED+

scenario. Based on the cost supply analysis, indigenous first generation biodiesel will

only be produced by used oils (256 ktoe) while no indigenous first generation bioethanol

production could occur as the respective supply chains cannot meet the high mitigation

targets (of above 70%). The 2G bioethanol production is estimated at 699 ktoe assuming that one third of the indigenous biomass supply for straw & perennial grassy crops will be used for ethanol production in the UK. The respective figures for

cost rises up to 1.2 billion € and the CO2 savings are in the range of 1.6 million tonnes/

year.

Annexes

Annex I

Heat; Electricity/ CHP

Cofiring

Electricity -

dedicated

biomass

Electricity -

energy from

waste

Biogas

electricity

Biomass heat -

domestic

Biomass heat -

commercial

Biomass heat -

community /

district heat Biogas heat

Technical

Proven, reliable technology 3 3 3 3 3 3 2 1

Technology / energy demand match 2 2 2 2 -1 2 1 3

Demand proximity 2 2 1 2 3 3 -1 3

Fuel supply logistics 1 -2 -2 2 -1 -1 -1 -3

Fuel quality 1 -1 -2 na -1 -1 -1 -2

Space requirement 1 1 0 na -2 0 -2 -1

Conversion efficiency 1 2 0 2 2 3 3 2

SUBTOTAL 11 7 2 11 3 9 1 3

Economic

Capital cost 2 -1 -1 3 -1 -1 -3 -3

Operation and maintenance cost 1 1 -1 2 -1 -1 -1 -1

Fuel cost versus fossil fuel 0 1 2 3 2 3 2 2

Heat sales revenue na 2 na na 3 3 3 3

Electricity sales revenue 1 3 2 3 na na 3 na

Capital grants 0 1 1 0 0 0 0 2

Emissions trading incentives 1 3 2 3 3 3 2 3

Access to capital / cost of capital 2 2 3 3 -1 -1 2 2

Eligibility for favourable loans na na na na na na na na

Other adminstrative costs 1 -1 -2 0 -1 -1 -2 -2

SUBTOTAL 8 11 6 17 4 5 6 6

Organisational

Potential for carbon displacement 2 3 2 3 3 3 3 3

Employment creation -1 2 2 0 3 3 3 2

Social acceptability -2 2 -1 3 3 3 2 2

Educational policy instruments 0 2 0 3 2 2 1 1

Amenity issues 0 0 -2 0 2 2 1 1

Organisational capacity 3 2 1 3 2 2 -1 1

Fuel infrastructure availability 3 1 0 -3 2 2 1 -1

Security of fuel supply 1 -1 2 0 2 2 1 -1

Fuel price stability 1 -1 2 3 2 2 1 -1

Regulatory frameworks 2 -1 -1 3 0 0 0 -1

Admistrative issues 2 2 -2 3 -1 -1 -2 -1

SUBTOTAL 11 11 3 18 20 20 10 5

GRAND TOTAL 30 29 11 46 27 34 17 14

Transport

Road bus private

Public/ private fleet

Road cars private

Road Motorcycle private

Aviation Rail Marine

Technical

Reliable technology 3 3 3 1 2 2 2

Biofuel content in mass market

3 1 3 1 3 1 1

GHG savings from full chain

3 3 3 3 3 2 2

Extensive refuelling infrastructure requirements

2 2 2 2 -1 -1 -1

Safety and standardization

3 3 3 3 3 3 3

Ensure compatibility of new engines in higher blends

3 3 2 1 2 -2 -2

Labelling -1 -1 -1 -1 1 0 0

SUBTOTAL 16 14 15 10 13 5 5

Economic

Financing new technology

1 -1 1 -1 -3 -2 -1

Capital costs 2 1 2 2 -3 -2 -1

Variable subsidies and grants

na na na na 0 0 2

Oil and gas price increases

3 3 3 3 3 3 na

Operating and maintenance costs

na na na na 0 1 -1

Access to loans-cost of capital

1 -1 1 0 -3 -2 -2

SUBTOTAL 7 2 7 4 -6 -2 -3

Organisational

Variable reliability of incentives

2 2 2 3 2 2 2

Lack of joined-up Government policy across different ministries

3 1 2 3 3 2 1

Security of feedstock supply

3 2 2 2 3 2 2

Good organizational capability

2 -1 0 2 1 0 0

Administrative issues and planning

2 0 2 2 2 -1 0

Challenge of balancing short-term interests and environmental agenda

3 -2 0 0 2 2 1

SUBTOTAL 15 2 8 12 13 7 6

GRAND TOTAL 38 18 30 26 20 10 8

Annex II Cases modelled in the heat, electricity/ CHP sectors

CASES MODELLED

HEAT Rural households stoves/ boilers Scale (in kW) 10; 30 Conversion efficiency (in %) 80

Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings)

Fossil Fuel Alternative Heating oil; Capex 650 €2010/kW Opex (excluding feedstock costs) 21 €2010/kW Rural services boilers Scale (in kW) 50; 200 Conversion efficiency (in %) 80

Biomass Fuel woody biomass (saw mill by products/ incl residues); agro residues (fruit tree prunings)

Fossil Fuel Alternative Heating oil; Capex 650 €2010/kW Opex (excluding feedstock costs) 21 €2010/kW ELECTRICITY/ CHP Solid biomass > 1MW ≤ 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,300- 2,700 €2010/kW Opex (excluding feedstock costs) 21 €2010/kW Biogas > 1MW ≤ 5MW Scale (in MW) 1; 5 Conversion efficiency to electricity (in %) 30 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex 770 €2010/kW Opex (excluding feedstock costs) 50 €2010/kW Solid biomass > 5MW Scale (in kW) 10; 30;50 Conversion efficiency to electricity (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite; Oil; Capex 2,100- 2,500 €2010/kW Opex (excluding feedstock costs) 21 €2010/kW Biogas > 5MW Scale (in kW) 10; 30; 50 Conversion efficiency to electricity (in %) 35 Biomass Fuel Sludges; MSW (landfill) Fossil Fuel Alternative Lignite; Oil; Capex 770 €2010/kW Opex (excluding feedstock costs) 50 €2010/kW Utilities power generation/ cofiring Scale (in kW) 10; 30; 50 Conversion efficiency (in %) 35 Biomass Fuel woody biomass; straw; energy crops Fossil Fuel Alternative Lignite Capex 300 €2010/kW Opex (excluding feedstock costs) 40 €2010/kW

S

25

Annex III Key figures of selected biofuels chains

Biofuel Feedstock LHV

1

(MJ/kg)

Density

(kg/l)

Biofuel

Costs at filling

station (€ 2002/ GJ)2

CO2 Savings with

respect to fossil fuels

emissions3

Average

Biofuel Yield

(t/ha)4

Land requirements

for the production of 1

tonne biofuel (ha)16

2005 2020 t CO2eq/m3 % 2005 2020 2005 2020

1st g

ener

atio

n

Biodiesel Rapeseed

385 0.8816 23 21.66 1.2 44% 0.78 0.85 1.28 1.18

Sunflower 1.5 57% 0.68 0.80 1.47 1.25

Bioethanol

Sugar beets 2716 0.7916

35.5 26.87 1.6 70% 3.95 4.94 0.25 0.2 Wheat

32.9 27 1.1 48% 1.1 1.3 0.9 0.77

Maize 1.5 66% 2.63 2.85 0.38 0.35

2nd

gen

erat

ion

Lignocellulosic Ethanol SRC 2716

0.7916

40.6 24.78 2.2 94% 2.6

9 4.4 0.38 0.23

1 Lower Heating Value – Energy Content 2 Source: Varela et al., 2005 3 Source: EU, 2009 4 Source: Panoutsou, et al., 2008 5 Source: BFIN, 2009 6 Reduction of 7% because although process costs will be reduced about 20%, feedstocks are expected to increase by 15% 7 Reduction of 25% is due to process & feedstock costs reductions of 5% & 17% respectively BUT mainly due to incresed efficiencies by 25% 8 Reduction of 40% is due to process & feedstock costs reductions of 24% & 15% respectively BUT mainly due to incresed efficiencies by 40% 9 For 10t/ha of SRC in 2005 and 12 t/ha in 2020