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Column - May 2013

Biomass bandwagon must not be missed

Biomass, which offers the UK a low carbon renewable fuel, should be an important part of the UK’s energy mix. In fact the use of biomass, which is intended to be a lower carbon renewable fuel, could ameliorate our energy problems, especially in the short to medium term as it can be brought on stream faster than nuclear or wind power.

Biomass bandwagonRail, as a low carbon energy efficient mode should have a key role in supplying biomass to the power stations. However currently, the Office of Rail Regulation is proposing to increase rail freight charges on this traffic which could result in investors failing to commit to the market. Biomass is an emerging market and needs Government support if it is to expand and become a viable alternative to coal which is expected to diminish sharply between now and 2020. The Carbon Floor Price (an escalating carbon tax) and Industrial Emissions Directive, which takes effect from 2016, imposes further restrictions as part of the decarbonising the energy sector and few coal-fired sites are expected to extend their working lives much beyond the early 2020’s.

However, the Government needs a joined approach to achieve this aim as biomass can only be part of the UK’s low carbon renewable energy solution as long as it is supported by Government policy across the different departments. Without investment, biomass generation and rail freight will fail. High rail transportation charges now before a market has had time to develop could undermine biomass generation and the health of the rail freight industry. At the moment the ORR proposed increases to freight charges are not aligned with Government work on renewable obligations which could leave a funding gap.

The proposed increased freight access charges for biomass which is under consideration now after a public consultation appears to be inconsistent with the Government biomass energy policy. The Energy Bill, which is currently progressing through Parliament, is designed to permit biomass generation to be treated as renewable and therefore eligible for support  in the form of Renewable Obligation Certificates. Therefore if biomass is supported by the Government, it can be used to replace coal fired power stations; biomass can also substitute coal traffic which currently accounts for around a third of rail traffic. Loss of this potential traffic will have serious impacts across all sectors. This will have knock-on effects on other parts of rail freight, for example locomotive use, maintenance and terminal costs across other commodities which could render other traffic unviable.

This lack of joined up approach to energy policy could have a serious impact on energy supplies and jobs and investment including rail jobs. From a rail side that would mean lost investment in ports, terminals, wagons etc, and worse, biomass would not provide a substitute traffic for coal for rail operators and we would expect job losses and possibly market exits. In order to use biomass considerable investment will be needed to:-

  • Convert power stations
  • Build supply chains involving rail, ports and pellitising plans abroad
  • Provide suitable storage and handling capacity both at ports and power stations
  • Convert rail wagons in Britain.    

We believe that the ORR’s proposals to increase freight charges contravenes the Government’s policy to encourage the conversion of existing coal-fired power stations. At the moment there is  an inconsistent message from Government with its Regulator proposing increased transportation charges which could undermine an important source of energy for the UK. This negative approach towards biomass could also serve to make the UK more dependent on gas with the resulting loss of control over energy and security costs to the economy and society as a whole.

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