Biomass Energy

Nigel Adams Excerpts

Wednesday 24th February 2016 Westminster Hall

[Nigel Adams (Selby and Ainsty) (Con)]

I beg to move,

That this House has considered biomass as a source of renewable energy.

It is a pleasure to serve under your chairmanship, Mr Crausby. I am delighted to have secured this important and timely debate. I am also thrilled that, at this early hour, lots of colleagues from across parties and borders have come to participate.

It has been less than a year since the Conservative party secured a clear mandate from the British people to govern. One of the core commitments that we made in the run-up to the general election, which we repeat regularly, is that it is important to keep energy bills as low as possible for consumers and to promote competition in the energy market. Indeed, those same themes featured in the speech given by my right hon. Friend the Secretary of State for Energy and Climate Change to the Institute of Civil Engineers in November. It was referred to as the “reset” speech because it set out the Government’s direction of travel on energy policy over the coming years.

The two themes of affordability and competition are at the core of today’s debate. Like many of us, I am fully committed to ensuring that my constituents have an energy grid that is secure, reliable and affordable. The question, of course, is how we go about achieving that. Last week NERA, an independent economic research consultancy, and Imperial College London published a significant and insightful piece of research that considered the very issues we are discussing. The research was commissioned by Drax, which, as many Members will realise by now—if they do not, they have not been listening very hard for the past six years—operates a power station in my constituency. I grew up looking at the cooling towers. Drax power station generates between 8% and 14% of the UK’s electricity and, perhaps surprisingly, it is the UK’s single largest source of renewable energy thanks to its gradual conversion away from coal to sustainable biomass generation.

The report revealed that around £2 billion-worth of savings could be passed on to the consumer if the Government allowed biomass to compete in future renewable auctions. That £2 billion would equate to an average saving on each and every household bill throughout the land of between £73 and £84. That saving, which I believe any reasonable person—energy expert or otherwise —would argue is significant, stems from the fact that on a whole-system cost basis, biomass is without doubt the cheapest form of renewable energy available to us today. The concept of whole-system cost is important. It has attracted a lot of interest and discussion in recent months and, on that basis, merits further consideration today.

Much of current Government policy is skewed towards assessing the affordability of different technologies based on what is known as the levelised cost, a narrow metric that only captures the cost of an energy project from construction through its lifetime. However, as the NERA report highlights, a number of globalised costs sit outside the umbrella of levelised costs and are not currently captured by Government policy. I think I can fairly describe them as hidden costs. They are associated with more and more intermittent renewable technologies, such as wind and solar, coming on to the grid, and are ultimately passed on to our energy bills. For example, when the wind stops blowing and the sun stops shining, which it tends to do on these islands, the energy generated by wind and solar drops significantly. That forces the hand of National Grid, the system operator, to pay a back-up generator—usually gas—to switch on and generate power to fill the void. Clearly that action comes with an associated cost.

Because intermittent renewables are unreliable, they require much larger amounts of back-up than traditional coal or nuclear power stations, which have far greater control over how much electricity they generate and when. Again, that comes with an associated cost. The failure to capture those costs when evaluating the price tags of different renewables is doubly disadvantageous. On the one hand, intermittent technologies benefit by looking cheaper on paper than they really are; on the other hand, technologies that are more flexible and reliable and have higher availability are handicapped by not being able to demonstrate the financial benefits and value they bring to the system. That is unquestionably the very definition of a perverse outcome.

If the associated costs, which are great, were added up properly and allocated proportionately to the technologies that generate them, the NERA-Imperial report shows that one renewable technology emerges as considerably more affordable than any other: biomass generation. I should say that I shall focus my comments largely on power generation. I understand that colleagues may wish to discuss the heat side of biomass, which is just as important, but if they will forgive me, I will confine my remarks to the generation side.

The report shows that if a renewable auction was held later this year and the Government allowed biomass to compete with other renewables on a level playing field, it could deliver a strike price that was between £8 and £13 per megawatt-hour cheaper than onshore wind, and £43 per megawatt-hour cheaper than offshore wind. Why is biomass so much cheaper than other technologies when the hidden system costs are taken into consideration? One of the principal reasons is that biomass energy is a flexible source of generation, which can ramp up or down the levels of electricity it produces at short notice in response to the demands of the energy grid. Having that flexibility in place, on the scale that a full power station provides, is hugely important. In fact, the more flexibility we have in the system in the coming decades, the lower will be the costs we incur as more and more intermittent renewables come on to the grid.

The Committee on Climate Change, an independent and well-respected voice on energy issues, stated in its recent report on the future of the UK power sector:

“Flexibility can help to meet the challenges of integrating low-carbon technologies. Flexibility can provide low-carbon sources of system reserve and response to minimise the need for partloaded unabated gas plant, with associated emissions savings. Flexible systems also allow renewables and nuclear output to better match demand by shifting demand…supply…or both”.

In the UK, only one other technology can provide the same level and scale of flexibility as biomass, and that is gas generation. However, as its usage has demonstrated over recent years, biomass has a far lower carbon footprint than gas on a life-cycle basis. Furthermore, as many colleagues will be aware, because of low commodity prices the market conditions are currently sufficiently challenging that the economics of building new gas-fired power stations from scratch does not stack up. There has been a dearth of new plants coming forward.

That brings me to the second reason why biomass is so much cheaper on a whole-system costs basis. Unlike many of the options touted as the solutions to our energy future—such as new nuclear, new gas, new wind and new solar—biomass generation re-uses the infrastructure we already have in place by converting and upgrading power stations to use compressed wood pellets instead of coal. Some colleagues present are old enough to remember the Central Electricity Generating Board building coal power stations, which are scattered all around the country—or rather, at least some of them are left. I vividly remember Drax B being built; in fact, members of my family were involved in its construction. Using such assets, which the taxpayer has already paid for, negates the need to build expensive new transmission lines or spend money to make existing transmission infrastructure more resilient.

All that is particularly pertinent given the fact that we are going through a volatile period when coal power stations are closing across the country. Eggborough in my constituency announced its intention to consult on closure, and Ferrybridge, just across the border, is going. In recent months, Fiddlers Ferry and Rugeley announced their intention to close or, at best, to operate on a very limited basis. I am delighted that my hon. Friend the Member for Cannock Chase (Amanda Milling) is here, as she represents Rugeley and is very concerned about the future of that plant and its workforce.

Such closures are terrible news for the communities in those areas and for the UK’s energy security. Since the beginning of this year, 2.5 GW of coal closures have been announced on top of the 4.9 GW announced last year, so a significant amount of power is coming off the grid. Those closures are creating genuine concerns about security of supply, and in recent months have forced National Grid to rely on expensive emergency measures to manage the grid and keep our lights on—the most recent event was in November. I am sure colleagues will be in equal measure surprised and concerned to hear that Drax is the last power station in the UK, and the only station between Yorkshire and Iceland, that can provide a black-start service, which is effectively a kick-start to the grid in the event of a blackout.

If the Government are committed to taking coal off the grid by 2025, as they have indicated, the quickest and most affordable way to do so is to enable more coal power stations to convert to biomass. That is not only the quickest and cheapest way to decarbonise our power sector, but a means of keeping existing stations on the grid, thereby ensuring that the communities that have enjoyed the social and economic benefits from those power stations for many years can continue to do so. There is a clear and compelling case, based on the analysis by NERA and Imperial College, for the Government to look hard at whole-system costs when considering which technologies to back or to allow to bid. I understand that the Department commissioned Frontier Economics to do work on that topic, which is very welcome, and that the Minister committed to publishing the results of that report in the first half of this year. That is unquestionably a step in the right direction and I thank her for it, but will she assure hon. Members that her Department will utilise the body of research on whole-system costs to inform Government policy?

The Secretary of State said clearly in her reset speech in November that,

“we also want intermittent generators to be responsible for the pressures they add to the system when the wind does not blow or the sun does not shine. Only when different technologies face their full costs can we achieve a more competitive market”—

hear, hear. Does the Minister agree that this issue can be sensibly addressed through the policy options outlined in the NERA-Imperial report? It states that we should introduce either an administrative solution that handicaps renewable technologies in future contracts for difference auctions based on their systems cost, or a market-based solution that allows renewables to bid into the capacity market and CfD auctions, thereby exposing them to market prices that better reflect their true system costs.

Will the Minister allow biomass to compete in upcoming CfD auctions, either on a level playing field—which seems perfectly reasonable—or on the terms I just described? Alternatively, for the sake of simplicity and expediency, will she work with the existing CfD pot structure that she inherited from the coalition? The CfD auctions are designed around three pots: one for established technologies such as onshore wind, one for less-established, higher-risk technologies such as offshore wind, and one for biomass. Why do the Government not simply transfer a portion of the funding allocated to pot 2 to the dedicated biomass pot in this autumn’s CfD auction? The Department could do that very simply without any significant regulatory or legislative changes. It would complement, rather than undermine, the Government’s strategy for supporting offshore wind by producing the system benefits that I described, which would benefit all generators in the system. That solution would also mean that fewer power stations have to join what one industry analyst recently referred to as

“the Strategic Balancing Reserve dole queue”—

an absurd situation in which renewables are rewarded for forcing coal off the grid, while National Grid has to pay through the nose for an SBR contract to ensure that coal power stations remain available as a contingency option.

As I said earlier, up to £2.2 billion-worth of savings could be passed on to the consumer by allowing just 500 MW of further biomass conversion—effectively one unit. The greater flexibility that biomass provides to the system will make it cheaper to integrate other intermittent renewables, such as wind and solar, into the grid, if that is the Government’s strategy.

[David Mowat (Warrington South) (Con)]

My hon. Friend is making a very important speech about biomass and the fact that it is the only dispatchable renewable. Will the Minister address the fact that the Government removed all subsidies from biomass stations unless they are 100% biomass? Fiddlers Ferry on my patch was keen to combine coal and biomass in the same unit, but there is no subsidy for that. Is there not a risk that the Government are making the perfect the enemy of the good?

[Nigel Adams]

My hon. Friend makes a very sensible point. Many of the stations that generate from biomass—certainly Drax, two of whose units now generate solely from biomass—have used coal firing as a way of learning about the technology. That is a perfectly sensible thing for a power station to want to do. I, for one, would like to see support in that area, so that is a particularly good point.

Converting stations to biomass is the quickest, most affordable way to get coal off the system and achieve what the Department says it wants to achieve. In less than three years, Drax has become the largest decarbonisation project in Europe; previously, it was called the dirtiest power station in Europe. It generates 12% of our renewable energy. I am delighted that the company has managed to protect the 850 or so jobs that are currently based in the power station, although colleagues may have read a Telegraph article this week that appears to imply that half of the station is under threat. I hope the Minister and her Department noticed that, because such threats are not normally hollow.

The company re-skilled its employees in the use of that exciting new renewable fuel in the place of coal, and invested hundreds of millions of pounds in a supply chain that includes new import facilities, four of our ports and 200 new rail wagons, which I had the pleasure of launching at the National Railway Museum. Those rail wagons, which hon. Members will have seen adorning and adding to the beauty of the north and east Yorkshire countryside, were purchased from Britain’s last independent rail wagon manufacturer, WH Davis. It really does add value to the UK economy. The Chancellor often refers to the northern powerhouse. The UK biomass industry is unquestionably the power behind the northern powerhouse, and it will continue to power it for many years to come.

These issues are at the core of a number of concepts that I hold dear as a Conservative: competition, security and fairness. The clock is ticking, so the Government must take meaningful and decisive action. They have committed to holding three CfD auctions between now and 2020, the first of which is due at the end of the year. For the reasons I have outlined, if the Government allow biomass to compete in those auctions on a level playing field with other technologies, they could save taxpayers billions of pounds and make the UK energy grid more secure in the process. To continue with the status quo would be inconsistent with my party’s oft-repeated commitment to securing the country’s renewable future at the least cost to consumers. I urge the Minister and the Government to think carefully about this issue.

[Mr David Crausby (in the Chair)]

Four Members have indicated that they wish to speak. I intend to call the Front-Bench spokespeople at around 10.30 am, so if Members can keep their contributions to around 10 minutes, I would much appreciate it.

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[Nigel Adams]

Ainsty.

[Albert Owen]

Ainsley?

[Nigel Adams]

Ainsty.

[Albert Owen]

Will the hon. Gentleman say that again?

[Nigel Adams]

Ainsty.

[Albert Owen]

He has it three times on the record—that’s important.

Along with the hon. Gentleman, I share a constituency interest in biomass and a general interest in energy. It is important to have the debate at this time, because we need to get a proper energy mix back on the agenda. We need that balanced agenda and I disagreed with the hon. Gentleman’s opening remarks when he talked about intermittent wind, because we need wind as part of the mix.

We have had this debate before, but we need to have periods when we have to switch some of our generation off. Although I hope for a long, hot summer with no wind, which many of us want for the tourism industry and everything else, one of the best ways to do things is to have wind as an intermittent back-up system, because it is cheaper to switch wind generation off than it is to switch off gas, biomass or nuclear-powered power stations. We need to start talking, and to build a consensus on a balance of energy sources for the country. We had such a consensus in the 1990s and right through until recently.

I worry about that, and the Minister knows my views, because I genuinely want to achieve the Government’s goal of an affordable, secure and low-carbon energy economy. To achieve it we need the broadest suite of energy sources. Biomass has huge potential to be part of that mix, and that is what I will talk about. There has been uncertainty with solar and uncertainty created on onshore wind, which damages not only energy production but the supply chain in the country. We need a forthright debate on the long term, yes, but we still need long-term policies for the renewables sector.

I am by choice pro-nuclear, pro-renewables and pro energy efficiency. I see no contradiction in that, because we need the three of them. One of the reasons why Scotland is reaching its low-carbon renewables target was not mentioned by our colleague from Scotland who spoke before me—I did not catch his constituency either, so he might want to intervene to name it—and that is that nuclear back-up and the extension of nuclear are helping to get emissions down.

Nuclear is an important part of the mix. In my constituency we have had 44 years of safe nuclear generation, although it has now come to an end, with high-quality jobs and a helpful contribution to the country’s energy security. With Hitachi and the Horizon project, we are proceeding with a new nuclear build in my constituency. I hope that that, too, will provide decades of quality jobs and of help to the country’s energy security.

I am disappointed that carbon capture and storage is off the agenda, because clean coal and gas could also play their part in the transition to a fully low-carbon economy. However, CCS is not on the agenda. What is on the agenda is the opportunity to have co-firing biomass plants for the future and I very much support that.

My constituency has been dubbed the energy island, a concept that I support, because we had early prototypes of onshore wind—they were much smaller than is proposed now. We have also had safe nuclear generation for 40 years, and we have projects in the pipeline for tidal power as well as the biomass project that I will talk about in my remaining time. It is a £1 billion project for not just a biomass station but an eco-park. Under the proposal we will have 299 MW produced from biomass and linked to that will be aquaculture, with a large fish farm and the opportunity to produce fertiliser at the farm for use in food production. It is a very forward-thinking project, so when we talk about building power stations in our areas, we should build eco-parks and link them into district heating systems in the future, so that there is no waste. Such areas really would be low carbon, with heat retained in them, which limits the effects of climate change.

The food part is important. There will also be research and development at the eco-park and it is important that we do the R and D in this country and do not just import that from other countries. We need to work at the cutting edge of new technologies, and biomass and eco-parks are one way forward.

The 299 MW plant—a very large plant—will be five 60 MW units in a module form that will be gasified on site. I understand that biomass sourcing is controversial. Orthios is working with DECC, which has already given consent for the project, which is under way—I was there at the launch of the site. In his opening remarks the hon. Member for Selby and Ainsty talked about using existing infrastructure. The project is on the site of a former large Anglesey aluminium smelter, so it is an industrial site that is linked to a jetty that can bring in the biomass from abroad, but I am told that it will use locally sourced biomass from the UK as well. The biomass to be brought in will be managed waste from forests and other areas, which is less controversial than just cutting down trees and burning them. Biomass must be managed. I understand that the opponents of biomass feel that it causes deforestation, but there are ways of using waste materials that can be converted into biomass.

I realise that there is a time constraint, and that another hon. Member wants to speak, but there is the jobs aspect, which was touched on. New green energy jobs can be created if we go forward with biomass technology, many of which can be for retrained people as well as for apprentices. As I said, they can be in research and development. In the construction phase of the Orthios project in my constituency there will be 1,200 construction jobs and then 550 permanent jobs.

I was at the launch a couple of weeks ago with apprentices who have already been taken on, and with young people from the schools. We must say to the young people that climate change is real—they get it even if many other generations do not—and there is a future for them in producing green, low-carbon energy. The United Kingdom can be world leaders, and Wales and my island of Anglesey in particular can pioneer many of the technologies.

I commend what the Scottish Government have done in wind because that project was not popular, but I would add that the renewables obligation allows the Scottish Government to top up renewables funding. They have done that as a way to entice companies in the first place.

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[Callum McCaig (Aberdeen South) (SNP)]

It is a pleasure to sum up for the SNP in this debate, which has been interesting. It has perhaps been a different debate from the one I anticipated, as the majority of contributions have been on the transfer of existing coal power plants to biomass, but I completely understand why that is. I add my congratulations to the hon. Member for Selby and Ainsty (Nigel Adams) on securing the debate. It is good to get a hearing on this issue.

I met with Drax quite early on in my role as the SNP’s energy and climate change spokesperson and very much commend what it has done on shifting away from coal to biomass. There are issues around such large-scale production, which have been touched on, but if it is done right and done well—as I think it broadly is by Drax—it has a large role to play.

The hon. Gentleman mentioned research that suggested that converting just 500 MW of coal to biomass could save £2 billion for consumers, when looking at the whole-system cost. That is quite a remarkable piece of research to suggest such a level of savings.

One theme in the debate has been the need for both a level playing field and a long-term plan for biomass technology. I know the Government are very fond of their long-term economic plan. It is perhaps time they got a long-term energy plan—I note that that has the same acronym, so it could be used interchangeably. The two plans are tied together rather neatly: to have a long-term economic plan, we need a long-term energy plan. As we have heard, we very much require that plan to include biomass if we are to meet our decarbonisation targets.

The hon. Gentleman talked about the hidden costs of intermittent technologies; that is fair. His comment was that that is the “definition of a perverse outcome”. My definition of a perverse outcome would be applying the climate change levy to green energy production. I was surprised that that did not feature in his speech, given that when the levy was introduced in the Budget, Drax’s share price fell by 25% overnight.

[Nigel Adams]

I am grateful to the hon. Gentleman for raising that. If he looks back in Hansard, he will discover that I raised that issue at the time—quite vociferously, in fact. It was the first time that I voted against my own party, to my regret, so it was a deeply held view.

[Callum McCaig]

I thank the hon. Gentleman for that. I would gladly check Hansard, but I have no requirement to do that as I will take him at his word. That is a point well made—touché, as they say.

UK energy production faces significant challenges due to the move away from coal. Significant power stations and traditional behemoths of energy production are coming off the market. The hon. Member for Cannock Chase (Amanda Milling) said that ensuring we get the policy structure right before those power plants close is fundamental. She made a valid point about the incentive for the plants to be demolished. Once the power stations are gone, there is no going back.

The reuse and recycling of the existing transmission line infrastructure is a powerful point. We will get one opportunity to do this, and that opportunity is closing by the day as the power plants close. I would impress upon the Minister that if she and her Government think biomass has a role to play, as it is clear a number of hon. Members do, time is pressing to get the framework right to enable that to happen. I repeat: once the power stations and the transmission lines that take the power from them are down, the cost of establishing biomass on that kind of scale will be astronomical in comparison with what it was.

My hon. Friend the Member for Inverclyde (Ronnie Cowan) talked about the positive benefit of biomass at a smaller, more localised level than the large-scale power plants on which other Members focused. He mentioned the 2,000 jobs in biomass in Scotland and the potential for more. The link between proximity of supply and production of energy through biomass is also important. While there will be a role to play for biomass in large-scale production, the use of it in a decentralised manner is very much a part of the future.

My hon. Friend the Member for Coatbridge, Chryston and Bellshill (Philip Boswell) talked about combined heat and power being a real and credible part of the future of biomass technology. In my own constituency, Aberdeen Heat and Power Company Ltd delivers heat, hot water and electricity through biomass to a number of my constituents and others across the city of Aberdeen. Its programme has resulted in a 56% reduction in emissions and, perhaps more startlingly, a reduction in bills of 50%.

Combined heat and power is used well elsewhere in the world, in particular on the continent. It has always struck me as perplexing that we have never utilised it on the same scale, because it is a pretty simple technology. It stops the wastage of electricity because it is converted into heat. If we can get that level of savings—by and large in deprived communities in Aberdeen—that is a win-win situation. I am pleased to see the Scottish Government looking at how combined heat and power can be ramped up as we look to meet our climate change commitments. We have discussed the different ways that the devolved Administrations and the UK Government can work. A lot can be learned from that example, and we would welcome that.

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[Dr Alan Whitehead (Southampton, Test) (Lab)]

As hon. Members around the Chamber this morning have made clear, biomass has a substantial role to play in the move towards a low-carbon energy economy. Indeed, not only does it have a substantial role to play, but we should encourage the proper fulfilment of that role over the next period—I will come to that in a moment. We should also be clear about where biomass stands in the move towards a low-carbon economy and the extent to which it can play a role. In that respect, we need to be clear that, given the extent to which reasonable levels of feedstock can be provided to biomass over the next period—and, indeed, over the longer period, up to 2050—it can probably achieve penetration in the UK energy market of perhaps 12% or so.

I take that estimate from the Government’s UK bioenergy strategy, which the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) mentioned. We need to be clear that it is not the case that there is no strategy; there is a strategy—at the moment. Whether the present Government consider it to be their strategy now is another question, bearing in mind our discussions on the recent Energy Bill, for example, about the extent to which things that happened under the last Government really were or were not part of the Government’s strategy. Before we end proceedings this morning, I would be interested to know from the Minister whether she feels that her Government wish to continue to pursue that strategy, or whether she is in the process of writing a new bioenergy strategy for the future.

The existing strategy clearly places limits on the extent to which biomass can play a role in the move to a low-carbon economy. As my hon. Friend the Member for Ynys Môn (Albert Owen) emphasised, that underlines the fact that biomass has to play a role as part of a suite of technologies in order to provide the widest possible mix of energy over the next period.

We also ought to be clear that, as a low-carbon energy technology, biomass has to be just that: sustainable. As my hon. Friend and the hon. Member for Coatbridge, Chryston and Bellshill both mentioned, sustainability is not just about where we get our biomass feedstock from, but about how we use land for biomass production, and the extent to which biomass production may push out other forms of production, or, as my hon. Friend the Member for Ynys Môn mentioned, the extent to which it takes place on marginal land. In the UK, Drax, for example, is encouraging the planting of short rotation coppicing production, Miscanthus grass and various other things, which can provide a sustainable source of biomass for those undertakings. It is important that biomass is fully sustainable, and of course that comes into play in ensuring that imports of biomass are fully certified across the board, as far as their origin and how they are produced are concerned.

Having said that, biomass certainly can play a clear and substantial role and can perhaps produce 10% to 12% of the UK’s energy requirements in future. That also emphasises the point that biomass should not be set against other forms of renewable energy. In that context, I was a little concerned about the suggestion from the hon. Member for Selby and Ainsty (Nigel Adams) that biomass should, as it were, be advantaged against other forms of renewable energy, because of its relationship to system integration costs, as far as the network is concerned.

[Nigel Adams]

I apologise if that is how my remarks came across. What I actually want for biomass generation is a level playing field—for the industry to be able to bid on an equal basis, taking into consideration the full system costs of all technologies. That is all I want: an opportunity for the industry to be able to bid on a level playing field, in a fair way.

[Dr Whitehead]

I thank the hon. Gentleman for that clarification, but perhaps I can also make a little clarification for him. He mentioned the NERA and Imperial College London report about system integration costs. That is an important report, but he should also know that a similar report from NERA and Imperial College London was produced about three months before the report that he mentioned. It so happened that the client for the other report was the Committee on Climate Change, as opposed to Drax. The questions that were asked in the two reports, which had identical authors at almost identical times, were slightly different and therefore produced fairly different results for overall system integration costs. Essentially, one looked at how biomass would relate to the system as it stands; the other looked at how it might relate to system changes.

One thing I am sure the hon. Gentleman would endorse is the extent to which system changes have to take place to ensure that those changes in the mix are integrated into the system as a whole—so, the periods over which energy is sourced, and what happens with transmission charges and how they may be levied in future for a particular location.