Interest in farm-based renewable energy has surges in UK

Interest in farm-based renewable energy has surged in the past year, and 2011 is set to see more exciting developments. In our first weekly renewable energy section, Paul Spackman examines the big issues facing the sector.

The introduction of Feed-in Tariffs (FiT) last April provided a massive boost to the adoption of renewable energy technology on farms, and the trend looks set to continue in the coming year.

A report by solar specialists Ownergy after the first six months of the FiT scheme confirmed the number of completed systems since the scheme was launched is in line with expectations, which forecast about 100MW of newly installed domestic and commercial capacity in year one.

Solar photovoltaics has been a clear beneficiary of favourable generation tariff rates, but many other projects are also underway.

The coming year is likely to see some sense of urgency for new projects as people strive to get schemes up and running before the scheduled review of tariff rates in 2012, says Carter Jonas’s head of energy & marine team, Andrew Watkin.

Added incentive to push ahead with plans comes from speculation about whether FiT rates will be reviewed earlier than planned and concerns about the government closing a loophole in the FiT system that allows foreign investors to build large-scale solar installations on greenfield sites, he says. This was alluded to by Gregg Baker, minister of state for climate change, during parliamentary questions last November.

But for the foreseeable future at least, FiTs will provide a strong incentive to invest in renewables, and another new government scheme is also likely to increase uptake of other technologies.

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The proposed Renewable Heat Incentive (RHI) scheme will support production of renewable heat from sources such as woodchip, ground and air source pumps, solar thermal panels and anaerobic digestion.

Up to £860m of funding was committed to the scheme as part of the government’s 2010 Spending Review, in anticipation of a 10-fold growth in the sector. Proposals for how it will work were published in a consultation document last February and final details about the scheme – originally expected in December – could come anytime soon, with a provisional start date of 1 June 2011 (pushed back from April).

“We’re looking forward to the RHI announcement, but the issue will be what level of tariffs are available,” says Jonathan Scurlock, the NFU’s chief adviser on renewable energy and climate change.

“The RHI is a direct government spend, so there is a danger they’ll want to reduce costs given the current economic pressures. If they trim tariffs too much from what was originally proposed, we could end up with many things not being sufficiently incentivised.

“But, the government is anxious to stimulate renewable heat and will be monitored and audited by the European Commission every two years on its progress, so it would be highly inappropriate to offer tariffs that are not sufficient to generate an enthusiastic response.”

Depending on the final tariff levels announced, the RHI could be particularly useful in stimulating the biomethane industry, as well as heat production from solid bioenergy sources, such as straw, short rotation coppice and wood chips, he says.

The government’s decision last July to “grandfather” Renewables Obligation support for dedicated biomass facilities could also benefit farmers, by encouraging more large-scale biomass plants to go ahead, Dr Scurlock suggests. “We know there’s 4000-5000MW of power potential in projects waiting to go ahead and we could see more of these coming to fruition over the next year or so.”

If or when these facilities do come on-stream, demand for feedstocks such as straw, short rotation coppice (SRC) and miscanthus could increase significantly, Dr Scurlock says. “The promise is definitely there, but early entrants to SRC and miscanthus markets have been frustrated year after year by lack of growth in the sector. Once growers start to see demand growing and favourable contracts offered, we should see the sector develop.

“The challenge is to show we can provide important renewable energy services from agriculture without compromising food security,” he adds.

The growth of the UK bioethanol industry will also have a major influence on UK agriculture over the coming months as a larger proportion of home-grown cereals is used as the feedstock. The Ensus plant on Teesside is on course to use 1.2m tonnes of feed wheat a year after coming on stream last spring, while the Vivergo plant near Hull will use another 1.1m tonnes of wheat annually. It is due to start production in mid-2011 and details of supply contracts have already been announced (Farmers Weekly, 12 November 2010). A number of other plants are proposed or in the planning stages (see table).

This growth of the biofuels sector is largely being driven by the EU’s Renewable Energy Directive, which sets targets for the increased use of renewables, explains the NFU’s Ruth Digby.

“It’s great to have these long-term targets, but the policy rules and boundaries are far from settled and there are many issues that will continue to impact on the future of this sector throughout the year; both on farmers directly and the markets they are trying to sell to.”

A key issue within this will be the Fuel Quality Directive, which provides for voluntary schemes to be submitted to the EU for proof of biofuel sustainability against mandatory criteria, including protection of highly biodiverse areas, high carbon stock areas and undrained peat lands.

“The UK Red Tractor Schemes and Scottish Quality Crops (SQC) are in this process now and we hope for approval in advance of the next harvest to ensure all farmers can sell/trade crops to Europe without restriction or additional burdens,” she says.

A single system utilising the strengths of current assurance schemes would be a much better way of demonstrating sustainability than several individual schemes for each supply chain, which would prove complicated and burdensome for farmers, she says. “Each would need an individual audit route, and also do not necessarily provide compliance with legislation.”

European policy drivers

Much of the recent surge in renewable energy has been driven by European policy that aims to tackle climate change and secure future energy supplies.

Central to this is the Renewable Energy Directive (RED)/Fuel Quality Directive, which sets stretching renewable energy targets for 2020 across the EU. It includes targets for uptake of renewable fuels and sustainability criteria.

The UK has signed up to the RED, which includes a UK target for at least 15% of energy consumption in 2020 to be from renewable sources – equivalent to a seven-fold increase from 2008 levels. A National Action Plan has been submitted to the European Commission, detailing how it will meet this obligation.

The government says a mix of technologies will help achieve the target and suggests it could be achieved with the following proportion of energy consumption in each sector coming from renewables:

• About 30% of electricity demand, including 2% from small-scale sources

• 12% of heat demand

• 10% of transport demand

The existing Renewable Transport Fuels Obligation, which came in during 2005, will remain until the end of 2011 at least, setting a target of 4% of UK road fuel to come from renewable fuels this year.

The government is confident of meeting its 2020 target through a mix of technologies and says the 15% target should “not be seen as an upper limit to the UK’s ambition for renewables deployment”.

It has also published a Revised Draft Overarching National Policy Statement for Energy, which will revise the current Planning Policy Statement (PPS22) for renewable energy. This is out to consultation until January 2011.