BREXIT will have a massive impact on many industries in the UK and biomass heating is no exception. In this blog I gaze into the crystal ball and try and anticipate some of the outcomes of us formally leaving the EU next March.
Obviously a lot of this is conjecture but I’ll be making some educated guesses. In many of the areas I deal with below I’m asking rhetorical questions and suggesting some ways I’d like things to pan out.
Will the cost of biomass energy increase?
Most biomass boilers, wood pellet supplies and equipment like chippers are imported into the UK from Europe. The weakening of the Pound since the referendum has increased the cost of imports and this has impacted both installers and end users. Over the winter heating season of 2017/18 the price of wood pellets increased massively. There are lots of reasons for this but one of the most important considerations is that as an importer we are at the end of the supply chain and therefore a price taker. This is likely to get worse following Brexit so that suggests we should be looking at ways to improve security of woodfuel supply (see CAP section below).
In any case exchange rates are only one part of the puzzle. Being outside the Single Market will almost certainly mean more bureaucracy, more red tape and complicated supply chains when it comes to importing any products. This will mean the cost of doing business will increase for boiler installers and fuel traders and any exchange rate benefits will be easily wiped out.
In addition, there is a likelihood that import tariffs will be levied on these sorts of products. The average export tariff for goods from the EU ranges between 2-4%. As biomass boilers and wood pellets are small beer compared to say Parmesan cheese and BMWs they are unlikely to come in for any special considerations. All in all prices are likely to rise.
Of course the flipside of this is that domestically produced boilers, wood pellets and other forms of biomass fuel may benefit from a new competitive edge. My view is that the UK Government should be seeking to harness this opportunity where possible.
Will the UK continue to honour Climate Change and Renewable Energy Targets?
Much of the initial evidence of the EU Withdrawal Bill suggests that many environmental targets currently covered by European law will be retained at least during the two year transition period. Once our ties are completely severed we may continue in this vein towards our 2020 and 2030 renewable energy targets and 2050 climate change aspirations. However, there are fears that if the size of the UK economy plummets as a result of Brexit, that targets will be watered down and timescales to enforcement lengthened. However, the evidence in recent years is that the UK has shed its tag as “the dirty man of Europe” and has led from the front in terms of bringing in innovative environmental legislation and initiatives such as legally binding carbon budgets and the Renewable Heat Incentive (RHI).
I would encourage the Government to listen and work with industry bodies like the WHA in order to continue fighting climate change. Biomass heating remains one of the cheapest forms of renewable energy and should be considered more than simply a transitional technology.
Will the UK continue to scrutinize the Sustainability Criteria of biomass fuels?
One of the key elements of the Renewable Energy Directive (RED) that impinges on biomass projects is Sustainability Criteria – fuels must be sustainable in terms of their lifecycle greenhouse gas emissions and there must be evidence that they were sourced from land that was not protected from 2008 onwards (Land Criteria). This type of legislation is exactly the sort of thing that Brexiteers would be glad to see the back of as it adds red tape and is viewed as preventing entrepreneurial spirit. However, despite flaws in its delivery and enforcement, environmentalists see this as a major win and will no doubt fight hard to keep it in place.
My view is that having spent close to £1 million of tax payers’ money establishing the Biomass Suppliers List (BSL) and encouraging an industry funded list for non-wood fuels (Sustainable Fuel Register) that the Government would be ill advised to reduce their commitment to only using sustainable fuels in biomass heat and power systems. I also hope that now the BSL has an established industry panel that the system can be improved to provide greater scrutiny whilst enabling increased user friendliness going forward.
Could future agricultural policy lead to increased woodland cover and energy crop planting?
Leaving the EU will bring an end to support for farming from the Common Agricultural Policy (CAP). The Government is committed to offering similar support as that under the CAP until around 2024 but what then? The Government have already published an Industrial Strategy which talks of a Farm to Fork Programme, a briefing paper which sets out future farming policy a 25 Year Environmental Plan and yesterday’s Agriculture Bill.
All of these suggest that future policies will put greater emphasis on maximising multifunctional benefits of land management in order to advance its Natural Capital and Ecosystems Services. This could be good news for home grown biomass production. Both woodland and perennial energy crops can produce sources of biomass whilst also providing carbon sequestration, flood mitigation and water quality improvements. It is possible that the need for increased security of biomass supply will mean that farmers will be enticed into converting more of their less productive or marginal land into non-food uses.
Upland farms will be particularly hard hit by Brexit as many of these farm businesses could not exist without EU subsidies. It is possible that in the years ahead many of these farms will be amalgamated by rich landowners and trees planted in order to provide a much more profitable income from the land. There are signs that this is already taking place in the Scottish Borders.
The UK farming landscape will almost certainly change following Brexit as loss making farming enterprises will be untenable without subsidies. As the UK has a finite land resource it makes sense to utilise it as efficiently as possible and the Government need to seize this opportunity. Recent research by the Energy Technologies Institute suggests that planting energy crops such as short rotation coppice (SRC) and miscanthus on 1.0-1.8 million hectares could produce 6% of UK energy and reduce the cost of meeting the UK’s 2050 carbon reduction targets by more than 1% of GDP (more than the agriculture sector’s entire current output of 0.7% of GDP in 2014). This indicates the major economic impact that home-grown bioenergy could provide.
Will air quality worsen if we are no longer bound by EU rules?
Concerns about smoke emissions from biomass combustion (particularly urban wood stoves) have recently gained many column inches in national newspapers. There is widespread fear that an increase in biomass burning will lead to poorer air quality especially if prices of premium woodfuels lead to cheaper alternatives being used. The Government are currently consulting on their Clean Air Strategy. The consultation document suggests that they are keen not only to maintain but to enhance environmental standards post Brexit. The document is asking consultees whether installing biomass boilers in urban areas should be restricted and proposes that there may be more monitoring of emissions from existing biomass systems receiving financial support from the RHI. It also suggests that although the Government wants to encourage innovation it will work with the industry to identify an appropriate test standard for new solid fuels entering the market.
The Wood Heat Association (WHA) is currently seeking member feedback and responding to this consultation. From sitting on the WHA board for three years and attending most member meetings I feel the consensus of opinion is that biomass heating can continue to provide the lion’s share of renewable heat and if appropriately policed can do this in a way that maintains local air quality.
Will the biomass sector lose out on research funding?
A major downside of Brexit will be that UK academic organisations and SMEs will be less likely to participate in EU-funded programmes like ERDF, INTERREG and Horizon 2020. This will diminish the other forms of support that are available for the UK biomass sector, such as participation in partnership projects, support from European wide industry bodies, joint initiatives on fuel quality, etc. These have made a meaningful contribution to the UK’s body of knowledge on biomass, most of which has been gleaned from EU partners. Some programmes do fund non-Member States but this depends on payments into the EU budget. For instance, Norway benefits from research funding but also pays in.
Continuing co-operation in research has got to be in the interests of both the EU and the UK so I would like to think that sense will prevail and a compromise reached as part of Brexit negotiations.
So as you can appreciate the UK biomass industry is likely to have some interesting times ahead in the approach to Brexit day (29 March 2019), the transition period and beyond. There is plenty to play for and the UK bioenergy industry and trade bodies such as the Wood Heat Association will need to work with the Government at every opportunity to make sure that the biomass sector is provided with as much support, fair policies and the right incentives as we enter a new historic period outside the European Union.