Thursday, 13 October 2016

Sustainable Energy Updates from Budget 2017

The Irish government has set out its 2017 budget on 11th October. We thought it might be helpful to those interested in sustainable energy to post an update.

Minister Paschal Donohoe summed up the political backdrop to the budget well "Many believed that the Government would not still be in place by the time Budget Day arrived, and yet, here we are".

The following item, assessed as a macro-economic risk in the budget documents sets a glum tone from a sustainable energy perspective: "..[that] higher oil prices would reduce consumer spending power and lower corporate profitability in Ireland." Many do highlight on a daily basis the logical alternative to reduce this risk - energy efficiency and renewable energy.

Also of note is a high level risk of Ireland not meeting an obligation to reduce greenhouse gas emissions by 20% on 2005 levels by 2020. "EPA projections indicate that [the target] will not be met without the purchase of additional emissions allowances, the cost of which cannot be quantified at present."

"The fuel inputs used to create high efficiency electricity in combined heat and power are being fully exempted from carbon tax." Engineers will scratch their heads at the description of high-efficiency electricity... nonetheless this measure will reduce the carbon tax payable on gas for CHP engines (certified as high-efficiency CHP) to zero.

Minister Michael Noonan offered the House "a relief from carbon tax for solid fuels that include a biomass element to incentivise the development of these greener fuels". Details on this will be helpful, it should benefit those selling e.g. briquettes which combine peat and wood shavings.

He also revealed "a measure.. to provide that natural gas used as a vehicle fuel will be taxed at the EU minimum rate of excise for a period of 8 years". The minimum rates at present are €2.6/GJ for private motor vehicles and €0.3/GJ for commercial vehicles. Biogas was not mentioned.

The scheme of accelerated capital allowances for energy efficient equipment is being made available to sole traders and non-corporates. This is a significant development as these entities may incur tax liability at the marginal 50% rate, as opposed to the corporate tax rate of 12.5%. About 100,000 farmers are sole traders. This should be particularly interesting for biomass heating, heat pumps or Solar PV on farm buildings for self consumption. The devil will be in the detail as always.

The recently rebranded  Department of Communications, Climate Action and Environment (DCCAE) got an extra €50m in the budget - is there a possibility of beefing up the energy policy team in Adelaide road? It has long been suggested to the Department that additional expertise would help accelerate programme delivery.

A capital spend of €90m on climate change actions was announced also.
Minister Denis Naughten provided some additional clarity on this in a release from DCCAE later that day.
  • €500,000 will be directed to the establishment of a National Dialogue on Climate Change, something Denis Naughten has initiated
  • €7 million has been allocated to a new Renewable Heat Incentive Scheme for 2017
  • €4 million will be allocated to the Better Energy Communities Scheme, a programme which has been one of the only sources of support for sustainable energy projects in recent years
  • €2 million will be allocated to the Better Energy Homes Scheme
  • the Warmth and Wellbeing scheme is to be expanded with €8m set aside for 2017

Renewable Heat Incentive (RHI) 


In light of this budget development, we have made further enquiries regarding the RHI. The €7m budget estimate is based on ongoing work by DCCAE and consultants Element Energy, and the ambition to go live in the latter half of 2017.

DCCAE are currently indicating that the design consultation paper for RHI will issue prior to the end of 2016 and that a scheme may be operational by Q3 2017, which is an optimistic timeframe. Industry frustration is palpable with delays to the implementation of this scheme since it was first announced in 2013. See previous post about our work on RHI.

The cost of an RHI can't be known until the design consultations have been progressed. Most aspects of the scheme are still up in the air, and we have to wonder what happened the budget allocated for RHI in 2016?

Keep in mind also that price supports are subject to approval from the EU competition authorities to assess them for unfair market distortion. Grandfathering (i.e. retrospective application of the RHI) remains in place for new qualifying installations after 8/7/14, though payment would not be back-dated.

Tuesday, 15 September 2015

Renewable Heat Incentive for Republic of Ireland

BioXL carried out an extensive analysis of options for incentivising renewable heat in Ireland on behalf of the Irish Bioenergy Association, which was published in September 2015 and submitted to the Department of Energy in response to ongoing consultations on the topic.

There are national and EU policies supporting decarbonisation through delivery of 12% renewable share of heat by 2020. Most public buildings and industries continue to rely on fossil gas for their heating needs. The market for renewable heat has seen almost zero activity since 2008.
The only prospect of getting this market going again is to promptly deliver a renewable heat incentive which pays end-users to switch from fossil gas to renewable heat. 

Some of the key recommendations are:
  • To urgently replace gas boilers with renewable heat systems to meet 2020 targets - Ireland is currently at 6% renewable share of heat
  • Gas prices are extremely competitive, and priced at a level which does not account for the wider socio-economic impact of it's use
  • In this context, an exchequer-funded renewable heat incentive is required to give an appropriate signal to switch from gas to more sustainable renewable heat technologies
Download the report here

Monday, 11 November 2013

Address on Energy Crops to Teagasc Bioenergy Conference

(Extract from speech delivered at the Teagasc National Bioenergy Conference 8th November 2013, Dublin)
It would be fair to say the energy crop sector is not in a great place. There are about 3,000 ha planted at the minute. It is a major challenge to get new growers. There is strong competition for agricultural land enterprises. This combined with the poor experience of some early growers has understandably set a negative impression for potential growers.

The author has been a member of a Teagasc tillage committee for the last few years. During 2012, this group took on the task of creating a Development Plan for the tillage sector (pdf). The plan identified potential for expansion in lots of areas. Additional market opportunities were identified, with potential increases in the area of cereals, oilseeds, sugar beet and energy crops.

Altogether looking at individual crops, a potential to increase the tillage area by 221,000 ha was identified, which would represent an increase by over 50% in the area under crops. This poses a whole other set of questions, as all these crop enterprises would be competing for the same land area. A whole separate work stream has evolved in response to the problems of gaining access to land for productive agriculture – the challenges of an ageing farmer profile, high land price, very high conacre prices, farm fragmentation, farm management deficiencies combine to make changes in our farm structure and land-use pattern very difficult.

Anyhow that is a separate group’s work – the tillage plan identified a potential market expansion for 67,000 ha of energy crops by 2020. I was asked to then chair a group convened specifically to consider energy crop market development. This group comprised 13 individuals from across the different parts of the energy crop supply chain – growers, planting contractors, harvesters, large end-users as well as the department of agriculture and energy.

So why is this group motivated to engage in this body of work on energy crops just now if it appears the goose is half-cooked? If crops are being ploughed in, in favour of tillage crops with better margins at present? The simple answer is that the major market drivers for energy crops remain in place.


Emerging Endusers for Biomass

There are strong policy signals in place supporting the growth of renewable energy and bioenergy. Our national and European renewable energy targets remain in place and are based on substantial growth in bioenergy by 2020. Looking beyond 2020, we have to anticipate deeper carbon cuts and an accelerated shift to sustainable sources of energy as we approach 2030 or even 2050.

Apart from the existing biomass boilers around the country and boilers still to be installed, there are many other existing and potential new users of woody biomass.
Timber Stocks ready for grading
at ECC sawmill
  • There are 3 panel board mills remaining in Ireland, 2 of them operated by Coillte. They have a continuous demand for pulp wood, both for their production raw material, but also as feedstock for onsite boilers. Some of these board mills are presently considering biomass CHP, which could impact on supply/demand balance of pulp wood in future.
  • There are 3 large peat fired power plants, which in a previous energy white paper were planned to start co-firing 30% biomass by 2015. In reality, only the Bord na Mona power plant is co-firing, and recently the two ESB-owned plants have been put up for sale.
  • A number of new stand-alone Biomass CHP plants are proposed around the country. REFIT3 allows for up to 100 MWe of these in the current framework.
  • There are a number of large sawmills. All generate significant quantities of sawdust and other residues. Nearly all of them use biomass boilers on-site for kiln drying of timber. Some have installed CHP units and others are considering same. Some have installed pellet manufacturing lines for surplus sawdust.
Any one of these plants could shift the dynamic of the regional and national biomass supply. Mainly due to new energy requirements, we are potentially seeing a 4-fold increase in demand for woody biomass. And this is based only on the sectors we know about. Perhaps new manufacturing facilities will require woody biomass for processing into advanced biomaterials – to make plastics, chemicals, transport fuel or other higher value materials. We could potentially see cement kilns using biomass, or even waste to energy plants seeking biomass feedstocks. So if we require lots of additional biomass where will it come from? This topic has been considered by COFORD, SEAI, DCENR and others in different supply modelling exercises. They all come to the same stark conclusion – that there is a gap between supply and demand.

Their conclusion is that just over half the requirement would be met by either imported biomass or from purpose-grown energy crops.

So this is the real reason why energy crops are important – we are faced with a choice between substituting imported fossil fuel with imported biomass – or developing indigenous biomass from energy crops or other new sources.


Energy Crop Stakeholder Recommendations

There is a huge gap between the 3,000 ha in the ground today and the 67,000 ha expansion goal. The purpose of the energy crop group was to put some policy ideas together to accelerate the pace of development. We came up with some low cost, practical ideas and some ambitious policy ideas which would support this goal. They are in the stakeholders report which will be available on the Teagasc website.

The main priority for all stakeholders was to ensure the investments already made in energy crop establishment are not wasted – and where no market is evident, new markets be urgently opened up to these early adopters. In some cases new infrastructure is required for harvesting, handling and drying of the product. A dedicated grant scheme for energy crops infrastructure is required.
Established Miscanthus Crop
at Oak Park

New local markets for energy crops would develop with the introduction of any kind of renewable heat support. Since the removal of all capital grants for boilers, there have been few new projects to stimulate demand.

A simple change to the definition of willow would facilitate additional revenue from sewage sludge disposal – at the moment there are significant permitting costs associated with this.

A number of changes were suggested to the current Bioenergy Scheme, which provides establishment grants. The market needs certainty over supply. On the demand side there is a 15-year offtake agreement, but energy crop planting grants are renewed on a very short term basis. A multi-year commitment is required to ensure the effort is sustained and that entrepreneurs developing their business and developing parts of the energy crop supply chain have some visibility over where their sector is going. A standardised grant payment amount was proposed which would simplify the grant process at no additional cost. The current upper limit of 30ha on plantings should be increased or removed – how can we get 1,000s of has planted with this limit in place?

A major factor in future energy crop plantings is cashflow – there are no comparable crops where a farmer has to wait at least 3 years before seeing any revenue, and a few more years before reaching the point of breakeven on the original investment. The ideal model is something akin to forestry premia payable for the first 3 years. It was recognised by the stakeholder group that this is not possible through the current EU funding sources, but alternate models must be considered.

Apart from having a critical role in meeting our energy targets, energy crops can and will deliver significant job creation and new investment into our economy. There are many other social and environmental benefits to promoting an Irish energy crop sector which are outlined in the energy crop sector report.