5th Report, 2013 (Session 4): The Renewables Obligation (Scotland) Amendment Order 2013 [draft]

SP Paper 294 (Web Only)

EET/S4/13/R5

5th Report, 2013 (Session 4)

The Renewables Obligation (Scotland) Amendment Order 2013 [draft]

CONTENTS

Remit and membership

Report
Background

Committee consideration

Key Issues

Wood Fuelled Biomass Support Ceiling
Combined heat and power quality assurance - efficiency standards
Microgeneration and wave and tidal generators
Scotland only restrictions
Subordinate Legislation Committee consideration

ANNEXE A:EXTRACTS FROM THE MINUTES OF THE ECONOMY, ENERGY AND TOURISM COMMITTEE

ANNEXE B: ORAL AND WRITTEN EVIDENCE

Remit and membership

Remit:

The remit of the Committee is to consider and report on the Scottish economy, enterprise, energy, tourism and renewables and all other matters within the responsibility of the Cabinet Secretary for Finance, Employment and Sustainable Growth apart from those covered by the remit of the Local Government and Regeneration Committee and matters relating to the Cities Strategy falling within the responsibility of the Cabinet Secretary for Health, Wellbeing and Cities Strategy.

Membership:

Marco Biagi
Chic Brodie
Murdo Fraser (Convener)
Rhoda Grant
Alison Johnstone
Mike MacKenzie
Margaret McDougall
Dennis Robertson (Deputy Convener)
David Torrance

Committee Clerking Team: 

Clerk to the Committee
Jane Williams

Senior Assistant Clerk
Katy Orr

Assistant Clerk
Diane Barr

Committee Assistant
Vikki Little

The Renewables Obligation (Scotland) Amendment Order 2013 [draft]

The Committee reports to the Parliament as follows—

BACKGROUND

1. The Renewables Obligation (Scotland) Order was first made in 2002, under powers in the Electricity Act 1989 which were executively devolved (as regards Scotland) to the Scottish Ministers. The Order imposes an obligation on electricity suppliers to provide an increasing percentage of their supply to customers in Scotland from qualifying renewable energy sources. The principal Order is now the 2009 Order.

2. The Renewables Obligation (Scotland) Amendment Order 2013 [draft] (referred to hereafter as the “draft ROS”) is an Affirmative Order and was laid in the Scottish Parliament on 18 February 2013.

3. The draft ROS introduces two changes. The first is a restriction on the support for electricity generated by certain types of wood fuelled biomass station. Article 7 introduces a new article 22C to the 2009 Order. Its general effect is that wood fuelled biomass stations with an installed capacity greater than 15 megawatts (MW) will not receive any Renewables Obligation Certificates ("ROCs") for their electricity, unless those stations are accredited under the Combined Heat and Power Quality Assurance scheme.

4. The draft ROS also substitutes a new definition of microgenerator, to exclude enhanced wave and tidal stream generators. This will enable such generators, with a capacity of 50 kilowatts or less, to remain eligible for the higher "ROC" bands for such generation, which are introduced by article 18 of the draft ROS.

Committee consideration

5. At its meeting on 6 March 2013 the Committee took oral evidence from:

  • Biofuelwatch;
  • The Wood Panel Industries Federation;
  • Estover Energy; and
  • Northern Energy Developments Ltd.

6. The Committee then took evidence from the Minister for Energy, Enterprise and Tourism and considered its draft report at its meeting on 20 March 2013.

7. At that meeting, the Minister for Energy, Enterprise and Tourism moved the motion S4M-05912—

That the Economy, Energy and Tourism Committee recommends that the Renewables Obligation (Scotland) Amendment Order 2013 [draft] be approved.

8. The motion was agreed to.

9. The Committee would like to thank all those who provided written and oral evidence on the draft ROS, especially given the short deadlines the Committee was working to. The written and oral evidence provided to the Committee can be found on the Committee’s meeting pages at:

http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/55890.aspx

10. The Subordinate Legislation Committee considered the draft ROS at its meeting on 5 March and reported its comments in its 17th Report 2013 on Subordinate Legislation.1

KEY ISSUES

11. From the start of the Committee’s deliberations, it was aware that there were two key areas of contention in relation to the draft ROS. Both of these relate to the restriction on the support for electricity generated by certain types of wood fuel biomass station.

12. As a consequence, this report primarily summarises the evidence received on these two areas and provides, where relevant, the Committee’s views on those issues.

Wood Fuelled Biomass Support Ceiling

13. Between October 2011 and January 2012 the Scottish Government consulted on:

  • a proposal to remove support for large scale dedicated biomass electricity stations;
  • whether there should be a capacity threshold for small scale electricity only plants, and if so at what level should this be set;
  • views on whether incentives should mirror UK proposals on enhanced co-firing and conversion; and
  • whether a maximum threshold for biomass CHP plants should be set.

14. In response to this consultation in September 2012, the Scottish Government proposed a total installed capacity ceiling of 10 MW for support for dedicated (wood) biomass stations, noting that this would be conditional upon a further short consultation which took place in autumn 2012

15. The Scottish Government's analysis of the consultation responses confirmed that a majority of responses supported the introduction of a capacity ceiling for large scale electricity-only biomass stations, noting concerns over the potential social, economic and environmental impacts associated with sourcing that increased demand for wood for biomass generation, and the potential to distort the market for other users of this material.2 A smaller group of responses noted that the ceiling was a barrier to investment in Combined Heat and Power (CHP) stations and should be removed or increased.

16. The Scottish Government subsequently proposed, in the draft ROS, that this capacity ceiling be lifted to 15 MW. In addition, wood fuelled biomass stations with an installed capacity above 15 MW will be eligible for ROCs if they meet with Combined Heat and Power Quality Assurance (CHPQA) accreditation (the Committee comments on the CHPQA in the next section of this report).

17. In oral evidence, Biofuelwatch explained that it opposed the capacity ceiling of 15 MW as it “allows for an unlimited number of small and medium-sized electricity-only power plants, which can have efficiencies as low as 20 per cent.”3

18. This, Biofuelwatch contended, means that 80 per cent of the energy contained in a scarce resource is being washed away entirely as uncaptured heat and that, therefore, such inefficient use of biomass “should not be supported or subsidised”.4

19. Both the Wood Panel Industries Federation (WPIF) and Northern Energy Developments Ltd had supported the previously proposed capacity ceiling of 10 MW. In relation to the change to 15 MW capacity ceiling, the WPIF commented in written evidence that it remained “supportive of this change to the banding levels for dedicated biomass” and also supported the Scottish Government’s emphasis on the use of woody biomass for heat-only and smaller scale CHP installations as a more sustainable use of Scotland’s limited wood resource.

20. Northern Energy Developments Ltd explained that whilst it had supported a 10MW cap, it was “pleased that the Scottish Government took heed of the concerns of the panel sector and the smaller renewables sector about capping the scale of projects that will receive support under the obligation”5

21. Estover Energy welcomed the increase to 15MW as the right level for the cap,6 having earlier commented in its response to the Scottish Government’s consultation that the previously proposed 10MW capacity ceiling would result in no further biomass CHP plants being developed in Scotland and would make electricity-only plants uneconomic.7

22. In oral evidence to the Committee on 20 March 2013, the Minister for Energy, Enterprise and Tourism, Fergus Ewing, explained that the 15 MW ceiling had been set higher than initially proposed for a number of reasons—

“…partly because our forecasts for additional supplies of wood in the marketplace mean that any new capacity that might be built will not be likely to affect other users and indeed will create opportunities for businesses in the forest supply sector. The higher ceiling will also enable investment to take place, subject to planning permission, in sustainable developments of a reasonable scale, and those investments could be vital to the continuation of existing businesses and associated jobs.8

23. In responding to a question regarding the concerns about the change of the capacity ceiling from 10 MW to 15 MW and the quality aspects of the emissions, the Minister for Energy, Enterprise and Tourism commented that—

“I am happy to provide an assurance that we will keep under specific review sustainability in relation to CHP schemes.”9

24. The Committee welcomes the Minister for Energy, Enterprise and Tourism’s assurance and looks forward to receiving an update on the outcomes of this review.

Combined heat and power quality assurance - efficiency standards

25. Biomass fuelled CHP schemes which provide electrical output above 15 MW are eligible for Renewable Obligation Certificates (ROCs) under the Renewables Obligation, if these plants are certified by the CHP Quality Assurance (CHPQA) programme as meeting certain efficiency standards. The CHPQA programme is administered by AEA Technology on behalf of the UK Department of Energy and Climate Change, in consultation with the Scottish Government, the National Assembly for Wales and the Northern Ireland Department of Enterprise, Trade and Investment.

26. A quality index is used to assess the efficiency of CHP biomass schemes. This involves using coefficients related to fuel type to calculate an index value for the heat and power efficiency of biomass plants, which are summed to give a quality index value. Heat efficiency is defined by the heat load as a proportion of fuel input energy. Power efficiency is defined as the electrical energy output as a proportion of fuel input energy. Plants which achieve a quality index value (QI) of 100 are eligible to claim ROCs on all their output.

27. ROCs are scaled back for plants which do not meet the QI of 100. The coefficients are derived to ensure that only schemes which deliver a primary energy saving of 10% relative to separate generation of electricity and heat can achieve a QI of 100. The coefficients are also designed to ensure that schemes over 25MW must have an overall efficiency of 35% to achieve a QI of 100.

28. The draft ROS proposes that wood fuelled biomass stations with an installed capacity greater than 15 MW will receive ROCs for their electricity if those stations are accredited under the CHPQA scheme (and therefore have an overall efficiency of 35%).

29. The draft ROS also proposes an exception, designed to cover circumstances where a heat customer has been lost due to circumstances beyond a generator’s control. This exception allows stations to continue to receive ROCs during no more than five obligation periods (a total of five years) in respect of which CHPQA accreditation has not been obtained.

30. Biofuelwatch commented that the current proposed efficiency setting under CHPQA was so exceedingly low (at 35%) that it did not feel that its effect would be much different from not having any cap.10 It explained that this proposed cap would enable stations to secure ROCs if they use a nominal amount of heat, for example, to dry their wood chips and that, “If a power station achieves the low standard of 35% efficiency – in some cases even less, a five-year exemption would follow, during which it would not have to supply any heat or even meet that low standard.”11

31. This, Biofuelwatch contended would not only result in the waste of scarce resources, with resources being used highly inefficiently, but would “incentivise companies to use those resources for electricity, not heat” which is less efficient, and “will also offer financial support to large, centralised power stations that rely on economies of scale”. As a consequence, large-scale imports of wood chips and pellets would be required, damaging forests, the climate and communities.12

32. Biofuelwatch also noted that EU Renewable Energy Directive, which states that in the case of biomass, “Members states shall promote conversion technologies that achieve a conversion efficiency of at least 85% for residential and commercial applications and at least 70% for industrial applications”.13 The WPIF also supported calls for the draft ROS to be brought into line with the EU renewable Energy Directive.14

33. The WPIF expressed concerns about the impact of the 35% efficiency requirement, explaining that—

“We agree that that could mean a large electricity producer producing a bit of off-heat too. Although that scale would be predicated on imports, all the companies are taking about 10 to 20 per cent of domestic timber, too. That is a massive amount of timber and the result could be the displacement of our industry.”15

34. Northern Energy Developments Ltd explained that in considering whether the CHPQA requirement would incentivise large centralised electricity only power stations, economic and environmental costs have to be considered—

“If you take out the timber cost and go where the timber is, you can make small-scale electricity only projects stand up. The building of some distribution-connected, small scale, electricity only plants provides a vital part of the energy mix and the cap is a very important signal in that regard.”16

35. Northern Energy Developments Ltd also highlighted that small localised projects also have the potential to remove significant lorry kilometres per year from the roads, by reducing the transportation distances from forests to the project concerned.17

36. In evidence, Estover Energy explained that a CHP project with 35% efficiency still represented, from a carbon point of view, a better use of wood resource than a heat-only project that is 80% efficient. In that regard, it argued that “It is better to focus on the carbon savings rather than on the overall figure for efficiency”.18

37. Estover Energy explained how heat load is a determining factor in whether to build one large scheme or 10 small ones—

“If we can find good heat loads…we can size the project appropriately to give the right balance of heat and electricity. To build something 10 times as large would require a vast heat load which we do not have.”19

38. The Policy Note to the draft ROS makes clear that the draft ROS, “in tandem with other UK obligations, forms an important part of the UK’s compliance with the European Directive on the promotion of energy provided from renewable sources (Directive 2009/28/EC), which amended Directive 2001/77/EC”.

39. In oral evidence the Minister for Energy, Enterprise and Tourism confirmed that the draft ROS was “fully in line with the requirements of the relevant European directive.”20 He then explained that the CHPQA efficiency setting of 35% was a minimum standard but that did not mean that plants did not exceed that standards and were more efficient, as in some cases they were. He added that—

“the qualification as a CHP station under the RO [Renewable Obligation] has always depended upon that efficiency level. The requirement is not new; it is a continuation of existing practice.”21

40. The Committee welcomes the Minister for Energy, Enterprise and Tourism’s assurance that the Scottish Government will keep these matters closely under review and looks forward to receiving an update on the review in due course.

Microgeneration and wave and tidal generators

41. As a result of the introduction of the Feed-In Tariff system, small scale (less than 50 KW) microgeneration relating to hydro, anaerobic digestion, solar and wind were not eligible for support under the Renewable Obligation. Small scale enhanced wave and tidal were not covered by the Feed-In Tariff and continue to be eligible for ROCs support set at a level of 2 ROCs per megawatt hour of electricity generated. This amendment to the definition will enable these small scale wave and tidal schemes to benefit from an enhanced ROC support of 5 ROCs per MW/h of electricity generated.

Scotland only restrictions

42. The draft ROS proposes that the restrictions on the support for electricity generated by certain types of wood fuelled biomass station and the new definition of microgenerator will apply to Scotland only.

43. In evidence, both WPIF and Northern Energy Developments Ltd expressed concerns about Scottish wood volumes heading to England (where no restrictions operated). Northern Energy Developments Ltd commented that its biggest concern was “the movement of the co-products … south of the border, allowing England and Wales to meet their targets using primary product from Scotland.”22

Subordinate Legislation Committee consideration

44. In reporting its consideration of the draft ROS, the Subordinate Legislation Committee (SLC) drew the draft ROS to the attention of the Parliament in relation to a minor drafting error.

45. The SLC explained that there is an error in article 7, which inserts new article 22C of the principal 2009 Order, in relation to electricity generated by certain types of biomass station. The new article 22C(2) refers incorrectly in two places to "qualifying combined heat and power station". The correct definition, in article 2 of the principal Order, is "qualifying combined heat and power generating station".

46. The SLC notes that the Scottish Government has undertaken to amend the error at the next available opportunity.

ANNEXE A: EXTRACTS FROM THE MINUTES OF THE ECONOMY, ENERGY AND TOURISM COMMITTEE

8th Meeting, 2013 (Session 4), Wednesday 6 March 2013

3. Subordinate legislation: The Committee took evidence on the Renewables Obligation (Scotland) Amendment Order 2013 [draft] from—

Almuth Ernsting, Co-Director of Biofuelwatch and European Focal Point of the Global Forest Coalition;
John Paterson, Chairman, Wood Panel Industries Federation;
Marcus Whately, Director, Estover Energy;
Fergus Tickell, Managing Director, Northern Energy Developments Ltd.

10th Meeting, 2013 (Session 4), Wednesday 20 March 2013

2. Decision on taking business in private: The Committee agreed to take item 6 in private. It also agreed that any future consideration of the draft report on the Renewables Obligation (Scotland) Amendment Order 2013 [draft] should be taken in private at future meetings.

3. Subordinate legislation: The Committee took evidence on the Renewables Obligation (Scotland) Amendment Order 2013 [draft] from—

Fergus Ewing, Minister for Energy, Enterprise and Tourism, David Wilson, Director of Energy, Cameron Maxwell, Forestry Commission Scotland, and Emma Thomson, Legal Directorate, Scottish Government.

4. Subordinate legislation: Minister for Energy, Enterprise and Tourism moved the motion—

S4M-05912—That the Economy, Energy and Tourism Committee recommends that the Renewables Obligation (Scotland) Amendments Order 2013 [draft] be approved.

The motion was agreed to.

6. Subordinate legislation (in private): The Committee considered the evidence heard on the Renewables Obligation (Scotland) Amendment Order 2013 [draft] and agreed a draft report and the arrangements for publications.

ANNEXE B: ORAL AND WRITTEN EVIDENCE

Wednesday 6 March

Official report

Almuth Ernsting, Co-Director of Biofuelwatch and European Focal Point of the Global Forest Coalition;
John Paterson, Chairman, Wood Panel Industries Federation;
Marcus Whately, Director, Estover Energy;
Fergus Tickell, Managing Director, Northern Energy Developments Ltd

Written submissions received can be viewed online at:-

http://www.scottish.parliament.uk/S4_EconomyEnergyandTourismCommittee/2013036p.pdf

Wednesday 20 March

Official report

Fergus Ewing, Minister for Energy, Enterprise and Tourism, David Wilson, Director of Energy, Cameron Maxwell, Forestry Commission Scotland, and Emma Thomson, Legal Directorate, Scottish Government

Combined Heat and Power


Footnotes:

1 Subordinate Legislation Committee, 17th Report 2013 (Session 4) Subordinate Legislation.

2 http://www.scotland.gov.uk/Resource/0041/00414086.pdf

3 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2647.

4 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2660.

5 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2649.

6 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2659.

7 Estover Energy, Written submission.

8 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 20 March 2013, Col 2679.

9 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 20 March 2013, Col 2692.

10 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2666.

11 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2647.

12 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2647-48.

13 Biolfuelwatch, written submission.

14 The Wood Panel Industries Federation, written submission.

15 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2654.

16 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2651

17 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2653.

18 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2652

19 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2656

20 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 20 March 2013, Col 2683.

21 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 20 March 2013, Col 2684.

22 Scottish Parliament Economy, Energy and Tourism Committee. Official Report, 6 March 2013, Col 2665

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