Consultation on Biomass Electricity and CHP Plants. Department of Energy and Climate Change

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1 Consultation on Biomass Electricity and CHP Plants Department of Energy and Climate Change Submission by GDF SUEZ Energy UK-Europe July 2012

2 Cover image: Artist impression of biomass conversion of Rugeley Power Station

3 Biomass Electricity and CHP Plants ensuring sustainability and affordability (Part A) A DECC Consultation Submission by GDF SUEZ Energy UK-Europe (I) About GDF Suez Energy International GDF SUEZ Energy International (formerly known as International Power) is responsible for GDF SUEZ s energy activities in 30 countries across six regions worldwide (Latin America, North America, the Middle East, Turkey & Africa, UK-Europe, Asia, and Australia). Together with power generation, we are also active in closely linked businesses including downstream LNG, gas distribution, desalination and retail. GDF SUEZ Energy International has a strong presence in its markets with 77 GW gross capacity in operation and a significant programme of 10 GW gross capacity of projects under construction as at 30 June The UK-Europe region (GDF SUEZ Energy UK-Europe) has 13.9 GW gross capacity in operation, which includes over 9.2 GW of plant in the UK market made up of a mixed portfolio of assets coal, gas, CHP, wind, a small diesel plant, and the UK s foremost pumped storage facility. Several of these assets are owned and operated in partnership with Mitsui & Co. Ltd. The generation assets represent just under 9% of the UK s installed capacity, making GDF SUEZ Energy UK-Europe the country s largest independent power producer. The company also has a retail supply business and a significant gas supply business in the UK, both serving the Industrial and Commercial sector. GDF SUEZ Energy International in the UK is exploring the potential conversion of Rugeley power station from coal to biomass fuel and welcomes the opportunity to contribute to DECC s Biomass Electricity and CHP Plants ensuring sustainability and affordability. Please note that our comments in relation to this consultation relate solely to Part A. (II) Summary key points GDF SUEZ believes that there are many ways in which wood pellets are different from other wood products for which the policy was created. As such the proposal to use the government s public procurement policy as part of the sustainability criteria for the production and supply of wood pellets for power generation is unsuitable, inappropriate, and likely unachievable by many suppliers. With respect to forest management criteria, GDF SUEZ would prefer to see the use of a more flexible scheme, that once implemented, would still deliver robust sustainability criteria, instead of the Government s public procurement policy, which is specific to the UK. 1

4 In the US, where much of the biomass is likely to be sourced, forest is owned by small landholders for whom gaining certification solely for the bioenergy industry is impractical - if the requirements are placed on these small landholders, it will be very difficult for the UK to source the volumes of biomass required to meet the UK s aspirations for this sector. For this reason sustainability requirements should be placed on the wood pellet supplier. Industry has indicated that it would like to see further certainty over grandfathering of sustainability criteria for conversion plants. The current lack of clarity post 2020, post 2025 in particular, is a significant risk to operators. GDF SUEZ believes that criteria set to 2030 would be more appropriate and visibility of the criteria would mitigate some risk for conversion projects. An indicative timetable for key decisions is needed as soon as possible, since further delays and uncertainty are additional risks to projects. GDF SUEZ believe that in order for projects to be successfully implemented in line with DECCs plans, it would be helpful if key decisions were communicated in Q (III) Answers to Consultation questions Question 1 Do you agree power and CHP plants using solid biomass or biogas feedstocks, of 1MWe or above, should be required to meet the sustainability criteria from October 2013 in order to receive ROC support? 1. Yes, we agree that power and CHP plants should be required to meet consistent sustainability criteria in order to receive ROC support; however we have some concerns over the criteria as proposed and have responded to those concerns throughout this response. 2. GDF SUEZ feels it is important that there is public acceptance of biomass as a fuel source to replace coal in order to help achieve the UKs legally binding carbon targets. Setting, and achieving, meaningful and robust sustainability criteria will help develop this trust in biomass as a sustainable alternative to coal fired generation. 3. GDF SUEZ also believe an indicative timetable for key decisions is needed as soon as possible, since further delays and uncertainty are additional risks to projects - it would be helpful if key decisions were communicated in Q so that biomass projects can be successfully implemented in line with DECCs plans. 2

5 Question 2 Do you agree that subject to EU or international requirements the sustainability criteria for solid biomass and biogas should be: i. Fixed to April 2020, and ii. Follow the planned GHG emissions trajectories to 2020 set out above for (a) new dedicated biomass, (b) existing dedicated biomass and (c) other biomass plants? 4. GDF SUEZ supports the fixing of sustainability criteria, as this delivers a level of certainty to operators. However, having a number of years of uncertainty at the end of the project life is not an acceptable risk to operators and investors, as new standards may be unachievable under long term contracts set prior to their announcement. For this reason we believe these criteria should be fixed and published until GDF SUEZ also supports the GHG emissions trajectories for all categories of biomass plant and once again, these should be extended to Question 3 Do you have data you would be willing to share on the potential improvements or changes to different elements of the GHG lifecycle for bioenergy to support setting the higher target to apply from 1 st April 2020 to 31 st March 2025 for each of the 3 trajectories? We are particularly interested in data on: Transport (e.g. GHG emissions associated with ship size/capacity); Harvesting and processing technologies for feedstocks (e.g. more energy efficient pelletisation); Energy used in producing feedstocks (e.g. change fossil to biomass CHP); Innovation in feedstock types/performance (e.g. non-intensively produced algae, increased yields form energy crops); Fertiliser use; Generation efficiencies at power plant, and Other 6. We are unable to provide detailed information on these issues at this time. 3

6 Question 4 Do you agree that wood when used for a solid or gaseous fuel, should be required to meet UK Government s public procurement policy for wood, and that this should replace the land criteria for solid and gaseous biomass in the particular case of wood? 7. No, GDF SUEZ does not believe that that the Government s public procurement policy for wood should replace the land criteria as set out in the Renewable Energy Directive we believe there are various points in which wood pellets are different from the timber products currently covered by the Government Procurement Policy: i. Wood used for wood pellets tends to come from the relatively low-value part of wood including sawdust or forest residue. Forest managers do not grow wood for pellet production, but rather for the high value part of the wood (known as the saw-log ) - this means there is no economic incentive to take action to satisfy the criteria (for example, obtaining forestry management certificates) in order to sell the wood to the pellet suppliers, unless the buyers of the high-value part of wood require it. ii. iii. GDF SUEZ believes that there are very few additional wood pellet production capacities in Europe and only US and Canadian suppliers could actually meet the increasing demand from current and prospective UK biomass generators on economically reasonable terms. In reality, very few of those wood pellet suppliers currently have certifications to serve as Category A evidence; for example, data gathered shows that just over 20% of forests in the southern US are certified to FSC/PEFC standards, which are recognised as Category A evidence. Pellet suppliers tend to procure wood from a variety of sources in order to secure sufficient volume for pellet production, for example, one of our potential suppliers has informed us that they have up to 600 land owners supplying one pelletising plant, and that over a 20 year period of production a US pellet producer will likely source biomass from 8,000 12,000 different, individual landowners. This demonstrates that the pellet supply chain is far more complicated than normal timber products. GDF SUEZ believes that it would be a significant and unrealistic administrative burden to put together evidence regarding chain of custody for each source as required by the Government Procurement Policy - even for one biomass conversion project this could entail thousands of sets of documents. iv. Also of concern is that under DECCs current proposals, only sawmill residue sourced from Chain of Custody certified sawmills would be allowed to count towards the Category A threshold of 70% of biomass needing to be certified within a fibre basket. Potential suppliers have indicated that the sale of wood residual material is not a significant source of revenue for US sawmills, therefore it is unlikely that we could demonstrate the value of certification just to meet UK CPET requirements to the sawmills for such a small proportion of their income. 4

7 v. In the US, where much of the biomass is likely to be sourced, forest is owned by small landholders for whom gaining certification solely for the bioenergy industry is impractical - if the requirements are placed on these small landholders, it will be very difficult for the UK to source the volumes of biomass required to meet the UK s aspirations for this sector. For this reason sustainability requirements should be placed on the wood pellet supplier. vi. Category B allows for the verification of the legality and sustainability of biomass from lands that are not certified. We feel that the requirements for gathering Category B evidence, three separate checklists for such small suppliers (given that there may be several hundred supplying a single pellet mill), and the potential requirement to avoid mixing of sources in the supply chain, also appear unworkable and uneconomic. 8. The proposals to replace the current land criteria with the Government Procurement Policy moves away from those implemented by the EU under the Renewable Energy Directive (2009/28/EC). If the sustainability framework is further developed within the EU for solid biomass, it is likely to be an extension of current land criteria for biofuels and bioliquids (as in the Renewable Energy Directive 2009/28/EC), which takes a similar approach as the land criteria in the current Ofgem sustainability guideline. 9. The Consultation highlights the potential for the sustainability criteria to be amended in order to meet EU criteria; there is a significant risk then, that the later implementation by EU of a solid biomass sustainability framework could cause the UK sustainability criteria (as currently proposed by DECC) to be inconsistent with the EU framework. 10. GDF SUEZ believes that it would be more appropriate and practical to implement a scheme whereby suppliers (instead of forest owners) could be accredited. A more universal and widespread scheme that once implemented would still deliver robust sustainability criteria, instead of the UK Government s public procurement policy, would provide stability in criteria that is needed to encourage the industry, such as the scheme being developed by the Initiative Wood Pellet Buyers (IWPB). 11. GDF SUEZ also believes that the process of segregating all streams of pellet supply, in order to comply with the separate Category A & B standards, is in itself an unsustainable process, costing time, extra space, fuel and therefore increasing GHG emissions throughout the life of these proposed conversions. 5

8 Question 5 Do you agree that energy crops which have been assessed as meeting the Energy Crops Scheme for England, or its equivalent, should be deemed to meet the land criteria for solid and gaseous biomass? 12. Yes - GDF SUEZ agrees with this proposal. We recognise that, under the Energy Crops Scheme, an environmental validation is already performed on land used for the supply of biomass. Therefore we believe this will address the same questions on land use as those raised under land criteria for solid and gaseous biomass. Question 6 Do you agree that (i) generators using energy crops for solid or gaseous fuel should be required to provide detail of the previous use of the land and (ii) generators using virgin wood for solid and gaseous fuel should be required to provide detail on quality and species? 13. It is reasonable to expect that the sustainability criteria will ensure against bad practice. However, it is worth noting that it would be difficult and onerous to require suppliers to report on the species of wood that has been used in the pellets. As outlined in the response to Question 4: i. Pellet suppliers tend to procure wood from a variety of sources in order to secure sufficient volume for pellet production. The pellet supply chain is far more complicated than normal timber products. ii. iii. GDF SUEZ believes that this would put a significant and unrealistic administrative burden on suppliers to put together evidence regarding chain of custody for each source as required by the Government Procurement Policy. In the US in particular, much forest is owned by small landholders who cannot justify multiple, local, state and international accreditation; in many cases suppliers may only harvest from their holdings once within the lifetime of biomass conversion projects. 14. GDF SUEZ thinks that it is more appropriate that all of the required information should all be included in a single reporting mechanism to reduce administrative and cost burdens to a minimum and promote renewable behaviours. Question 7 Do you agree that the introduction of sustainable forest management criteria based on the UK Government s public procurement policy for wood will help address the key land use change issues of: i. Sustainable harvest rates and carbon stocks ii. Deforestation iii. Biodiversity, and iv. Social concerns? 6

9 15. No, the use of the UK Government s public procurement policy for wood will not address the key land use issues as listed above. GDF SUEZ believes that the public procurement policy is too onerous and places a significant administrative burden on pellet suppliers. There are more practical accreditations available, such as the scheme being developed by the IWPB, that would allow pellet suppliers and generators to demonstrate that the fuel source and supply chain is sustainably managed and allay concerns regarding harvest rates, carbon stocks, deforestation, biodiversity and social concerns. 16. GDF SUEZ believes it would be more appropriate and practical to implement a scheme whereby suppliers (instead of forest owners) could be accredited. Further, a regional accreditation scheme for pellet suppliers would be appropriate, particularly in areas with long standing forestry management processes, such as those in US and Canada, as this would reduce administrative and cost burdens for suppliers. Question 8 Do you agree with our proposed changes to the article 54 profiling report, and the circumstances in which it must be provided? 17. No, it would be unfeasible to answer some of the questions posed under the article 54 profiling report. The use of an independent auditor to verify that the feedstock has achieved the sustainability criteria is appropriate. 18. GDF SUEZ is concerned that the grounds and criteria for challenging an audit result or timescales have yet to be published and would appreciate sight of these, as well as the criteria and circumstances under which ROCs would have to be reconciled on a generator/unit basis. Question 9 Do you agree with our approach to: i. Allow the use of mass balance approach for the purpose of demonstrating compliance with the sustainability criteria for solid and gaseous biomass, except where that biomass is woodfuel using category B evidence to demonstrate meeting the UK Government public procurement policy for wood, and ii. Require biomass power plants of 1MWe and above to provide a sustainability audit report form an independent verifier, operating to ISAE 3000 standard or equivalent? 19. GDF SUEZ supports the provision of an independently verified sustainability audit report as this helps to demonstrate transparency to customers and other stakeholders and addresses issues of public perception over the sustainability of biomass. 7

10 20. There is scope to introduce an audit accreditation scheme for pellet suppliers. This would allow suppliers and generators to demonstrate that they meet the requirements for UK ROCs, rather than having to undergo an audit for each generator which they supply. 21. GDF SUEZ does not object to the mass balance approach for the purpose of demonstrating compliance with the sustainability criteria for solid and gaseous biomass, we would however want to be able to use mass balance for all categories of solid biomass, as the inability to mix within the supply chain makes whole chains uneconomic. 22. There remains a question as to the appropriateness of the ISAE 3000 standard to demonstrate sustainability for power plants, as it is not specifically designed to deal with the complexities of wood pellet supply chains. 23. There should be clear guidelines for generators should any aspect of the audit be failed - if there is any sanction involved, such audit shall be made solely against the sustainability criteria. Also, in line with other audit and verification schemes, it would be appropriate to allow a grace period in the event of such a failure to rectify the issue and ensure that procedures are amended to ensure that the problem cannot perpetuate. 24. GDF SUEZ agrees with the approach to only require biomass power plants of 1MWe and above to provide a sustainability report from an independent verifier. Question 10 Do you agree that power plants of 1MWe or above should use: i. The greenhouse gas lifecycle tool provided by the UK Government and available from Ofgem website or an alternative lifecycle tool that an independent verifier operating to ISAE 3000 standard, or equivalent, has confirmed it is compliant with the recommendations made by European commission, and ii. Use actual rather than standard inputs for those elements that the GHG lifecycle result is most sensitive to, namely: (a) fertiliser use, (b) type and amount of energy used in processing and (c) transport distances? 25. Yes, we agree that power plants of 1MWe of above should use either the UK Government s greenhouse gas lifecycle tool or one that has been independently verified to meet the standards as required by the European Commission. 26. We feel that that the use of actual data would only be practical where the inputs are clearly traceable and measurable, such as process energy and transport distances. 8

11 Question 11 Do you agree that only power plants below 1MWe, will be able to choose to use high-level default values covering whole feedstock lifecycles as specified within the Renewables Obligation, and are therefore not required to use a GHG modelling tool? 27. GDF SUEZ agrees power plants below 1MWe should be able to use default values. Given the complexity and diversity of the sources of wood for biomass, it may be impracticable and burdensome to require generators to collect the actual data for every wood supply route. Therefore, all generators should be able to choose either (i) to use the best available data to calculate the GHG emissions or (ii) to use highlevel default values covering whole feedstock lifecycles. Question 12 Do you agree that the use of animal manure and animal slurry should be exempt from the GHG emissions and land criteria for solid biomass and biogas and exempt from the requirement to report on the mass/volume used? - If you consider other specific types of non-waste biomass also offer low risks and high benefits and should be considered exempt, please provide reasons for your answer. 28. GDF SUEZ is unable to comment on this question Question 13 Do you agree with our proposals for clarification and consistency across the renewable incentives? 29. Yes, there should be clarification and consistency across the renewable incentives, and it is important to ensure fair and consistent regulation across all operators. 30. There are a number of areas which require further clarification to satisfy the above sentiment; for example, Section 10.9 of the Biomass Sustainability consultation paper states: We propose to make clear that residues from forestry e.g. tree tops, branches, brash, clippings, trimmings, leaves, bark, shavings from felling, should be considered as zero-rated at the process of their collection for solid biomass, biogas and bioliquids. This would mean these residues would be treated in the same way as residues from agriculture and processing. It is not clear what this means or what impact such classification would have. 9

12 Question 14 Do you agree that solid biomass pellets may contain up to 2% by weight of another solid biomass material for the purpose of binding, without needing to report separately on the sustainability of the binding additive in order to be eligible for ROCs on 100% of the resulting biomass generation from the pellet? 31. Yes, GDF SUEZ agrees that solid biomass pellets may contain up to 2% by weight of another solid biomass material for binding. 32. It may be helpful if suppliers were able to use a non-biomass material for binding of pellets, in order to meet unforeseen developments such as new standards. 10

13 GDF SUEZ Energy UK-Europe T: +44 (0) International Power Ltd. Senator House 85 Queen Victoria Street London EC4V 4DP

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