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Deloitte report suggests biomass generation could exceed government estimations

Biomass could provide cheap, sustainable, reliable energy for the UK, but government energy reforms must deliver

5 November 2012

The Government has estimated that biomass could contribute up to 21 per cent of the UK’s 2020 renewable energy generation targets, but a new report from Deloitte, the business advisory firm, thinks it could go further.

The report, Knock on wood: Is biomass the answer to 2020?, says that converting certain old fossil fuel power plants to run on biomass could provide reliable, affordable, low carbon energy for the UK. However, all eyes are on the Government’s much anticipated Energy Bill, expected this month, as the industry wants to see a policy framework and regulatory environment that will give investors confidence they will see a reasonable return on investment.

The UK faces three major energy challenges – decarbonisation, energy security and affordability.

Under the EU’s Renewable Energy Directive, the Government has agreed to generate 15 per cent of the UK’s energy from renewable energy sources by 2020. If implemented correctly biomass could contribute major carbon savings.

Several of the UK’s fossil fuel power stations are forced to close under the EU’s Industrial Emissions Directive (IED). Most of the UK’s ageing nuclear power stations will be decommissioned in the next decade, but events like the Fukushima disaster in Japan and the continuing impact of the global financial crisis have put at risk the Government’s plans for the private sector to replace them. This is against a backdrop of reduced production from the North Sea Continental Shelf and a growing reliance on imported natural gas. Biomass plants could provide reliable generation that would supply low carbon electricity even when intermittent renewable technologies like wind and solar cannot.

The Department of Energy and Climate Change (DECC) estimates that around £110 billion will need to be invested in low carbon generation and network infrastructure by 2020.  The majority of this funding must be committed up front and it will take years before investments can be recovered from customers. With government spending constrained and household energy bills at an all time high, the private sector is expected to bear the brunt of this funding in the medium term. Deloitte’s modelling indicates that converting existing power plants to run on biomass can provide attractive returns for investors, and that it can be competitive with other renewable technologies.

Dean Cook, UK sector leader for renewable energy at Deloitte, said: “In a sector where government subsidies are an integral part of the revenue stream, the clarity of the regulatory regime is crucial.  Government support will therefore shape the future of biomass and its potential to contribute to the UK’s 2020 targets and reduce carbon emissions in a cost effective manner.

“As the amount of intermittent generation technologies in the UK’s energy mix increases, flexible fuel sources that can provide stable and predictable electricity will become increasingly more valuable.  Sustainably-sourced biomass could provide this stability.

“There are hurdles that need to be overcome, but Deloitte believes biomass has the potential to help answer the UK’s energy challenges.  With many of its power stations being forced to shut down under the IED, the question is whether the UK would be missing an opportunity if it did not give biomass more consideration.”

Ends

Notes to editor
About Deloitte
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited (“DTTL”), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

The information contained in this press release is correct at the time of going to press.

Member of Deloitte Touche Tohmatsu Limited.

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