The European Commission’s Renewable Energy Directive requires the EU to fulfil at least 20% of its total energy needs with renewables by 2020.
Initially, biomass had gained a significant profile in Europe in an attempt to meet these objectives, experiencing steady growth from the beginning.However, when compared to other energy sources the UK biomass market remains relatively small at 3.8% of the total energy market, with the outlook remaining uncertain.
There are numerous challenges facing the biomass sector which have generated uncertainty and undermined confidence, leading to growing speculation on its sustainability.
- A lack of Government strategy: Brexit, a new Government taking seat and a less than clear long-term energy policy
- A reduction in available subsidies: Since 2015 there has been a significant reduction in the subsidies available to large-scale biomass end users
- A decline of market investment in infrastructure: The reduction in subsidies and lack of clarity in the Government’s long-term strategy has clearly impacted investor confidence, and failed to attract further much-needed investment in supporting infrastructure and logistics networks
- Availability of biomass crops for domestic production: Previously, biomass energy crop growth was incentivised through the Energy Crop Schemes which have now closed in the UK.
So, the question is whether this sector can survive in the UK without Government intervention and remain a viable fuel option? The European biomass market is similar to the UK in that it faces parallel challenges in establishing both efficient, affordable and reliable value chains to entice growth.
The way forward
If the biomass sector is to stand on its own feet in the absence of Government support mechanisms there needs to be increased collaboration and co-operation between market segments. Tactical and strategic partnerships can benefit the industry by resulting in greater efficiencies and, therefore, reducing transaction costs. For example, increased collaboration between domestic suppliers and end user groups would reduce the dependency on imports and benefit the domestic end-to-end value chain. Some such partnerships have emerged which have benefited from first mover advantage and secured considerable market share, however, if the market is to remain competitive and sustainable, sector participation must be optimal on the whole and not just on an individual level.
Ultimately to enable growth, there needs to be certainty in both revenue and fuel supply to attract investment. If the biomass sector continues to receive and allocate Contracts for Difference (CFDs) this will go a long way to building up sector confidence. In the absence of subsidies, however, market prices must support project economics. One way of achieving this is by increasing value chain efficiency through:
- Capitalising on declining industries, like coal, and utilising additional freight capacity
- Identifying cross-industry supply chain synergies where infrastructure can be exploited
- Examining lean, cost-effective solutions to meet operational requirements.
 These statistics consider biomass use in heat and power only. They do not include the use of waste or the production of transport biofuels.
 An example is evident in the UK’s collaboration of key ports and rail freight operators to support DRAX in addition to the alliance of AW Jenkinson and Stobart’s.