Brexit and Biomass

There are real concerns about what Brexit means for the future of the U.K.’s renewable energy sector, which has grown significantly with the help of EU-funded investments and subsidies.
By Amanda Saint | July 27, 2016

The uncertainty that surrounds the United Kingdom’s biomass sector has been swirling for some time, and the recent vote for the U.K. to exit the European Union has exacerbated the situation. Since the Conservative government came to majority power in 2015, things for biomass haven't been looking as bright as before. The Brexit result was preceded by significant cuts to subsidies that had already led to many projects being cancelled or scaled back. An immediate impact of the referendum result has seen the value of the pound plummet against the euro and the U.S. dollar, meaning imports have become much more expensive. As the world’s largest importer of wood pellets for biomass energy, much of which comes from North America, Brexit may hard hit the pockets of many U.K. businesses.

The biggest concern for the sector is that investments will now be significantly cut. Many of the advances that have been made in the technologies and roll-out of biomass have been funded through the European Investment Bank. The EIB is owned by the 28 member states of the EU, with the U.K. owning 16.11 percent of the shares. But to be a shareholder of the EIB, a country must be a member state of the European Union, so the U.K. will now have to pull out of the EIB.

On the day that the referendum results were announced, Werner Hoyer, president of the EIB issued a statement, saying, “Today is a very sad day for Europe. As president of the European Investment Bank, I take note of the U.K. vote with the deepest regret, although of course the bank will work with member states and other EU institutions to assure an orderly transition to a new negotiated arrangement according to the treaty.”

For now, U.K. shareholding in the EIB remains, and the EIB’s engagement in the U.K. is unchanged. While the Conservative party begins negotiating its exit from the EU, EIB shareholders will be discussing how the bank is going to engage with the country in the future.

Funding Fallout
In the past decade, the EIB has invested around 50 billion euros in U.K. projects, particularly in renewable energy and infrastructure. Amongst all the well-founded concerns about the future of the sector, there has been some good news—three big biomass projects that received European Commission approval recently for Contract for Difference (CfD) subsidies will still be moving forward. These are the 420-MW Lynemouth coal-to-biomass conversion for Czech energy firm EPH, Drax’s full conversion of its 645-MW Unit 1, and U.K. company MGT Power’s, 299-MW Teeside combined-heat-and-power project.

Members of EUREC, the Association of European Renewable Energy Research Centres, collaborate on EU-funded projects to advance technologies for all renewable energies. Vinicius Valente, EUREC’s communications adviser, has concerns but is still hopeful that biomass research and development can still advance in a post-EU Britain. “We regret the U.K.’s decision to leave the European Union despite all the breakthroughs achieved by the EU in several strategic areas, including excellence in science,” he says. “EUREC has a long history of engagement with the EU, and our U.K. members are all prominent research centers that have been working for many years with EU funds to unlock the potential of several technologies.”

Many of the research programs that EUREC members and other research institutes and businesses in the U.K. and Europe are involved in are funded through the EU Framework Programme for Research and Innovation, Horizon 2020. This 79 billion-euro funding initiative runs until 2020 and aims to drive forward scientific understanding and innovation in energy and many other areas, particularly those that are tackling climate change.

Former U.K. Prime Minister David Cameron indicated in a statement to the U.K. Parliament that any contract signed under Horizon 2020 will be honored. But it’s unclear if, post-Brexit, it would be honoured with EU money or British money.

Carlos Moedas, EU research commissioner, has confirmed that researchers remain eligible to apply for funding from the Horizon 2020 research program, since the U.K. remains a member of the EU until the end of the negotiations. But if the U.K. is not going to be a part of the EU from 2018 onward, it seems unlikely that any projects involving U.K. universities and businesses that extend beyond then will be top of the list to access that funding pot. Any projects that receive funding must be made up of a consortium of at least three organizations from different member state countries, so the decision is likely to make U.K. organizations a less-attractive partner when consortiums are coming together.

But could the U.K. become a new Switzerland in the way it participates in projects? The “Swixit” Framework Programme that was introduced in 2014 means that Switzerland has the status of “nonassociated, third-country participant” in some parts of Horizon 2020, including projects under the Energy Societal Challenge Work Programme. Valente added, “The U.K. might, in the future, enjoy a similar status. But that said, it is rare that the European Commission’s Horizon 2020 money funds nonassociated, third-country participants. Instead, national funding agencies must cover their costs and this could be the case for the U.K.”

Climate Agreement Goals
The growth of biomass in the EU has been driven by the need to achieve cleaner energy generation in order to meet greenhouse gas emission reduction goals. Considering the backtracking the Conservative party has already done with biomass subsidies, many questions are being raised around the climate change agreements the U.K. has signed up to.

So far, initial signs are good. Statements coming from the U.K. government have confirmed that the commitment to increasing renewable energy generation remains. Amber Rudd, minister for energy and climate change, was an ardent “Remain” campaigner, and issued a statement saying, “We have announced record investment in new heat networks, to enable new and innovative ways of heating our homes and businesses. And we made a commitment to closing unabated coal-fired power stations—a commitment that was praised by leaders across the world. All these commitments remain in place. They will help us rebuild our energy infrastructure, and I am certain that future investment in this sector will continue to flow to Britain’s strong economy.”

On June 30,  the U.K. government also confirmed the Committee on Carbon Change’s recommended carbon budget, aiming for a 57 percent reduction in carbon emissions from 1990 levels from 2027-’32. But in order to achieve these goals, they are investing half of the renewables funding pot in new nuclear.

James Court, head of policy and external affairs at the U.K.’s Renewable Energy Association, says, “The fundamentals of energy have not changed post-referendum, we still need new generation that is cost-effective, low-carbon and secure. This would be the worst time for the government to row back or U-turn on existing commitments, which would be toxic to inward investors. So this is a positive first step, but will need to be backed up by a robust energy plan by the end of the year.”

Innovation Continues
The U.K. has been defined by its technological innovation since the time of the industrial revolution, and leaving the EU will not change that. The drive to develop new and better biomass solutions continues. One of the most exciting new developments in the U.K. biomass industry in recent times has come from a new London-based business, Bio-bean, and its stakeholders are feeling confident that the Brexit result is not going to affect plans for growth at all.

The business started up in 2014 and believes it is the first company in the world to industrialize the process of recycling waste coffee grounds into advanced biofuels and biochemicals. The company works within the existing energy and waste infrastructure and has developed sustainable products and solutions to replace conventional fuels and chemicals. It has launched nationwide collection services and recycles the used coffee grounds into biomass pellets and briquettes. The next step is to turn them into biodiesel, and the ultimate goal is to go international.  “Historically, even during recessions, the appetite for drinking coffee remains consistent no matter the economic circumstances,” says CEO Arthur Kay. “For our business, because our feedstock is already here and we simply divert it from less valuable forms of waste disposal, we are largely insulated from the negative influence of Brexit.”

Despite the uncertainty that has been shaking the country since the Brexit result, there is still a lot of confidence that the renewable energy sector, and biomass within it, can still thrive.


Author: Amanda Saint
Biomass Magazine freelance writer
amandasaintwriter@gmail.com



EDITOR'S NOTE: At press time, it was announced that new U.K. Prime Minister Theresa May has dissolved the country's Department of Energy & Climate Change. Visit www.biomassmagazine.com for continued, up-to-date coverage.