Further fears have been stoked in the wood recycling market after a major energy firm withdrew plans to build two dedicated biomass plants.
Centrica Energy said it has dropped plans for an 80MW station in Barrow-in-Furness and a 137MW plant in Lincolnshire following recent changes to Government subsidies.
In September the Government announced plans to cap the amount of support dedicated biomass would receive under the Renewables Obligation (RO).
The announcement drew accusations of Government bias from the renewables industry and will create further uncertainty among wood recyclers currently hit by weak demand.
Last winter’s warm temperatures and the closure of the Sonae panel board factory in September have contributed to glut of material in wood yards across parts of England. The industry is hoping the development of domestic biomass and energy from waste markets will increase demand.
Peter Butt, executive director of the Wood Recyclers Association said the news from Centrica was “obviously not good” for the industry. He warned the subsidy decision by Government would “breed more uncertainty” which would be bad for the “confidence on which the sector relies”.
In a statement Centrica said: “While the Government has declared its support for biomass as part of the UK’s future energy mix, recent clarification on the regulatory framework relating to dedicated biomass plants indicates a preference for co-firing and coal conversion to biomass.”
“This includes a consultation on a cap on dedicated biomass ROCs, a consultation on greenhouse gas limits on the biomass supply chain not being certain for 20 years, and the likely exclusion of dedicated biomass projects from the new capacity mechanism.”
The news follows a similar announcement by Drax in March, which dropped plans for a 300MW dedicated biomass plant in Selby, North Yorkshire. The firm intends to go ahead with plans to convert existing coal stations to co-fire wood.
A DECC spokesman said: “We are determined to strike the right balance between encouraging investment in renewable electricity and ensuring value for money for consumers. That’s why our proposed approach to support for new dedicated biomass plant recognises its relatively high cost of carbon saving compared to conversion and wind power.
Gaynor Hartnell, chief executive of the Renewable Energy Association, said: “We cannot afford to have companies with the standing and acumen of Centrica dropping out of the sector. This is bad news for employment, the supply chain and energy security. Biomass is an economic and baseload source of renewable power.
She added: “Right now the Government seems to have an institutional bias against new biomass power projects.”