ANALYSIS - Biomass power hopes for UK boost in 2002

Biomass, which uses plant and animal matter to provide power, has been in the doldrums for the last couple of years, hit by high costs and a hiatus in government support for new renewable energy schemes. Now hopes are rising the industry could be kick started by government plans to introduce a \"renewables obligation\" in April, forcing electricity suppliers to buy at least three percent of their power from green sources this year. \"Everyone is waiting for the renewables obligation to kick in on April 1. It is an extremely important event,\" said Melville Haggard, director responsible for financial advice at the Impax Group which specialises in finance for environmental schemes. \"The obligation creates a legally enforceable demand driver,\" he added. The rules require companies to buy just over 10 percent of their supplies from green sources by 2010 and will create a renewables market worth around 750 million pounds by the end of the decade. WIND, BIOMASS SEEN DOMINATION Analysts expect wind and biomass to be the main winners under the renewables obligation as their technology is proven whereas the costs of solar power are still too high and tide and wave power technologies are in their infancy. Wood chips, straw and poultry litter already produce small amounts of electricity for Britain\'s homes. These schemes are backed by the Non Fossil Fuel Obligation system but funding for new schemes stopped three years ago while preparations were made for the renewables obligation. If biomass takes off, then farmers could plant thousands of acres of land with energy crops like willows and miscanthus, or elephant grass, a bamboo-type grass which would be harvested to fuel small power stations. Analysts say \"bioenergy\" will need help if it is to follow the example of wind power where government support, in countries like Denmark and Germany, led to the building of large-scale manufacturing plants and a sharp drop in costs. \"Biomass needs to be encouraged. Wind is nearly there and can just about stand on its own two feet,\" said Stewart Gray, an analyst at Edinburgh-based consultants Wood MacKenzie. Wind power generation costs have tumbled to around three pence a kilowatt hour, compared with 10-11 pence when the first turbines started whirring in Britain in the early 1990s. In contrast, biomass companies need at least five pence a kilowatt hour to make a profit at the moment compared with current wholesale prices of around two pence. LARGE UTILITIES LOOK AT BIOMASS Signs are emerging that large utilities, which have announced big investments in wind in the last few months, are also gearing up to pour cash into biomass. Powergen plans to build 1000 megawatts of renewable generation by 2010, of which 800 MW will be wind power and 200 MW will be for bioenergy, said a spokesman. The biomass industry says Britain will needs to build about 1000 MW of biomass power stations, up from just over 100 MW today, if it is to meet its target of 10 percent of power from green sources by 2010. \"Biomass has to feature. Hydrocapacity is limited, landfill gas will decline over time and there is only so much land available for (onshore) wind,\" said Keith Pitcher, strategic development manager at First Renewables, a subsidiary of water utility Kelda Group Plc. First Renewables runs the eight MW ARBRE wood chip fired power station and has plans for a 38 MW plant but will not be able to complete financing for it until the renewables obligation has come into force, he said. Story by Margaret Orgill REUTERS NEWS SERVICE