The dark horse of Ireland’s renewable transition?

Matthew Clancy, Lead Energy Modelling Specialist with SEAI, highlights the crucial role bioenergy must play in Ireland’s transition to a sustainable energy system.

Bioenergy has a critical role in Ireland’s move to a more sustainable energy sector. Increasing its use can reduce greenhouse gas (GHG) emissions, reduce the exposure of Irish companies to the price volatility of imported oil and grow economic activity in domestic supply chains.

SEAI recently completed a number of analyses focused on the potential availability and cost of biomass resources, the costs of policy options to drive uptake, and the potential for Irish supply chains to maximise the value from investment in new technologies and biomass fuel.

The evidence presented in these and other studies can help inform measures aimed at invigorating the bioenergy sector to overcome some of the barriers that currently persist.

Role in targets

Approximately half of the energy required to meet our binding renewable energy targets in 2020 is anticipated to come from bioenergy. While much public discourse is focused on renewable energy in the electricity sector, particularly wind, deployment of bioenergy technologies must also increase in all sectors: heat, transport and electricity. Crucially, much of the renewable energy output from bioenergy technologies will displace GHG emissions in sectors that count towards Ireland’s GHG target.

Potential resource availability

SEAI’s analysis of the potential availability and harvesting costs of our national biomass resource shows, that the planned renewable energy output from bioenergy in the heat and electricity sectors could be fuelled entirely from domestic resources, should market prices rise sufficiently to cover the harvesting costs of the less accessible resources required. A doubling of current bioenergy prices could make this a financially viable prospect for most potential domestic biomass sources. The availability of competitively priced imports of refined wood products may limit the market for indigenous biomass. Policy aimed at stimulating demand for domestic resources needs to be cognisant of the potential impact of low cost imports.

The resource requirements for biofuels in the transport sector are far in excess of the domestic potential and the availability of sustainable imports may be restricted. This is an EU-wide issue and will not impact on Ireland alone with active discussions ongoing between several EU institutions on the issue. Biogas may have a role in the transport sector but numerous deployment and cost barriers may limit its potential before 2020.

Renewable heat

Policies are in place to encourage bioenergy use in the electricity sector through the REFIT scheme and in the transport sector though the Biofuels Obligation, notwithstanding the challenges associated with high efficiency CHP requirements and availability of sufficient biofuels that meet EU sustainability standards.

Policy for the heat sector is less well developed. Our analysis indicates that, even under optimistic assumptions of what current policy can deliver, Ireland risks falling short of the 2020 targets. Any shortfall will expose the Irish exchequer to penalties, fines and compliance trading costs under both the Renewable Energy Directive and the 2009 Effort Sharing Agreement. To avert this scenario, the equivalent of an additional 200 large industrial sites or 2,000 large services sector buildings or 300,000 residential dwellings (or some combination) must change to a renewable heating source between now and 2020.

In recognition of the need for action, the Government’s draft Bioenergy Plan suggests a Renewable Heat Incentive (RHI) instrument as the primary means to close this gap. Our analysis of the policy options available shows that the costs of an RHI type scheme are closely linked to how oil prices will develop in coming years, the extent to which imports of refined wood products are available, how effective energy efficiency policy is at reducing overall heat demand, and the degree to which a RHI tariff structure focuses on smaller scale renewable heat options.

The estimated support is estimated to be of a similar magnitude to that required for wind energy and significantly less than the support levels for bioenergy in the electricity sector. Unlike the REFIT scheme, an RHI is likely to require direct exchequer funding. Any increased emphasis on biomass use in the electricity sector is likely to also increase policy funding costs as increased demand for scarce biomass resources will push up the price in both the heat and electricity sectors.

Enterprise benefits

Biomass boilers in the industrial and services sectors, with large year round heat loads, tend to be most competitive with fossil fuel options and can deliver increased uptake at the lowest cost. Recent market led deployment of large scale biomass boilers in the Aurivo dairy plant in Ballaghadereen and the Astellas plant in Tralee is real world evidence of the willingness of market players to move to biomass – even in the absence of policy support. The biomass supply chain in Ireland is well positioned to capture some of the estimated

€200 million per annum that sites such as these are poised to spend on biomass fuel. A move to biomass will lessen the dependence of rural industry on oil and will benefit the long-term competitiveness of these industries, reducing the risk of re-location, if oil prices rise.

The diffuse nature of the bioenergy sector and the complexities of the supply chain mean that concerted action is required to address a number of supply side and demand side barriers. A policy instrument in the heat sector is likely to induce a significant increase in bioenergy demand and can help address some of challenges. Overcoming the barriers to the deployment of bioenergy has a large potential environmental, enterprise and economic payoff for Ireland.

For further information, please visit www.seai.ie/publications and consult Bioenergy Supply Curves for Ireland, Ireland’s Sustainable Energy Supply Chain Opportunity, and Renewable Heat in Ireland to 2020 (forthcoming).