7 March 2023

Why the Government would be wrong to launch a risky bet on biomass


With the Spring Budget just around the corner, it’s no surprise that Westminster’s legion of lobbyists are intensifying their efforts to influence tax and spending decisions one way or another. 

Given how far it has rocketed up the political agenda, energy policy is an area where campaigning activity has been especially frenzied. The recent establishment of the Department for Energy Security and Net Zero has also thrown an interesting dynamic into the mix. Should power companies emphasise their ability to reliably keep the lights on, or to cheaply decarbonise? 

One group claiming to be able to do both is the biomass industry. Biomass is an umbrella term referring to energy derived from organic materials, but it is generally used as shorthand for electricity generated in power stations by burning tiny wooden pellets.

On the face of it, biomass appears to occupy a Goldilocks position. The industry will tell you that it’s a flexible, reliable and secure source of power which contributes nothing towards climate change. It is a natural complement to renewables, able to ramp up and down to fill in the gaps when the sun doesn’t shine or the wind doesn’t blow.

So what’s the issue?

Well, a growing body of scientific evidence casts serious doubt on how ‘carbon neutral’ biomass really is. In short, while trees grown for their wood do draw down carbon dioxide, it takes time to regrow them; and the harvesting, processing, and transporting of all the pellets produces emissions even before they are burnt. Meanwhile, the price of pellets has soared following Putin’s barbaric invasion of Ukraine, and the tumbling cost of renewables means they are now realistic competitors.

The industry is well aware of this and is now touting ‘biomass energy with carbon capture and storage’ (BECCS) as the way forward. The idea here is to capture the emissions of combusted biomass before they are released into the atmosphere – in theory presenting a way of generating energy which actively brings emissions down, rather than simply not producing them. Not even wind or solar can make that boast.

As it stands, however, the technology behind BECCS is far from proven and the industry wants help to get it off the ground. That’s not entirely unreasonable – government support for renewables has seen their costs plummet, and shielded us (to some extent) from the ongoing gas crisis. 

But when it comes to designing the shape that support should take, the Government must tread carefully. The biomass industry has been banging the drum for a scheme which would pay a fixed guarantee for electricity they produce – modelled on the ‘contracts for difference’ (CfD) approach which is widely used to finance renewables, and even nuclear energy.

But given how untested BECCS is, agreeing to such a scheme would mean charging headlong into a risky proposal, with no certainty that the technology will even work. To put this in context, one recent study found that almost eight in ten large-scale carbon capture projects ultimately end up being cancelled or put on hold. The cost involved is huge too. Energy analysts have suggested that a BECCS CfD just for Drax  – by far the biggest player in the industry – could cost over £31bn. This would be paid over a span of decades, either through a levy on energy bills or directly funded by taxpayers.

If the selling point of BECCS is that it can sequester emissions, then that should be the focus of any potential government support. Rather than an expensive bet on biomass, a better approach would be to design a scheme – perhaps an advanced market commitment – which is open to any and all technologies capable of capturing carbon, regardless of how they go about that. This would bring many more ideas, techniques and entrepreneurs into the fold, injecting a competitive edge which will ultimately be what stimulates innovation in the market and pulls prices down.

You can’t blame the biomass industry for trying. Indeed, for decades, their lobbyists have succeeded in extracting taxpayer money to turn a profit. But at a time of straitened public finances, it is more important than ever that government support is subject to scrutiny. 

Energy policy has long been a vexed issue in Britain – littered with poor decision making (or, more accurately, the lack of any decision making at all). The Budget therefore presents either the risk that that continues, or an opportunity for change. For the sake of taxpayers and the environment, let’s hope it’s the latter rather than the former.

Click here to subscribe to our daily briefing – the best pieces from CapX and across the web.

CapX depends on the generosity of its readers. If you value what we do, please consider making a donation.

Eamonn Ives is the Head of Research at The Entrepreneurs Network.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.