FIT Company breaks cover
February 28, 2010
The UK’s Feed in Tariffs for low carbon energy production are about to come into effect and in a bid to steal a march on any potential competitors one specialist supply company has broken cover.
Ownergy seems to have a business model eerily similar to one that I suggested last June in my post Energy Ideas Part Two. Not only is it going to do all the technical assessment, design and installation, but its also offering management and finance for the installations and will be covering all technologies that attract an FIT.
The guy who is running it, Phillip Wolfe, is a big cheese in the Renewable Energy Association and seems to have had a big hand in the design of the FITs in the first place, so I doubt that he’s a regular reader of this blog. Who says that only the major energy companies can capture government policy mechanisms 
Got even more wood ?
February 3, 2010
So DECC has launched a consultation document package for its Renewable Heat Initiative (RHI)
Lots of good stuff in there, but the bit that I’d like to comment on is the incentivisation of wood chip/wood pellets for domestic heating.
Feel free to correct me if I’m wrong but to me this provision looks like a commitment to an effective long term taxation of the rural poor. Its a bit counter-intuitive at first sight, after all how could an incentive to use local renewable biomass result in higher bills ? Well, its all to do with having a limited land package available to provide that biomass.
There is a distinction in the consultation between biomass that originates from wood, that which comes from grown for energy crops and that which is the result of existing agricultural processes (such as straw), but what concerns me is the interaction between existing managed woodland and possible new energy crops such as mycanthus and willow. The problem is that the RHI incentives only relate to pellet or chip burning boilers effectively replacing fossil-fuel burning boilers and central heating. Standing hardwood doesn’t make economic sense for pelletisation or chipping, its wears the machinery and takes more time and energy to produce and harvest.
What the consultation leaves out (and I can’t find mentioned anywhere in the document package) is the economic impact on existing wood users and those who cannot replace boilers. In other words me !
My situation is as follows: I live in a little village in Cornwall that is a good 10km from the nearest gas main. Most houses in the village use coal or wood to supplement Economy-7 electric heating. In many ways its a typical granite-built miners village. No cellars, very little outside space, houses are well over 100 years old (so low ceilings) and built of thick solid stone walls. Speaking for myself only; I don’t have a boiler, just an immersion heater that I turn on if and when I need hot water. I don’t have central heating, just a single electric storage heater that is powered by Economy-7 over-night. I rent the cottage and have only a small amount of space outside. I am not unusual in this county.
What I do have is a nice big fireplace that I can settle down in front of in the evening. I burn wood in that grate and buy my wood from local suppliers or one of the many local shops who sell 5kg bags of split logs over the counter.
My concern is that if pelletised or chipped wood becomes a lucrative product, managed woodland in the area will shift towards those products and away from larger trunked species suitable for splitting and domestic use. It’ll take time, I don’t expect to see the price that I pay for wood to rocket overnight, but the house that I live in will be around for at least another 100 years so the issue is not gong to go away. Over the 20-50 year timescale, by shifting the forestry from bulk wood to processed chip you will see a price differential mount that penalises those living in houses that cannot be physically altered to accommodate pellet burning boilers. These houses are generally smaller, cheaper and occupied by those less able to cope with price rises. Effectively this is an incentive that will put the rural poor at a greater disadvantage than ever.
I like the idea of increasing biomass use as I previously stated in Got Wood ?, but this particular policy seems poorly devised.
Random Energy Ideas Part Two
June 19, 2009
Feed-In Tariff Franchises
I like this one. Its got real possibilities.
The UK is going to bring in feed-in tariffs for some renewable energy sources. Not sure which. Not sure when. But it will happen. This opens some possibilities, like roof rental for solar. My idea is a bit more holistic.
If feed-in tariffs were enabled the possibility of local ‘Mom & Pop’ power companies is raised. This could placate much enmity within the planning process with operators being locally based and directly accountable to the communities that they live in (there has always been an issue with perception vs reality here but I won’t go into that).
To get a significant number of these ‘local’ power companies why not set up an off-the-shelf McPower franchising system.
The franchise would cover the technical feasibility, planning process and engineering set-up. Once commissioned the franchisee would be tied to the franchisor (possibly an existing network operator, possibly not) who would supply any specialist consultancy and engineering supplies required at +/- market rate.
The franchisee would be responsible for operation, care & maintenance of the installation. It would, for a large proportion of the set-up fee, take a cut of the energy supplied and a portion of the sale of any carbon credits generated. The option could be given that the franchisee can ‘save’ carbon credits for redemption in the future thus giving them the option to hedge their capital investment through exposure to the EU carbon market.
Capital investment for the project would initially be via a loan from either the franchisor or a commercial bank that has applicable skillsets (it would be an investment bank but I’m not sure that any of those still exist).
The reason for a network operator to engage in this kind of operation is
less on the ground staff, pensions, etc
a quick and guaranteed payback on capital investment (loan would be secured)
probably an increased chance of gaining planning permission for additional generating capacity covered under the RO
a tied-in supply of carbon credits (under supposed terms & conditions of franchise)
Reasons for planning authorities to buy-in
local operator on a scale that is accessible and accountable (to local govt and populous)
meets objectives on employment (many areas with potential for renewables are both under populated and under employed)
meets objectives on sustainable industry (with majority of supply chain easily seen it is easier to assess sustainability)
Reasons for a franchisee to buy the franchise
allows a small skilled/semi-skilled business to operate in an area that is remote (lifestyle)
ethical industry (lifestyle)
allows access to an area of industry that was not previously available (economic gap)
has back-up from the big boys (insurance)
can grow the business by adding more sites (possible for terms and conditions allow for good corporate citizenship proof by operation. This would qualify the franchisee to acquire more sites in the area as they gain a good reputation within the community. Cycle of benefit)
Possible problems
Still requires a well funded corporate or govt agency behind it to sustain the model (to facilitate loans and supply chain economies of scale that make the franchise model viable)
Franchisees may be seen as puppets rather than local operators
Ideal first targets large farmers and land owners with significant on-site energy needs (there is a possibility of linking in with subsidies for CAPEX on renewables for these to negate the need for development loans). It allows a risk reduction and diversification of income stream for these users.
There’s your business model, now away you go and make it happen
