Fuel

C611/020/2003
Supply chain development for biomass fuel challenges and opportunities

P SIMPSON PDM Group Limited, Nuneaton, UK

INTRODUCTION
The future development of biomass-fired power generation capacity presents significant technical challenges as well as economic opportunities for the bioenergy sector. How the sector addresses the challenges and delivers a satisfactory solution will be the key to the sectors future economic prosperity. Achieving a secure fuel stream that satisfies the business drivers of economy, efficiency and effectiveness whilst remaining within acceptable parameters for environmental impact, quality and future sustainability will be essential to future project development. Developers need to balance the public and political demand for the development of innovative energy resources such as willow and energy crops with the pragmatic economic and fuel security demands of financial stakeholders.

BACKGROUND
Projects completed under the early rounds of NFFO pioneered the use of agricultural residues (from both vegetable and animal production) for renewable power generation. Despite facing significant technological and operational challenges the projects proved the fundamental strengths of the concepts and gave developers the opportunities to establish operational competence in the emerging marketplace.
It is encouraging to note that today, almost 10 years since the worlds first animal-residue fired power plant opened at Eye in Suffolk the UK is still the only country in the world with power plants producing electricity from animal residues such as poultry litter. This is a significant achievement both in terms of renewable power generation and the removal of animal residues and nitrates from sensitive agricultural areas.

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The success of the renewable energy plant at Widnes operated by the PDM Group also shows the application of innovative concepts to provide renewable energy (both electricity to the grid and steam to local users). The plant at Widnes along with a sister site at Wymington, Bedfordshire has been so successful that the company met its initial 40 month production target after a period of only 23 months. The plants performance against tough operational and environmental targets provides a perfect example of what can be achieved through selecting the right technology, and developing the interface between the supply chain and operation of the plant in an efficient and effective manner. The utilisation of similar plant concepts expanded to incorporate other locally produced biomass materials forms part of PDMs future strategy for renewable energy generation. Alongside this continuing development of proven technology and operational concepts the company will be developing other innovative areas of power generation using renewable fuels sourced from agricultural and industrial biomass residues. The UKs track record in the use of closed loop biomass energy crops such as willow and myscanthus is not so good. Many valuable lessons can be learned from the unfortunate failure of the ARBRE project and the lack of success with other projects associated with closed loop biomass. Empirical evidence suggests that for biomass to be successful as a fuel source for renewable energy the material has to be a residue from some other primary production process.

SUPPLY CHAIN CHALLENGES

Future renewable energy projects will have to meet much more stringent regulations and guidelines on all areas of operations, from environmental emissions, feed stock materials, process residue disposal or recycling through to employment conditions. The latest advice on the Waste Incineration Directive suggests that materials previously accepted as clean biomass are now going to be categorised as waste. Therefore any projects looking to use this type of readily available biomass will have to comply with the same emission limits as waste incinerators. The Industry must come to terms with the new legislation and move away from the view that it has an exclusive right to be excluded. Project Operators looking to utilise innovative residue-sourced materials are restricted by increasing demands for audit trails, material analysis and testing protocols laid down by the Environment Agency. Whilst protecting the environment is central to all our objectives in many ways the renewables sector is being excessively constrained. There is much comment in the media about the need for joined-up government policies; the contradictory positions on issues within the renewables sector being taken by DEFRA and the EA are prime examples of the failure to operate a common strategy. For instance, how is it acceptable for certain waste products to be spread on the land and used in arable agriculture but they are severely restricted or even banned from use as renewable fuel for power generation?
For example, if a renewable energy plant wishes to use wood from a timber mill it is virtually impossible to obtain a workable approval, if an animal bedding company wishes to take the same material for use as bedding there are very few if any constraints placed upon them. It is

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ironic that the very same wood products that in their virgin state are deemed a waste and not suitable for use in the renewable energy plants become perfectly acceptable once they come into contact with, for instance, chicken production and are then supplied to renewable energy plants as poultry litter.

FUTURE OPPORTUNITIES
It is my view that issues such as the Waste Incineration Directive, Landfill Directive and IPPC as well as the Renewables Obligation should be viewed positively as opportunities rather than merely threats to the sector and in particular to operators of older generation plant. We must not lose sight of the global benefits being sought by tighter regulation and legislation. Whereas in the past developers have been able to secure long term supplies of agricultural residues and other forms of open loop biomass fuels and transport them often hundreds of miles to the project sites, in the future the focus will have to be on locally sourced materials fuelling smaller scale sustainable low impact projects. The projects will have to overcome the technical constraints resulting from the implementation of the Waste Incineration Directive whilst still being able to operate and provide an acceptable economic return for the financial stakeholders. The fuel streams for such projects will form a basket of open loop biomass encompassing materials such as animal production residues, recycled materials, food production residues, biosolids as well as new energy crops. Furthermore the energy production both in terms of electricity and steam must form part of the portfolio of energy available to the local area. Such small scale projects will need to be developed in partnership (either formal joint ventures or on an informal cooperative basis) with local stakeholders such as Councils, Water Companies and the wider local community. Engaging the local stakeholders will assist with acceptance of the projects as local solutions to local problems. Past objections to renewable projects have centred on the impact on the local environment as well as the NIMBY issues such as importing other peoples problems for recycling/disposal. Looking at the materials available for fuel streams, the UK land spreads around 98 million wet tonnes per annum of industrial residues. Of this, 93% comes from animal production and around 5% is from other industrial sources such as resides from fruit and other vegetable processing (it is estimated that fruit and vegetable production alone yields around 3 million tonnes). Even allowing for localised fertiliser usage on arable land there remains a significant potential renewable fuel source available nationwide from the animal production sector. The landspreading of residues is going through a period of change, whilst the use of landspreading is certain to continue increasing legislation and environmental control is certain to create further opportunities for the use of materials from this sector as renewable biofuels. The UK is obliged under EU directives to reduce the quantity of biodegradable material being placed into landfill. Because the UK is so dependent on landfill the government has set out the following timetable:

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By 2010 to reduce biodegradable municipal waste landfilled to 75% of that produced in 1995 By 2013 to reduce biodegradable municipal waste landfilled to 50% of that produced in 1995 By 2020 to reduce biodegradable municipal waste landfilled to 35% of that produced in 1995.

To put the targets in context, assuming 60% of municipal waste is biodegradable, the UK needs to divert at least: 3.2 million tonnes of biodegradable municipal waste each year to meet the first target; 7.5 million tonnes of biodegradable municipal waste each year to meet the second target; and 10.1 million tonnes of biodegradable municipal waste each year to meet the third target. The targets create significant opportunities for material recovery for renewable power generation.
The UK also disposes of almost 50% of sewage sludge by land recycling such as injection.
As well as residues from agriculture and recycled elements of domestic waste streams, the UK produces a huge quantity of residues from industrial food production. Such residues often go to land filling or have, in the past, been used for the production of animal feed rations. The restriction on the use of landfill as a disposal option is going to create a potential major new area of fuel materials for the renewables sector.

Building on their past success in the renewable energy sector the PDM Group have recently announced plans for an Integrated Renewable Energy and Recycling facility adjacent to their existing processing plant at Hartshill near Nuneaton in Warwickshire. The supply chain strategy for the plant provides a good example of the type of localised renewable energy and recycling plants that are likely to become common place in the future renewable bioenergy marketplace in the UK.
As well as utilising the meat and bone meal produced from the neighbouring rendering plant,

the project will recycle 60,000 tonnes of locally produced waste materials (the biomass element will be used for power generation and the other elements recycled) and existing pipe work to the adjacent water treatment works will be utilised for the pumping of biosolids for integration into the fuel feed.
As well as delivering the usual benefits of renewable energy production, C02 reduction and

local employment the project will deliver a significant reduction in local HGV traffic and odours. Looking at the market from a holistic viewpoint it can be seen that the projects that have achieved success up to now have either followed a mixed-bag approach to securing and developing fuel streams or have focussed on a material where the developer has existing experience and competence. Looking at the early NFFO projects in particular, materials with known benefits and handling characteristics such as wood chips and straw have been used to balance the development of innovative materials such as poultry litter, coffee residues, mustard husks and spice wastes. It is this wide ranging fuel procurement approach that I believe offers the best route for future developers. Future developments should use this type of model and the combination of known products and new developments for developing their own supply chain strategy.

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Although a pragmatic approach utilising a variety of fuel types from different material streams including industrial residues may not fully satisfy the desire for process and supply innovation it will enable developers in the sector to contribute to the UKs ability to deliver on environmental improvement targets. In addition to the technical and operational challenges such a market-driven mixed bag strategy will undoubtedly present, the developers will also need to establish the business systems in such a way that they provide a greater customer focus than has existed up to now. If the sector is to create a viable alternative to systems such as landfill then the way the supplier/consumer relationship is handled will have to be managed accordingly. For instance, moving towards a service-based operation will require developers to look closely at their technical systems and in particular their materials handling and storage. Put simply the process employed must be able to handle the by-products generated by the supply chain it serves and provide an acceptable level of service guarantee. Although moving operations towards the utilisation of residues from food production and other industrial sources as well as energy crops or agricultural products provides potential benefits to the Project Operator it will also mean changes to the methods employed for supply chain management. Project Operators will have to manage their supplier relationships on an Account management basis utilising skills and systems such as those that are now extensively employed elsewhere in the service sector. Up to now Projects have operated in an almost closed market for fuel materials, with the demands for renewable energy compliant feed stocks such as poultry litter or straw etc. certain to increase over the coming years the Operators will have to develop their resources and capabilities in such a manner that they are able to service their markets and create sustainable long term relationships with their supply chain partners. A fundamental change in attitude on the part of Developers towards their supply chain partners is required to reflect the change in strategic direction and new marketplace. The supply chain partners will need to feel comfortable that the Project Developer will create a secure, reliable disposal route for their by-products. A route that not only gives an environmentally sustainable option but will not suffer frequent delivery suspensions due to plant breakdown or an inadequate stock holding capacity at the plants. Passing the pain of poor design to supply partners does little to encourage long term cooperation.

SUMMARY
If the Renewable Bioenergy sector is to develop and maintain a competitive advantage within the wider environmental market against alternative disposal routes attention must be paid to focussing on the supply chain and maintaining partner loyalty and level of service. Developers looking to leverage their resources employed in managing supply chains may look to expanding the range of services offered to encompass materials management for alternatives such as composting or biogas production. The ability to deliver an integrated approach to the recycling or recovery of materials for a variety of uses (be it power generation, compost, biogas or biodiesel) will enable the sector to structure its operations in a

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sustainable, economically beneficial manner. Developers could extend their areas of operation to provide a unified disposal route for all grades of organic residues. Future developments will undoubtedly be unable to attract the same level of financial support for infrastructure and operating costs from the taxpayer as has existed in the past. In order to operate successfully in an environment where public subsidy will be reduced or removed Operators will have to focus on their supply chain costs (providing a financial alternative to landfill for instance), plant developmenr/operating costs and the quality of service provided to the customer. By carefully utilising the opportunities created by developments such as the Waste Incineration Directive, Landfill Directive and IPPC legislation, Project Developers will be able to create robust, sustainable business models and generate healthy economic returns for investors in the renewables sector. Creating projects that enable supply chain partners to comply with their own environmental obligations and targets whilst also delivering a fuel stream compliant with the Renewables Obligation fuel-type criteria will be central to the sectors future success.

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