1. The Mature Market : A European Perspective Neil Harrison SAC Environment & Design Senior Bioenergy Consultant

2. 1.Where are we starting from? 2.What are we aiming for? 3.Woodfuel in Upper Austria 4.Summing Up Overview

3. 1.Where are we starting from?

4. 4 Source : DECC Energy Trends, December 2010 Energy Consumption in the EU

5. 5 Renewable Energy Consumption Source : DECC Energy Trends, Dec 2010

6. 6 Source : DECC Energy Trends, December 2010 Proportion of Renewable Energy

7. 7 Proportion of Heat from Renewables 1.4% 63.1%

8. Energy and Heat Use in the UK

9. Whichever way it’s presented, the facts are that : The UK is a huge energy user; The proportion of renewables in the energy mix remains small; Heat makes up the largest proportion of energy demand; Heat is by far the worst-served in terms of RE capacity.

10. 2.What are we aiming for?

11. Renewable Energy Targets in the UK EU 2009 Renewable Energy Directive sets a binding target of 20% of energy in the EU coming from renewable sources by 2020. The UK share commits us to 15%. Target is for 12% of our heat to come from renewable sources by 2020. Longer term targets set by Government are for a reduction in carbon emissions of at least 80% by 2050.

12. How Will We Meet the Target? Composition of Renewable Heat by Technology and Sector (Central Growth Projection, 2020) Source : NERA/AEA : The UK Supply Curve for Renewable Heat, DECC 2009

13. Barriers to Development Source : Ernst & Young, Renewable Heat Initial Business Case, DEFRA/BERR 2007

14. 3.Woodfuel in Upper Austria

15. Upper Austria - A Mature Market A third of total primary energy comes from renewable sources; 46% of the total heating demand is from renewable sources - 31% from biomass (mainly wood); Annual investment in new installations totals €210m, with biomass heat making up € 110m; Use of renewables avoids the emission of 7.4mt/yr CO 2 ; Avoids imports of c. €1bn/yr (value retained in economy).

16. Upper Austria - The Drivers Farmers, foresters and sawmills looking for new revenue streams for forestry residues in early 1980’s; Creative entrepreneurs looking for solutions to the automation of wood-fired heating systems; Heavy taxes on coal in 1980’s due to air quality issues, and high- cost of other fossil fuels (Austria is land-locked, with no gas or oil reserves).

17. Upper Austria - The Carrots Support for enterprises of all types with grants for R&D and capital investment - a feature for 25 years; Support from Agriculture and Forestry Department for skills and training, including apprenticeships in biomass production; 100-year history of forestry practices emphasising sustainability; Creation of State Energy Cluster to coordinate and support activity - 150 member companies. State support for export to other countries globally.

18. Upper Austria - The Sticks Obligation to use renewable heating in public buildings over 10,000 sq ft; Energy performance certificates for buildings; Inspection regime for boilers and AC systems; Minimum requirements for renewable heating and cooling;

19. Upper Austria - The Results Annual revenues from manufacturing, sales and installation of wood-fired boilers of around €530m; Total employment in wood heating c. 4,500 people; 25% of all modern wood-fired boilers installed in the EU are manufactured in Upper Austria (easily >50% of those in the UK); Annual sales of woodfuels approaching €100m.

20. Upper Austria - The Results Highly developed wood energy industry; 30 years of competition with fossil fuel boilers, and also with each other; Process of constant product improvement & innovation. Boiler efficiency 1980-2004

21. Upper Austria - The Results Not just boilers! Chippers, chip handling equipment, pellet and briquette production equipment, computer controls and even fuel is now made and exported from Upper Austria around the world. Austrian consultancies, universities and state institutions export their know-how and expertise around the world. Mus-Max Factory, Gross St Florian, AT

23. Upper Austria - On the Ground Incredibly well developed woodfuel industry, with plenty of competition in the marketplace (good for customers). State Forestry Department has comprehensive woodfuel research, training and even apprenticeship programmes.

24. Upper Austria - Woodfuel Use

25. Upper Austria - District Heating Huge number of district heating plants - in excess of 1,000, with an average size of 1MW.

26. Upper Austria - District Heating

27. Upper Austria - Forest Resources Standing stock in Austrian forests - inventories from 1961-2002.

28. Upper Austria - Woodfuel Prices Competition, improved production efficiencies and increasing resource availability have led to steady (and falling) fuel prices. €/m 3 Pulpwood Prices 1972-2008 at roadside nominal real

29. Upper Austria - Woodfuel Prices Even in times of instability and overheating markets, woodfuel prices are comparatively stable.

30. Upper Austria - Summing Up Woodfuel is the first choice for heating in most homes, commercial premises and public buildings; There is competition and innovation in the marketplace, delivering excellent value for customers; There are a range of ways to have your heat provided.

31. Upper Austria - Summing Up The available resource for fuel is increasing, in marked contrast to fossil fuels, which are decreasing; Woodfuel prices show long term stability, and a downward trend over a period when use was increasing dramatically; State support over a long period of time was needed to deliver an industry and infrastructure that is truly world leading.

32. The UK - Summing Up The soon-to-be-introduced Renewable Heat Incentive has the potential to catapult us very rapidly towards the Austrian position; Some parts of the UK are scaling back on their support for the supply chain, despite evidence from Austria that demonstrates it is at least as important to support as the demand side; Given the right approach, the need to heat a building will actually become a highly profitable enterprise.

33. Principal Contacts Neil Harrison Environment & Design 01668 283 363 07825 781 941 neil.harrison@sac.co.uk Kate Hutchinson Environment & Design 0131 535 3075 07557 033 475 kate.hutchinson@sac.co.uk