Freight specific charge for biomass

Reference: ORR/002/2013
Date published: 15 February 2013
Start date: 15 February 2013
Closing date: 28 March 2013

This was a consultation on whether to introduce a freight specific charge on biomass as part of the periodic review (PR13). A freight specific charge balances payments for freight costs more fairly between businesses, taxpayers and passengers, recognising the wider benefits that rail freight brings against the costs of subsidising rail freight that would not otherwise travel by road.

We received 27 responses from a variety of stakeholders to this consultation. Although some stakeholders were supportive of the charge for biomass in order to maintain consistency with charges for other fuels such as coal, the majority opposed the new charge principally because of concerns about the impact it could have on the development of the emerging biomass market for electricity generation and the government's renewables energy targets.

Stakeholders' main concern was the potential detrimental impact the charge could have on the development of the biomass market and the Department for Energy and Climate Change (DECC) policy encouraging the use of biomass for electricity generation. Stakeholders were particularly concerned that DECC subsidy levels to support biomass did not take account of increases in track access charges and that an increase in costs might deter investors from converting coal-fired power stations to biomass.

Stakeholders commented on how the charge should be calculated. Some argued the charge should be based on the calorific value of biomass in electricity generation, whereas others insisted that the charge should reflect the costs of using the railway. Although some stakeholders were concerned a charge could result in some biomass switching from rail to road most agreed this would not be the case for large-scale biomass electricity production. Some stakeholders pointed out that if the charge was calculated incorrectly it could penalise inland biomass plants with longer rail routes to and from ports (the majority of biomass is imported) and give ports located closer to biomass plants a competitive advantage.

Finally, stakeholders discussed whether the charge should be phased-in to allow the market and its competitors to adapt. The vast majority of stakeholders said that, if that the charge is to be implemented, phasing-in was essential. Many argued that, as the market is not yet established, the charge should be deferred at least until the next control period.

Following this consultation we have decided not to introduce a freight specific charge on biomass as part of this periodic review. We have done so because of the emerging nature of the biomass market for which there is a great deal of uncertainty. Expert advice from DECC and the electrical supply industry has told us the charge puts the deployment of renewable electricity at risk and could alter long-term investment plans. In the light of these arguments we consider that if we were to impose a freight specific charge on biomass there would be a significant risk that it could result in exclusion of the use of the infrastructure by biomass.

We expect to review the position in PR18 when the market is more established and we propose to work further with the industry, and customers for biomass haulage, to understand better the costs they generate on the network and how these should be reflected in charges in CP6.

Our full decision on a freight specific charge for biomass can be found at Annex B pdf icon PDF, 1,314 Kb of our PR13 draft determination published on 12 June 2013.

Consultation document

Last updated - 10 April 2014