Solid fuel businesses could lose over £14 MILLION because of the ban on traditional housecoal and wet wood sales.
The Government’s own figures show that although sales of lower sulphur and dry wood fuels are expected to rise, they may not be sufficiently offset losses elsewhere.
The projected loss in sales, based on government analysis, are as follows:
⁃ Housecoal sales (£14.7m)
⁃ High sulphur manufactured solid fuel (£18.2 million)
There will also be a net loss in profits to the wood industry estimated at £15.9 million as a result of the ban on the sale of wet wood, says the government.
“We estimate the total net loss in profits to solid fuel businesses to be approximately £14.3 million in present value terms based on fixed current market prices in the central scenario.
“The loss in profits is expected to range between £17.1 million in the low scenario taking into consideration a 20% discount and £11.4 million in the high scenario using a 20% mark-up. Coal and high sulphur manufactured solid fuel (MSF) businesses can recover profit losses through the sale of low sulphur MSF.”
The assessment also admits there is “some uncertainty” as to how much wood manufacturers will have to fork out in order to meet compliance.
“Some wood suppliers will need to invest in drying kilns or covered space to season wood in order to comply with the proposed legislation.
“Based on discussions with stakeholders a kiln and the supporting fuel infrastructure are believed to cost between £70,000 and £80,000 for a drying capacity of over 1,800 tonnes of wet wood per year.
“The operating costs (labour, maintenance, insurance and others, boiler feedstock) are estimated at £16 per tonne. Covers to dry wood are estimated to cost £150 per metre squared with a capacity to season three tonnes per year.
“From an analysis of the consultation responses, we estimate that half of wood businesses that will incur some capital costs to dry their wood will invest in a kiln drier while the other half will invest in construction of covered areas for the processing, storing and seasoning of timber and processed firewood.
“There is some uncertainty regarding the size of additional capital investment required to raise existing wood drying capacity to a level that meets the expected demand from consumers following the enactment of the proposed legislation.
“Based on our consultation and discussions with industry experts, wood producers are likely to respond in one of 4 ways to comply with the legislation for quantities of wood sold wet:
• Season it using existing spare drying capacity;
• Scale up and sell only in volumes over 2m3 – potential customers would be both domestic and larger businesses with drying capacity;
• Build home-made cover storage or drying kiln;
• Invest in cover space or drying kiln.
“It should also be noted that the Government anticipates that, initially, there may not be full compliance to the legislation by wood producers due to the flexibility in the design of the regulation and the large number of small retailers which makes the regulation harder to fully enforce. This has been reflected in the analysis.”
Reading all this, I find it interesting that what is already a comparatively small scale industry is being subjected to such a massive overhaul when quite frankly there were other options available.
Admittedly, there is always a balance to be struck. The Government figures do point out that there are potential savings to the customer by switching to more efficient fuels.
However, this is based on a few general assumptions, mostly that those who are currently burning wet wood will switch to other alternatives and also that the prices across the whole market will remain broadly similar.
The big concern has always been though that, despite the clear hopes of the government, will some manufacturers be able to stomach both a hit in terms of sales and also a massive capital investment at the same time?
Clearly, those with large cash reserves may be able to weather that storm, but what about the smaller ones?
Will this be the final nail in the coffin for the local, independent fuel supplier?
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