Biomass wins initial exemption from new UK rail charges
July 10, 2012
By Argus Media
July 10, 2012, London, UK — Biomass cargoes transported by rail will not be affected by proposals to implement freight charges to recoup damage to UK rail operator Network Rail's lines, according to the UK Office of Rail Regulation (ORR).
The UK biomass market is not yet sufficiently developed so will not face the new track access charges, according to ORR proposals. But the charges, which will be levied against the rail transport of “inelastic” electricity supply industries such as coal and iron ore as well as spent nuclear fuel, could be added to biomass rail freight costs as soon as 2017, the ORR said.
“We are not proposing to levy such a charge for biomass as part of this periodic review because the market is in an early stage of development,” ORR said in consultation documents.
“Instead, we propose to revisit this policy to coincide with the recalculation of its associated subsidy regimes — from 2017 for England and Wales. We are considering whether we would then implement any charge for biomass at the point that the new credit levels are introduced or for the subsequent control period.”
In addition, there is currently little movement of biomass by rail in the UK, according to a study by consultancy MDS Transmodal, commissioned by the ORR, which examined the impact of changes in track access charges on freight traffic.
“The only significant movement of biomass by rail in the base year [up to the end of September 2011] is from the port of Tyne to the Drax co-firing power station at in Yorkshire,” the study said. “And in the near term, an increase in rail freight is unlikely to come from the development of new dedicated biomass stations inland, as most of the planned and proposed larger projects are sited within or in close proximity to a deepwater port estate where they can receive imports directly.”
In addition, ORR noted that smaller plants would be likely to source biomass from local areas, and so would have less need to access the rail network.
Eligibility for the charges was based on competition from road freight, elasticity of demand — how the demand for rail freight might fall or rise as a result of higher charges— and whether the market could bear the charge.
Although the actual cost of the charge is yet to be set, ORR has suggested that it is likely to be calculated on a per tonne kilometre basis. The consultation closes on 10 August and conclusions will be published in November.
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