Government subsidies to encourage power companies to burn wood are distorting the market for timber and forcing up prices in manufacturing and construction industries, Channel 4 News has learned.

The Drax power station's increased use of biomass is pushing up timber prices

The largest consumer of biomass fuel in the UK is now the Drax power plant in Selby, North Yorkshire. It is also the largest source of carbon dioxide emissions in the UK as a result of burning coal.

This raises questions about incentive schemes for biomass power in the UK, which were established to try and encourage farmers to grow alternative sources of biomass fuel or to see wood recycled before being burned.

Senator, Britain's largest office furniture manufacturer, says the price it pays for chipboard, one of its main materials, has gone up 30 per cent, with a 10 per cent increase in the last quarter alone.

Biomass burning wood is hitting our industry and any industry that uses wood-based products. Paul Clarke, Senator furniture manufacturers

"Biomass burning wood is hitting our industry and any industry that uses wood based products,” says Paul Clarke, commercial director.

While around 30 new biomass power plants have been approved or are awaiting planning permission, Drax is now in the unique position of being Britain's largest single source of renewable energy as well as our largest source of carbon dioxide emissions.

'Biomass is a really good opportunity'
This year Drax completed a new biomass facility to increase the amount of wood and other agricultural by-products like husks and straw it can burn alongside coal in its furnaces.

Last year Drax burned around 900,000 tonnes of biomass – mostly wood. Its owners say that the subsidy on biomass – around £25 for every megawatt-hour in the case of Drax – should be increased to allow them to burn more. Its ultimate ambition is for at least half of its fuel to be biomass – around 7 million tonnes a year.

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"Biomass is a really good opportunity for the UK and the world to reduce carbon emissions," said Peter Emery, production manager for Drax Power Limited.

Biomass is a really good opportunity for the UK and the world to reduce carbon emissions. Peter Emery, Drax Power Limited

Given the scale of Drax's carbon emissions, burning biomass is one of the only ways the plant can meet legally binding targets to reduce carbon emissions in the medium term.

The current subsidy system allows them to burn a maximum of 12.5 per cent. They are now lobbying government to have that cap raised.

"If we don't get that support then I think we are squandering a real opportunity to save carbon emissions today. Not just at Drax but in the UK generally."

The Drax power station's increased use of biomass is pushing up timber prices

Drax biomass plant in Selby being built (Steve Walsh)

Making something positive
But any increase in subsidy that encourages power plants to burn virgin timber – often imported from overseas – would unnecessarily harm their industry, said Paul Clarke.

"We want the wood to come to us so we can make something positive out of it – use it for a life of 20 years or so before Drax and the people burn it to get power back," said Clarke. "The power is always there - we want to use the wood first."

Their factory in Accrington, Lancashire, has been part-powered by off-cuts from wood used in the plant for 12 years.

As Senator see it, subsidy for biomass fuel should reward people for either making use of waste timber or alternative sources of fuel that don't impact other sectors.

Domestic supply chain for wood
The subsidy system was set up to encourage farmers and foresters to grow biomass crops. These include grasses like miscanthus, as well as fast-growing trees like willow and poplar.

Subsidy is also designed to reward new, small-scale, purpose-built biomass plants – not existing fossil-fuel plants.

"The idea behind subsidising burning of biomass in coal-fired power stations was to try and establish domestic growers, and a domestic supply chain for wood," said Dr Rob Gross, Director of the Centre for Energy Policy and Technology at Imperial College, London.

The idea behind subsidising biomass burning was to establish a domestic supply chain for wood. Dr Rob Gross, Imperial College

"If that could be made to happen, then that would be a very good thing for biomass fuel and it should also relieve the pressure on furniture makers and other users of wood,” he added.

“Unfortunately despite trying for about the last 10 years, as yet that hasn't happened."

Rising wood consumption
Industry body, the Wood Panel Industries Federation, estimates that there is the capacity in the UK to produce 16.6 million tonnes of wood each year.

They say if the government were to achieve its 2020 greenhouse gas emissions targets for biomass generation, wood consumption would have to rise to about 50 million tonnes per annum.

Studies funded by the UK Energy Research Centre, however, suggest that if currently unused agricultural land in England, were planted with coppiced wood, an extra 7 million tonnes could be produced each year – the same mount Drax plans to burn.

In a statement, the Department for Energy and Climate Change told Channel 4 News: "It is not our intention for our renewable support mechanisms to adversely affect other industries.

"We believe this can be minimised by increasing the supply of wood and forestry residues available, better management of our waste wood, and the increased use of other biomass resources such as food waste and perennial energy crops."