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JOINT COMMITTEE ON AGRICULTURE, FISHERIES AND FOOD díospóireacht -
Wednesday, 21 Jul 2010

Proposed Incentives for Co-Firing Peat Stations: Discussion with Coillte

I welcome Mr. David Gunning, chief executive, Mr. Gerry Egan, group director of strategic and corporate affairs, and Mr. Neil Foot, chief operations officer, who are here to make a presentation on the potential implications for the forest products industry of the proposed incentives for co-firing peat stations.

Members are reminded of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of the evidence you are to give this committee. If you are directed by the committee to cease giving evidence in relation to a particular matter and you continue to so do, you are entitled thereafter only to a qualified privilege in respect of your evidence. You are directed that only evidence connected with the subject matter of these proceedings is to be given and you are asked to respect the parliamentary practice to the effect that, where possible, you should not criticise nor make charges against any person(s) or entity by name or in such a way as to make him, her or it identifiable.

Mr. David Gunning

I thank the Chair. We are grateful for the invitation from the committee to address it on this matter. We raised the matter on the last occasion we appeared before the committee in mid-May. We indicated its importance to Coillte. I congratulate the committee on the excellent report prepared by Deputy Andrew Doyle, the Green Paper on Forest Protection and Information in the EU: Preparing Forests for Climate Change. It is a good day for forests and forestry when we see a report of this quality.

Coillte has a number of successful businesses, specifically the panels business. The panels business in Ireland has four main players, Masonite Ireland near Carrick-on-Shannon, County Leitrim, Finsa Forest Products in Scarriff, County Clare, Medite Europe Limited in Clonmel, which is owned by Coillte, and SmartPly, which is owned by Coillte in Waterford Port in south Kilkenny. These businesses source their raw material from a range of inputs, including forest thinnings, pulp from the forests or the residues from sawmilling processes. Recent announcements of subsidies paid by the State to energy use, specifically co-firing in peat stations, has significant capabilities to distort the market and render businesses less than competitive. I am joined by Mr. Gerry Egan, who has appeared before this committee before, and Mr. Neil Foot, the chief operating officer for the Medite Europe Limited and SmartPly plants. Mr. Foot will explain the details of the slides.

Mr. Neil Foot

The first slide concerns Coillte panel products. The photographs give a flavour of the businesses. Mr. Gunning referred to the fact that these are successful businesses. Not everyone knows about them because they are somewhat under the radar. I appreciate that the photographs are small. Members will see two world-scale production plants. One is in Belview, County Kilkenny, and the other is in Clonmel, County Tipperary. These are the Coillte Panel Products plants — the Coillte side of the Irish panel industry. There are similar plants in Scarriff, County Clare, and Carrick-on-Shannon, County Leitrim. These plants have not just arrived on the scene. The Medite plant was brought to Ireland in 1983 and has gone through several different owners. These plants are not like a call centre which can be packed up into a few 40 ft. trucks and taken away in the morning. They have stood the test of time, adding value to Irish resources. These plants will use about 1.2 million cu. m. of fibre this year from thinnings and chip residue from sawmills. We manufacture two basic products: oriented strand board, OSB, and medium-density fibreboard, MDF. These are engineered wood products and represent an evolution from saw timber and plywood. They are modern materials used in construction. They are probably behind the furnishings and under the floor in this room. They are used in high-tech industries throughout Europe.

Today, Coillte Panel Products, having weathered the collapse of the Irish construction industry, come through the recession and dealt with exchange rate difficulties, is now exporting well over 90% of what it produces. Our turnover this year is probably in the region of €150 million, 90% to 95% of which goes directly back into the Irish economy. One would imagine this was an ideal business model for Ireland: an Irish-owned business with Irish employees, using Irish indigenous resources and highly committed to exports. A total of 400,000 tonnes of exports are going out through Irish ports, predominantly in the south east but also elsewhere. This represents a major export volume. Where do these products end up? They are utilised in state-of-the-art construction and high-tech furniture and flooring manufacture. It is an ideal business model.

As I have mentioned, the companies employ 325 people, with about the same number employed indirectly in associated businesses such as transportation of the final product to ports, engineering and so forth. There are many positives to Coillte Panel Products.

I will give one example of the type of business with which we are working and collaborating. Ireland Inc. is in a great position because of its proximity to the UK. That is especially the case for the forest products industry. The UK is a major importer of forest products and is at the leading edge in the development of energy efficient houses. We are working with the leading player in off-site construction, Stewart Milne, which has the capacity to manufacture 12,000 houses per annum at its factories in Scotland and Oxfordshire. There is no doubt that as the UK economy starts to pick up in the coming years, it will start to deliver 12,000 units of housing per year into the British economy. We are working with it at a collaborative stage in developing a highly energy efficient house called the Sigma home.

The fairly futuristic-looking house in the picture is actually located in a BRE Group innovation park in Oxford. It was built there about a year and a half ago and people have been living there experimentally to provide feedback on how it works. It is a zero carbon home, so all the energy used in the day-to-day running of the house is offset by savings in the construction fabric of and systems used in the house. The walls, floors and inside of the roof are made from OSB manufactured and produced in Belview from Irish spruce and pine logs. This demonstrates the type of cutting edge business that Coillte Panel Products is involved with. When construction starts to pick up again in Ireland, it is clear from our renewable energy targets that we will have to build similar types of houses and apartments. Coillte Panel Products is well positioned for this.

I will now turn to the issue of demand and supply. This is related to the concern outlined by Mr. Gunning about the availability of material. There may be a perception that there is a major surplus of wood fibre in Ireland as a result of the planting that has taken place over the past 20 to 30 years but the reality is somewhat different. Although the supply of material has steadily increased over the past 20 or 30 years, so too has the capacity and the demand of the existing industries. The chart illustrates projections for total demand vis-à-vis total supply and also the level of excess demand from 2010 to 2020.

Today, demand and supply are pretty much in balance as a result of development in various sectors. That demand is largely made up of sawmills, panel mills that use pulp wood and plants in between those that make pallets, fencing, animal bedding and so forth. Also shown is the energy demand over the same period. This energy demand will drive the increase in demand for wood over the next ten years and thus the supply deficit, which will grow to around 2 million cu. m. When we consider that the total supply in this country is projected, according to figures from the Department of Agriculture, Fisheries and Food, to grow to more than 5 million cu. m. in that time, we can see the considerable size of the gap that must be filled. That is the reason for our presence here today.

What are the impacts of the renewable energy feed-in tariff, REFIT, and the 30% co-firing target? In broad terms, there are three peat plants which could be adapted for co-firing. This would require 1 million tonnes of biomass. The policy is to go beyond 30% after 2015, but the 30% target requires 1 million tonnes at least. What are the consequences of doing that? It will frustrate the development of the more efficient CHP-led biomass energy sector in Ireland, where CHP is combined heat and power. This in turn will undermine the achievement of the Government's 2020 targets of 44% renewable energy use and 12% of heat produced through renewable energy.

From our perspective at Coillte Panel Products, the 30% co-firing target seriously distorts the fibre market. The distortion is about €23 per tonne, which is effectively a 60% premium on the current market prices for fibre. This is a considerable distortion which results from a significant subsidy for that market. It will inevitably undermine the viability of the existing panel industry, threatening all the value added products we have talked about, and will negate the carbon positive effect of using wood fibre to make building products for permanent constructions instead of burning it, which releases all the carbon dioxide back into the atmosphere. It is not just about Coillte Panel Products but also the wider panel product industry. We are not speaking for other companies today, but it will inevitably affect them as well. The effect will also extend to other areas such as the production of pallets and horticulture bark, which are vibrant businesses in Ireland today.

Mr. David Gunning

The key points are that today demand and supply are in balance. Every ounce of fibre we produce in Irish forests has a home. Therefore, if we are to create a new demand and support it with Government subsidies, it will require the diversion of existing supply to meet that demand. The impact of such a diversion of supply is what concerns us. The gap of 2 million cu. m. by 2015 is based on the assumption that the co-firing strategy will be implemented. In those circumstances we will have a very large gap. That is the essence of the challenge.

What are the solutions? We refer to forestry and farmers investing in it, which has been an ongoing process with some success. If we are to get solutions by 2015, we cannot grow forests that quickly, even though we can do a bloody good job with them. The idea that getting into short rotation crops and other crops and trying to enlist the support of Irish farmers to solve this problem is probably where the solutions to this particular issue come from. We thank the committee for the opportunity to make our presentation.

I thank the representatives. The last point made is probably where we would all like to get to. Has the delegation factored into its projections the coming on stream between now and 2020 of the volumes of significant post-1990 plantations which took place in the private sector? The one thing we have learned from food commodity prices is that price volatility suits no one. It leads to uncertainty for people investing in any sector and there is nothing for supply. The key to this is to have an adequate supply for the extra demand.

Others would say that it is in Coillte's interest to ensure that virtually no one else is in the market. That is a fair comment. I do not want to labour the point. On the last point made by Mr. Gunning on all the stakeholders in this business, between the report we launched today and the Agri-Vision 2020 references to forestry in the overall land use, if that is taken on board the problem can be solved. Simply saying we are not going to allow a REFIT is not the answer. The short-term rotation crops should be considered. It will require action.

If one imposes one set of rules and does not deal with their implications, a Government decision will be taken. If demand and supply, regardless of the market price, which is a significant factor from the point of view of Coillte, are not addressed, we will have to import some of this material to co-fire the stations. In terms of achieving carbon efficiency, it is a non-runner. It will be a cost from a carbon point of view. I do not think we want to envisage a scenario where we end up importing raw materials from another country to co-fire stations.

We have land that is under-used, not profitable and has the capacity to deal with this. I urge all the stakeholders involved in this business to get together and inform the Government. We have a role to play and we should hear from the other stakeholders in terms of putting forward some form of resolution from the committee to say that it is laudable to have a REFIT tariff. We have heard representatives from the anaerobic digestion sector and others who also see this as necessary to reach our target for 2020. It is all-important but it is of very little use if we end up importing the materials because, from the planet's perspective, we will have achieved nothing.

I hope this committee can assist in that. At this stage there is not much more we can say. We should hear from the other stakeholders and, if needs be, try to facilitate a discussion on it.

I thank Coillte for the presentation and congratulate it on its changes. We criticise it often enough. The work it has done and the jobs it has created in areas where they are badly needed are things we cannot forget. Coming from a farming background, I can see opportunities for farmers for a change. Farmers can see that where there is competition in the market for any product, it will be an advantage for them. From that point of view, farmers may be upbeat.

Farmers, by their very nature, are people who want to make money and they have only been existing in recent years. The delegation will find that farmers will be very co-operative with whatever suggestions are made here in order that they may be part of the solution to this problem. They must be involved. As Deputy Doyle said, people need to meet and come up with a solution.

The immediate situation in which we find ourselves is a problem. If there is huge demand for this product all of a sudden, someone will suffer along the line, and as the delegation said, they are in line to suffer more than anyone else. We can find solutions to this. It is a good news story because the producer who has been at the wrong end of the line for far too long in this country is now in a position to work this to his or her advantage and he or she must be taken into account. This committee and others must be active. If we all work together, we can find a solution.

I realise that when Coillte is involved there are jobs and it must have the raw material. The energy side feels it needs the material and it should be in a position to source it. Therein lies the dilemma and we will have to see how we can solve it. There is work to be done and it must be done quickly because none of us wants to see jobs being lost in any sector. That is the bottom line for me. Again, coming from a farming background I might be somewhat biased. I want to see the farmer and the producer of the raw material getting a fair crack of the whip.

I welcome the presentation. It is a good time for Coillte to appear before the committee, especially given that new legislation has been passed by the Government on the subsidies for co-firing. I have met Mr. Foot on this issue and I compliment Medite and SmartPly on what they are doing in the country in terms of exports and the modernised products they are producing. I am glad to hear the English market, in particular, is going from strength to strength, especially given that this affects my constituency.

The problem is what the future will hold and concerns the supply of raw material we will have. Some 3 million cu. m. will be needed. Does the graph to which the delegation referred include co-firing? Was that included on the chart and, if not, what will be the shortfall in the years mentioned?

Much has been said about the issue but it is about the farmer who is the primary producer in terms of the money paid and the value they get for the crop they grow. As Deputy Doyle said, there is potential for growth in the forestry industry. We plant approximately 6,000 hectares but we should try to increase that figure to at least 10,000 hectares or more. There is a great deal of marginalised land that could be planted. We must always keep a balance between our green pastures and tree growing but there is potential for growth of up to 10,000 or 15,000 hectares a year without impinging on our main production of arable crops, dairy cattle and sheep products. There must be a happy medium in that respect.

I have some knowledge of growing trees and so on. It does not sound right to cut down a mature forest of 15 or 20 years of growth and put it into incineration for heat. The use of short rotation crops could be considered. Trimmings, pulp and residue from saw mills should be the main feeder to this co-firing. The mature trees we have grown for years should be kept for the products produced by Coillte and the private producers as well. Cutting a mature tree of 20 or 25 years and burning it is not the answer.

I come from a farming background and I believe that exporting products made from this timber will create jobs. The best value for this timber product is to cut it into board or whatever, which would create jobs, export it and bring revenue back into this country. That is the value for money aspect we should try to achieve. If Government subsidies for co-firing are to be made available, they will tilt the balance against those people trying to produce and export these products.

We must examine this issue in great detail. There are alternatives that can be used, as mentioned by Deputy Doyle. The short rotation crops, trimmings, pulp and residues from the saw mills should be used and put into co-firing peat stations, but we should consider further the use of mature trees.

I support Deputy Doyle's suggestion that we should invite in the companies that will gain from this co-firing and hear their side of the story, following which we should invite in the officials and the Minister to allow us conduct a detailed examination of the finished product and determine where the best value for money lies. We must examine this area in more detail before we make any major decisions with a view to determining what is the best value for Ireland.

I welcome Mr. Gunning, Mr. Egan and Mr. Foot and thank them for putting these statistics before us which have given us food for thought. I want to ask some questions on the Coillte co-firing, peat burning stations. My understanding is that the ESB, under the 2000 tripartite agreement, closed six peat plants generating 425 MW and replaced those plants with two stations generating 250 MW. How many ESB generation plants are capable of using this fuel? What would be their total needs each year over the next decade? I believe that is outlined in the graph which refers to fibre demand and supply to 2020. What percentage does that represent of the total thinnings produced each year by Coillte? Bearing in mind that the ESB's market share of power generation is shrinking, are the independent power generators able to use any of those fuel sources or have they any plans to build generation plants that would use these products?

Regarding the CO2 emissions, what are the comparisons if using that as raw fuel compared with other fuels used in electricity generation, ignoring the other environmental benefits of growing it here? I would appreciate answers to those questions from the delegation.

I will be brief. I thank the gentlemen for the presentation. Everyone accepts the work done by Coillte and the employment it creates in rural areas but it all comes down to money in the final analysis. I have a number of questions. How much a tonne does Coillte pay for trimmings? How much a tonne will those trimmings be worth if they are burned? That is what all of this comes down to in the long term. It takes 20 to 25 years to grow a forest. Farmers get one opportunity in 20 to 25 years to make a profit, and I would have to come down on the side of the farmer. I agree with Deputy Aylward. No one is talking about burning mature trees. We are talking about something that we hope will have a value for farmers. Can the representatives tell members what will be the difference in price because that is what it will come down to in the long term?

Mr. David Gunning

I thank the members for their questions. I will try to deal with a number of them, with some support from my colleagues.

The first question concerned what is and is not in the numbers on the demand and supply sides. What is in the supply side is all of Coillte's supply and the private supply and an element of the Northern Ireland supply. It is an all-island look at this because that is the way the market works. We have a good handle on the supply.

On the demand side there is the current demand forecasted forward plus all the demand associated with the Government's renewable heat associated requirements. That is co-firing, renewable heat such as the heat plants that may be built in industrial premises to replace gas or oil-based heat currently in dairies, for example. The other provision is for combined heat and power and a certain demand for that. All of that, which is a Government commitment, is already embedded in that demand side. It is all included. I hope that clarifies the matter.

In terms of whether the private material is included in the supply side, all of the private material is included. It is probably included at quite an optimistic level but all of the Irish private material is included in the assumptions.

On the numbers, agreement is emerging that that is an accurate statement of the numbers. We are not fully there yet but we are getting close to alignment and in terms of the various stakeholders we mentioned, that is an accurate reflection of the challenge.

Competition has been mentioned. A number of issues arise. Coillte sells products in the United Kingdom market, France, Sweden, the Benelux countries or wherever. We are already competing in the market in terms of full competition with global scale companies. We are not afraid of competition but we have an issue with the fact that some of our competitors are armed with a subsidy paid for by the state that tends to skew the levelness of the playing field.

The other issue members should be aware of is that REFIT is a renewable feed-in tariff, and that goes back to the question of who gets it. It is paid to the company supplying the energy. That may be a different company from the one generating the energy and it is certainly two steps away from the farmer growing this material. While we talk about support for REFIT for farmers, it should be made clear that REFIT goes to the energy supply company. It pays the generator. The generator pays the supplier of the material.

That raises the interesting question of whether that is the appropriate place to target the incentives or whether those incentives should go directly to farmers. Deputy Scanlon asked about the difference in price. It is difficult to model this in terms of what is within and without. We mentioned in the document that if this incentive flowed through to the farmer or to the purchaser of this material, it would allow him or her to pay €23 per tonne more than we can pay today. We pay approximately €40 per tonne for it today. Therefore, it is a significant amount. Our concern is that we cannot afford to pay €65 a tonne for this material in the end market and then sell our product in the market, as we would not make any margin of profit on that. Such a high cost would endanger our business. That covers the competition issue.

We take great encouragement from what members of the committee said in that we would like a full and open discussion on all the implications and analysis of all the impacts of this proposal on the current users of this material, and that all of these issues would be taken into consideration in designing an appropriate set of supports to contribute to this national target.

Deputy Sheehan asked a number of questions on ESB matters and other matters, but I am not fully equipped to deal with those. In the national renewal energy action plan, three stations are dealt with. They include the Edenderry plant, which is owned and operated by Bord na Móna, and two ESB plants, the Lough Ree plant and the west Offaly plant. Three peat burning plants are being discussed in terms of these targets, which are candidates for co-firing. Their specific plans are not clear to us.

Mr. Neil Foot

I could give Deputy Sheehan some rough numbers. For each of those plants to achieve a target of 30% co-firing, they would each require in excess of 300,000 tonnes of biomass. That is from where the figure of 1 million tonnes comes.

I thank the delegates for their answers. The proper thing to do is to pay the subsidy direct to the farmer. That would leave a level playing field for Coillte and anybody else who wants to compete in the marketplace. I just wanted to make that comment. I take it that no decision in any shape or form has yet been taken on this proposal.

Mr. David Gunning

The status of this proposal is that an announcement was made by the Minister, submissions will be made to Europe and the state aid rules will have to be checked in this respect. I gather when all that is done, this proposal will come back here for approval. I am not clear on the process involved.

I take Mr. Gunning's point that a subsidy for such material could be two steps away from the farmer. If it were paid directly to the farmer, that would leave everybody operating on a level playing field. That is what we should ensure happens, if that is possible.

Mr. David Gunning

When we examine solutions, that must be a key element of them.

Who would be eligible for the payment of the €25 per tonne in subsidy? Would only the ESB and Bord na Móna be entitled to draw down that money? Would it be open to Coillte and to everybody else concerned? I would like clarification on that.

Mr. David Gunning

An announcement of this proposal was made, although many of the details of it are not contained in the announcement, but I will outline our interpretation of it. REFIT, a renewable energy feed in tariff, will be paid to the energy supplier, which could be the ESB. The energy supplier either generates the electricity or buys it from other generators. Bord na Móna is not an energy supply company, it tends to sell it to the ESB which in turn sells it on to the grid. The material to provide the energy for generation will come from the farmers or the growers. The flow through of the 8.5 cent or 9.5 cent for short rotation crops from the energy supply company through the system is not clear to us but that is our understanding of the process. That is as best as I can communicate it to the Deputy.

I call Deputy Creed.

I welcome Deputy Creed back, we missed him.

I thank Deputy Aylward for that. I welcome the delegation from Coillte and apologise for being late. I had another meeting but I followed the content of the discussion on the monitor in my office.

This is a debate about a significant natural and national resource in the hands of Coillte and some private resources, about who the preferred end user of that resource should be, and whether the resource should be used as a energy source or a construction material source. We should have a national debate on that issue. What is the national priority now? What is the sustainable level of demand, say, on a construction site for this material and the export opportunities versus the cost benefit analysis of using this material to generate an energy source that would have a public dividend in terms of the public investment made by Coillte, and where does the balance of financial and sustainable advantage rest?

I wish to ask a question on the energy yield of timber. I am specifically referring to calorific yield of the timber that is burned in, say, the Edenderry plant, as opposed to, say, the energy yield of a CHP plant. Where does the balance of energy yield rest in terms of either of those options?

I am aware Coillte is negotiating with a substantial sized company in the south west on the supply of material for a CHP plant. I am also aware of serious concerns about the tariff Coillte is considering levying on that proposal if it proceeds. All of this feeds into the national debate about what is the preferred end user, what is the sustainable long-term volume of material that is available, whether that should be sunk into one big flagship project or if it would be better to have a range of smaller CHP plants, where I believe the yield would probably be far more beneficial. My information is that some of material could be used in plants such as the Edenderry plant. If we are talking about anything other than the waste material — I know that Coillte has carried out some research on extracting the root and baling up the limbed material — if Coillte could strike a deal with Bord na Móna to burn that, I do not believe there would be any other possible use for it. I am aware that Coillte does not extract that material in many cases. In some areas it is not extracted for good land management reasons, possibly because of the gradient and the residue that would be washed away.

For environmental reasons.

Yes, for environmental reasons. In this context, there is a national debate on what is the balance of advantage. With all due respect, I do not believe we should buy a pup from Coillte today on this issue. There needs to be a national debate on it because it is a valuable resource. It is not endless. The question is whether one semi-State or State company should take it all from Coillte and be the losers on that side. From an energy point of view, it is clear that we are not getting a return on that. What is the sustainable demand, opportunity and financial return from, say, continuing to supply the material to the plants in Clonmel and Waterford versus the balance of advantage in feeding a host of smaller CHP plants and-or one big plant? That is the framework for the debate. The bottom line must be where the balance of advantage is for us nationally.

I appreciate the Chairman allowing me to contribute to the debate, as I am not a member of the committee. I have a concern about this proposal by the Minister because it impacts on an industry in my area, Finsa Forest Products, with which I am sure the delegation will be familiar. It produces chipboard and it is part of a multinational company. It employs more than 100 people in Scariff in County Clare. The introduction of this proposal would impact significantly on that company. Its ability, even at present, to purchase raw material in a market where there is a greater demand from the biomass sector is challenging to say the least, particularly at a time when the market for its product — which is no different I am sure from the market for Coillte's product — has been severely affected by the downturn in the economy. I agree with Deputy Creed that we need to have a much greater debate on this proposal. While it might be our desire to move towards the generation of renewable energy, a significant number of jobs would be impacted upon by such a development. We must ensure that existing jobs will be protected and sustained. In light of current economic circumstances, there are significant benefits to be obtained in the context of trying to protect jobs.

Our guests and others would have faced challenges with regard to obtaining the raw material required for wood pellet and various other biomass-type initiatives. A further subsidy would divert money away from a resource which was unusable at one stage but which now has much greater value and the use of which has progressed to such a degree that the position of manufacturing companies will not be viable going forward. We must consider that matter in much greater detail.

I welcome the fact that our guests are present and I thank them for their contributions. I will certainly support their efforts. I am not trying to be parochial but I would like to be informed with regard to anything which might affect my area. I am sure the Chairman would also be keen to obtain such information. Perhaps our guests have already identified the potential loss to the State in the context of its being unable to compete and of the industry not surviving as a result. In the current economic environment, we must monitor what might be the effects of any actions we take.

I accept that by 2020 we must reach certain targets in respect of the amount of energy we are obliged to produce from renewables. In working towards those targets, however, we must be careful not to throw the baby out with the bath water. There was a time when a net loss of 100 or 200 jobs could be absorbed because other employment opportunities were available. That is not the case at present. We need to protect what is a viable and vital industry. It would be a shame if this industry disappeared.

A great deal of pressure has been exerted in respect of the use of recycled timber in this process. In light of pollutants making their way into the environment, companies such as Coillte and Finsa find it difficult to use materials that have previously been used. I would welcome a wider debate on this matter and I look forward to working with our guests.

I thank the Deputy, who is more than welcome to the meeting. I wish to make clear that we will be returning to this issue in the autumn session.

Our guests stated that the details relating to the REFIT tariff remain to be worked out. Is it because Coillte is a State company that it will be obliged to supply Bord na Móna? Will the company be in a position to continue to supply its own factories? Regardless of the private sector plantations and those in Northern Ireland, is it a fact that because Coillte is such a significant player that it can do what it wants or will it be obliged to supply Bord na Móna or the co-firing stations?

Our guests may be aware that the Minister for the Environment, Heritage and Local Government has a number of issues with regard to the building of an incinerator near Ringsend. Has Coillte considered the possibility of using some of the waste material destined for such an incinerator in co-firing stations, thereby killing two birds with one stone?

Mr. David Gunning

Members have launched a few high balls at us. Deputy Creed posed an important question in respect of energy yields. When material is burned, different types of processes extract more energy than others. Our understanding is that the efficiency of the co-firing process is approximately 37%. This means that 37% of the calorific value is harvested from the burning process and the remainder escapes into the environment.

The efficiency of modern CHP plants is over 80%.

Mr. Neil Foot

It is between 80% and 90%.

Mr. David Gunning

The efficiency of some of dedicated heat plants, one of which is located in the Deputy's area, is between 75% and 80%. The CHP and dedicated heat plants are extremely efficient in the context of how they use this valuable resource, particularly when compared with co-firing plants which, as already stated, only have an efficiency level of 37%.

Is there any proposal to capture the heat element being lost at the co-firing plant in Edenderry? As matters stand, is the plant merely producing power while the potential of the heat to which I refer is being lost?

Mr. David Gunning

That question would be best answered by Bord na Móna. All I have done is engage in a number of discussions with representatives of the latter in respect of this issue. It is not unusual for a plant of that age to have an efficiency rating of 37%. Bord na Móna may consider investing in harvesting more of that heat. However, the current rate is 37%. This figure relates to the energy produced; the remainder goes up the chimney. That is the reality of the situation.

We are not under any obligation to supply Bord na Móna. It is important to understand the flows of material which obtain. What Coillte harvests from its forests for its own use in SmartPly goes directly to the plant, is manufactured into board and is exported. The material for Medite is slightly different and that is why it is so important to the broader forestry sector. We sell logs to sawmills which then remove the centre rectangle for use. The remaining material is classed as residue. The latter is converted into small chips which we buy back from the sawmills. It is for this material that we will be competing with the co-firing users. That is the primary supply material required for the Medite plant in Clonmel. That is the key issue.

It is important to understand that there is an imbalance with regard to the various wood flows in this country at present. Material is taken from the forests and has a range of different uses. There is construction timber — of which we export a considerable amount — and then timber for stake and pallet manufacture and that relating to the production of fencing for the UK market. There are various layers of demand, right down to forest residues. This year, Coillte will manufacture approximately 50,000 cu. m. of material from forest residues. In the past, such residues would have been left on the forest floor. We bundle up these residues and some of them are sent to Edenderry, while others go to our Medite plant. Coillte is already the largest user of heat for energy in Ireland.

The intricacies of the situation must be understood. We welcome suggestions relating to getting stakeholders together in order that we might engage in discussions on this matter. The proposal relating to a national debate on the matter is extremely important. The implications of this policy on existing users should be fully exposed and understood before such decisions around providing incentives to one category of users as opposed to others are approved and implemented. That is our request.

On behalf of the committee, I thank Mr. Gunning, Mr. Egan and Mr. Foot for their presentation and for answering the questions put to them. On any occasion we have made a request of them, they have always made themselves available. We look forward to a further debate on this matter in the autumn.

Mr. David Gunning

I thank the Chairman.

The joint committee adjourned at 12.50 p.m. sine die.
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