UK wood panels manufacturers are warning the energy minister that part of their industry could fold if it does not alter a renewable fuels subsidy being paid to the power industry.

The Wood Panel Industries Federation will put its concerns to minister Stephen Timms tomorrow at the Department of Trade and Industry.

It will ask the government to review a the subsidy which is currently going to power generators under its “Renewable Obligations” policy. The latter is intended to cut the UK’s CO2 emissions in line with commitments under the Kyoto international environmental protocol. As part of the strategy the government wants 10% of the UK’s electricity generated from renwewable sources by 2010. To achieve this it is issuing a subsidy to power firms in the form of “Renewable Obligations Certificates” to convert from coal and gas to biomass, and to build 100% biomass power stations. The WPIF estimates that this amounts to the equivalent of £30 per megawatt hour.

The Federation says that the subsidy could distort the wood co-products market, with the result that panel manufacturers would not be able to compete with power companies for raw material.

“The subsidy will undoubtedly hand control of the market to the energy companies and drive up the price of [wood] biomass,” said WPIF director-general Alastair Kerr. “A price rise of only a few pounds would seriously impact on the competitiveness of the wood panel manufacturers, threatening their viability.”

&#8220The subsidy will undoubtedly hand control of the market to the energy companies and drive up the price of [wood] biomass”

WPIF director-general Alastair Kerr

He added that the WPIF supported subsidy for the growing of “energy crops”, but only if this can be done without wood becoming the preferred material for burning in power stations. It also wants more of the government money to go to non-fossil energy sources such as wind, wave and geothermal.

“The wood panel industry is already environmentally efficient and should not be destroyed by the loss of its findamental raw material to subsidised power stations,” said Mr Kerr.

According to the WPIF, the UK panel industry turns over £550m. Its members employ 2,500 people directly, with a further 13,000 dependent on them for work.