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http://www.ft.com/cms/s/0/b83d5050-c3a3-11e2-aa5b-00144feab7de.html#ixzz2VGGRqFHl By Guy Chazan Drax, the UK power supplier, is pushing ahead with what is shaping up to be a huge bet on biomass. The company, which has a big coal-fired power plant in Yorkshire, has launched a £750m investment programme to convert three of its six units to wood pellets, a renewable source of energy. It started commissioning the first converted unit in April. For Dorothy Thompson, chief executive, the attraction of biomass is obvious. “It’s a lot cheaper than offshore wind, there is security of supply and it’s more flexible,” she says. The pellets burnt in biomass boilers are made from the “cheapest part of the forestry industry product – harvested residues and thinnings” – and a “supply chain is developing”. Drax’s interest in biomass is part of a wider industry trend. New EU emissions regulations have put pressure on many of the continent’s old coal-fired power stations but some operators have realised they can keep the plants alive by converting their boilers from coal to wood pellets. The discovery of biomass has given a new lease of life to ageing coal assets that would otherwise have been shuttered. Bloomberg New Energy Finance (BNEF) says between 3.6 and 6.8 gigawatts of biomass generating capacity could be commissioned between 2012 and 2016, though it warned that slow governmental decisions on future subsidies “risks unnerving manufacturers and investors”. Interest has been driven by EU laws that stipulate member states must source 20 per cent of their energy from renewables by 2020. That will not present much of a problem for Germany, with its massive investments in wind and solar power. But the UK and others may struggle, hence the embracing of coal-to-biomass conversion. “It’s an easy, quick and capital-lite way to meet the renewables targets,” says Harry Boyle, an analyst at BNEF. “Coal plants are already connected to the grid and what’s required are relatively minor modifications to an existing asset.” Biomass is also a consistent source of supply, in contrast to the intermittency of wind and solar. Such considerations have pushed the UK to create a generous subsidy regime for the fuel. Previously, developers were awarded half a renewables obligation certificate (ROC) for co-firing coal with biomass. Now, the government is offering operators a whole ROC if they fully convert their boilers to biomass from coal. It was this decision that underpinned Drax’s big investment programme. As a result of this and other subsidies, generating capacity is expected to grow quickly across Europe. BNEF says European pellet demand will rise to 25m-30m tonnes by 2020, up from about 12m tonnes now. Most of that will be imported from outside the EU. Yet biomass remains much more controversial than wind and solar. This is partly because when wood is burnt, it releases carbon dioxide into the atmosphere – just like fossil fuels such as oil, gas and coal. Advocates like Ms Thompson stress that these emissions are neutralised by regrowth in the forest from which the wood was harvested. “You’re not using trapped carbon.” Partly because of that, she says, the carbon footprint of biomass is “70-80 per cent smaller than that of coal”. Environmentalists are unconvinced. A recent study put out by the Royal Society for the Protection of Birds together with Greenpeace and Friends of the Earth says it may take “many years for the end-of-pipe emissions to be neutralised” by regrowth of forests. It disputes the industry’s assertion that pellets used in power generation are made of residues from timber production, saying there is evidence that whole trees are often used. The study claims that the UK government’s proposed sustainability standards for biomass will not prevent wood being used that comes from forests “where management regimes cause problems for biodiversity”. The report’s authors say there is a risk the UK will be “locked into financially supporting an industry that results in increasing greenhouse gas emissions and other serious sustainability issues”. Biomass developers face other difficulties, aside from the objections of green groups. A big challenge is finding enough pellets to supply their hungry biomass boilers. “It takes time to build up the supply chain,” says Ms Thompson. “Each [converted] unit requires 2.3m tonnes of biomass a year – and the total global cross-sea trade is only about 7m tonnes.” So a chunk of Drax’s £750m investment will go on building a wood pellet factory in the southeast of the US to fill Drax boilers. Some people worry about the carbon emissions involved in transporting pellets from the US to Europe. BNEF’s Harry Boyle says the problem is not necessarily the emissions released by tankers bringing huge cargoes of pellets across the Atlantic, but those of trucks transporting the wood from pellet factories hundreds of miles to ports in the US. Continue reading →