Credit: Dreamstime

Europe’s deteriorating economic conditions of recent years have taken a toll on its biomass and biogas markets, as many governments pull the plug on vital incentive programmes. Kelvin Ross examines the state of the market.

Just a few years ago, the European biomass sector was expecting a boom time and biogas, while anticipating less dizzy highs, was also looking forward to significant growth.

The biomass industry had every reason to be optimistic. As governments around the world set renewable energy targets, biomass was seen as something of a sure thing to play its part in meeting countries’ low carbon ambitions.

And when the operators of coal-fired plants realised that they could extend the life of power stations by converting them in part to run on biomass fuel, then the outlook looked even more promising.

But like so many other forms of power generation – renewable or otherwise – both biomass and biogas in Europe have taken a hit from the economic crisis.

In times of austerity, the subsidy and incentive programmes needed to drive the biomass/biogas sector have proved financially unsustainable and governments have shelved many projects.

This market instability has also resulted in the acquisition of several major market players, such as AE&E, MWM and MW Power.

The biomass and biogas sector in Europe breaks down as biomass holding 67.7 per cent and biogas 32.3 per cent. Globally, biomass accounts for 3 per cent of electricity generation capacity, and half of this is located in Europe.

Of the biomass segment, 62 per cent of installed capacity is in power plants and 38 per cent in combined heat and power (CHP) plants – percentages set to become more balanced as the trend is slowly moving towards CHP installations as they receive better incentives than power plants.

The European market comprises more than 50 companies with the major players being Foster Wheeler, Metso, Andritz, GE Jenbacher and MWM. Together these companies hold 78 per cent of the market for biomass and 77 per cent for biogas. Other notable market participants included Perkins, BWE Energy and Kohlbach.

Analysts at consultancy Frost & Sullivan estimate that the current value of the European biomass and biogas market is €3.33 billion ($4.4 billion), and it is set to experience a compound annual growth rate (CAGR) of 2.5 per cent between now and 2017. They also forecast that the installed capacity base will reach 42,322.1 MW by 2017 witnessing a CAGR of 5.3 per cent for the same period, “as the market tries to stabilise itself after the economic crisis in the continent”.

However, the economic crisis has had its casualties in the sector, the most recent being Tilbury power station in the UK.

Tilbury stopped generating electricity last month after 44 years of operation as a coal plant and the last two years as the world’s first 100 per cent biomass facility.

It opened in 1967 as a 1467 MW coal-fired plant and was scheduled to close under the EU’s Large Combustion Plant (LCPD) Directive, giving it 20 000 hours of operation from 1 January 2008.

However, in 2010 its operator RWE decided to begin converting it to run on biomass for the remainder of its LCPD hours and it started operating in this capacity in 2011.

The biomass plant had a capacity of 750 MW and RWE has claimed that it delivered more than 10 per cent of the UK’s total renewable electricity.

Once the LCPD deadline ran out on 14 August, RWE had planned to close it for two years while it carried out a full-scale biomass conversion, which the company said would have given Tilbury up to 12 more years of work.

However, the UK’s Department for Energy and Climate Change revealed earlier this year that the project was ineligible for the government’s Contracts for Difference, a new support mechanism for low-carbon technologies, which forced RWE to take “the difficult decision not to proceed with the project, as it is no longer economically viable”.

RWE stressed that “Tilbury remains an excellent site for power generation” and said it was reviewing future plans for the site.

“The lessons learned from the successful biomass conversion will be shared across the RWE Generation portfolio, as RWE remains committed to exploring new energy technologies that can provide energy solutions that are both affordable and sustainable.”

‘A successful experiment’

So is Tilbury a warning shot to other existing and potential biomass plant operators. David Hostert of Bloomberg New Energy Finance says its closure has “damped the mood” in the biomass industry and warns that “projects that have been in limbo for the last four to five years are now even further away from financing.

European biomass and biogas market
The value of the European biomass and biogas market is estimated to be $4.4 billion
Source: Siemens

However Ashay Abbhi, energy and environmental research analyst at Frost & Sullivan and one of the authors behind a recent report, Opportunities in the Biomass and Biogas Power Market in Europe, is more positive on Tilbury and its legacy.

“Tilbury should be looked at as a successful experiment,” he says. “It was a success in my view because it has given an alternative to the large-scale production of power and it has given confidence to RWE and a lot of other power corporations to go ahead [with biomass].” He adds it has “set the tone” and become “a pioneer for such plants”.

However, in its report, Frost & Sullivan is less upbeat about the wider European biomass and biogas markets, where it warns that “deteriorating economic conditions have limited market expansion”.

“Countries have cut down or even stopped subsidies for power generation from biomass and biogas, jeopardising the prospects of plant owners,” it concludes. The report also highlights that a “lack of steady raw material supply in the region poses another challenge”.

It states that “high-demand customers are willing to pay more to keep their power plants running, which triggers a rise in feedstock and equipment prices, affecting profitability. The withdrawal of government incentive schemes further dampens revenues.”

Abbhi says: “Biopower plants are increasingly preferred as a source for large-scale power generation owing to their low-capital requirements. Their efficiency, longer operational times and reliability further boost their popularity over other sources of renewable power generation.”

Europe's biomass sector
A lack of steady raw materials is a challenge for Europe’s biomass sector
Source: Dreamstime

But he warns that “government support is necessary for technology development, especially as constant innovation will enable a reduction in capital expenditure”.

Abbhi states: “For now, the conversion of coal power plants to biomass plants will be the strongest market trend as it requires far less investment than setting up a greenfield biopower plant.”

This would certainly seem to be borne out in the UK: Drax, which operates Britain’s largest coal plant, has a £700 million programme underway to convert three of the plant’s six units to biomass. Drax Group chief executive Dorothy Thompson says: “We are in the middle of a project to turn it from a coal station that burns a little bit of biomass to a biomass station that burns a little bit of coal.”

The first unit is already in operation and the second is expected to follow suit by the end of 2014.

Drax will use wood pellets imported from the US to fuel the units and is building four silos – each bigger than London’s Royal Albert Hall, in which to store them.

The company has also designed Britain’s first purpose-built rail freight wagon to carry biomass imports to the plant from the ports of Tyne, Hull and Immingham. At 18.9 metres long with top doors stretching 18.2 metres and bottom doors of 3.7 metres, the supersize wagon has a capacity of 116 m3, allowing a biomass load weighing 71.6 tonnes. Its volume is almost 30 per cent bigger than any freight wagon currently used in the UK.

Meanwhile, in the same week as Tilbury ceased generating electricity, it was announced that a new 40 MW biomass plant is to be built on the site of a former sugar factory in Lincolnshire, England.

Brigg renewable energy plant will be built by Danish company BWSC – part of Japan’s Mitsui Engineering & Shipbuilding – and is set to be operational by 2016, when it will run on locally-sourced straw.

This activity confirms the UK’s status as the prime mover in the European biopower market, along with Germany. But Frost & Sullivan expects their dominance to “slowly give way to opportunities in the developing Central and Eastern Europe markets”, with “Poland expected to be a hotspot”.

Abbhi says: “Poland has proper incentive systems and it has not cut subsidies. Companies are willing to invest, the availability of wood chips is quite abundant and if not, they are in close proximity.”

He says “the framework the government has is quite impressive – Poland has all the right ingredients for biomass to work”. He concedes that “the economy could hamper the growth, but is hasn’t thus far” and expects Poland to become one of the biomass and biogas leaders in Europe.

As of last year, Poland had a total installed biopower capacity of 2662.9 MW, and Frost & Sullivan expects the nation’s capacity to reach 2864.1 MW by 2017.

Abbhi adds that more coal-to-biomass conversions are expected in Poland for 2015, which currently has one converted plant.

For other countries, the future is not quite so rosy. Frost & Sullivan believes that “Germany will observe sluggish growth with reduced incentives and Spain’s growth will be non-existent as the country abandons its incentive schemes for renewable power generation”.

It also warns that many European countries will turn their focus “towards developing other forms of renewable energy to complete their designated targets by 2020, as biopower installations are becoming unsustainable because of reduced incentives”.

Abbhi says that the future for the industry “is a little bleak” although if the European economy revives within the next five years he believes the investment will return.

However he warns that in the short-term, “the initial investment is going to decrease even further”.

He says the sector is suffering from being overshadowed by other renewable technologies such as solar and wind – especially offshore wind.

“I think governments are not paying much attention to it – it is not being given the credit it is due.”

Recent European biomass activity

GDF Suez has inaugurated a 205 MW biomass power plant in southern Poland which it claims is the biggest 100 per cent biomass-fuelled facility in the world.

The plant at Polaneic is to provide electricity for 600,000 households and is powered by a mix of tree-farming product and agri-fuels.

It is located at the site of the utility’s existing 1780 MW coal/biomass co-fired thermal plant, GDF Suez Energia Polska.

Construction of the plant, dubbed ‘the Green Unit’, began in 2010, engineered by Tractebel Engineering. Foster Wheeler supplied a circulating fluidized bed boiler believed to be the largest ever deployed at a biomass power plant.

Meanwhile, Doosan Power Systems has been awarded a major biomass conversion and turbine upgrade project for E.ON’s coal-fired Provence power plant in Gardanne, France.

The project will help to create what will become France’s largest biomass-fired power plant to date. The new unit will generate electricity from the combustion of wood, including forest chips, green residues and recovered timber, and will be converted from the existing coal-fired Provence 4 unit.

It will provide 150 MW of power with base production of more than 7500 hours per year until 2034.

A proposed biomass-fired combined heat and power (CHP) plant is slated to be the UK Green Investment Bank’s first investment in Scotland.

The £465 million ($710 million) CHP project will be developed at the Port of Grangemouth by Forth Energy – a joint venture between Forth Ports and SSE – and received approval from the Scottish government in June.

The CHP plant will use sustainably-sourced, primarily imported wood fuel and will have the capacity to generate 120 MW of electricity and 200 MW of heat.

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