Friday, October 26, 2012

British coal plants are converting to biomass with no certain climate benefit

Drax power station

A British Government policy change is causing coal plants to convert to burning biomass, fueling a huge increase in wood pellet exports from North America. But a new review of biofuels' impact has cast doubt on their ability to tackle climate change.

Around one-third of the EU bioenergy share in 2020 is projected to come from wood biomass from forests and woods, according to EU states’ National Renewable Energy Action Plans.

But there is a significant time lag between the carbon debt created when trees are cut down to be burned for energy, and the carbon reductions that fully grown replacement trees will bring, according to a report from the Institute for European Environmental Policy (IEEP).

“It is not currently possible to define the emissions profile and savings associated with Europe’s expanding use of biomass for energy, nor is there any policy process currently in place to secure this,” the IEEP report says.

“As a consequence, at present there is only the certainty of commitment to bioenergy use up to 2020, but no associated guarantee of emission reduction.”

The IEEP paper cites several studies to show that boosting bioenergy supplies with increased forest management would only achieve around 20% of the anticipated greenhouse gas savings in a 50-year period.

American imports rise

The European policy is boosting exports of wood pellets from North America. American export volumes are forecast to increase from an estimated 1.5 million tons in 2012 to 5.7 million tons in 2015, according to the North American Wood Fiber Review.

Total Canadian exports to Europe in the second quarter of this year rose 14% from the first quarter, with reports of British Colombian pellet plants running at full capacity thanks to European demand.

Biomass-burning plants in the UK import most of their fuel, mostly from North America, which increases their carbon impact from transportation.

While in 2010-11, 13% of biomass burnt in British power stations was home-grown, this fell to 8.6% in the last financial year.

Meanwhile the amount imported grew, from 840,250 tonnes in 2010-11 to 1,086,880 in 2011-12, an increase of 23%.

Drax, based in Selby, North Yorkshire, is the main importer of biomass for this purpose, and is about to become a much bigger customer.

It has just raised £190 million to convert three of its six generating units exclusively to burning biomass instead of coal. The cost of this conversion is staggering: up to £700 million. It is being additionally financed by £230 million of cash, a £100 million loan and bank credit of £400 million.

Half of this money will not be spent in this country. It will be spent in upgrading port facilities and new wood pellet plants in North America.

Several new Canadian pellet facilities, such as Holbrook Forest Products in Roddickton, Newfoundland, have expressed their intentions to export pellets via these new port facilities.

Drax has used a financial technique called hedging to presell its power output to 2014. It issued an interim statement yesterday saying: "We have taken advantage of better dark green spreads since [2012] to strengthen our contracted position, including additional power sales of 3.5TWh and 2.9TWh for 2013 and 2014 respectively".

DECC's preference for conversion

Its incentive to make the conversion is the decision, announced in September in the banding review for the Renewables Obligation Certificates, that the more biomass is consumed in a given plant, the more support it is given. Electricity generated by a unit using 100% biomass will receive 1 ROC.

In addition, DECC's review came down on explicitly supporting co-firing and coal conversion to biomass, as opposed to new biomass plants, and a consultation on a cap on dedicated biomass ROCs.

It is also likely that dedicated biomass projects will be excluded from the new capacity mechanism in the Energy Bill.

This decision caused Centrica Energy, to announce on Wednesday that it will not be proceeding with planning applications to develop dedicated biomass power stations at Roosecote in Barrow-in-Furness and at Glanford Brigg in North Lincolnshire.

Centrica Energy had proposed to build a new 80MW biomass power station on the site of its existing Roosecote gas-fired power station, and a 137MW biomass power station adjacent to its existing gas-fired power station at Brigg.

Others are not deterred, however. MGT Power announced this week that it will build a new 300 MW biomass power station at Teespor, at an estimated cost of £500 million.

Eggborough Power aims to convert all four units at its 2GW coal-fired plant to biomass. These would consume over 15 million tonnes per year of wood pellets if all units underwent conversion. The vast majority of these will be imported.

One port through which biomass imports come from North America is Immingham. It said on 15 October that it expects to handle 8 million tonnes of biomass in 2020, up from 62,000 tonnes in 2011.

The port discharged a 46,000 tonne wood pellet cargo in August, which was delivered to a large Aire Valley coal station. It expects to see further deliveries this year.

Several developers are deciding whether to build biomass plants close to the port.

Attempts are being made to address the lag in the intended greenhouse gas emission-curbing benefit of burning trees for electricity.

In August, the American state of Massachusetts implemented a regulation that biomass can only now be sourced from residues and thinning trees, taking into account soil productivity and protection of biodiversity and natural habitats.

Biomass units must also show that they emit at least 50% less greenhouse gases than fossil fuels, while efficiency requirements, operating certificates, and verification procedures are also imposed.

A DECC spokesman said that it will be consulting soon on setting caps on the carbon impact of biomass plants.

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