Exciting times and challenges ahead

In their recent report, “Renewable Energy Scenario to 2040,” the European Renewable Energy Council (EREC) is clear. The Council believes that in the long term, “renewable energies will dominate the world’s energy supply system. The reason is at the same time very simple and imperative: there is no alternative. Humankind cannot indefinitely continue to base its activities on the consumption of finite energy resources.”

EREC projects biomass to remain the most-used renewable energy source on the planet going forward. But, if the long-term future for biomass use is bright, that doesn’t mean the road will be smooth. Canadian Biomass takes a close look at the factors that will help spur the industry forward, and those that will provide the greatest challenges.

Diversity and flexibility
The range of products that can come from biomass is a huge factor in the growth of its use, now and in the future. Biomass can provide heating, electricity, fuel, biochemicals and more. “Biomass is a prolific and globally-distributed renewable carbon-based resource,” notes Doug Bull, a researcher in the Biorefinery & Energy Group at industry research firm FPInnovations. “Other renewable energy
resources (wind, solar, hydro and so on) are not, and hence cannot, be used to directly make carbon-based products such as fuels and to get organic chemicals from.”

Many commercial biofuel plants are expected to be built worldwide over the next few years, some of which can accept feedstocks such as construction debris and textiles. The flexibility of these facilities is very attractive. The conversion of coal power plants to accept biomass is also well underway in several countries, and some are using waste heat in combined heat and power plants (CHP) as well.

Another important feature of biomass is that it can produce energy on demand, notes Gordon Murray, executive director of the Wood Pellet Association of Canada. “In electricity, this is known as dispatchable energy. Some other energy forms are dependent on the sun shining or the wind blowing, etc.”

Canadian natural gas prices 
Canadian natural gas prices are not likely to rise in the next few years, which is as far as anyone can reasonably predict. This reality is going to pose a challenge over that time period in the quest to get more biomass energy projects off the ground.

Keith Schaefer, editor and publisher of Vancouver-based Oil & Gas Investments Bulletin, says continued supply increases of natural gas are the major factor that will keep Canadian gas prices low. He points to brokerage firm Raymond James’ outline of how the fast-growing and low-cost gas production from the stacked Marcellus and Utica shales in the northeastern U.S. could displace the use of all Western Canadian natural gas in Eastern North America in the short- to medium-term.

“There are currently four major projects underway that are going to make the inevitable export of United States natural gas to Canada happen,” Schaefer notes. “Those projects combined should allow for enough U.S. natural gas to get into Eastern Canada so that no Western Canadian natural gas will be needed. This will mean that the Northeast United States will have gone in just a few years from being almost fully dependent on Canada for natural gas, to having the ability to export natural gas to Canada – and fill all of eastern Canada’s needs. Meanwhile, a portion of Western Canadian natural gas production will need a new home, with Canadian natural gas prices therefore facing some stiff headwinds.”

Evolving energy sourcing
The recent political situation involving Ukraine and Russia is stirring up calls for Europe to start looking hard for energy alternatives to Russian fossil fuels. U.S. President Obama told the European Union in April 2014, that while it can look to the United States to help it reduce dependency on Russian energy (the U.S. has already agreed to relax restrictions on gas exports to Europe, for example), it must also look beyond. The EU currently relies on Russia for about a third of its oil and gas needs. The 28-member association is indeed stepping up efforts to diversify its energy sources, and some of those include biomass. Several European countries, including Germany and England, already have bio-energy plans in place, which is great news.

“Pellets to Europe are presently 9 million tonnes for power plus 10 million tonnes for commercial, residential, and institutional heating annually,” says Murray. “Both sectors continue to grow rapidly. Most experts predict that Europe’s market will be 50 million tonnes by 2020, with South Korea and Japan each at about 5 million tonnes.” He notes that the Northeastern U.S. biomass heating market is also growing rapidly as a result of high oil prices, the introduction of European heating appliances and the cost savings of using bulk pellet deliveries over bags.

Rising fuel costs
We can all count on the fact that fossil fuel prices will continue to rise. This is tough on biomass companies, which need to gather forestry residues and other feedstocks, transport and process them – and in some cases, ship finished products such as pellets as well. At the same time, however, high electricity and fossil fuel prices are prompting more Canadians and beyond to look at biomass.

Murray notes that only 45 per cent of Canadian homes are served by natural gas, which represents a huge opportunity for pellets to be used for heat and hot water production – but that getting there will require significant marketing effort. “In most provinces, pellets are cheaper than oil, electricity, propane. We need to educate Canadians about the modern automated pellet appliances that are commonplace in Europe.”

Carbon credits
The European Union has an Emissions Trading System where large emitters must buy emissions allowances, and various countries in that region also have carbon taxes. However, Canada has no national meaningful carbon reduction policy, which hinders the growth of biomass use for energy.  In Murray’s view, the Canadian government’s focus on continued development of the oil sands means there will not be any federal carbon-controlling mechanisms introduced anytime soon.

On a provincial level, Dan Fraleigh notes that B.C. has a carbon tax and Alberta has a voluntary cap-and-trade system for large carbon emitters, as does Quebec (which trades with California companies). He expects something in Ontario in the next five to 10 years, but nothing is certain, and like Murray, Fraleigh expects nothing nationally in the foreseeable future. “The voluntary carbon offset market is what’s most active in North America – buying credits for marketing purposes,” says the Chief Operating Officer of Carbonzero, a firm which aids organizations in assessing, reporting, and reducing their emissions.

In its new vision and action plan released in April, “Evolution and Growth: From Biofuels To Bioeconomy,” the Canadian Renewable Fuels Association states that “Globally, more than 40 countries have or are in the process of putting a price on carbon. In so doing, they are effectively monetizing carbon benefits that accrue through the use of sustainable products, like biofuels.” However, while Fraleigh acknowledges that biomass projects are now eligible for credits, he expects that to end within the next decade or so. Offsets are a mechanism to encourage change, he notes, so when an offset-eligible activity such as biomass use becomes prevalent, offsets become unavailable for it (but then become available for other carbon-reducing activities that need support due to growth).

Government incentives, policy and support
The biomass industry has long called for stable government policy that supports the nation to use more biomass for energy. Kevin Kerschen, a senior project manager for Black & Veatch’s global energy business, echoes the sentiment. Black & Veatch has had a significant role in planning, evaluating and providing engineering services for many of the recent biopower projects under development in the U.S., including standalone biopower, co-firing biomass in coal plants and repowering coal plants with biomass fuel.

In a recent Black & Veatch article, “Four Key Developments Needed to Boost Global Biomass Industry,” Kerschen notes that of all renewable energy sources, biomass is challenged by the widest and most complex set of factors that impact project development. These include everything from forestry sector regulations to carbon emissions, and Kerschen says these issues have been among the reasons the biomass sector has seen slower growth compared to other renewable energy sources.

“For more utilities to be willing to pay a premium for renewable energy, there needs to be more consistent and well-defined government policies, and better clarity on environmental regulations as they pertain to biomass that urge utilities to embrace renewable energy within the context of an overall national energy plan,” Kerschen says. “If governments put into place certain regulations that foster a stable environment, where developers and buyers meet mutually beneficial objectives, then I can see there being a strong increase in the development of biomass facilities.”

Demand rising for ‘green’ energy
Many countries are putting more of an emphasis on renewable energy production and reducing greenhouse gas emissions than Canada, which is good news for biomass exporters. Murray points out that the United Kingdom is moving away from coal mostly in order to reduce its carbon emissions.

Drax, the U.K.’s largest electricity-generating company, began converting the majority of its facilities from coal to biomass generation in 2003. All of their facilities are now co-gen or predominantly biomass, with the first biomass-only unit was operational in 2013. The company plans to complete the second unit this year and a third by 2016 – a fourth is under consideration.

Murray reports that Drax calculates that having three units firing pellets instead of coal will reduce carbon emissions by about 80 per cent, reducing CO2 production by 10 million tonnes a year compared to levels today. When all three units are done, Drax will use seven to eight million tonnes of pellets annually, and will likely be the world’s largest biomass generating company.

Cost of biomass and biomass systems
“The current biggest challenge for commercializing biomass to energy systems, is the true cost of biomass-derived energy (particularly for liquid transport fuels), versus their fossil fuel equivalents,” says FPInnovations’ Doug Bull. “Economies of scale limitations exist with biomass-based energy systems to a greater extent than occurs with most fossil fuel energy facilities. Furthermore, depending on the conversion process and final form of the energy being generated, some major technical challenges exist with biomass energy conversion routes.”

A prime example is deoxygenating biomass-based energy carriers such as pyrolysis oil and biocrude for conversion into hydrocarbon transportation fuels. However, Bull says that upgrading techniques and solutions to technical challenges are being actively developed around the world. “Hence, the economic viability of such processes are difficult to predict while technical development is still occurring.”

Green energy, as FPInnovations’ Forest Feedstocks Research Leader, Dr. Dominik Roser, notes, is already a reality in Canada. “Whenever we are in areas or communities that are not connected to the natural gas grid, forest biomass can be a good alternative to heating oil or propane,” he says.

“Communities across Canada are making the switch to a renewable, sustainable and local source of energy that creates energy independence and ensures that money stays in the communities. Using forest biomass for heating in communities is something that can be done now, and helps to bridge the gap until higher value uses for forest biomass can be found.”