By Graeme Rodden, Executive Editor, Pulp & Paper International magazine
BEDFORD, MA,
Aug. 16, 2011
(RISI) -
Hard on the heels of the recently released North American Bioenergy Review, the RISI bioenergy team has just released the European Biomass Review. Co-authored by Glen O'Kelly, Consultant, Bioenergy Services, and Anne Rahikainen, Director, Bioenergy Service, RISI, the study provides forecasts for biomass demand for 2015 and 2020 and scenarios on how the demand will be met, providing implications for biomass prices and import requirements.
Rahikainen says that the European increase in demand for biomass in the next five years will be almost twice that of North America: 37 million dry tonnes compared with 20 million dry tonnes.
The study covers lignocellulosic biomass (wood, energy crops, agricultural residue) for the EU27 countries as well as Norway and Switzerland, broken down into five regions: north, west, east south, UK and Ireland.
By 2020, the demand for biomass in Europe should reach 243 million dry tonnes. The European figure includes the industrial sector so black liquor is incorporated into the numbers. More than 77% of the overall demand growth in Europe will come from the energy sector.
Rahikainen explains that the regulatory environment is one of the main reasons why expected growth is so much higher in Europe. The commitment was made to increase the supply of renewable energy in Europe. The EU Energy 2020 Strategy calls for an increase in renewable energy by 20% with a corresponding drop in greenhouse gas (GHG) emissions by 20% (of 1990 levels). This means, for example, converting coal-fired units to biomass and building new heat generating facilities that use biomass.
"The target to reduce GHG emissions had an indirect positive effect," says Rahikainen. "The goal includes a trading system where facilities with set emission levels pay penalties if they exceed them, but if they go lower, they can trade and, therefore, gain additional revenue. And, carbon prices in Europe are expected to increase because of tightening emission targets."
The three scenarios contained in the report analyze the issue from a supply perspective: To what extent can Europe supply the increase in biomass demand internally? There are plans to increase supply from new sources such as agricultural residues, energy crops and forest residues. "We estimated potential from all supply sources to 2015 and 2020 and the cost of these supplies. This gave an idea of what could be generated in Europe and how cost efficient domestic sources are compared to imports," Rahikainen says.
"We then developed the three scenarios," she adds. "We determined early on that forest biomass, including both direct and indirect sources, would not be sufficient to meet the increase in demand so new sources need to be developed."
The first demand and supply scenario looks at the issue from a perspective of Europe being able to supply its own needs. That would necessitate a full mobilization of regional biomass potential. Even then the UK and Ireland would face supply deficit equal to twice the current European imports for wood pellets.
The second takes a more conservative approach. The team looked at current best practices and assumed that new sources could be developed to the highest degree currently seen in leading European countries. For example, Denmark is the best at using agricultural residues. As perhaps could be expected, the use of forest residue was more advanced in Scandinavia. Development of energy crops has been limited so far, even though national plans assume substantial increases in biomass supplies from purpose crown crops. . In this scenario, most regions would need imports from external sources to meet increase in demand.
The final scenario looked at the issue if no new sources of supply could be developed. Therefore, more imports would be needed as there would be an acute shortage of biomass.
Based on the three scenarios, the team concluded that even under the assumption that Europe could fully develop its internal biomass potential, it will still have to import biomass. The estimates range from 3.5 to 55 million tonnes/yr.
Other factors that played into the forecast were the recession, which should slow demand and the new national action plans published in 2010. These plans indicate that the EU countries will develop more alternative energy sources such as wind and solar and the development will be faster than expected so the EU will become less dependent on biomass compared to what earlier studies have indicated nd although wind, geothermal and solar energy sources are developing rapidly, lignocellulosic biomass is still the largest renewable energy source and will continue to be due to its relative abundance and reliable supply.
It now accounts for 60% of the overall supply in Europe. It will still be in demand and a critical component, but its actual market share in terms of percentage will drop as other sources grow. Rahikainen says that for Europe to become more self-sufficient in renewable energy sources, growth will have to come from energy crops and agricultural residues. Energy crops can be defined as short-term forest plantations such as willow and poplar that would use genetically-improved planting stock. Rotation could be in the three to seven year range. Also, some grasses and annuals are suitable as biomass.
The results of the RISI study show that there is a business opportunity for outside suppliers. As noted, Europe will need to import between 3.5 and 55 million tonnes/yr of biomass. "The majority of the imports will take the form of pellets because it is the most cost-efficient way of transporting biomass for long distances," Rahikainen explains.
Pellet facilities are being developed in some key North American regions such as the US southeast and western Canada. There are also some under development in Canada. The larger facilities will produce between 200,000 and 800,000 tonnes/yr. One of the issues being raised among the pulp producers is that this could lead to increased competition for roundwood, driving up costs. Brazil and Russia are also in a position to supply biomass to Europe and South Africa could be a supplier as well.
Rahikainen notes that the whole biomass sector is driven by the EU's strong renewable energy mandate. Without the mandate and subsidies, these investments would not be made. However, Europe is committed to its renewable energy targets in the long-term, even though economic concerns created by changing subsidies may hinder or slow down some investment projects in the short-term.
The biggest challenge for the sector in Europe is to develop new sources of supply. Europe needs to develop energy plantations. "It is assumed the owners of agricultural land will develop the plantations," Rahikainen says. "But, are there enough incentives available to induce substantial investment in energy crops? In the short-term, supply will have to come from traditional sources where the supply chain is in place."
For agricultural residues, the supply will come from farmland owners and there are concerns about soil and economies: will prices be high enough vis-à-vis costs? Also, how do farmers organize: who takes care of the supply chain?
The study also covers in depth the EU Energy 2020 strategy, including targets and actions plans; supply potential directly and indirectly from forest and non-forest sources; biomass availability and cost in Europe; announced biomass heat and power installations in the EU; economic incentives affecting biomass energy developments and installation type in key countries; European biomass and wood price scenarios that are likely to develop given demand and costs of supply; potential implications for the traditional forest industries and energy sectors.
For more information, contact: www.risi.com/eubioenergy
