Biomass 2012: International Growth and Domestic Obstacles
In 2012, expect to see the continued development of the biomass industry in the European Union and other areas of the world. Currently, the U.S. leads the world in biomass power capacity, but that is beginning to change. The North American wood pellet industry has become a major supplier to the EU. The volume of EU-bound wood pellet shipments in 2010 was double that of 2008, with the Netherlands, the U.K. and Belgium leading the demand. From 2008 to 2009 the EU’s gross electricity production from biomass increased more than 10 percent, with Germany, Sweden and the U.K. leading the way. The U.K., in particular, is focusing its efforts on developing its biomass capacity. October saw the U.K. propose subsidies to business customers (to be followed by households after the program was established) who use renewable energy technology for heating. While the program’s rich subsidy was scaled back (from 2.7 pence per kilowatt hour (kWh) to 1 pence per kWh), the efforts show clearly that the political will is in place to continue to support the biomass industry. The U.K.’s proposals included as a key goal the development of “cheaper” renewable generation, focusing specifically on the conversion of coal plants to biomass and cofiring plants.
But the U.K. is not the only place to see recent movement in the biomass space that is expected to continue throughout 2012. India, Japan and Brazil have also added biomass power capacity with additional projects in development phases. In addition, biogas is expected to see significant growth in Italy, France and Spain. China, in particular, has set ambitious goals for its biomass industry. By 2015, China wants to have 13 gigawatts of biomass power capacity, which is a 160 percent increase from its 2010 capacity. This means China anticipates adding 500 to 700 biomass power plants by 2015. With a biomass reserve equivalent to 500 million tons of coal, from sources such as straw, algae, methane, fallen timber and manure, China may very well emerge as the new high-growth country in the biomass space.
The U.S. biomass industry is growing, though it will continue to face significant challenges during 2012. But first, some success stories. Several new biomass plants are under construction (not just in the development stage) including 100 megawatt (MW) plants in Texas and Florida and smaller 50 to 75 MW plants in New Hampshire and Florida. Several more plants are in the development phase, with construction expected to begin in 2012. Most of these plants are located in rural areas where jobs are needed the most. New plant construction and job creation will go a long way to garnering the political support needed to move the industry forward.
What the biomass industry can’t control is the price of natural gas and oil. Further, the inability to establish an acceptable definition of “biomass” has torn the industry’s focus away from developing its supply chain and establishing its presence as a cost-effective alternative to fossil fuels. In addition, we are seeing a shift toward investment in smart grid and energy efficiency technologies, which may result in a focus away from biomass projects, at least in the short term. Energy service providers are focusing more on smart grid technologies, as a result of commercial customer demand for real-time energy management capabilities, through the acquisition of battery storage and consumer-driven energy management technologies.
In 2012, the biomass industry needs to focus on the positive economic benefits it brings to communities and the importance of energy independence. Further, while establishing a biomass definition is important, let’s not allow that debate to divert precious time and energy away from the development of a cost-effective supply chain and establishment of biomass as an alternative energy source to fossil fuels.
Author: Kate Bechen
Attorney, Michael Best & Friedrich LLP