Increased competition for biomass feedstocks to supply future biomass power plants and biofuels production facilities is a growing issue. One sector that is relevant to that discussion is the European pellet market. This short brief provides background on how that sector may impact renewable energy efforts in North Carolina.

In 2007, North Carolina committed to two major energy initiatives to develop a new energy economy within the state. The first of these was the passage of Senate Bill 3¹ and the creation of a renewable energy? mandate for our state electricity producers. The second initiative was the establishment of a state goal that by 2017, ten percent of liquid fuels sold in North Carolina will come from biofuels grown and produced within the state.

Both of these ambitious initiatives will require substantial utilization of North Carolina’s 18 million acres of forestland? for energy purposes. As policy-makers consider the potential impacts that these energy efforts will have on the state’s forestlands, other sectors such as the traditional forest products? industry and the emerging European wood pellet? market must be considered in tandem.
Consequently, a brief overview of the policies and actions driving the European energy markets is instructive as to how North Carolina’s new energy economy based on wood biomass may be impacted by external forces.

Background

The Kyoto Protocol? was adopted in 1997 with the goal of stabilizing worldwide greenhouse gas emissions. While the United States chose not to ratify the treaty, close to 200 countries have done so. Under the protocol industrialized nations agreed to reduce their greenhouse gas emissions by 5.2% collectively from 1990 levels by 2012. One of the outgrowths of the Kyoto protocol in Europe was that it established the institutional policies that provided subsidies and incentives for renewable energy producers. These policies led to an advancement of the development of the renewable energy sector. During the last 10 years approximately 350 biomass power plant?s were put into operation throughout Europe.² By 2006 more than half of the renewable energy produced in Europe was generated through biomass, most of which was woody biomass.

The Kyoto Protocol has been supplanted in Europe by much more aggressive renewable energy and greenhouse gas reduction initiatives. One of these initiatives is the European Union directive adopted in 2009 setting a target of 20% renewable power generation by 2020. Incidentally, the directive also includes a 10% target in the transportation sector, which should spur growth in the biofuels market.
Member states are required to submit national renewable energy action plans by June 30, 2010. While the collective renewable energy goal is 20%, individual member states have differing targets (e.g. 15% for the United Kingdom (UK), 18% for Germany and 49% for Sweden).³ Each member state has flexibility in its approach to meeting the requirements outlined in the directive. For example, German is relying heavily on feed-in tariffs, while the UK has instituted a more traditional renewable portfolio standard.

From North Carolina’s perspective the salient point is that the renewable energy directive is driving increased demand for the combustion of biomass and, more specifically, wood pellets. Wood pellets are in demand because of their compatibility with co-firing in coal plants and their ease of shipment.
Southeastern United States

The growth of the pellet market in Europe has created industry opportunity in the Southeastern United States. One plant in Cottondale, Florida is producing 500,000 tons of pellets a year for export to European markets. In 2009 a pellet plant, also producing 500,000 tons a year located in Alabama, filed for bankruptcy leaving the plant’s 70 employees out of work. Media reports indicate that the closure of the Alabama plant was based more on logistics rather than a signal about the future of these markets.
Within the last year new pellet plants in Georgia, Mississippi and Arkansas have been announced and/or are under construction.⁴ The pellet production capacity of the plants ranges in size from 250,000 tons per year to 1 million tons per year. In moving ahead with the construction of these plants, backers point to the possible domestic market if the United States enacts a national renewable portfolio standard in the next few years.

Long Term Outlook

The ability to predict the long term viability of the wood pellet market in Europe is complex and beyond the scope of this update. Close to 90 percent of the biomass currently utilized for power production in the European Union is sourced from European forest residues and other wood by-products. However, anecdotal reports illustrate that the use of wood for power generation will continue to grow in Europe and that overseas demand for imported wood pellets will increase. In Britain two 300 MW biomass plants are in the planning stages; each of which is projected to consume 3 million green tons of wood chips annually and represent hundreds of millions of dollars in capital investment. Consequently, the demand for biopower is driving the demand for wood pellets on a global basis. One forest industry consulting firm reports that in 2008 global demand for wood pellets was 12 million tons and predicted that this demand would double by 2015.⁵

A critical factor that must be layered into the European biopower policy discussions is the juncture of biopower and carbon neutrality. While still developing, this factor has the potential to slow down the growth of the wood pellet markets. Despite the other positive impacts of biopower, (e.g. job creation, energy independence) the policies in Europe driving the market are primarily linked with the reduction of greenhouse gas emissions. Consequently, the proposition that all biomass energy is carbon neutral is being closely examined. A recent report prepared in advance of the December 2009 Copenhagen conference on climate change outlined the complexity of the impacts of biomass combustion from a climate change perspective. The Intergovernmental Panel on Climate Change? is also preparing a report on renewable energy, which will include a section on climate considerations for biomass combustion.

References and external links

¹ See: www.ncleg.net/Sessions/2007/Bills/Senate/PDF/S3v6.pdf

2 See: www.ecoprog.com/en/studie_biomass_power_plants_europe.php

3 See: ec.europa.eu/energy/renewables/targets_en.htm

4 See: www.beckgroupconsulting.com/Anderson%20Column%20-%20The%20Forestry%20Source%20Jan%202010.pdf

5 See: www.newenergyfocus.com/do/ecco/view_item