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HAWKINS WRIGHT
Copyright ©: Hawkins Wright Ltd. 2021
Forest Energymonitor
BIOMASS & PELLETS — MARKETS — INVESTMENTS — LEGISLATION
www.hawkinswright.com/forest-energy-monitor
Issue 121 – Apr 2021
A stretch of surprisingly cold weather in April - heating demand in Europe was +45% year-on-year - saw a flurry of spot market activity from Scandinavian district heating buyers. Higher power and CO2 prices also supported demand for wood pellets. Traders report around 200,000t of spot deals concluded in April for near-term delivery, consisting of mainly volumes from the Baltics. An abundance of pellets in storage helped keep prices low despite the renewed buying interest. The deals concluded in a range of €114-120/t CIF ARA. We estimate spot prices on a dollar basis held steady at $138-148/t CIF ARA.
Forecasted colder weather in May and the expected continuation of high power and CO2 prices in Europe could spur more spot buying next month. The higher power and CO2 prices could also mean Ørsted extends the operation of its Danish CHP plants on a power-only basis during the summer months, increasing its demand. And could even push Drax's unit #4 into profitability without a ROCs subsidy.
Russian producers continue to be the most competitively priced in the market, with offers around €5-10/t lower than the Baltics. In recent weeks Russian pellet exporters have reported increased custom checks at St Petersburg terminals – the key point of export to the EU market. The checks on wood pellet containers are randomised but exporters say they are taking place more regularly since the second half of 2020. One theory is that an attempt to smuggle cigarettes into Germany in a wood pellet cargo from Belarus late last year has led to the increased inspections by the EU. However, reports suggest
Colder than expected April boosts buying appetiteMarket analysis1 Biomass market briefing
3 Biomass price indications
5 Wood fibre availability
6 Energy and carbon markets
7 Other forest product industries
Industry news
Investment and technology 8 Drax outlines need for BECCS in
the UK8 Cancelled Japan coal plant to
consider biomass instead9 Japanese pipeline makes pro-
gress10 Enviva plans MS pellet mill11 In brief...
Policy and legislation12 German report considers coal-to-
biomass costs13 Korea to revise RPS target
14 France to encourage particle emission reductions
15 US sets ambitious climate change targets
16 In brief...
Market data17 Wood pellet trade statistics
18 Fossil energy & carbon prices
18 Power generation economics
19 Heating market economics
20 Exchange rates and freight rates
21 Project list: biomass power/CHP
22 Project list: industrial pellet mills
Prices of wood pellets in selected European countries
Sources: See the footnotes beneath the price indications table, page 3.
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PIX Pellet Nordic (industrial)
Switzerland (residential heat)
Germany (residential heat)
Austria (residential heat)
Lithuania (commercial heat)
April 2021
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Biomass market briefing (continued)
Forest Energy monitorPublished monthly byHawkins Wright Ltd.
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Copyright © Hawkins Wright Ltd. 2021.All rights reserved. No part of this publication may be reproduced, stored in or introduced into any retrieval system, or transmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying or recording, without the written permission of the publisher.
there are increased inspections on other products too. Inspections result in increased costs for exporters due to the time delay and storage at the port while the pellets are inspected. Some exporters have discussed increasing their pellet prices to help recoup the extra costs.
Looking later in the year, the start-up of MGT Power’s 299MW plant in northern England will have a major impact on spot prices in the second half of 2021. The UK’s Low Carbon Contract Company, the administrator of the CfD subsidy scheme, recently moved MGT’s start date back to 26 June 2021. However, for some time we have expected the plant to start up later in the summer, perhaps July or August, but it is very possible it will be delayed further.
Drax’s planned outage at its unit #1 from 5 August 2021 to 11 November 2021 will reduce overall demand in Q3 and Q4. However, the fact it is a scheduled outage means it is unlikely to have a huge effect on the spot market unless extended beyond schedule. And further ahead there is encouraging news regarding Drax's BECCS plans (see page 8), as well as some useful insights regarding the economics of potential coal-to-biomass conversions in Germany (see page 11).
In the South Korean market the oversupply of pellets continues to limit price moves in the region despite a couple of new genco tenders. The shortage of containers in Asia persists in disrupting trade flows, keeping CIF prices higher although FOB prices remain largely unaffected (see FEM#120, p.1). However, the recent tenders reportedly caused the price to firm modestly, although the prices achieved are yet to be publicly announced. Korea South East Power (KOEN) issued a tender for 180,000t for imported wood pellets for the second half of 2021. It wants the pellets delivered to its Yeongdong plant from July 2021 to January 2022. Korea Southern Power also issued a tender looking for 40,000t of wood pellets for June-October delivery to its Hadong power plant. Bidding closed on 29 April so it is too early to know results.
In the European residential market, the approaching end of the heating season has softened prices across the continent. Some market participants had not expected spring prices to reveal the usual discount because prices were already low compared to previous years. However, DEPI assessed German retail pellet prices at €226.74/t in April, down -5.5% on March and down -7.8% compared to a year earlier. Austrian prices as assessed by ProPellets sat lower at €219.80/t, down -5.3% from March and -9.2% on the year. The 2020/21 heating season in Austria was particularly affected by the COVID-19 lockdown’s impact on tourism and the resulting reduced demand for pellets from ski resorts and hotels. In addition both countries were producing at record levels in 2020.
We have published Russian heating pellet prices for the first time this month (see page 4), as assessed by the Russian Pellet Council (RPC). The RPC assesses the price of ENplus certified pellets on a free carrier (FCA) basis from the port of St Petersburg, the major export port for the European heating market. In March (the latest available data), RPC assessed the price of pellets to be €83/t FCA, down -6% from February, pressured downwards by the oversupply in the market. A weaker rouble versus the euro since the second half of 2020 has also increased the competitiveness of the Russian producers and pushed down prices on a euro basis.
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PRICE: £3,500
FOR MORE INFORMATION: www.hawkinswright.com/bioenergy/biomass-demand-in-japan-korea
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Biomass demand in Japan and South Korea, published March 2021
Since our last Biomass Demand in Japan and South Korea report in mid-2019, Japan and South Korea have ramped up their climate change com-mitments. With both now targeting net-zero by 2050, their governments are making key policy decisions and defining the role of biomass. This new report analyses the changing policy framework and its impact on biomass demand, including the Japanese coal phase out and new sustainability requirements. We showcase the latest 2020 data as well as detailed updates on planned projects and their expect-ed timings. With most of the projects having now confirmed their fuel mix, we are able to share in-depth insights regarding the relative roles of pellets, palm kernel shells and wood chips in the market.
Planned biomass demand in Japan and Korea
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Forest biomass and wood pellet price indications
Sources: 1. Hawkins Wright estimate; 2. FOEX; delivered within 50km in bulk, excluding taxes. Lot size: 26t Germany, 17t Austria 3. DEPI; 4. proPellets Austria; 5. proPellets France; 6. Pellet Preis; 7. BALTPOOL UAB; 8. Russia Pellet Council; 9. Maine Governor’s Energy Office; 10.Timber Mart-South; 11. Swedish Energy Agency. 12. FOEX
Notes: a) Where the original data is weekly or daily, the monthly and quarterly figures shown here are simple averages of the original. b) *Apr-21 averages are based on data available up to 30 April 2021. c) All wood pellets are assumed to have a calorific value of 4.72MWh/t (17 GJ/t), except the PIX Pellet Nordic Index where the assumption is 4.8MWh/t, and the France heating pellet index where the assumption is 4.6MWh/t. d) FOEX discontinued its PIX Pellet Continental Index in May 2020.
1Q20 1Q21 Feb-21 Mar-21 Apr-21* chg on Apr-20
WOOD PELLET PRICES
Industrial wood pellets1. CIF Amsterdam, Rotterdam, Antwerp (ARA)
US$/tonne 159.83 143.67 143-153 138-148 135-147 3.50
US$/MWh 33.86 30.44 31.36 30.30 29.87 0.74
€/tonne 144.91 119.18 122.37 120.17 117.90 -8.62
€/MWh 30.70 25.25 25.92 25.46 24.98 -1.83
Industrial wood pellets - PIX Pellet Nordic Index2.
CIF Baltic Sea or North Sea portSkr/MWh 361.85 341.46 343.82 327.14 - -
€/tonne 162.85 162.03 163.58 154.42 - -
€/MWh 33.93 33.76 34.08 32.17 - -
Heating wood pellets - Germany (residential heat)3. delivered, bulk: <6 tonne, 100-200 km, incl. taxes
€/tonne 260.10 238.11 236.45 239.83 226.74 -19.2
€/MWh 55.11 50.45 50.10 50.81 48.04 -4.07
Heating wood pellets - Austria (residential heat)4. delivered, bulk: <6 tonne, incl. taxes
€/tonne 244.70 232.00 232.60 232.00 219.80 -9.20
€/MWh 51.84 49.15 49.28 49.15 46.57 -1.95
Heating wood pellets - France (residential heat)5. delivered, bulk: 5 tonnes, incl. taxes
€/tonne 293.30Q4 286.70Q4 - - - -
€/MWh 63.76Q4 62.33Q4 - - - -
Heating wood pellets - Switzerland6. CHF/tonne 374.30 359.83 360.2 360 348.3 -13.50
€/tonne 350.72 329.84 332.02 325.08 315.53 -27.50
€/MWh 74.30 69.88 70.26 68.87 66.85 -5.83
Heating wood pellets - Lithuania (commercial heat)7. delivered, bulk
€/tonne 120.09 98.65 108.69 90.28 - -
€/MWh 25.44 20.90 23.03 19.13 - -
Heating wood pellets - Russia (residential heat)8
FCA St Petersburg, ENplus certified€/tonne 110.33 83.83 83.50 83.00 - -
€/MWh 23.38 17.76 17.69 17.58 - -
Heating wood pellets - US, Maine9. US$/tonne 295.42 295.42 295.42 295.42 - -
US$/MWh 62.59 62.59 62.59 62.59 - -
WOOD FIBRE / BIOMASS PRICES
Pine pulpwood (Average US South)10. delivered (Timber Mart-South)
US$/s.ton 28.45 28.35 - - - -
US$/MWh 6.35 6.51 - - - -
In-woods pine chips (Average US South)10. fob-woods (Timber Mart-South)
US$/s.ton 23.07 24.21 - - - -
US$/MWh 5.39 5.65 - - - -
Pine process residuals (Average US South)10. fob-woods (Timber Mart-South)
US$/s.ton 21.35 21.28 - - - -
US$/MWh 4.99 4.97 - - - -
Energy wood/biomass - Sweden11. delivered to heating plant
Skr/MWh 201.00Q4 197.00Q4- - - -
€/MWh 18.89Q4 19.18Q4- - - -
Forest biomass Finland - PIX12. Industrial by-products and forest residues, delivered, excl. taxes
€/MWh 33.79 30.71 31.61 30.97 - -
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Planned increases to Belarus’s sawmilling capacity could boost fibre availability to wood pellet producers in the country. Two major sawmill projects are due online in 2022 which together will boost sawmill capacity by 750,000m³/y and subsequently increase the supply of sawmill residues.
Estonian firm Kaamos Timber’s planned 250,000m³/y sawmill in Mozyrworks is currently under construction. It is due online in the second half of 2022. Meanwhile, Austrian company HS Timber’s (formerly Holzindustrie Schweighofer) subsidiary HS Belacon is constructing a 500,000m³/y sawmill in Svisloch due online in spring 2022. Sawmill capacity has significantly grown in Belarus in recent years. Bellesbumprom Group – the state-run group consisting of around 50 private and public forestry companies - processed 5.6Mm³ of softwood logs in 2020, double the volume processed in 2015.
Taking advantage of the increased sawmill residues, Belarus has shown considerable growth in wood pellet production in just the past couple of years. In 2020, European customs data show the EU imported 524kt of wood pellets from Belarus, up +40% from 2019.
The Belarus government continues to support the expansion of pellet production capacity. We understand there are 13 pellet mills, all around 20kt/y each, planned in partnership with local forest agencies. In addition, forest products company Akitama is planning seven new pellet mills. It plans to start production at its first 150kt/y pellet mill by the end of 2021. Akitama plans to sell the majority of the pellets to commercial heating customers in Europe, as well as residential users.
Wood fibre availability
In brief...
The Russian government has adopted decree non. 396 which confirms the export ban on softwood and hard-wood logs from 1 January 2022. Future exports of hardwood and softwood logs will require payment of a uniform tariff rate which will render exports uneco-nomical. The export of industrial birch roundwood should remain possible.
France’s agriculture, housing and industry ministers have announced the government will revise its strategic con-tract for the wood sector, called the CSF. Strategic contracts are drawn up by the sector's committees to help organise a sector. The contract aims to accelerate the contribution of the forest sector in the low-carbon transition and develop the industry. It will include a call for expressions of interest for the develop-ment of wood products and innovative wood construction systems. France is currently heavily reliant on imported wood but the contract hopes to help the industry utilise its own resources.
Source: EU customs data
EU wood pellet imports from Belarus, 2015-2020
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Energy and carbon market
European commodity prices - oil, coal and natural gas
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Coal (US$/tonne cif ARA) left scaleCrude oil (US$/barrel, Brent Index) left scaleNatural gas (€/MWh, ICE UK Gas Index) right scale
Chinese President Xi Jinping pledged at the Leaders’ Climate Summit to strictly control coal projects in the current five-year period and phase them down during 2026-2030. Xi also affirmed China's exist-ing targets on peak CO2 emissions before 2030 and carbon neutrality before 2060.
More than 1.5GW of coal power capacity will shut from December, following the second round of Germany’s coal closure auctions. The auction was again oversub-scribed. The three successful bidders will receive between €0-59,000/MW accord-ing to the German regulator. It had set a cap of €155,000/MW. The successful bidders were Uniper's 757MW Wilhelms-haven plant and Czech EPH's Mehrum 690MW and Deuben 67MW plants.
The UK and EU are coming under increas-ing pressure to link their emission trading schemes post-Brexit. In April, more than 40 UK and EU companies signed an open letter to UK Prime Minister Boris John-son urging him to begin negotiations “as soon as possible". According to the letter, advantages of linking the two systems include "liquidity, price discovery, and the ability to attract abatement from across Europe rather than just the UK,". The sig-natories sent a similar letter to European Commission president Ursula von der Leyen.
Sources: EEX, IHS and ICE
In brief...The EU’s announcement that it has agreed on the European Climate Law further supported the bullish sentiment in the European carbon market. Trialogue talks between the European Commission, Parliament and Council ended in an agreement on the bloc’s 2030 and 2050 climate change targets. New legislation will set into law the bloc’s 2050 net zero target and the 2030 target of at least a 55% net emissions reduction below 1990 levels. Previous EU targets had called for a 40% cut. While the 55% target is lower than the 60% Parliament had earlier voted for, EU member states made a concession to Parliament by agreeing to cap the contribution of carbon removals from land use, agriculture and forestry.
The more ambitious targets will likely mean the number of EU emission allowances (EUAs) in the European Emission Trading Scheme (ETS) will need to be reduced and prices will rise further. The Commission is expected to publish details in June on how the carbon market will be reformed to help achieve its tougher climate target. In late May, EU heads of state and government will meet to discuss climate policy reform and consider legislative proposals on the expansion of carbon trading to buildings and vehicles.
As a result, EUA prices continued their record-breaking run and the benchmark December 2021 contract climbed above €46/tCO2 for the first time ever. In addition to the more ambitious climate change targets, speculative buying continues to fuel the rise in carbon prices in the EU ETS. Traders and hedge funds from outside the industry have been attracted by the strong price gains since the second half of 2020, further fuelling the price rally. By the end of April, EUA prices have climbed +47% since the start of the year.
April buying was also boosted by utilities rushing to meet the 2020/21 EU ETS compliance deadline at the end of April.
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Developments in other forest product industries
In brief...
UK demand for domestic and imported sawn softwood continues to exceed the available supply. There is heavy demand for decking and garden wood products such as screen fencing, and agricultural fencing. In addition, carcassing timber (usually used in structural applications) is not available in sufficient quantities. Home DIY and construction is fuelling the demand. As a result sawn softwood imports were up +22% in January 2021, compared to a year earlier (530,000m³).
Swedish forest products company Setra has made its first delivery of planed timber (planed lumber). The shipment was sent to Port Canaveral in Florida and will be distributed to customers in the US South. The planed timber was processed at Setra’s new 300,000m³/y planing mill in Hasselfors, Sweden which began production last year. It also sends planed timber to Europe and Australia. Setra has benefitted from the US’s insatiable demand for lumber and plans to send more shipments to Florida and Baltimore, MY. The timber has been adapted to meet the specific US length requirements and according to the American certification system for strength. Lumber prices in the US are at record highs (see FEM#119, p.4 and FEM #112, p.4) boosted by a revived housing market and robust DIY demand.
Apple’s newly created $200M Restore Fund will invest in timber-producing commercial forestry projects to help remove carbon emissions from the atmosphere and support sustainable forestry. Apple has identified the importance of commercial forestry to help fight climate change.
Apple has teamed up with US bank Goldman Sachs, which will run the investment portion of the project, and non-profit Conservation International to establish the new fund. Conservation International aims to remove 1Mt/y of CO2. The fund aims to showcase a viable financial model that can help scale up investment in forest restoration. The three parties will identify new projects to invest in later this year.
The effort is part of Apple’s broader goal to become carbon neutral across its entire value chain by 2030. More and more privately-owned corporate companies are setting themselves ambitious net zero targets. While several companies such as Microsoft and Shell have identified planting trees to offset emissions, Apple is one of the first outside the wood products industry which has specifically identified commercial forestry and using those wood resources in its products and packaging. This could encourage other companies to follow suit.
Apple will directly eliminate 75% of emissions from its supply chain and products by 2030, while the fund will help address the remaining 25% of Apple’s emissions by removing CO2 from the atmosphere. It has been increasing its use of biomass based packaging and also replaced the plastic film on iPhones to a biomass based screen cover.
To ensure that the carbon stored in forests is being accurately quantified, and permanently locked out of the atmosphere, the Restore Fund will use robust international standards developed by recognised organisations such as Verra, the Intergovernmental Panel on Climate Change, and the UN Climate Convention.
Printing & writing paper outputmillion tonnes 2020 Nov-20 Dec-20 Jan-21 % YTD
Europe (deliveries) (1): 17.87 1.54 1.44 1.45 -22.1%
Coated WF 3.72 0.33 0.31 0.30 -27.4%
Uncoated WF 5.60 0.49 0.45 0.52 -15.0%
Uncoated mech. 1.92 0.16 0.15 0.14 -20.0%
Coated mech. 3.92 0.33 0.30 0.30 -25.2%
SC-Magazine 2.71 0.23 0.23 0.18 -26.7%
North America (shipments) (2): 10.10 0.82 0.83 0.82 -22.4%
Coated WF 1.79 0.16 0.16 0.15 -28.9%
Uncoated WF 5.44 0.44 0.45 0.46 -14.8%
Uncoated mech. 1.74 0.14 0.14 0.15 -37.7%
Coated mech. 1.13 0.09 0.09 0.07 -17.9%
Japan (production) (3): 5.88 0.50 0.49 0.53 -11.3%
Korea (production) (4): 2.32 0.19 0.21 0.20e -10.8%
Source: (1) EUROGRAPH, (2) EMGE, (3) JPA, (4) KPANote: we are still looking for alternative sources of data to update subscribers on the wider forest product markets. We will review this data again next month.
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Investment & technologyNew study by Baringa concludes BECCS at Drax will deliver cost-savings
A new study commissioned by Drax highlights the importance and cost-savings of bioenergy carbon capture and storage (BECCS) if the UK is to meet its net zero target by 2050. Drax instructed consultancy Baringa to explore the role of BECCS from power generation (BECCS-power) in three scenarios with varying levels of deployment: Central, Downside and Upside. All scenarios assumed BECCS is deployed at Drax, with a further 1-9GW of additional new build capacity developed elsewhere in the UK by 2050.
The report reaffirms that negative emissions technologies will be required to offset residual emissions across the economy. Engineered solutions such as BECCS-power can make a major contribution. Its analysis suggests there will be very strong demand for CO2 removals (50-90MtCO2/y), in addition to those which can be achieved through land management (LULUCF), to offset emissions from sectors that are hard to decarbonise, e.g. agriculture, aviation and certain heavy industries.
Drax is considering converting two of its four biomass-fired units to BECCS, with the first unit online in 2027. The two units would have their generating capacity de-rated to 460MW (net) once equipped with CCS, due to the parasitic load needed to operate the CCS plant. Each unit has the potential to deliver 4MtCO2/y of negative emissions. This equates to a significant share of the 20-40MtCO2/y of negative emissions the UK’s Climate Change Committee says will be required in 2050.
The analysis assumes that the units will run at a minimum load factor of 85% until 2045 but concludes that in most cases the Drax units will be deployed above this. Beyond 2045, as we approach net zero, Baringa foresees BECCS providing dispatchable negative emissions generation, supporting the base of intermittent renewables and filling in for the diminished role of flexible fossil fuel plant i.e. the units would operate at a lower load factor.
Cost savings
The report finds that, in the absence of BECCS power, achieving net zero will be significantly more costly. The cost savings estimates range from an additional £4-69bn in total discounted system costs to 2050. The cost of not having Drax's BECCS project is driven by both the lower cost of retrofitting CCS at Drax, compared to new-build BECCS, as well as the value of facilitating power sector and broader decarbonisation earlier in the pathway. In its central case, without BECCS-power, discounted system costs will be circa £15bn higher by 2050, equating to around £17 every year for each household in the UK. The capital cost of retrofitting carbon capture at Drax's existing biomass units is significantly lower than developing a new build BECCS facility.
Baringa's analysis shows that additional short term system costs are particularly material if there was no BECCS at Drax. In the central case, over 80% of the cost increases, due to not building at Drax, are incurred before the end of 2032 (the end of the UK’s Fifth Carbon Budget). For power generation, a significant net increase in wind and solar capacity would be needed by 2032 in the absence of Drax. An additional 10GW of new capacity would be required, over and above the 30GW that would need to be built even if Drax is deployed. Similarly, significant additional investment in decarbonisation of domestic heating and road transport would also be required in the absence of BECCS at Drax.
Baringa highlighted the importance of early deployment of negative emissions technologies in achieving the UK’s intermediate carbon targets. It describes the Drax BECCS-Power project as a ‘no regrets’ option across a wide range of scenario conditions, enabling the UK to meet net-zero in a cost optimal manner. Deployment of BECCS-power before 2030 is cost-optimal in all scenarios and early deployment will enable BECCS-power to scale up ahead of 2050. It is therefore cost-optimal to deploy BECCS power in the late 2020s. According to Baringa, not deploying BECCS at Drax in 2027 would cost the UK an additional £5bn and make achieving the fifth and sixth carbon budgets significantly harder.
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Financial support
If BECCS is to be deployed at Drax in 2027, a final investment decision needs to be taken by 2024. The report says a carbon payment and power contract for difference (CfD) would be needed to underpin the investment at the Drax site.
Biomass with hydrogen
According to Baringa, the deployment of BECCS at Drax could pave the way to a substantial programme of new build BECCS and other negative emissions technologies, such as biomass gasification to produce hydrogen with negative emissions. The report also found BECCS with hydrogen production will play an important complementary role to BECCS-power, and is a key biomass consumer in the central and downside scenarios. In both cases, BECCS-power is added earlier in the pathway, while the need for BECCS with hydrogen develops later.
Kansai Electric and Marubeni consider biomass for 1.3GW Akita power plant
Japanese utility Kansai Electric Power and trading house Marubeni Corporation will consider using biomass at its planned power plant in Akita city following its decision to abandon coal. Kansai Electric’s subsidiary Kanden Energy Solutions and Marubeni carried out a feasibility study on the planned 1.3GW coal power plant. However it concluded using coal was not economically viable given the increasing restrictions on coal use in Japan and the country’s more ambitious climate change targets (see page 15).
They had planned to construct two coal units at the site, with a goal to commission the first 650MW unit in March 2024 and a second 650MW unit in June 2024.
Marubeni and Kanden Energy will continue to work together and will now consider the construction of a biomass power plant instead. It is unclear whether a new biomass plant would be the same capacity as the planned coal units.
The investment environment for new coal power plants in Japan is becoming increasingly difficult. The three Japanese mega banks, Mitsubishi UFJ Financial, Mizuho Bank and Sumitomo Mitsui Banking Corporation have all announced plans to move away from supporting coal power projects. In April, Japanese utility J-Power and Ube Industries decided to cancel their Nishiokinoyama coal power project in Yamaguchi prefecture. J-Power cited stable electricity demand and increased renewable energy in the region as the reason for the cancellation.
New biomass power projects make progress in Japan
The strong pipeline of new biomass power plants in Japan is now coming to fruition, with many now operational and several others nearing completion. We expect at least 1GW of new biomass-fired capacity to start up in Japan this year. This is on top of the 2.4GW of biomass capacity which is already operating under the FIT tariff, according to METI data valid as of September 2020, and the 2.3GW of biomass capacity which has been operating under the country’s previous RPS support scheme.
Here are some individual project updates:
● The Onahama 75MW biomass power plant in Iwaki City, Fukushima Prefecture has begun commercial operations. The plant was developed by energy and chemical company Air Water (51%) and Chugoku Electric Power (49%). It will use a mix of wood pellets and PKS.
● Chugoku Electric Power is also a partner on the Kaita Biomass Power in Hiroshima prefecture. The 112MW plant also started up in April. It will use around 80% biomass, consisting of local unused residues, imported
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wood pellets and PKS, and 10% coal. Chugoku is a 50:50 partner with Hiroshima Gas.
● Construction work has started on Renova’s 75MW Omaezakikou biomass-fired power plant in Shizuoka prefecture. Renova is developing the project in partnership with Chubu Electric Power (34%), Mitsubishi Electric Credit (18%) and Suzuyo Shoji (10%). The plant is due to begin operating in July 2023. Renova reached a final investment decision on the project in November 2019. It will use a mix of wood pellets and PKS.
● Itochu Corporation has teamed up with Osaka Gas, Tokyo Century and Tokyo Energy & Systems to develop a 50MW biomass-fired power plant in Hososhima Industrial District in Hyuga City, Miyazaki Prefecture. The Hyuga biomass power project will use a mix of imported wood pellets and domestic wood chips. Itochu will provide a long-term supply of wood pellets and Osaka Gas’s subsidiary Green Power Fuel Corporation will supply domestic wood chips. The plant is due online in November 2024.
● Sumitomo Corporation has appointed JGC Holdings Corporation as the EPC contractor for its planned 112MW biomass-fired Sendai Takamatsu power plant. The plant will be situated in Sendai City, Miyagi Prefecture. It will mainly use wood pellets and some wood chips. It is due to begin operating in 2023.
In total, 8.2GW of new biomass capacity has been certified in the FIT, including 7GW which intends to use biomass in the ‘general wood’ category (including imported wood pellets and PKS). Recent modelling by METI shows the ministry expects biomass capacity to reach 7.2GW by 2030, but it envisages only 310MW of further woody biomass capacity will come to fruition under the revised FIT or FiP schemes by 2030. This confirms that the country’s biomass targets will almost entirely be fulfilled by projects which have already received FIT certification.
For more details of planned projects in Japan please get in touch to learn about our new report: Biomass Demand in Japan and South Korea.
Enviva plans new pellet mill in Mississippi
Enviva's sponsor company Enviva Holdings has announced plans to build a new wood pellet mill in Bond, Mississippi. It has acquired the land for the proposed mill. If it goes ahead, the mill will produce between 750k-1Mt/y of wood pellets.
Its location close to the Port of Pascagoula means the pellets can be trucked to Enviva's planned terminal there for export. Enviva's Pascagoula terminal is on schedule to be completed in the middle of 2021, with the first shipment scheduled for later in the year.
Meanwhile, Enviva Holdings has also acquired a wood products mill adjacent to its planned Epes pellet mill. The pellet mill is currently under construction. Enviva is evaluating how to utilise the existing infrastructure to reduce the costs of the new Epes mill. It is also considering increasing the nameplate capacity from the planned 750kt/y to 1Mt/y in line with the existing air permit.
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Investment and technology in brief...UNITED KINGDOMUK utility Drax completed the acquisi-tion of Canadian pellet producer Pin-nacle (see FEM#119, p.7) on 13 April. Pinnacle will not be changing its trading name. Drax now has a total of 17 pellet plants and new projects under develop-ment with the capacity to produce 4.9Mt/y of wood pellets from 2022.
Octopus Renewables, the specialist green energy investor arm of Octopus Group, will acquire two UK biomass power plants in a joint venture with Copenhagen Infrastructure Partners and Burmeister & Wain Scandina-vian Contractor. Octopus will manage the 40MW Brigg power plant and the 44MW Snetterton power plant. It already manages five biomass plants in the UK. Both plants use primarily straw sourced locally.
RUSSIARussian forest products company DOK Enisey is on track to complete con-struction of its expansion at its existing 120kt/y wood pellet mill in June this year. Once ramp up of production is completed, the pellet mill will have capacity of 200kt/y. The mill produces industrial and heating grade pellets for export. It is situated at and uses waste from its own sawmill in Berezovka, Kras-noyarsk Territory.
Wood processing company Sveza is planning include a 35kt/y wood pellet mill as part of the development of its new 255,000m³/y sawmill in Volgoda. Sveza plans to select the site in Volgoda region by the end of 2021. It will also upgrade its plywood production facil-ity in the region from 52,000m³/y to 200,000m³/y this year. Svesa will secure long-term lease agreements for forest areas in the region. Svesa says the investment is linked to Russia’s Forest Strategy which will increase wood pro-cessing in the country (see page 5).
UNITED STATESThe US’s largest residential grade pellet producer Lignetics has acquired Great Lakes Renewable Energy’s 33kt/y pel-let mill in Hayward, Wisconsin. Great Lakes Renewable Energy is a specialist barbecue pellet producer under the Lumber Jack Grilling Pellets brand. Its pellets are 5.5mm diameter, smaller than residential grade pellets which are usually 6mm. Lignetics now operates 13 pellet mills with a combined capacity of around 900kt/y.
CoalSwitch producer Active Energy says it is close to starting up its new pellet mill in Lumberton, North Carolina. The 40kt/y pellet mill has been relocated from Utah. AEG plans to produce 900t of black pellets for use in a demonstra-tion project at a coal power plant in Utah later this spring. Its CoalSwitch technology produces steam-exploded pellets.
US producer Enviva has amended its senior secured revolving credit facility. The loan was increased from $350M to $525M, while the maturity was extended to April 2026 from October 2023. The applicable interest margin has been reduced, as well as other improved terms. Enviva expects to use the future borrowings to support its strategic growth initiatives and drop-down acquisitions, and for general partnership purposes.
The state of Georgia generated 5.8TWh of electricity from biomass in 2020, equivalent to 10% of the nation’s total, according to the Energy Information Ad-ministration. Biomass power generation in Georgia has grown by 80% in the past decade; almost 400MW of new capacity has come online from 16 different facili-ties. Biomass accounted for nearly half of Georgia’s total renewable electricity generation in 2020, mostly from wood and wood-derived fuels. It trails only
California as the largest state producer of biomass power.
NETHERLANDS
Netherlands-based developer Host will build a 12.4MWth biomass-fired heat plant for the mushroom producer Sikes Group. The plant in Ysselsteyn is sched-uled to begin operating in Q1 2022. It will use prunings and wood residues from the surrounding area, although no tonnages have been announced.
PORTUGAL
We have heard reports that Portuguese pellet producer Glowood has filed for bankruptcy but was unable to confirm with the producer. Glowood has a 125kt/y pellet mill in Cercal do Alentejo but it has been running below capacity for some time. The majority of its pel-lets were exported to industrial users in Europe, but more recently it had made investments to allow it to produce pre-mium pellets for the domestic market. Rising raw material prices in Portugal have reduced the profitability for many producers, particularly for those reliant on industrial spot market sales because of the current low prices. All Glowood assets are now up for sale.
SPAIN
Beer producer Heineken has converted its La Imora factory in Jaén to 100% renewable energy with the start-up of a biomass heat plant. The plant will use ~6kt/y of pruning waste from olive groves within a 90km radius, contribut-ing 70% of its energy needs. The re-maining 30% will come from solar. The biomass plant will produce 12.6GWh of renewable energy per year. The project has been developed together with Biosteam, a specialist in the manage-ment of agricultural and forestry waste. Heineken has signed a 12 year heat offtake agreement.
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A new report by consultancy Enervis sheds light on the economic case for coal-to-biomass conversions in Germany. The study found coal-to-biomass conversions would require a CfD strike price of around €105-120/MWh over a 10-year term to be economically viable.
As part of Germany’s plans to phase out all coal power by 2038, the Federal Government has been considering whether to develop a funding programme for the conversion of hard coal-fired power stations (with and without heat utilisation) to biomass. It is currently not financially viable to convert coal plants to biomass based on the existing regulatory framework. The purpose of Enervis’s study was to determine the necessary level of funding needed to support conversions. It considered a Contract for Difference (CfD) mechanism, similar to the schemes already established in the UK and Netherlands. A strike price would be set at the necessary level for a project to recoup both its capital conversion costs and the operating costs. The generator receives the difference between the wholesale electricity price and the strike price.
In the study, four power plants (reference power stations, see table) were analysed, taking into account their varying technical conditions and costs. The power plants differ in their heat capacities, age, efficiency and biomass logistics costs. It was assumed the facilities would be converted in 2026. The cost assumptions were as follows: conversion cost – €300-400/MW; biomass costs – €150/t; transport costs - €0-20/t.
For the reference power stations, the required CfD strike price was calculated as between €105-120/MWh over a term of 10 years (see table). The average was €112/MWh. The values assumed utilisation of 3500 full hours per year (equivalent to a ~40% load factor). This demonstrates that the converted plants would be expected to play a balancing role on the grid, rather than operating as baseload. Variable operating costs make up around 75% of the overall costs of generation and are largely driven by the biomass costs (including transportation). For comparison, the current CfD strike price received by the Lynemouth conversion in the UK is £124.35/MWh (€144/MWh).
In a CfD mechanism, the government only pays the incremental cost between the wholesale power price and the strike price. The report’s calculations show that based on its assumed future power price (€75/MWh), an average of €37/MWh subsidy payment is required. For longer CfD terms of 15 years, this amount falls to an average of €33/MWh. Power station sites which are more optimal for biomass deliveries (e.g. close to a port) require a lower CfD strike price, with subsidy equating to €30/MWh. If power prices rise more sharply in future, for example because of higher CO2 prices, funding needs could be even lower. The assumed CO2 price in the base scenario was €44/t in 2030.
Enervis concluded that retrofitting coal-fired power plants to biomass could "not only make a substantial contribution to the rapid lowering of CO2 emissions, but also serve to maintain secure capacity in the system with existing infrastructure". Enervis argues that with the phase out of coal and an increase in renewable capacity, there will be a lack of secure power capacity.
The report was commissioned by power plant operators Energie Baden-Württemberg (EnBW) and Onyx Germany and wood pellet producer Enviva. EnBW operates coal-fired units at six of its CHP plants in Germany, plus it has stakes in a further three coal CHP plants. Onyx owns three German coal-fired power plants.
Policy & legislationNew report calculates subsidies needed for coal-to-biomass conversions in Germany
Reference plantsReference plant Capacity, MW CHP Heat Location Electricity production cost
Plant 1 300 Yes Heat generation based on assumed district heating load profile
Inland €115/MWh
Plant 2 600 Yes Port location €108/MWh
Plant 3 300 No Port location €120/MWh
Plant 4 600 No Port location €105/MWh
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The South Korean government is considering increasing its Renewable Portfolio Standard (RPS) obligation from 10% to 25% by 2030. The RPS introduced by the South Korean government in 2012 requires energy companies with a capacity exceeding 500MW to obtain an increasing proportion of their electricity from new and renewable energy sources. The RPS for 2021 is 9% of total electricity generation, increasing to 10% by 2022. It is not clear how the target will be stepped up in the preceding years before 2030, as it was from 2012 to 2022.
Obligated energy companies can either invest in their own renewable energy installations (which will earn them Renewable Energy Certificates, RECs), or purchase RECs on the market. If an RPS-obligated company fails to present enough RECs to the New and Renewable Energy Centre, a financial penalty will be applied equivalent to 1.5x the average market price of RECs in that year.
The subsidy amount that a renewable project receives is determined by its REC weighting, which describes the number of RECs a project earns for each MWh of electricity it generates. Biomass projects can earn between 0.5-2 RECs/MWh depending on their type and fuel.
It is hoped that increasing the RPS target will help the recovery of REC prices. Oversupply of RECs since 2017 has pressured REC spot prices lower, reducing the profitability for some independent power producers which rely on selling their RECs. The change will also help Korea meet its more ambitious climate change targets. Its 9th Basic Energy and Power plan, announced in late 2020, set a target for the share of renewable energy capacity to reach 34% in 2030 and 40% in 2034 from 16% in 2020.
It is expected the government will confirm the new RPS target in the second half of 2021.
France plans to reduce particulate emissions from wood heating
The French government’s plans to reduce fine particle emissions could boost wood pellet demand by encouraging the replacement of old wood heating appliances. The Minister of Ecological Transition has submitted for public consultation a draft action plan that will reduce particulate emissions by 50% from domestic wood-fired heating by 2030. This consultation follows preparatory work by the National Air Council.
The Minister reiterated that using logs and wood pellets is renewable, carbon neutral and should be encouraged but the combustion of wood in poor conditions can cause fine particle pollution. In 2018, domestic wood heating was responsible for 43% of France’s PM2.5 emissions (fine inhalable particles less than 2.5 micrometers), as well as more than
Korean government mulls more ambitious RPS target
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half of very fine PM1.0 emissions. The main factors affecting the emission of particles are the performance of the device and the quality of the fuel, specifically its moisture content. Wood pellets can reduce particle emissions because of their low moisture content, compared to poorer quality fuels.
The government is proposing accelerating the replacement of old stoves and fireplaces with more efficient equipment including new wood pellet stoves and encouraging the use of better-quality fuels. It has outlined an action plan comprising the following:
● Raise public awareness on the of impact of inefficient appliances and poor-quality fuel. To help owners know when replacements are needed, heaters will be assessed as part of new diagnostic de performance énergétique (DPE) rules. DPEs are conducted to assess the amount of energy consumed by homes and buildings, often when they are being sold or rented.
● Strengthen and simplify support mechanisms to speed up the renewal of wood-burning appliances. 600,000 devices will be replaced by 2025 thanks to aid for the energy renovation of housing and “air-wood funds” made available by local authorities and French environment agency ADEME. The air-wood fund subsidises the replacement of old wood heating equipment with high-performance renewables ones.
● Improve the performance of new wood-burning appliances by upgrading the green flame label beyond the current “7-star” threshold. Currently applicants to the air-wood fund must replace their appliance with a 7-star one.
● Promote the use of quality fuel by developing a label to certify the quality (e.g. low moisture) and its origin (from sustainably managed forests).
● Monitor the use of wood heating in the most polluted areas, by taking measures to reduce emissions of fine particles.
France is not the first country to take such measures. From February 2021, the UK has restricted the sale of wet wood (moisture content >20%) and is considering introducing a biomass maintenance standard for all RHI participants, in part to minimise emissions.
USA aims for 80% 'clean' electricity by 2030 and GHG emissions reductions of 50-52%
President Biden has announced a significant new commitment to reducing the country’s greenhouse gas emissions by 50-52% below 2005 levels by 2030, implementing a pathway which will help the USA to reach net-zero by 2050. The new target has been submitted as the USA’s revised nationally determined contribution (NDC) under the Paris Agreement.
Although the 50-52% GHG reduction commitment exceeds the ambition set out by President Obama in 2015, which was a reduction of 26-28% by 2025 (equivalent to ~38% by 2030), analysis by Climate Action Tracker concluded that the target was still below that needed for the US to be on a 1.5 degree-compliant pathway, which would require emissions reductions of 57-63% by 2030.
The target was set by Biden’s National Climate Task Force, which was tasked with investigating how each sector of the US economy can ‘spur innovation, unleash new opportunities, drive competitiveness, and cut pollution’. The announcement focussed heavily on the employment and economic opportunities that reducing emissions could bring.
In developing the target the Climate Task Force considered the role of subsidies, standards and incentives and will develop this research into a national climate strategy to be issued later this year. Little is yet known about the technologies
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which the US will deploy to meet its goals, but the following were all mentioned in the President’s announcement: nuclear power; fossil power plants retrofitted with CCS; electrification of buildings; optimising forest and agriculture carbon sinks; and green hydrogen produced from waste, renewables or nuclear.
Clean Electricity Standard
Biden had already confirmed a goal of reaching net zero emissions in the electricity sector by 2035 and energy sector investment was a major feature in the $2 trillion Infrastructure Plan, announced in March. Alongside a raft of other investments, President Biden called on Congress to invest $100 billion in the energy sector, specifying the need to upgrade the electricity transmission network and deliver more low carbon electricity. In particular, Biden wants to extend and expand a ten-year investment tax credit and production tax credit for clean energy generation and storage. This would be a major tool to drive investment in renewables along with a new Energy Efficiency and Clean Electricity Standard (EECES).
A Clean Electricity Standard would oblige US utilities to source more low carbon power, with the present target of zero-emissions electricity by 2035 in mind. However, in late April the White House confirmed that it was in fact aiming to put into law a stronger interim goal, targeting 80% 'clean' electricity by 2030. Although previously discounted by many US utilities as undeliverable, there is now a strong body of evidence demonstrating that such an ambitious decarbonisation trajectory is feasible and affordable.
Reaching 80% clean electricity by 2030
A new study by researchers at Energy Innovation and the University of California, Berkeley, looked specifically at the viability of achieving 80% clean electricity in the US by 2030. Its remarkable conclusion was that such a goal can be achieved in every US region with existing technologies at no additional cost to energy consumers, thanks to the dramatic reduction in costs of renewables and batteries.
The study envisages huge deployment of solar and wind (950GW) and battery (227GW) capacity, supplemented by existing nuclear assets and balancing/peaking generation from gas. It assumes all coal capacity is closed by 2030 and that no new gas plants are built.
Could there be a role for biomass?
Other renewables do not play a significant role in the modelling, which was configured to identify the generation mix with the lowest cost of generation. However the authors note that: “New supply-side resources, such as firm low-carbon generation…could also provide system flexibility.” Of course, biomass plants could offer that firm low carbon power, perhaps negating the need for the 50GW of gas capacity which is included in the model, but which deploys at a capacity factor of <1%. The authors also note that “alternative approaches to balancing generation…could cost less than retaining significant natural gas capacity that is rarely used”.
Next steps
It will now be the job of lawmakers to finalise and implement the regulations needed for the Clean Electricity Standard. The ten-year timeline of the interim 80% clean electricity by 2030 goal means that Democrats could pass the law with a simple majority (the Senate is split 50:50 but VP Kamala Harris has a tie break vote), via a revision of the budget legislation. However, the legislation needed for a 2035 or later target would require 60 votes.
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GERMANYGermany's Federal Constitutional Court has ruled that the Federal Climate Change Act governing national climate targets until 2030 is incompatible with fundamental rights because it lacks sufficient information on further emis-sion reductions from 2031 onwards. The ruling states the Act irreversibly offloads major emission reduction burdens onto periods after 2030. The ruling now means the government must provide details by 31 December 2022 on how the reduction targets for GHG emissions are to be adjusted for periods after 2030.
UNITED KINGDOM
The UK government has published its Biomass Strategy Call for Evidence, which will review the potential for bioenergy to support the UK’s net-zero emissions target across the heat, trans-port, and power sectors. The strategy will help inform the government how biomass can be best. The call for evi-dence includes questions on biomass supply (both domestic and imported) as well as sustainability criteria for biomass and whether they should be revised. The strategy is expected to be published in 2022.
The government has announced tougher climate change targets, in line with recommendations from the inde-pendent Committee on Climate Change (CCC). It now pledges to reduce CO2 emissions by 78% by 2035 compared to 1990 levels, from a previous target of 68% by 2030. It will in effect bring forward the UK’s previous 80% target by nearly 15 years. The government will now set into law its sixth carbon budget for the period 2033 to 2037 as recom-mended by the CCC. For the first time, climate law will be extended to cover international aviation and shipping. The move is intended to help spur further
action by other governments, ahead of vital UN climate talks (COP26) to be hosted by the UK this November.
JAPANPrime Minister Suga has upped Japan’s climate change targets as pledged under the Paris Agreement. Suga an-nounced an increase to a 46% reduction in GHG emissions by fiscal year 2030 compared to 2013 levels. The current target is 26%. Initially media reports said Japan could increase its target to a 40% or 45% by 2030 compared to 2013 levels. Suga also said Japan will
“continue to take on the challenge to increase to 50%”. Environmentalists and sustainable business leaders had been lobbying for a target of up to 60%. Climate Action Tracker says a 60% cut would be “challenging” but necessary to align with the Paris Agreement goal to hold global warming to 1.5oC.
NETHERLANDSThe Dutch province of Overijssel will temporarily stop subsidising biomass energy (heat and power) projects starting up after July. The province said it cannot rule out the possibility that the use of woody biomass will do more harm to the climate than good. Overijs-sel’s district government had tried to introduce its own biomass origin requirements to stop the transport of biomass long distances and ensure none is sourced from clear cutting but the attempt was ruled illegal. The Dutch government has already introduced some of the strictest sustainability requirements in the world for biomass. However, fractions within the national government are opposed to the use of biomass and are trying to push to end future subsidy support. Overijssel has said biomass can be environmentally friendly depending on the origin of the wood and hopes biomass can be used in the future if more clarity is given.
Biomass is an important part of the Overjissel’s energy plans. It will recon-sider supporting biomass if the national government revises its sustainability criteria or changes to the EU’s RED II are introduced. The biomass industry would argue, given the Netherlands’ existing strict sustainability criteria, it is already ensured that biomass used in the country is from sustainable sources.
EUROPEThe European Commission has kept bio-energy and forestry in its draft imple-menting rules for the EU green finance taxonomy, meaning they will qualify as green investments in the EU. The rules spell out detailed criteria that economic activities must comply with in order to be labelled as green investments. Positive changes in the draft include the removal of references to bioenergy as a transitional technology. The criteria for bioenergy now align more closely with existing sustainability criteria under the RED II. Agriculture has been left out for now but may be revisited later. Small scale forestry below 25 hectares will not be covered by the taxonomy requirements. The European Commis-sion has delayed a decision on whether to label nuclear and natural gas power plants as a sustainable investment.
UNITED STATESThe Massachusetts state government has reversed its December decision to change state regulations to allow some wood-burning power plants to qualify for renewable energy subsidies. Specifi-cally, the government had planned to support a new 35MW biomass-fired power plant in Springfield, but will no longer do so. The changes mean any new biomass plant must meet a high efficiency standard in order to qualify for subsidies. The changes make it more difficult for electricity-only facilities to operate under the RPS.
Policy & legislation in brief...
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Wood pellet trade statistics
Wood pellet imports by Korea and Japan, Q1 2021 v 2020tonnes Vietnam Canada Malaysia Indonesia Russia US Other TOTAL Jan-Mar
2021TOTAL Jan-Mar
2020y/y %
Korea 562,631 824 138,084 58,651 51,724 0 4,172 816,087 673,036 21%
Japan 385,558 210,993 44,556 12,451 0 26,945 282 680,785 481,528 41%
TOTAL Jan-Mar 2021
948,189 211,817 182,640 71,102 51,724 26,945 4,454 1,496,872 1,154,564 30%
Source: Eurostat, adapted by Hawkins Wright
Source: Customs data.
EU27 + UK net wood pellet imports, Jan 2021 vs 2020
tonnes
Extra EU Intra EU TOTAL Extra EU Intra EU TOTAL United Kingdom 692,280 68,775 761,055 718,311 139,535 857,846 -96,791 -11%Netherlands 138,550 78,704 217,254 7,120 174,247 181,367 +35,887 +20%Denmark 149,915 210,322 360,237 120,319 204,255 324,574 +35,663 +11%Italy 38,172 118,381 156,553 69,480 95,645 165,125 -8,572 -5%Belgium 30,218 28,173 58,391 62,232 45,271 107,503 -49,112 -46%Latvia 29,880 11,152 41,032 19,247 880 20,127 +20,906 +104%France 19,913 25,882 45,795 51 38,418 38,468 +7,326 +19%Austria 153 32,883 33,037 156 25,916 26,071 +6,965 +27%Slovenia 10,909 9,920 20,829 8,771 16,331 25,103 -4,274 -17%Lithuania 12,442 50 12,492 15,977 153 16,130 -3,638 -23%Germany 4,050 21,429 25,479 2,929 14,447 17,377 +8,102 +47%Poland 11,766 179 11,945 10,861 1,304 12,165 -220 -2%Sweden 0 29,679 29,679 20,000 1,517 21,517 +8,162 +38%Finland 10,235 3,626 13,861 5,868 3,498 9,366 +4,495 +48%Bulgaria 3,634 1,998 5,632 3,218 2,722 5,940 -308 -5%Ireland 9,923 503 10,426 5,466 421 5,887 +4,540 +77%Spain - 7,445 7,445 - 8,099 8,099 -654 -8%Greece 909 1,893 2,802 3,714 1,687 5,401 -2,599 -48%Croatia 1,942 2,309 4,251 1,684 1,112 2,797 +1,454 +52%Romania 3,495 62 3,557 1,920 305 2,225 +1,332 +60%Slovakia 1,339 390 1,729 1,120 1,428 2,548 -819 -32%Czech Republic 1,371 556 1,926 1,127 1,033 2,160 -233 -11%Hungary 1,266 416 1,681 1,462 335 1,797 -116 -6%Luxembourg - 1,560 1,560 - 1,214 1,214 +345 +28%Estonia 176 999 1,175 173 248 420 +755 +180%Cyprus 27 213 240 288 293 580 -340 -59%Portugal 56 252 308 - 216 216 +93 +43%Malta - 98 98 - 27 27 +71 +264%TOTAL Jan 2021 1,172,620 657,850 1,830,470 1,081,492 780,557 1,862,049 -31,580 -2%TOTAL Jan 2020 1,081,492 780,557 1,862,049 Change +91,128 -122,707 -31,580% change +8% -16% -2%
ImporterJan-21 Jan-20
Change % Change
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Notes: a) the calculation of the Wood Pellet Spread is based on a 100% coal-to biomass converted unit that receives support – in the form of 1xROC/MWh – under the Renewables Obligation. Source: Hawkins Wright. b) *Apr 21 averages are based on data available up to 30 April 2021.Source: Hawkins Wright research
Generation economics in the UK: Clean Dark, Clean Spark and Wood Pellet spreads, 2013-2021
Fossil energy and carbon prices
Europechange
Apr-20 Feb-21 Mar-21 Apr-21* month-on-month
year-on-year
Crude oil (Brent) US$/barrel 27.36 62.40 66.02 65.20 -0.81 37.85
Natural gas (UK marker) £/MWh 5.45 16.08 14.42 16.53 2.12 11.08
Coal (CIF ARA) US$/tonne 43.45 65.98 68.77 71.49 2.72 28.04
Carbon (EU ETS, Dec 2021) €/tCO2e 20.23 38.04 41.07 44.76 3.69 24.53
United Stateschange
Apr-20 Feb-21 Mar-21 Apr-21* month-on-month
year-on-year
Crude oil (WTI) US$/barrel 16.55 59.04 62.33 61.60 -0.73 45.05
Natural gas (Henry Hub) US$/MWh 6.00 18.45 9.03 8.91 -0.12 2.91
Coal (Central Appalachian) US$/tonne 60.85 61.97 66.14 65.81 -0.33 4.96
Clean Dark, Clean Spark and Wood Pellet Spreads – United Kingdom, April 2021*
Wood pellets (ROC) Coal
Natural gas
Plant conversion efficiency 38% 38% 49%
Electricity price (Base load) £/MWhe 60.66 60.66 60.66
Fuel price (output energy) £/MWhe -56.81 -19.49 -33.59
Total carbon cost (per unit output) £/MWhe - -55.03 -23.29
ROC price (1xROC/MWhe) £/MWhe 50.80 - -
CLEAN SPREADS (electricity price, minus fuel, minus carbon, plus renewable electricity incentives) 54.65 -13.85 3.78
Electricity generation economics
The Wood Pellet Spread (aka Bark Spread) is the difference between the price of base load electricity and the cost of wood pellet fuel. The result is adjusted by the value of the UK’s renewable energy incentive. In the case of a converted biomass station this is one Renewable Obligation Certificate (ROC).Also shown are comparable indicators of the economics of coal and natural gas-fired generation in the UK. The principles are the same: the cost of fuel is deducted from the price of baseload electricity. Also deducted is the cost of carbon emissions which, in the UK, comprises two elements, the variable price of an EU emission allowance (EUA) - see above - and the UK’s Carbon Price Support (CPS) rate which is fixed at £18/tCO2e.Source: Hawkins Wright research
Coal prices, CIF ARA
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European pellet heating economics
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France
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Heating oil pricesUnits Apr-20 Mar-21 Apr-21* M/M Y/Y
Austria €/litre 0.61 0.69 0.68 -0.01 0.07
Germany €/litre 0.00 0.69 0.68 -0.01 0.68
Netherlands €/litre 0.85 1.16 1.20 0.04 0.34
France €/litre 0.74 0.85 0.84 -0.01 0.10
Sweden €/litre 0.83 1.08 1.08 -0.01 0.25
Denmark €/litre 1.07 1.38 1.38 0.00 0.30
Italy €/litre 1.10 1.23 1.23 0.00 0.13
New England, USA $/litre 0.70
Source: Eurostat, Weekly Oil Bulletin, EIANotes: a) Prices for New England are only published from October-March
Heating oil versus pellet price differentialApr-20 Mar-21 Apr-21* M/M Y/Y
Austria 14.9% 23.7% 26.8% 3.1% 12.0%
France 14.6% - - - -
Germany -9.0% 21.5% 24.9% 3.4% 34.0%
Source: ProPellets Austria, ProPellets France, DEPI, Weekly Oil BulletinNotes: There is a lag in the publication of the French pellet data, which is only published once per quarter.
Source: MDA EarthSatNotes: The chart shows the cumulative heating degree days (cHDD) that have accrued over the 2020/21 heating season so far, compared to the same period in previous years. The heating season runs from October-May each year. HDD calculations are based on a base temperature of 18°C (65°F for US locations, which are then converted back to °C using a conversion factor of 1.8)
Note: *Apr 21 averages are based on data available up to 30 April 2021.
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Indices of industrial wood pellet prices CIF ARA, in US dollars and in other selected currencies
Exchange rates
Freight rates
60
80
100
120
140
160
180
Jan-14 Oct-14 Jul-15 Apr-16 Jan-17 Oct-17 Jul-18 Apr-19 Jan-20 Oct-20
Price
inde
x. D
ecem
ber 2
013
= 10
0 DOLLAR Index
EURO Index
STERLING Index
SWEDISH KRONA Index
CANADIAN DOLLAR Index
April 2021
Exchange rates against the US dollar Pellet prices in US dollars and other currencies% change local currency per tonne CIF ARA % change
Apr-20 Mar-21 Apr-21* month-on-month
year-on-year
Apr-20 Mar-21 Apr-21* month-on-month
year-on-year
US dollar 1.00 1.00 1.00 - - 137.5 143 141 -1.4% +2.5%
Euro 0.920 0.840 0.836 -0.5% -9.1% 127 120 118 -1.9% -6.8%
Canadian dollar 1.406 1.257 1.251 -0.5% -11.0% 193 180 176 -1.9% -8.7%
UK pound 0.806 0.722 0.723 +0.2% -10.3% 111 103 102 -1.2% -8.0%
Swedish krona 10.021 8.540 8.504 -0.4% -15.1% 1,378 1,221 1,199 -1.8% -13.0%
Baltic Freight Indices% change
Apr-20 Mar-21 Apr-21* month-on-month year-on-year
Baltic Dry Index 665 2018 2445 21% 267%
Baltic Capesize Index 717 2048 3524 72% 392%
Baltic Panamax Index 788 2507 2380 -5% 202%
Baltic Handysize Index 289 1236 1065 -14% 268%
Note: *Apr 21 averages are based on data available up to 30 April 2021.
0
500
1000
1500
2000
2500
3000
Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20 Jan-21
Balti
c Ind
ex
Baltic Dry Index
Baltic Panamax Index
Baltic Handysize Index
Baltic Freight Indices
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Issue 121 – April 2021
Forest Energy monitor
New biomass power projects under development over 75MWe
Name/location Country Plant type Capacity, MWe
Fuel type Fuel demand,
Mt/y
Status Online
MGT Power Teesport UK Biomass CHP 299 Pellets 1.0 Under construction 2021
Air Water Onahama Japan Dedicated 75 Pellets, PKS 0.3 Operating 2021
Chugoku Kaita Japan Cofiring 112 Pellets 0.2 Operating 2021
Chubu Taketoyo Japan Cofiring 1070 Pellets 0.5 Under construction 2022
Renova, Kanda Japan Dedicated 75 Woody biomass TBC Under construction 2021
Ene Vision Kumamoto Japan Dedicated 75 Woody biomass 0.3 Under construction 2022
Tokushima Tsuda Japan Dedicated 75 Pellets, PKS 0.3 Under construction 2023
Shimonoseki Biomass Japan Dedicated 75 Pellets 0.3 Under construction 2022
Osaka Gas Sodegaura Japan Dedicated 75 Pellets 0.3 Under construction 2022
Oji Green Tokushima Japan Dedicated 75 Chips, PKS 0.3 Under construction 2022
Osaka Gas Hirohata Japan Dedicated 75 Chips, PKS 0.3 Under construction 2023
Nippon Paper Yufutsu Japan Dedicated 75 Chips, PKS 0.3 Under construction 2023
Renova, Omaezakikou Japan Dedicated 75 Pellets, PKS 0.3 Under construction 2023
Renova, Sendai Japan Dedicated 75 Pellets, PKS 0.3 Financed 2023
Renova, Ishinomaki Japan Dedicated 75 Pellets, PKS 0.3 Financed 2023
Tokyo Gas Ichihara Japan Dedicated 75 Pellets 0.3 Financed 2024
Osaka Gas Tahara Japan Dedicated 75 Pellets 0.3 Financed 2024
eTEC, SMG Energy, S1 Korea Dedicated 100 Pellets 0.4 Under construction 2021
Source: Hawkins Wright researchNotes: Due to the large pipeline of Japanese projects we have updated this list to include only projects >75MW under construction. For a more detailed list of Asian projects please refer to our multi-client report Biomass Demand in Japan and South Korea.Capacity refers to the total capacity of the plant, not just the unit(s) which use biomass or the equivalent cofiring capacity. Fuel demand refers to estimated annual consumption once a plant is fully operational. Some of the plants above use a combination of biomass fuels, where this is the case we have specified only the tonnage of wood chips/pellets. ‘Chips’ includes low quality forest residues, as well as de-barked/processed wood chips. Recent additions and/or changes are marked in red text.
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Forest Energy monitor
Industrial pellet mill projects (>100kt/y) under development
Company Location State Region / Country Expected online
Production capacity, t/y
UNDER CONSTRUCTION / FINANCED
Enviva JV Development Co. (expansion) Greenwood (Colombo) SC US South Central 2021 140,000
Enviva Holdings LP Lucedale MS US South Central 2021 700,000
Enviva Holdings LP Epes AL US South Central 2022 700,000
Pinnacle/Westervelt/Two Rivers Demopolis AL US South Central 2021 360,000
ULK Arkhangelsk Russia 2023 600,000
Drax (expansions) 2 x mills US South Central 2021/22 250,000
Drax 3 satelite mills US South Central 2022 120,000
SY Energy Busan South Korea 2021 320,000
Delitimbers Lda Proença-a-Nova Portugal 2021 100,000
Atgreen Guarda Portugal 2021 200,000
Coega Biomass Centre Port Elizabeth South Africa 2021 120,000
Indef (expansion) Chile Chile ? 125,000
Monpellet Buryatia Russia ? 120,000
Biosyl Auvergne France 2021 100,000
FINANCING / CONTRACTING
Enviva Bond MS US South Central 2023 750,000
Biogren Skjerøya Norway 150,000
Northern Energy Solutions Miramichi NB Canada 275,000
Siam Biomass Product, Siam Steel South Phrasaeng Thailand 100,000
Gitxsan Forests Hazelton BC Canada 100,000
Source: Hawkins Wright researchNote: Recent additions and/or changes are marked in red text.For a complete database of all operating and planned pellet mills, please get in touch to learn more about our Outlook for Pellets service.
