Ea Energy Analyses Analysis of the market for bio energy – locally and internationally Final report, 29 September 2010 Report carried out by Ea Energy Analyses on behalf of CMBI as part of an Enercoast project, with support from the Interreg IVB North Sea Region Programme and Region Midtjylland. September 2010 Ea Energy Analyses Prepared by: Ea Energy Analyses Frederiksholms Kanal 4, 3 th 1220 Copenhagen K Denmark Phone: +45 88 70 70 83 Fax: +45 33 32 16 61 Email: [email protected] Web: www.eaea.dk Table of contents Summary and conclusions .............................................................................. 5 1 Introduction/Background .......................................................................... 15 2 Randers, Norddjurs and Syddjurs municipalities .................................. 17 2.1 Current energy use and production units .............................................. 18 2.2 Climate and Energy Plans of the 3 municipalities ................................. 28 2.3 Future Demand for Bioenergy ............................................................... 29 3 Danish existing and future demand for bioenergy ................................ 31 3.1 Current Danish biomass usage ............................................................. 31 3.2 Danish goals and future biomass usage ............................................... 31 3.3 Danish energy incentives and regulations ............................................ 33 4 Regional/International existing and future demand for bioenergy ...... 37 4.1 EU biomass usage and goals ............................................................... 37 4.2 Global biomass usage........................................................................... 38 5 Existing and future bioenergy resources ............................................... 40 5.1 Local resources ..................................................................................... 40 5.2 National resources ................................................................................ 42 5.3 Regional/International resources .......................................................... 43 5.4 Sustainability issues .............................................................................. 46 5.5 Chapter Summary ................................................................................. 47 6 Trade in bioenergy .................................................................................... 48 6.1 Biomass in Europe today ...................................................................... 48 6.2 Local - Municipalities and Central Denmark Region ............................. 49 6.2.1 Trading of straw ............................................................................ 49 6.3 National and International ..................................................................... 52 6.3.1 Market for wood chips ................................................................... 52 6.3.2 Market for wood pellets ................................................................. 55 7 Case analysis ............................................................................................. 64 7.1 Relevant Technological Options ........................................................... 64 7.2 Biogas for CHP ..................................................................................... 65 7.3 International biomass for CHP .............................................................. 68 7.4 Local biomass ....................................................................................... 71 7.4.1 Erecting small district heating plants ............................................ 72 7.4.2 Replacement of Grenaa power plant ............................................ 73 8 Opportunities and barriers facing biomass markets ............................. 75 8.1 Opportunities and barriers locally and nationally .................................. 75 8.2 Opportunities and barriers internationally ............................................. 77 References ...................................................................................................... 79 4 Biomass Market Analysis Ea Energy Analyses Summary and conclusions This report aims to describe the market potential for biogas and biomass heat and power applications, and to assess the opportunities and barriers for devel- opment of such biomass markets locally and internationally. The project has been commissioned by ENERCOAST whose overall aim is to create a market for bio energy in the North Sea area. The project uses Denmark, Central Den- mark Region, and three Danish municipalities (Randers, Norddjurs, and Syddjurs) to illustrate the challenges related to developing a more substantial market for bio energy trade. SSCM analysis A parallel study also commissioned by ENERCOAST and carried out by Ea Energy Analyses assessed the sustainability of relevant biomass supply chains related to the resource accessibility in the three municipalities. The primary focus was on biogas, straw, wood residues, and energy crops for combined heat and power production and the results were presented in a report released in July of 2010 entitled „SSCM Analysis of the Bioenergy Resources in Rand- ers, Norddjurs and Syddjurs‟ (Ea Energy Analyses, 2010). The data basis for both studies is very similar, and as such the current report incorporates and builds upon many of the SSCM reports findings. The present report describes the market structures and price developments of the aforementioned biomass resources. The market structures and trade condi- tions are described on a local (the 3 municipalities), national (Denmark) and regional/international (European/global) level. Biomass demand Political climate and energy goals constitute the major demand side drivers. With high European targets for the share of renewable resources in the energy production the demand for biomass is expected to increase dramatically to- wards 2020. However, the distribution of biomass fired production plants is not keeping pace with this target, which indicates that there are different barriers to be overcome before the utilisation of the various resources is optimal. Particu- larly local resources such as biogas and energy crops, and to certain extent straw, face challenges related to economy and technology. Concrete recom- mendations related to these barriers are discussed throughout the report. Local demand The three municipalities in focus currently utilise a significant amount of bio- mass, as on average over 30% of their gross energy consumption comes from biomass, a figure that is more than 3 times the national average. With this in mind, relative to today, the future local heat demand in the three municipalities is still expected to be met by an increasing share of district heating coming from biomass (particularly in Randers where Randers Kraftvarmeværk will con- tinue to replace coal with biomass). The establishment of new biogas plants within the municipalities would also lead to an increased demand for bioenergy. On the other hand, the municipalities have also set goals of reducing overall heat consumption, which may reduce the demand for bioenergy. National demand The use of biomass (and in particular wood pellets) is expected to increase over the coming years in Denmark. In its annual report on Danish energy trends from 2009 (DEA 2009), The Danish Energy Agency (DEA) reports that it expects renewable energy to grow over the coming years. A large part of this growth is due to an increase in the use of wood pellets. Figure 1: Danish increased use of renewable energy from 2009 to 2020 from the annual report on Danish energy trends from 2009 from the Danish Energy Agency. Biogas, energy crops (energiaf- grøder), solar (solenergi), wood (træ), wind (vindenergi), other (andet), heat load for heat pumps (omgivelsesvarme) , straw (halm), and garbage (affald).(DEA, 2009) The reason that the use of wood is expected to increase dramatically com- pared to the other resources is due to the fact that several of the central coal- fired power plants are expected to shift from coal to wood pellets within the period. The reason that the use of straw could be expected to decrease is that at least one of the central power plants is expected to replace their straw usage with wood chips or wood pellets. One very recent example of this is Dong En- ergy who in September of 2010 stated that starting in 2012 they intend to use 25% less straw, and replace it with wood pellets imported from Canada and the Baltic states (Ingeniøren, 2010). EU demand Relative to 2007 figures, for the EU to reach its 2020 renewable energy target of 20%, it will require an additional 10,600 PJ of renewable energy by 2020 (in gross consumption terms). In this report it is suggested that 60% of this could come from biomass and waste, equivalent to 6,300 PJ, or roughly 420 million tonnes of additional biomass. Combined with the 2007 EU consumption of biomass and waste of 4,000 PJ, an estimate for the annual gross energy from biomass and waste in 2020 is 10,300 PJ, roughly 690 million tonnes of bio- mass. 6 Biomass Market Analysis Resource availability In recent years a variety of studies aimed at quantifying the available biomass resources on a national, regional and global level have been carried out, and the results vary considerably. This is due to the different calculation methods and data, and the different types of resources, and resource inventories util- ised. There does however appear to be significant potential