RENEWABLE ELECTRICITY FROM BIOMASS

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1 RENEWABLE ELECTRICITY FROM BIOMASS November 2003 European Commission (Directorate-General for Energy and Transport) Contract no. NNE5/2002/52: OPET CHP/DH Cluster

2 Renewable Electricity From Biomass Author(s): Organisation: Address: Tel.: Maurice N. Millar, Mark Hobbins OPET Scotland, NIFES Consulting Group 8 Woodside Terrace Glasgow Scotland, UK G3 7UY +44 (0) (office) +44 (0) (direct) Fax: +44 (0) Web: maurice.millar@nifes.co.uk NIFES Consulting Group acknowledges support received from the European Commission s OPET Programme and from Scottish Enterprise, through the Scottish Forest Industries Cluster, in undertaking this work as part of the OPET-Scotland project. This paper has been produced as Task of NIFES work plan as part of the OPET Biomass CHP/DHtg collaboration. The project "OPET CHP/DH Cluster" has obtained financial support from the European Commission (Directorate-General for Energy and Transport) under the contract no. NNE5/2002/52 for Community Activities in the Field of the specific programme for RTD and demonstration on "Energy, Environment and Sustainable Development - Part B: Energy programme" The responsibility for the content on this publication lies solely with the authors. The content does not necessarily represent the opinion of the European Community and the Community is not responsible for any use that might be made of data appearing herein.

3 Renewable Electricity From Biomass Introduction Increasing emissions of greenhouse gases from the combustion of fossil fuels are recognised as contributing to changes in the global climate. The Kyoto protocol was established by the United Nations Framework Programme on Climate Change to address the impacts of increasing global greenhouse gas [GHG] emission levels. This international agreement is target-driven and it specifies emissions reduction targets for all participating countries, mostly the developed nations. These targets are set as percentage reductions relative to baseline emissions figures for Some European Union countries have taken the lead by setting more ambitious GHG reduction targets than those agreed in the Kyoto Protocol. The emissions reductions targets are to be achieved by 2010, with the targets specified as being the average of the annual values over the years 2008 to GHG emissions can be reduced by improving energy conversion and end-use efficiencies and by displacing fossil fuel combustion by greater use of renewable energy sources. In the UK, national targets for 2010 have been set for reductions in emissions of GHG (12.5% below the 1990 level) and for the market penetration of electricity generated from renewable energy sources (10%). There is no UK national target for the use of renewable energies other than electricity. In Scotland, there is already extensive renewable electricity output (11%) from existing hydropower plants. A Scottish target of 18% green electricity market share has been set for 2010, with an aspiration to increase this to 40% by Background To encourage investment in new renewable electricity generating capacity, and to work towards the Kyoto targets, various new legislation have been enacted. The Renewable Obligations on electricity suppliers in Scotland, England and Wales require each electricity supplier to source a set proportion of their electricity sales from accredited renewable electricity generation. The target percentage increases each year from a 3% of electricity supplied in 2002/03 to 10.4% in Suppliers who do not achieve their targets are required to pay a set penalty charge per unit shortfall. The accreditation process is based on Renewable Obligation Certificates (ROCs); electricity generation from renewable energy plants in Scotland is allocated SROCs; one certificate is allocated per megawatt-hour of electricity generated. These certificates are transferable between generators and suppliers at negotiated market rates. Non-compliance by the electricity supply companies results in penalties referred to as the 'buy-out' rate (3p/kWh in 2002/03; 3.051p/kWh in 2003/04), which is specified annually by the industry regulator, OFGEM (the Office of Gas & Electricity Markets). Each year, each supplier has to balance the costs of investing in renewable electricity generation capacity; contracting to buy ROCs from independent generation companies; trading ROCs in the marketplace; or paying the penalties to reach the specified annual minimum of their total output. The target for 2003/04 is 4.3%. The penalties paid at the buy-out rate by non-compliant suppliers are shared amongst those compliant suppliers in proportion to the percentage of ROCs held. Consequently there is this extra incentive for suppliers to achieve their target, as this attracts a share in the penalty dividend. It also increases the market trading value of ROCs and SROCs. UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group

4 Regulations The process of regulating and enforcing the Renewables Obligations is the responsibility of OFGEM. OFGEM produces a register of compliant suppliers and an annual report and monitors the trading of ROCs. The Renewables Obligation Order 2002 (for England & Wales) is separate from the Renewables Obligation (Scotland) Order 2002; these run in parallel with another piece of legislation, The Climate Change Levy (CCL). The CCL is an energy tax on the non-domestic consumption of electricity, coal, natural gas and liquefied petroleum gas (LPG). It is possible for an energy user to avoid CCL by purchasing renewable electricity. In such an instance the supply and end-use of renewable electricity are complementary in that the Renewables Obligations (ROs) and the Climate Change Levy act to influence the supply and demand, so achieving environmental policy objectives. As part of the UK Government s commitment to the Kyoto Protocol, legislation was passed requiring industry to comply with the Renewable Obligations and CCL. These statutory instruments were most recently published as 'The Climate Change Levy (General) Regulations 2003 (Statutory Instrument 2003 No. 604); The Climate Change Levy (Use of Fuel) Regulations 2003 (Statutory Instrument 2003 No. 665); and The Renewables Obligation (Scotland) Order 2003 (Scottish Statutory Instrument 2002 No. 163). These provide the framework, which is implemented by OFGEM, as well as the definition of the processes involved, such as defining the eligible types of renewable electricity generation. ROCs Marketplace There is a marketplace developing for the trading of ROCs between electricity suppliers and renewable electricity generators. In order to be eligible for ROCs, each renewable electricity generator has to be accredited by OFGEM. There are currently eleven ROC sites registered for the generation of renewable electricity from biomass in England and Wales and two in Scotland. These represent a total installed capacity of 158 MW e. Although the buy-out rate is set by OFGEM (currently 3.051p/kWh in 2003/04), the marketplace trading value of ROCs also includes the value of a share of the penalties. Electricity suppliers holding ROCs for an annual reporting period, will share the penalty payments made by those suppliers who fail to meet their target. Consequently the trading value of a ROC combines the penalty value and the additional premium from the sharing of the penalties paid by other suppliers. Auction prices for ROCs have achieved prices of and in This comprises the base price of 30 plus the marketplace premiums of and 18.21, which represent the market s assessment of the penalties dividend for the year 2002/03. The third element of the full value of green electricity is the electricity price itself. The long-run marginal cost of electricity in Scotland is about 1.6p/kWh (or 16/MWh). In addition to 100% renewable electricity from biomass power generation, ROCs can also be generated by co-firing eligible biomass materials with fossil fuels in existing thermal power plants. There are limits to the proportions of ROCs from co-firing that electricity suppliers can use to meet their targets. Consequently a different marketplace exists for the trading of ROCs from co-firing. Biomass as a source of fuel Biomass is attracting increasing interest as a renewable energy fuel source. As a source of solid fuel, it has a natural advantage over intermittent renewable electricity sources, such as wind, wave, hydro, tidal and solar. Biomass is available from a range of sources; it can be processed and stored for use when required; and it naturally incorporates energy storage, unlike intermittent forms of renewable energy. Biomass as a fuel is principally available from forestry operations (smallwood thinnings, roundwood and logging residues); from secondary processing (sawmill residues bark, UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group

5 shavings, offcuts, sawdust); and from waste wood recovered from industry and construction (used pallets, demolition wood). Imported biomass materials, such as palm nut kernels and olive residues, are already being used in co-firing. Power generation using biomass is based on (i) steam-raising from combustion or (ii) gasification. Heat recovery from power generation can provide an extra benefit, as the process then produces electricity and process heat for use on-site. Biomass differs from other solid fuels in its calorific value or usable energy content. As a fuel, biomass varies in usable energy content depending on the moisture content. Wood-fuel from freshly harvested trees can have a moisture content of 55%; after air-drying in optimum conditions, the moisture content can be reduced to less than 30%. At 55% moisture content, the usable energy value of the fuel is 7.2 GJ/tonne and at 30% moisture content, the usable energy value is 12.6 GJ/tonne. Oven-dried with 0% moisture content, the usable energy value is 19.1 GJ/tonne. Co-firing Biomass is attracting attention for use in large-scale plant in combination with other fuels. In the context of ROCs, the regulations dictate that co-firing of biomass with fossil fuels is eligible for ROC generation. The regulations intend to reduce the use of general biomass in co-firing over time, in favour of increasing use of energy crops. The initial timescales for the Renewables Obligation Order 2002 (for England & Wales) and the Renewables Obligation (Scotland) Order 2002 are currently being re-assessed as part of parallel general reviews of the regulations. Co-firing regulations: A station fuelled partly by biomass and partly by fossil fuel is eligible for the Renewables Obligation. Current timetable for Scotland, England & Wales Until 31 March 2006 Suggested revised timetable for Scotland, England & Wales Any biomass can be co-fired until 31 March 2009 Until 31 March 2009 A station fuelled partly by biomass and partly by fossil fuel will (unless it is a minimal fossil use generating station) only be eligible if 75% or more of the energy content of the biomass is derived from energy crops After 31 March % of co-fired biomass must be energy crops From 1 April 2009 until 31 March 2010 a generating station fuelled partly by biomass and partly by fossil fuel will be excluded After 31 March % of co-fired biomass must be from energy crops From 1 April 2010 until 31 March % of co-fired biomass must be energy crops From 1 April 2011 until 31 March 2016 A full-scale review of the Renewable Obligation (Scotland) has already been announced, to be undertaken by the Scottish Executive in It has already been announced that the effect of the ROS and the RO in England and Wales should be the same. So, in the short-term, any UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group

6 changes made to the workings of the ROS should be the same as changes to the RO in England and Wales. Output generated from the fossil fuel input will not be eligible for ROCs. There are currently eighteen registered co-firing plants in the UK, including two in Scotland. The total accredited renewable capacity is 884 MW e. Sources of Biomass For the purposes of renewable energy, biomass is defined in the Statutory Instruments and consequently in OFGEM's interpretation. A range of biomass sources is covered by these definitions 'Biomass: means the fuel used in a generating station that is at least 98% of the energy content is derived from plant or animal matter or substances derived directly or indirectly therefrom ' Energy Crops: means a plant crop planted after 31 st December 1989 and grown primarily for the purpose of being used as a fuel. Short Rotation Coppice (SRC): included under the Energy Crops definition but often referred to separately as quick growing plants (3-5years fully grown) like willow, poplar and miscanthus. Existing Forestry: the use of existing forestry that may have been planted for other purposes, i.e., timber/pulp industry, and has significant wastes/residues. This may come in the form of logs, smallwood thinnings and roundwood where the thinning process leaves residues often left unclaimed to rot. Other forms: Woodchips, pellets, and logs. These are specifically produced from the forestry industry. These practices encourage better quality of fuel as well as helping with the handling prior to use. Woodchips and logs are often dried prior to use whereas pellets have the moisture removed during production. In addition, biomass is defined as including forestry or wood wastes or residues 1. In the case of biomass in Scotland, the principal potential sources of biomass for energy are Roundwood from forestry harvesting Smallwood thinnings from forestry management Logging residues, as a co-product of forestry harvesting Recovered wood from industry and demolition Sawmill processing residues; sawdust for pellets, bark, shavings, offcuts Biomass Technologies and Techniques Technologies used for biomass are wide ranging as process developments provide new ways of utilising biomass fuels for power generation and heating. There are two accredited ROC stations fuelled by biomass and waste using an advanced conversion technology. These have a combined capacity of 1.8 MW e. 1 from The Renewables Obligation (Scotland) Order 2002 UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group

7 The range of technologies for biomass conversion include - Pyrolysis: conversion of one fuel to produce a better fuel. Wood is heated to high temperatures with little presence of air to form a char (charcoal like) until volatile matter has been driven off giving a fuel of twice the energy density and capable of higher temperatures when burnt. Gasification: a range of processes but primarily a solid fuel is reacted with hot steam and air/oxygen to produce a gaseous fuel. Anaerobic Digestion: in the absence of air, bacteria acts to decompose almost any biological material (animal waste/rubbish) producing a gas, referred to as Marsh Gas for animal wastes and Landfill Gas for municipal wastes. Mass Burn: incineration of Municipal Solid Waste that is burned for the purpose of generating steam to produce electricity via a steam turbine. Co-firing: when more than one fuel is used in the combustion process. This can be the combination of fossil fuel (e.g. coal) with wood chips or pellets. Boiler plant suitable for biomass fuels are of differing types, according to the scale of project: Fluidized bed boilers are suitable for the combustion of poor quality fuels, which can be of variable moisture content and variable particle size, including agriculture and forestry biomass fuels. Applications tend to be in medium to large-scale projects. Previously used in the coal and chemical industries, fluidised bed boilers are of two types: - bubbling bed where fuel is introduced to the combustion chamber through a bed of sand. The sand is then blown to act like a fluid that increases the mass and heat transfer. The fuel is injected directly into the combustion air that allows a constant and uniform temperature giving better control. In circulating fluidised bed boilers, the fuel combusts as it rises inside the boiler with the airflow. Co-firing of biomass with coal in pulverised fuel boilers is also an option. Moving grate boilers are more appropriate to the industrial use of biomass at medium scale. A circulating grate, similar in movement to a conveyor belt, rotates with the fuel fed onto the grate passing through a drying area before entering the combustion chamber of the boiler. This type has the advantage of reliability; it can cope with varying sizes of fuel particles and load fluctuations; and has simple parts. Conclusion The introduction of the ROC process is beneficial to the increase in the use of biomass as a form of renewable energy in power generation. The process creates premium prices for renewable electricity over electricity generated from fossil fuels. These premium prices offset the higher generating costs from renewable energy sources and should help to make biomass power generation viable. This complements the increasing interest in biomass as a source of renewable energy for heat. A diverse range of sources is eligible for use as biomass fuel. Biomass offers the inherent advantage of energy storage, in comparison with intermittent renewable energy sources (wind, solar, etc.) A key issue with respect to the future of biomass as an energy source is the creation and development of the fuel supply arrangements to make biomass a credible and secure energy supply option. UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group

8 Similarly, the future trading values of ROCs greatly influence the workings of the renewable electricity marketplace. The present lack of accredited generating capacity is resulting in undersupply of ROCs and high trading prices as holders of ROCs share the penalties paid by noncompliant suppliers. These high ROC values should result in strong demand for renewable electricity generation output and continuing new investment in renewable electricity generating capacity. However, the financial risk assessment for a 25-year biomass power plant investment will be focussed on the future trading values of ROCs. There is unavoidable uncertainty in forecasting future ROC values; particularly as the whole ROC process is an artificial device to create added value for green electricity. The ROC process is currently under review in England and Wales and also in Scotland. A further major review of The Renewables Obligation (Scotland) is also to be undertaken in References: The Climate Change Levy (General) Regulations 2003 (Statutory Instrument 2003 No. 604) The Climate Change Levy (Use of Fuel) Regulations 2003 (Statutory Instrument 2003 No. 665) The Renewables Obligation (Scotland) Order 2003 (Scottish Statutory Instrument 2002 No. 163) The Renewables Obligation definition of a generating station; OFGEM, April 2003 RE:SOURCE OFGEM renewables update newsletter, February ROC Register at OFGEM The Renewables Obligation (Amendment) Order 2003, Statutory Consultation, DTI August 2003 The Renewables Obligation (Scotland) Technical Review (August 2003) Statutory Consultation. Non-Fossil Purchasing Agency UKE-312; 7 Nov OPET Scotland, NIFES Consulting Group