Seth Walker
Bioenergy Economist
RISI
RISI’s 9th International Woodfiber Resource and Trade Conference
Outlook for Global Biomass Markets
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Outlook for Global Biomass Markets
Seth WalkerSenior Economist, [email protected]@BioEconomist
International Woodfiber Resource and Trade ConferenceFebruary 2017
• Korean imports of low‐cost pellets remain steady
• Japanese imports of wood pellets and palm kernel shells (PKS) have increased rapidly as biomass power plants have been commissioned
• ~120 independent power producers (IPPs) in Japan have been approved for over 2,000 MW of woody biomass generating capacity
Update on Asian Biomass Markets
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Korean Pellet ImportsVolume has remained strong, but price is down and the share from Vietnam has increased from 25% in 2012 to 73% in 2016
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Japanese biomass imports have increased rapidly, albeit from a fairly low base, as new biomass plants begin to come on linePellet imports increased with Showa Shell – Kawasaki in 2015
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Japanese Imports of Wood PelletsThousand Tonnes
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Japanese Imports of PKSThousand Tonnes
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• Japanese Feed in Tariff (FiT) for “general wood,” including pellets and PKS, is ¥24/kWh. To be reduced to ¥21/kWh
• FiT for local biomass is ¥32/kWh.• Japanese Paper Association counts 119 biomass power
plants under the new FiT.• Total capacity is over 2,000 MW. Average size 19 MW, many smaller
• The majority (by county) of these new plants are smaller and aim to use local biomass.
• Several larger plants will use various combinations of wood pellets, woodchips and PKS.
Japanese Biomass IPPs
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Japanese Wood Pellet Co‐Firing Potential
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Cumulative New Coal Cap.
Pellet DemandAll New CoalIPP / JVIPP Only
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• Japan IPP demand 1.0‐5.0 million tonnes Another potential 1.5‐7.0 million tonnes of demand from co‐firing at new coal plants
• Japan’s “dirty little secret” – 20 GW of new coal capacity in various stages of development
• Korea Co‐firing demand to increase, but will continue to rely on low‐cost spot volume Potential for dedicated biomass plants offers upside
Outlook for Asian Pellet Markets
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Palm Kernel Shell• Byproduct of palm oil processing
• Has some advantages as fuel High energy content
• Negatives Ash and other inorganics
• Finite supply
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• Steady growth, but limited upside, continues from UK, Belgian and Danish industrial markets
• Netherlands could re‐emerge as a major market
• Heating markets continue to face headwinds from low oil prices and warm winters
Outlook for European Biomass Markets
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Global Pellet Demand Still Largely Driven by EuropePellet Imports, Million Tonnes
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Japan ImportsThousand Tonnes
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European Pellet Markets
Industrial Displacing coal with wood pellets UK, Denmark, Belgium, Netherlands
• Significant reliance on coal
• Lack of domestic biomass resources
Heating Primarily displacing oil, but also gas, cordwood, electricity In‐home pellet stoves and boilers Largest markets
Italy, Germany, Austria, France, Denmark
Both markets: approximately 10 million tonnes/year
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• Policy Transition from Renewables Obligation(RO) to Contracts for Difference
(CfD) European Commission state aid investigation over Limited uncertainty surrounding Brexit
• Outlook Drax – largest coal fired power plant in Europe
• Now 50% biomass on three out of six 660 MW units• More than 7 million tonnes of pellets per year
Lynemouth ‐ 420 MW power station• Sold from Rio Tinto Alcan to RWE then to EPH (Czech)• 1.5 million tonnes per year
MGT Power – 299 MW Greenfield CHP in Tees• Recently announced 15‐year 1 million tonne per year agreement with Enviva
United Kingdom
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Belgium
Policy: Green Certificate programMarket Development2006 – Les Awirs – Antwerp – 80 MW 2011 – Rodenhuize (Max Green) – Ghent – 200 MW (pictured)Future: E. ON Antwerp 300 MW ?Langerlo Electrabel ‐> E.ON ‐> German Pellets ‐> Graanul Invest
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Denmark
Heat > Power – 63% of the population gets heat from district heatingFewer than 10 remaining large central power stations – several already converted to biomass
energinet.dk
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• Dong – Avedore, Unit 2: “World’s most efficient thermal power station”
49% thermal efficiency for power up to 94% for CHP up to 1 million tonnes of pellets per year
Unit 1 conversion underway – additional 600,000‐700,000 tonnes per year
• Hofor – Amager (City of Copenhagen) Unit 1 uses roughly 300,000 tonnes of pellets per year Unit 4 (under construction) – 1.2 million tonnes of wood chips per year
• Dong – Herning 80 MW CHP Mix of chips and pellets
• Dong – Studstrup (ongoing conversion) 285 MW Unit 3: 800,000 tonnes of pellets per year
• Dong – Skaerbaek (upcoming conversion) 392 MW: more than 1 million tonnes of wood chips per year
Danish Biomass Consuming Central Power Stations
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Netherlands• 2011 “MEP” program
replaced by “SDE+” Co‐firing did not qualify until
sustainability criteria established
• 2015 – Sustainability criteria released (25 PJ cap) No contracts for co‐firing were
awarded (budget over subscribed)
• 2016 – Two facilities awarded contracts under the SDE+
• 2017 – Will coal plants be allowed to remain operational?
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Netherlands Pellet Co‐Firing and Renewable Electricity Targets
Million Tonnes
Pellet Co‐Firing
% Renewable Electricity
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EU Heating Markets
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Wood Pellets
• Motivated by economics more than policy Cost savings over
heating oil has deteriorated
• Italy – biggest market More than 2 million
pellet stoves installed Pellets still significantly
cheaper than oil (40 c/l excise tax)
Comparative Heating Fuel Prices in Selected EU Countries, c/kWh
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European Pellet Heating Headwinds
Winters 2013‐2014 and 2014‐2015 were the two warmest on record for much of Continental Europe
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Average Heating Degree Days in the EU 27/28
EU Average ‐ Annual
EU Average ‐ 1980‐2015
‐13%
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PIX Continental Pellet Price Index
Economic Headwinds for European Heating MarketsOil prices and exchange rates
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• Opportunities limited outside of North America
• Exchange rates make US South less competitive
• Where will additional supply come from?
Pellet Supply Outlook
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Pellet Supply Growth Has Primarily Come from North America
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ExportsMillion Tonnes
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USA Has Shifted from a Low Cost Producer to Above Average on the EU Industrial Pellet Supply CurveEuropean Industrial Pellet Costs, Delivered to Rotterdam, 2016
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• US South Ample opportunity for growth, cash costs higher than current market prices
• British Columbia Constrained by sawmill residual availability – beetle kill impact continuing
• Baltics Harvest at or near maximum sustainable, sawmill residual all constrained
Pellet Supply Outlook
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• Russia Fiber plentiful in some places, inverse relationship between transportation cost and fiber cost
• Vietnam Furniture manufacturing supply limited Plantation wood requires significant price increase
• Latin America Tanac to start supplying Drax
• Australia and New Zealand New projects in development?
Pellet Supply Outlook
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RISI Special Study:European Pellet Supply and Cost Analysiswww.risi.com/europeanpellet
Thank you for your attention!For more information:
North American Bioenergy 5-Year Forecast
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