Monday, December 6, 2010

Wood Cheaper Fuel Than Coal for Generation of Electricity in UK

Wood Cheaper Fuel Than Coal for Generation of Electricity in UK

The highest-priced coal in two years is making wood pellets a viable fuel alternative for U.K. power producers, heralding a doubling of electricity generation from biomass in the next three years.
Using coal to make a megawatt hour of electricity in the U.K. costs 40.25 euros ($53), compared with 39.35 euros for wood, according to Bloomberg New Energy Finance. Prices have been “approximately the same” since May, it said.
Pledges by Prime Minister David Cameron’s government to step up renewable energy use are stoking investment in U.K. projects to get electricity from biomass such as tree and vegetable matter just as coal prices surge amid rising demand from China. Utilities plan to more than double biomass capacity in Britain to 5,800 megawatts by 2014, enough to supply almost 6 million homes, New Energy Finance said.
“More and more coal-fed power plants need to look at ways to increase renewable-energy production,” said Pasi Laine, president of environmental technology at Metso Oyj, a Helsinki- based maker of equipment that turns biomass into electricity. “Most of the existing coal-fired power boilers could be adapted.”
Benchmark coal for delivery next month in Northwest Europe has climbed 40 percent this year to $116.50 a metric ton as of 4:30 p.m. in London, the highest since Oct. 24, 2008, according to data compiled by Bloomberg from broker prices. Pellets have fallen 3.2 percent this year to 123.19 euros ($193) a ton, according to APX-Endex, an Amsterdam-based exchange that plans to begin trading of wood contracts on its system by mid-2011.
Diminishing Returns
Power companies are turning to biomass as the profit from coal-based electricity generation slides. Returns have dropped about 70 percent in the past 12 months to about 3.50 pounds ($5.50) a megawatt hour, and were as low as minus 6 pounds in March, according to Bloomberg data. Coal accounted for 28 percent of the U.K.’s electricity last year.
Essen, Germany-based RWE AG said Nov. 16 it’s seeking permission to burn wood instead of coal at its 1,050-megawatt power station in Tilbury, England, next year. The company, Germany’s second-biggest utility, also started building a 50- megawatt plant in Fife, Scotland, that will burn wood.
Drax Group Plc, the owner of Western Europe’s largest coal- power station at Selby, England, said in October 2009 it wants to construct three U.K. plants fueled by organic matter. It also plans to switch one of its 645-megawatt coal-fed units at the Selby site to run entirely on biomass.
‘Double Win’
It would be a “double win,” Melanie Wedgebury, a Drax spokeswoman, said by e-mail. “It will remove coal from the energy mix and replace it with significant, reliable, cost- effective and dispatchable renewable power.” After an expansion this year, the 4,000-megawatt station in Selby has the ability to use such fuels for as much as 13 percent of its output.
The cost of burning coal includes European Union emission allowances, which companies must buy to compensate for producing greenhouse gases linked to global warming. Benchmark carbon allowances have risen 18 percent this year on the ICE Europe Futures Exchange in London.
While burning biomass spews about the same amount of greenhouse gas into the atmosphere as coal, it doesn’t require emissions permits under the EU’s cap-and-trade program because trees and plants absorb carbon-dioxide when they are growing.
Using biomass to create electricity in the U.K. wouldn’t be profitable without a government subsidy of about 31 euros a megawatt hour, said Irmgard Herold, a London-based analyst at New Energy Finance. The U.K. awards so-called Renewable Obligation Certificates to companies that process wood biomass and other renewable forms for power generation.
Supply Limits
British generators that burn both coal and biomass are eligible for at least half a credit for every megawatt hour they produce. Wood pellets became profitable in May for the first time since the country changed its renewable subsidies a year earlier, cutting support by half for mixing coal and biomass.
Limited supply of biomass as a feedstock may deter some companies from switching from fossil-fuel generators, said Isabel Boira-Segarra, renewable services director at WSP Environment & Energy, a London-based research consultant. Costs running into “hundreds of millions of pounds” may also discourage producers, according to Lakis Athanasiou, an analyst at Evolution Securities in London.
“There’s room for biomass for making electricity in Britain, but there are too many uncertainties in fuel supply,” Boira-Segarra said. “You don’t have a project unless you can prove liquidity for the feedstock in the market or secure a long-term supply of biomass.”
Feedstock Imports
While utilities require twice as much biomass as coal to produce electricity, there’s enough sustainable fuel worldwide to power all of Britain, according to Rotawave Ltd., an Aberdeen, Scotland-based company that sells technology to turn vegetable matter into a material more comparable to coal.
“Britain’s potential for more biomass-fed power capacity is quite big because the feedstock can be imported” from Russia, Scandinavia and North America, Herold said.
Biomass can be obtained from fallen branches and bark as well as agricultural waste rather than cutting down trees. U.K. companies can currently generate about 2,200 megawatts of power from biomass, enough to supply more than 2 million homes.
“Biomass could become a sustainable global commodity with a market price,” Metso’s Laine said.
To contact the reporter on this story: Catherine Airlie in London at
To contact the editor responsible for this story: Stephen Voss at

Posted by Don Squire - Hawken Energy Outdoor Wood Furnaces
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