Welcome on the biomass to energy weblog
The conversion of biomass to energy is still a new industry in the Netherlands and the technologies applied in for the large scale conversion of biomass to energy are still in one’s infancy.

This weblog is devoted to the Biomass conversion energy technologies. It investigates several aspects about the energy industry like its position in the global environment and the characteristics of the industry like; main drivers, different technologies and opportunities. Also several observations in this industry are assessed that reveal the strategies, problems and differences of the firms under study.

All of these issues are reported on the several logs of this website.

If you have any comment regarding the subject discussed on this weblog, please do not hesitate to react, so we can have some discussions about these items.

We hope you’ll find the biomass weblog a welcome experience!!

The sources used for this analysis were/are all publicly available. Therefore most of the collected material comes from government institutions and public research centres. Far less material could be collected from market players, the electricity producing companies or private research centres. This is not surprising though, as the production process is crucial for electricity production companies. To reveal everything about their production process is to tell all the competitors how they perform. In a competitive market this is clearly not sensible.

Difficulties with regard to the market and market players.
- Sales is disconnected from production.
- Whether production takes place inside or outside the Netherlands.
- Existence of many different discussion groups, taskforces, joint undertakings and interest committee. There are still few authorities in the field.

Other difficulties in the information use:
- Disagreement on definitions of biomass; whether or not to include Municipal Solid Waste (MSW) as biomass, or how to determine the biogenic fraction in MSW.
- Forthcoming the issue of “green electricity”.

We have to acknowledge that the image we had from the collected material is not the complete image of the industry. Does this change our earlier recommended strategy?

It provides the image of a young and immature – part of the – industry. Here, common definitions are often lacking and there is a lack of clarity on the market players, especially after the recent liberalization of the electricity sector. Therefore there is little transparency of the market.
This strengthens us in the recommended strategy towards the Ministry of economic affairs to be clear in their long term support and be flexible with regard to regulations. As it is an industry where developments are desired, this should create an environment for the industry to deploy.

(This log replaces the previous log containing the analysis of the industry)

The well-established trade and logistics for energy can make the Netherlands the main distributor of biomass. The well and numerous experiences with electricity generating technologies give opportunities for the Netherlands to be a leader in biomass applications.

Biomass is not limited by finite fuel reserves and is geographically more evenly distributed than fossil fuel reserves are. Therefore biomass has a large potential to contribute to the energy needs and decreases our energy dependence on other countries. In general, their application also has lower external (e.g. environmental) costs than the present use of fossil fuels. These characteristics have been key drivers for the Dutch government to set ambitious targets for the production of electricity from renewable sources in 2010: a contribution of respectively 9% to the gross domestic electricity consumption. Yet, the current contribution is only 3.3% and it is uncertain whether these targets will be reached. (SenterNovem, 2005) In order to meet these targets, the government has made agreements with the industry and has determined subsidies and laws. These are of great importance for the industry, but also branding is of significance (creating a corporate social responsible firm) Biomass promises the moon, but, how promising is this biomass indeed and what are the difficulties? Lest to find an answer on this, a SWOT analysis will be done.

Strenghts
- The knowledge position of energy technology of universities, institutions and firms is well established as well as their mutually national and international network.
- Logistics and trade in the Netherlands are well developed
- The technology enables the fuel switch from coal, oil or natural gas to biomass in existing technologies. The Netherlands is a leader in the field of coal-fired plants, so the technology to generate electricity from biomass is well known and developed.
- There is a legal framework that promotes biomass usage
- Biomass is commonly agreed to be without additional CO2 emission.

Weaknesses
- The Netherlands has a low level of fabrication industry and therefore focuses on trade transport and knowledge export.
- Little knowledge of society about biomass, which can cause problems for the acceptance.
- High costs
- Immature biomass market especially in fuel supply
- Dependency on policies

Opportunities

- The Netherlands has a well developed bio- en agricultural sector
- Dutch power plants are leader in biomass fired or co fired plants, which results in an increase in biomass import. The Dutch harbour and its position as distribution country offer excellent opportunities.
- The desire for a European electricity network can offer the Netherlands an opportunity to distribute this energy with their existing trade- and logistical systems.
(Bolt e.a., 2006)

Threats
- powerfull establishment of natural gas, coal and oil
- The present liberalization of the energy sector may lead to a (temporary) hesitance towards new investment projects
- Changing policies for subsidies

SenterNovem (2005) Learning in renewable energy technology
Bolt N., Combrink F.M., Vaessen P.T.M.(2006) State of the art studie techniekontwikkeling voor de elektriciteitsvoorziening, KEMA T&D Consulting, 10 februari 2006

As we concluded in the previous log, Summary, the Dutch market does not yet provide the conditions in which biomass can cost-effectively be used to produce electricity and heat on a large scale. This, and also the environmental issues justify government policy.
What would improve conditions for biomass applications, and in particular for large-scale electricity production, to be developed? Currently biomass has the attention of the government, the energy industry and research institutes. Various government measures are in use, varying from subsidy on production and R&D, to joint taskforces where all actors come together.

Recommendations for government conduct can be sought in:
- To dis- / continue, or improve upon current measures,
- To propose new measures.

Past and current measures have successfully stimulated electricity production from biomass. But there is also criticism. Power companies complain that a clear long term policy regarding biomass is lacking. To often measures change, regulation is ambiguous and there is no (international) agreement on environmental aspects with regard to CO2 emission permits. Essent, the largest Dutch electricity producer, explicitly mentions this in their annual report over 2005. They also anticipated cutting production from biomass by half if subsidy on bio-oil is decreased against earlier government statements. (Press release October 11th, 2005)
What is lacking is a stable environment for investment. The government can improve on this with:
- a clear long term policy,
- by resolute and progressively dealing with conflicting regulations,
- and where possible initiate the settling of disagreements concerning CO2 emission permits and the sustainability issue.

Essent Press release October 11th, 2005

Essent Annual report [pdf]

Biomass in the hands of god or the government?!

The use of biomass has increased a lot in the Netherlands for the last decade. So, how could this increase of the use of biomass occur? This is mainly because of the high subsidies in the Netherlands what caused the biomass sector to further develop itself. This development has contributed to the technological status and large companies have already adopted these technologies to use biomass for the large scale energy production.
Without the subsidy for sustainable energy the large scale production of energy by means of biomass is only feasible given the following conditions;

- When biomass is available for a sufficient price that is competitive to alternative fuels like fossil fuel or nuclear fuel.
- Where environmentally driven policies encourage deployment.

The figure underneath provides an overview for the different present biomass prices.

In 2010, 9% of the electricity consumption should be produced from renewable energy sources. It is expected that 75-80% of this target can be met by using biomass. That’s why electricity production from biomass on a large-scale is extremely important!
However currently, biomass is about 150% more expensive than fossil fuels. Companies, with making profit as main objective, will choose for the option that is commercially most appealing. It is clear that the government should intervene in order to meet the above-mentioned objective. The government has several ways to influence the market:

This can be either to:
- Stimulate the use of biomass
or
- Discourage the use of fossil fuels

The main available measures are:

Financial measures:
- MEP subsidy
- Tax stimulation
- Subsidy for biomass feedstock production
- Stimulate R&D (EOS subsidy)
or
- Impose a tax for fossil fuels

Legal measures:
- Oblige companies to use a given amount of biomass
or
- Limit fossil fuel usage by power companies

Communication measures:
- Influence public opinion and herewith the societal demand for biomass usage
- Joint taskforce government and market
or
- Covenants on limiting fossil fuel usage

The best strategy however, will be a combination of several measures. Up to today demand for biomass has increased rapidly, largely as a response to government incentives. R&D should be stimulated to increase the efficiency of electricity production from biomass. SenterNovem shows that the price level of the MEP subsidy of 2006 is too low to reach the biomass target of the government in 2010. But also joint taskforces are very important because they emphasize the importance of all actors and the cooperation between them.

Up to now, power companies have shown to respond to government incentives, such as the MEP subsidy and they have agreed on a covenant to limit fossil fuel usage. Also they participate in joint taskforces with other actors in the industry. Still obstacles remain for feasible large-scale heat and electricity production. It is now to find out what would be a sensible measure to achieve this or get closer to it and what should be the role of the government.

Report “De verwachte beschikbaarheid biomassa in 2010″ by SenterNovem [pdf]

In our research, we try to find out whether electricity and heat can be feasibly produced from biomass on a large-scale and what kind of government intervention is needed. The policy that has to be implemented to achieve this aim, should not only consider technological factors, but should also include economic and societal issues.

To develop the use and application of biomass, a whole innovation network can be compiled. It is important to know that several actors are involved and that they all have their own beliefs, interests and influence.

Government
The government can implement their own policy, but are bound to international regulation. Government are assumed to act in favour of the society in general and will therefore have a close relation towards this actor ‘society’.

National government
The national government has a preference for a stable and growing economy. This cannot be reached without the availability of energy. Also a clean environment will contribute to the sustainability of the economy, but also the population of a country is attracted towards a clean environment (from the perspective of the Netherlands) and this will not be neglected by the government. The availability of a clean and environmentally sound energy source is therefore very positive in the eyes of the national government. Therefore it has direct benefits of the implementation of biomass in the energy sector.
Also the development of biomass related technology will be stimulated by the government because of the possibilities it creates for the potential growing industry of biomass. This created direct links to the actor; research institutes.

International regulations
From the international perspective there are several regulations that affect the biomass sector. The most important one is the Kyoto protocol that with the objective to decrease the CO2 emissions in general (source: UNFCCC). This is an enormous stimulation for the international players for the biomass sector because this sector can produce energy without the emission of CO2 in relative terms.
Other international regulations that affect the biomass sector are environmental regulations, human rights regulations and fair trade (to some extend). These international regulations are mainly composed by international NGOs like UN and WTO and in favour of various countries (most industrialized countries).

Society
At the present situation in the Netherlands almost everybody is in favour of sustainable energy. That is if the costs of this kind of energy are equal or almost equal in comparison to conventional energy sources. So sustainable energy is commonly accepted in the Netherlands, but more specifically; is biomass accepted?
Because of the uncertainty that comes with new things in general, people are hesitantly to the acceptance of biomass. An example of this is that a few years ago several people wondered if they still could receive this “green energy” or that they had to change their wall sockets and get a new energy line installed to their homes. This could also be the case with several issues concerning biomass.
In a research about the preference of the society there was concluded that people preferred the generation of energy by means of wind-, solar-, and hydro-power above biomass (source: TNS NIPO, 2004). So the acceptance of the society for biomass lacks compared to other sustainable energy sources.

Then there is also the “not in my backyard” argument which stays that people often like various technologies as long they do not have any direct disadvantages of it.

Research institutes
There are several research institutes that contribute to the technological development that are biomass related. Some of these research institutes are public like Universities and others private like ECN, TNO and BTG. These institutes have as goal to develop their technologies and to create knowledge in order to make money. Many of the research is performed in assignment of the government, so there is a strong link with the government.

Technology which comes forth out of these research institutes is in fact very relevant for the energy sector and fuel suppliers, because it can imply that these actors can change their production process in order to be more efficient. So, new technology can result in an economic climate, which is in favour of a certain direction. In the field of biomass this can be the combustion of biomass or the gasification of it.

Non-Governmental Organizations
Non-governmental organizations (NGOs), such as environmental organizations, consumer organizations, international energy organizations (International Energy Agency) and international trade organizations (World Trade Organization; actually an inter-governmental organization) all have a share in the development of bio-energy.
These organizations can put pressure on the behaviour of other actors, most prominent being the society, the government and the energy sector.

Energy sector
The energy sector represents the producers of electricity and/or heat from biomass. Because we look at the biomass production on a larege-scale, this mainly comprehends the commercial power companies. In the Netherlands, the following companies are active in electricity and heat production from biomass; Nuon, Essent, E.ON Benelux, EPZ and Electrabel. Their interest is to produce / supply electricity and heat (and gas), at competitive prices, in sufficient quantities, today and in the future, to achieve maximum profits. Their choice to use biomass can be strategic, it can be based on government regulations that stimulate sustainable energy production by for example subsidies, or it can be caused by the availability of biomass residues.
Interaction with other actors takes place in several ways. They have to comply with various regulations, most important being environmental regulations. They depend on biomass suppliers, from which they require certain quantities and quality of biomass. They also depend on, and possibly cooperate with research institutes who develop new technologies and create new insights in biomass processing. Finally society depends on the energy sector to supply electricity and heat (and gas) in sufficient quantity and quality.

Fuel suppliers
With fuel suppliers are meant the chain of (agricultural) producers, traders and (future) market coordinators of biomass streams. They can be divided in national or international parties. The producers and traders are guided by regulations about quality, contamination of supply and transparency of origin and sustainability. These regulations are either set by the government, customers (the energy sector) and ngo’s, or these actors influence the decision making process.
The interest of the fuel suppliers is to supply sufficient quantities of biomass at a commercial price to maximize profits.

How about the use of biomass in Dutch electricity production facilities? This is a fairly hard question to answer just from public information on the internet. First of all, information on electricity ‘produced’ and electricity ‘sold’ are two different things, usually happening at the same company. (Mind import and export) Second, if information on production is available, frequently fuel mix data are not mentioned.

A search revealed that all major power companies, mentioned in the previous log, co-fire biomass to a certain extent. Only one owns and operates a fully biomass-fired plant, this is Essent. The plant is a 25 MW woodchip combustion plant, located in Cuijck, Noord-Branbant. At start up in the summer of 2000, this plant was the largest of its kind in Europe. A year earlier though, a 38,5 MW plant, fired on poultry litter was put to use in Thetford, Norfolk, UK. In Lockerbie, Scotland, UK, a 44MW plant is being constructed at the moment, designed to run on wood and other plant matter. Also at other locations in Europe, biomass fuelled plants are designed or constructed. This shows a lot is happening in biomass fired electricity plants in Europe, a very interesting development!

Cuijck plant (Photo by Siemens)

Back to the plant in Cuijck. Is it competitive with conventional or multi-fuel (capable of co-firing biomass) plants? No, not yet. For the construction, € 6 million of government subsidy was awarded from the CO2-reduction plan. (12% of total investment costs). Operation is made feasible with the so-called MEP subsidy, subsidy on cleanly produced electricity.

To sum up:
- all the major players use biomass to a certain extent to co-fire in their current production facilities, one more than the other.
- One power company owns a relatively small, but fully biomass-fired electricity plant.
- Construction and operation of this plant is made possible with government subsidies.
- Over Europe, fully-biomass-fired electricity plants increase in number and size.

Cuijck plant

Siemens data on Cuijck

Design of Lockerbie plant (Photo by Siemens)

Siemens Power generation (Use search query “Biomass”)

Owner of Thetford plant and others: Energy Power Resources UK

The industry

A closer look at the industry tells us that the power companies operate in an oligopolistic market, where there are few main sellers and many buyers. The five companies mentioned in the previous log all make – limited – use of biomass to produce electricity. To assess the competitiveness of the industry we made use of the “5 forces model” of Porter (Porter, 1990). The main driver of this industry does not seem to come from either buyers, sellers or the competition, but rather from regulations set by, and incentives from the government. These measures stimulate the search for and use of alternative energy sources. They encompass:

- A set amount of allowable CO2 emission, coming forth of the Kyoto protocol,
- Subsidy on environmental friendly produced electricity (MEP).

It is for the power companies to decide how to live up to the regulation and to profit most from the subsidy. This makes technology an important aspect, to provide reliable and efficient plant performance. Another import aspect is a guaranteed, clean and cheap supply of biomass.

Besides government regulations and subsidies, power companies make use biomass as a marketing concept, to attract a certain group of people with an environmental friendly view. So, it is also used for image building.

A more elaborated application of the “5 forces model” of Porter is found below.

Source:
Porter, M. (1990) Competitive Strategy: techniques for analyzing industries and competitors, New York : Free Press

Bargaining power of suppliers
- Suppliers of biomass resources are numerous, both national as international and they
are not very organized – yet.
- There is uncertainty about quality and quantity of supply.
- Production of energy crops is less profitable than producing cash crops for the food industry.
- Price and quality of biomass is of significant importance for production costs of power
companies. The lower the price of biomass, the more competitive this option becomes
compared to alternative sources. Besides that, there needs to be a guaranteed supply.
- Biomass can often been seen as a form of waste from industries of society (municipal waste), this
is a cheap form of energy which also has the benefits that it removes the waste.

Sources:
SenterNovem (2005) Leaflet Examples of bioenergy projects; Cuijk, De Lier, Schijndel, Lelystad, 09-02-2005
KEMA (2005) Opportunities for a 1000MWe biomass-fired power plant in the Netherlands, The Netherlands

Bargaining power of buyers
- Up to today, there is a growing demand for electricity. Also the demand for environmentally
friendly produced electricity is growing.
- Buyers are numerous and vary from small retail users to large scale business users. If organized
they can put pressure on the power companies. As there is competition between the power
companies, they have the possibility to switch. Switching cost mostly involves only paper work.
- Although the produced electricity is homogeneous, the resources are not and buyers might have
difficulties finding out what they buy, as information is not always clear.

Threat of substitute products or services
- There are many substitutes, namely nuclear energy, energy generated from fossil resources,
such as coal or natural gas, or other sustainable energy sources, such as hydro, wind and solar
power.
- Generally the alternative, sustainable energy sources are more expensive and still only
competitive with government subsidies. But they are infinite sources and an increase of the price
of fossil and nuclear fuels makes the sustainable alternatives more competitive.
- As mentioned, switching to substitutes usually does not involve more than paper work.

Threat of new entrants
- Investment costs create a huge barrier for new entrants. Also the technology is not yet mature,
which involves increased risks for new investment. Adjusting existing plants to make co-firing of
biomass possible is less expensive, but obviously implies the ownership of a suitable plant.

Rivalry among existing competitors
- Although most, if not all power companies investigate, and make use of alternative energy
sources, some do profile themselves as environmental friendly. Still there is just a select group of
consumers that specifically demands sustainable energy. Also consumers are very sensitive for
the price, which makes that prices do not differ much between power companies.
- As the prices for bioenergy are more or less bounded upwards, gains are made when production
costs are lowered. This can be achieved by lower costs for biomass resources or more efficient
production. The latter can be achieved with improved technology, which is therefore important for
the industry.

(www.energieprijzen.nl, 27-03-06)

Extra force government interests
- The government often plays a major role in sustainable energy industries. Without governmental
incentives these industries would have a hard time competing with traditional competitors in the
market. The incentives are initiated because of the depletion on fossil fuels and international
environmental agreements, for example the Kyoto protocol. This protocol consists of several
objectives for countries to reduce the CO2 emissions. One of the ways to reduce CO2 emission is
by replacing fossil fuels for biomass or by other forms of sustainable energy like wind, solar or
hydro power. This is definitely one of the main drivers for this industry.

In the next step we’ve narrowed our point of interest even more and decided to focus on the following industry:

Industry for large scale production of electricity and heat from biomass.

Directly the distinction is made between biomass as organic material, either intentionally produced or as a by-product, and (municipal-) waste as biomass. For the latter it is debatable whether it actually is biomass. Besides that, production of heat and electricity from (municipal-) waste is already common practice and therefore less appealing.

In the Netherlands, the following companies are active in electricity and heat production from biomass; Nuon, Essent, E.ON Benelux, EPZ and Electrabel. So far biomass is co-fired with traditional fuels, such as coal. For a transition to a sustainable energy infrastructure, where fossil fuels are replaced by substitutes, large scale electricity and heat production from biomass are required.

That leaves the question:

How can electricity and heat feasibly be produced from biomass on a large-scale?

Frequently, new posts will keep you informed of our investigation.