outlook for global biomass markets - events.risiinfo.com · outlook for global biomass markets ......

Seth Walker

Bioenergy Economist

RISI

RISI’s 9th International Woodfiber Resource and Trade Conference

Outlook for Global Biomass Markets

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© Copyright 2017 RISI, Inc. | Proprietary Information

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

© Copyright 2017 RISI, Inc. | Proprietary Information 3

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


Japanese Wood Pellet Co‐Firing Potential

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Pellet DemandAll New CoalIPP / JVIPP Only


• 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


Palm Kernel Shell• Byproduct of palm oil processing

• Has some advantages as fuel High energy content

• Negatives Ash and other inorganics

• Finite supply


• 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


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


• 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


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


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


• 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


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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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


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

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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


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


• 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



• 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?



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


outlook for global biomass markets - events.risiinfo.com · outlook for global biomass markets ......

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