EWB Insight: December 2016

This month: All eyes on Drax, new deals for Suez and a turn of fortunes predicted for waste processing ACT technologies

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Eyes on Drax as state aid probe draws to a close

Financial analysts are watching closely to see whether the European Commission will approve UK state aid for Drax Power to convert its third boiler from coal to biomass, with a decision due before the end of the year.

The outcome will be hugely important to the company, which operates Britain’s largest power station and Europe’s largest biomass combustion facility.

Like the company itself, the financial markets appear confident the Commission’s ruling will be positive. This month the Financial Times newspaper polled 17 investment analysts and found nine advised holding Drax Power stock and only four advised to sell.

Evidence to support this confidence includes the fact that two other UK biomass projects - at Teesside and Lynemouth - have already received EU state aid approval regarding government support under the UK contracts for difference (CfD) scheme.

On the other hand, when the Commission opened its detailed state aid investigation in January it highlighted two particular concerns that it said it would investigate further.

The first was potential "over-compensation" of Drax Power because the Commission suggested that the converted boiler could have a better rate of return than assumed in the company’s CfD contract,

This includes a strike price of £100/MWh (about €118). It is one of the highest for any renewable energy technology, higher even than the £92.50/MWh (about €110) controversially agreed for the planned Hinkley Point C nuclear power station

The Commission also expressed worries that the very large conversion could "distort competition" by sucking in 2.4 million tonnes of wood pellets per year. Potential market distortion could outweigh the positive effect on achieving European Union 2020 targets for renewable energy, it warned.

Meanwhile, Drax Power announced plans this month to diversify its business by buying natural gas generating capacity and an energy retail business, even while pledging continued commitment to biomass at Drax.

Data Watch

EfW plants in the Netherlands increased their heat and electricity output in 2015 despite a fall in the amount of waste consumed, according to figures compiled by the Waste Registration Working Group. The annually produced statistics also show a continued increase in the share of imported waste consumed in Dutch EfW plants.

The report Waste Processing in the Netherlands 2015 shows an overall stabilisation in the amount of waste incinerated over the last four years, after tripling since the mid-1990s.

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The report also shows detailed waste consumption trends over time for each EfW plant in the Netherlands (see table).

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Policy Insight

The British public strongly supports greater use of waste and bioenergy, according to results from a survey by pollster Yougov for the Energy Technologies Institute (ETI). The survey of 5,300 adults found 74% supported producing bioenergy from biomass and 81% supported producing energy from waste. Corresponding levels of opposition were just 3% and 1.4% respectively. Support for bioenergy from waste was higher than for any other of seven renewable energy technologies tested.

UK-based Consultancy Eunomia predicted a "renaissance" in waste gasification, pyrolysis and other advanced conversion technologies in the UK. Investors and developers are seeking alternatives to wind and solar projects, driven by the early closure of the UK’s Renewable Obligation (RO), "drastic cuts" in the Feed-in Tariff (FiT) and their exclusion from the new Contract for Difference (CfD) support mechanism. However, support for ACT remains available through the CfD, which is due to hold an auction round early next year. The report also states high profile failures by facility developer Air Products and technology firm Energos has "undermined" the sector.

Claus Sauter, founder and chairman of German biofuel producer Verbio and vice president of the German Biofuels Industry Association, warned that "inconsistency" of EU and German biofuels policy was encouraging imports of tropical palm oil, in turn damaging the environment and sidelining domestic products. "Burning, human rights violations and threats to whole species in the tropical rainforests are not an acceptable price for a vegetable oil," he said.

Experts said in two reports that cities could lead European decarbonisation efforts by championing integrated solutions for heating and cooling. District heating schemes, which are often fired on waste and biomass, were seen as key to such strategies. One of the reports, by Brussels-based thinktank the Breugel Institute, identified cities as the emerging "key arena" for EU decarbonisation.

Three trade associations hit out at the English Environment Agency over new rules on fire prevention. The three warned that new guidance could put their members "out of business or drastically reduce their capacities".

Germany’s roofing industry voiced anger over new rules requiring it to send polystyrene waste, which generally contains HBCD (hexabromocyclododecane), to specialist hazardous waste plants rather than regular EfW facilities. Prices at these specialists facilities have become unaffordable, they argued.

Market update

France-based multi-nationals Suez and Total agreed to boost French production of biofuel from waste cooking oil by a third. Suez will supply 20,000 tonnes of used oil per year from around France to be turned into biofuel at Total’s €200m La Mède biorefinery, which is due to start production next year. Currently, only about 45,000 tonnes of used cooking oil is collected, compared with 100,000 tonnes of fresh cooking oil consumed

Separately, Suez revealed plans to develop its network of waste recovery plants across Europe after buying a German plant. The company bought a hazardous waste recovery plant from Dow in Schkopau near Leipzig for an undisclosed fee. The plant will supply former owner Dow and other companies in the ValuePark with up to 120,000 tonnes of steam per year.

Germany-based utility MVV Energie revealed that its Plymouth EfW plant in the UK was critical to a large jump in profits this year. The company reported its adjusted EBITDA leapt 26% to €425m from €336m with the €250m Plymouth facility the "most important" factor according to a financial statement.

The number of British biogas plants producing biomethane has rocketed in the past three years, according to an end-of-year market report from the Anaerobic Digestion and Bioresources Association (ADBA). By early December there were 86 operational projects, double the number in 2015 and up from close to zero as recently as 2013, ADBA reported.

Denmark-based shipping business Norden secured itself a place as a "leading carrier of wood pellets" after signing a nine-year deal to move biomass from North America to Europe.The company’s deal with Canada’s largest wood pellet maker, Pinnacle Renewable Energy, will see it transport 3.5 million tonnes annually from 2018.

Finnish company UPM Biofuels became a member of the international Roundtable on Sustainable Biomaterials (RSB), a global standard and certification scheme for sustainable production of biomaterials and biofuels.

Dutch waste and biomass energy firm Twence partnered with energy supplier Ennatuurlijk deliver more sustainable heat to 20,000 additional households and businesses in the Dutch city of Enschede. Twence has been generating heat from waste in Enschede since 2011, supplying 5,500 households and 180 businesses. From 2018 the primary source will be biomass via a plant to be converted in 2017.

A biomass power plant in Terni, Umbria is now the subject of a complex police inquiry, with various parties connected with the facility accused of 32 offences.  The main focus is on alleged environmental infractions, including the levels of contaminants in the pulp waste feedstock, incorrect classification of hazardous wastes as non-hazardous, and emissions to air of carbon monoxide at illegal levels and "with criminal intention".

Staff employed by Interserve were locked out of the Glasgow Recycling and Renewable Energy Centre after the termination of Interserve’s contract on the scheme came into effect. Up to 150 staff are affected. Interserve said it would try to redeploy staff where possible but that some roles were at risk. Viridor insisted it had terminated the contract with Interserve "as a last resort, in the best interests of the project."

The city of Hamburg considered waste-fired options to replace capacity it will lose when a large coal-fired plant goes offline in about 2019. Parts of the city to the south of the river Elbe could supplied with heat from new build waste recovery or by using existing industrial waste heat source, while the existing Stellinger Moor incinerator is "currently under intensive consideration... to supply considerable amounts of energy to the heating network", in the north of the city.

London-listed business PowerHouse Energy revealed that a unit of its high-temperature waste gasification system would be delivered to a partner in the UK by the end of Q1 2017 for in-situ demonstration on a waste management site. The company has been testing its G3-UHt (ultra-high temperature) gasification system, which it calls PHE-G3, in Brisbane Australia.

Switzerland-based EfW business Satom announced plans to reform its management structure after an audit of its business. The company, which was founded four decades ago to run a waste incineration plant, now "has very little to do with what it was at birth" and will simplify its ownership. Its current 11 directors will be reduced to to just five with its two largest municipality owners reducing their number of directors from two to one. The company runs several EfW plants and is also involved in the production of biogas.

Facilities Update

Denmark’s DONG Energy completed an 18-month project to transform its formerly coal-fired Avedøre Power Station to fire on 1.2 million tonnes biomass. Unit one of the facility is now using wood pellets and straw instead of coal to provide electricity and district heating after the DKK740m (€100m) project was completed. DONG undertook the conversion with district heating business Vestegnens Kraftvarmeselskab (VEKS).

The assets of Mayo Renewable Power’s half finished biomass-fired plant would be stripped and sold before Christmas financial firm Grant Thornton said. The company was appointed liquidator of the facility when it ran out of money with debts of €125m. The €180m facility, in Killala, County Mayo, was due to have a capacity of 42MWe. It would also have produced heat to dry woodchips for supply to the Irish market.

A ground-breaking ceremony was held for an €87m industrial bio-CHP plant being developed by Akuo Energy (Néréa) using combustion and flue gas treatment equipment from Danish firm AET. The Cogéneration Biomasse de Novillars (CBN) plant is being built in Doubs in the Bourgogne-Franche-Comte region. It will have capacities of 20MWe and 23.5MWth, and supply 153GWh a year of electricity and 215,000 tonnes of steam to the Gemdoubs paper mill.

Architectural details and an artist’s impression were released for the EkoImpuls EfW plant in Warsaw, Poland. Construction is due to begin next year and the new facility is expected to go online in 2019. An existing plant, Poland’s oldest EfW facility, is being transformed to treat 305,000 tonnes of waste per year and to produce about 200,000MWh heat and 100,000MWh electricity annually.

The Nordic Investment bank signed a 15-year loan with Finland-based utility Lahti Energia to support construction of its biomass-fired heating plant Kymijärvi III. The facility will replace the 350MW coal-fired plant, Kymijärvi I. It had already secured a €75m loan from the European Investment Bank (EIB). The plant is planned to be built in two phases. The first with a capacity of 190MWth is expected to open in 2019.

The Dutch owners of Scandinavian Biopower decided to press ahead with plans for a black pellet manufacturing facility in Norway. Netherlands-based private equity investment firm Momentum Capital said the plant would have a capacity of  about 200,000 tonnes a year and begin operations between 2017 and 2018.

France-based Global Bioenergies got the green light to start operating its demonstration-level biomass-to-fuel plant in Leuna, Germany. TÜV, the main state certification agency in Germany, cleared the plant, which completed construction last month.  It has capacity to produce 100 tonnes a year of bio-isobutene. This can be used to make isooctane, ETBE and MTBE, compounds used in gasoline mixes.

Plans by UK-based Broad Energy emerged for an £80m (€94m) cogeneration plant fired on waste in the Buttington Quarry in Wales. A planning application is due soon after an outline of the project was showed to residents near the proposed site. The plant would process about 100,000 tonnes of non-recyclable waste annually to produce up to 9MWe. Additional heat could be supplied to heat buildings at a future eco-business park and the nearby Offa’s Dyke Business Park.

The European Investment Bank agreed to lend Lithuanian energy firm Lietuvos Enegija €190m to support the construction of a biomass-fuelled cogeneration plant in  Vilnius. The facility will consume both waste and biomass and have capacities of 88MWe and 227MWth.

Derby City Council gave planning consent to a biogas plant being developed by water company Severn Trent. The proposed plant would supply up to 55GWh of biomethane per year by processing food waste and is the second of a number of biogas facilities that Severn Trent has said it plans to develop across the region.

It will join the £13.5m (€16m) Coleshill biogas facility, which processes 48,500 tonnes of food waste, has capacity of 2.4MWe and was built by Agrivert.

Denmark-based Babcock & Wilcox Vølund was awarded a DKK279m (€37.5m) contract to design an EfW boiler for Shenzhen Energy Environmental Engineering in Guangdong Province, China. When complete, the plant will be the largest EfW facility in the world, fired on up to 5,600 tonnes of municipal waste a day, or up to 2 million tonnes per year. B&W Vølund will supply equipment, including its DynaGrate combustion system, hydraulics, burners and other boiler components for the 168MWe plant. It is the first time the DynaGrate technology has been deployed in China. The plant is scheduled to begin operation in mid-2019.

An Austrian biomass-fired plant that was destroyed by fire in March restarted operating after a complete rebuild costing €1m. The heating plant in Feldbacin owned by Energie Steiermark can supply 16,000MWh of heat per year through the combustion of around 24,000m3 of locally sourced woodchips.

Agrivert opened the UK’s largest biogas facility, and the fourth it has constructed, in Bridgend, South Wales. The facility will process around 48,000 tonnes of organic waste per year and has a capacity of 3MWe.

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