Related News:
Biomass Feedstocks `Scary' to Handle For Financiers, Deutsche Bank Says
Deutsche Bank AG and renewable energy financiers say the supply and management of wood and other plant-based fuels is one of the biggest constraints to raising money for bioenergy power projects.
Power stations that burn plants to generate electricity and heat face potential feedstock price increases as well as storage, supply and transportation “challenges” that concern bankers, Paul Battelle, Deutsche Bank’s director of renewable energy financing, said today in Brussels.
“With some bioenergy projects you get 100 truck movements a day delivering wood,” said Battelle. “For a financier, this is a scary thought.”
Biomass may account for more than half of the increase in renewable energy use in the European Union as the region attempts to boost non-polluting sources of power to a fifth of the total by 2020, thge European Biomass Association says. Unless landowners and forestry companies grow and use wood more efficiently, the region may face a shortage of material for biomass, the Confederation of European Paper Industries said.
“Without biomass you can’t write a de-carbonized story,” said Paul Hodson, a policy officer at the European Commission who works on sustainable energy. “It’s just not possible.”
‘Immature’ Industry
The biomass feedstock industry is still “immature” and lacks large companies with financial resources to help reduce risk for banks, said John Bingham, a bioenergy analyst.
There is almost no tradition of long-term contracts for wood or agricultural fuels and pricing is “opaque,” said Bingham, research director at Hawkins Wright, a London-based forestry consultancy. In addition, there are almost no opportunities to protect against price fluctuations, known as hedging.
Prices for wood, still the main fuel used in biomass heating and power production, will rise as much as 25 percent in the coming years, Heinz Kopetz, president of the European biomass association, said in an interview. In some countries including Austria, the cost of pellets used in domestic furnaces is 50 percent cheaper than oil, he said.
Easy-to-acquire sources of wood have been exhausted and as demand rises, the production costs of processing wood fuel will increase as well, resulting in higher prices, Kopetz said.
Most of the planned bioenergy plants in the U.K. are located near coasts in anticipation of the need to import feedstock from Russia and North America. Security of supply will be “quite a challenge” as local demand in markets like Canada and the U.S. rises, reducing the volume available for export to the U.K. and Europe, Bingham said.
In Spain, bioenergy has “significant” potential, but development is held back by a lack of feedstock, said Emilio Luis Lopez Carmona, chief executive officer of Gestamp Biomass, which is investing in 100 megawatts of “mainly small” bioenergy power stations over the next four years.
“Theoretically there is a lot of biomass available, but there are not many big companies that can supply in the way financiers would like,” said Carmona.
To contact the reporter on this story: Jeremy van Loon in Brussels via jvanloon@bloomberg.net
Rate These Stories
Rate this Page