April 8 (Bloomberg) -- RWE AG, Europe’s biggest emitter of greenhouse gases, plans to convert its 1,050-megawatt coal-power station in southeast England to run entirely on wood pellets.
The U.K. is encouraging utilities to burn biomass, such as wood pellets and other plant-matter, to help reach a European Union target of getting 15 percent of its energy from renewable sources. Britain changed subsidies known as Renewable Obligation Certificates in July 2010 to support biomass plants.
“There are great benefits in turning from coal to biomass from an environmental point of view,” Dan Meredith, a Swindon, England-based spokesman for RWE, said yesterday by telephone. Testing the ability to convert the coal-power station at Tilbury completely to biomass “allows us to put the investment in without committing to a new plant.”
Tilbury is one of nine U.K. power plants with a limited number of hours left to operate under EU laws to curb the release of gases linked to acid rain. The stations must close by 2016 or when the allotted hours are used.
RWE will operate the converted plant under the same European restrictions and may decide to re-license the power station if burning biomass proves profitable, Meredith said. That may allow the power station to operate outside the EU’s so-called Large Combustion Plant Directive.
“It’s very much dependent on the electricity market reform and what that’s telling us to do,” Meredith said.
British generators that mix biomass with coal are eligible for at least half a renewable certificate for every megawatt-hour they produce. These are tradable and were worth about 49.89 pounds a megawatt-hour in the last certificate auction on March 29. The U.K. is considering changing aid later this year and may create a new band of subsidy to accommodate conversions.
The U.K. introduced a carbon-dioxide tax on power emissions starting in 2013 and plans further changes to encourage investment in low-carbon power generation. RWE may also consider whether to close the Tilbury plant and build a natural-gas fed station, Meredith said.
The Tilbury station emitted 2.8 million metric tons of CO2 last year, EU emissions data compiled by Bloomberg show. 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.
In the five years through 2012, power stations get a portion of EU allowances for free. Tilbury receives an annual allocation of 1.5 million permits in those years. These can be sold in the market if unused.
The power station will continue to receive free EU permits through the end of 2012, said Isaac Valero-Ladron, a climate spokesman at the European Commission in Brussels.
“This is an inherent and important feature of cap-and-trade,” he said by e-mail. “If one would take away allowances once emissions are reduced, it would take away the incentive to invest.”
Ships carrying coal up the River Thames to dock at Tilbury will switch to transporting wood pellets after RWE converts the facilities at the power station to handle plant material, Meredith said. A “large proportion” of fuel for the plant will travel across the Atlantic from RWE’s wood-pellet plant in Waycross, Georgia, he said.
RWE will use Green Gold Label wood pellets, an independently certified standard to assure the fuel is sourced sustainably, Meredith said.
The conversion, which would make Tilbury the largest biomass plant in the U.K., will be completed by the end of the year, he said. RWE plans to halt the entire station until the end of November, data submitted to National Grid Plc show. The power station will be able to produce 750 megawatts by the end of the year, the data show.
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