The Wood Pellet Association of Canada was a sponsor of the Canada Europe Energy Summit that was held at Canada House in London on Nov. 22. The Alberta government and the magazine Alberta Oil were listed as knowledge partners. WPAC's objective was to raise awareness amongst senior energy industry and government leaders of the benefits of using wood pellets as a coal replacement for power generation. Attendees showed a distressing lack of awareness about the many coal-to-biomass conversions that have taken place in the U.K., the rest of Europe, Asia, and Canada.
The purpose of this year's conference was supposed to be to examine the policies, technologies and energy mix that will diversify energy production, meet energy security needs and climate change commitments whilst stimulating economic growth. New Brunswick Premier Brian Gallant spoke at the conference, but did not mention renewable energy. Instead he focused on the importance of building the Energy East oil pipeline so that Alberta's oil could be exported through his province. Baroness Neville Rolfe, the U.K.'s minister of state for energy and intellectual property, emphasized the need for nuclear energy and carbon capture and storage. When asked about the possibility of additional coal-to-biomass conversions in the U.K., she appeared uninformed and answered incoherently. Much of the rest of the day's conversation was about keeping oil in the energy mix and the future of nuclear energy.
I participated in a panel discussion regarding diversifying Canada's energy exports and how to ensure a diverse energy mix in the U.K. and continental Europe and was the only speaker to promote bioenergy. Here is what I said:
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I represent the Wood Pellet Association of Canada. Our members produce wood pellets, which are used as a clean, renewable replacement for coal in power generation and as a cost-effective home heating fuel that provides substantially lower carbon emissions than coal or heating oil.
Wood pellets are biomass. Biomass is renewable and carbon neutral if sourced from sustainably managed forests. However, since some fossil fuel is used in the manufacturing and transporting of wood pellets, the overall GHG savings from biomass when compared to coal is normally 80 to 90 per cent. In Canada, we make wood pellets from sawmill and logging residues using what used to be wasted before our industry began.
We began exporting pellets from Canada to Europe in 1998, and to the U.K. 10 years later. In 2016, Canada is on pace to ship 1.8 million tonnes to the U.K. worth $300 million. Total U.K. wood pellet imports this year will be about 7.3 million tonnes with a total value of about $1.7 billion. Most of the rest will come from the United States.
The U.K. has its own pellet production, most of which is used for residential, commercial, and institutional heating. The U.K. government has a target of 12 per cent renewable heat by 2020. The country supports converting fossil heating systems to renewable alternatives, including biomass systems with its Renewable Heat Incentive support scheme.
From 2009 to 2014 Drax Power completed the world's largest coal to biomass conversion. Drax converted three of six – 600 MW power units to use wood pellets, spending about 700 million British pounds on the project. There are many other European generators that are producing power using wood pellets including Dong Energy, Engie, HOFOR, RWE, and others. Drax Power alone provides six to eight per cent of the U.K.'s electricity, about 70 per cent of which is produced from wood pellets. The project is saving about 12 million tonnes per year of GHG emissions. According to a study by Oxford Economics, Drax supports 14,000 jobs in the U.K. – direct, indirect, and induced. Drax's project has also revitalized port facilities at Hull, Immingham, Tyne and Liverpool.
There are two new substantial biomass power projects now under way in the U.K., including the conversion of the 420 MW Lynemouth Power Station and MGT Power – a new 300 MW combined heat and power project at the Port of Tyne.
There are also many coal power plants in Japan and Korea that are now using wood pellets. In Canada, Ontario Power Generation has completely converted its 200 MW Atikokan power plant to wood pellets.
Wood pellets are ideal for power generation. At power plants, pellets are handled much like coal. They are milled into powder, mixed with air, and blown into a boiler for combustion to heat hot water, produce steam, turn a turbine and generate electricity. The required modifications are relatively modest. They include installing covered storage to protect wood pellets from moisture and handling systems to transport from storage to the milling process, and modifying coal mills, burners, and ash handling. The rest of the power plant stays the same – the boilers, turbines, generators, cooling system and so forth. And there is no loss of energy efficiency. So, by converting to wood pellets, generators are able to use almost all of their existing infrastructure. Since the U.K. plans to phase out coal power generation by 2025, biomass power generation is a great way to repurpose existing power stations.
One of the benefits of power from wood pellets is that unlike wind and solar energy, it is dispatchable, in other words, available on demand. That means that wood pellet power has the flexibility to be used for base load and for peaking.
Although wood pellets are more expensive than coal, they provide substantial environmental benefits over coal. Besides being renewable and having 80 to 90 per cent lower carbon emissions, they are lower in NOx, SOx, Mercury, other heavy metals and ash.
In the U.K., renewable electricity is supported by the Contract for Difference (CFD) mechanism. Drax Power, Lynemouth Power, and MGT Power were all supported by early CFD contracts, but unfortunately additional biomass power conversions are not eligible to bid in the upcoming CFD auctions. A 2016 study by NERA Economic Consulting and Imperial College showed that when system integration costs are considered, biomass conversions are the lowest cost renewable electricity option and provide the best value for U.K. consumers. System integration costs include providing back up for intermittent sources like wind and solar, and balancing when those sources are not available, which is more than half the time. System integration costs can amount to as much as 13 per cent of the total cost of electricity. According to NERA and Imperial College, if developers of biomass power conversions were allowed to participate, it could save U.K. consumers as much as 2.2 billion pounds in system integration costs. This is a great opportunity for the U.K., which plans to phase out coal power generation by 2025. Drax has told us that they are willing convert a fourth boiler to biomass if allowed to participate in upcoming CFD auctions. For there to be a level playing field, full system costs must be considered and biomass should be entitled to the full 15 years of support that is currently available to other renewable technologies.
On Nov. 21, Canada's Environment Minister Catherine McKenna announced Canada's intention to completely phase out coal power by 2030 following Alberta's lead from November 2015. Alberta intends to replace one third of its coal power with renewables and two thirds by natural gas.
Alberta has 18 coal power stations, some of which are approaching end of life. However, there are five newer units that will not be fully depreciated by 2030. We see an opportunity to repurpose several of those power units to use wood pellets.
Although the Government of Alberta has not yet fully defined its phase-out plan for coal, on Nov. 3 of the year it released a report describing how its renewable energy support scheme will work. It will use an auction process that looks very similar to the U.K.'s CFD mechanism. It will be fuel-neutral. Alberta plans to hold its first auction in early 2017 for renewable energy projects to be in service by 2019. While we like the structure of Alberta's auction process, we observe that the first auction is to be capped at 400 MW, which is less than 10 per cent of Alberta's ultimate renewable energy target. This is not large enough to accommodate the biomass conversion of even a single power unit. So, the first auction seems to be targeted at wind and solar.
The schedule for future auctions will be updated as Alberta completes its plan to phase out coal. We are optimistic that there will be an opportunity for biomass conversions of the newer coal units. The province will have grid reliability concerns if the current dispatchable baseload provided by coal is not replaced.
Converting just a single power unit in Alberta would consume about 1.7 million tonnes of wood pellets per year. Between Alberta and neighbouring B.C., the forest industry creates ample raw material to produce those pellets. There is a lot of knowledge that has been gained here in the U.K. from Drax and other biomass power projects that could be transferred to Alberta, further strengthening the relationship between our two countries.
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Although I made my remarks passionately, delegates looked at me as though I was from Mars. Perhaps they thought I had come to the wrong conference. It was evident to me that we need to do much more to educate senior government and industry leaders – both in Canada and in the U.K. – about the benefits of biomass.