Under the new tender process, co-firing installations that achieve the same 15% biomass threshold are eligible to bid for support. This raises the prospect that coal stations not previously involved in the certificate scheme could be granted subsidies to co-fire biomass with coal for the full 15-year period stipulated by the Res Act, guaranteeing their lifetimes beyond the 2030s!
(It is possible for a co-firing installation that meets the 15% biomass threshold that has already received support under the certificate scheme to move over to the auction scheme, but for the existing installations the 15-year period of support under the new scheme is counted from the actual date of the first generation of electricity from biomass.)
Finland
In 2015 Finland generated 5.5TWh from co-fired biomass, the majority of this biomass was co-fired with peat, a dirtier fuel than hard coal or even lignite. Peat has a low heating value with high nitrogren and moisture content, and the burning, draining and degradation of peatland releases vast quantities of CO2.
Finland’s biomass plants are numerous but relatively small, with no plant generating more than 0.5TWh from co-fired biomass in 2015. They are mostly CHP units also providing local heat.
Biomass generation is supported by a feed-in tariff [5]. For wood fuel power plants this comprises the target price (€83.50/MWh) minus the three-month mean market price of electricity. The feed-in tariff payable to timber chip power plants is determined according to the three-month mean price of emission rights and the energy tax on peat. Finnish power plants identified as co-firing (using Sandbag’s definitions & 2015’s fuel mix data) have received approximately €140 million in subsidy support since 2011[6].
Finland plans to introduce a law next year to phase-out coal by 2030. This transition will be hindered if subsidies continue to support the co-firing of biomass with fossil fuels rather than incentivising alternatives to coal.
Currently, 70% of Finland’s coal or peat generation is in power plants co-fired with at least 10% biomass.
Denmark
In Denmark, 2.5TWh was generated from co-fired biomass in 2015, the vast majority of which took place in the Amager, Avedøre & Fyn power stations. All of these stations are split into units that burn 100% biomass and units that burn 100% coal, however, they remain classed as co-firing due to the likely cross subsidy the coal units receive from their biomass companions. These power stations emitted a combined 2.5MT of CO2 in 2015[7].
Electricity generation from biomass is supported in Denmark through a premium tariff system based on bonus payments. The operators usually receive a variable bonus, which is paid on top of the market price. Existing and new biomass installations are currently paid a price supplement of DKK 150/MWh, approximately €20/MWh[8], this is available to both co-firing and biomass-only installations. There is also an important indirect subsidy – the use of biomass is tax-free in Denmark.
The Czech Republic
Europe’s fourth-largest co-firer, the Czech Republic, generated 1.3TWh from co-fired biomass in 2015. This represents a 55% increase on 2008’s levels. The largest facility is CEZ group’s Hodonín power station (0.3TWh in 2015), after starting co-firing in 2008, CEZ group converted one of the units to burn pure biomass at the end of 2009, the other unit continues to burn lignite.
Hungary
Hungary generated 0.8TWh from co-fired biomass in 2015, the majority of which was burnt at RWE’s 950W Mátrai Erőmű lignite power plant which co-fires approximately 10% biomass. This makes it the largest supplier of ostensibly “renewable” energy in the country. The plant emitted 6.4MT of CO2 in 2015[9].
Rest of EU
Electricity generation from co-fired biomass has fallen sharply in the rest of the EU in recent years. Below we highlight the key drivers:
- The Netherlands – closure of Gelderland under the Energieakkoord and the reduction in biomass co-firing at Amer in 2014 following a fire.
- Belgium – closure of Centrale Ruien and the full conversion of Rodenhuize.
- The UK – changing subsidy regime, reducing co-firing subsidies dramatically but keeping them high for dedicated installations, including coal plant conversions.
- Sweden – reduction of biomass co-fired at Värtaverket and coal burn at Åbyverket falling below our 20% threshold.
Despite the recent declines we are likely to see a revival of co-firing in the rest of the EU, driven by growth in The Netherlands. RWE has announced this August that it plans to retrofit their Amer 9 and Eemshaven hard coal plants to co-fire up to 80% and 15% biomass respectively[10]. This is after the approval by the Dutch state of subsidies of up to €2.6 billion for the two plants which will be paid out over a period of 8 years.
Additionally – Uniper secured subsidies in the autumn 2016 SDE+ round to co-fire up to 15% biomass at its 1.1GW Maasvlakte 3 unit in Rotterdam. Engie was awarded just under €300m for co-firing at its Rotterdam coal plant in the spring 2016 SDE+ round[11].
*Update* – on the 10th of October the coalition agreement for the new Dutch government was presented. It plans to end biomass co-firing subsides by 2024. However, it is unclear as yet how this will impact the investment decisions for the coal plants mentioned above.
