Prices for biomass energy rise

Biomass-powered heating plants that quickly became unaffordable for some municipalities could be warning flags for another pricing fiasco in the renewable energy industry.

Biomass takes organic material, primarily plant matter, and converts it through incineration at plants to energy for heating and electricity, and is considered a renewable energy source. It most often includes forest waste (dead trees or branches), woodchips and plants grown for that purpose like corn, sorghum and sugarcane.

The fuels are renewable, but they aren't always readily available. Heating plants are already feeling the upward trend in biomass prices as the sector develops, and experts say those prices will only continue to rise under legislation that favors biomass over other renewables.

Approximately 4,000 tons of woodchips are used every winter in the west Bohemian village of Hartmanice, which relies on a biomass-fueled heating plant, and the price the town pays for a ton of woodchips has increased to 600 Kč ($35) per ton from 400 Kč last year, according to mayor Jiří Jukl, who said his town has begun importing chips from as far as 100 kilometers away.

"It will soon become unbearable for Hartmanice residents to pay for it," he told The Prague Post.

Hartmanice is not the only town feeling the pinch. According to Jukl, he has been in contact with officials from the village of Rybniště, which pays even more per ton, he said. Jaroslav Končický, the mayor of Slavičín, a town in east Moravia, told The Prague Post that in the past year, woodchip prices for their village had gone up 15 percent.

At the root of these price hikes are government subsidies provided under the National Action Plan (NAP), meant to encourage development in the sector. The Czech Republic has committed to boosting renewable energy to 13 percent of its total energy portfolio by 2020.

Biomass falls into a number of categories based on its source; wood chips are included in the first and second categories. The price set by the Energy Regulation Authority in November 2009 for electricity produced by wood chip biomass actually increases for newer plants to between 3,530 Kč per megawatt hour (MWh) and 4,580 Kc/MWh for plants commissioned between January 2008 and December 2010. Those commissioned before 2008 were guaranteed prices between from 3,200 Kc/MWh and 3,900 Kc/MWh. Plants that existed before the price decision in 2009, and that switched to biomass from nonrenewable sources after the subsidies were set, can receive between 2,530 Kc/ MWh and 2,830 Kc/MWh.

Demand for the woodchips has grown drastically in the past three years as a result and shows no sign of slowing, according to Michał Wantulok, a spokesman for Dřevošrot, a.s., a company that processes woodchips for biomass plants. Wantulok estimated that just four years ago, his company exported approximately 70 percent of their woodchips and that, in the Czech Republic, it sold for around 675 Kč per ton. Today, almost 80 percent of what they produce is sold on the domestic market at 1,125 Kč per ton.

An amendment to the NAP, approved in draft form by the Cabinet Sept. 15 and to be voted on by the end of the year, would further boost the biomass sector by allowing biomass plants to provide higher quotas of energy for the grid than other renewable sources. According to estimates provided by law firm Norton Rose, biomass plants will produce 4,819 gigawatt hours of energy in 2015, compared with 1,930 this year, far outpacing any other renewable energy source.

Output that doubles in four years would push up prices significantly, according to experts, and won't just affect small wood-burning heating plants, but will affect food prices and availability, as agricultural land is needed to grow many types of biomass.

"Today, biomass energy is to a large extent derived from wooden waste. It is, however, expected that the amount of this source might not be sufficient soon," Pavel Kvíčala, a partner at Norton Rose who works with clients investing in renewable energy, told The Prague Post.

"The importance of other sources, including purpose-grown sources, is increasing," he said. "If the government answers the requests of the energy and agricultural sectors to increase subsidies for production of such crops, farmers will begin to use more of the arable land for this, which certainly would have a substantial impact on [food] prices."

The government's solution to the inevitable price hike is to contain prices by only subsidizing cogeneration plants that are powered by biomass under the NAP amendment.

"We want to make sure biomass is used efficiently," said Jiří Sochor, a spokesman for the Industry and Trade Ministry. "Current technology to generate electricity from biomass has an efficiency on average with the best technologies reaching just over 40 percent. Cogeneration plants normally reach efficiency levels of about 80 percent."

But the support for cogeneration plants also covers those that are powered by traditional fossil fuel sources. Under the legislation, cogeneration plants that co-fire fossil fuels with biomass are subsidized, while strictly biomass-powered plants that only produce electricity will receive no support.

"Support for biomass co-firing with coal or other fossil fuels will bring more problems than benefits," said Antonín Slejška, a member of the Green Party and the Czech Biomass Association board. "Quite often, this means using low-quality biomass." 

The potential limits wouldn't ease price pressures enough, according to Leoš Gál, president of the Czech Biofuels Technology Platform, who said the government's solution was only half-baked, and that he still expected a boom in biomass prices.

"There is no national strategy for a conceptual resource base that takes into consideration the efficiency of biomass energy transfer and future threats to it or defines priorities, potential replacement options, sociological, environmental and effect on landscapes; the complexity of the issues are beyond the control structure," Gál said.

The solution, according to Gál and Slejška, should not be rooted in any federal price control but in encouraging the local development of biomass materials - an idea that Jukl himself advanced as a solution to his town's predicament.

"We managed to reduce the amount of pollutants by 90 percent when we switched from coal to biomass," Jukl said. "The plan is to create our own biomass plantation and provide our own sources. ? Here, you need to receive a permit for timber felling, so the lawmakers will have to meet us halfway."

Cat Contiguglia can be reached at
ccontiguglia@praguepost.com