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Subsidy Cuts Eroding European Biopower, Analysis Finds

We hear a lot about how the economic crisis and subsidy cuts are affecting Europe’s solar and wind sectors — but what about the bioenergy sector? According to a new report from analysis firm Frost & Sullivan (F&S), a number of European countries are giving up on biopower installations as a means of meeting their 2020 renewable energy targets as reduced or shelved incentives make bioenergy plants an increasingly unsustainable proposition. As in other renewable energy markets, policy changes have added to the problem by creating uncertainty in the biopower sector.

Biomass and biogas also have problems with funding and suffer from public perception issues that wind and solar don’t have, said Ashay Abbhi, energy and environment research analyst at F&S and lead author of the report, Opportunities in the Biomass and Biogas Power Market in Europe. Feed-in tariffs (FiTs) for solar and wind have not been reduced as much as for biomass and biogas because solar and wind’s zero fuel costs have caught the public's imagination, he said. 

Bioenergy plants’ fuel requirements make them more capital-intensive, Abbhi continued, and there is a lack of trust in the technology. The report found that a number of ambitious biopower projects have been stalled due to difficulties in funding: banks are cautious about putting money into technologies which require more investment and projects that involve added expense for fuel procurement, Abbhi said.

F&S values the European biomass and biogas power market at €3.33 billion, with a compound annual growth rate (CAGR) of 2.5 percent predicted between 2012 and 2017. The installed capacity base will reach 42,322.1 MW by 2017 with a CAGR of 5.3 percent for the same period, the report said, as the market tries to stabilise after the economic crisis.

The UK will steam past market leader Germany (where growth will be “sluggish”) by 2017, said the report, while the Spanish market fades to nothing due to the disappearance of subsidies and new opportunities open up in Eastern Europe.

The upcoming market to watch, Abbhi said, is Poland, “one of the very few countries in Europe that has unambiguous policies when it comes to renewable energy”. Poland “has set FiTs, it is not going back on them, and it is still supporting biopower installations,” he said. As of 2012 Poland had a total installed biopower capacity of 2,662.9 MW, and F&S expects the nation’s capacity to reach 2,864.1 MW by 2017. But, cautioned Abbhi, this projected figure is based on approved projects currently in the pipeline, which may or may not go through. Also, he said, more coal-to-biomass conversions are expected in Poland for 2015, which currently has one converted plant.

Indeed, the good news comes in the form of coal-to-biomass plant conversions, especially in the UK where utilities RWE, E.ON and Drax are planning more conversions for 2014-15. F&S says these plant conversions will be the next big thing in the biopower market as greenfield installations become less economically feasible. Plant conversion is also a practical response to disappearing subsidies, said Abbhi. “This is something [the utilities] don’t have to do from scratch; they just have to tweak the technology a bit and change the feedstock,” he said, predicting that coal-to-biomass conversion could be “quite instrumental” for the UK in meeting its 2020 renewable energy targets.  

Regarding the upcoming closure of the converted Tilbury biomass power plant in the UK, Abbhi said that while plant owner RWE is hopeful that it will be granted the extension it has applied for, if the plant does close it could lead to problems for other coal-to-biomass conversion projects and could be viewed as a setback for the industry. “But we have to also consider that Tilbury was quite an old plant,” Abbhi said; it was at the end of its lifecycle anyway, “but there are newer plants that could be converted and go on for the remainder of their lives.” Rather than a setback for the sector, he said, Tilbury “could also be seen as an experiment, which was a success.”

Lead image: bioenergy via Shutterstock

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Tildy Bayar is a journalist focusing on the energy sector. She is a former Associate Editor on RenewableEnergyWorld.com and Renewable Energy World magazine.

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