Metso Oyj, a Finnish engineering company, plans to expand its biomass business in China and India as growing urban populations drive up energy demand, while European governments cut back support for clean power.

The growth of Asian cities adds to waste as well as energy consumption, offering opportunities to use that waste as biomass, Martin Ridderheim, vice president of Helsinki-based Metso’s power business, said by e-mail.

Power plants fueled by municipal waste, wood chips and straw can help utilities reduce consumption of coal to generate electricity. China, the world’s biggest coal user, has offered incentives to build clean-energy projects as it seeks to meet burgeoning power demand without adding to carbon emissions.

“If the current urbanization trend continues in China, nearly 1 billion people will live in Chinese urban centers by 2025,” Ridderheim said. In India, more than 590 million people may live in cities by 2030, or twice the population of the U.S. today, he said.

India, which also relies on coal for most of its electricity output, plans to add 29,800 megawatts of renewable generation capacity by 2017, of which 2,700 megawatts could come from bio-energy, according to the country’s Ministry of New and Renewable Energy.

India is one of the most “significant” markets for biomass power plants after China, Ridderheim said. Metso, which invests about 70 million euros ($89 million) a year in biomass research and development, is also interested in Indonesia, Thailand, Malaysia and Australia, he said.

M&A Potential

The company may seek to buy assets abroad to expand, according to Deputy Chief Executive Officer Pasi Laine. “We would look for global acquisitions, so if there are good opportunities in Asia of course they are of interest to us,” he said by phone.

As Metso adds operations overseas, its expansion in Europe is curtailed by increased policy uncertainty, according to the deputy CEO. The frequent revision of regulations by politicians is a “big hurdle” in many European countries, making it difficult to make investment decisions, he said.

“What we would like to see is that whatever the decisions are, they would stay long enough so the industry can start to invest,” Laine said.

Germany said last month it plans to introduce a cap on renewable-energy subsidies, meaning it would end payments to wind and biomass plants as installed capacity reaches national targets. Britain in July cut subsidies for new biomass plants and said it’s considering a cap on the amount of renewable generation provided by new biomass facilities.

Copyright 2012 Bloomberg

Lead image: Pile of wood pellets via Shutterstock