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Support mechanisms for co-firing biomass in coal-fired power plants

World Coal,

Biomass is an ancient fuel that has been used for several thousands of years. Currently, more than 60% of biomass consumption is still used for traditional domestic cooking and heating. But biomass has been increasingly used for industrial heating, electricity generation and transport fuel production, especially in OECD countries. This is largely due to its perceived CO2-neutural merit compared to fossil fuels. The IEA expects that the bulk of growth in biomass demand to 2035 to come from the power sector and the transport sector. The power sector will surpass the industrial sector as the largest consumer of biomass.

Biomass in the power sector

Biomass can be used primarily in two ways to generate electricity. The first is to burn biomass in a power plant that is designed specifically to operate on 100% biomass feedstock. This type of power plant is generally small in capacity and may encounter severe ash fouling and slagging problems.

The second way is to co-fire biomass with coal in coal-fired power plants, where the output capacity is large and ash-related operational problems can be effectively mitigated. Moreover, co-firing is of lower capital cost relative to 100% biomass generation. The biomass co-firing rate is commonly 5 – 10% of total heat input, but higher rates and, in some cases., reverse co-firing, have been achieved in Europe. Biomass co-firing is regarded as the ‘”low-hanging-fruit” opportunity to reduce GHG emissions from existing coal-fired power plants, while the total electricity output, hence security of supply, is not compromised.

Since biomass is more expensive than coal on an energy content basis, government support is needed to ensure a feasible business case for utilities. A new report by Nigel Dong at the IEA Clean Coal Centre discusses the enabling and supporting mechanisms for coal/biomass co-firing in selected countries: the EU, the US, Australia and China. These countries represent various degrees of co-firing uptake and different policy settings for the overall bioenergy development. As such, the report provides not only a policy overview but also a collation of the measures adopted by each country to promote biomass co-firing in coal-fired power plants.

Co-firing biomass: the EU leads the way

The EU is the world’s leader in biomass/coal co-firing in terms of both technology development and installation capacities. There is considerable experience in Finland, Germany, the UK, Sweden, Denmark, Italy and the Netherlands. The EU’s leading position is underpinned by three broad categories of enabling and supporting measures:

  • The first includes a carbon tax and tax exemption for biomass fuels, which discourage the use of fossil fuels.
  • The second category is designed to provide for a feasible market for heat and power from biomass. The feed-in tariff and renewable energy obligation fall into this category, with the former being increasingly favoured by most European governments as it passes on the cost of support directly to end users.
  • The third category focuses on investment support and cost reduction of bioenergy projects.

These three categories of support measures combined enable the European governments to promote biomass/coal co-firing in a cost-effective manner.

Co-firing biomass: in second place, the US

With the second largest number of co-firing installations in the world, the US is projected to have strong growth in electricity generation from co-firing power plants.

Renewable portfolio standards and green pricing programmes are currently the most important state-level incentives for the development of biomass co-firing projects, though their applicability and the levels of support vary from state to state. One critical issue is that most incentives do not explicitly include biomass/coal co-firing as an eligible technology, which requires clarification by the regulator on a case-by-case basis. Moreover, some important tax benefits, such as the Production Tax Credit, Investment Tax Credit, the 1603 programme and Clean Renewable Energy Bonds, explicitly exclude biomass/coal co-firing as qualifying projects, largely because of concerns over the perceived increased use of coal for electricity generation. As such, the overall policy setting in the US is not favourable towards biomass/coal co-firing.

Co-firing biomass: Australia lags behind but is aiming to catch up

Compared to the EU and the US, Australia has only limited experience in co-firing biomass in coal-fired power plants. Nevertheless, both the government and the power sector are positive in promoting biomass co-firing. The Australian Government allows co-firing projects to receive large-scale generation certificates, an important financial incentive to utilities to adopt co-firing in their coal-fired power plants. The recently enacted carbon price is expected to strengthen the business case for biomass/coal co-firing. With rollout of the co-firing technology, biomass co-firing could make a considerable contribution to meeting Australia’s renewable energy targets by 2020.

Co-firing biomass: China has great potential but faces many challenges

Given China’s sheer size of coal-fired power plant fleet and abundant biomass resources, biomass co-firing has a large potential in this country. But China has negligible experience in co-firing at the moment, with only two plants reported to have adopted this technology. The largest barrier is that the current financial incentive, a price premium for biomass-generated electricity, excludes co-firing as eligible projects. Part of the reason is that the Chinese Government finds it difficult to verify the co-firing rates claimed by the utilities. Therefore, a transparent monitoring and verification methodology needs to be put in place by the government.

Nigel Dong is an energy strategy consultant at the IEA Clean Coal Centre. His full report is available from the IEA Clean Coal Centre Bookshop.

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