finance
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iomass is used around the world to generate heat, steam and electricity. However, coal is preferred over biomass for energy production because it generates between 7,000 and 12,500 British thermal units (Btus) per pound while woody biomass produces between 5,300 and 6,400 Btus per pound. But coal prices are rising. Meanwhile, climate change initiatives around the world are calling for greenhouse gas (GHG) reductions. Demand for cleanburning biomass for heat and power generation is increasing. Government programs in the United States and Europe are funding projects to develop a more streamlined, far-reaching system of trade for biomass. Could biomass become a commodity that is bought and sold on a trading floor?
Increasing Demand Global coal markets are tightening and the United States is exporting more coal. The average price of exported coal in the second quarter of 2008 was $97.24 per short ton, its highest value in history and an increase of more than 50 percent year-over-year, according to the Energy Information Administration, a service of the U.S. DOE. Meanwhile, the European Union and its member states, which more than six years ago ratified the Kyoto Protocol to the United Nations Framework Convention on Climate Change, have committed to reducing their collective GHG emissions by at least 8 percent by 2012. The EU’s Biomass Action Plan includes a directive to promote renewable electricity generation by increasing production in member states from 14 percent in 1997 up to 21 percent by 2010. In the United States, 28 states have individually established renewable portfolio standards, specifying that electric utilities must generate a certain amount of electricity from renewable resources by specific dates, according to the Pew Center on Global Climate Change. This market environment has led electric utilities in the United States and around the world to use woody biomass from timber harvesting and sawmill operations, as well as waste wood destined for landfills, for power generation.
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For example in the United States, Xcel Energy plans to spend $55 million to $70 million to convert the last remaining coal-fired unit at its Bay Front Power Plant in Ashland, Wis., to a biomass gasification system. The plant has been burning waste wood to generate electricity since 1979 and currently uses just over 200,000 tons of waste wood each year. When the project is complete, the plant will use an additional 185,000 to 250,000 tons per year. In Europe, Prenergy Power Ltd. of Switzerland is building a $788 million wood-burning power station capable of generating 350 megawatts of electricity in deep-water Port Talbot on the western side of Wales. Approximately 3 million tons of wood chips will be imported by cargo ship for the plant annually. In addition, Drax Group Plc in the U.K. is planning to build three 300-megawatt biomass-fed plants at the deep water ports of Immingham and Kingston upon Hull; the third location is to be determined. During the past five years, global trade of woody biomass has almost doubled, especially trade for wood pellets for energy generation, according to Håkan Ekström of Wood Resources International LLC. Global trade of woody biomass was just over 11 million tons in 2007, up from 5.6 million tons in 2003, Ekström says, and a record of more than 3 million tons of wood pellets was traded globally in 2007. Most of the trade has been between European countries or exports from Canada to Europe. Germany exported 1.4 million tons of biomass to neighboring countries in 2007. Canada exported 1.3 million tons