How to make the bioenergy sector work
By Robert Colman
The B.C. Bioenergy Network was recently formed by the B.C. government to encourage the development of this emerging industry. The Network held its first conference, in conjunction with the 22nd Annual PwC LLC Forest and Paper Industry conference in Vancouver in May. What was obvious from this first conference is that bioenergy growth will require creativity and a local focus on viable feedstocks. There are opportunities, but making them economically viable relatively quickly will be challenging.
By Robert Colman
Second generation intense
The challenge with biofuels has been the issue of time to market. When will the second generation biofuels so highly touted be ready for primetime? Will they always be five years away? Neil Bernard, CEO of CERES Bioventures tackled this question in his presentation.
“Biomass is only carbon neutral if it’s produced in a sustainable way,” notes Bernard. “Investment in this sector typically will flow to those projects where the abatement cost, the limiting factor or scarcity factor such as capital or land is the best equation.” Bernard points out that some projects that have shown promise in other ways haven’t respected this particular fundamental.
Bernard says that second generation biofuels are much more capital intensive than first generation fuels were. That, and the challenge of woody biomass supply are likely to keep costs high in the short term here in North America.
Keeping prices down, Bernard explains, will be driven by supply chain productivity. For instance, in Sweden, they’ve brought the cost down of getting feedstock out of the ground significantly through the use of different harvesting, bundling and logistics systems.
Petri Vaisanen, Global Business Line Manager for Biomass-to-Energy, Poyry Energy Oy, shared with the audience the European perspective on the rise of bioenergy. Vaisanen notes that climate change is really driving the interest in biomass in Europe. However, biomass-generated energy is still not competitive — “it still needs incentives,” explains Vaisanen. Combined heat and power, however, is already a competitive option.
Vaisanen sees no real breakthrough coming in the bioenergy sector over the next few years. “Maybe the most significant (advance) is the multi-fuel boiler, capable of combusting various types of biomasses and waste, and also having coal as a backup fuel,” he suggests.
Security of supply is a key point in the bioenergy growth process, as many speakers at both the PwC and Bioenergy Network conferences noted. As demand grows, competition for fibre will increase. Making the economics work, and creating a sustainable business model will be a challenge.
Larry Russo, from the Office of the Biomass Program, U.S. Department of Energy, was quick to express how rapidly the biomass landscape is going to change, and how the U.S. government is trying to adapt with it.
“In five years, we’re going to be looking at energy very differently than we did five years ago, we’re going to be looking at the environment very differently than we did five years ago, and we’re going to be looking at the financial community and how money is lended, used and put to work differently than we did a year ago,” he says.
Russo insisted that we need to think about doing more with less, working smarter, finding synergies — all platitudes, yes, but he explains himself. The point is that there’s no panacea to the energy crunch, so it’s going to require going from a few sources of fuel to a myriad of sources.
“All (energy sources) build on each other to give us the depth to weather the current paradigm,” says Russo. “That being said, I think the important thing is that we have to drive costs down. When we look at where we’re (likely to be) in 2012, we’re still not necessarily cost competitive with petroleum on a transportation fuel basis because we’re not sure what petroleum’s going to cost. If it’s $140 a barrel we’ll look darn good. If it’s at $40…well, maybe not.”
The problem that the U.S. government is having right now is that they’re putting money out there and have to be concerned with results. As Russo puts it, picking some good projects used to be good enough — back a few interesting projects and one will likely come out the big winner.
But in today’s market — and due to the nature of bioenergy — the big winners aren’t really there anymore. “We’re now looking at a regional level,” explains Russo. “What makes sense in what area — what makes sense from a conversion standpoint, what makes sense from a growing standpoint, and what makes sense in terms of getting it to the marketplace and social economic viability.”
This means that, because they can’t expect short-term wins, the DoE is thinking about what else the projects might have going for them. Can the project be supported by existing infrastructure? Can the entry cost be lowered?
“Or is it solving a problem?” Russo asks. “If it’s solving a problem, that might justify and pay for that project to some extent, or at least bring it to the forefront.”
Another question to consider is whether there may be another niche for a co-product that’s coming out of a process that might give it an advantage, while also being sustainable on a global and life cycle analysis basis.
Essentially, looking for these other opportunities or reasons is an attempt to reduce the risk profile of the projects. What’s interesting about this is that it recognizes that local solutions are sometimes better than large scale deployment.
“I don’t think economies of scale are necessarily going to rule the day,” says Russo. “I think we’re going to get into a more modular situation. Maybe synergy is the key word.”