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In this article, Adam Westwood and Bruce Knight, from Douglas-Westwood Ltd and Innovation Management, present the conclusions of the recently published study “The World Biomass Report”. The report funded is a business study jointly sponsored by Douglas-Westwood Ltd and Innovation Management.

The commercial biomass market is a dynamic one that is forecast to show significant growth over the next decade as current environmental drivers are increasingly supported by fundamental commercial ones. The most significant change is likely to come from growth in energy prices, as oil shortages and growing demand increase the costs of conventional energy and improve the competitive position of biomass as a power source. With most of the world’s oil coming from politically unstable areas, security of energy supplies will also be a growing issue that benefits biomass.

Market Overview - Biomass Power

The market has been split into its three core sectors based on the conversion process used to extract energy: thermal, landfill gas and anaerobic digestion.

Figure 1: Biomass Plant Capital Expenditure 2000-2013 ($ million)

The thermal sector will attract the largest capital expenditure due to average plant sizes having greater capacity than the other two sectors. In addition, thermal plants will see average plant size grow considerably over the period. Landfill gas and anaerobic digestion are important markets, but small in comparison to thermal.

By virtue of their economic status, West Europe and North America are the most important regions for all biomass systems but it is Asia that has the most potential for both crop-based and livestock wood and agricultural materials.

Figure 2: Biomass – Annual Installed Capacity by Sector 2000-2013

A total of 12,172 MW is forecast for installation between 2004 and 2013 worldwide. Large thermal biomass plants represent the bulk of this capacity, with 9,868 MW being installed in the next ten years. Landfill gas is the second largest sector, with 1,887 MW of installations forecast. The anaerobic digestion market will grow, but it is a smaller sector than either large thermal or landfill, with only 417 MW of new capacity forecast over the next ten years.

Total annually installed capacity has grown each year since 2000 and is forecast to grow throughout the period. However the landfill gas sector will peak in 2006, from which point installation rates fall quickly. The strong large-thermal sector is responsible for the overall growth rate more than making up for the declining landfill market.

The biomass market attracted an annual expenditure of $863 million in 2000. This will rise to $1,276 million by the end of 2004, and to $2,145 million by the end of 2013. Over the next decade the authors forecast that some $18 billion of capital investment will be made.

Large-Scale Thermal

Figure 3: Large-Scale Thermal - Forecast Annual Installed Capacity

A total capacity of 9,868 MW is forecast to be brought online from large-scale thermal plants over the ten year period. Annual installed capacity will more than double; 568 MW is forecast for installation in 2004, which will grow to 1,432 MW per year by 2013. Although annual installed capacity was down in 2003 compared with the two previous years, continuing growth is now forecast up to the end of the period.

While Europe and North America will continue to develop, with 2.4 GW and 4.4 GW forecast for installation over the next ten years respectively, it is other regions where the most dramatic rates of growth will be found. Asia and Latin America will see the highest growth as these regions have held massive potential for a long period which is now beginning to be exploited. Small-scale thermal is already well established, and the move to large-scale developments is being encouraged.

Large-scale thermal development will attract a total Capex over the future ten year period of $13,908 million. Western Europe is the largest market with $5.6 billion of expenditure forecast. While North America is the second most valuable market with $3.4 billion of expenditure over the next ten years, it is Asia that is the most interesting region – the rapid growth here means the market is worth a substantial $2.1 billion between 2004 and 2013.

The Capex growth rate decreases towards the end of the period. This pattern is the most pronounced in the already well-developed markets of Western Europe and North America. This is indicative of reducing costs and greater efficiency and experience in designing and building thermal plants. By building larger plants, costs per MW are generally reduced.

Anaerobic Digestion

Although slightly erratic, the market trend for anaerobic digestion is clearly growing. The annually installed capacity peaks in 2011 with close to 60 MW being installed that year. The total installed capacity increases more than three-fold over the ten year period from 2004-2013, growing from 185 MW in 2004 to 575 MW in 2013.

Western Europe dominates with forecasts to install 203 MW in the future ten year period. The capacity added per year in Western Europe decreases after 2007, fluctuating between 15 and 25 MW of new installations per year. By 2013, however, the region will have four times the installed anaerobic digestion capacity of the next largest region, North America.

North America installs 68 MW of anaerobic capacity in the ten-year period. The annual capacity in North America is projected to increase each year, one of only two regions where it does so (the other being Eastern Europe).

Australasia had significant anaerobic digestion increases, installing 46 MW over the period, but this area is also the most erratic. The potential is large, but stronger market mechanisms and proven technologies are necessary to attract investment.

Although every region has growth forecast, some, such as Africa and the Middle East, will only make limited progress over the next ten years. Growth in other regions such as Asia and Australasia is ongoing, but is not as rapid as market-leader Western Europe, or North America – which develops well from a small base, becoming the second largest region by the end of the period.

A total spend of $1.6 billion is forecast for the anaerobic digestion sector between 2004 and 2013. Capex increases from $85 million in 2004 to a peak of $246 million in 2011. Western Europe will see the bulk of this expenditure, some 52%, with a market worth $846 million over the next ten years. North America and Eastern Europe are the next largest regions with 17% and 12% market share respectively.

Compared with the other sectors, Africa is forecast to have a significant level of expenditure. Total spending for 2004-2013 is $81 million – higher than that of the Middle East, Asia, and Latin America. Costs per MW here are several times greater than in other regions.

Landfill Gas

A total of 1,680 MW will be installed worldwide over the ten year period 2004-2013. From a strong position in 2000, when over 200 MW of capacity was installed, landfill gas installations slumped by half within two years to little over 100 MW in 2002. From 2003 through to 2006, growth picks up reaching a high of 272 MW of new installations per year, before decreasing through to 2012.

The reason for this pattern is largely the declining installation rates in the two largest markets, Europe and North America. These have 70% of future installations and therefore a big effect on global annually installed capacity levels. In North America, 160 MW of landfill gas capacity was installed in 2000.This falls to 110 MW in 2004, and slumps massively to just 10 MW in 2013. Although there is growth until 2006 in Western Europe, from this point on, the installation rate plateaus before decreasing from 2011.

Other regions such as Australasia and Latin America will experience stable installation rates. Although Africa and Asia show signs of long-term growth, no region is forecast year-on-year growth in the landfill gas sector.

North America is forecast to install 400 MW of new capacity between 2004 and 2013. Western Europe’s higher installation rate means that by the end of the period it is only narrowly behind North America in terms of total installed capacity. North America will experience a 31% increase in installed capacity over the next ten years, whereas Western Europe has a much higher 85% rise in prospect. Midway through the next decade, Western Europe will be the market leader with $1.2 billion of expenditure or 44% market share between 2004 and 2013. North America is the second largest market at $766 million forecasted; a 28% market share. The North America market slumps dramatically from 2005 and does not recover by the end of the period. This has a major impact on the global picture.

Asia is the fastest growing market, achieving more than ten-fold growth in ten years, albeit from a lower base level. From 2008, the region brings more capacity online each year than the larger North American market. Asia has the potential to spend $309 million; an 11% market share which is likely to increase over the next decade.

The large decrease in spending after 2000 has only recently been reversed. From the present until 2006, expenditure increases each year. However, from 2007 it begins to fall until to 2012. The last year of the period shows a slight increase. Overall, significantly more investment is forecast in the first half of the period than in the second. Capex over the 2004-2013 period is forecast at $2.7 billion.

Reference: The World Biomass Report, Douglas Westwood Ltd, 2004. www.dw-1.com

Approximately 1,568 trillion Btu of energy were consumed in the state of Arizona in 2000. The majority of that energy was provided by petroleum and coal, representing 32 percent and 28 percent of the total energy consumed, respectively. Energy supplied by nuclear power accounted for 20 percent, natural gas provided 13 percent, and hydroelectric power provided 6 percent of the total for the state. Biomass supplied 12.0 trillion Btu of energy, or slightly less than 1 percent of the total energy consumed in Arizona.¹

Most of Arizona’s renewable energy programs and projects are based on solar energy. Arizona currently has no projects that focus specifically on biomass technologies.² Arizona has a Municipal Energy Management Program (MEMP) that encourages and assists in the development of energy management programs that lower energy costs and increase energy efficiency for Arizona cities, towns, counties, and Indian tribes. MEMP considers a wide range of renewable energy sources, including biomass.³

The Mainstay Energy Rewards Program - Green Tag Purchase Program is the only financial incentive offered for biomass technology in Arizona. The program offers Mainstay Energy customers, who have installed renewable energy systems, the opportunity to sell the renewable energy credits associated with the installation. Biomass and biofuel electricity systems are compensated at a rate of 0.1 cent to 1 one dollar per kWH, depending on the energy production of the system and the length of the contract. Arizona also has participates in one a policy incentive program that supports biomass technologies. The Environmental Portfolio Standard (EPS) requires regulated utilities to provide certain percentages of their electricity from renewable energy sources, including biomass. In 2004, Arizona utilities are required to provide 0.8 percent of electricity from renewable sources. By 2012, Arizona utilities will be required to provide 1.1 percent of total electricity from renewable sources under EPS.⁴