Negawatts vs Biomass vs Green Certificates - the complexities of using biomass for electricity

Grist Magazine is doing an interesting exercise that allows us to highlight the complexity of using biomass for the production of electricity: it compares the cost of increasing efficiency in electricity production ("negawatts") versus the cost of using biomass and biofuels for electricity generation versus the (ever increasing) cost of using ordinary fossil fuels (coal, natural gas). It arrives at a logical hierarchy: fossil fuels remain the cheapest way to produce electricity, followed by negawatts, while biomass ranks last:

"energy-efficiency programs are wildly successful, oversubscribed -- [...], cost about 1.3 cents per kilowatt hour saved, which is a massive bargain. Says Energy Trust's executive director, Margie Harris: Energy efficiency is the most cost-effective resource -- half the cost of new generation ... "

Obviously, this situation is only true in the U.S. where the high and real cost of CO2 is not taken into account. In Europe, fossil fuels are far more expensive because their use is penalised (via the Kyoto Protocol and Europe's carbon-market). In Europe, major power companies are using biomass precisely because it is cheaper than fossil fuels. By doing so, they receive green certificates ("carbon credits"), that can be traded on the market. Since the price of carbon is quite high (€16.35 per ton), using biomass becomes attractive. So let's assume that we take the real costs of fossil fuels into account (destructive climate change, expressed in a price per ton of carbon), then the hierarchy changes: negawatts first, biomass second, fossil fuels third.

But there is a massive flaw in Europe's green certificate system, which was revealed recently. (1) On the one hand, power companies do invest in green technologies and get carbon credits for it, but they pass on the cost to the consumer. So in the end, the power company makes the profit. (2) Moreover, governments issued too many allowances, making the entire idea behind the scheme a farce - the whole point of any carbon trading scheme is that what is given out is less than what would have been released. (3) There is an even more damaging effect: even though too many certificates were issued, the price of carbon kept rising. This gave power companies who kept using polluting fossil fuels an incentive to tell their customers that electricity prices in general have risen, and they simply passed the costs on to the consumer - once again.
The result of this fiasco is that carbon reductions were not significant enough, polluters made massive profits, and consumers paid the bill.

Currently the system is being corrected. But problems remain - and they are tied to the negawatt-biomass-fossil fuel hierarchy we're trying to sketch here. Let us illustrate this with a real life example. The Franco-Belgian power company Electrabel, one of Europe's largest, recently decided to stop using coal and to switch entirely to biomass in its (416 MW) Les Awirs plant, in Wallonia (Belgium). The former coal-fired plant was built 50 years ago, and is inefficient compared to modern systems that make use of thermo-coupling (using the waste-heat generated by the plant either to heat the households in the vicinity, or to power secondary processes in the plant itself).

And now we see the real problem, highlighted by Greenpeace [Dutch]: Electrabel does not want to invest in negawatts (in this case increased efficiency through thermo-coupling), because that would require a major overhaul of the entire power plant's system. Instead, it sticks to biomass (wood pellets), which it even imports all the way from South and West Africa and from Latin America - thousands of kilometres away from Belgium... The only conclusion is that for this company the hierarchy clearly is: biomass first, fossil fuels second, negawatts last.

Now policy makers should take a lesson from this. The green certificates are a must and should be kept in the game, because they express the real costs of carbon. But in order to increase the appeal of negawatts, they should give incentives to those willing to invest in more efficient technologies. The Les Awirs plant is currently green, but only 35% efficient. If thermo-coupling were to be used, it would be up to 80% efficient. It is crucial to couple the use of biomass to efficiency efforts. Because otherwise, valuable biomass is wasted in old inefficient power plants, while it could be used to its full value (its carbon off-setting value) in far more efficient plants. Tying negawatts and biomass to each other is the only way to break the pure economic logic that currently prevails, which is one of wasting valuable resources.

Laurens Rademakers