NEWS RELEASE                                                                                                                JUNE 2013

European Fossil Power Market Taking a Surprising Turn toward Coal and Wood

The U.S. coal and logging industries are booming thanks to exports to Europe. Alternatives to these two fuels are much more expensive in Europe. At the same time, the carbon credit price has fallen to insignificance. The result is a great incentive for European power plants to burn solid fuels. These trends are being analyzed in the McIlvaine Fossil & Nuclear Power Generation: World Analysis & Forecast. The impacts on industrial boilers are being tracked in Air Emitters. The impacts on the FGD, DeNO_x, precipitator, and fabric filter markets are also being analyzed in McIlvaine market reports.

Here are some of the surprising developments in Europe:

• The number of new coal-fired power plants in planning or construction in Europe is rising,
• The electricity production of existing coal-fired power plants is up substantially,
• A large number of dedicated biomass power plants are underway,
• Major investments are being made to convert coal-fired power plants to burn combinations of biomass and coal,
• Coal imports are soaring,
• Gas-fired power plant construction is down.

How did the region, most dedicated to reducing CO₂ emissions, do an about face? A major contributing factor is the cost of electricity. Solar and wind are expensive and do not generate as much power as had been anticipated, so Europe has to rely on other fuels. Germany is shutting down nuclear facilities and is planning on lignite (brown coal) to fill the gap. France is renovating three large coal-fired boilers and plans to operate them for another thirty years. The economics dictate fossil fuels because the penalties for CO₂ emissions have become negligible.

In 2007, the EU set a goal by 2020, of reducing Europe’s greenhouse-gas emissions to 20 percent below their 1990 level. It also set a goal of moving Europe to 20 percent renewable energy by 2020. To accomplish this, it set up a plan for carbon trading. Emitters have to pay for their CO₂ emissions. As they say about the best laid plans of mice and men, they often go astray. A drastic drop in industrial activity has sharply reduced the need for companies to buy emission rights, causing a gradual fall in the price of carbon allowances. On April 16, the European Parliament was on the verge of temporarily tightening the supply of allowances to boost the price of carbon and shore-up the market. But opposition by countries led by Poland defeated the measure. The result is the price of carbon plummeting to a historic low of $3.60.

A new supercritical coal-fired power plant generates 30 percent less CO₂ than an old subcritical power plant. With the relatively high price of coal, the cost per kW hr of coal-fired generation is lower with the more efficient new power plants. The result is a program to replace existing old power plants with new ones. Germany, in particular, has followed this course.

European power producers realize that the carbon credit situation could change with another decision regarding the carbon allowances, so they are looking for renewable solid fuels which do not generate net carbon increases. One of the results is an expanded focus on biomass. Forty-nine percent of renewable energy generated in the EU came from wood and wood waste in 2010. This percentage is now rising rather than falling.

European power generators are importing agricultural waste from Asia and wood pellets from the U.S. They are developing biomass farms to provide a continuing supply of biomass. The justification of burning biomass is that it is carbon neutral. When a tree grows, it absorbs CO₂. When it is logged and burned, it emits the CO₂ back to the atmosphere, so it is carbon neutral. Here is the math showing we need to increase biomass growth by 5 percent to offset all of manmade emissions.

Soil and biomass presently absorb 123 billion tons per year of carbon. If the absorption were increased to 129 billion tons per year, it would offset all of manmade emissions. This makes lots of sense in the short-term. But let’s look at the long-term. Soil and biomass presently hold 2,300 billion tons of carbon. Under the biomass burning strategy, this would increase by 0.2 percent per year. Sometime in the next fifty years we would have 2,600 billion tons in inventory. Inevitably, this resource will start emitting carbon at greater than 122 billion tons per year. Eventually, all the excess storage will result in excess emissions.

The initiative toward supercritical coal and biomass makes sense if one believes that solid fuels can be an interim solution while other renewables such as wind and solar are given time to develop to provide more economical power than they do now. For more information on Fossil & Nuclear Power Generation: World Analysis & Forecast

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