Germany could rethink role of biomass plants – experts

As Germany’s prepares to revise its renewable energy law again, experts say the country should review the role of biomass – a carbon-neutral way of balancing fluctuating wind and solar electricity generation.

Germany’s previous renewable energy law change, which came into force last year, hit the biomass sector with lower subsidies and a 100MW annual expansion cap (see EDEM 6 November 2014).

This has brought biomass development close to a halt. The country’s installed capacity stood at 8.8GW in August, almost unchanged from late 2014, according to the Fraunhofer research institute. Last year, installed biomass capacity increased by 5%, compared with 10% in 2013.

“We estimate a growth of roughly 200MW installed capacity for 2015,” said Guido Ehrhardt, an expert at the German Biogas Association, about the near term prospects of biogas, a sub-sector of biomass. Almost all of this would come from plant extensions, with new plants only adding 8MW.

The state slashed the subsidies in 2014 as they were costly and there were fears the biomass boom would harm the environment and food production.

But since the last renewable energy law revision, the government has decided not to introduce a capacity market – where fossil-fuelled plants could make money from being on standby – which means other measures are needed to cope with a high share of volatile renewables in the future. Fostering biomass could be one example.

This is a sensitive topic in Germany because biomass is also used for food, said Deutsche Bank analyst Josef Auer. But it would be useful for the energy sector and the government might consider changing its policies, he added.

The economic affairs ministry is to decide in the next months how existing and new biomass plants could be subsidised in the future and made no immediate comment to ICIS.

The German energy agency dena, which helps the government form its energy policies, said it is still working on its position about the role of biomass in the future power market.

The ministry is likely to decide the future of biomass subsidies after 1 October. This is when a public consultation on financing new wind and solar plants through tenders closes. Biomass was out of the scope of this consultation, but the tender model could be re-used for the fuel if the government rethinks its role in the energy sector.

Consultancy PwC points out in a discussion paper that even though the government estimates biomass to be more expensive than wind or solar power, it has the advantage of being able to adjust to demand.

Outlook

If policy does not change, German biomass capacity is likely to decline in the longer term as more goes offline than comes into operation. The biogas decline is likely to start in 2021 as the more generous subsidies in the pre-2014 renewable energy law come to an end, said the biogas association.

“At the end of 2020, the first plants drop out of their 20-year support period,” said Ehrhardt. “Without further support the vast majority will be shut down.”

PwC experts envisage that in the future, biomass plants could run only at times when electricity supply from other sources is tight. This would limit the competition with food production.

The 2014 renewable energy law revision already promotes flexibility among new biogas plants, as they get subsidies for running just half the time, or around 4380 hours annually. The biogas association said this subsidy limit should be extended to existing plants.

It also wants any future tenders to be opened to existing biomass plants, so that they would not close down after the end of their 20-year feed-in-tariff periods. This would increase competition at tenders and lead to lower subsidy awards, Ehrhardt added.

According to PwC, the annual biomass expansion target would have to be increased to 150MW to ensure sufficient competition at tenders in case only new biomass plants were to participate.

The case against biomass

However, not all experts agree that the target should be increased. The climate-neutrality advantage of biomass is outweighed by its high cost compared to natural gas, said experts at a German consultancy who wished not to be named.

And the threat fertilisers pose to groundwater also puts limits to biomass usage, they said.

This could stop the government from reviewing the current biomass target, the experts added. laura.raus@icis.com