Of the 23 projects awarded funding under the EU's New Entrants' Reserve (NER)300 first call, eight were bioenergy projects1, underscoring the relative importance of the sector for Europe’s renewable energy ambitions. Five of these projects are still underway, but three have stalled. An examination of the reasons behind this may allow us to see what lessons can be learned and what implications, if any, there are for future bioenergy projects in Europe.
The first NER300 bioenergy project to be mothballed was Pyroglot, a project by Sweden’s BillerudKorsnäs that investigated conditions for pyrolysis oil production from forestry residue. The company announced the project’s withdrawal from the NER300 programme in December 2013, citing concerns about the current commercial environment and short- to mid-term market development forecasts. BillerudKorsnäs CEO Per Lindberg said at the time that the company was unhappy about having to discontinue a project that it believed in, but that it would continue to monitor developments and be ready to act if and when conditions change.2
Similarly, the board of directors of Finland’s Vapo Oy decided in February 2014 to freeze project planning for the Ajos BTL biodiesel plant. This project had been jointly launched with the company Metsäliitto in 2007 but, after its partner withdrew in 2012, Vapo Oy was forced to go it alone. In the summer of 2012, the project received a commitment for support of EUR 88 million from the EU if the EUR 700-million project were realised.
According to Vapo’s Managing Director Tomi Yli-Kyyny, the project raised a great deal of international interest but it proved impossible to obtain a binding long-term partner agreement due to increased uncertainty in the operating environment and concern over renewable fuel legislation under preparation in the European Union. Another Finnish company, UPM, has also put its Stracel BTL biomass-to-liquid plant in France on hold, also citing proposed changes in the regulatory regime for the bioenergy sector. The company had been awarded EUR 170 million under the NER300 scheme in 2012 and the project was expected to become operational at the end of 2015. However, UPM Vice-President Marko Janhunen said that the company had mothballed the project until some clarity is received on the post-2020 regime for biofuels.3
From these three projects it seems clear that regulatory certainty for the post-2020 bioenergy sector is a ‘sine qua non’ for investor confidence. That said, the five other bioenergy projects awarded funding under NER300 are continuing to operate in the current environment. So, what is the secret of their success?
Germany’s VERBIO received EUR 22 million of NER300 funding for demonstration projects for the production of biomethane entirely from straw in December 2012. The project has now officially been launched and the biomethane is set to be fed-in at the VERBIO plant in Schwedt in the second half of 2014. The company underlined the important role that European Commission funding plays in the continuing development of biomethane in Germany and said that the decision to grant funding to the project underscored its intention to provide greater funding for sustainable types of biofuel in the future.4
Another NER300 bioenergy project to be successfully launched is the Crescentino biorefinery in Italy, being implemented by Beta Renewables. This integrated biofuels plant will use giant cane and wheat straw to produce ethanol, and will have an annual production capacity of 51 million litres per year. “Policy makers now need to send clear signals to encourage the necessary investments in advanced biofuels,” said Peder Holk Nielsen, CEO of project partner Novozymes.5
Sweden’s Goteborg Energi is implementing its GoBiGas (Gothenburg Biomass Gasification) plant to produce biogas via the gasification of biofuel and forestry waste, in two phases. Phase one of the plant was commissioned in March 2014, and the second phase is planned for completion in 2016. “The conditions for implementing GoBiGas 2 is, just as for any other plant for renewable energy production, a market demand for the product and an acceptable level on the forecasted market's ability to pay, so that the plant can generate profits that provide acceptable return on investment over time,” Göteborg Energi Chairman Kia Andreasson said, adding that this would require the provision of “clear instruments or other measures.”6
The remaining two bioenergy projects to receive NER300 funding are the CEG Plant in Goswinowice, Poland, which will demonstrate the production of second generation bioethanol from agricultural residues on a large commercial scale, and the Woodspirit refinery in the Netherlands. Information on the current status of the CEG plant is scant. However, a statement on the NER300 website suggests that the spectre of uncertainty may be casting its shadow on Woodspirit also. NER300 consultant Greg Arrowsmith notes that the regulatory outlook for the advanced biofuel sector means a review may be needed on whether the remaining projects awarded NER300 cash can come to fruition, or need to be withdrawn so their funding can be redistributed in the second round. NER300 estimates that from EUR 250 million to EUR 450 million of funding could go unclaimed, “if Woodspirit goes the way of Stracel and Ajos BTL”.
While some of the decisions to mothball or to forge ahead with bioenergy projects have been taken for purely strategic business reasons, or based on the level of investment already carried out, one thing that all NER300 bioenergy projects, both stalled and ongoing, have in common is that they all view policy support as crucial for their future success. In response to the energy security crisis that has developed in the meantime as a result of the conflict between Russia and Ukraine, the Commission has adopted an Energy Security Strategy7 in which it stipulates that Member States should consider favorable taxation for alternative fuels, in particular for renewable fuels. This and other policy signals may be sufficient to underpin investor confidence and keep Europe’s bioenergy and biofuel projects on track.
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