The future potential for biomass-based energy is huge. This was one of the key conclusions from a panel discussion at the Asia Future Energy Forum (AFEF) during SIEW 2012.
The track, which focused on "Markets and investment Perspectives in Asia", saw contributions from panellist experts Dr Geng Anli, President of Bioenergy Society of Singapore; Milo Sjardin, Bloomberg New Energy Finance; Per Dahlen, Founder & Managing Director, Aumbiz; Douglas Bradley, President of Canadian Bioenergy Association; and Carlo Hamelinck, Managing Consultant, Biofuels, Ecofys Investment BV.
One focus was on the rising demand for bio pellets due to the conversion of coal-fired plants in Europe and the US. Southeast Asia, particularly Malaysia and Indonesia, is considered to be strongly positioned to capitalise on this growth.
South Korea, Japan and China are leading investments in bio-energy with increased mandates in power generation. A further boost to the sector is expected from new entrants such as Thailand, Sri Lanka and the Philippines.
Singapore is expected to capitalise on its strength as a regional hub by accommodating bio refineries and utilising its trading infrastructure. However, a potential challenge for the industry seems to be the lack of financing and resources in the region to develop biomass projects.
Reduced investments in renewables in general over the last couple of years and a loss in share of biomass in renewable energy investments will prove challenging for the biomass vertical in the short term. Last year, around US$20 billion was invested in the bioenergy sector.
Of particular interest was the conversion of coal-fired plants in Europe into biofuel-fired plants. Recent investments in Europe have seen around the US$10 billion figure. Converting coal-fired plants in bio plants provides a cost benefit for bio-energy; typically, the cost of bio-energy varies from US$50-250/MWh, depending on the feedstock. But with coal plant conversion, the energy generation costs can come down to US$60-100/MWh.
Europe as the biggest and currently only market for bio pellets is expected to triple in market share over the next 10 years. There is significant potential for external pellet suppliers as Europe imports close to 60 percent of its pellet demand. There could be additional potential with China, Japan and South Korea looking to convert coal-fired plants in biofuel plants.
Bradley highlighted Canada as one of the growth regions for biomass as raw material. Canada has become the biggest bio pellet exporter in the world and its capacity has doubled over the last three years. The current Canadian biomass production is around 14.5 million tonnes per annum.
One other significant challenge that was highlighted is the financing of biomass projects. Bradley pointed to the launch of an equity-linked Asian fund that would invest in supply chain establishment, biomass densification, port facility creation and the establishment of a specialised shipping facility. These areas would be crucial to enable cost-beneficial long-distance trade of biomass raw materials. The Asia fund is looking for S$400 million and an Asian fund manager.
By :Karan Khinchi, INSEAD