Bioenergy Economy And Market Development: Burning harvested organic matter – biomass – provided most of mankind’s energy needs for millennia.
Using such fuels remains the primary energy source for many people in developing and emerging economies, but such “traditional use” of biomass is often unsustainable, with inefficient combustion leading to harmful emissions with serious health implications.
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Modern technologies can convert this organic matter to solid, liquid and gaseous forms that can more efficiently provide for energy needs and replace fossil fuels. A wide range of biomass feedstocks can be used as sources of bioenergy.
These include: wet organic wastes, such as sewage sludge, animal wastes and organic liquid effluents, and the organic fraction of municipal solid waste (MSW); residues and co-products from agro-industries and the timber industry; crops grown for energy.
Including food crops such as corn, wheat, sugar and vegetable oils produced from palm, rapeseed and other raw materials; and nonfood crops such as perennial ligno-cellulosic plants (e.g. grasses such as miscanthus and trees such as short-rotation willow and eucalyptus) and oil-bearing plants (such as jatropha and camelina).
Many processes are available to turn these feedstocks into a product that can be used for electricity, heat or transport. Figure 1 illustrates a number of the main pathways available for these applications.
The most common pathways to date have been: the production of heat and power from wood, agricultural residues and the biogenic fraction of wastes; maize and sugarcane to ethanol; and rapeseed, soybean and oil crops to biodiesel.
Each of these bioenergy pathways consists of several steps, which include biomass production, collection or harvesting, processing to improve the physical characteristics of the fuel, pre-treatment to alter chemical properties, and finally conversion of the biomass to useful energy.
The number of these steps may differ depending on the type, location and source of biomass, and the technology used to provide the relevant final energy use.
Bioenergy and sustainable development
The contribution of bioenergy to the achievement of low-carbon scenarios such as the IEA 2DS must be based on pathways which unequivocally provide significant reductions in life-cycle GHG emissions compared to the use of fossil fuels.
This roadmap concentrates on identifying opportunities to produce and use bioenergy sustainably, that is, in ways that avoid negative impacts on the environment, foster both food and energy security, and contribute to sustainable development goals for agriculture, rural development and climate.
- Like other renewable energy technologies, bioenergy can provide a number of environmental and social benefits. It can:
- Reduce GHG emissions (especially in sectors such as long-haul transport where other opportunities are limited).
- Improve energy security by enhancing diversity of energy supply and reducing exposure to fluctuating global energy markets and import dependency.
- Provide economic opportunities, including jobs and income for rural economies.
- Complement efforts to improve waste management and air and water quality.
- Contribute to the improvement of modern energy access for heating, cooking and electricity for the 2.7 billion people who lack it.
- Support investments in rural infrastructure and development that are essential for improving food security.
- Provide additional market incentives and opportunities for afforestation and reclamation of degraded lands.
Bioenergy interacts extensively with the agricultural, forestry and waste management sectors. The related environmental, economic, and social implications associated with the production and use of bioenergy have many implications that reach beyond the energy sector.
These create both benefits and potential risks for the environmental, social and economic pillars of sustainability. These benefits and potential risks relate particularly to the United Nations Sustainable Development Goals (SDGs).
An ongoing analysis being conducted as part of the Global Bioenergy Partnership (GBEP) activities notes that while biomass, bioenergy and biofuels are not explicitly mentioned in the SDGs, bioenergy has the potential to contribute to or have positive impacts on nearly all the SDGs.
The SDGs can drive the expanded use of bioenergy as part of a growing bioeconomy, while also providing safeguards against unsustainable bioenergy practices. This goes beyond SDG 7, which is primarily concerned with energy. For example, bioenergy can contribute to combatting climate change (SDG 13).
SDG 3 (Health) can be a driver for avoiding the health implications of air pollution due to inefficient traditional use of biomass, while encouraging the efficient use of biomass to replace polluting fossil fuels.
Bioenergy in the bioeconomy
Far more than any other type of renewable energy, bioenergy is strongly related to the whole system of land use and agricultural and forestry production that make up the global bioeconomy.
The “traditional bioeconomy” has largely been concerned with the production of food, feed for animals, forest products including construction materials and paper and pulp, and textiles, while also providing a substantial contribution to local energy needs through the provision of firewood.
There is now greater recognition of the potential for an expanded bioeconomy with the capacity to reduce dependence on fossil fuels and many other finite resources.
There is increased emphasis on recycling bio-based materials (within a “circular economy”) and the development of a wider range of high added-value products based on sustainably produced biomass feedstocks.
These products include speciality chemicals based on cellulose or lignin, building materials, wood-based textiles and many others – as well as modern and efficient production of energy.
New and existing products of the bioeconomy can provide energy and carbon savings compared to fossil-intensive products. For example, using wood as a construction material reduces the need for steel and concrete in buildings as well as sequestering carbon for an extended period.
While estimates of the actual energy and carbon benefits vary widely depending on assumptions about lifetimes and eventual disposal methods, these uses are generally considered to be highly carbon efficient as they replace materials that are produced by carbon intensive processes.
In theory, the growth of the bioeconomy could lead to increased competition between the use of biomass resource for food and feed, materials, chemicals, and energy. In practice, such competition is limited because the value of bioenergy products is much lower than those used for food, chemicals or materials.
However if policies and regulations introduced to stimulate a rapid phasing out of fossil resources cause unacceptable socioeconomic impacts, additional policy measures might be needed (for example to ensure that carbon pricing applies to all affected sectors). In most cases the use of a fraction of the biomass feedstock for energy complements the use for other products.
Bioenergy can improve the economics and carbon benefits of these primary bioproducts, helping to maintain existing industries and strengthening the overall economic case for new projects, as economies of scale help to bring down costs of new technologies.
Examples include the use of sawmill residues and co-products as fuel for heating or electricity generation, digestion of waste waters and organic effluents in agro-industrial processes, and integrated production of chemical products and bioenergy in biorefineries.
Conversely, subsidies for energy production alone, without recognising the carbon and other benefits that can be associated with the production of biomaterials, could produce market distortions and in some cases lead to increased GHG emissions
Bioenergy progress and development
To provide an understanding of the current market landscape for bioenergy, an overview of market developments across the heat, electricity and transport sectors over the 2010-16 period is provided.
This highlights key market trends since the production of the previous IEA technology roadmaps on bioenergy, and puts the longer-term scenarios in this roadmap into context.
Biomass and waste are already a significant global energy source, accounting for over 70% of all renewable energy production, and making a contribution to final energy consumption in 2015 that was roughly equivalent to that of coal.
The largest end use of biomass and waste remains the traditional use of biomass, which is generally considered an unsustainable application of these resources. The focus of this publication is modern bioenergy solutions; the term bioenergy is generally used to refer to these and exclude the traditional use of biomass.
Modern bioenergy consumption is largest in the heat sector, although bioenergy for electricity and transport biofuels is growing faster, mainly due to higher levels of policy support (Figure 2).
Transport biofuel markets
Global production of conventional biofuels reached 136.5 billion litres (L) (79 million tonnes of oil equivalent [Mtoe]) in 2016, accounting for around 4% by energy of world road transport fuel. Double digit global output growth pre-2010 has slowed due to economic and structural challenges, as well as policy uncertainty in key markets.
As a result, production increased at a slower average annual growth rate of 4% over 2010-16. The current market context indicates that global growth in conventional biofuels output is to slow further still over the next five years.
Transport biofuels play an important role in a limited number of markets. In 2016, just six countries had fuel ethanol production levels over 1 billion L, in a global market dominated by the United States and Brazil, who jointly represented around 85% of 101 billion L of global production (Figure 3).
Biodiesel production is more evenly distributed, with ten markets having production levels over 1 billion L, contributing to a total of just under 36 billion L of global production. Looking ahead, crude oil-importing Asian countries, driven by security of supply considerations, are poised to make a key contribution to conventional biofuels market growth.
Globally, the majority of biofuel production is policy driven, principally through mandates stipulating blending at low levels.
However, there are signs of more widespread application of technology-neutral frameworks that stipulate defined reductions in the life-cycle carbon intensity of transport fuels, for example as established in California and Germany, with such an approach also under development in Canada.
In addition, fiscal incentives play an important role in increasing biofuels’ competitiveness at the pump, and therefore consumption.
Mandates have proved to be effective in shielding biofuels from low oil prices. However, lower petroleum product prices cause market-specific challenges, such as a more difficult investment climate and limited opportunities for discretionary blending above mandated volumes.
In the European Union, 92% (by energy) of biofuels used in 2015 were compliant with mandatory sustainability criteria, and these accounted for the vast majority of transport sector renewable energy consumption. Nevertheless, ensuring sustainability remains a crucial consideration, particularly in growing markets where governance frameworks are yet to be established.
The IEA defines advanced biofuels as sustainable fuels produced from non-food crop feedstocks, which are capable of delivering significant life-cycle GHG emissions savings compared with fossil fuel alternatives, and which do not directly compete with food and feed crops for agricultural land or cause adverse sustainability impacts.
Currently, novel advanced biofuel production is at a low level and, even considering anticipated growth over the next five years, output is only expected to increase to around 1-2% of total biofuel production (1.5 to 3 billion L).
The most evident progress is being made in the production of cellulosic ethanol, with a number of commercial-scale plants constructed and working to scale up production. However, further development is required to reduce investment and production costs.
Several aviation biofuel production processes are already certified to industry standards, and with a growing number of commercial flights and fuel off-take agreements, biofuels are poised to play a central role in the aviation industry’s long-term decarbonisation plans.
However, regional supply chain development and actions to reduce cost premiums over conventional jet fuels are needed. Biofuel consumption remains limited in the marine transport sector due to high cost premiums over bunker fuel and the need to build supply chains. The lack of a supportive regulatory environment for biofuels is a barrier to their adoption in both aviation and marine transport.
Bioenergy electricity generation is based on a variety of biomass and waste fuels in solid, liquid and gaseous forms, with consumption commonly determined by available national resources.
For example, in China bioenergy capacity principally uses energy from waste (EfW) and agricultural residue (straw) fuels, while in the United States and Nordic countries forestry residues are more prominent.
In most markets, solid biomass and wastes are the main contributors, accounting for over 70% of bioenergy electricity capacity in member countries of the Organisation for Economic Cooperation and Development (OECD) on average in 2015.
Bioenergy supplied around 500 terawatt hours (TWh) of electricity in 2016, accounting for 2% of global electricity production. In the same year cumulative bioenergy electricity capacity reached 110 gigawatts (GW), increasing at an annual average growth rate of 6.5% since 2010.
Over 2010-16 annual capacity additions were steady in the range of 5-7 GW (Figure 4).
Looking ahead, Asia is expected to replace Europe as the largest market for bioenergy electricity deployment due to a combination of increasing energy demand, low-cost biomass waste and residue resources, and longterm targets in emerging economies such as China, India and Thailand.
However, bioenergy only plays a prominent role in the electricity generation portfolios of a limited number of countries.
In 2016, 90% of all capacity was located in just 26 countries. Current market trends indicate that bioenergy capacity is growing in these existing markets but not expanding strongly into a wider array of countries, in many cases despite biomass resource availability.
Establishing the use of biomass and waste fuels in new markets will be essential to meeting the needs of the IEA’s long-term climate scenarios.
Globally, bioenergy accounted for only 4% ofrenewable power capacity additions in 2016. A constraining factor to accelerated deployment in the electricity sector is anticipated to be its
relatively high electricity generation costs and limited scope for lowering these from mature technologies.
Cost competition from onshore wind and solar PV technologies has strengthened considerably since 2010, driven by reductions in investment and operating costs and an expansion into new markets with excellent resources. However, a range of bioenergy technologies and fuels can still deliver cost-competitive electricity generation in diverse markets.
Despite a lower share of capacity additions compared to variable renewable energy (VRE) technologies, bioenergy remains an important contributor to renewable electricity generation, contributing 8% of total global renewable electricity generation (including hydro) in 2016. This is because bioenergy plants generally have higher capacity factors than VRE technologies.
Within OECD countries, the average bioenergy capacity factor in 2015 was 50%,4 compared with 13% for solar PV and 26% for onshore wind.
Higher generation costs compared to VRE technologies need to be balanced against the dispatchable nature of some bioenergy electricity technologies and the potential for wider benefits associated with rural development, enhanced waste management and job creation across the fuel supply chain.
However, these benefits only help to stimulate bioenergy electricity deployment when monetised, for example through the receipt of gate fees for waste or where markets for flexible generation and electricity system services exist.
Most bioenergy electricity deployment is driven by policy support mechanisms, and a shift to directing policy support for renewable electricity towards competitive, cost-driven auctions is evident in many markets. Where auctions are used, how their design accounts for the flexible generation potential and the wider benefits provided by bioenergy will be crucial in shaping deployment opportunities.
Global wood pellets market development
Global wood pellet consumption for both industrial and heating purposes increased by 60% during 2010-16. Wood pellet production in 2016 reached 28.5 million tonnes (Figure 5), with the United States, the European Union and Canada key producers. In Canada, high levels of third-party certification are particularly evident.
The principal markets for industrial and heating wood pellets are found in the European Union, supplemented by industrial pellet demand in Japan and Korea and heating demand in North America.
Industrial wood pellet demand is still dominated by a relatively small number of large-capacity consumers, e.g. coal power stations converted to biomass, and therefore can undergo notable demand changes as a result of technical, economic or policy factors.
Conversely, fuel consumption in heating markets is influenced by weather conditions and biomass fuel costs relative to competing heating fuels and technologies.
The relatively high energy density of wood pellets allows for their long-distance shipment, especially as marine freight.
In 2015 over half of global wood pellet production was traded internationally. As a result, wood pellets are used in countries without sufficient national forestry resources to meet domestic demand, as shown by consumption of imported industrial pellets in Denmark, Japan, Korea and the United Kingdom.
When the production of biomass fuels occurs far from the point of use, certification schemes that track the origins of the fuel and supply chain can give confidence to end users regarding the sustainability and suitability of fuels.
Therefore, market access for suppliers is maximised by obtaining third-party certification from bodies such as the Forest Stewardship Council, Sustainable Forestry Initiative (both forestry), Sustainable Biomass Programme (fuel sustainability) and ENplus (fuel quality).
There is room to increase supply liquidity by the adoption of common certification criteria as well as standardisation of quality requirements and trade terms. Potential also exists for more widespread application of wood pellet futures contracts and trading platforms to improve price transparency in wood pellet markets.
The traditional use of biomass
The “traditional use of biomass” primarily refers to the inefficient use of local solid biomass resources by low-income households who do not have access to modern cooking and heating fuels or technologies. Such consumption principally occurs in emerging economies and developing economies.
Biomass resources commonly used in a traditional manner to provide energy for cooking, hot water and residential heating (in colder climates) include wood, animal dung and agricultural wastes and residues.
These resources are used in open fires or basic stoves at very low efficiency e.g. 5-15%, consequently leading to high particulate matter (PM) emissions and other air pollutants. Combined with poor ventilation, such pollutants result in household indoor air pollution, which is responsible for a range of severe health conditions and a leading cause of premature deaths.
Around 2.8 million premature deaths per year are caused by indoor air pollution, primarily due to the traditional use of biomass for cooking. Social impacts also arise since the labour-intensive collection of biomass, often undertaken by women and children, consequentially limits available time for other activities and education.
Demand for local biomass resources can also exceed sustainable supply and therefore result in environmental impacts, while associated black carbon and methane emissions are potent climate change pollutants.
It is difficult to quantify the traditional use of biomass precisely given the unregulated nature of its use and a lack of detailed and coordinated efforts necessary to more accurately gauge consumption levels.
However, current estimates indicate that over 2.5 billion people still rely on the traditional use of biomass as their principal source of energy, equating to 28 EJ of solid biomass resource and around 7% of global final energy demand.
In order to promote more sustainable use of solid biomass resources and reduce the associated health and social impacts from their traditional use, activities have been coordinated under the UN Sustainable Energy for All (SEforALL) initiative to ensure universal access to clean energy by 2030.
The transition away from traditional use of solid biomass to more modern and efficient heating and cooking solutions can be achieved through fossil fuels, such as liquefied petroleum gas (LPG), as well as renewable energy solutions.
More advanced biomass stoves (e.g. microgasifiers) and biogas systems are available to offer improved efficiency and lower pollutant emissions, reducing health impacts and biomass resource demand.
Reducing the traditional use of biomass remains a significant challenge, particularly considering the increasing population trends in many countries, e.g. sub-Saharan Africa and developing Asia, where such practices are prevalent.
Without a transition to a more sustainable and efficient use of biomass resources, consequential environmental, ecosystem and social impacts will be accentuated. As such, further international efforts to promote the uptake of modern heating and cooking solutions, which include but are not limited to bioenergy options, are imperative.
Modern bioenergy heat markets
The largest application of modern bioenergy is for the provision of heat. This equated to 12.9 EJ and accounted for 70%8 of all renewable energy use for heat in 2015 (Figure 3). The provision of heat for industrial processes was the largest end user (63%), followed by buildings (34%) and agriculture (3%).
However, growth has been slow: between 2010 and 2015 consumption of bioenergy in the heating sector increased at an annual average growth rate of around 1%. Biomass and waste fuels are well-placed to meet the temperature, pressure and quantity of heat and steam required by many industrial processes.
Bioenergy deployment is highest within industries that produce biomass wastes and residues as part of their operations, such as the pulp, paper and print industry (Figure 6).
Consumption is less evident in other industries, e.g. iron and steel, where biomass wastes and residues are not produced and fuel supply chains need to be mobilised; notably, however, the cement industry often uses wastes as a supplementary fuel.
Modern biomass boilers and stoves offer ease of use comparable to fossil fuel heating, as well as high efficiency and low air quality impacts where emissions control equipment is fitted. Combustion in well-designed plants is highly efficient, and, in larger-scale plants, emissions can be carefully controlled to meet stringent air quality standards.
At a smaller scale, meeting these standards is also possible but it is relatively more expensive; and, ensuring low particulate emissions requires high specifications for boilers and stoves as well as for the fuels that are used.
Biomass fuel costs also demonstrate a higher degree of stability compared to fossil heating fuels. However, biomass boilers generally have higher investment costs than natural gas and oil heating systems.
Consequently, low and stable biomass fuel costs relative to these fuels are essential to ensure uptake, which is typically strongest in areas without a connection to the natural gas network. Within the buildings sector, biomass heating also faces non-economic barriers that can constrain deployment.
These include customer inertia, building suitability and a limited workforce to undertake design, installation and operation and maintenance (O&M) in some markets.
The most well-developed modern bioenergy heating markets are found in the European Union due to member state renewable energy targets for 2020 under the Renewable Energy Directive (RED), which have resulted in the introduction of policy support measures such as investment grants, soft loans and tax incentives.
Biomass heating is a core contributor in those EU member states that have already met their 2020 targets. However, at present there is little policy support for bioenergy heat technologies elsewhere, especially in emerging economies and developing countries.
District heating networks and co-generation are proven facilitators for the consumption of biomass and waste for heating.
Deployment in Nordic and Baltic countries has been driven by a combination of the need to reduce fossil fuel import dependence, excellent forestry resources and existing district heating networks suitable for conversion from using fossil fuels to biomass. In Nordic countries fossil fuel and carbon taxation is also a key growth factor.
Conclusions on current bioenergy markets
Bioenergy is by far the largest renewable contributor to the transport and heating sectors, and also provides an important share of renewable electricity generation.
However, market growth across all three sectors since 2010, and the latest IEA five year market forecasts, indicate that deployment is expected to be well below that required under the long-term 2DS by 2025, as signalled by the IEA ETP Tracking Clean Energy Progress analysis.
Across heat, electricity and transport, the combination of increasing energy demand, security of supply considerations and resource availability means that Asia is increasingly expected to play a leading role in bioenergy deployment in the coming years.
However, despite this and ongoing growth in other existing markets, bioenergy is not aggressively expanding into new countries or market sectors (e.g. new industry sectors, aviation), despite ample resources in many cases.
In cases where bioenergy is cost-effective, accelerated deployment can still be constrained by a lack of policy and regulatory frameworks that provide the long-term certainty needed to deliver project investment. In some cases, even when these frameworks are in place, policy uncertainty has nonetheless hampered investment.
In addition, the challenge of mobilising fuel supply chains from dispersed biomass resources also constrains uptake in certain markets.
Market prospects for bioenergy are influenced by developments in alternative fuels and technologies, for example, VRE electricity generation, light passenger electric vehicles and heat pumps. Cost and performance improvements among these, as well as current low fossil fuel prices, create greater competition for the use of bioenergy.
This is accentuated where technology-neutral support measures are employed (e.g. renewable electricity auctions and carbon intensity reduction-based transport policies).
Such frameworks provide a driver to focus deployment on the lowest-cost bioenergy solutions and also emphasise the need to ensure that the wider environmental, economic and social benefits of bioenergy deployment are considered in policy development and, where possible, are monetised.