Tag: biomass energy

Supporting a circular economy in the forests

Every year in British Columbia, millions of tonnes of waste wood – known in the industry as slash – is burned by the side of the road.

Land managers are required by law to dispose of this waste wood – that includes leftover tree limbs and tops, and wood that is rotten, diseased and already fire damaged – to reduce the risks of wildfires and the spread of disease and pests.

The smoke from these fires is choking surrounding communities – sometimes “smoking out entire valleys,” air quality meteorologist from BC’s Environment Ministry Trina Orchard recently told iNFOnews.ca.

It also impacts the broader environment, releasing some 3 million tonnes of CO2 a year into the atmosphere, according to some early estimates.

Slash pile in British Columbia

Landfilling this waste material from logging operations isn’t an option as it would emit methane – a greenhouse gas that is about 25 times more potent than CO2. So you can see why it ends up being burned.

In its Modernizing Forest Policy in BC, the government has already identified its intention to phase out the burning of this waste wood left over after harvesting operations and is working with suppliers and other companies to encourage the use of this fibre.

This is a very positive move as this material must come out of the forests to reduce the fuel load that can help wildfires grow and spread to the point where they can’t be controlled, let alone be extinguished.

The wildfire risk is real and growing. Each year more forests and land are destroyed by wildfire, impacting communities, nature, wildlife and the environment.

In the past two decades, wildfires burned two and a half times more land in BC than in the previous 50-year period. According to very early estimates, emissions from last year’s wildfires in the province released around 150 million tonnes of CO2 – equivalent to around 30 million cars on the road for a year.

Alan Knight at the log yard for Lavington Pellet Mill in British Columbia

During my recent trip to British Columbia in Canada, First Nations, foresters, academics, scientists and government officials all talked about the burning piles of waste wood left over after logging operations.

Rather than burning it, it would be far better, they say, to use more of this potential resource as a feedstock for pellets that can be used to generate renewable energy, while supporting local jobs across the forestry sector and helping bolster the resilience of Canada’s forests against wildfire.

I like this approach because it brings pragmatism and common sense to the debate over Canada’s forests from the very people who know the most about the landscape around them.

Burning it at the roadside is a waste of a resource that could be put to much better use in generating renewable electricity, displacing fossil fuels, and it highlights the positive role the bioenergy industry can play in enhancing the forests and supporting communities.

Drax is already using some of this waste wood – which I saw in the log yard for our Lavington Pellet mill in British Columbia. This waste wood comprises around 20% of our feedstock. The remaining 80% comes from sawmill residues like sawdust, chips and shavings.

Waste wood for pellets at Lavington Pellet Mill log yard

It’s clear to me that using this waste material that has little other use or market value to make our pellets is an invaluable opportunity to deliver real benefits for communities, jobs and the environment while supporting a sustainable circular economy in the forestry sector.

Alabama Cluster Catchment Area Analysis

The area of timberland in the Alabama cluster catchment area has remained stable over the last 20 years, increasing slightly from 4.08 million ha to 4.16 million ha, an increase of 79 thousand hectares.  This area represents 79.6% of the total land area in 2020, up from 78.1% in 2020.  The total area of forestland and woodland was 86% of the catchment area in 2020, with farmland making up 13% and urban areas 1%.  This land base can be considered to be heavily forested and dominated by timberland.

Figure 1: Land Use Type – Alabama cluster

The timberland area is classified by growth rate potential, capable of achieving a minimum of 0.57 m3/ha/year.  More than 95% of the timberland area is in private ownership.  This proportion has remained stable since 2000 as shown in Figure 2.

Figure 2: Timberland Ownership Profile – Alabama cluster

The total standing volume, the amount of carbon stored in the forest area, has increased by 115 million m3 since 2000 an increase of 30%. Most of this increase has occurred since 2010, with 90 million m3 added to the inventory since this time, reflecting the maturing age class of the forest resource as it passes through the peak growth phase.  Almost all of this increase has been in the softwood pine forest area, with a combined increase of 86 million m3 since 2010.  Pine saw-timber and chip-n-saw both increased by 46% since 2010 and pine pulpwood by 25% over the same period. Suggesting that the average tree size is getting larger as the forest matures.

Figure 3: Standing Volume by Product Class – Alabama cluster

One measure of the sustainability of harvesting levels is to compare average annual growth against removals.  This comparison gives a growth drain ratio (GDR).  Where removals are equal to or lower than growth (a GDR of 1 or more) this is a measure of sustainability, where the ratio falls below 1, this can indicate that harvesting levels are not sustainable in the long-term.  Figure 4 shows that all pine product classes have a positive GDR since 2010.  In particular the pine pulpwood GDR ratio is in excess of 2 suggesting that there is a substantial surplus of this product category.  By contrast, the hardwood GDR for both saw-timber and pulpwood are both lower than 1 suggesting that harvesting levels for hardwood species should be reduced until growth can recover.

Figure 4: Growth Drain Ratio by Product Class – Alabama cluster

Figure 5 shows the maturing age class of the forest area, charting the change in annual surplus and deficit in each product class.  The trend shows that harvesting of pine saw-timber from 2000 to 2008 represented a deficit of growth compared to harvesting removals.  This indicates an immature forest resource with a low quantity of forest categorised as saw-timber, therefore harvesting volume in mature stands outweighed the growth in mid-rotation stands.  As the forest aged, and more standing timber grew into the saw-timber category, the surplus of annual growth compared to removals increased.  Saw-timber growth in 2020 was 3 million m3 higher than in 2000.  The surplus of pine pulpwood has remained positive and has increased substantially from 3 million m3 in 2000 to 6.5 million m3 in 2020 despite harvesting levels increasing slightly over this period.

Figure 5: Annual Surplus/Deficit of Growth and Removal by Product Class – Alabama Cluster

Biomass demand began in 2008 at a very small scale, representing just 0.5% of total pulpwood demand in the catchment area.  From around 2013 it began to increase and reached peak in 2015 with a total demand of 724,000 tons of pulpwood in that year, representing 8.1% of total pulpwood demand in the catchment area.  After that time, demand for pulpwood declined as pellet mills switched to mill residuals.  The latest data on pulpwood demand shows that the biomass sectors made up just 2.8% of total pulpwood demand in 2020 with just over 216,000 tonnes of total demand.  This demonstrates that the biomass and wood pellet sector is a very small component of the market in this region and unlikely to influence forest management decision making, as shown in Figure 6.

Figure 6: Pulpwood Demand by Market – Alabama Cluster

Pine pulpwood stumpage prices have declined significantly since a peak in 2013, falling from an annual high of $9.46 when demand was strongest to just $4.12 in 2020 as demand for pine pulpwood declined in 2020.  Pine saw-timber prices have seen a similar decline from a high point in the early 2000’s to a plateau from 2011 onwards.  Saw-timber stumpage more than halved in value over this period from $49 per ton to $22 per ton.  This can have a significant impact on forest management objectives and decision making.

Figure 7: Stumpage Price Change by Product Category – Alabama Cluster

Detailed below are the summary findings from Hood Consulting on the impact of biomass demand on key issues in the Alabama cluster catchment area.

Is there any evidence that bioenergy demand has caused the following:

Deforestation?

No. US Forest Service (USFS) data shows that total timberland area has held steady and averaged roughly 4,172,000 hectares in the Alabama Cluster catchment area since Alabama Pellets-Aliceville started up in late-2012. More importantly, planted pine timberland (the predominant source of roundwood utilized by the bioenergy industry for wood pellet production) has increased more than 75,000 hectares (+4.9%) in the catchment area since Alabama Pellets’ startup in 2012.

A change in management practices (rotation lengths, thinnings, conversion from hardwood to pine)?

Inconclusive. Changes in management practices have occurred in the catchment area over the last two decades. However, the evidence is inconclusive as to whether increased demand attributed to bioenergy has caused or is responsible for those changes.

Clearcuts and thinnings are the two major types of harvests that occur in this region, both of which are long-standing, widely used methods of harvesting timber. TimberMart-South (TMS) data shows that the prevalence of thinnings temporarily increased in the Alabama Cluster market (from 2007-2013) due to the weakening of pine sawtimber markets. Specifically, challenging market conditions saw pine sawtimber stumpages prices decline from an average of $47 per ton from 2000-2006 to just over $23 per ton in 2011, or a roughly 50% decrease from 2000-2006 average levels. This led many landowners to refrain from clearcutting (a type of harvest which typically removes large quantities of pine sawtimber), as they waited for pine sawtimber prices to improve. However, pine sawtimber stumpage prices never recovered and have held between $22 and $25 per ton since 2011. Ultimately, landowners returned to more ‘normal’ management practices by 2014, with thinnings falling back in line with pre-2007 trends.

The catchment area has also experienced some conversion. Specifically, from 2000-2020, planted pine timberland increased more than 460,000 hectares while natural hardwood and mixed pine-hardwood timberland decreased a combined 390,000 hectares. Note that the increase in planted pine timberland and decrease in natural hardwood/mixed pine-hardwood timberland over this period were both gradual and occurred simultaneously. This suggests a management trend in which natural timber stands are converted to plantation pine following final harvest. It’s also important to note that there is little evidence that links these changes to increased demand from bioenergy, as this conversion trend begun years prior to the startup of Alabama Pellets and continued nearly unchanged following the pellet mill’s startup.

Diversion from other markets?

No. Demand for softwood (pine) sawlogs increased an estimated 12% in the catchment area from 2012-2020. Also, there is no evidence that increased demand from bioenergy has caused a diversion from other softwood pulpwood markets (i.e. pulp/paper). Also, even though softwood pulpwood demand not attributed to bioenergy is down 14% since Alabama Pellets-Aliceville’s startup in 2012, there is no evidence that increased demand from bioenergy has caused this decrease. Rather, the decrease in demand from non-bioenergy sources is due to a combination of reduced product demand (and therefore reduced production) and increased utilization of sawmill residuals.

An unexpected or abnormal increase in wood prices?

No. The startup of Alabama Pellets-Aliceville added roughly 450,000 metric tons of softwood pulpwood demand to the catchment area from 2012-2016, and this increase in demand coincided with essentially no change in delivered pine pulpwood (PPW) price over this same period. Ultimately, the additional demand placed on the catchment area following the startup of Alabama Pellets-Aliceville was offset by a decrease in demand from other sources from 2012-2016, and, as a result, delivered PPW prices remained nearly unchanged.

However, the Aliceville facility was shut down for a majority of 2017 due to the catastrophic failure of a key piece of environmental equipment, and this was followed by Alabama Pellets’ strategic decision to transition to residual-consumption only beginning in 2018, which eliminated more than 360,000 metric tons of annual softwood pulpwood demand from 2016-2018. Over this same period, softwood pulpwood demand from other sources also decreased nearly 360,000 metric tons. So, with the elimination of roughly 720,000 metric tons of annual softwood pulpwood demand from all sources from 2016-2018, delivered PPW prices in the catchment area proceeded to decrease more than 6% over this period. Since 2018, total softwood pulpwood demand has increased roughly 4% in the catchment area (due to increases in demand from non-bioenergy sources), and this increase that has coincided with a simultaneous 4% increase in delivered PPW price.

Statistical analysis did identify a positive relationship between softwood biomass demand and delivered PPW price. However, the relationship between delivered PPW price and non-biomass-related softwood pulpwood demand was found to be stronger, which is not unexpected given that pine pulpwood demand not attributed to bioenergy has accounted for 94% of total pine pulpwood demand in the catchment area since 2012. Ultimately, the findings provide evidence that PPW price is influenced by demand from all sources – not just from bioenergy or from pulp/paper, but from both.

Furthermore, note that Alabama Pellets’ shift to residual-consumption only beginning in 2018 resulted in no increase in pine sawmill chip prices, as the price of pine sawmill chips in the Alabama Cluster catchment area rather decreased from 2018-2020, despite a more than 100,000-metric ton increase in pine sawmill chip consumption by the Aliceville mill over this period.

A reduction in growing stock timber?

No. From 2012 (the year Alabama Pellets started up) to 2020, total growing stock inventory increased an average of 2.6% per year (+22% total) in the Alabama Cluster catchment area. Specifically, inventories of pine sawtimber and pine chip-n-saw increased 41% and 40%, respectively, while pine pulpwood (PPW) inventory increased 25% over this same period.

A reduction in the sequestration rate of carbon?

No. US Forest Service (USFS) data shows the average annual growth rate of total growing stock timber in the Alabama Cluster catchment area increased from 6.0% in 2012 to 6.2% in 2020, suggesting that the sequestration rate of carbon also increased slightly over this period.

Note that the increase in overall growth rate (and therefore increase in the sequestration rate of carbon) can be linked to gains in pine timberland and associated changes with the catchment area forest. Specifically, growth rates decline as timber ages, so the influx of new pine timberland (due to the conversion of both hardwood forests and cropland) has resulted in just the opposite, with the average age of softwood (pine) growing stock inventory decreasing from an estimated 35.4 years of age in 2000 to 33.2 years of age in 2010 and to 32.2 years of age in 2020 (total growing stock inventory decreased from 41.9 to 41.0 and to 40.4 years of age over these periods).

An increase in harvesting above the sustainable yield capacity of the forest area?

No. Growth-to-removals (G:R) ratios, which compare annual timber growth to annual timber removals, provides a measure of market demand relative to supply as well as a gauge of market sustainability. In 2020, the latest available, the G:R ratio for pine pulpwood (PPW), the predominant timber product utilized by the bioenergy sector, equaled 3.26 (recall that a value greater than 1.0 indicates sustainable harvest levels).

Moreover, note that the PPW G:R ratio has increased in the catchment area since the Aliceville mill’s startup in 2012, despite the associated increases in pine pulpwood demand. In this catchment area, pine pulpwood demand from non-bioenergy sources decreased more than 860,000 metric tons from 2012 to 2020, and this decrease more than offset any increase in demand from bioenergy.

Impact of bioenergy demand on:

Timber growing stock inventory

Neutral. According to USFS data, inventories of pine pulpwood (PPW) increased 25% in the catchment area from 2012-2020, and this increase in PPW inventory can be linked to both increases in pine timberland and harvest levels below the sustainable yield capacity of the forest area. Specifically, pine timberland (both planted and natural combined) increased more than 185,000 hectares in the catchment area from 2012-2020. Over this same period, annual harvests of PPW were 65% below maximum sustainable levels.

Timber growth rates

Neutral. The average annual growth rate of total growing stock timber increased from 6.0% in 2012 to 6.2% in 2020 in the Alabama Cluster catchment area, despite pine pulpwood (PPW) growth rate decreasing from 15.1% to 12.5% over this period. However, this decrease in PPW growth rate was not due to increased demand attributed to bioenergy but rather to the aging of PPW within its product group and its natural movement along the pine growth rate curve. Specifically, USFS data indicates the average age of PPW inventory in the catchment area increased from an estimated 13.4 years of age in 2012 to 13.6 years of age in 2020.

Forest area

Neutral. In the Alabama Cluster catchment area, total forest (timberland) area remained nearly unchanged (decreasing only marginally) from 2012-2020. However, pine timberland – the predominant source of roundwood utilized by the bioenergy industry for wood pellet production – increased more than 185,000 hectares over this period, and this increase can be linked to several factors, including conversion from both hardwood and mixed pine-hardwood forests as well as conversion from cropland.

Specifically, the more than 185,000-hectare increase in pine timberland from 2012-2020 coincided with a roughly 197,000-hectare decrease in hardwood/mixed pine-hardwood timberland and a more than 8,000-hectare decrease in cropland over this period. Furthermore, statistical analysis confirmed these inverse relationships, identifying strong negative correlations between pine timberland area and both hardwood/mixed pine-hardwood timberland area and cropland in the catchment area from 2012-2020.

Wood prices

Negative/Neutral. Softwood pulpwood demand attributed to bioenergy increased from roughly 80,000 metric tons in 2012 (the year Alabama Pellets-Aliceville started up) to more than 655,000 metric tons in 2015 (the year biomass demand reached peak levels). However, this roughly 575,000-metric ton increase in softwood biomass demand coincided with essentially no change in delivered pine pulpwood (PPW) price – which averaged $26.40 per ton in 2012 and $26.39 per ton in 2015. Ultimately, the additional demand placed on this catchment area following the startup of Alabama Pellets-Aliceville was offset by a more than 680,000-metric ton decrease in demand from other sources over this same period, and, as a result, delivered PPW prices remained nearly unchanged. Also note that Alabama Pellets’ strategic shift to consume residuals only (a transition that begun in 2018 and had been completed by 2019) resulted in a nearly 480,000-metric ton decrease in softwood biomass demand in the catchment area from 2015 to 2020. Over this same period, softwood pulpwood demand from other sources decreased more than 180,000 metric tons. In total, softwood pulpwood demand from all sources decreased more than 660,000 metric tons from 2015 to 2020, and this decrease in demand resulted in delivered PPW prices decreasing 5% over this period.

Statistical analysis did identify a positive relationship between softwood biomass demand and delivered PPW price. However, the relationship between delivered PPW price and non-biomass-related softwood pulpwood demand was found to be stronger, which is not unexpected given that pine pulpwood demand not attributed to bioenergy has accounted for 94% of total pine pulpwood demand in the catchment area since 2012. Ultimately, the findings provide evidence that PPW price is influenced by demand from all sources – not just from bioenergy or from pulp/paper, but from both.

Markets for solid wood products

Positive. In the Alabama Cluster catchment area, demand for softwood sawlogs used to produce lumber and other solid wood products has increased an estimated 12% since 2012, and this increase in softwood lumber production has consequentially resulted in the increased production of sawmill residuals (i.e. chips, sawdust, and shavings) – by-products of the sawmilling process and materials utilized by Alabama Pellets to produce wood pellets.

Moreover, the increased availability of sawmill residuals and lower relative cost compared to roundwood (after chipping and other processing costs are considered) led Alabama Pellets to make a strategic shift to utilize residuals only for wood pellet production beginning in 2019. So, not only has Alabama Pellets benefited from the greater availability of this lower-cost sawmill by-product, but lumber producers have also benefited, as Alabama Pellets has provided an additional outlet for these producers and their by-products.

Read the full report: Alabama Cluster Catchment Area Analysis

This is part of a series of catchment area analyses around the forest biomass pellet plants supplying Drax Power Station with renewable fuel. Others in the series can be found here

What is sustainable forest management?

Sustainable forest management is frequently defined in terms of providing a balance of social, environmental, and economic benefits, not just for today but for the future too. It might be seen as the practice of maintaining forests to ensure they remain healthy, absorb more carbon than they release, and can continue to be enjoyed and used by future generations.

To achieve this, foresters apply science, knowledge, and standards that help ensure forests continue to play an important role in the wellbeing of people and the planet.

Managed forests, also called working forests, fulfil a variety of environmental, social, and economic functions. These range from forests managed to attract certain desired wildlife species, to forests grown to provide saw timber and reoccurring revenue for landowners.

How are forests sustainably managed?

How forests are managed depends on landowner goals – managing for recreation and wildlife, focusing on maximising production of wood products, or both. Each forest requires management tailored to its owner’s or manager’s objectives.

There are many ways to manage forests to keep them healthy – there is no ‘one size fits all’ – but keeping track of how they are doing can be tricky. One alternative for monitoring forests is to use satellite imagery.

One common sustainable forestry practice is thinning, which involves periodically removing smaller, unhealthy, or diseased trees to enable stronger ones to thrive. Thinning reduces competition between trees for resources like sunlight and water, and it can also help promote biodiversity by creating more space for other forest flora.

The wood removed from forests through thinning is sometimes not high-quality enough to be used in industries such as construction or furniture. However, the biomass industry can use it to make compressed wood pellets; a feedstock for renewable source electricity.

By providing a market for low-quality wood, pellet production encourages landowners to carry out thinnings. This practice improves the health of the forest, and helps support better growth, greater carbon storage, and creates more valuable woodland.

Fast facts

What are the environmental benefits of sustainably managed forests?

Through their ability to act as carbon sinks, forests are an important part of meeting global climate goals like the Paris Agreement and the UK’s own target of reaching net zero emissions by 2050.

When managed effectively through thinning or active harvesting, and replanting and regeneration, forests can often sequester – or absorb and store – more carbon than forests that are left untouched, increasing productivity and improving planting material.

Harvesting trees before they reach an age when growth slows or plateaus can help prevent fire damage, pests, and disease, so timing of final cutting is important. Though the vast majority of timber from such cutting will go to other markets (construction, furniture etc) and secure higher prices from those markets, being able to sell lower quality wood for biomass provides the landowner with some extra revenue.

Sustainably managed forests also help achieve other environmental goals, such as sustaining biodiversity, protecting sensitive sites and providing clean air and water. Managed forests also have substantial water absorption capacity preventing flooding by slowing the flow of sudden downpours and helping to prevent nearby rivers and streams from overfilling.

Wood from working forests also help tackle climate change in that high-value wood from harvested trees can be used to make timber for the construction or furniture sectors. These wood products lock up carbon for extended periods of time, and the wood can be used at end-of life to displace fossil fuels. Using wood also means materials such as concrete, bricks or steel are not used, and these materials have a large carbon footprint compared to wood.

What are the socioeconomic benefits of sustainably managed forests?

There are also social and economic benefits to managing forests. Sustainably managed working forests make vital contributions both to people and to the planet.

The commercial use of wood in industries like furniture and construction drives revenue for landowners. This encourages landowners to continue to replant forests and manage them in a sustainable way that continues to deliver returns.

Healthy forests can also improve living standards for local communities for jobs and helping to address unemployment in rural regions. Managed forests can also improve access for recreation. On a larger scale, sustainable forestry can offer a valuable export for regions and nations and foster trade between countries.

Go deeper 

Forests, net zero and the science behind biomass

Tackling climate change and spurring a global transition to net zero emissions will require collaboration between science and industry. New technologies and decarbonisation methods must be rooted in scientific research and testing.

Drax has almost a decade of experience in using biomass as a renewable source of power. Over that time, our understanding around the effectiveness of bioenergy, its role in improving forest health and ability to deliver negative emissions, has accelerated.

Research from governments and global organisations, such as the UN’s Intergovernmental Panel on Climate Change (IPCC) increasingly highlight sustainably sourced biomass and bioenergy’s role in achieving net zero on a wide scale.

The European Commission has also highlighted biomass’ potential to provide a solution that delivers both renewable energy and healthy, sustainably managed forests.  Frans Timmermans, the executive vice-president of the European Commission in charge of the European Green Deal has emphasised it’s importance in bringing economies to net zero, saying: “without biomass, we’re not going to make it. We need biomass in the mix, but the right biomass in the mix.”

The role of biomass in a sustainable future

Moving away from fossil fuels means building an electricity system that is primarily based on renewables. Supporting wind and solar, by providing electricity at times of low sunlight or wind levels, will require flexible sources of generation, such as biomass, as well as other technologies like increased energy storage.

In the UK, the Climate Change Committee’s (CCC) Sixth Carbon Budget report lays out its Balanced Net Zero Pathway. In this lead scenario, the CCC says that bioenergy can reduce fossil emissions across the whole economy by 2 million tonnes of CO2 or equivalent emissions (MtCO2e) per year by 2035, increasing to 2.5 MtCO2e in 2045.

Foresters in working forest, Mississippi

Foresters in working forest, Mississippi

Biomass is also expected to play a crucial role in supplying biofuels and hydrogen production for sectors of the global economy that will continue to use fuel rather than electricity, such as aviation, shipping and industrial processes. The CCC’s Balanced Net Zero Pathway suggest that enough low-carbon hydrogen and bioenergy will be needed to deliver 425 TWh of non-electric power in 2050 – compared to the 1,000 TWh of power fossil fuels currently provide to industries today.

However, bioenergy can only be considered to be good for the climate if the biomass used comes from sustainably managed sources. Good forest management practises ensure that forests remain sustainable sources of woody biomass and effective carbon sinks.

A report co-authored by IPCC experts examines the scientific literature around the climate effects (principally CO2 abatement) of sourcing biomass for bioenergy from forests managed according to sustainable forest management principles and practices.

The report highlights the dual impact managed forests contribute to climate change mitigation by providing material for forest products, including biomass that replace greenhouse gas (GHG)-intensive fossil fuels, and by storing carbon in forests and in long-lived forest products.

The role of biomass and bioenergy in decarbonising economies goes beyond just replacing fossil fuels. The addition of carbon capture and storage (CCS) to bioenergy to create bioenergy with carbon capture and storage (BECCS) enables renewable power generation while removing carbon from the atmosphere and carbon cycle permanently.

The negative emissions made possible by BECCS are now seen as a fundamental part of many scenarios to limit global warming to 1.5oC above pre-industrial levels.

BECCS and the path to net zero

The IPCC’s special report on limiting global warming to 1.5oC above pre-industrial levels, emphasises that even across a wide range of scenarios for energy systems, all share a substantial reliance on bioenergy – coupled with effective land-use that prevents it contributing to deforestation.

The second chapter of the report deals with pathways that can bring emissions down to zero by the mid-century. Bioenergy use is substantial in 1.5°C pathways with or without CCS due to its multiple roles in decarbonising both electricity generation and other industries that depend on fossil fuels.

However, it’s the negative emissions made possible by BECCS that make biomass  instrumental in multiple net zero scenarios. The IPCC report highlights BECCS alongside the associated afforestation and reforestation (AR), that comes with sustainable forest management, are key components in pathways that limit climate change to 1.5oC.

Graphic showing how BECCS removes carbon from the atmosphere. Click to view/download

There are two key factors that make BECCS and other forms of emissions removals so essential: The first is their ability to neutralise residual emissions from sources that are not reducing their emissions fast enough and those that are difficult or even impossible to fully decarbonise. Aviation and agriculture are two sectors vital to the global economy with hard-to-abate emissions. Negative emissions technologies can remove an equivalent amount of CO2 that these industries produce helping balance emissions and progressing economies towards net zero.

The second reason BECCS and other negative emissions technologies will be so important in the future is in the removal of historic CO2 emissions. What makes CO2 such an important GHG to reduce and remove is that it lasts much longer in the atmosphere than any other. To help reach the Paris Agreement’s goal of limiting temperature rises to below 1.5oC removing historic emissions from the atmosphere will be essential.

In the UK, the  CCC’s 2018 report ‘Biomass in a low-carbon economy’ also points to BECCS as both a crucial source of energy and emissions abatement.

It suggests that power generation from BECCS will increase from 3 TWh per year in 2035 to 45 TWh per year in 2050. It marks a sharp increase from the 19.5 TWh that biomass (without CCS) accounted for across 2020, according to Electric Insights data. It also suggests that BECCS could sequester 1.1 tonnes of CO2 for every tonne of biomass used, providing clear negative emissions.

However, the report makes clear that unlocking the potential of bioenergy and BECCS is only possible when biomass stocks are managed in a sustainable way that, as a minimum requirement, maintains the carbon stocks in plants and soils over time.

With increased attention paid to forest management and land use, there is a growing body of evidence that points to bioenergy as a win-win solution that can decarbonise power and economies, while supporting healthy forests that effectively sequester CO2.

How bioenergy ensures sustainable forests

Biomass used in electricity generation and other industries must come from sustainable sources to offer a renewable, climate beneficial [or low carbon] source of power.

UK legislation on biomass sourcing states that operators must maintain an adequate inventory of the trees in the area (including data on the growth of the trees and on the extraction of wood) to ensure that wood is extracted from the area at a rate that does not exceed its long-term capacity to produce wood. This is designed to ensure that areas where biomass is sourced from retain their productivity and ability to continue sequestering carbon.

Ensuring that forestland remains productive and protected from land-use changes, such as urban creep, where vegetated land is converted into urban, concreted spaces, depends on a healthy market for wood products. Industries such as construction and furniture offer higher prices for higher-quality wood. While low-quality, waste wood, as well as residues from forests and wood-industry by-products, can be bought and used to produce biomass pellets.

A report by Forest 2 Market examined the relationship between demand for wood and forests’ productivity and ability to sequester carbon in the US South, where Drax sources about two-thirds of its biomass.

The report found that increased demand for wood did not displace forests in the US South. Instead, it encouraged landowners to invest in productivity improvements that increased the amount of wood fibre and therefore carbon contained in the region’s forests.

A synthesis report, which examines a broad range of research papers,  published in Forest Ecology and Management in March of 2021, concluded from existing studies that claims of large-scale damage to biodiversity from woody biofuel in the South East US are not supported. The use of these forest residues as an energy source was also found to lead to net GHG greenhouse emissions savings compared to fossil fuels, according to Forest Research.

Importantly the research shows that climate risks are not exacerbated because of biomass sourcing; in fact, the opposite is true with annual wood growth in the US South increasing by 112% between 1953 and 2015.

Delivering a “win-win solution”

The European Commission’s JRC Science for Policy literature review and knowledge synthesis report ‘The use of woody biomass for energy production in the EU’ suggests  a win-win forest bioenergy pathway is possible, that can reduce greenhouse gas emissions in the short term, while at the same time not damaging, or even improving, the condition of forest ecosystems.

However, it also makes clear “lose-lose” situations is also a possible, in which forest ecosystems are damaged without providing carbon emission reductions in policy-relevant timeframes.

Win-win management practices must benefit climate change mitigation and have either a neutral or positive effect on biodiversity. A win-win future would see the afforestation of former arable land with diverse and naturally regenerated forests.

The report also warns of trade-offs between local biodiversity and mitigating carbon emissions, or vice versa. These must be carefully navigated to avoid creating a lose-lose scenario where biodiversity is damaged and natural forests are converted into plantations, while BECCS fails to deliver the necessary negative emissions.

In a future that will depend on science working in collaboration with industries to build a net zero future continued research is key to ensuring biomass can deliver the win-win solution of renewable electricity with negative emissions while supporting healthy forests.

Enviva Cottondale pellet plant catchment area analysis

The Enviva Cottondale pellet mill has a production capacity of 760,000 metric tonnes of wood pellets annually. Raw material used by the mill includes a combination of roundwood, chips, and secondary residuals (i.e., sawdust and shavings), with pine accounting for 80‐90% of total feedstock. In October 2018, Hurricane Michael passed through the centre of the Cottondale catchment area, causing significant damage to the forest resource with more than 500,000 hectares (ha) of forestland destroyed and an estimated loss of 42 million m3of timber (equivalent to around 4 times the UK annual production of roundwood).

This event has had an impact on the data trends for forest inventory, growth and harvesting removals – as harvesting levels were increased to salvage as much timber as possible before it became unusable due to decay. This can be clearly seen in many of the charts below. However, these forest areas have been restored and now continue to grow, allowing the catchment area to return to its pre-hurricane trends in the medium term.

Forest Area 

The catchment area around Enviva’s Cottondale pellet mill includes 4.3 million ha of land, based on the historical feedstock sourcing patterns of the mill. Timberland represents 68.7% (2.95 million ha) of the total land area in the Cottondale catchment area, this has increased slightly since 2000 from 67.8% and can be considered to have remained stable over this time period.  There are also around 300,000 ha of woodland (associated with agricultural land) and around 800,000 ha of cropland and pastureland.  Forestry is the dominant land use in this catchment area (Figure 1).

Figure 1: Land area by usage

Planted pine represents 33% of the timberland area, natural pine 20%, with 10% mixed stands and the remainder being hardwood forest of which 94% is naturally regenerated (Figure 2).  The breakdown of forest type and species composition has remained relatively stable and largely unchanged over the last 20 years, in contrast to other parts of the US South where some natural pine stands have been converted to planted pine. The pine and mixed forest areas are actively managed and produce the majority of the timber harvest in the catchment area. Despite the large area of hardwood forest, management and timber production is limited. Much of this area is classified as bottomland hardwood located alongside rivers, streams, and creeks and in streamside management zones (SMZs), which restricts active management. In addition, the proportion of this catchment area located in Florida contains a large area of swampland, which is largely composed of hardwoods and cannot be actively managed for timber production and is recognised as having important ecological value.

Figure 2: Breakdown of forest type

Volume and Growth

The overall trend of volume and growth in the Cottondale catchment area is of a maturing forest resource and an increasing accumulation of standing volume, particularly in the larger forest product classes (saw-timber and chip-n-saw). Figure 3 shows that total standing volume increased by 64 million m3 from 2000 to 2018, with the largest increases in the pine saw-timber and chip-n-saw categories. In 2018, the devastating impact of Hurricane Michael caused a substantial reduction in the standing volume across every product category with the total standing volume being reduced by 42 million m3. This event has had a significant impact on the forest resource and is a primary cause of recent data trends.

However, the overall long-term trend in the catchment area is of maturing forest and increasing inventory. This should continue in the long-term once the impact of the hurricane damage has been managed and replacement forest areas begin to mature.

Figure 3: Standing volume by product category

Pine pulpwood inventory increased steadily by around 8 million m3 from 2000 to 2013, reaching a peak of 49 million m3. This then declined slightly to 46 million m3 in 2018 due to the maturing age class of the forest and pulpwood forest growing into the larger size class of chip-n-saw and saw-timber forest (Figure 4), in addition to an increase in pulpwood demand as biomass markets became operational and ramped up production. Following the hurricane in 2018, the pine pulpwood inventory dropped by more than 10 million m3. 

Replanting and reforestation of damaged areas will ensure that future pine pulpwood production will increase again once these forests start to mature.

In the period from 2000 to 2018 pine sawtimber standing volume increased by 41.5 million m3 (78%) and chip-n-saw by 19.6 million m3 (73%), indicating a maturing age class and a growing forest resource. The 2018 hurricane caused a reduction in standing volume in both of these product categories of 11.6 and 8 million m3respectively (12% and 17% of the 2018 volume). However, the increasing trend is likely to continue once the forest area recovers.

Figure 4: Standing volume by product category

The growth drain ratio (GDR) is the comparison of average annual growth to removals (typically harvesting), where the growth exceeds removals the GDR will be in excess of 1 and this is considered sustainable, where removals exceed growth then the GDR will be less than 1 and this is not sustainable if maintained in the long-term – although in the short-term this can be a factor of large areas of mature forest with low growth rates and high rates of harvesting, short periods of high demand for a particular product or salvage harvesting after a natural disturbance. The GDR should be considered over a longer time period to ensure it reflects the long-term trend. In the period from 2003 to 2020 the combined GDR for pine products averaged 1.52 with a high of 1.84 and a low of 1.08 (Figure 5).

Figure 5: Growth to drain ratio by product category

The maturing forest resources can be clearly seen from the growth to removals data for each product category. Average tree sizes getting larger and more pulpwood class stands moving into the larger saw-timber and chip-n-saw categories. This trend can be seen by comparing the data values from 2003 and 2018 where saw-timber average annual growth increased by 90% (1.6 million m3), and removals by 41% (0.98 million m3).  Chip-n-saw growth increased by 73% (1.3 million m3) whilst removals increased by 160% (1.9 million m3). Pulpwood growth decreased by 7.5% (0.4 million m3) whilst removals increased by 63% (1.6 million m3).  Over this time period the total annual surplus of pine growth compared to removals averaged 3.7 million m3 per year (Figure 6).

Figure 6: Pine growth and removals by product category and year

Hardwood saw-timber and pulpwood removals declined by 20% and 40% respectively between 2000 and 2018, whilst growth increased by 23% for hardwood saw-timber and declined by 16% for hardwood pulpwood. The average annual hardwood surplus over this time period was 1.5 million m3 per year (Figure 7).

Figure 7: Hardwood growth and removals by product category and year

Despite a short-term imbalance in some product categories, the overall surplus of pine growth compared to removals has remained strong, with an average of 3.3 million m3 between 2000 and 2020, which includes the increased salvage harvesting in 2018 (Figure 8).

Figure 8: Cumulative annual surplus of growth compared to removals

Wood Prices

Stumpage price is the value paid to the forest owner for each category of product at the time of harvesting. The variation in prices in the Cottondale catchment area has been significant and shows some interesting trends. The higher value pine products (saw-timber and chip-n-saw) began with high stumpage values in 2000, as markets were strong for construction and furniture grade timber and supply limited at that stage due to the young age class and predominance of pulpwood stands at that time.  In 2008, following the global economic crisis and the crash in housing and construction markets, saw-timber prices declined substantially reaching a low of $23 per ton, a 47% decline from the 2000 price. This stumpage price has never recovered, despite an improvement in the economy and an increase in housing starts and demand for structural timber. The reason for the continued deflated saw-timber stumpage price is a substantial surplus of supply in this catchment area.  As the forest area has matured and more saw-timber grade stands are available, markets have been able to satisfy demand without an increase in price.

Pine pulpwood prices at Cottondale were lower than the US South-wide average in 2000 and remained relatively low until around 2013. A reduction in saw-timber production, and consequent reduction in mill residuals, due to the recession of 2008, led to a shortage of pulp mill feedstock and increased harvesting of pulpwood stands. This caused an increase in pine pulpwood stumpage values alongside an overall increase in demand as biomass and pellet markets began production around this time. The data shows a short-term spike in pine pulpwood stumpage prices in 2013-14, but this returned to a more normal trend as more saw-timber residues became available and pulpwood stumpage values have been around $10-11 per ton since 2015 (Figure 9).

Figure 9: Variation in stumpage value over time

Biomass demand 

Biomass demand in the Cottondale catchment area began in 2008 and has averaged around 800 thousand m3per year since that time with a high of just over 1 million m3 in 2013 to 2015 and a low of 200 thousand m3 in 2008. Other pulpwood markets have had an average annual demand of 3.97 million m3 between 2000 and 2020 with a high of 4.76 million m3 in 2018 and a low of 3.2 million m3 in 2009.  In 2020 the biomass market represented 16% of the total pulpwood demand in the Cottondale catchment area (Figure 10).

Figure 10: Total pulpwood demand

Forest Management

The average size of clear-cut harvesting sites from 2000 to 2020 has been 47 ha, ranging from 38 ha up to 56 ha. The average size of thinning sites has been 65 ha, ranging from 55 ha up to 76 ha. When isolating the period from 2000 to 2010 and 2011 to 2020, the averages and range remain very similar, suggesting that there has been no significant change in harvesting coupe size over this period.

Figure 11: Average size of harvesting sites

The impact of biomass and wood pellet demand on the key metrics in this catchment area are considered below. This is a summary of Hood Consulting’s view on the trends and impacts in the Cottondale catchment area.

Is there any evidence that bioenergy demand has caused the following:

Deforestation?

No. US Forest Service (USFS) data shows a 55,166-hectare (+1.9%) increase in the total area of timberland in the Enviva Cottondale catchment area since the Enviva Cottondale pellet mill commenced production in 2008. Furthermore, a strong positive relationship was identified between biomass demand and timberland area, suggesting that the increase in timberland area since 2008 can be linked, to a degree, to increased demand attributed to bioenergy.

A change in management practices (rotation lengths, thinnings, conversion from hardwood to pine)?

Inconclusive. Changes in management practices have occurred in the catchment area over the last two decades. However, the evidence is inconclusive as to whether increased demand attributed to bioenergy has caused or is responsible for these changes.

Clearcuts and thinnings are the two major types of harvests that occur in this region, both of which are long-standing, widely used methods of harvesting timber. TimberMart-South (TMS) data shows that thinnings accounted for 63% of total reported harvest area in the Cottondale market from 2005-2011 but only 39% of total harvest area reported from 2012-2020. Specifically, the decreased prevalence of thinning since 2012 can be linked to the strengthening of pine pulpwood markets and concurrent weakening of pine sawtimber markets beginning in the mid-2000s.

Prior to the bursting of the US housing bubble in 2006, timber management in this market had been driven to a large degree by pine sawtimber production. However, challenging market conditions saw pine sawtimber stumpages prices decline more than 40% from 2006-2011. At the same time, pine pulpwood markets started to strengthen, with pine pulpwood stumpage prices increasing more than 50% from 2006-2010. So, with sawtimber markets weakening and pulpwood markets strengthening, the data suggests that many landowners decided to alter their management approach (i.e. to take advantage of strong pulpwood markets) and focus on short pulpwood rotations that typically do not utilize thinnings.

Bioenergy has had an impact on this market by adding an average of roughly 680,000 metric tons of additional pine pulpwood demand to this catchment area annually since 2008. However, bioenergy has accounted for only 17% of total softwood pulpwood demand in this market since Enviva Cottondale’s startup. Ultimately, the shift in management approach that occurred in this market can be more closely linked to other factors, such as increased softwood pulpwood demand from non-bioenergy sources (i.e. pulp/paper) as well as the weakening of pine sawtimber markets.

Diversion from other markets?

No. Demand for softwood (pine) sawlogs increased an estimated 23% in the Cottondale catchment area from 2008-2020. Also, there is no evidence that increased demand from bioenergy has caused a diversion from other softwood pulpwood markets (i.e. pulp/paper), as softwood pulpwood demand not attributed to bioenergy has increased 25% since the Cottondale mill’s startup in 2008.

An unexpected or abnormal increase in wood prices?

Inconclusive. The startup of Enviva Cottondale added more than 900,000 metric tons of softwood pulpwood demand to the catchment area from 2008-2013, and this increase in demand coincided with a 28% increase in the delivered price of pine pulpwood (PPW) – the primary roundwood product consumed by the Enviva Cottondale mill. However, since 2013, delivered PPW prices have held flat, despite biomass-related softwood pulpwood demand falling to an average of roughly 635,000 tons per year since 2016, down more than 40% compared to 2013 peak levels. (Note the decrease in roundwood consumption was due to a higher utilization of secondary residuals). It’s also important to point out that the roughly 410,000-metric ton decrease in softwood biomass demand from 2013 to 2020 was offset by a roughly 455,000-metric ton increase in softwood pulpwood demand from other sources.

Statistical analysis did identify a positive relationship between softwood biomass demand and delivered PPW price. However, that relationship was found to be relatively weak. The relationship between delivered PPW price and softwood pulpwood demand from other sources was found to be much stronger, which was not unexpected to find given that softwood pulpwood demand not attributed to bioenergy has accounted for 83% of total softwood pulpwood demand in the catchment area since 2008.

Furthermore, there is some evidence linking the increase in pine sawmill chip prices to increased consumption of secondary pine residuals by Enviva Cottondale. Specifically, consumption of secondary pine residuals by Enviva Cottondale more than doubled from roughly 213,000 metric tons in 2012 to nearly 490,000 metric tons in 2016, and this increased consumption of pine residuals coincided with a nearly 20% increase in the price of pine sawmill chips. However, increased consumption of residuals by the bioenergy sector was only one of several contributing factors that can be linked to the increase in pine sawmill chip prices. Increased consumption of pine residuals by the pulp/paper industry also contributed to higher pine sawmill chip prices. In addition, there is a strong linkage between pine sawmill chip prices and softwood lumber production. Specifically, the increase in softwood lumber production that begun in the early-to-mid-2010s consequently resulted in the increased production of secondary residuals, and the increased availability of this lower-cost material led to greater competition and ultimately higher pine residual prices.

A reduction in growing stock timber?

No. From 2008 (the year Enviva Cottondale commenced production) up until Hurricane Michael struck in late-2018, total growing stock inventory increased an average of 1.8% per year (+19% total) in the Cottondale catchment area. Specifically, inventories of pine sawtimber and pine chip-n-saw increased 58% and 28%, respectively, while pine pulpwood (PPW) inventory decreased 4% over this same period.

However, note that the decrease in pine pulpwood inventory from 2008-2018 was not due to increased demand from bioenergy or increased harvesting above the sustainable yield capacity of the forest area, as annual growth of pine pulpwood exceeded annual removals every year throughout this period. Rather, this slight decrease in PPW inventory levels is more a reflection of the aging of the catchment area forest and the movement of stands classified as pulpwood to stands classified as chip-n-saw.

A reduction in the sequestration rate of carbon?

No. US Forest Service (USFS) data shows the average annual growth rate of total growing stock timber in the Cottondale catchment area decreased from 5.9% in 2008 to 5.2% in 2020, suggesting that the sequestration rate of carbon also declined slightly over this period. However, there is little evidence to suggest that increased demand attributed to bioenergy is responsible for this change.

The reduction in overall growth rate (and therefore reduction in the sequestration rate of carbon) is more a reflection of the aging of the catchment area forest. Specifically, growth rates decline as timber ages, and this is exactly what USFS data shows in the Cottondale catchment area, with the average age of growing stock timber increasing from less than 44 years of age in 2008 to nearly 46 years of age in 2020.

An increase in harvesting above the sustainable yield capacity of the forest area?

No. Growth-to-removals (G:R) ratios, which compare annual timber growth to annual timber removals, provides a measure of market demand relative to supply as well as a gauge of market sustainability. In 2020, the latest available, the G:R ratio for pine pulpwood (PPW), the predominant timber product utilized by the bioenergy sector, equaled 1.26 (recall that a value greater than 1.0 indicates sustainable harvest levels).

Note, however, that the PPW G:R ratio averaged 1.57 in the catchment area from 2013-2017 before falling to 1.20 in 2018 and averaging 1.27 since. This notable drop in 2018 was due to a nearly 35% increase in PPW removals (due to Hurricane Michael). It’s also important to note that while annual removals have moved back in line with pre-Michael levels since 2019, this lower PPW G:R ratio is likely reflective of the new norm (at least over the midterm). Hurricane Michael destroyed an estimated 22% of total pine pulpwood inventory in the Cottondale catchment area, and this loss in inventory will be reflected in reduced growth until the destroyed forests regenerate. However, in spite of this loss, adequate PPW inventory levels still remain and sustainable market conditions are expected to persist moving forward.

Timber growing stock inventory

Neutral. According to USFS data, inventories of pine pulpwood (PPW) decreased 25% in the catchment area from 2008-2020. However, this substantial decrease was due to Hurricane Michael, which destroyed nearly 520,000 hectares of catchment area timberland when it hit the Florida panhandle in late-2018. Prior to this event occurring, PPW inventory levels had held relatively steady, decreasing slightly but averaging 47.2 million m3 in the catchment area from 2008-2018. However, the destruction caused by Hurricane Michael resulted in the immediate loss of more than 10.3 million m3 of PPW inventory, or a 22% decrease compared to pre-hurricane levels.

Moreover, the slight decrease in PPW inventory levels that did occur from 2008-2018 was not due to increased demand from bioenergy. Typically, a reduction in inventory is linked to harvest levels above the sustainable yield capacity of the forest area, but in the Cottondale catchment area, annual growth of PPW exceeded annual removals every year throughout this period. Ultimately, the decrease in PPW inventory from 2008-2018 can be more closely linked to decreased pine sawtimber production beginning in the early to mid-2000s. Specifically, annual removals of pine sawtimber decreased 28% from 2003-2014, and the reduction in harvest levels over this period translated to a reduction in newly-re-established pine stands and ultimately the slight reduction in PPW inventory levels that occurred in the mid-to-late 2010s.

Timber growth rates

Neutral. Overall, timber growth rates declined slightly in the catchment area from 2008 (the year Enviva Cottondale commenced operations) through 2020. However, this decrease in timber growth rates was not due to increased demand attributed to bioenergy but rather to the aging of the catchment area forest. Specifically, USFS data shows the average age timber inventory in the Cottondale catchment area increased from an estimated 43.6 years of age in 2008 to 45.7 years of age in 2020.

Forest area

Positive. In the Enviva Cottondale catchment area, total forest area (i.e. timberland) increased more than 55,100 hectares (+1.9%) from 2008 through 2020, and this increase can be linked to several factors, including increases in softwood pulpwood demand (from both bioenergy and other sources) as well as conversion from farmland.

Specifically, the more than 55,100-hectare increase in catchment area timberland from 2008-2020 coincided with a 1.1-million metric ton increase in annual softwood pulpwood demand (roughly half of which was attributed to bioenergy). While statistical analysis identified moderately strong positive relationships between timberland area and both softwood biomass demand and non-bioenergy-related softwood pulpwood demand, a strong positive correlation was found between timberland and total softwood pulpwood demand – suggesting that the increases in timberland since 2008 can be attributed, in part, to the increase in total softwood pulpwood demand (from both bioenergy and other sources).

The more than 55,100-hectare increase timberland from 2008-2020 also coincided with a roughly 75,000-hectare decrease in farmland (i.e. cropland, woodland, and pastureland) over this period. Specifically, the catchment area experienced a roughly 31,800-hectare loss in cropland, 8,900-hectare loss in pastureland, and 34,300-hectare loss in woodland from 2008-2020. Furthermore, statistical analysis confirmed this inverse relationship, identifying a strong negative correlation between timberland and farmland in the Cottondale catchment area.

Wood prices

Negative / Positive. Total softwood pulpwood demand attributed to bioenergy in the Cottondale catchment area increased from zero tons in 2007 (the year prior to Enviva Cottondale’s startup) to over 1.0 million metric tons in 2013. Over this same period, the price of delivered pine pulpwood (PPW) – the predominant roundwood product utilized by Enviva Cottondale for wood pellet production – increased 42% (from $21.06 per ton in 2007 to $29.82 per ton in 2013).

However, the apparent link between increased softwood biomass demand and increased delivered PPW price is only loosely supported by statistical analysis, which identified a relatively weak positive relationship between these two variables. Furthermore, delivered PPW price has remained nearly unchanged in the catchment area since 2013, despite softwood biomass demand declining and averaging roughly 577,000 metric tons per year since 2016. (Note that the roughly 410,000-metric ton decrease in softwood biomass demand from 2013-2020 was offset by a roughly 455,000-metric ton increase in softwood pulpwood demand from other sources). Ultimately, the increase in delivered PPW prices in the catchment area can be linked to increased demand for softwood pulpwood from all sources, and roughly half of the 1.2-million metric ton increase in softwood pulpwood demand since 2007 can be attributed to bioenergy.

However, it’s also important to note that the increase in bioenergy-related wood demand has been a positive for forest landowners in the Enviva Cottondale catchment area. Not only has bioenergy provided an additional outlet for pulpwood in this market, but the increase in delivered PPW price resulting from increased softwood pulpwood demand from bioenergy has transferred through to landowners in the form of higher PPW stumpage prices. Specifically, over the six years prior to Enviva Cottondale’s startup, PPW stumpage price – the price paid to landowners – averaged roughly $7.40 per ton in the Cottondale catchment area. However, since 2010, PPW stumpage prices have averaged more than $11.15 per ton, representing a more than 50% increase compared to pre-mill startup levels.

Markets for solid wood products

Positive. In the Enviva Cottondale catchment area, demand for softwood sawlogs used to produce lumber and other solid wood products increased an estimated 23% from 2008-2020. This increase in softwood lumber production has consequentially resulted in an increase in sawmill residuals (i.e. chips, sawdust, and shavings) – by-products of the sawmilling process and materials utilized by Enviva Cottondale to produce wood pellets.

Specifically, softwood sawlog demand has increased more than 16% in the catchment area since 2014, and this increase in demand has coincided with a nearly 60% increase in pine residual purchases by Enviva Cottondale. (Note that pine residuals constituted 25% of total raw material purchases by Enviva Cottondale in 2014 but 41% of total raw material purchases in 2020). So, not only has Enviva Cottondale benefited from the greater availability of this sawmill by-product, but lumber producers have also benefited, as Enviva Cottondale has provided an additional outlet for these producers and their by-products.

Read the full report: Enviva Cottondale pellet plant catchment area analysis

This is part of a series of catchment area analyses around the forest biomass pellet plants supplying Drax Power Station with renewable fuel. Others in the series can be found here

Half year results for the six months ended 30 June 2021

Engineers walking in front of sustainable biomass wood pellet storage dome at Drax Power Station, June 2021

RNS Number: 8333G
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Six months ended 30 JuneH1 2021H1 2020
Key financial performance measures
Adjusted EBITDA (£ million)(1)(2)186179
Continuing operations165160
Discontinued operations – gas generation2119
Net debt (£ million)(3)1,029792
Adjusted basic EPS (pence)(1)14.610.8
Interim dividend (pence per share)7.56.8
Total financial performance measures from continuing operations
Operating profit / (loss) (£ million)84(57)
Profit / (loss) before tax (£ million)52(85)

Will Gardiner, CEO of Drax Group, said:

“We have had a great first half of the year, transforming Drax into the world’s leading sustainable biomass generation and supply company as well as the UK’s largest generator of renewable power.

“The business has performed well, and we have exciting growth opportunities to support the global transition to a low-carbon economy.

Drax Group CEO Will Gardiner in the control room at Drax Power Station

Drax Group CEO Will Gardiner in the control room at Drax Power Station

“Drax has reduced its generation emissions by over 90%, and we are very proud to be one of the lowest carbon intensity power generators in Europe – a huge transformation for a business which less than a decade ago operated the largest coal power station in Western Europe.

“In the past six months we have significantly advanced our plans for Bioenergy with Carbon Capture and Storage (BECCS) in the UK and globally. By 2030 Drax could be delivering millions of tonnes of negative emissions and leading the world in providing a critical technology needed to tackle the climate crisis.

“We are pleased to be announcing a 10% increase in our dividend, and we remain committed to creating long-term value for all our stakeholders.” 

Financial highlights

Pinnacle named ship

  • Adjusted EBITDA from continuing and discontinued operations up £7 million to £186 million (H1 2020: £179 million)
  • Acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) for cash consideration of C$385 million (£222 million) (enterprise value of C$796 million) and sale of gas generation assets for £186 million
  • Strong liquidity and balance sheet
    • £666 million of cash and committed facilities at 30 June 2021
    • Refinancing of Canadian facilities (July 2021) with lower cost ESG facility following Pinnacle acquisition
  •  Sustainable and growing dividend – expected full year dividend up 10% to 18.8 pence per share (2020: 17.1p/share)
    • Interim dividend of 7.5 pence per share (H1 2020: 6.8p/share) – 40% of full year expectation

Strategic highlights

Kentaro Hosomi, Chief Regional Officer EMEA, Mitsubishi Heavy Industries (MHI) at Drax Power Station, North Yorkshire

Kentaro Hosomi, Chief Regional Officer EMEA, Mitsubishi Heavy Industries (MHI) at Drax Power Station, North Yorkshire

  • Developing complementary biomass strategies for supply, negative emissions and renewable power
  • Creation of the world’s leading sustainable biomass generation and supply company
    • Supply – 17 operational plants and developments across three major fibre baskets with production capacity of 4.9Mt pa and $4.3 billion of long-term contracted sales to high-quality customers in Asia and Europe
    • Generation – 2.6GW of biomass generation – UK’s largest source of renewable power by output
  • >90% reduction in generation emissions since 2012
    • Sale of gas generation assets January 2021 and end of commercial coal March 2021
  • Development of BECCS
    • Planning application submitted for Drax Power Station and technology partner (MHI) selected
    • Participation in East Coast Cluster – phase 1 regional clusters and projects to be selected from late 2021
    • Partnerships with Bechtel and Phoenix BioPower evaluating international BECCS and biomass technologies
  • System support – option to develop Cruachan from 400MW to over 1GW – commenced planning approval process

 Outlook

  • Adjusted EBITDA, inclusive of Pinnacle from 13 April 2021, full year expectations unchanged

Operational review

Pellet Production – acquisition of Pinnacle, capacity expansion and biomass cost reduction

close-up of truck raising and lowering

  • Sustainable sourcing
    • Biomass produced using forestry residuals and material otherwise uneconomic to commercial forestry
    • Science-based sustainability policy fully compliant with current UK, EU law on sustainable sourcing aligned with UN guidelines for carbon accounting
    • All woody biomass verified and audited against FSC®(4), PEFC or SBP requirements
  • Adjusted EBITDA (including Pinnacle since 13 April 2021) up 60% to £40 million (H1 2020: £25 million)
    • Pellet production up 70% to 1.3Mt (H1 2020: 0.8Mt)
    • Cost of production down 8% to $141/t(5) (H1 2020: $154/t(5))
  • Near-term developments in US Southeast (2021-22)
    • Commissioning of LaSalle expansion, Demopolis and first satellite plant in H2
  • Other opportunities for growth and cost reduction
    • Increased production capacity, supply of biomass to third parties and expansion of fuel envelope to include lower cost biomass

Generation – flexible and renewable generation

  • 12% of UK’s renewable electricity, strong operational performance and system support services
  • Adjusted EBITDA down 14% to £185 million (H1 2020: £214 million)
    • Biomass – Lower achieved power prices and higher GBP cost of biomass reflecting historical power and FX hedging
    • Strong system support (balancing mechanism, Ancillary Services and optimisation) of £70 million (H1 2020: £66 million) – additional coal operations and continued good hydro and pumped storage performance, in addition to coal operations
    • Coal – utilisation of residual coal stock in Q1 2021 and capture of higher power prices
  • Pumped storage / hydro – good operational and system support performance
    • £34 million of Adjusted EBITDA (Cruachan, Lanark, Galloway schemes and Daldowie) (H1 2020: £35 million)
  • Ongoing cost reductions to support operating model for biomass at Drax Power Station from 2027
    • End of commercial coal operations in March, formal closure September 2022 – reduction in fixed cost base
    • Major planned outage for biomass CfD unit – August to November 2021 – including third turbine upgrade delivering improved thermal efficiency and lower maintenance cost, supporting lower cost biomass operations
    • Trials to expand range of lower cost biomass fuels – up to 35% load achieved in test runs on one unit
  • Strong contracted power position – 29.3TWh sold forward at £52.1/MWh 2021-2023. Opportunities to capture higher power prices in future periods, subject to liquidity
As at 25 July 2021 202120222023
Fixed price power sales (TWh) 15.99.14.3
-      CfD(6)3.80.6-
-      ROC10.88.44.0
-      Other1.30.10.3
At an average achieved price (£ per MWh)51.752.452.7

Customers – renewable electricity and services under long-term contracts to high-quality I&C customer base

 

  • Adjusted EBITDA loss of £5 million inclusive of £10-15 million impact of Covid-19 (H1 2020 £37 million loss inclusive of £44 million impact of Covid-19)
  • Continuing development of Industrial & Commercial (I&C) portfolio
    • Focusing on key sectors to increase sales to high-quality counterparties supporting generation route to market
    • Energy services expand the Group’s system support capability and customer sustainability objectives
  • Closure of Oxford and Cardiff offices as part of SME strategic review and the rebranding of the Haven Power I&C business to Drax
  • Continue to evaluate options for SME portfolio to maximise value and alignment with strategy

Other financial information

  • Total operating profit from continuing operations of £84 million including £20 million mark-to-market gain on derivative contracts and acquisition related costs of £10 million and restructuring costs of £2 million
  • Total loss after tax from continuing operations of £6 million including a £48 million charge from revaluing deferred tax balances following announcement of future UK tax rate changes
  • Total loss after tax from continuing operations of £6 million including a £48 million charge from revaluing deferred tax balances following confirmation of UK corporation tax rate increases from 2023
  • Capital investment of £71 million (H1 2020: £78 million) – continued investment in biomass strategy
    • Full year expectation of £210–230 million, includes pellet plant developments – LaSalle expansion, satellite plants and commissioning of Demopolis
  • Group cost of debt now below 3.5% reflecting refinancing of Canadian facilities in July 2021
  • Net debt of £1,029 million (31 December 2020: £776 million), including cash and cash equivalents of £406 million (31 December 2020: £290 million)
    • 5x net debt to Adjusted EBITDA, with £666 million of total cash and committed facilities (31 December 2020: £682 million)
    • Continue to expect around 2.0x net debt to Adjusted EBITDA by end of 2022
View complete half year report View investor presentation Listen to webcast

Refinancing of Pinnacle Debt with Lower Cost ESG Facility

Demopolis wood pellet plant being constructed

RNS Number: 9930E
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Drax is pleased to announce that it has completed the refinancing of the Canadian dollar facilities it acquired as part of the Group’s acquisition of Pinnacle Renewable Energy Inc. (Pinnacle) in April 2021.

The new C$300 million term facility (“the Facility”) matures in 2024, with an option to extend by two years(1), and has a customary margin grid referenced over CDOR(2).

A Pinnacle wood pellet plant

A Pinnacle wood pellet plant

The Facility reduces further the Group’s all-in cost of debt to below 3.5% and includes an embedded ESG component which adjusts the margin payable based on Drax’s carbon intensity measured against an annual benchmark.

The Facility, along with surplus cash, replaces Pinnacle’s approximately C$435 million facilities which had a cost of over 5.5%.

Enquiries

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.Drax.com

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Acquisition of Joint Venture Interest from Westervelt

RNS Number : 7524D
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Drax is pleased to announce that it has agreed to acquire a 20% minority interest in Alabama Pellets, LLC (“Alabama Pellets”) – the joint venture which owns the Demopolis and Aliceville pellet plants – from The Westervelt Company (“Westervelt”) for $29.7 million cash consideration. The acquisition will increase the Group’s interest in Alabama Pellets to 90% and provide Drax with economic control over a further c.130,000 tonnes of biomass production capacity per annum. Completion is expected to take place in July 2021.

Westervelt is considered to be a Related Party under the UK Listing Rules with the proposed transaction constituting a Smaller Related Party Transaction under Listing Rule 11.1.10.

The acquisition of Pinnacle Renewable Energy Inc. included a change of control provision over Alabama Pellets. Drax has been in discussions with Alabama Pellets joint venture partners regarding future working relationships, including their minority interests. The remaining joint venture partner, Two Rivers Lumber Co., LLC, holds a 10% economic interest.

Demopolis and Aliceville are located in Alabama, in the US southeast, close to the Group’s existing US operations and have a combined nameplate production capacity of 660,000 tonnes per annum. Aliceville was commissioned in 2018 and Demopolis is expected to be commissioned in 2021.

Drax Group has 13 operational pellet plants (including Aliceville) plus satellite plant developments and Demopolis, with total nameplate production capacity of 4.9 million tonnes per annum once commissioned. These plants are geographically diverse and sited in three major fibre baskets (British Columbia, Alberta and the US southeast) with access to four deep water ports providing routes to markets in Asia, Europe and the UK.

Enquiries

Drax Investor Relations: Mark Strafford

+44 (0) 7730 763 949

Media

Drax External Communications: Ali Lewis

+44 (0) 7712 670 888

Website: www.Drax.com

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What is bioenergy with carbon capture and storage (BECCS)?

What is bioenergy with carbon capture and storage (BECCS)? 

Bioenergy with carbon capture and storage (BECCS) is the process of capturing and permanently storing carbon dioxide (CO2) from biomass (organic matter) energy generation.

Why is BECCS important for decarbonisation? 

Sustainably sourced biomass-generated energy (bioenergy) can be carbon neutral, as plants absorb CO2 from the atmosphere as they grow. This, in turn, offsets CO2 emissions released when the biomass is combusted as fuel.

When sustainable bioenergy is paired with carbon capture and storage it becomes a source of negative emissions, as CO2 is permanently removed from the carbon cycle.

Experts believe that negative emissions technologies (NETs) are crucial to helping countries meet the long-term goals set out in the Paris Climate Agreement. As BECCS is the most scalable of these technologies this decade, it has a key role to play in combating climate change.

How is the bioenergy for BECCS generated?

Most bioenergy is produced by combusting biomass as a fuel in boilers or furnaces to produce high-pressure steam that drives electricity-generating turbines. Alternatively, bioenergy generation can use a wide range of organic materials, including crops specifically planted and grown for the purpose, as well as residues from agriculture, forestry and wood products industries. Energy-dense forms of biomass, such as compressed wood pellets, enable bioenergy to be generated on a much larger scale. Fuels like wood pellets can also be used as a substitute for coal in existing power stations.

How is the carbon captured?

BECCS uses a post-combustion carbon capture process, where solvents isolate CO2 from the flue gases produced when the biomass is combusted. The captured CO2 is pressurised and turned into a liquid-like substance so it can then be transported by pipeline.

How is the carbon stored?

Captured CO2 can be safely and permanently injected into naturally occurring porous rock formations, for example unused natural gas reservoirs, coal beds that can’t be mined, or saline aquifers (water permeable rocks saturated with salt water). This process is known as sequestration.

Over time, the sequestered CO2 may react with the minerals, locking it chemically into the surrounding rock through a process called mineral storage.

BECCS fast facts

Is BECCS sustainable?

 Bioenergy can be generated from a range of biomass sources ranging from agricultural by-products to forestry residues to organic municipal waste. During their lifetime plants absorb CO2 from the atmosphere, this balances out the CO2that is released when the biomass is combusted.

What’s crucial is that the biomass is sustainably sourced, be it from agriculture or forest waste. Responsibly managed sources of biomass are those which naturally regenerate or are replanted and regrown, where there’s a increase of carbon stored in the land and where the natural environment is protected from harm.

Biomass wood pellets used as bioenergy in the UK, for example, are only sustainable when the forests they are sourced from continue to grow. Sourcing decisions must be based on science and not adversely affect the long-term potential of forests to store and sequester carbon.

Biomass pellets can also create a sustainable market for forestry products, which serves to encourage reforestation and afforestation – leading to even more CO2 being absorbed from the atmosphere.

Go deeper:

  • The triple benefits for the environment and economy of deploying BECCS in the UK.
  • How BECCS can offer essential grid stability as the electricity system moves to low- and zero-carbon sources.
  • Producing biomass from sustainable forests is key to ensuring BECCS can deliver negative emissions.
  • 5 innovative projects where carbon capture is already underway around the world
  • 7 places on the path to negative emissions through BECCS