Biomass CHP/DH - common findings of SWOT analysis VTT Processes, Finland

Summary
The Biomass for CHP/DH – ‘promoting further use through developing of tools and training' Work Package was part of a 14-month OPET CHP/DH project initiated in April 2003 – May 2004. The project aimed to compile an up-to-date summary of the major barriers, existing policy and financial measures relevant to the development and further market penetration of biomass CHP/DH technologies' in partner countries.

The summary report of the WP is based on country surveys provided by the project partners. The countries covered by the survey were Austria, Denmark, Finland, Hungary, Lithuania, The Netherlands, Poland, Scotland, Slovakia, Slovenia and Sweden. The work was lead and compiled by VTT Processes (Finland).

The partners drafted a biomass CHP/DH SWOT analysis of the biomass CHP/DH country surveys.

End-user area	Financial instruments Industry Legal initiatives (municipal regulations, directives, etc) Planning issues Sustainable communities
Target audience	Decision makers Financial institutions Local and regional authorities Utilities
Technical scope	Biomass CHP Cooling Heating

Context
In 1997 the Commission White Paper included the requirement to develop and promote RES technologies with the aim of doubling their contribution from 5.7% then to 12% of overall gross inland energy consumption by the year 2010. The Kyoto Protocol (1999) has added to the need for implementation of effective policies concerning RES.

The two most relevant policies affecting biomass CHP/DH systems in partner countries are the ‘Directive on the promotion of cogeneration based on useful heat demand in the internal energy market' (Directive 2004/8/EC) and the ‘Directive on the promotion of electricity produced from renewable energy sources in the internal electricity market' (Directive 2001/77/EC).

At present the use and application of biomass CHP/DH technologies varies considerably between partner countries, i.e. Austria, Denmark, Finland, Lithuania, Netherlands, Poland, Scotland, Slovakia, Slovenia and Sweden. The share of CHP in DH production is rather high in majority of partner countries, but predominantly using natural gas as a fuel. Countries sourcing a rather high share of their DH using biomass include Finland (wood 7.6% and peat 18.5%), Austria (waste and biomass 21%) Lithuania (wood 12% and sawdust 2%) and Sweden (solid biofuels 28%). In contrast in the Netherlands DH uses 99% fossil fuels (natural gas 80% and coal 19%) and in Slovakia and Slovenia biomass is not used in DH systems as a fuel.

Biomass for CHP/DH – promoting further use by development of tools and training Work Package was part of 14-month OPET CHP/DH project running from April 1, 2003 – May 31, 2004.

Objectives
The aim was to compile an up-to-date summary of the major barriers and existing policy and financial measures used in partner countries relevant to the development of biomass CHP/DH technologies' further market penetration.

Biomass CHP/DH has very diverse status in partner countries at present. In some countries biomass CHP is considered as a matter of great concern, whilst in others as a matter of less or no concern. Some partner countries have been pioneers in the field of developing biomass technologies and have already implemented these technologies. Other countries still consider biomass technologies as an unfamiliar issue. These essential differences are closely studied in the SWOT analysis process, as the way to deal with strengths, weaknesses, opportunities and threats differs, notably among partners.

Process
Work concentrated in exchanging experiences and the latest innovative technologies in biomass district heat and CHP (including the whole production-utilisation chain). Leading biomass countries, Finland, Sweden, Denmark and Austria have long experience of using biomass DH and CHP. New member countries use mainly fossil fuels in DH and CHP. Some project-partners only have little familiarity with biomass DH and CHP.

Biomass for CHP/DH focused on the whole supply chain, and the related technologies connected with the use of biomass resources for combined heat and power or district heating purposes. Goal of the project was gathering expertise required for exploitation of market penetration possibilities.

The project partners prepared country surveys which were summarised in a report. The SWOT analysis presents the recognised common biomass CHP/DH elements for partner countries and then gives a glimpse at the country specific biomass CHP/DH elements.

The main common barriers for further biomass CHP/DH implementation specified in partners' country surveys are: economics and financing of the biomass CHP/DH projects and low electricity prices. Customers are not willing to pay extra for green electricity; and there is a lack of standardisation on the definitions and methodologies.

The immaturity of biomass markets is linked to competitively priced fuels and information barriers which restrict demand, i.e. lack of public awareness and information dissemination.

Actions
- Market analysis
- Report

Financial resources and partners

Project partners
VTT - Technical Research Centre (Finland) (WP leader),
DTI - Danish Technological Institute (Denmark),
LEI - Lithuanian Energy Institute (Lithuania),
EC BREC/BMER - (Poland),
ECB - Energy Centre Bratislava (Slovakia),
STEM - Swedish Energy Agency (Sweden),
EVA - Energieverwertungs-agentur, the Austrian Energy Agency (Austria),
NIFES - National Industrial Fuel Efficiency Service Ltd. (United Kingdom),
SenterNovem - (Netherlands),
IJS-EEC - Institut Jozef Stefan (Slovenia) and
Energy Centre - Energy Efficiency, Environment and Energy Information Agency (Hungary).

Results
The present use and application of biomass CHP/DH technologies vary a lot among partner countries.

In terms of biomass CHP/DH SWOT analysis, one of the common strengths identified is that CHP and DH technology are familiar and well developmed due to the a long history of usage in partner countries. The ability of CHP technologies to enable fuel switch from coal, oil or natural gas to biomass in existing CHP/DH systems is also seen as a great strength, as is a legal framework that promotes CHP and the biomass usage. The high potential of biomass CHP in terms of contribution to RES-e targets is commonly considered as a strength.

Common weaknesses include: the current centralised energy generation systems and higher cost of biomass CHP/DH compared to conventional systems. Other common weaknesses are the uncertain prospects of CHP market development, the immature biomass market especially concerning fuel supply, the lack of efficient distribution channels, and a tendency to be dependent on supportive policies. DH also has a perception problem due to the history of the technology and the strong position of fossil fuels.

Common findings in biomass CHP/DH SWOT analysis for partner countries

Strengths:	Weaknesses:
CHP and DH have a long history and are well known and developed CHP technologies enable the fuel switch from coal, oil or natural gas to biomass in existing CHP/DH systems Legal framework that promotes CHP and biomass usage High potential of Biomass CHP in terms of contribution to RES targets	Low acceptance of DH due to history and the strong position of fossil fuels Centralized energy generation systems High costs Uncertain prospects on the CHP market development Immature biomass market Lack of efficient distribution channels Dependency on policies
Opportunities:	Threats:
RES promoting national and EU legislation: RES are and will be continuously promoted Increasing price of natural gas, oil and electricity Broad category of biomass CHP technologies varying from micro-scale to large-scale production A rather strong position of industrial CHP, opportunities for fuel switch, i.e. to biomass CHP	Privilege of natural gas, coal and oil The present process of liberalisation of the energy sector may lead to a (temporary) hesitance towards new investment projects Falling prices of electricity Changes in taxation or policies for subsidies Spreading the gas networks into areas that have biomass potential Withdrawal of the EU from the Kyoto Protocol Failure of deployment of new technologies

The common opportunities identified by partners include following observations:

• RES are and will be continuously promoted by national and EU legislation;
• the price of natural gas is likely to increase;
• there is a broad category of biomass CHP technologies varying from micro-scale to large-scale production; and a rather strong position of industrial CHP gives opportunities for fuel switch from fossil fuels to biomass. Privilege of natural gas, coal and oil;
• Uncertain outcome of the present process of liberalisation of the energy sector, the possibility that it may lead to hesitance towards new investment projects;
• falling prices of electricity and uncertainties among legal framework related to biomass CHP, i.e. changes in policies for subsidies; and failure of deployment of new technologies are considered as the main common threats by partners.

Lessons learned and replication potential
The greatest strength of co-operation is the opportunity for information dissemination through partners, which should continue to be well-exploited. It is essential to facilitate Information transfer from countries with good know-how on biomass CHP/DH technologies and experience of implementing and maintaining bioenergy projects to countries with insufficient knowledge and no experience on the biomass technologies. In order to discover large scale sustainable (technologically, economically and socially feasible) solutions for exploiting biomass in energy production, strong efforts for promotion of biomass CHP technologies and environmental aspects are required.

The SWOT analysis approach is quite a practical way of studying the feasibility of technologies, market actions or other relevant aspects in several areas. In this project the country specific SWOT analysis was also done and results of that can be found at the project web-site.

Printed reports or other literature available
These reports are at no charge downloadable from the OPET CHP/DH website (www.opet-chp.net).

Other contacts
Irmeli Mikkonen
Motiva Oy
P.O.Box 489
FI-00101 Helsinki
Tel: +358 9 8565 3113
Fax: +358 9 8565 3199
e-mail: irmeli.mikkonen@motiva.fi
www.motiva.fi