Denmark's Biomass Reboot

The smallest Nordic country is having a big impact on European pellet demand as DONG Energy, the country’s largest energy company, pivots away from coal and toward woody biomass.
By Tim Portz | January 17, 2017

Late last fall, a floating crane was positioned near two hulking 180-foot mega cranes in Kalundborg, Denmark, at the Asnæs Power Station. In just a few weeks, the floating crane deconstructed the massive pair that had been a fixture on the skyline since 1984. Each capable of lifting and moving 32 tons of coal at a time, the cranes had outlived their usefulness and were decommissioned, deconstructed and recycled by their owners, DONG Energy.

“In future, the coal-fired power station units at the power station will be either out of operation or in reduced operation, and we’ve therefore decided to remove the coal cranes,” says Niels Christian Kjaer, a regional manager at DONG Energy.

The decommissioning of the cranes is an apt illustration of the transformation DONG has been undergoing for over a decade. Since 2006, DONG Energy has nearly halved the carbon intensity of its delivered power and is well on its way to its goal of achieving 260 grams of CO2 per kilowatt-hour (kWh) by 2020.

For now, Asnæs will continue to burn coal, but at volumes that have been reduced to the extent that two, 32-ton cranes no longer make sense to maintain and keep operational.

The downturn in coal consumption at Asnæs is just one small facet in the decarbonization efforts DONG Energy has thrown itself headlong into. Coal consumption across DONG’s generation portfolio has fallen 74 percent since 2006 as the company ramps up the production of both wind- and biomass-derived energy. As 2016 drew to a close, DONG Energy concluded a massive conversion project at Avedøre Power Station near Copenhagen, marking the beginning of the biomass era in the country’s capital city.

Avedøre Joins the Fleet
Denmark is twice the size of New Jersey with a population similar to Wisconsin’s. DONG Energy’s transition unfolds in parallel to the country’s efforts to drive carbon out of its energy portfolio. Just four decades ago, the country generated the vast majority of its energy from imported oil. Now, the country generates nearly 40 percent of its energy from renewable sources and is aiming for 100 percent renewables by 2050. Alongside the efforts to increase renewables, the country is hoping to reduce its greenhouse gas emissions by 40 percent compared to 1990 levels by 2020, a full 10 years ahead of European Union time frames. It could be argued that Denmark’s lofty energy and climate goals pivot on the biomass strategy currently under deployment by its largest energy company.

Most recently, DONG Energy celebrated the conversion of its Avedøre combined-heat-and-power (CHP) facility to biomass, an 18-month project that transformed the already highly efficient facility to one of the most state-of-the-art biomass conversion facilities in the world.

“We’re reducing our annual coal consumption at Avedøre Power Station by around 160,000 metric tons,” says Thomas Dalsgaard, executive vice president at DONG Energy. “This is very good for the climate and in line with the conversion of our power stations, which has been ongoing for several years.”

This conversion reflects a joint effort by DONG Energy and Vestegnens Kraftvarmeselskab (VEKS), Copenhagen’s installed district energy transmission system to deliver heat and hot water to nearly 215,000 households in the metro area.

VEKS, established in 1984, is responsible for delivering hot water and heat to 19 different local district heating companies, which then serve the households, businesses and institutions within Greater Copenhagen.

“Choosing the right levers to curb the ongoing CO2 emissions and thereby global warming is a complex task,” says Steen Christiansen, chairman of VEKS. “However, using biomass at Avedøre Power Station’s two units is a huge step toward achieving VEKS’ goal of supplying fossil fuel-free district heating in 2025. We’ve made a difference.”

All told, the conversion to biomass from coal will reduce the emissions associated with the Avedøre Power Station by 500,000 tons, the equivalent of taking nearly 255,000 cars off the road.

Studstrup Set the Stage
The story of the conversion of DONG’s Strudstrup facility is remarkably similar to Avedøre. The power station at Studstrup, like Avedøre, is relied upon to deliver hot water and heat to a nearby urban center. Aarhus is Denmark’s second most populous city and, like Copenhagen, is aggressively pursuing its own decarbonization and renewable energy goals.

“Using wood pellets as fuel at Studstrup Power Station will mean a lot in terms of us achieving our climate targets,” says Kristian Wurtz, alderman for the Department of Technology and Environment in Aarhus. “It gives us the incentive to go further with the green transformation, something we intend to pursue to a greater degree together with residents and businesses.”

The facility at Studstrup will be capable of heating over half the city, and another project at nearby Lisbjerg will contribute an additional 20 percent of the city’s heat needs.

Studstrup’s conversion from coal to wood pellets required changes to the fuel storage silo, conveyance system and the boiler. The project took nearly 18 months to complete and cost DONG nearly 1.3 billion Danish Krone ($185 million).

Together, Avedøre and Studstrup will introduce nearly 1 million tons of wood pellet demand to the marketplace and industry observers think these conversions will finally result in some contracts with North American producers. Until recently, producers in North America found themselves on the outside looking in with regard to Danish pellet demand. In 2015, Denmark imported just 28,000 tons of wood pellets from producers in the United States, according to the UN Comtrade database. While complete data for 2016 is not yet available, the country imported over 30,000 tons through October. According to the database, Denmark did not import any pellet volumes from Canada in 2016.

Historically, Denmark’s pellet demand has been served by producers in the Baltics, most notably Latvia and Estonia. In 2015, Denmark imported 600,000 tons of wood pellets from Latvia and 550,000 tons of pellets from Estonia, a combined value of nearly $175 million. The competition through October of 2016 remained close between these two Baltic producers; Estonia besting Latvia with 480,000 tons to 425,000 tons. 

The full impact of these conversions to North American producers should begin to show up in 2017. Before the new year, Enviva Partners LP announced the completion of its acquisition of the Sampson plant owned by Enviva Holdings LP’s joint venture with affiliates of John Hancock Life Insurance Co. in Sampson County, North Carolina. Enviva also completed the acquisition of the associated offtake contracts, including a 10-year, 420,000-metric-ton-per-year offtake agreement with an affiliate of DONG Energy Thermal Power A/S. Whether this offtake contract is directly linked to new demand at Avedøre or Studstrup is beside the point. Denmark would be a welcome new beachhead in Europe for North American producers.

The days of double-digit, year-over-year growth in pellet demand driven exclusively by the Drax Power Station will soon come to a close. In order to maintain the kind of growth in Europe that U.S. producers have grown accustomed to, DONG’s two facilities will have to result in a dramatic uptick in North American imports by Danish buyers. This is far from certain, however, as Denmark has strong pellet trade relationships with some of the fastest-growing pockets of pellet production in Europe. The conversions at Avedøre and Studstrup, together, have catapulted Denmark onto the global pellet industry’s watch list and the battle for market share is sure to unfold in 2017.

Author: Tim Portz
Executive Editor, Pellet Mill Magazine
701-738-4969
tportz@bbiinternational.com