In the past, black pellet technologies have struggled to gain a foothold in the market. To date, matching the limited supply of black pellets with the desired demand from end users has been a brake on the black pellet industry's development. But for the first time, a substantial pipeline of new black pellet projects is emerging. Several are due to start-up this year, with at least seven commercial-scale black pellet mills under construction and due to start-up in 2020-&rsquo;21. A further eight projects are planned or seeking permits. This pipeline of projects amounts to approximately 2 million metric tons of annual capacity.
So why now? International efforts are stepping up to phase out coal, particularly in Europe where several countries have already phased out coal-fired power generation and many more have set ambitious targets to do so. It&rsquo;s not only power stations that offer an opportunity to use black pellets to replace coal. Industrial process heating applications, as well as district heating networks, will need to find renewable energy alternatives.
Of course, there are challenges with black pellet technologies. They were was considered in the late 2000s and early 2010s, when U.K. coal conversions and the initial round of Dutch cofiring were being planned. But the supply chain could not be established quickly enough to fulfil demand&mdash;RWE, Drax and others turned to white pellets instead. Utilities now using white pellets in Europe have made the investments needed for white pellets and have developed their supply chains, meaning that, at this point, black pellets are unlikely to be an option for them.
Once again, black pellet developers are now in a race to begin operating. They must successfully demonstrate their technologies to new prospective customers if they are to win market share from white pellets and other renewable technologies.
The Rotterdam power plant, owned by Onyx Power (backed by the private equity firm Riverstone Holdings), could be vital in proving the feasibility of using black pellets at a large scale. The Dutch coal-fired power plant, formerly owned by Engie, has begun using black pellets under the Netherlands&rsquo; SDE+ renewable energy subsidy scheme. It has signed a supply agreement with steam-exploded black pellet producer Arbaflame, but it is evident it will use other black pellets as well, including torrefied pellets. Engie had planned to cofire black pellets while evaluating the potential of a full conversion. Hawkins Wright understands that Riverstone, which purchased the power plant in 2019, will continue with those plans. All Dutch coal-fired generation must cease by 2030, but the Rotterdam plant was only commissioned in 2015, so potentially, it has a long operating life ahead of it.&nbsp;
There are opportunities for black pellets outside Europe, particularly in Japan. Although the country does not have a coal phase-out target date, public support for coal is waning. In April, both Mizuho and SMBC joined Mitsubishi UFJ&mdash;the three major Japanese banks&mdash;in pledging no longer to fund new coal power stations.
Land is scarce and expensive in Japan, so a wood pellet fuel that can easily replace coal and be stored in the same space without the need for expensive and bulky storage facilities would be advantageous. But if black pellet supply chains are not built up quickly enough, Japanese project developers may face the same challenges faced by the early European wood pellet users. Conditions of the feed-in tariff subsidy scheme mean power generators must prove they have a secure supply of biomass. If that cannot be demonstrated early enough, projects may have to make the investments needed to use white pellets, diminishing the advantages of black pellets.
Another opportunity in Japan could come later, due to its Energy Savings Act. The act requires all large power plants to achieve a minimum generating efficiency of 41% by 2030. Usually, energy efficiency is calculated as the proportion of energy output (megawatt-hour (MWh) of electricity) versus energy input (MWh of fuel). On this basis, only the most modern ultra-supercritical coal plants would have an efficiency above the required 41%. In this instance, however, the methodology used by the government to calculate efficiency permits biomass fuel to be deducted from the assumed energy input of the power station. This means that cofiring biomass is a simple way of enabling coal power stations to achieve the required 41% efficiency standard.
As Hawkins Wright discusses in its latest report, the Black Pellet Market Outlook, the development of the black pellet market has been delayed by numerous problems in the past. But as producers learn from earlier challenges and improve their technologies, now could be the chance for them to fulfil their many promises. Author: Rachael Levinson Biomass Research Manager, Hawkins Wright rachael@hawkinswright.com www.hawkinswright.com

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In the past, black pellet technologies have struggled to gain a foothold in the market. But for the first time, a substantial pipeline of new black pellet projects is emerging. 

Timing Key to Resurgence in Black Pellet Market

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