by Arthur Caldicott
Gordon Campbell and the BC Liberals’ energy legacy is a boondoggle of policies, subsidies, and fantastical claims. The 2010 Clean Energy Act brought together a decade of energy initiatives in a single legislative dog’s breakfast – delivering blows to the environment, the economy, and the credibility of government.
BC’s Bioenergy Strategy is a complex part of the energy strategy. Its dimensions include the types and supply of biofuels, how they can be used, and the economic and ecological impacts. It will reduce BC’s greenhouse gas emissions, strengthen competitiveness, achieve electricity self-sufficiency, open new export opportunities, and turn mountain pine beetle (MPB) devastation into an opportunity. World peace may be in there too. Paid for by citizens, profiting private companies.
BC’s Biofuels
The government’s pie chart shows 87% of BC’s biomass coming from the forest – the focus of this article; 53% is from forestry activities; another 34% are the trees killed by MPB. Agriculture contributes 10%, and municipal solid wastes are the remaining 3%.
/>Estimates of the energy potential of new sources – the sun or biomass, for example – start optimistically – “enough power for 100 years!” Reality generally ratchets down those big numbers, just as it cranks up costs. Government’s glib expectation that 50% of BC’s renewable fuel requirements – note, not just electricity – will be met by biofuels by 2020, may join the Kyoto emission targets as colossal broken promises.
Pine Beetle
MPB was expected to kill 80% of the province’s merchantable pine in the timber harvesting land base. Government saw this as a 20 year biofuel resource and hoped to capture the value by increasing annual allowable cuts (AAC) with a “pine-leading” emphasis, and by directing BC Hydro to issue two bioenergy calls. By 2011 – today – with the peak kill six years ago, the mortality projection has been adjusted down to 61% (still a huge volume of 830 million cubic metres [m3] or 340 million “bone dry tonnes” [BDT] ). The quality of the dead wood is now rapidly declining, while economic and environmental constraints further reduce the actual harvestable portion. The opportunity to obtain the best energy and economic outcomes from this crisis in our forests has already passed – but the worst is yet to come in terms of harvests.
For example, in the Lakes Timber Supply Area (TSA) – west of Prince George, east of Smithers – the AAC more than doubled from 1.5 million m3 per year in 2001 to 3.2 by 2004 as the MPB infestation moved through its arc of devastation. The Lakes TSA AAC is now reduced to 2 million m3/yr. Within a decade, the Lakes TSA AAC may be only 250,000 m3/yr when no harvestable pine remains. It may be 90 years before cuts can return to pre-MPB levels.
“Sustainable Forestry”
For government to be talking about “sustainable forestry” while the MPB catastrophe is unleashed, is a bit like watering flowers while flames engulf the house – but that’s where 53% of BC’s biomass resource is anticipated to come from in the bioenergy strategy. Estimated at more than 17 million BDT per year (42 million m3), 12 million BDT is to come from “forest residues” or wastes from existing forestry and milling operations, 1.2 million will come from “enhanced silviculture” for traditional forest products, and 4 million will come from enhanced silviculture for “bioenergy plantations.”
It represents 65% of the 2011 provincial AAC of 64.5 million m3 – which suggests that we’re making beneficial use of only 35% of the forests we cut, or that the AAC will expand to include new harvesting for energy.
But it is really difficult to tell. Combine the elastic amount of residue available from wood harvesting, with “enhanced silviculture” and “bioenergy plantations,” add an uncertain amount of biomass from MPB mortality, and that’s the supply part of BC’s Bioenergy Strategy – some parts reality, some parts fantasy.
Government has also introduced a mish-mash of tenure novelties to support the bioenergy strategy. These include non-replaceable forest licences, stand-as-a-whole pricing, and receiving licences, taking MPB out of the AAC, putting MPB back into the AAC.
The term “bioenergy plantation” envisions trees grown specifically for their energy. Ethanol from agriculture, brought into large scale production by government policy and incentives, has been discredited on ecological, economic, and carbon arguments. Similar initiatives in the forest are likely to be equally without merit – but BC’s Chief Forester is already considering demands on the forest for plantations.
What To Do with Biofuel?
Burn it. First choice in the Bioenergy Strategy is burn it here to generate electricity; second is send it to Europe as pellets, where they’ll burn it. These involve conventional, established technologies, and government policies have fabricated the demand and provided the financial inducements.
The strategy also envisions an assortment of fuel switching technologies including burning the biomass in place of natural gas or diesel, mixing it with coal, and converting it to synthetic gas or synthetic coal. Apart from burning wood in place of gas or coal – the crudest of fuel switching strategies – these other technologies mostly “need research” or “need development” – and they also need subsidies.
Electricity Generation
BC Hydro pays generously for electricity – $124 per megawatt hour (MWh) is the latest figure it cites. Not only can those IPPs find no other buyer, they have struck pure shareholder gold with these rates. Compare this with the $36/MWh market rate mid-August at the California-Oregon border.
The first biomass project in which BC Hydro was involved was Northwest Energy in Williams Lake, owned by Edmonton’s Capital Power, and the first self-generation projects at pulp mills in BC were with Zelstoff Celgar and Howe Sound Pulp and Paper (HSPP). These were initiated in 1989. Since then, BC Hydro has implemented a series of calls for power. A number of biofuel projects have been proposed, some received Electricity Purchase Agreements (EPAs), one started then closed when its host mill shut down (Eurocan). By 2008, the high rate of attrition for these projects meant that there were still only five operating bioenergy projects selling any electricity to BC Hydro.
The government’s Bioenergy Strategy kicked into high gear when BC Hydro was directed to issue Bioenergy Phase 1 and Phase 2 calls for energy.
Phase 1 ran from February 2008 to February 2009. BC Hydro was looking for 1000 gigawatt hours (GWh) from projects which needed no new tenure, would use existing forest-based biomass including mill wastes and black liquor, and proven technologies. It received 20 proposals for 4100 GWh, but EPAs were issued for only four projects totalling 579 GWh. Three were from pulp mills – Canfor, Domtar, and Zellstoff Celgar – and one was independent. The last, PG Interior Waste-to-Energy, a pyrolysis scheme which should have failed the “proven technology” criterion, has apparently joined the attrition list, reducing Bioenergy Phase 1 to 509 GWh.
While the Phase 1 call was unfolding, the federal government introduced its Green Transformation Fund (GTF) – a billion dollars for Canadian kraft pulp mills which could be applied to energy efficiency and generation projects. [See Rob Wiltzen’s companion article, “Turning BC Forests into Fuel,” page 12.]
The GTF essentially covered the capital costs for the three successful bidders – all of whom had pitched their projects months before GTF was introduced, drawn only by the potential revenue from an EPA with BC Hydro.
Bioenergy Phase 2 ran from May 2010 to August 2011. It also was looking for 1000 GWh of energy, with two big differences from Phase 1: these projects could require new forest tenure, and projects could not be eligible for the GTF. EPA’s were awarded to four projects proposed by two companies, and 754 GWh of energy. One of the companies, Western Bio Energy, is wholly owned by French corporations Veolia and Electricité de France.
While Phase 2 was underway, BC Hydro signed an unrelated EPA with Conifex for 200 GWh to be generated in Mackenzie using biomass sourced from the company’s own tenures and mills.
That brings us to the present: seven bioenergy projects are delivering 1929 GWh per year to BC Hydro, and five, not yet been built, could deliver another 954 GWh – though attrition is likely to take a bite out of them.
That 2883 GWh/yr of energy will require between 2.1-3.2 million tonnes (5-7.8 million m3) of wood.
Pulp, Paper and Wood – Power and Profit Hungry
Of the seven existing forest-based biofuel projects in BC with EPAs, five are with pulp and paper companies.
The pulp, paper and wood industries are BC Hydro’s biggest power consumers, using 14,000 GWh or 25% of BC Hydro’s supply in 2010. Reducing that huge demand is an important component of BC Hydro’s planning. There are two ways that can be done: self-generation and efficiency measures.
Industries in BC do not generate electricity for their own use because BC Hydro’s “transmission rate” for electricity , at $31/MWh, is far below the cost of building and operating a new generation facility.
BC Hydro does nevertheless offer financial incentives to customers to generate some of their own power through “load displacement agreements.” A number of industrial customers now generate at least some of their own electricity. BC Hydro has identified another 1200 GWh of undeveloped generation potential.
There is a wall between a pulp producer as a customer of BC Hydro and the same company as an electricity supplier to BC Hydro. Those are two separate relationships – the pulp producers continue to receive embedded-cost power for their pulp and paper operations, while selling their self-generated high-priced EPA power to BC Hydro.
Whether or not this seems like gaming the system, or even arbitrage, it has the approval of the BC Utilities Commission. The Commission even takes it a step further: “any self-generators, as owners of the generation facilities, should have the flexibility to reduce domestic load as they see fit in the commercial circumstances at hand in order to optimize the export of self-generated power.” A pulp producer, or Alcan or Teck, can cut back on its core business – pulp, paper, smelting – to ramp up its electricity sales when it is more profitable to do so.
Pellets
Pellets are made from sawdust, which is heated, compressed, and bagged. Europe takes perhaps 90% of BC pellet production. European carbon reduction policies have created a demand for lower carbon fuels to mix with or replace coal. And demand is growing.
BC now has ten pellet manufacturing operations (owned by five companies) located in the interior from Houston to Prince George and down to Kelowna. Production capacity is 1.6 million tonnes per year.
Nevertheless, the industry faces some risks. Fire is one: pellets like to auto-combust. The problem is so severe that obtaining insurance in Canada has become one of the industry’s big challenges. Try a Google search for “BC pellet plant fire”.
Future wood supply is another. Logging and milling residues, combined with MPB wood makes for plenty of supply, but the availability of MPB wood which retains enough calorific value will decline, and AACs will decline with it. Yet the industry is still investing as if wood supply will continue indefinitely. Pacific Bio Energy even boasts that 50% of its feed stock is from MPB.
BC’s biofuels strategy, like most initiatives in the Liberal’s energy program, rests on subsidies. Yet there is no direct subsidy in BC for pellet manufacturing. That’s because the subsidy is in Europe. Enough of a subsidy to more than overcome the cost of pellets and the expense of shipping. But Europe’s economic difficulties are putting severe pressure on carbon mitigation initiatives.
Switching, Syngas and Syncoal
Burning wood in place of natural gas, oil, and coal is relatively straightforward. Other Bioenergy Strategy technologies propose to convert biomass first into substitutes for these fossil fuels. These conversions involve pyrolysis – heating wood fibre in low-oxygen environments.
A number of companies in BC are working on these technologies. Nexterra has the highest profile, and has staked the most opportunities for itself and its clients: at Dockside Green in Victoria local construction waste is converted to syngas which fires a boiler generating heat for the entire complex as well as a nearby hotel; UBC where a combined heat and electricity pilot project is underway, University of Northern BC (heat), Kruger’s paper mill in New Westminster (process steam), Tolko’s Heffley Creek sawmill near Kamloops (process heat). These projects have been the recipients of millions of dollars in grants.
Pacific Carbon Trust
An ingenious method of moving money from the public sector to private interests involves the Pacific Carbon Trust (PCT). Itself an invention of Gordon Campbell’s climate initiatives, the PCT sells carbon offsets from revenues which come almost entirely from the public sector – BC government, local governments and school districts in BC – which have been required since 2010 to be carbon neutral.
The cost to the public sector, the revenues to PCT, and the eventual shift into offsets sold by the private sector, such as fuel switching projects at pulp mills is about $25 million per year. The PCT has seized on the bioenergy strategy and has so far funded fourteen fuel-switching projects in BC, many at pulp mills.
Dollars and Carbon – Fooling the People
Climate change provides the rationale for much of the Bioenergy Strategy. It is based on an understanding that biomass is carbon-neutral. A number of studies have concluded that this is not correct, that burning biomass releases more carbon than natural gas, if not coal, and that it takes a human lifetime to refix that carbon released from biomass today, in new forest growth. The Manomet Study of Woody Biomass in particular, is cited in this respect: “Forest biomass generally emits more greenhouse gases than fossil fuels per unit of energy produced.” [graph from Manomet study]
The strategy is based on hard-to-pin down and diverse guesstimates of wood volumes, supply forecasts, conversion factors. Nobody could borrow from a bank based on this data, but hundreds of millions of dollars of public money has been committed.
The long-term beneficiaries of these programs are corporations and their shareholders. Zelstoff Celgar, for example, now owns a 48 MW facility paid for by the GTF which is generating about $22 million per year paid by BC’s electricity ratepayers. Capital Power of Edmonton receives about $49 million a year from its Williams Lake bioenergy facility.
The increasing use of forest-based biomass for electricity, heat, and steam for industrial processes, would not happen without government support. The millions of dollars being channelled into the bioenergy sector are flowing from the public treasury to private interests.
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Energy analyst Arthur Caldicott is a regular writer for the Watershed Sentinel
Resources:
BC Bioenergy Strategy: Growing Our Natural Energy Advantage,
www.energyplan.gov.bc.ca/bioenergy
Provincial-Level Projection of the Current Mountain Pine Beetle Outbreak: Update of the infestation projection based on the 2010 Provincial Aerial Overview of Forest Health and the BCMPB model (year 8), www.for.gov.bc.ca/ftp/hre/external/!publish/web/bcmpb/year8/BCMPB.v8.BeetleProjection.Update.pdf
Biomass Sustainability and Carbon Policy Study, Manomet Center for Conservation Sciences, Manomet, Massachusetts, June 2010, www.manomet.org/node/322
[From Watershed Sentinel, September/October, 2011]
