Biomass fuelling northern power

There is something of an epochal change under way in Britain’s workaday dry bulk ports. Biomass imports, in the form of wood pellets, have spurred hundreds of millions of pounds of investment in freight infrastructure across the north of England.
 
As UK bulk terminals have seen coal volumes freefall from 54 Mt in 2006 to 25 Mt last year, wood pellets, largely from North America, have emerged as a new commodity for ports on the Mersey, Humber, Tyne and Tees. The lion’s share is bound for the Drax Power Station in Selby, Yorkshire, where demand for pellets increased to 6.5 Mt last year from 0.5 Mt in 2010.
The greening of Britain’s energy policy has accelerated the rise of biomass. By 2020, Britain wants to reduce its greenhouse gas emissions by 34% (relative to 1990 levels), and produce 15% of its energy from renewable sources.
Earlier this year the UK government announced the end of coal burning by 2025, with coal-fired power plants already closing, faced with tough economic conditions and new environmental regulations. The conversion of coal-fired power stations to biomass offers a ready means to plug the energy gap. Wood pellet imports provide UK ports with a substitute bulk commodity too. 
 
Drax, which opened in two phases as a coal-fired facility in 1974 and 1986, has now switched almost half of its capacity to biomass. Two of its generation units were fully converted in 2013 and 2014, while a third is fitted to co-fire 85% biomass, and awaits approval from Brussels to burn only biomass. 
Providing around 8% of the UK’s electricity, the 4 GW station has relied on international and UK coal, and recently biomass. But Drax’s £365M investment in biomass conversion in the UK has resulted in a decline in coal demand to 4 Mtpa, alongside carbon savings of more than 80%. In the first half of 2016, a fifth of the UK’s renewable power came from Drax’s biomass units.
May’s vision?
Prime Minister Theresa May’s new government is yet to spell out its vision for biomass. But her new Department of Business, Energy and Industrial Strategy, with its pro-renewables secretary of state, Greg Clark, could steer policy in favour of the industry.
Growth of biomass offers regional industrial regeneration (even if the prime minister has been lukewarm about the former chancellor of the exchequer George Osborne’s Northern Power house), transatlantic trade (with wood pellets  largely from North America) and the adaption of existing coalfired infrastructure.
Drax, which has developed biomass technology for a decade, is waiting for “the right policy framework” to upgrade further units, says CEO Dorothy Thompson. 
 
Plans for converting Selby from coal have been held up by the focus on offshore wind, to the exclusion of biomass, in recent renewable  energy auctions, despite the Competition and Markets Authority urging a “technology neutral” approach. 
 
With coal still providing a quarter of the UK’s energy, Drax argues that biomass is the most affordable, reliable and flexible large-scale renewable energy. NERA, the UK consultancy, and Imperial College London have highlighted the hidden costs of solar and wind power, in particular the need for backup power generation. Biomass conversion also offers further life on coal assets, when little additional capacity is under construction. 
 
The Drax initiative has helped offset falling levels of coal at UK ports, and has spurred major investment and wider economic benefits across the North of England. Drax and its partners at the ports of Tyne, Liverpool, Immingham and Hull, with rail operators DB Cargo UK and GB Railfreight (GBRf), have created a region-wide freight infrastructure for wood pellets. 
 
Oxford Economics, the UK think tank, calculates that the Drax conversion and supply chain has given rise to more than £710M in GDP since 2009. Investment in the four ports’ specialist handling capacity has approached £300M, while other biomass terminal upgrades, in the wake of the Drax conversion, bring this figure near to £400M – and rising. 
 
Pellets to Tyne
The Port of Tyne showed foresight when Drax started to explore biomass a decade ago, signing an agreement in 2009 to handle up to 1.4 Mtpa of pellets for Selby. The first pellet-laden vessel was unloaded in 2010, and 6 Mt of imports have since been handled. 
 
In the meantime, the Newcastle port expects to handle no coal this year, compared to a record 5 Mt in 2013. Andrew Moffat, CEO of the Port of Tyne, says the rate of decline has been more dramatic than expected, but biomass now accounts for more than a half of the port’s dry bulk throughput.
 
Tyne has already invested £30M in its 2 Mtpa biomass storage and loading complex, the first in the UK, together with rail facilities and dredging for larger bulkers. Tyne’s biomass facilities will expand further following the go-ahead to convert the Lynemouth coal-fired plant. 
 
In January, German utility RWE, which bought the Northumberland power station in 2012, sold the facility to Czech group Energetický. In December, Brussels approved  a UK government grant for the conversion of the 420 MW plant. In May, Tyne announced it had secured the agreement to handle,  store and transport 1.8 Mtpa of wood pellets for the coal-to-biomass conversion. 
 
Spencer Group, the UK engineering firm, will design and build the biomass complex at Tyne Dock, South Shields, where the port has already invested £25M in extending the Riverside Quay. Features include a 75,000t storage facility, three enclosed conveyors and transfer towers, three silos, and rail-loading facilities. 
 
The Port of Tyne is contributing £13M, with Lynemouth Power shouldering the majority of an estimated £100M cost. Moffat says the biomass terminal is part of a strategy of diversification, as the UK port sector prepares for the “fast approaching end of coal imports”.
 
Tees renewable
 
Teesport, owned and operated by PD Ports, is also set to gain from investment in biomass, after the green light was given this summer for the £900M Tees Renewable Energy Plant (Tees REP) project. The 299 MW biomassfuelledpower station will be situated on the Teesport Estate near Middlesbrough, generating electricity for around 600,000 households by 2020.
Teesport, the UK’s fifth largest port by volume, will handle wood pellet imports from the US and Europe at Tees Dock, which is adjacent to the proposed combined heat and power (CHP) facility. 
 
Tees REP is a joint venture between Macquarie, the Australian investment bank, and Danish pension fund PKA, costing £650M to build, with a further £250M for operating costs. US group Enviva Holdings, the world’s largest biomass producer, will supply 375,000 tpa of pellets as part of an overall 1 Mtpa delivery deal struck by its joint venture with US insurance group John Hancock.
Initial shipments from 2019 will ramp up to the full supply between 2021 and 2034. Enviva produces 14% of the world’s wood pellets at six sites in the US south-east, with 2.3 Mtpa capacity. It operates a biomass terminal at the Port of Chesapeake, Virginia, as well as leasing dock space at the port of Mobile, Alabama, and it has recently developed another biomass terminal in the port of Wilmington, North Carolina. 
 
The Tees REP plant, which will be the world’s largest new biomass plant, will be built by Spain’s Tecnicas Reunidas and South Korea’s Samsung Construction and Trading, with commercial operations due to begin in 2020. David Robinson, CEO of PD Ports, says the development will give “substantial impetus” to the region’s long-term economic activity and status as an energy hub.
 
PD Ports recently completed its £35M redevelopment  of its Number One Quay at Teesport, which will serve the biomass facility. The 550m quay has a 14.5m depth alongside that can accommodate two Panamax vessels.
 
Wood ships
Merseyside is also busy reviving itself as a west coast hub for transatlantic trade, including biomass imports. Graham, the UK construction group, last year completed the first phase of a wood pellet terminal at Gladstone Dock in the Port of Liverpool. 
 
Peel Ports’ £100M development includes three concrete storage silos, two continuous ship-unloaders (CSUs), and an automated rail loading facility to tranship 3 Mtpa of wood pellets from North American mills to Drax. David Huck, port director at Liverpool, says the terminal will be fully operational by the end of this year, and will be officially launched in 2017. 
 
Peel Ports’ investment, alongside the ambitious £300M Liverpool2 container port development, has required significant upgrades of rail infrastructure. Liverpool’s biomass terminal will handle up to 10 trains a day and 40% of the wood pellets consumed by Drax each year.
 
By June this year, Peel had dispatched from its new railhead at Liverpool more than 400 freight trains of biomass, each carrying around 1,700t of wood pellets, on the 99-mile journey to Drax via the trans-Pennine rail links. As well as rail loading capability, the port has 100,000t of pellet storage capacity. 
 
Drax and the new state-of-the-art terminal mean Liverpool is well placed to take advantage of further opportunities in biomass, says Huck. But the energy sector can be “very challenging”, with the risk of potential changes to global supply chains and domestic and international government policy.
 
“There are always risks focusing on a single commodity,” he adds. “It’s very important to us to ensure we are well-placed to deal with a wide range of cargoes.” Thus, Peel Ports has invested recently in handling facilities for steel and agribulk in Liverpool, and cement in Runcorn.
 
Humber and beyond 
 
As Drax has diversified its supply chain, Associated British Ports (ABP) has developed more than £160M of handling capability and infrastructure for biomass imports at the Humber ports of Immingham and Hull.
 
Spencer Group has already built a dedicated £16M rail terminal and storage facility in Hull, which opened in late 2014, and handled 1 Mt of biomass in its first year of operation. At the end of last year, ABP also opened a £4M biomass storage shed at King George Dock in east Hull for wood pellet imports bound for Selby.
 
Work by Graham on the Immingham Renewables Fuel Terminal (IRFT) started three year ago. Upon completion, it will be able to handle 6 Mtpa and store 200,000t of wood pellets. Backed by a 15-year contract with Drax, the world’s largest biomass handling facility is expected to cost £144M, up from the initial £130M, ABP told investors in April. 
 
The first phase opened in 2015, with four silos, rail load-out facilities and two CSUs. Phase two started in 2014, and is due to finish over the coming months, offering four more silos. In the meantime, the Humber International Terminal (HIT) has handled pellet imports.
 
The biomass handling and storage facilities on both sides of the Humber handled 4.6 Mt in 2015, almost double the volume shifted in the previous year.
 
James Cooper, CEO of ABP, sees the new bulk cargo as an important development for the UK port group. “Biomass is helping to offset a decline in coal volumes handled at our ports,” he says. However, Cooper views biomass as “just one part of the UK’s renewable energy future” in which the port group wants to be involved. For instance, the group’s £146M wind turbine factory in Hull will be handed to Siemens in early 2017. 
 
Only connect
Rail freight providers have also looked to couple on to the growth of biomass imports as coal trades decline. DB Cargo UK identified early on that Drax’s decarbonisation programme was an opportunity to diversify, amid the retreat of the coal and steel industries. The German group has a contract to supply up to 80% of Drax’s biomass. 
 
GBRf’s managing director, John Smith, says more biomass capacity could make rail freight operations efficient and offset the decline in coal. The UK rail group, which has invested extensively to service Drax, has also secured a 10-year contract to move biomass from the Port of Tyne to the Lynemouth power station.
 
The future of biomass in Britain’s power mix remains up for debate, but UK ports and bulk handlers have moved quickly to maximise on the trade. Biomass was in the sights of the new Northern Ports Association, launched in September, which will connect and lobby for the interests of ports on both coasts. 
 
Gary Hodgson, chief operating officer of Peel Ports, views Liverpool’s biomass development as “tangible evidence” of the Northern Powerhouse.  
 
More broadly, ABP chief Cooper  sees biomass as part of an emerging renewable energy industry that will play an increasingly significant role for his company, as well as the success of the Northern Powerhouse and a source of investment and jobs in the region.