DONG Energy. Biomass for heat and power experience and perspectives

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1 DONG Energy Biomass for heat and power experience and perspectives Workshop om faste biobrændsler til el og varmeproduktion i Danmark Wednesday 10 March 2010 Jeppe Bjerg, Senior Innovation Manager DONG Energy

2 Content Our 85/15-strategy Biomass utilization in DONG Energy Future biomass utilization in DONG Energy Sustainable biomass 2

3 Our Strategy 85/15 3

4 DONG Energy activities 4

5 Fossil fuels cause climate change World projected greenhouse gas emissions GHG emissions Gt CO2 eq Projected emissions Abatement Business opportunities requirements Emissions path if 2 degrees increase Year GHG: Greenhouse Gas. Gt: 1 billion tons Source: IPCC (Intergovernmental Panel on Climate Change), Climate Change 2007 Synthesis report

6 Generation We have defined the path towards the our vision 1) 2006 total heat and power production 28,5 TWh equiv. power; CO 2 -emissions 18,2 mt => 638 g CO 2 / kwh Primary means to reach the targets in short to medium terms are: Wind many new onshore and offshore wind farms Biomass fuel conversion at existing plants and establishing new plants 6

7 Unchanged profitability criteria DEVELOPMENT OF PRODUCTION PORTFOLIO Wind Gas Bio/Multifuel Coal/ Multifuel Wind Gas Bio/Multifuel Coal/ Multifuel New tech Wind Gas ??? Bio/Multifuel CCS? ALL INVESTMENTS SHOULD MEET 5 INVESTMENT EVALUTATION CRITERIA VALUE CREATION The investment must create positive economic value for DONG Energy to enable future growth PORTFOLIO STRATEGY MATCH The investment must comply with the 85/15 milestones UNIQUE CORE COMPETENCIES The investment must benefit and/or develop DONG Energy's competencies SYNERGIES The investment must create synergies to DONG Energy's existing business MARKET POSITION The investment must benefit from and/or develop DONG Energy's existing market positions

8 2006 Most decisions for reaching the target in 2020 have already been taken, and options to complete the path identified Target for reduction in specific CO 2 emissions g /kwh Severn Horns Rev 2 Gunfleet Sands Enecogen Onshore Norway and Poland DK biomass conversion Walney London Array European biomass CCGT in UK and DE Offshore in UK and Germany Onshore in Norway and Poland Today Target 2020 Target 2040 [decided investments] Continued wind expansion Continued conversion to biomass Increased use of CCGT CCS New technologies

9 Biomass can substitute coal and gas at several Danish power plants Biomass for combined heat and power production, % share DONG Energy is leading in combined heat and power production DONG Energy is leading in biomass combustion Biomass projects in Denmark and abroad will sustain our position Biomass sourcing will be a mix of domestic and foreign biomass Only a small fraction of the global biomass potential is used (less than 0.5% of yearly wood harvest residues are converted to wood pellets) DONG Energy central power plants

10 Negative Increasing costs DKK/GJ Biomass research and development Energy sources Pre-Treatment technologies under development Products Wood Energy crops Gasification Heat & Power Replacing coal Replacing oil and gas Straw INBICON Chemicals Transport Replacing oil Industry waste Fodder Replacing fodder Household waste Waste Liquefaction Heat & Power Replacing coal From resource to market 10

11 Biomass in DONG Energy 11

12 Background for introduction of biomass in Denmark A political desire for CO 2 -reduction in Denmark by replacing coal based power production with wind power, biomass and natural gas Political agreement in 1993 to obligate power plants to apply 1.4 mio. tonnes of biomass (mainly straw) for power production in 2000 Limited national and international experience with straw combustion in 1993 Large program for development and demonstration of straw combustion technology initiated Obligation fulfilled in

13 Current fleet of biomass CHPs / power plants 13

14 Development of biomass usage in Danish power plants 14

15 Conclusion current DK power production from biomass Capacity for use of 1.5 mio. tonnes of straw and wood for power production established during the last 15 years Focus on development of straw combustion technology handling slagging, fouling and corrosion catalyst performance use of residues Main technologies are grate firing of straw and wood chips co-firing of straw in coal-fired power plants pulverised wood pellets in large power plant boilers 15

16 Future Biomass Utilization in DONG Energy

17 DONG Energy wishes to increase biomass-usage With available technologies from Studstrup, Avedøre and Herning, DONG Energy could convert to 100 % biomass-firing However with present conditions, biomass-firing is only economical during cogeneration of heat and power In short term biomass quantity can increase rapidly by the usage of wood pellets Co-firing of straw and coal (like Studstrup) results in minor increases, since byproducts and chemical conditions limit the share of straw The most advantageous is converting to 100 % biomass where problematic handling of by-products such as fly-ash is avoided Speed and dimension of conversion is primarily determined by fuel prices, subsidies and availability of biomass resources 17

18 PJ Current and potential for increased biomass use in Denmark Past and future use of biomass Måbjerg Herning Studstrupværket DTU Horsens Svanemølleværket Kyndbyværket H.C. Ørsted Asnæsværket Avedøreværket Værket Esbjergværket Skærbækværket Vejen Slagelse Køge Odense Ringsted Haslev Haderslev Stigsnæsværket Enstedværket Frederikshavn Grenaa Maribo- Sakskøbing Central CHP Decentral CHP Waste CHP Masnedø Obligation Biomasse konvertering SKV (pellets) SSV (straw) AVV (straw/pellets) HEV (chips) ENV (straw/chips) Decentrale (straw/chips) Nuværende forpligtigelse DONG Energy will in the future use significantly more biomass from agriculture and forestry 18

19 Example: Wood Pellets on Avedøreværket (AVV) Increased fuel flexibility on AVV Modification of Blok 1 to wood pellet firing Modification of Blok 2 to coal firing Results in increased fuel flexibility Future fuel use will be dependent on heat and power markets wood pellets primarily CHP (heat market) coal pure power production 19

20 Biomass abroad: Study on 300 MW in UK Preliminary studies on 300 MW biomass power plant in UK no concrete plans yet for site Exclusive rights to area in east England near Hull Situated next to harbor with future infrastructure for ships with m 3 capacity. Location ensures potentially attractive economy: Lowest possible fuel costs Potential for cooling with sea water thereby increasing plant efficiency Ongoing consultation process with local authorities, organizations, and stakeholders to address eventual concerns. Environmental approval by end IF decision to build it could be in operation by 2016

21 Sustainable Biomass 21

22 Responsible Sourcing Code of Conduct The Code was introduced in 2007 The Code is included in all contracts above DKR CR develops and maintains the Code procurement owns it CR helps procurement with the implementation of the Code Code under revision 22

23 Why Code of Conduct Because it's the way we do business! For DE to better understand the business of our key suppliers As risk management for DE To fulfill stakeholder expectations NGO attention 23

24 Environmental sustainability criteria in DONG Energy Existing practises: All fuels are certified Suppliers "must meet all relevant local and national environmental regulations and strives to minimize damaging effects to the environment". Improvement through ongoing dialogue and cooperation In case of serious or repeated violation of code of conduct we can and will annul contract EU sustainability criteria DONG Energy engaged in development of criteria in collaboration with EC through EURELECTRIC EURELECTRIC Recommends: harmonized EU wide criteria compared to 27 different regimes same criteria for all uses of biomass for energy but not necessarily the existing regime for liquid biofuels that EC takes action NOW market can not wait until 2011 with action that sustainability criteria and regime is developed in close dialogue with market actors 24

25 The future role of biomass and waste in a global perspective Biomass & Waste is the one of the only storable Carbon Neutral Energy Source we have Biomass & Waste will play a central role in order to balance the energy from the fluctuating natural forces as wind, solar and wave energy. Biomass & Waste is however also our only source of carbon, when we run out of fossil fuels, and at that time, biomass and waste will play a huge role in the chemical and material industries Over time we expect a transition, where the prime use of biomass will move from the energy sector to the chemical sector, bio-fuels and bioplastics are already now being marketed

26 Thank you for your attention Avedøre Power Station, Denmark 26