Industry Trend Analysis - Global Biomass Power Forecast: Residue Availability Key To Growth - JUNE 2017
BMI View: The availability of agriculture, forestry and livestock residue will be an essential driver of growth in the biomass power sector o ver the coming decade, with mature biomass markets set to slow as they will face obstacles to ramping up biomass feedstock production to cater additional demand. China will be a global biomass power outperformer in terms of capacity additions, as the country leverages residue from domestic food production and forestry i ndustry to stimulate growth in its relatively nascent biomass sector.
|Asia Driving Biomass Sector Expansion|
|Global - Heat Map Of Biomass Capacity Additions By Country Between 2016 and 2026, MW|
|*Grey colour means no new capacity, or outside of coverage. Source: EIA, BMI.|
|f = BMI forecast. Source: EIA, BMI.|
|Generation, Biomass and Waste, TWh||508.556||525.523||540.306||553.961||565.199||578.492|
|Generation, Biomass and Waste, % y-o-y||2.852||3.336||2.813||2.527||2.029||2.352|
|Capacity, Biomass, MW||108,556.8||112,818.4||116,366.1||119,808.8||122,959.0||125,946.6|
|Capacity, Biomass, % y-o-y||4.8||3.9||3.1||3.0||2.6||2.4|
Key Forecast Takeaways
We expect the global biomass sector to expand by almost 30% between end-2016 and 2026 - with global biomass capacity additions totalling more than 38 gigawatt (GW)during this time period. This will result in a global installed capacity base of close to 140GW by 2026.
The sector will remain marginal in terms of the global non-hydro renewables capacity mix, comprising less than 9% of the total in 2026. That said, the baseload characteristics of the technology means that it has a relatively higher capacity factor than that of intermittent wind and solar power. This will enable biomass power to make up more than a fifth of global non-hydro renewables power generation by the end of our 10-year forecast.
The Asia Pacific region will drive global biomass power capacity additions over the coming decade - with the region registering an annual average capacity growth of 5.6% between 2016 and 2026. In comparison, growth will be much slower in Latin America, North America and Western Europe, averaging annual average rates of 2.4%, 0.5% and 2.3% respectively.
China will add the most biomass capacity globally over our forecast period, making up almost 30% of total capacity additions. We are less constructive on already established biomass markets, such as the UK, Germany, Brazil and the US, as mature biomass sectors and feedstock access restrictions will mean that growth will be slower relative to historic rates.
India, Thailand and Malaysia will all register robust growth from relatively low bases - as we expect these countries to better leverage forestry and agriculture activities to generate feedstock for the biomass sector. We expect India and Thailand to both add more than 4GW, whilst Malaysia will add up to 1.8GW. This will make these countries relative growth outperformers globally, as mature biomass markets slow over the coming years.
|China To Become Largest Biomass Market|
|Global - Top Five Biomass Markets By Installed Capacity In 2026f|
|e/f = BMI estimate/forecast. Source: EIA, BMI.|
China To Spearhead Asia-Pacific's Biomass Growth Dominance
We believe China will be the fastest growing biomass market in the world over the coming decade, adding more than 11GW between 2016 and 2026. According to the China's 13 th five year plan, the country aims to boost biomass to such an extent that it generates an equivalent heat and electricity output to 58 million tonnes of coal annually by 2020. As part of the country's longer-term biomass capacity expansion plan, the government aims to expand the sector to a total of 30GW by 2030, a substantial increase from the 11GW installed as of end-2016. We therefore forecast power generation from the segment to expand by an annual average of 4% between 2016 and 2026.
We believe China will benefit from the vast cross-country potential for biomass feedstock production. In central and north-eastern parts of the country this will likely be derived from residues left from the food harvest, with straw and stalks being of particular potential. These can stem from maize, rice, cotton and wheat agriculture. Whereas, forestry derived biomass feedstock will have greater potential in southern and central parts of China where such industry is more prominent.
|China Main Asian Biomass Growth Driver|
|Biomass Capacity By Market, MW|
|e/f = estimate/forecast. Source: EIA, BMI.|
China's outperformance for biomass capacity additions and growth will support an increasingly strong Asia Pacific (APAC) footprint in the global biomass market. India, Malaysia and Thailand will also look to leverage domestic agriculture and forestry industry to produce biomass feedstock - supporting growth from a relatively low base in these markets. As such, we forecast APAC's share of global installed biomass capacity to increase from 29% in 2016 to more than 36% in 2026. This forecast is also informed by slowing growth in mature markets such as the UK, Germany, and the US. As such, North America and Western Europe's combined share of the global installed biomass capacity will fall from 52% in 2016 to 45% in 2026.
Feedstock Access To Determine Type Of Biomass And Growth Prospects
The availability of feedstock will be a key driver of, or obstacle to biomass capacity uptake. Biomass feedstock is typically derived from traditional activities in the agriculture, livestock and forestry sectors which can support biomass power generation. This means that the type of feedstock utilised is usually restricted to what is easily accessible in the vicinity of the relevant biomass-fuelled power plant. We therefore highlight the aforementioned Asian markets, with limited biomass segments to date, as strong growth markets over the coming years. In particular, substantial food production sectors, such as grains, create scope for biomass power generation (see chart below). Similarly, we note that Cuba has a substantial bagasse-fired biomass project pipeline for the same reason, as the country aims to leverage its sugar cane production and reduce the usage of expensive oil-fired power.
|Harvesting Residue To Support Biomass|
|Wheat, Corn and Rice Production By Market, '000 tonnes|
|f = BMI forecast. Source: China Ministry Of Agriculture, Indian Ministry Of Agriculture, Office Of Agricultural Economics, USDA, BMI|
In more mature biomass power markets, such as Brazil and the US, we see less scope for robust growth. This is mostly down to the challenges associated with producing enough feedstock in a sustainable manner to a sector that already consumes substantial volumes. For example, Brazil's traditionally robust sugar cane business has meant that the country has a substantial biomass segment fuelled by bagasse feedstock. However, we question how much more generation capacity can be sustainably supported by residue from the industry. Similarly, a market such as the UK is also required to import wood pellets for its biomass facilities, capping potential for growth in the sector over the coming years.
|Feedstock Availability Key To Biomass Technology Utilisation|
|Biomass Capacity By Type By Market, 2015, MW|
|Source: IRENA, BMI|
Sustainability Concerns To Remain Pertinent Hurdle To Growth
Green energy agendas have been key drivers of biomass uptake in the developed world over the last decade. By sourcing feedstock from ecologically sustainable sources, the segment has helped displace polluting fossil fuelled power generation and has thus received robust government support across multiple markets. This enabled strong capacity growth, with annual average growth rates of 8.3% between 2005 and end-2015 in NAWE.
That said, we believe the increasing maturity of such sectors will make the question of ecological sustainability much more pertinent, weighing on the continued growth in the segment. Countries such as the UK, France and Denmark are all increasingly reliant on imported feedstock - mostly from the US. This will erode support for continued growth in the segment, due to the negative environmental footprint associated with importing the feedstock, as well as the increasing pressure on the US forestry industry. Given that biomass remains relatively expensive, government incentives for the segment will likely be reduced over the coming years - a trend that we already have observed in Germany, the UK and France. This feeds into our downbeat forecast for NAWE, with biomass capacity only expanding by an annual average of 1.7% between 2016 and 2026.