The post-Brexit era Interesting times ahead for the U.K. and our wood pellet sector. BIOMASS CANADIAN Volume 16 No. 4 Editor -Andrew Snook (905) 713-4301 [email protected] Contributors -Gordon Murray, Staffan Melin Editorial Director/Group Publisher -Scott Jamieson (519) 429-3966 ext 244 [email protected] Market Production Manager Josée Crevier Ph: (514) 425-0025 Fax: (514) 425-0068 [email protected] National Sales Manager Ross Anderson Ph: (519) 429-5188 Fax: (519) 429-3094 [email protected] Quebec Sales Josée Crevier Ph: (514) 425-0025 Fax: (514) 425-0068 [email protected] Western Sales Manager Tim Shaddick [email protected] Ph: (604) 264-1158 Fax: (604) 264-1367 Media Designer -Brooke Shaw Circulation Manager Carol Nixon – [email protected] 450-458-0461 Canadian Biomass is published six times a year: February, April, June, August, October, and December. Published and printed by Annex Business Media. Publication Mail Agreement # 40065710 Printed in Canada ISSN 2290-3097 Subscription Rates: Canada -1 Yr $49.50; 2 Yr $87.50; 3 Yr $118.50 Single Copy -$9.00 (Canadian prices do not include applicable taxes) USA – 1 Yr $60 US; Foreign – 1 Yr $77 US CIRCULATION Tel: (416) 442-5600 ext 3552 Fax: (416) 510-5170 [email protected] 80 Valleybrook Drive, Toronto, ON M3B 2S9 Occasionally, Canadian Biomass magazine will mail information on behalf of industry-related groups whose products and services we believe may be of interest to you. If you prefer not to receive this information, please contact our circulation department in any of the four ways listed above. No part of the editorial content of this publication may be reprinted without the publisher’ s written permission ©2016 Annex Business Media, All rights reserved. Opinions expressed in this magazine are not necessarily those of the editor or publisher. No liability is assumed for errors or omissions. All advertising is subject to the publisher’ s approval. Such approval does not imply any endorsement of the products or services advertised. Publisher reserves the right to refuse advertising that does not meet the standards of the publication. www.canadianbiomassmagazine.ca W ith the United Kingdom (U.K.) voting to leave the European Union (EU), this decision has likely raised a few eyebrows of wood pellet producers this side of the North Atlantic. The U.K. is by-and-large the current world leader in the use of biomass for energy production and the home for the majority of Canada’s wood pellet ex-port market. By early July, the pound had decreased in value by more than 10 per cent since the U.K. voted to leave the EU, making it more ex-pensive for companies to purchase wood pellets in North America. Will the U.K.’s currency decline significantly impact existing busi-ness in Canada? Not likely. Could it hurt Canadian companies’ abilities to secure supply contracts in the U.K. in the future? Maybe. This is a particularly important factor to consider in British Columbia, where there are 12 wood pellet factories currently pro-ducing approximately 1.7 million wood pellets annually. About 70 per cent of those pellets are currently destined for the U.K. Another factor to consider is the im-pact that leaving the EU could have on the country’s wood pellet demands in the future – if the country does go ahead with leaving the EU (the Brexit referendum is not necessarily legally binding). The U.K.’s biomass industry is very dependent on government subsidies for growth and there are major projects coming up the pipes: Drax’s full conversion of its 645MW Unit 1 co-firing power plant, EPH’s 420MW Lynemouth coal-to-biomass conversion and MGT Power’s 299MW Teeside com-bined heat and power plant. Combined, the three projects could increase the U.K.’s industrial wood pellet demand by about 3 million tonnes per year by 2020. The Lynemouth project owned by EPH, a Czech-based energy company, is a par-ticularly interesting case to watch. While the project did obtain EU state-aid approval last year, it will be interesting to see how EPH responds if the U.K. decides to exit the EU, since the country would no longer necessarily need to follow EU regulations and the potential for increased fuel supply costs exists due to fluctuating currencies. On a positive note, EPH has secured contracts for half of its expected wood pellet demand from U.S. producer Enviva (MGT has se-cured its expected wood pellet demand from the same producer). Drax is currently awaiting a decision from an EU state aid investigation for the CFD subsidy it was granted back in 2014 for its Unit 1 conversion. Media are ques-tioning whether the referendum results will create delays in the process. That said, the unit is already co-firing at 85 per cent, so I don’t see the decision on full conver-sion creating a big impact on its operations either way. The bottom line is that the U.K.’s appetite for North American wood pellets isn’t likely to dry up anytime in the near future – current demand for Drax’s two full unit conversion power plants is about 6.8 million tonnes annually. For now, we will have to watch and see if the U.K. decides to leave the EU. Either way, there are interesting times ahead. 4 Canadian BIOMASS FEBRUARY 2016
Canadian Biomass July August 2016: Page 4
