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Bioenergy4Business Report Summary

Project ID: 646495

Periodic Reporting for period 1 - Bioenergy4Business (Uptake of Solid Bioenergy in European Commercial Sectors (Industry, Trade, Agricultural and Service Sectors) – Bioenergy for Business)

Reporting period: 2015-01-01 to 2016-02-29

Summary of the context and overall objectives of the project

Bioenergy4Business (B4B) is an EU-funded Horizon 2020 project addressing the key societal challenge of providing secure, clean and efficient energy for Europe. The projects’ main objective is to facilitate the deployment of locally available solid biofuels for in-house and district heat purposes instead of fossil fuels – which are mainly used in the European business and in the residential sector so far. The project supports the development of know-how along the bioenergy value chain and of policy frameworks for an efficient provision of sustainable, profitable and high-quality bioheat, thus contributing – among others – to the achievement of the 2020 RES targets of the European Union (RES Directive2009/28/EC) in the member states and paving the way for the use of bioheat beyond 2020.
Concerning the target group, B4B represents on one hand front-runner countries that are already advanced in the usage of biomass for heating purposes, such as Finland, Denmark, The Netherlands, Germany and Austria; and on the other hand less advanced countries, too. This composition enables the efficient transfer of know-how from the experienced countries to “bioheat transition countries”, such as Poland, the Slovak Republic, Croatia and Greece, and to less advanced countries like Romania, Bulgaria and Ukraine. In addition to this, the participation of the European Biomass Association (AEBIOM) strongly facilitates the project’s outreach beyond the partner countries. In short, B4B gathers 11 partner countries willing to convince key stakeholders to switch from fossil fuels to bioenergy, taking a contribution of thereto related long lasting experiences and contacts of the partners from Denmark and Belgium into consideration. The B4B project activities consequently revealed the following observations, which led to the identification of promising heat market segments, on which B4B is going to focus within each of the 11 target countries within the upcoming period.
Solid biomasses, like by-products from wood-based industries or from agricultural and forestry management operations (i.e. wood chips, pellets and straw) have proven to be a cheap, reliable and readily available fuel option for the supply of bioheat. In some countries, solid biofuel utilization therefore has reached a very high degree of market penetration, e.g. wood by-products are used as fuels in the Finnish and Austrian timber and district heating industry. However, in practically all countries the heat market is still dominated by fossil fuels even though good potential for sustainable solid biofuels exists. This potential is often far from being fully exploited and sometimes even completely untapped.
In the small-scale heat market (up to 0.1 MW), solid biofuels, especially for space heating, are facing an intensified competition with fossil fuels. Due to technological reasons, bioheat requires substantial higher up-front investments in comparison to heat from fossil fuels. However, a bioheat investment normally pays off because of lower operating expenditures (mainly because of lower fuel costs). For small-scale boilers, which are mainly deployed for space heating, it can be stated that the heat demand is steadily decreasing due to the more and more improving insulation quality of building stocks and the emerging saturation of modern low(est) energy buildings. In the latter case the capacity of the bioheat boilers is far below 10 kW, thus resulting in a very high up-front investment per kW. In addition, the heat demand decreases, thus capital costs per heat unit (kWh) leap. Due to lower capital cost and for comfort reasons, heat pumps, which are operated in reverse mode for cooling purposes or natural gas, are substantially increasing their market shares in the small-scale sector. Between 2012 and 2014, the sales of small-scale biomass boilers in many cases have halved. Currently, the low oil prices jointly with the low prices for natural gas are even more threatening the European biomass boiler manufacturers, which are traditionally supplying the small-scale sector.
Mid-scale heating systems often have a higher heat demand than small scale systems, resulting from higher peak loads and significantly increasing full-load operating hours. Since large boilers require a lower investment (economies of scale – see figure 1) per capacity unit (kW), and in addition generate more heat per year (kWh) because of their high full-load operating hours, the capital cost per heat unit substantially decrease.

Figure 1
Furthermore, mid-scale systems entail, because of biomass supply scale-effects, lower biofuel procurement cost per energy unit (kWh). For these reasons, mid-scale systems are more attractive than small-scale bioheat plants. These effects cumulate to shorter pay-back periods for mid-scale systems in comparison to small-scale bioheat plants. In the mid-sized market sector, economic efficiency is regarded as more important than comfort issues. Less competition with heat pumps and fewer constraints, e.g. availability of space for biofuel storage, are further potential advantages for biomass in the mid-scale sector in comparison to the small-scale sector.
These interrelations are not yet adequately recognized by many of the mid-scale heat market actors, however. European mid-scale heat markets, in businesses, service and residential sectors, currently consume predominantly fossil fuels, which are often imported from politically unstable regions, despite the high unexploited regional available biofuel potentials. One of the key objectives of the B4B project is to raise awareness of both policy and business actors and to arouse interest for secure, clean and efficient bioheat within promising mid-scale market segments.
The B4B in depth analyses revealed that, in the advanced bioheat markets, commercial use is spread out over a high number of different types of applications and market sectors. In all “B4B-countries”, mid-scale market segments have not been assessed and addressed in a systematic way so far. Therefore B4B identified three to four promising heat markets in each of the 11 target countries, for which mid-scale bioheat plants can be utilized best to substitute fossil fuels. The potential markets were identified by interviewing a total of 56 European biomass boiler manufacturers, bioheat plant planners, developers and other sector-related professionals. The interview results were verified and deepened by analyses of statistics on fossil fuel consumption, market structures and biofuel potentials. The figures 2-4 display the identified promising markets, sorted by nominations per country.

Figure 2-4
One of the main findings is that in-house boiler market segments are more frequently mentioned than biomass district heating sectors. Due to the high investment for the heat distribution grid, a district heating plant is a long-term “infrastructure investment”, which pays off much later than in-house investments with comparable boiler sizes. Estimates on fossil fuel substitution and CO2-mitigation potentials were completing the country analysis. Figure 5 shows the CO2-mitigation potential of bioheat within the identified target markets, which are potentially realizable until 2025.

Figure 5
In general, the market analyses show that the criteria of the identified relevant segments are distinct differently from country to country, depending on national framework conditions. The following table 1 gives an overview of the B4B findings regarding an analysis of recent framework conditions.

Table 1
In a further step, technical and non-technical barriers, opportunities and solutions how to tackle barriers were identified – considering the results of 118 interviews with suppliers, stakeholders of target markets and policy actors. Existing barriers in the target heat markets and solutions how to overcome such hurdles were intensively discussed in the 1st national stakeholder workshops with a total of 207 stakeholders.
Thanks to the long lasting experience of advanced countries, the B4B project partners have learned how to stimulate the required change-mechanism, how favourable conditions should be created and how key stakeholders should be trained adequately. To start-up a market, first movers are crucial for both sides of the market. The provided feedback indicated that bioheat markets require a demand pull, rather than a supply push (chicken-and-egg problem). Many success stories show that fuel supply is creatively handled by the market actors, as soon as a critical mass of demand has been generated. To enable a growing bioheat market, the availability of sufficient fuel and well-functioning operations and maintenance markets on a regional level are crucial.
As practice shows, once a project site can be demonstrated and visited, follow up projects will emerge soon. Having said this, B4B-partners were asked to describe two to three existing best practice examples from their country each for the biomass supply side as well as for the demand side. 39 bioheat projects and 23 biomass supply chains have been described and put on line– focussing on the countries’ target heat markets. The stakeholder interviews revealed that if users appeal (advertisement) for the deployment of biomass such an approach proved to be very effective from the market diffusion perspective within a branch. In relation to district bioheat projects one can say that a project based communication with the local community/ about the project and its’ societal, environmental and climate impacts, is a crucial success factor for the acceptance and support of the plant.
The main challenge, bioheat actors often have to tackle, is to find solutions how to attract potential bioheat customers – taking their perception of risk into account and using their channels of communication. Stable long-term and predictable framework conditions, that allow bioheat markets to emerge and grow smoothly, need to be established. Among the most important economic barriers of high up-front cost for biomass plants, investment subsidies and tax advantages proved to be very effective for the realisation of such projects in many countries. An effective pricing of CO2-emissions – generating reasonable prices for CO2 – could help a lot.
Financing of projects and utilizing appropriate business models are further main barriers to be mastered.
In order to describe such hurdles and the thereto related solutions, the participating countries were asked to establish reports summarizing the current situation and describing innovative financing and business models. Acquiring loans recently became more difficult for businesses as banks apply increasingly stringent conditions for the financing of such projects (Basel III). There are many bioheat business models in operation, ranging from investors’ own business initiatives to plant and energy performance contracting and cooperative models. Table 2 provides an overview of the main models.

Table 2
Table 3 shows the level of support of the legislative framework to the business models in the considered partner countries.

Table 3
An innovative business model to reach potential investors, matching their risk perception by taking over investment risks, recently emerged in Austria. The model is based on cooperation between installers and energy service companies (ESCOs). If ESCOs do not trade equipment, a win-win situation can occur: The ESCO provides the know-how and the financing of the investment; the installer provides equipment and the installation.
Due to long-term partnerships, installers often have excellent access to potential bioheat investors (e.g. hotels etc.). They often cover a broad range of crafts, e.g. sanitary, bathroom, air, hot-water and space-heat-related, in one company, however. Concretely this means that – even in advanced countries – installers often do not become specialists in bioheat and its’ system integration. Some ESCOs are experts in implementing bioheat by energy plant contracting (taking over the investment risks and subsequently selling heat to the customers). At customer side ESCOs often observe suboptimal energy related building systems, being untuned piece-by-piece installations. ESCOs which excellent technology know-how can – together with wider energy efficiency measures – replace such inefficiencies in a highly economic efficient manner. Accompanying energy efficiency measures have both, a huge energy-saving, thus cost-saving potential, subsequently enabling a shorter payback period of bioheat investments. This model supports the exploitation of energy efficiency and bioheat potentials very effectively.
As intended, B4B disseminates a range of further best practice financing and business models, identified in national market surveys, to European heat markets. In some countries, farmers’ cooperatives investing in micro-grids proved to be successful in exploiting local biomass potentials. In some cases “roof-cooperatives” for such rural cooperatives emerged. Such “roof-cooperatives” provide a ready to use legal entity, planning know-how and sharing of long lasting experiences. Furthermore they are offering joint procurement processes, centralized billing and accounting services.
Another excellent example how to efficiently over-come hurdles are public authorities providing over-regional standardized licensing procedures and guidelines as well as AutoCAD CDs enable a time- and cost saving drag-and-drop design of structural details of biomass heating houses, fuel storages and its’ access-roads.
A further crucial issue is training and certification of installers, planners and operators. A best-practice policy program to assure a high quality of bioheat systems operation over the entire system life time, leading to sustainable, durable and economical district heating systems, is the introduction of a comprehensive, project-oriented quality management system. Such a system is for example the Quality Assurance for Wood Combustion Plants named “QM Holzheizwerke®” established in Austria, Bavaria and Switzerland. Planners, installers, operators and the interested public are trained by its certified quality delegates. In Austria, participation at the respective “klimaaktiv heizwerke” program is obligatory for applying for investment grants for commercial bioheat plants > 0.4 MW. Commercial plants < 0.4 have to undergo a “quick quality check”. The cost of participation in this program usually pays off quickly. In the Netherlands, under the Activities Decree, for newly installed combustion plants a SCIOS-certified company must carry out the inspection and monitor the maintenance. An accredited assessor or a certified installation company must demonstrate that the plant meets the emission limits. SCIOS is the Certification Inspection and Maintenance Combustion Plants Foundation. Recently SCIOS has developed a sub scope for biomass fired boilers. Subsequently ISSO, the research institute for the installation sector, developed guidelines, handbooks and exams. Shortly teaching institutes will offer specific training for installers and inspectors of biomass boilers.
In 2016, B4B will offer three training seminars per target country, tailor-made for relevant stakeholders of the relevant heat markets identified (before summer, in autumn and winter). Besides, a range of tools, developed in the framework of the project, will be presented at the seminars: contract templates for biomass supply; a multi-lingual tool for conversion from prices per volume or weight unit – which are commonly used in forestry and the timber industry – into energy prices for a variety of solid biofuels and fuel assortments; a tool for dimensioning of bioheat plants; and a multi-lingual tool for the calculation of the economics of solid biomass and fossil fuel fired (district & in-house) heat-only plants
for both, new and existing systems (fuel switch). The latter tool contains reference values for various investment components and regular payments for mid-scale plants (0.1 to 20 MW) for twelve countries. All training material, tools and further B4B publications, like reports and brochures, can be downloaded from the project website
In September 2016, an international study tour to Denmark will take place. Three mid-scale straw and wood-chip heat systems will be visited. All of the B4B training activities are targeting the main stakeholders, offering know-how and show-how (field-trips) by experienced key market actors and bioenergy heat experts of the project consortium. In January 2017, the second national B4B info days will take place in each “B4B-country”. In February 2017, a second study tour to Finland is planned. In spring 2017, relevant policy makers will be informed about the proposed policy measures which are expected to speed up bioheat diffusion in promising market segments (based on other countries’ experiences) in the framework of national stakeholder workshops. The discussions of solutions to overcome market barriers is an on-going process, thus know-how exchange is taking place more or less on a “daily basis”. Finally, the project results will be presented at the final conference in Brussels in August 2017.

Work performed from the beginning of the project to the end of the period covered by the report and main results achieved so far

See text above, for more details please have a look to Part B of the technical report.

Progress beyond the state of the art and expected potential impact (including the socio-economic impact and the wider societal implications of the project so far)

The growing stiff competition in the small-scale residential biomass boiler market forces the boiler manufacturers to focus stronger on further – more promising – market sectors. Commercial mid-scale applications are being regarded as a more profitable market segment by heat market actors– including some niche applications. Having said this, B4B supports the producers of biomass boilers as well as the consumers by provision of relevant data, analyses of the hurdles to overcome, development of the proper policy framework to be suggested to the relevant politicians and tools which enable a quick initial assessment of project proposals. In other words, B4B makes sure that the assessment criteria are on the right spot at the right time.
B4B analyses indicate that the commercial use of solid biomass is currently spread out over a considerable number of different types of applications and market sectors. None of those market segments have been addressed in a systematic way so far, thus a systematic assessment of relevant market segments by the market actors was not available.
B4Bs’ analyses provide evidence that market segments with good prospects differ from country to country. The mentioned analyses were based on interviews with experienced biomass boiler manufacturers, bioheat project planners and developers, using standardized criteria enabling the selection of market segments. The interview results were verified by structural data of the relevant market segments and statistics on fossil fuel consumption.
B4B supports bioheat market actors in addressing the promising markets and provides know-how and tools – in particular to potential future market actors like investors and operators of bioheat plants. B4B mainly copes with the following aspects of bioheat projects within the promising market segments:
• Understanding the personal and non-personal communication channels
• Overcome the – sometimes given - resistance of planners and installers
• Perception of project risks by potential investors
• Solutions how to deal with high upfront investment
• Identification of further promising financing and business models
• Availability and acceptance of ESCOs
So far, two innovative tools, which are beyond state of the art, have been developed within the on-going project. The B4B Fuel Parameter Calculation tool is a multi-lingual tool for conversion of prices per volume or weight unit, commonly used in forestry and the timber industry, into prices per energy unit for a variety of solid biofuels and fuel assortments. By typing in just a few required variables, the program can quickly calculate the most important parameters for a variety of wood fuel, pellets and straw assortments. This tool is an enhancement of a less sophisticated Austrian tool, which has achieved an impressive relevance for a broad range of bioheat market actors over the last ten years. As conversion to energy prices is a key issue for the development and operation of mid-scale bioheat plants this tool will be of great help.
The Bioheat Economic Assessment tool is a multi-lingual tool applicable for the comparison of the economics of solid biomass and fossil fuel fired (district & in-house) heat-only plants for both, new and existing systems (fuel switch). The discounted Cash-flow analysis method (based on VDI Guideline 2067) serves as the comparison basis. The tool contains reference values for various investment components and regular payments for mid-scale fossil and biofuel fired plants (0.1 to 20 MW) for twelve countries. This tool is unique as it contains the economical assessment of two competing systems (biomass versus fossil fuels) and – in addition – provides guidance on investment (default values) and outgoing payments (operating expenditures) for the entire capacity range of mid-scale bioheat projects.
Within the training activities, B4B partners have the opportunity to easily get in contact with potential clients from the market segments they have identified, thus are able to test the reactions of these clients related to bioheat and the services the B4B-project and the domestic external bioheat experts’ offer.
Taking into account the long lasting experience of the project partners, the progress achieved so far in relation to publications, the development of relevant calculations tools, promotion activities and rendered services, B4B has great potential to positively impact business activities in the partners countries’ bioheat markets and beyond – despite the low fossil fuel prices which currently hamper a more positive market development for solid biofuels.

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