17 February 2023
Bioenergy growth is inevitable – opportunities abound but tread carefully
In a world where supply security is an ever-growing concern, the appeal of generating clean electricity and carbon-neutral gas from organic matter is obvious.
As countries become increasingly anxious about their path to net zero, subsidies have been granted, and bioenergy’s footprint has expanded. The sector’s profile is now under the spotlight, and some people are concerned with what they see.
The sector’s green credentials have faced high-profile probing, but beyond that, there has been a realisation of the problematic enormity of the sector. Bioenergy is currently a mass of wildly varied processes – both in terms of execution and scale – therefore measuring the sector’s environmental impact can be challenging. In fact, currently the EU and UK don’t include bioenergy in their emission figures, arguing the practice is carbon neutral. An assertion that is widely disputed in climate circles.
Bioenergy is also deemed high-risk, as recent insurer losses will attest. Unpredictability of source can add to the balance, with some firms struggling financially, even with government subsidies. Yet bioenergy is a fast-evolving sector that is already addressing its challenges. Undoubtedly, as a greener alternative to fossil fuels, demand for these projects is certain to continue growing. How can the construction sector find effective ways to manage the risks involved during design, construction, and their ongoing operational stages?
This article explores the opportunities that biomass presents for a renewable future and discusses the associated risks for the construction sector during the design, construction, and operational stages of a project.
Read our next article on the construction and insurance implications of increased solar photovoltaic (PV) demand.
The bioenergy catch-all challenge
The bioenergy label needs to be sizable to cover its varied elements. At one end of the scale are the large former coal fired power stations that now burn wood pellets; at the other are small-scale initiatives, which might include new fuel development in a laboratory or cottage-industry style seaweed farming.
The bioenergy sector has been evolving for over three decades, and the number of methods has multiplied and grown in sophistication. They include combustion of more stable forms of biomass, such as woodchips, manure and other agricultural waste products.
This process is tried and tested, and the waste sources are relatively consistent – it’s the burning of solid municipal waste (or processing it in other ways, such as oxygen-free pyrolysis, used in particular for plastics), which is the least predictable and stable fuel source, and therefore the one that makes insurers most wary.
Despite these reservations, development in this part of the sector is bound to continue, as these plants have the potential to address three major global problems. First, they help to recycle or process domestic, agricultural and industrial waste that would otherwise go to landfill. Second, they help tackle climate change and offer more renewable energy sources in markets where fossil fuel-based generation is being scaled back. And third, they can help to reduce global dependence on fossil fuel imports – a problem that’s been glaringly exposed by Russia’s invasion of Ukraine.
There is progress, but it remains a mixed picture. The Renewable Energy Association has urged the UK government to commit to bioenergy providing 16% of the primary energy supply by 2032, arguing that the sector is an essential part of the UK’s net zero goal. Some may believe the 16% figure is ambitious, but the broader point is that there needs to be a pool of energy solutions.
The Renewable Energy Association has urged the UK government to commit to bioenergy providing 16% of the primary energy supplied by 2032
Biomass - an imperfect solution
Biomass plants power millions of homes and businesses, but they remain under scrutiny and may be subject to more planning restraints.
Using wood pellets is a ‘greener’ solution compared to fossil fuels, but it is not without controversy or indeed, emissions.
Matters would certainly be improved by using feedstock from the local area, but there are problems in guaranteeing supply. This leads to the need to transport the materials, pushing up costs and increasing emissions yet further.
Another factor is that turning over land for the production of plants and trees suited to biomass may well become more problematic. The soaring price of food has also raised awareness of land use. With wheat and cooking oil being particularly affected by the Russia-Ukraine war, no country can rely on cheap imports as they did in previous years – as such, growing crops for biofuels may become less feasible.
Nevertheless, there is ample room for optimism. Many countries are committed to reducing emissions, with governments and major energy companies making investments to do so. There are other advantages since the sector leads to the recycling or processing of domestic, agricultural and industrial waste that would otherwise go to landfill. The bioenergy sector is also creating an increasing number of jobs, and the growth we are seeing is also of benefit to the construction sector.
Insurance underpins sector development
Any developer considering a bioenergy project needs insight into the insurance market, and this is where a broker’s guidance can be invaluable. Rates have long been higher than in many other areas of construction because of the risks posed.
Some projects are still relatively unproven or even at the very early prototypical phase. They’re dealing with significant variability in feedstocks, and many also involve potentially complex combustion or gas production processes.
Developers will need to work closely with their broker on an intensive risk management programme to secure the right insurance. Meanwhile, developers and contractors will likely have to answer some daunting questions around their track record – what technologies and equipment they’ll be using in the facility and which systems they’ll be implementing to prevent serious accidents, particularly fire.
Indeed, fire risks are arguably the biggest concern in relation to these projects. From waste burning in fuel bunkers in the yard to flammable materials being stored incorrectly, to battery fires from discarded lithium-ion batteries, to self-combustion explosion events and explosives getting trapped in combustion chambers – fire risk is always an imminent danger at these facilities. A case in point was the fire last year at the MGT Teeside biomass plant, caused by smoldering fuel.
Some firms are now far warier of the bioenergy sector. In the past, they may have signed up to EPC contracts with fixed liabilities in the form of compensation if they did not meet their targets during the commission phase. This can be particularly problematic if there are very stringent insurance conditions and they’re affected by the labour shortages that continue to beset the construction industry.
So, developers that choose bioenergy are likely to be highly specialist and have the right teams in place to satisfy all stakeholders, including insurers. While insurers are currently cautious, bioenergy is not the first challenging sector the market has covered, and it won’t be the last. As the sector’s many nuances develop, risk management best practices will be established and insurers will grow more comfortable with bioenergy’s risk profile.
Overall, there is plenty of buy-in to bioenergy, despite its challenges. Whether a sticker on a vehicle saying it’s powered by hydrogen or the aviation industry starting to increase its use of biofuels, bioenergy will only gather momentum. This is a market with strong prospects for a slice of the action. Now is the time to stay up to date on what is happening in the fast-moving bioenergy sector and to make best practice the highest priority.
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