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BYO Biomass – Bioenergy Production In The Agribusiness Sector
Corrs Chambers Westgarth Jeremy King and Lucas Bediaga Australia May 28 2013 World demand for energy could triple this century and the pressure on governments to find new energy sources is intense. While biomass accounts for just one percent of Australia’s electricity generation now, it may become a more valuable source of renewable energy in the future. If that happens, Australia’s agribusiness sector, with its vast biomass resources derived from agricultural by-products, could benefit from a new suite of opportunities. Several companies in Australia have already proven that converting agricultural waste to energy can be used to offset soaring fossil fuel costs. And while bioenergy projects have particular hurdles, there is potential for other agribusiness operators to find similar savings in operational costs. How can biomass be used in the agribusiness sector? Biomass is any organic matter, including wood, agricultural residues and organic waste, that can produce bioenergy – a carbon neutral and renewable energy form. Biomass can be converted into a variety of bioenergies including electricity, heat and fuel. Australian agribusiness offers a rich source of biomass production. Biomass materials include agricultural by-products such as stalks, husks, nut shells, logging and mill residues, marc (the residue of grapes that have been pressed for winemaking) and bagasse (the residue of sugar cane left after the extraction of juice). [1] This can ascribe a value to materials which may otherwise go to waste. If the biomass [2] is used to produce electricity, a farmer may be eligible to participate in the Renewable Energy Target scheme. Under the scheme, a farmer creates a Large-scale Generation Certificate (LGC) for each MWh produced at the power station. These LGCs can then be sold to entities which have an obligation to surrender them under the Renewable Energy Target scheme. A farmer may also obtain funding under trade programs such as the Clean Technology Food and Foundries Investment Program. [3] Grants range from $25,000 to $10 million and are offered on a co-investment basis. Another program is the Emerging Renewables Program [4] which has provided financial support to conduct studies into biomass feasibility. [5] Other funding and grants may also be available from State governments. [6] There are several Australian examples where individual companies have successfully implemented a biomass solution to increasing energy costs. Australian Tartaric Products (ATP) is constructing a 0.6MWe biomass boiler. It will use 90,000 tonnes of grape marc and other onsite waste streams as the feedstock. ATP decided to install the biomass boiler due to large and increasing power bills and increased competition from China. It is estimated ATP’s annual energy costs will drop by $1.52m. ATP also received funding from Regional Development Victoria ($1.8m), Clean Technology Food and Foundries Investment Program ($1.71m) and Australian Industry Group ($40,000). [7] Morton Seed and Grain (MSG) is constructing two biomass boilers. The boilers will use oat husks to generate both steam and electricity to run oatmill operations. The project is estimated to save MSG $900,000 per year in energy costs. MSG received funding from Clean Technology Food and Foundries Investment Program ($917,500). [8] Sucrogen currently has seven cogeneration plants which have a total capacity of 198MW . The largest two plants are located in the Burdekin region and provide 68MW and 49MW of electricity. The plants use bagasse as feedstock. Excess electricity of around 123MW is exported back to the grid, which can meet the annual power needs of almost 30,000 homes. [9] Reid Bros Sawmill (RBS) constructed a 1MWt bioenergy plant at their sawmill. The plant burns 70-80 tonnes of wood milling waste each week. This has saved RBS $300,000 per year compared to the LPG they previously used. They have also now installed an organic rankin cycle system to convert waste heat into electricity. [10] If bioenergy production is not viable for an individual farm, plantation or vineyard, it may be that an agricultural cooperative could invest in the technology for the benefit of members’ surrounding landholdings. Those members of the cooperative could receive the additional benefit of being able to sell their biomass to the power plant as feedstock. What’s hampering bioenergy expansion? Bioenergy in Australia is facing several challenges that are additional to the usual issues associated with greenfield power projects. High capital and maintenance costs. A basic bioenergy plant which produces 8MWt and 0.6MWe can cost $7.5m. There are also material costs involved in operating and maintaining a bioenergy plant. If a bioenergy plant is going to be co-located on a farm, plantation or vineyard, it is unlikely to have a huge installed capacity yet there will need to be substantial savings on energy costs and waste disposal costs in order to offset the capital and maintenance costs. Production of feedstock may be seasonal. Biomass from agricultural by-products will logically be collected during the harvesting period, and is impacted by issues of agricultural yield. Therefore, biomass from agricultural by-products will not be a year-round source of feedstock. This may require farms, plantations or vineyards to have dual sources of energy in place; one from biomass production and the other through more traditional means. The seasonality of feedstock production could be mitigated by storing excess feedstock for use throughout non-harvesting periods. [11] Transportation costs. Biomass is typically dispersed over various locations and there is a need to transport the biomass to the power station efficiently. This can be expensive – especially for larger power plants. However, high transportation costs can be mitigated by optimising the logistics surrounding crop harvest and also waste management practices. Further, to date, it hasn’t been possible to produce utility scale electricity from biomass. The required spot price for a 500kWe biomass plant to be commercially viable is around $310/MWh. [12] This is compared to the wholesale electrical cost which, for the purposes of discussion, is around $60/MWh. Expanding a biomass plant to utility scale (20MWe) would only bring down the required spot price to about $160/MWh. [13] However, there are examples in Queensland where large cogeneration plants running on residue biomass produce enough electricity to power 30,000 homes for a year. [14] What is clear is that biomass can be used to generate energy in the right circumstances: where the regulatory environment is stable and supportive of the technology; where feedstock is cheaply and readily available; where transmission distances are relatively low; and where the cost of alternative sources of power are high. While there is a great deal of negativity around Australia’s green energy sector, and the difficulties facing Australia’s agricultural sector (in terms of raising finance, international competitiveness and productivity), bioenergy offers new opportunities that could produce positive outcomes for energy security without compromising on food security. Continue reading
Is The UK Really Heading For A Property Bubble?
Homeowners are cheered by positive house price indices but experts say recovery in the property market is still slow outside London. by Michelle McGagh on May 28, 2013 at 14:36 A lack of new properties is pushing up house prices but rises in London have skewed the market, which means that contrary to some reports, the UK is still a long way from a replay of the 2007 property bubble. Followers of house price indices will have been cheered by news of a recovering market with commentators making encouraging noises about how this year will play out for property. Four years of historically low interest rates and more recently the government’s Funding for Lending scheme – which has given lenders access to cheap funds – have pushed mortgage rates to all-time lows and increased competition in the home loan market . Lenders are falling over themselves to take on new business but there is a snag; the supply of property on the market is not keeping up with demand which has pushed up the prices of property available. Data from property analytics company Hometrack shows the number of sales agreed is outstripping supply. Nationally new supply grew 2.8% this month while sales agreed jumped 8.2% higher. This lack of supply is the key driver of increases in property prices but there is also disparity in the way indices record house price movements. Property website Rightmove has the most optimistic outlook on the market, stating that the average UK house price hit a record high of £250,000 this month. However, Ray Boulger of mortgage broker John Charcol, said the Rightmove data was the ‘least reliable’ of the indices as it was based on asking prices rather than actual prices achieved. The more reliable house price indices from Nationwide and Halifax paint a more subdued picture of the UK housing market. Nationwide’s data showed a typical home actually declined in value by 0.1% between March and April, but was 0.9% higher than April 2012. It estimated a typical home is now worth £165,586, far below the £250,000 estimated by Rightmove. Halifax’s index puts the average house price at £166,094, more in line with the Nationwide estimate, but its figures show house prices increased by 1.1% in April. All house price indices operate on their own calculations but one key factor that cannot be ignored is the Bank of England’s mortgage approval statistics, which is a leading indicator of completed house sales. Between February and March this year mortgage approvals increased 3% following two successive monthly falls, but approvals in the first three months of 2013 were still 1% lower than in the previous three months. No bubble yet If demand continues to outstrip supply then house prices will continue to increase but according to the experts, the UK is still a long way from a property bubble. Boulger has revised up his predictions for growth in property this year from 3% to 5% and tentatively expects the same in 2014 but said: ‘We are not near bubble territory yet, we are flat-lined and in real terms house prices have gone up less than inflation.’ However, he added that sellers were being ‘ambitious’ in their asking prices and that as consumer confidence grows in the property market, higher house prices will become ‘a self-fulfilling prophecy’. Craig McKinley, mortgage director at Halifax, part of the Lloyds Banking Group, said the UK was ‘very far from a property bubble’ and predicted growth of between 0% and 2% this year, with house prices expected to rise in 2014. He said that consumer confidence and the economy were still too weak to cause a property bubble. Lenders would also be constrained by new rules coming into force next year that will force them to give a lot more information to borrowers. ‘We are not seeing evidence of a UK property bubble,’ he said. ‘Next year will be when we get a national recovery but we are not expecting runaway growth because the economy and consumer confidence remain weak.’ Philip Croggan of The Economist is more optimistic in his outlook for house prices and said that low interest rates usually translate into a property bubble. ‘In a year or two we will have an equity [stock market] bubble and I would not be surprised if we have another property bubble,’ he said. ‘London house prices are still going up, the yield on commercial property is good and when we have low interest rates it generally turns into a property bubble. ‘In a year or two there will be someone trying to sell you a property fund on the back of two years of [house price] growth.’ Two-speed market As Croggan points out, talk of a property bubble has been centred around price rises in London and the South East but rises in those areas do not reflect the rest of the country . Hometrack figures show that average prices increased 0.3% in April but this figure was skewed by the 0.7% rise in Greater London. Out of the 10 regions Hometrack analyses, which excludes Northern Ireland, four saw no increase in prices in April, the North East saw a 0.1% fall, and the remaining four regions did not see a rise above 0.2%. McKinley said there was ‘definitely a two-speed market of London and the South East versus the rest of the country’ and that in some areas prices were still declining. ‘London and the South East have been affected by external factors like overseas interest and wealthy individuals in the eurozone looking to protect their money,’ he said. ‘There is a lot of foreign money in London that is not in the rest of the country.’ Future increases London-style increases may be a long way off for the rest of the country but there is confidence that property values will continue to tick up next year thanks to the introduction of the government’s Help to Buy scheme. From January 2014 the scheme will offer interest-free loans to buyers and guarantee the mortgages of first-time buyers with 5% deposits, meaning the market will be boosted with more eager buyers. The International Monetary Fund (IMF) has warned that the rush of buyers will be counter-productive . In a report on the UK economy, the IMF said: ‘This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing.’ Boulger shared the IMF’s concerns and said the Help to Buy scheme could cause a bubble if the government does not control it or fails to provide an increase in new build homes. Without the housing stock to soak up the increased number of buyers he said the Help to Buy scheme could ‘stoke up house prices to an unhealthy level’ and warned the government may have to cut the three-year long initiative short. However, McKinley holds the opposite view and does not think the Help to Buy scheme will mark the beginning of a property bubble. ‘We do not see that happening in the short-term but it could have an impact over the longer term ,’ he said. ‘We are seeing new builds increase but the question is whether they are building fast enough. ‘We are not overly concerned [that Help to Buy will increase property prices]. There will be more buyers but not exponentially more and they will still need a deposit and credit assessments, which are becoming stricter.’ Continue reading
Sustainable Agriculture — No Silver Bullets, But Maybe Some Silver Buckshot
by Elton Robinson in Farm Press Blog Agriculture’s future challenge is to provide enough food to feed 9 billion people by 2050. Environmental groups are sure to want more rules and regulations, but these rules cannot handcuff agriculture’s freedom to innovate, say experts. Producing enough food to feed 9 billion people by 2050 could be the biggest test sustainable agriculture has ever faced. The difficulty is balancing the preservation of natural resources with the technological development needed to meet these goals. To get it done, David Cleary, director of agriculture for The Nature Conservancy, says there must be collaboration between agriculture and environmentalism. During a panel discussion on sustainability at Monsanto’s Media Days, Cleary clearly understands that, well, we’re all in this together. “It is critical for the health of the world’s food system that the American agricultural system maintains yield and productivity gains over the past 40 years to 50 years,” Cleary said. “It’s also critical for the health of the world’s food system that the United States continues to play its historical role as the biggest center for technological innovation.” On the other hand, Cleary is unapologetic in blaming agriculture for not paying enough attention to the environment in the past. “Historically, yield and productivity gains have been bought at the expense of topsoil. You can extend that to water as well. The science is pretty unambiguous if you’re looking at hypoxia in the Gulf of Mexico, or algal blooms in the Great Lakes. There is an agricultural contribution to that. “Looking forward, I think there has to be some kind of grand bargain between agriculture and the environmental side of the equation. There’s a huge amount of devil in the detail. It’s not as though there is a single silver bullet. But there may be some silver buckshot. There are solutions out there that we can deploy.” Rick Tolman, chief executive officer, National Corn Growers Association, cited recent studies indicating that U.S. corn producers have discovered and implemented quite a few nuggets of agricultural sustainability over the last 30 years. “Since 1980, the land that it takes to produce one bushel of corn has declined by 30 percent, the soil loss per bushel has declined by 67 percent, the water used to irrigate a bushel of corn by 53 percent and the energy use to produce a bushel of corn has been reduced by 43 percent. “We have made continued improvement, we still have room to grow and improvement will continue. It’s been a great story of sustainability and it has been done scientifically,” Tolman said. The next 35 years will demand that agriculture continue to shrink its environmental footprint while doubling food production. Environmentalists are sure to want more rules and regulations. Agriculture – the freedom to be innovative. “We need to be very careful that we don’t take away the solutions to the problem,” Tolman said. “Some well-meaning proposals would take away some of the tools that have allowed farmers to intensify agriculture.” Hopefully, the twain shall meet in a reasonable place for everyone. Continue reading
