Opportunity Knocks

Canada’s new regulations for reducing greenhouse gas (GHG) emissions from coal-fired electricity were released by Environment Minister Peter Kent on September 5, 2012. As a result of a year of the electrical industry and the provinces lobbying both Environment Canada and the Prime Minister’s Office, the new regulations are weaker than those initially proposed in 2011. Despite this, Canada’s wood pellet producers have an opportunity to grow the domestic pellet market by supplying coal power plants and by helping them to meet their emissions requirements.

The final regulations for coal-powered plants stipulate they can emit no more than 420 tonnes of greenhouse gases per gigawatt hour of electricity generated, which, according to Environment Canada, is the emissions intensity level of Natural Gas Combined Cycle technology. This number is significantly higher than the 375 tonnes per gigawatt hour originally proposed.

The new regulations also stipulate that coal-powered plants must be shut down after 50 years of operation. It was 45 years in previous draft regulations. Power stations commissioned before 1975 will have to shut down after 50 years or at the end of 2019, whichever comes first.

The provinces have the opportunity to opt out of the federal regulations if they adopt provincial regulations that deliver an equivalent environmental outcome. Alberta, Saskatchewan, and Nova Scotia – the three largest coal-consuming provinces – are all pursuing equivalency agreements with the federal government. Ontario – once Canada’s largest coal consumer – is phasing out coal completely by 2014.

Coal-powered plants have several options to reduce emissions: they can implement carbon capture and storage (CCS) technology or the plants may co-fire with natural gas, biomass, or a combination of both. Under the regulations, only emissions from fossil fuels are considered. Thus emissions from biomass do not count toward the 420 T/MWh cap. Interestingly, the coal power industry has indicated interest in combined co-firing of coal, natural gas and biomass.

So there is now an opportunity for Canada’s pellet producers to convince the coal-power industry of the benefits of wood pellets. To that end, the Wood Pellet Association of Canada is working on two projects: (1) a $200,000 biomass co-firing study in co-operation with the Canadian Clean Power Coalition (funded in part by B.C.’s Forestry Innovation Investment) to help the power industry understand in detail, the economics of biomass co-firing; and (2) an $800,000 wood pellet emissions study in co-operation with Environment Canada (funded by the Government of Canada) to gain actual emissions data for wood pellet co-firing on an industrial scale to be used in support of government policy.

So how big is this opportunity? By 2015, when the regulations come into effect, it is expected that there will be 34 operational coal-power units in Canada with 9,200 MW of capacity, consuming some 44 million tonnes of coal annually. Of these, nine units will be affected by the new regulations within the first five years the regulations are in force. (Table 1)

Coal power units in Table 1 will use some 5.6 million tonnes of coal annually. Assuming an average coal emissions factor of 1,050 tonnes of CO2 per MWh must be reduced to 420 T/MWh, this means that coal consumption must be reduced by 3.3 million tonnes annually (assuming 25 GJ/T), and if replaced entirely by wood pellets (assuming 19 GJ/T) would require 4.4 million tonnes annually. To put this into perspective, current annual Canadian wood pellet production is only about 1.6 million tonnes.

Gordon Murray is executive director of the Wood Pellet Association of Canada. He encourages all those who want to support and benefit from the growth of the Canadian wood pellet industry to join. Gordon welcomes all comments and can be contacted by telephone at 250-837-8821 or by e-mail at gord@pellet.org.