In this book, we talk about opportunities and challenges when it comes to harnessing the biomass potential. In other words, we consider ways through which bioenergy can contribute to global sustainable energy systems. What types of energy services can be provided and how? What needs to be addressed when implementing bioenergy systems? We do not try to be comprehensive but we do move about in the different realities of Europe and developing countries, where needs and demands can mean different things though the bioenergy benefits can be quite similar. We address resource management, markets, technological and institutional development, and policy issues.

Our major task is to show accomplishments and indicate possible directions. We also provide views of different stakeholders so that we can better understand their concerns and the specific roles they can play in the implementation of solutions. We are not proposing a business plan, but we are perhaps suggesting that we should be working on a strategic plan from which various business plans can be generated. Why do we need a broad framework to move forward? — Because the tasks are many, and the potential impacts, very significant. There is need for a multisectoral coordination of action, and that requires appropriate plans for timely and speedy moves, which prove effective in both short and long terms.

We are asking questions such as what the main forces enhancing bioenergy utilization are. Where and how are opportunities being sized, and how can ongoing initiatives be enhanced? What policies are being applied to foster biomass techno­logies, and how can they be improved? How can the environmental and social benefits of bioenergy be better highlighted and valued, in order to increase the bioenergy attractiveness? What are the challenges ahead and how should they be framed towards effective action? Thus, we are now beyond the question of whether biomass is an attractive and effective energy carrier. Our focus is not on the problems, but on the opportunities. We identify demands and questions related to next steps in developing bioenergy systems, and try to answer some of them by indicating possible solutions.

This chapter provides an introduction to the role of bioenergy in perspective and as it stands today, and a discussion of how bioenergy prospects can be realized and framed towards sustainable development. Throughout the book, the demands and prospects are further discussed, the role of accumulated knowledge and experience reviewed, and new tasks identified.

Chapters 2 to 4 explore policies to promote bioenergy utilization. In Chapter 2, Bauen discusses the policy framework in the European Union (EU), and gives exam­ples of how these policies are reflected in national action. Chapter 3 describes the Swedish experience, and ways through which bioenergy utilization can be enhanced in the country in the near future. In Chapter 4, Rakos addresses the issue of public acceptance to the introduction of district heating systems in Austrian villages, providing a concrete case to exemplify the effect of policies and technology dissemi­nation at the local level.

Chapters 5 to 7 are focused on the management of biomass resources and enhancement of biomass production. Rijal addresses relevant issues in the context of Himalayan Mountain Forests while Braunbeck et al. discuss ways to enhance the biomass base of cane production in Brazil. In Chapter 7, Silveira and Andersson discuss the integration of forestry and energy activities in Lithuania where Swedish experiences are providing the know-how basis for helping explore the local bioenergy potential.

Chapters 8 to 11 discuss ways to promote bioenergy utilization. Sandberg and Bernotat assess the potential for new district heating systems in three counties in Sweden. In Chapter 9, Walter et al. discuss how cofiring natural gas and biomass can be an interesting alternative both technically and commercially. Wijayatunga et al. show a feasibility study done for Sri Lanka where biomass is contemplated as an alternative for the provision of electricity. In Chapter 11, Thran et al. describe the international work within the EU aimed at standardization of biofuels as a tool to boost markets. These chapters are particularly relevant for the methodologies they present.

Chapters 12 to 16 discuss the Clean Development Mechanism (CDM) to the Kyoto Protocol as a means of promoting bioenergy projects. Economic advantages, development priorities and climate change mitigation are addressed in Chapter 12. The emphasis, however, is given to aspects of project implementation. In Chapter 13, Kossoy discusses the CDM in a business context, particularly from a financial point of view. Chapters 14 to 16 provide examples of CDM projects in Brazil and Ghana.

Chapter 17 closes the book with some final considerations on the trade-offs involved in the choice of energy options, and the need for comprehensive strategies and systems integration to achieve the sustainability goals. Some considerations are also made about the platforms available for enhancing synergies and the ultimate value of energy projects. How can so many opportunities be combined effectively towards the realization of the bioenergy potential and sustainable development? What role can the developing countries play at a global level?

Erik Ling and Semida Silveira

3.1. BIOENERGY IN TRANSITION

The next ten years will be decisive in terms of turning biomass into a major modern and reliable energy supply source globally. The ongoing development of bioenergy technologies and the know-how and liberalization of energy markets, allied to increasing international trade with biofuels, and policies supporting emissions trading and green certificates are likely to create favorable conditions for a larger utilization of bioenergy.

Also for countries such as Sweden, where bioenergy already occupies a very significant place in the total energy mix, the conditions for the development and utilization of bioenergy are changing rapidly. In this chapter, we look briefly at what has been accomplished in Sweden in the past few decades, and discuss three major drives that both open opportunities and bring new challenges to the bioenergy segment. These drives need to be considered in the design and implementation of robust strategies for the sector. They refer to the internationalization of the bio­energy segment, integration of bioenergy systems with other production processes, and mainstreaming of bioenergy as a major energy source.

Further, we discuss more specific tasks that the Swedish bioenergy segment will have to deal with in the near future. These tasks are related to the energy supply source, integration within the forest industry, reduction of C02 emissions and development of a competitive bioenergy industry. The matrix format of our analysis is illustrated in Table 3.1. Though this discussion is focused on conditions observed in Sweden where bioenergy has evolved closely linked with forestry activities, we believe that it serves as a reference for other countries which are either contemplating the utilization of bioenergy or wanting to benefit from the formation of biofuel markets.

3.2. BIOMASS UTILIZATION IN SWEDEN

During the last few decades, the Swedish energy sector has undergone substantial changes. In short, nuclear power and biomass have become major energy sources,

31 Bioenergy — Realizing the Potential

© 2005 Dr Semida Silveira Published by Elsevier Ltd. All rights reserved.

while the utilization of fossil fuels was radically reduced (Silveira, 2001). Total energy supply went from 457 TWh in 1970 to 616 TWh in 2002. However, in 1970, fossil fuels corresponded to 80 per cent of the total energy supply in the country compared with 38 per cent in 2002 (Swedish Energy Agency, 2003).

Sweden has reached remarkable progress in the utilization of renewable energy, not least in comparison with other OECD countries. In 2002, almost one-third of the total energy supply in the country came from renewable sources, mainly hydro­power, biomass and windpower. As a result of focused attention on the national energy potential throughout the last few decades, biomass has attained a particular place in the Swedish energy system. Today, it corresponds to approximately one-fifth of the total energy used in the country, and is the number one energy source outside of the transport sector1 (Swedish Energy Agency, 2003).

Figure 3.1 shows the development of the biofuel utilization in Sweden. Solid biomass, peat and waste supplied 98 TWh of energy in 2002, which compares with about half as much in 1980. Biomass is used in the forest industry, district heating and single-family houses for provision of heat and power through a variety of generation and end-use technologies. Despite the progress already achieved, the existing biomass resource base allows further development of bioenergy in the country. National estimates have indicated that an annual energy potential of approximately 160 TWh could be reached by 2010 using Swedish biomass sources only (Lonner et al., 1998). [2]

Taxes and investment grants have played a decisive role in enhancing the competitiveness of bioenergy in Sweden (Bohlin, 2001). Fossil fuels have been taxed in the form of CO2 taxes, sulfur taxes, NO* taxes and the general energy tax[3]. Investment grants have also been provided for the establishment of bioenergy plants. Since energy and environmental taxes have distinguished between types of users and energy carriers, certain segments have been particularly encouraged. This has been the case for district heating. In 2002, biomass responded to 35.5 TWh, or approximately 65 per cent of the total district heating consumed in Sweden, compared with a very marginal contribution two decades earlier.

The share of district heating in Sweden is high by any international comparison. Nevertheless, there is a significant potential to use more district heating based on biomass, if such systems can be established in areas with more sparsely distributed heat demand. One-third of the Swedish single-family houses are still being heated with electricity. Further development of the district heating system can help release electricity from the heating system for use elsewhere, while also making the country’s total energy system more efficient. The conditions through which this may become possible are further discussed by Sandberg and Bernotat in Chapter 8.

The conversion of heating systems away from electricity in single-family houses has occupied the attention of energy planners in Sweden for a long time but the progress achieved has been limited. Besides convenience to end-users, electricity prices have been relatively low in the past, while initial investments to shift systems are high for a household. Getting a bioenergy equipment installed has proven time consuming for potential users who are not familiar with the new technologies, biofuel distribution chains, permissions needed and incentives available. Beyond that, users have been reluctant to install bioenergy systems due to the more intensive maintenance required in comparison with fossil — or electricity-based heating systems. Meanwhile, heat pumps have gained popularity. Today, however, bioenergy is probably the most cost-efficient alternative for heating single-family houses in Sweden. The market seems to have reached a critical mass of installed units to prove this and, with further incentives being provided, bioenergy use in single-family houses is bound to increase.

The forest industry is the major producer and user of bioenergy in Sweden. Of the 51 TWh of biomass used in the industrial sector in 2002, about 80 per cent were used in the pulp and paper industry. However, this should not be understood as a result of energy policy incentives, as there are synergies that favor bioenergy utilization in the sector. Pulp and paper production is very energy intensive, and the annual use of energy in the sector can vary significantly from year to year due to variations in markets for forest products.

Though Swedish policies have been quite successful in enhancing the use of biomass for heat production, the same cannot be said about the fuel mix in power generation and transport. Only 6TWh of electricity and 0.5 per cent of the total amount of fuel used in the transport sector came from biomass in 2002. When it comes to electricity, the same incentives provided for heating were not considered possible. It is increasingly difficult for Sweden to tax electricity generation very differently from neighboring countries due to the integration of electricity markets. Moreover, it is believed that the competitiveness of energy-intensive segments of the Swedish industry would be severely affected if they were obliged to pay electricity prices much higher than today. For that reason, these sectors have been exempted from the various taxes that might otherwise have favored a fuel shift.

As for the transport sector, the main barrier to change has been the lack of alternatives, that is, a competitive renewable alternative to fossil-fuel-based trans­port. A competitive alternative has to cover the whole chain from biofuel produc­tion to biofuel adapted vehicles, to infrastructure for storage and distribution. However, ethanol has already been introduced in Sweden mixed with gasoline. Two factories are producing 57 000 m3 of ethanol for use as transport fuel in Sweden. Research on alternative motor fuels has received continuous support since 1975 (Zacchi and Vallander, 2001). A pilot plant to produce ethanol from lignocellulosic materials such as agricultural wastes, wood and municipal waste has been established recently.

Christian Rakos[4]

4.1. DISTRICT HEATING IN AUSTRIA

Energy from biomass provides about 13 per cent (130PJ) of all Austrian primary energy consumption today. The greatest part of this bioenergy use (60 per cent) can be attributed to traditional stoves and boilers fired with wood logs. Small district heating plants have, however, gained increasing importance in the last 20 years as providers of domestic heating in rural areas. These plants use wood chips, industrial wood wastes and straw as fuel, and provide about 5PJ of energy per year. By 2001, more than 600 Biomass District Heating Plants (BMDH) had been established in the country.

The advantages of biomass district heating as compared to traditional heating systems were well known in Austria. BMDH would eliminate fuel handling at the individual level, allow the provision of continuous heat, and reduce emissions sig­nificantly as the individual heating systems were predominantly old and technically poor. Despite these advantages, the introduction of BMDH was by no means an easy process. It was only successful due to a unique combination of top down policies and local bottom up initiatives. Top down policies included financial incentives and the establishment of organizations focused on the management of the introduction process.

The Austrian experience in introducing district heating constitutes a relevant case study on technology dissemination. It allows for a close observation of the interac­tion between driving forces for innovation and barriers that need to be overcome in the process. It turns out that a combination of technological performance and socio­economic factors has been the key to the successful dissemination of district heating

in Austria. As part of a systemic management, technology introduction was accomplished paying particular attention to the social system in which it was embedded. Supportive policies have played a critical role and included a multitude of measures. Particularly in the early phase of technology diffusion, dedicated institutions managed the day-by-day initial difficulties and accelerated the learning processes through continuous communication and feedback.

IEA (2003) estimates that 13.5 per cent of the total 10038Mtoe of primary energy supply in the world came from renewable sources in 2001. As much as 79.6 per cent came from fossil fuels, and 6.9 per cent came from nuclear power. Over the last thirty years, the average increase in the utilization of renewables went hand in hand with the increase in energy supply, or around 2 per cent per year (IEA, 2002). Unfortunately, this implies a faster absolute increase in the use of fossil fuels. In fact, the absolute use of fossil fuels increased Five times more than the use of renewables in the last three decades.

Since 1990, the primary energy supply in the world grew by 1.4 per cent per year while the growth of renewables was 1.7 per cent per year, indicating not only a slower increase in the use of energy but also a slightly more rapid increase in the use of renewables when compared with other sources. Nevertheless, fossil fuel utilization is still increasing faster in absolute terms as renewable sources are still at low levels. Thus much remains to be done in order to shift world energy systems towards sustainable solutions.

Figure 1.1 illustrates the shares of various renewables in the world energy supply. New renewables such as solar, wind and tide comprise a very small fraction, corresponding to less than 0.1 per cent of the total energy supply of the world and only 0.5 per cent of the renewables. Biomass is by far the most significant renewable source, representing 10.4 per cent of the world total. It is worth pointing out

Liquid biomass

0.7%

Renewable

Gas from

Figure 1.1. World renewable energy supply by source, 2001. Source: IEA (2003).

that while 87 per cent of the biomass resources are used in developing countries, 86 per cent of the new renewables are found in OECD countries (IEA, 2002). In any case, given the small amounts of the latter, developing countries are, in fact, much larger users of renewables than industrialized nations. In addition, it is important to remember that, though making a relatively small contribution to the world’s total supply, renewables allow energy to arrive at remote and isolated locations, thus often making a crucial contribution.

Biomass is mostly used in solid form and, to a lesser extent, also in the form of liquid fuels, renewable municipal solid waste and gas. However, recent trends show a faster increase in the use of liquid biomass and municipal waste than solid biomass. In fact, when compared with other renewables, solid biomass showed the slowest growth since 1990. While solar and wind energy supply grew by 19 per cent, solid biomass grew by only 1.5 per cent per year during the 1990s. On the other hand, non­solid biomass and waste such as municipal solid waste, biogas and liquid biomass grew by 7.6 per cent per year. Thus some opportunities are being sized particularly as a result of efforts to find new alternatives to fossil fuels in the transport sector and in waste management. Nevertheless, considering the resource base that is readily available and the great potential to grow biomass, there is much more that can be done to enhance the role of bioenergy.

In the so-called rich and green scenario developed by IIASA/WEC, biomass could account for 20 per cent of the total amount of the world energy in 2100 (Nakicenovic et al., 1998). Obviously, this will not happen by itself, and the slow growth of solid biomass provides an illustration of that. This scenario includes significant technological progress and strong international cooperation around environmental protection and equity issues. It is also important to point out that biomass utilization in the IIASA/WEC scenario differs from the present conditions especially when it comes to technology. In particular, significant changes in the way
biomass is being utilized in many developing countries today will have to be accomplished. We are basically talking about going from traditional to modern and efficient technologies that can provide high-quality energy services, many of which require access to electricity.

There are significant regional differences when it comes to the availability and use of biomass resources in the world (see Figure 1.2). In many regions of developing countries, biomass is the only accessible and affordable source of energy. In Africa, for example, biomass corresponds to half of the total energy supply. Most of the biomass used in the continent is being harvested informally and only a small part is commercialized, with biomass markets usually operating in urban areas only. In many parts of Asia and Latin America, on the other hand, modern and commercial bioenergy options are readily available and significant. The Brazilian ethanol programme is noteworthy as the single most important accomplishment in providing an alternative fuel to the transport sector.

In addition to woodfuels, other biomass fuels such as forest and crop residues as well as animal waste are common sources of bioenergy in poor countries, where also traditional technologies predominate. Besides the amount of biomass that is readily available in the form of residues, and the potential for improved efficiency in technologies being presently applied, many countries still have land available for energy plantations. Integrating biomass harvesting for energy purposes with forestry and agricultural activities is another option. In many regions, the use of biomass still needs to become sustainable, this being true both where traditional and modern technologies are applied.

Non-OECD

Former Europe M|ddte

— 0.1%

OECD

China

20

Africa 23.9%

Asia*

Latin

America

‘Asia excludes China

Figure 1.2. Regional shares of bioenergy supply. Source: IEA (2003).

Figure 1.2 shows how the utilization of biomass is distributed across the globe. What it does not say, however, is how large the actual potential for harvesting biomass resources is in the various regions. In fact, the most promis­ing areas are found in the tropical regions. The best average yields per hectare have been observed in sugarcane plantations in Zambia which have reached 1350GJ/ha/year (global average 650 GJ/ha/year), followed by best-performing eucalyptus plantations in Brazil with 1000 GJ/ha/year (Brazilian average 450 GJ/ha/year). For comparison we can mention that registered US record yields for maize are slightly over 400 GJ/ha/year while the average is about half, and the high estimates from American commercial forests are less than 100 GJ/ha/year (IPCC/SAR, 2001).

A large part of the biomass in developing countries is used in households for cooking and heating. But biomass is also an important energy source in many industries, for example, in the production of ceramics and beverages, and in drying and processing food. These same industries provide an important demand base and starting point for realizing bioenergy projects in developing countries, not least integrated with other established commercial activities. These opportunities are often forgotten for reasons such as lack of knowledge of how to develop bio­energy systems, nonexistence of supporting policies, lack of managerial capacity and conventional energy planning practices.

Only 13 per cent of the total biomass is consumed in the OECD countries, where it accounts for some 3 per cent of the energy supply. In fact, renewables as a whole correspond to only 5.7 per cent of the total primary energy supply in OECD countries, of which about half is being used to generate electricity. The use of solid biomass has had a positive development in OECD countries, showing an annual increase of 1.8 per cent since 1990 as opposed to 1.5 per cent in non-OECD countries. As previously observed, the segments utilizing municipal solid waste and producing liquid biomass are the ones growing faster. While wind and solar energy have reached growth rates higher than 20 per cent per year, liquid biomass has grown at an annual rate of 84 per cent in the OECD. Certainly, all these large growth rates have to be considered with caution as the starting points for renew­ables have been quite low.

It is also worth noticing that, although the electricity demand is growing by more than 2 per cent per year in OECD countries, the electricity generation from renewables has only grown by 0.8 per cent per year since 1990. The participation of renewables in the total supply of electricity has decreased in absolute terms in many regions of the OECD since the late 1990s, for example in North America, particularly in the US. The European Union, on the other hand, has had a con­tinuous growth since 1990, thanks to supportive policies, not least those related to urban waste handling.

Biomass only corresponds to 1 per cent of the world electricity generation. More specifically, electricity generation from solid biomass has shown an average increase of 2.7 per cent per year and some 20 TWh have been added to the supply base of OECD countries since 1990, denoting a slight increase in the share of biomass for electricity generation in OECD countries. In fact, renewable municipal waste and biogas are becoming increasingly important in OECD countries. Though both are still at an initial stage, we should expect significant growth in these segments in the years to come. Heat production from biomass has also increased substantially, both in heat plants only and in CHPs, but available data series do not allow further inference.

Biomass currently supplies 3.5 per cent of the energy in the EU, which is equivalent to 45 million toe. However, the interest for bioenergy has increased rapidly both among members and candidate countries. Some EU countries have had outstanding performance in their national biomass programs, for example, the Netherlands, United Kingdom and Denmark, all of which started from very low levels in the early 1990s. Also countries previously outside the EU such as the Czech Republic and Hungary have been investing in bioenergy (IEA, 2003).

In the past few years, the EU has developed common guidelines and energy directives, which are expected to have a significant impact in the coming years, not least on bioenergy use (see also Bauen, Chapter 2). Provided the efforts being made to promote bioenergy succeed, the amount could increase from 45 to 130 million toe in the region by 2010-15. Bioenergy provides a great opportunity to address problems other than energy in the EU, such as decreasing populations in rural areas, employment in peripheral regions, and restructuring of agricultural policies including new uses for idle croplands and reduction of subsidies. A recent Europe­wide study indicates that as many as 900 000 jobs could be created by 2020 from investments in renewables of which 500000 are in agriculture to produce biofuels (ALTENER, 2001).

In developing countries, electricity generation from renewables has grown by some 3 per cent since 1990, following a parallel track with the increase in electricity demand in these countries at large. Thus the growth of renewables in electricity generation is larger in developing countries than in OECD countries. Certainly, most additions in the developing world come from hydropower, and only few countries are exploring other renewable sources systematically. Indeed, hydropower remains a major renewable option where potential is available. The conventional view favoring centralized energy generation may lead to large-scale projects, heavy financial burden on poor economies and negative environmental impacts. Yet many developing countries do have programs for small hydroplants.

Thus the truth about renewables is that there is a positive trend which may look impressive in relative terms but which is slow in absolute terms. This means that non-renewables not only remain very strong but are still mainstream. When it comes to biomass, the development has been slow in comparison with the new renewables. It can certainly be accelerated, bringing ancillary advantages to many countries, for example, rural development. To facilitate this process, there is a need for models that allow an effective and rapid assessment of local biomass potentials, while also providing guidelines to support project design and implementation. Certainly, there is no reason for allowing a very rapid move towards fossil fuels in developing countries where a significant untapped biomass potential exits. Reversing that trend is a major global challenge, and the introduction of bioenergy options definitely provides part of the solution.

Conditions for the implementation of different energy systems vary from country to country. For example, the natural resource availability, existing infrastructure and the types of services on demand are likely to define technology choices and system options (Roos et al., 1999). Policies and priorities may also imply more or less favorable conditions for given technologies and solutions, setting the development path, boosting or canceling opportunities. A technology breakthrough, major political or social events, as well as natural disasters may also influence choices significantly, thus affecting the direction of development.

Rather than trying to cover the whole spectrum of factors that may affect the evolution of bioenergy systems, we refer to three major drives that are likely to have a direct influence on the design of strategies and policies for bioenergy utilization in Sweden. These drives are internationalization of the bioenergy sector, integration of bioenergy systems with other production systems, and the mainstreaming of

bioenergy as a major energy source. We believe that these trends will also affect the development of bioenergy use in Europe at large, not least due to the present energy policies being applied in the region, and the recent accession of ten new countries into the European Union.

Table 3.1 shows how these drives relate to specific actions and opportunities when it comes to enhancing the resource base, further integrating bioenergy with forest industries, pursuing climate policies and business opportunities. We discuss each of these drives and groups of actions separately.

The scheme of a BMDH system is simple. A big furnace fueled with biomass heats water that passes through a pipe grid and supplies energy to heat individual houses in a village. Austrian villages with BMDH plants usually have between 500 and 4000 inhabitants and are of predominantly rural character. Accordingly, the size of BMDH plants varies between a few hundred kW and 8 MW, with corresponding grids between 100 m and 20 km. About two-thirds of all plants have a power of less than 1500kW. Plants larger than 800 kW typically supply whole villages, while smaller plants may heat only a few larger buildings in the village center. Most plants were built in Lower Austria, Upper Austria, Salzburg and Styria. Presently, there is an obvious saturation of the market of village heating systems and a sharp increase in what is called microgrids.

During the first phase of the technology introduction and until 1984, private companies were the predominant developers and operators of BMDH plants, mostly sawmills. They were followed by municipalities and farmers’ cooperatives, which are now operating a great majority of plants. Utilities became more interested in BMDH in the 1990s but were rather cautious in setting up projects. In some cases, interesting forms of joint ventures with farmers’ cooperatives were established. The utilities took the role of developers taking advantage of their, professional, technical and management know-how, while farmers took the role of operating the plant and arranging for fuel supply. It is important to mention that the general dominance of farmers as developers and operators is related to the enhanced availability of subsidies for this group.

We referred earlier as to what may be a turning point in bioenergy utilization. This idea needs perhaps to be further developed and motivated. During the industri­alization period, started in England in the middle of the eighteenth century, fossil fuels gained increasing importance, offering the scale, efficiency and reliability needed to change production systems radically. The supremacy of fossil fuels was reinforced with the advent of the automobile and the choice of oil as the source of liquid fuels to move those engines. This process continued with full speed until three decades ago when oil-producing countries, in a concerted action, forced oil prices up to appropriate larger rents for a resource that the world economy so heavily relied upon.

After the oil price shocks, intense efforts were made to deploy new energy technologies based on resources other than oil, and to improve the efficiency of energy generation, distribution and consumption. Parallel to these efforts, however, a very significant amount of research continued being made on fossil-fuel-related technologies and nuclear power. As a result, while renewable technologies were indeed developed, the relative position of fossil-related technologies was constantly improved both on the supply as well as on the demand side. In addition, most of the non-fossil energy generation capacity added in the last few decades comes from nuclear power, an area that also received significant attention of governments and researchers.

Nevertheless, the balance of efforts made in the last few decades includes a portfolio of renewables, in parallel with a significant decrease in the energy intensity of many segments of the economy, and a trend of decarbonization mainly due to the shift from coal and oil towards natural gas and increasing use of nuclear power (Silveira, 2001). Whether positive trends will persist and be further improved depends on what efforts are made next. For example, recent studies reveal that increasing amount of investments is no guarantee for improvements in energy intensity, as expanding industries can, in fact, become more energy intensive (Miketa, 2001). We are also used to the thought that the energy intensity of developing countries shall increase as a result of industrialization and moderniza­tion. However, if we consider the increasing utilization of combustible renewables and wastes, the energy intensity may have decreased in some developing countries in the past years. Constraints in the utilization of combustible renewables and wastes may be forcing a higher utilization of fossil fuels in developing economies than would otherwise be necessary (Sun, 2003).

When it comes to transport, the sector remains trapped in the oil solution after three decades of research and constant improvements. More recently, the strong dependency of the transport sector on oil resources has received increasing attention due to issues of security, potential oil scarcity in a rather near future, and the climate change agenda (see also Silveira, 2001). In the European Union, for example, security of supply and climate change are two major driving forces to the introduction of renewables. Liquid biofuels provide immediate opportunities to reduce fossil fuel dependency in the transport sector, taking advantage of existing distribution chains for fossil fuels. A major preoccupation is the formation of markets for alternative transport fuels and technologies. However, significant initial steps have been taken recently at the EU level which may have important consequences in the development of markets for liquid biofuels.

But what is actually the turning point that we are referring to? After all, the figures do not indicate any spectacular change in favor of bioenergy. The use of bioenergy is actually growing slower in many cases when compared with other renewable options. Recent trends do not, at first, seem to relate to ambitious future scenarios and identified possibilities for bioenergy options. In fact, the turning point can only be understood as a convergence of factors and tendencies that are likely to favor bioenergy use. Some of these factors are general for all renewables, others are specifically related to bioenergy options. The most important factors are:

• The global climate agenda, which requires a shift from fossil fuels to renewables as a means to reduce greenhouse gas emissions and mitigate global climate change;

• Increasing awareness and understanding of the local impacts of fossil fuel utilization on environment and health (e. g. acid rain, respiratory diseases) and intensified search for sustainable alternatives;

• Decreasing policy support for fossil fuels and gradual reduction of subsidies for nonrenewable energy sources;

• A shift from centralized energy planning due to the privatization of electricity and heat markets, favoring local alternatives and decentralized solutions;

• Awareness of the potential of bioenergy options to foster regional development (e. g. through the creation of jobs);

• Enhancing policy support framework for renewables, including bioenergy, in many countries and regions (e. g. various EU directives);

• Better understanding of the potential integration of bioenergy solutions with established industrial processes leading to economic and environmental benefits (e. g. forest industry);

• Integration of bioenergy options with established energy systems for heat, power and transport (e. g. cofiring, ethanol additives);

• Critical mass of examples of good performance of bioenergy systems including biofuel production, heat and power generation, and demand-side technologies in various countries under different conditions;

• Variety of scales, raw material sources and technologies that can be used for the implementation of bioenergy systems depending on local conditions for raw material production, existing demand for energy services and future potential for expansion;

• Improving conditions for new entries and competition as biofuel markets evolve and the commercial attractiveness of bioenergy options is improved, while risks are reduced;

• Readily available conventional solutions and promising development of new technologies for bioenergy generation, and biofuel production and utilization.

These factors are processes which, when combined in different institutional and regional contexts, have varied impacts and effects. They contrast with the set of conditions that allowed the extraordinary economic development in the past decades and which included cheap energy provided by fossil fuels, lack of environmental concerns and centralized energy planning (see also Schipper et al., 1992). Energy was particularly cheap because there was little preoccupation to internalize the various costs associated with its extraction, transport and use, let alone with the sustainability of environmental and socioeconomic systems.

The present conditions are quite different. In particular, it is most likely that both households and industry will experience significant increase in energy costs in the coming years, if international efforts prove fruitful in moving the environmental agenda forward. In the medium and long term, it is possible to improve the overall efficiency of production systems through dematerialization, new industrial organizational patterns and new forms of land use planning. Due to its potential integration into various production segments and its role in social and environ­mental sustainability, bioenergy can become an important element in the process of shifting energy systems. The convergence of factors required to reach a turning point has already been reached. Work lies ahead.

The internationalization processes that affect the bioenergy segment more directly are reflected in (i) the development of markets for biofuels, (ii) definition of policies and actions to favor bioenergy options, and (iii) research and development.

Traditionally, biomass for energy has been harnessed and used locally, but trade in biofuels is, in fact, expanding rapidly, boosted by commercial opportunities. These opportunities are anchored in well-established systems and are on increas­ing demand. In Sweden, the imports of biofuels have increased from a volume corresponding to less than one TWh in the beginning of the 1990s to 6-8 TWh today. Further market development in the near future shall be strongly affected by national and regional policies.

Policy making reflects the internationalization of the bioenergy sector. Various EU directives deal directly or indirectly with energy issues, and some are particularly significant for the development of bioenergy e. g. directives dealing with energy taxation, waste incineration, combined heat and power production (CHP), and motor fuels (European Commission, 1997, 2001). Standards and specifications are also the subject of common projects within the EU, e. g. European standards for solid biofuels and for solid recovered fuels are being developed (see also Thran et al., Chapter 11). These standards aim at improving conditions for trading biofuels. The development of a common policy framework for the EU is also in line with international agreements such as the Climate Convention and Kyoto Protocol, and may gradually lead to common strategies and legislation for bioenergy.

Internationalization is also observed in R&D. The EU aims at a better coordina­tion of research and development as a means to make Europe more competitive, and this is being promoted through specific schemes to distribute EU research funds. It is believed that increasing complexity implies high costs for further developing bioenergy systems, and small countries such as Sweden cannot cope with the task alone. Obviously, such coordinated efforts find barriers particularly due to the large variation in the progress achieved by the various EU countries when it comes to understanding and using bioenergy systems.

Integration of bioenergy systems with other production processes A more rapid and effective development of bioenergy, to reach more volume and importance in the European energy matrix, and offer the reliability and cost effi­ciency commercially required, demands integration and coordination. The bioenergy sector needs to be more integrated with other segments of the energy sector, for example, as part of strategies to secure the energy supply, or as a means to make bioenergy a more competitive alternative.

Bioenergy can be better motivated when integrated with other business sectors and industrial processes. For example, there is a significant potential for synergies through increased integration with the forest industry (see e. g. STFI, 2000; see also the discussion in Chapter 7). Bioenergy generation companies need vertical integra­tion of the fuel chain to guarantee quality biofuels derived from waste handling and forestry activities. The sector also needs to forward integration in consumer markets in order to exploit the full potential and qualities of bioenergy. But there are barriers to such integration. For example, biofuel and bioenergy production are at the margin of core activities of most forest companies (e. g. Ling, 1999). Other non­technical barriers include issues related to the distribution of business ownership, as well as the sharing of responsibility for management and risks.

There is integration potential also with sectors such as waste management and rural development, which conventionally belong to other departments. Such integra­tion requires a coordination of policies, planning and development, and strategies for marketing bioenergy. This implies coordination of public and private actors from different business spheres. The experience of Enkoping provides an example of how this can be made possible (see Fact box 3.1). In fact, the potential to contribute to environmental benefits, new business opportunities and regional development while providing efficient energy services can be crucial in assuring continued support for bioenergy and further progress in this area.

Four distinct aspects of technology performance influenced the technology diffusion quite differently: performance of the central heating plant with respect to the reliability of the operations, performance with respect to emissions, the technical interface with heat consumers, and overall systems efficiency.

Reliable operation was a major preoccupation to operators in the beginning. It did not influence diffusion significantly because the proud plant owners were secretive about operation problems. Due to their technical versatility, they managed to overcome daily problems. Customers usually do not notice central plant failures of a few hours only, due to the heat capacity of the hot water in the grid.

A close follow-up of the problems faced in the plants was carried out with the equipment providers with the help of the supporting organizations and the so-called technology introduction managers. This contributed to learn-by-doing and led to the necessary technological improvements for reliable plant operation. Figure 4.1 shows the effect of the process of technological learning. The percentage of plants with serious operation problems dropped sharply after the initial years of the technology dissemination. By the mid-1980s, almost one-third of the plants were problem-free.

The second aspect of technology performance was related to emissions from the heating plant. In the early 1980s, emissions played a secondary role in the public perception of technology performance. Nevertheless, a publicly funded R&D pro­gram was carried out and this led to the deployment of emissions mitigating equipment employing continuous power control, electronic combustion control and, in the early 1990s, flue gas condensation. The attention given to the issue of emissions was worthwhile as the technological improvements achieved favored further dissemination of district heating plants, particularly in the 1990s when environmental awareness became more widespread.

The greatest threat to the district heating technology diffusion came from deficiencies in the technical interface between the district heating grid and the

individual house-heating systems. Failures in this subsystem directly affect consumer comfort. This interface, including for example the heat exchanger and pipes, is not a part of the BMDH plant. Normally, the equipment was planned, installed and maintained by independent local plumbers, who did not have any particular experience with district heating. In some cases, plumbers repeated the same mistakes in many installations in a single district, which seriously affected the local reputation of biomass district heating. It so happened that plants could not be established in neighboring villages due to the bad reputation created.

The last technical aspect is the overall plant performance. While considerable R&D efforts were made to minimize emissions, overall technical performance of the system was largely neglected. Even today, the annual system efficiency is only around 50 per cent in many plants. Heat losses and high electricity costs occur due to oversized boilers, badly maintained district heating pipes and electric pumps, vents, etc. Operators were seldom aware of the high heat losses and electricity costs of their plants and understood these technical problems to be an economic problem related to competition with low oil prices. Since no public attention was paid to monitoring technical overall performance and as the operators did not properly understand such problems, no feedback reached the responsible technical planners. This slowed down technological learning considerably.

Figure 4.2 shows the specific electricity costs of plants installed between 1984 and 1993. As can be seen from the figure, there was no noteworthy technological learning in this period. It is significant to notice that the electricity costs for delivering 1 MWh of heat to customers varies widely, that is, from 15 to 150 ATS 2 per MWh between the best and the worst plants. [5]

It is difficult to quantify what impact the deficiencies in planning and operation had on the dynamics of technology diffusion. They certainly led to unnecessary costs and management problems. Politicians managed to prevent open financial disasters by asking public utilities to take over plants with serious problems. Proactive policies to upgrade plants technically were only put in place 20 years after diffusion kick-off with the introduction of technical quality criteria as precondition for subsidies.

Thus lack of qualification among relevant professionals such as plumbers, plan­ners and plant operators was a major technical obstacle for biomass plant diffusion in Austria. This is important to emphasize as there is a tendency to focus attention on the technical device per se and less so on what is considered more peripheral such as technology interface and professional skills. Feedback at all points along the energy generation and distribution chain is fundamental for technological learning. Putting in place appropriate feedback mechanisms should therefore be regarded as a central task for renewable energy management.

In the past decade, the number of countries exploring biomass opportunities for the provision of energy services has increased rapidly. This has contributed to make biomass, in the form of solid and liquid fuels, an attractive and promising option among available renewable energy sources. This includes solid biomass and waste, which consists of firewood, charcoal, energy crops, and forest and agricultural residues for the production of heat and power, as well as short crops for the production of liquid fuels such as ethanol and biodiesel. Also the increasing attention to urban waste has contributed in drawing attention to bioenergy options. What is in place is a result of combined top down and bottom up initiatives. However, nothing seems more powerful at present than the increasing awareness about biomass potentials resulting from successful experiences in both industrialized and developing countries.

We still need a much more forceful move towards renewables if we are to promote our energy systems to a qualitative leap. In this context, bioenergy offers attractive alternatives which are only partially being explored. The enhancement of bioenergy utilization has to count on modern and efficient technologies, which should be deployed on a commercial basis in order to guarantee energy services of high quality. Commercial options are sorted within competitive markets. But how can we talk about competition between bioenergy and other alternatives when choices are not on the table at a fair playing field?

Recent studies indicate that biomass technologies can be competitive with fossil fuel alternatives. One particular advantage of bioenergy is that it can be organized at small scales, from 1 to 100 MW, thus allowing a slow modular increment in energy supply, avoiding stranded investments, and minimizing risks. At a time of restruc­turing of the electricity sector, these are essential advantages, as economies of scale may not be easily realized in volatile markets. In addition, risk aversion and high demand for faster returns by stakeholders will tend to favor smaller projects and a gradual change in the configuration of the electricity infrastructure (Patterson, 1999). The solar economy, which includes bioenergy, favors small-scale and decentralized solutions with local distribution, which differ significantly from the centralized and large-scale configuration of existing energy systems (Wicker et al., 2002; Scheer, 1999).

Bioenergy is not a generalized solution for all countries and regions. The dimension of the regional potential for bioenergy needs to be seen in the context of competing uses for resources demanded for the production of biomass. Where land resources are scarce, energy forests may compete with other land uses and lead to negative impacts on food production. However, there are many countries in the world where this is not the case. Many developing countries such as Brazil, Thailand,

Indonesia and Nigeria have large amounts of biomass potential from different sources and are good candidates for bioenergy technologies.

In Europe, the restructuring of agriculture is releasing land, which can be claimed for biomass production aimed at energy generation. If biomass is to become a major source of energy in Europe as a whole, the potential needs to be assessed in terms of the overall environmental and socioeconomic implications vis a vis other alter­natives. The possibility of increasing supply security through a broader use of bio­energy needs is to be more seriously considered. A more significant increase in the share of biofuels cannot be attained through isolated national initiatives but will require coordinated action, not least to facilitate the formation of biofuel markets (European Commission, 2000).

There is a long way to go before bioenergy becomes a mainstream energy alternative. In particular, there are significant market barriers to be overcome, which can only be achieved through close coordination among the various sectors that need to be involved in bioenergy initiatives. This book discusses some of the opportunities that are already at hand to harness the bioenergy potential and some of the progress that has been achieved in different contexts.

The turning point should rather be understood as a perception among experts, policy makers and industries that a wide window of opportunity has been opened, which should be used to realize the global bioenergy potential. In many cases, the leap is more political than economic given, for example, that the removal of subsidies from nonrenewable alternatives is a necessary step in the process. In many regions, political coordination of efforts is a necessary initial step to establish bioenergy markets. In any case, the leap towards a broader utilization of bioenergy is now more psychological than technological.