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Co-firing solid biomass: the underrated option

"In the context of energy transformation and current policy, Germany has set ambitious targets for electricity generated from renewable sources."




Energiewirtschaftliche Tagesfragen

Dr Uli Brunner

July 2012



In the context of the energy transformation and current policy, Germany has set ambitious goals for an expansion of electricity generated from renewable sources. To sustain these targets with due regard to competitiveness and prosperity, attention must be paid to the cost efficiency of the measures taken. Assuming that the current system of feed-in tariffs as per Renewable Energy Act (EEG) stays in place for the foreseeable future, subsidies for the co-firing of solid biomass in thermal power stations can make a substantial contribution to cost efficiency. In addition to having comparably lower funding requirements than other renewable energy-generating technologies, the advantages of this renewable energy source lie in the use of existing infrastructure, the potential for rapid implementation and its contribution to security of supply.

In the question of how to implement the goals of the energy transformation [1] as efficiently as possible, the title for the federal government's Energy Plan [Energiekonzept] already describes the conflicting goals: “environmentally friendly – reliable – affordable” is not attainable all at once, as the prioritisation of one goal tends to come at the expense of the others. Economists speak of constraint optimisation – a concept that informs numerous economic problems. Despite a great number of possible implementation schemes, the content of the Energy Plan [Energiekonzept] demonstrates the need to focus on cost efficiency in searching for an optimal “how” in the energy transformation:

The “environmentally friendly” goal, which leads to a national energy supply that is nearly free of greenhouse gases and nuclear power, is firmly fixed until 2050 due to the quantification of the renewable-energy generation targets along a time line (see fig.) – and thus forms the first constraint.

The “reliable” goal could essentially be weighed against the “affordable” goal, i.e. it is conceivable to lower the degree of supply security in favor of a less expensive energy transformation. However, it is safe to assume that German electricity consumers are unwilling to make concessions to their accustomed level of supply security, one of the highest in the world [2]. Therefore, this also forms the second constraint.

For the question of how to optimally implement the energy transformation, we are essentially left with the cost-efficiency factor (“affordable”). This is especially important because electricity generation from renewable energy will remain more expensive than conventional fossil fuels for the foreseeable future, e. g. electricity from gas power plants in a centralised system [3]. Thus, there remains a need for financial support in order to attain the goals for renewable energy generation and to attract investors.

Shortcomings of the EEG

Since the early nineties there is agreement in Germany on a system of fixed feed-in tariffs, which are priced to enable the amortisation of investments in certain renewable energy-generating technologies throughout their estimated lifespan under typical generation capacity. The subsidies for renewable-energy production stem from the difference between the feed-in tariff and the wholesale market price for electricity that would otherwise have been available. The cost of this difference is transferred to the electricity bills of all end consumers by way of the EEG apportionment: at 35 €/MWh, the EEG levy in 2011 was almost 70 % of the average annual cost for the actual product that is electricity – and the trend is rising [4].

This system of fixed feed-in tariffs is non-discriminatory towards all types of renewable energy, in the sense that the feed-in tariff is set high for expensive technologies and correspondingly low for low-cost technologies. This leads to over-funding for certain expensive technologies – a misallocation. Based on this, one can only assume that fixed feed-in tariffs are a particularly expensive mechanism for achieving the expansion targets for renewable-energy production, and that consequently the EEG system is in fact not cost efficient. Thus, for example, the EEG Progress Report 2010 [Erfahrungsbericht] finds that the technologies being built the most are the ones with the costliest funding [5].

The Monopoly Commission recommends rethinking the system of fixed feed-in tariffs in terms of cost efficiency, and favors switching to a quota system for renewable-energy production [6]. Furthermore, the EEG funding scheme blends out additional costs arising from remote production sources, in particular from wind power stations in Northern Germany [7]. As a consequence, these costs are left out of consideration. Moreover, the EEG subsidies do not reflect the costs arising from the maintenance of supply security, which become necessary alongside the expansion of supply-dependent renewable-energy generation capacity [8].

Despite the fact that these disadvantages are undisputed among economists, the EEG was revised in the summer of 2011 and remains Germany's funding mechanism of choice for the foreseeable future. In light of this development, the question arises: If the essential pillars for implementing the energy transformation are already in place – the expansion targets for renewable energy (“environmentally friendly“), the preservation of supply security („reliable“) and the funding mechanism for renewable-energy generation (“affordable“) – where is there any remaining potential to optimise the cost efficiency?

One obvious answer to this question is funding for the use of solid biomass. Above all, co-firing in existing power plants presents an opportunity in the short term to significantly advance the expansion of renewable energy in Germany in a manner that is cost efficient and ecologically sustainable without necessitating concessions to supply security.

Although the recently revised EEG does not subsidise biomass co-firing, it is the opinion of the authors that it will only be a matter of time before this EEG technology becomes a part of the funding scheme.

However, the following questions must first be addressed:

What is solid biomass, and why is it a renewable energy source?

How does the current funding scheme regard electricity generated from solid biomass?

What are the essential advantages of using solid biomass (especially within the context of co-firing), and what is the potential generation capacity from the use of solid biomass in Germany?

Solid biomass as a renewable energy source

Biomass can be summarised to comprise three categories of energy sources for the generation of electricity and heat [10]:

Solid biomass for combustion – wood, including chips and pellets; Liquid biomass – bioethanol and other alternative fuels (primarily used in the transport sector); gaseous biomass – methane produced from the fermentation of biomass (e. g. organic waste) is fed into the natural-gas network or used for electricity generation in gas turbines.

Biomass is a renewable/regenerative energy source because the carbon dioxide released during combustion merely reflects the amount of CO₂ that was previously absorbed from the environment during the growth phase (plants, organic waste). The focus here is on solid biomass to be co-fired for electricity and heat generation in large, centralised power plants, i.e. the partial substitution of solid biomass for hard coal or brown coal. From a technical standpoint, the co-firing of 10 % wood chips in a coal-fired power plant is safe without additional structural upgrades [11]. Technical upgrades can increase the co-firing of energy-richer wood pellets up to 50 %, but only under acceptance of further investment outlays (see below).

Generally speaking, the following principle applies: the lower the moisture content of the solid biomass, the higher its dosage accuracy (or bulk density) and the better the renewable energy source can replace the fossil fuel. One can distinguish between the following options (in ascending order of suitability for co-firing) [12]:

Wood chips – moisture content 35 to 50 %, low bulk density (ca. 400 kg/m3) and an energy density of 0.3 to 0.6 MWh/m3;

Wood billet – same moisture content as wood chips, but higher bulk and energy density (ca. 500 to 600 kg/m3 and 0.5 to 0.9 MWh/m3, respectively);

Wood pellets [13] – moisture content < 10 %, high bulk and energy density (650 kg/m³ and 3.2 MWh/m³, respectively);

Torrefied wood pellets [14] – additionally dried and refined wood pellets with very low moisture content (< 5 %) and high bulk and energy density (750 kg/m³ and 4.3 MWh/m³, respectively), which actually approaches the fuel quality of hard coal and brown coal and is therefore best suited for co-firing.

Solid biomass in the current funding scheme

Electricity generation from solid biomass is subsidised in the EEG via its own feed-in tariff; however, in accordance with § 27 of the EEG, the feed-in remuneration is tied to certain conditions:

Only those power stations are subsidised that have a capacity of 20 MW (electric) and generate at least 60 % of their annual electricity in combined heat and power;

The subsidies are limited to facilities that rely almost exclusively on biomass [15] – thereby excluding a mere co-firing.

Before the EEG's revision in 2011, bonuses were included for certain fuels in addition to the feed-in tariff. These so-called “renewable-resource bonuses” [“Nawaro bonuses”] rendered the feed-in compensation scheme even more attractive.

The confinement of subsidies to small facilities that rely exclusively on solid biomass merely stimulates the construction of new, small and decentralised renewable energy production plants, and excludes EEG funding for the co-firing of biomass in existing power plants. As a consequence, by the end of 2010 just under 1 500 MWel worth of new power plants based on solid biomass were built [16], which produced ca. 11.8 TWh of electricity in 2010 [17] – less than 2 % of Germany's gross electricity production in 2010.

Better controllability for renewable electricity generation

Lawmakers have nonetheless recognised that electricity generation from solid biomass has an important role to play in the integration of renewable energy [18] within the electric grid. Supply-dependent renewable-energy production capacities such as wind and photovoltaic power stations can hardly react meaningfully to fluctuations in demand. In contrast to this, the controllable electricity generation from solid biomass is able to throttle production and save fuel costs in response to an unexpected drop in demand, or quickly increase production in response to an unanticipated rise in demand, as long as the capacity is not fully exhausted.

Although electric output from wind and solar power stations can be reduced or throttled in response to an unplanned drop in demand, this represents a „waste“ of electricity, because throttling does not lead to a conservation of fuel costs. Additional capacities are typically unavailable in case of unexpected increases in demand. At times when there is no need to regulate the output, electricity generation from solid biomass can be supplied much like a base load [19], unlike the irregular feed-in from wind and solar power stations.

In order to provide incentives for the control of electricity production and for a better integration of renewable energy generation, the revised EEG incorporates two additional instruments:

On the one hand, the market premium provides an incentive to market the produced electricity directly: renewable-energy producers are prompted to leave the EEG funding scheme and to sell their electricity directly to consumers instead. Regardless of the proceeds from these sales, the offered compensation is equivalent to the difference between the feed-in tariff and the wholesale price of electricity during the relevant time frame (i.e. the actual market premium), as well as a so-called “management premium” to cover additional expenses associated with the direct marketing [20]. As a contribution to integration, this model is supposed to provide suppliers with a monetary incentive to respond to varying demand and to better forecast their production.

On the other hand, in addition to the market premium, a flexibility premium was introduced specifically for biomass facilities in an attempt to provide incentives for maintaining certain reserve capacities and using them in times of high demand. Thus, the flexibility premium relies on investment incentives to equip small biomass facilities with storage reservoirs.

However, taken as a whole, these two measures have limited potential [21]. Furthermore, it is to be expected that renewable-energy suppliers will only opt for direct marketing and the flexibility premium when the resulting revenue is higher than it would otherwise be under the EEG [22]. This leads to a situation in which a contribution to the integration of renewable-energy production can only be bought through additional subsidies – which creates deadweight effects and runs contrary to the principle of cost efficiency. With the co-firing of solid biomass, by contrast, production can be adjusted to match demand in the short term, so that the integration of renewable-energy production is not an issue for this form of renewable electricity generation.

Economic viability of solid biomass co-firing

In 2010, 41 % of the electricity in Germany was produced in hard-coal and brown-coal power plants [23]. The carbon-dioxide emissions thus created came to ca. 300 million tons – some 40 % of the overall energy-related CO₂ emissions in Germany. The co-firing of 10 % torrefied wood pellets in existing hard-coal and brown-coal power plants could therefore immediately reduce CO₂ emissions by ca. 30 million tons per year while increasing the share of solid biomass in overall electricity production from 2 % of gross electricity production today to 6 %.

To what extent would this help satisfy the climate goals? According to the Energy Plan [Energiekonzept], the share of renewable energy is to double from 17 % to 35 % between 2010 and 2020 (a linear annual growth rate of 1.8 %), and by 2020 the share of CO₂  emissions is to decrease by 40 % compared to 1990 levels [24]. 10 % co-firing of torrefied wood pellets in existing power plants – without significant new structural changes or investments in the grid, production or transport infrastructure, since existing infrastructure can be used – entails the following short-term achievements:

20 % of the stated goals for 2020 concerning renewable-energy production as a share of overall electricity supply (an increase of four percentage points to the 18 percentage points envisioned for 2020);

35 % of the 2020 goals for the reduction of carbon-dioxide emissions (30 million tons per year of the 86-million-ton annual reduction envisioned for 2020).

Nonetheless, the commercial success of this adjustment – despite relatively low additional investment costs – is by no means a foregone conclusion: cost reductions stemming from saved carbon credits are over-compensated by the higher cost of acquiring and expending solid biomass. Based on current calculations, the German Energy Agency [Deutsche Energie-Agentur] (dena) [25] estimates a funding requirement of 3.5 ct/KWh for the co-firing of solid biomass in hard-coal power plants [26]. Depending on the scenario, this funding requirement would decline over time in proportion to the rising cost of brown coal and hard coal as well as carbon credits. Dena estimates the CO₂ abatement cost (see text box) of co-firing 10 % torrefied wood pellets in existing power plants at 27 to 54 €/t for hard coal and 52 to 89 €/t for brown coal [27]. This is – at least for hard-coal power plants – below the CO₂ abatement cost from the EEG average (ca. 80 €/t [28]) and well below the currently most expansive renewable-energy generation technologies, namely offshore wind (ca. 90 €/t CO₂) and solar facilities (estimated abatement cost of partly well over 500 €/t CO₂) [29].

Solid biomass offers hitherto untapped potential

The use of solid biomass for co-firing in existing power plants is a cost-efficient method of achieving the goals of the energy transformation. Although the funding requirement is partly well below the amount paid to other renewable-energy production technologies via the EEG – even after its revision in mid-2011 – this approach has yet to find support in Germany and will probably not be subsidised in the foreseeable future [30].

This is unreasonable from the point of view of a cost-efficient implementation of the energy transformation. In addition to the low production expenses and reduced CO₂ abatement cost compared to other renewable energy sources, the co-firing of solid biomass in existing power plants provides further cost advantages that are not yet reflected in the comparison of production expenses:

Use of existing production infrastructure: In the co-firing of up to 10 % torrefied wood pellets, no appreciable investments are required for expansion, while increases to the amount of solid biomass (up to 50 %) can be achieved with investment costs of 300 €/kW [31].

Use of existing transport infrastructure: Hard-coal power plants require a constant supply of combustibles and cooling liquid, and are therefore regularly built along inland rivers or in the vicinity of the sea. This logistical supply infrastructure is available for the environmentally-friendly procurement of biomass.

Use of existing grid infrastructure: Existing coal power plants are linked into the central electric grid. Neither the construction of new transmission networks (as with offshore wind energy) nor the expansion of distribution lines (as with the majority of photovoltaics) are required.

No delays through permit applications or a lack of acceptance from residents: Existing hard-coal and brown-coal power plants already possess a permit in accordance with the Federal Emissions Protection Act [Bundesimmissionsschutzgesetz] (BImSchG) and can therefore be adjusted for co-firing. The existing emissions and environmental impacts are tendentiously reduced.

Ready availability of solid biomass: The global supply of residual timber and scrap wood exceeds the expected demand for wood-fired energy [32]. This does not yet comprise the potential from the targeted cultivation of wood in so-called "short-rotation coppices“, including in Europe.

International experience: Other EU nations are committed like Germany to the expansion of renewable energy based on EU Directive 2009-28-EG. In this context, it is apparent that countries whose funding mechanisms for renewable energy follow market principles exhibit a distinctly higher share of cost-efficient co-firing of solid biomass in coal power plants (e.g. Great Britain, Sweden and the Netherlands) [33]. By contrast, it is precisely these countries where the expensive production of electricity in photovoltaic power stations hardly carry any weight. This also presents an empirical argument for quota systems with numerical targets, for example, which are superior in cost efficiency to EEG-style systems of fixed feed-in tariffs.

Of course it is important to observe sustainability standards in the harvesting of torrefied wood pellets. Above all, this requires the certification of the sustainable production of wood pellets and their sustainable transport by independent service providers (see [34] for examples). Taken as a whole, however, the cost of monitoring the sustainable production of wood pellets by external certification agencies is considerably lower than the added cost of subsidising renewable-energy production, which has significantly higher funding requirements than the co-firing of solid biomass in coal power plants.


 Dr Uli Brunner is energy expert at PA Consulting Group.




[1] The term "energy transformation“ refers here to both the expansion targets for renewable-energy production (Energy Plan [Energiekonzept]) and the decision to accelerate the abandonment of nuclear power.

[2] See CEER (2009) “4th Benchmarking Report on the Quality of Electricity Supply” as well as BNetzA: “Monitoringbericht 2010”, Bonn 2011, p. 273 and the BNetzA press release from 11/17/2011.

[3] For a current comparison of the levelized cost of electricity (LCOE), see Fraunhofer ISE: “Studie Stromgestehungskosten Erneuerbare Energien”, December 2010.

[4] Based on the average annual spot price for electricity at the electricity exchange EEX in 2011. For projections on the development of the EEG allocation, see for example Kroll A., Langrock T.: “Die Entwicklung der EEG-Umlage und der EEG Differenzkosten bis 2020”, in: „et“ no. 12, vol. 61 (2011).

[5] See BMWi (2011), “Erfahrungsbericht 2011 zum Erneuerbare-Energien-Gesetz”, drafted 5/3/11, p. 7.

[6] See Monopolies Commission: “Energie 2011: Wettbewerbsentwicklung mit Licht und Schatten”, Special Report [Sondergutachten] 59, Bonn 2011, p. 10, margin no. 23.

[7] The problem of sluggish grid expansion is becoming more urgent (e. g. see Brunner, U., Drillisch, J.: “Integration of renewable energy – why the grid matters”, in: D+C Development and Cooperation, September 2011, p. 325-327). In 2009, 74 GWh worth of potentially produced electricity was unable to feed into the grid due to overloading, and in 2010 the figure was at 127 GWh. This throttled electricity stems almost exclusively from wind turbines in Northern Germany. Another significant rise in the amount of “wasted” electricity is expected in 2011, for which German consumers must still pay by way of their electricity bills in accordance with § 12 of the EEG. For further reading, see German Bundestag: “Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Bulling-Schröter”, Lenkert, Lötzer – Drucksache 17/6897, 9/20/11.

[8] Electricity from wind and solar power facilities have a low so-called “capacity credit,” i. e. their contribution to guaranteed output within the production system is significantly lower compared to biomass facilities.

[9] See the open letter from the German Advisory Council [Wissenschaftlicher Beirat] at the BMWi concerning the revision of the EEG on 5/2/11.

[10] For a legal definition, see § 2 Biomasseverordnung.

[11] German Energy Agency [Deutsche Energie-Agentur] (dena): „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken”, Berlin 2011; also cf. dena: „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken – Ein Beitrag zur Energiewende und zum Klimaschutz?“, Berlin 2011.

[12] Data gathered from TFZ Bayern: “Handbuch Bioenergie Kleinanlagen”, published by Fachagentur für Nachwachsende Rohstoffe e. V., Gülzow-Prüzen 2007.

[13] Ground, dried and compressed wood with good rheological and dosage properties.

[14] Torrefaction describes the thermal pre-processing of biomass in a vacuum with the aim of increasing the energy density and thus the specific fuel value per unit of weight, as well as improving its transport and combustion properties.

[15] There are narrow exceptions for the limited co-firing of sewage gas or for ignition firing, see § 4 Biomasseverordnung.

[16] BMWi: “Erfahrungsbericht 2011 zum EEG”, drafted 5/3/11, p. 71.

[17] Federal Environment Ministry [Umweltbundesamt]: “Emissionsbilanz erneuerbarer Energieträger – vermiedene Emissionen in 2010”, August 2011. Stated value refers to final energy supply.

[18] Integration of renewable energy means, roughly speaking, to reconcile difficult-to-forecast (and in some cases decentralized) electricity production with fluctuating electricity demand.

[19] The criterion of full-load hours is insufficient to measure the consistency and continuity of electricity production, since continuous production can also occur at mid-load and peak-load power plants as defined by the criterion of full-load hours. See also Brunner U., Enkel P.: “Zur Quantifizierung der Stetigkeit der Stromerzeugung”, in: „et“ no. 7, vol. 61 (2011).

[20] According to appendix 4 of the revised EEG, additional expenses for direct marketing include the cost of applying for a stock listing and trade connections, additional personnel costs if applicable, and the cost of generating precise feed-in forecasts.

[21] Regarding the expected extent of direct marketing, see r2b/Consentec: “Förderung der Direktvermarktung und der bedarfsgerechten Einspeisung von Strom aus Erneuerbaren Energien”, study on behalf of BMWi, June 2010.

[22] Given a sufficiently ample management premium, it is conceivable that the feed-in behavior of, say, wind-turbine operators would remain unchanged after the introduction of direct marketing (i. e., there is no resulting integration effect for renewable-energy production), but that they nevertheless opt for direct marketing because revenues are above the EEG feed-in tariff.

[23] Workgroup for Energy Budgets [AG Energiebilanzen]: “Bruttostromerzeugung in Deutschland von 1990 bis 2010”, 11/4/11.

[24] The CO₂ emissions in Germany were ca. 1 242 million tons in 1990, which have already been reduced to 831 million tons by 2010. Thus, reaching the CO₂-emission targets for 2020 requires a further reduction by 86 million tons.

[25] German Energy Agency [Deutsche Energie-Agentur] (dena): „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken”, Berlin 2011; also cf. dena: „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken – Ein Beitrag zur Energiewende und zum Klimaschutz?“, Berlin 2011.

[26] The cost of co-firing in brown-coal power plants is currently higher than the cost of co-firing hard coal, because brown coal is cheaper than hard coal.

[27]: German Energy Agency [Deutsche Energie-Agentur] (dena): „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken – Ein Beitrag zur Energiewende und zum Klimaschutz?“, Berlin 2011.

[28]: Ibid.

[29] See IEA: “Energy Policies of IEA Countries: Germany, 2007 Review”, Paris 2007; also cf. RWI: “Die ökonomischen Wirkungen der Förderung EE: Erfahrungen aus Deutschland”, Essen 2009; and Forschungsstelle für Energiewirtschaft: “CO₂-Minderung in Deutschland”, München 2009.

[30] See German Bundestag: “Antwort der Bundesregierung auf die Kleine Anfrage der Abgeordneten Krischer, Höhn, Behm”, Drucksache 17/7563, 11/30/11: “The federal government currently does not intend to create a funding instrument for the co-firing of wood-like biomass in coal power plants.”

[31] German Energy Agency [Deutsche Energie-Agentur] (dena): „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken”, Berlin 2011; also cf. dena: „Die Mitverbrennung holzartiger Biomasse in Kohlekraftwerken – Ein Beitrag zur Energiewende und zum Klimaschutz?“, Berlin 2011.

[32] Ibid.

[33] For Great Britain, see DECC: “Digest of UK Energy Statistics”, UK Department for Energy and Climate Change, ch. 7, July 2011, ill. 7.3; for the Netherlands: Energie Nederland: "Energie in Nederland 2011“, ill. p. 68; for Sweden: Swedish Energy Agency: "Energy in Sweden 2010“, table 5.

[34] British Energy: "The Sustainability of Biomass in Co-firing“, Final Report, study conducted by AEA Energy Group, November 2006.

PA Consulting Group in Germany

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