Wood pellet shipments fuel growth at UK's Port of Tyne, which has handled two million tonnes of wood pellets since 2012; biomass market expected to grow as UK government encourages more coal-to-biomass plant conversions, says Port of Tyne CEO
NEWCASTLE UPON TYNE, England
October 9, 2013
– Green energy fuels growth at Port OFTYNE - but not in the way it had expected ; Peter McCusker speaks to Port of Tyne chief executive officer Andrew Moffat about energy developments at the region's largest port
The Port of Tyne COAL imports into South Shields reached record levels last year with almost four million tonnes arriving to power Britain's electricity network.
But the Port of Tyne will not see those activity levels again, as the UK looks to close all of its coal-fired power stations by 2020.
Last year was also a record one for wood pellet imports to Tyne Dock, and it is here that Andrew Moffat, its chief executive, has immediate aspirations.
"The rapid growth of this market has taken us by surprise. It's a new industry which has come from nowhere.
"We were there at the beginning of wood pellet importing and have been able to lever our coal-handling, storage and transport skill sets to this market.
"This coupled with our location, reputation, innovative pricing and commercial strategies means we are now the number one port in Europe for handling wood pellets," he said.
The Port of Tyne has handled two million tonnes of wood pellets since 2012. Much of this comes from North America and is then distributed by rail to northern biomass power stations.
The port's major customer is the Drax power station in Yorkshire, which is the UK's largest, and is currently undergoing a Pounds 700m investment to convert three of its six turbines from coal to wood pellets.
Moffat sees further growth in the sector with the UK Government encouraging more biomass conversions, and new build, as reliable base-load energy sources which will help the UK hit its 2020 green energy targets.
The Port of Tyne has already spent Pounds 20m on new wood pellet storage facilities and dredging work to allow for larger vessels to arrive with shipments.
Earlier this year it unveiled Pounds 180m plans for new wood pellet handling developments at Tyne Dock, which would create 900 construction jobs and a further 300 full-time operational jobs.
In recent weeks the port has moved to secure finance for this development by entering into a joint venture with UK fund manager Equitix, whilst also lining up a contractor for the construction work.
It remains confident it will be able to proceed with the development once it has secured the long-term contracts needed to support it.
Biomass projects in the UK receive Government subsidies which currently mean generators receiving double the market price for the electricity they produce.
As a carbon-based fuel wood has similar CO2 emission levels as coal and, as it has a lower calorific value, it requires 30% more wood to generate the same energy as coal.
The biomass equation is balanced by an equivalent amount of new wood planting to replace the burnt feedstock.
This quid pro quo has come under intense recent scrutiny. Those against, including many environmentalists, say it can take at least 80 years for the new trees to take up the CO2 released, and there are concerns biomass plantations are taking over land once used for food crops.
The Government has moved to quell these fears by placing an upper limit of 400MW on new build biomass plants and demanding strict adherence to supply chain carbon offsetting.
Moffat continued: "As the country has moved away from coal into renewables biomass has developed more quickly.
"The Government has set out its support levels and created the market confidence to fund investment in the industry "The wood pellet industry is much more advanced than offshore wind at the moment."
Offshore wind is another renewable energy source which also receives generous subsidies, and it was in this sector that the port's plans for green energy developments were initially focused.
Over the summer the Government announced offshore wind would receive subsidies of Pounds 155 per MW/h and although this has been generally welcomed there are still a number of issues to resolve before the industry scales up.
The subsidy will decrease over time and the Government wants to see costs fall to under Pounds 100 per MW/h. The industry had hoped for the level of support to be guaranteed for 20 to 25 years but the Government wants a 15-year contract term.
Moffat said: "The decreasing tariff scale is causing some problems and creating too much project risk and at the moment people are not prepared to take that risk "The power generators do not want to fund it. There still seems to be a risk with the technology and the need to reduce costs."
The North East is ideally placed for the next stage in the development of the offshore wind industry - known as the Round 3 sites.
The three largest Round 3 sites are in the North Sea at Dogger Bank, Hornsea and Norfolk Bank and will require a total of 5,000 turbines, capable of generating 20GW of power, equivalent to 20% of the nation's current energy needs.
Constructing these is a multi-billion pound business with the North East hoping to attract some of the industry's major turbine manufacturers to the region and create up to 10,000 new jobs.
Four of the world's main players have signalled their intent to locate to facilities in Scotland: French firm Areva, Spanish firm Gamesa, Mitsubishi of Japan and Korean outfit Samsung, and a fifth, Siemens, says it currently favours the Humber.
Moffat says the port has had talks with a number of major manufacturers and these continue.
"While many ports have made announcements, in reality everyone is in the same place, as yet no orders have been placed "We have the space here and we are currently talking to a multinational, which is a major player in the power sector."
These delays in offshore wind have seen the Port of Tyne renew its focus on offshore oil and gas.
Tyneside is home to some of the world's leading players in the subsea oil and gas sector, with Tyne Dock playing host to one of these; subsea mining and trenching and remote operated vehicle firm the IHC Engineering Business.
The port recently acquired McNulty's shipyard next to Tyne Dock and sees this as having potential in the offshore sector.
Moffatt said: "Oil and gas is booming in Aberdeen and some of the overflow work is coming to Tyneside."
s " A port mainstay is exporting vehicles made by Nissan at the UK's most successful car factory, down in the road in Sunderland.
On the north bank of the river, a site which has been earmarked for a possible turbine manufacturer is currently used as a 'car park' for thousands of imported Volkswagen vehicles.
The port has two sites on the north bank of the river earmarked for potential development, with a particular eye for the offshore wind industry. These comprise 250 hectares, with 40 hectares of these being in the Enterprise Zone of the North East Local Enterprise Partnership.
In Tyne Dock, coal shipments continue to arrive as the port fulfills contracts with EDF Energy, SSE and Lynemouth Power Limited.
The irony is not lost, as the port's initial growth and development was based on exporting coal across the globe to fuel the industrial revolution.
Today's coal import contracts helped the port turn in a record performance last year with revenues up by one third to Pounds 60m and profits rising to Pounds 9m, Moffat says: "The market for coal will see a natural reduction but it will not disappear and biomass will continue to grow."
And Moffat remains optimistic that the port and the region will witness a new offshore energy boom.
He added: "I believe we will see a turbine manufacturer locate here and even if that does not happen the Port of Tyne will play a major role in supply and maintenance to the North Sea offshore wind industry.
"I do think it will be significant. It will be big, but as this stage we don't know how big. It will happen, but we don't know when it will happen, "If the market develops as it should we are as well- placed as anyone else, we have a great reputation and are in a great position.
"I believe the market will develop and it could be huge for the North East. We are on the cusp of something big. I can feel it in the gut, something significant is happening here and it could be as significant as coal was in the past."
The wood pellet industry is much more advanced than offshore wind at the moment Andrew Moffat
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