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Drax Group Pushes Through 2020

UK electricity producer Drax Group reports it has reduced its carbon emissions by more than 85% since 2012, while becoming the UK’s largest renewable energy generator and has an ambition to become a carbon negative company by 2030.

Those statements were made as part of Drax’s annual report for 2020, a year in which it persevered through the dangers and constraints of COVID-19. Drax announced an end to commercial coal generation effective in March 2021 while continuing to develop options for Bioenergy with Carbon Capture and Storage (BECCS), which Drax believes can become a world leading, UKled and exportable solution for large-scale carbon negative power generation. Subject to the right negative emissions framework from the UK Government, Drax expects to be in a position to make further investment in the development of this option in 2021.

Drax, whose recently announced purchase of major Canadian-based industrial wood pellet producer Pinnacle is moving through required approvals, says Drax’s three pellet plants in the U.S. produced 1.5 million tonnes in 2020, an increase of 7%, which reflects a strong operational performance and good fiber availability compared to 2019 when heavy rainfall restricted commercial forestry activity.

Pellet quality, as measured by the level of fines in each cargo, improved in 2020. Lower levels of fines result in biomass that is easier and safer to handle throughout the supply chain and as such there are safety, operational and cost benefits in reducing the level of fines.

Drax identified supply chain improvements, efficiencies and investments, which it believes will reduce the cost of biomass by $35/tonne (£13/MWh) on its existing portfolio by 2022 compared to 2018. In 2020 this program alongside increased output and other incremental operational improve ments resulted in an average production cost of $153/ tonne, a 5% saving year-on-year. It expects to deliver further savings by expanding its three existing pellet production sites in the Southeast U.S. by 0.4Mt. At the end of 2020 it completed the first phase of these with the remaining capacity of 0.3Mt expected to come on stream by 2022.

Realizing these programs will expand total capacity to 1.9Mt at the three Drax facilities, providing economies of scale and allowing greater utilization of low-cost residues.

In February 2020 Drax announced plans to further expand its existing infrastructure with the development of three new 40,000 tonne satellite plants. These sites will use lower cost sawmill residues and leverage existing infrastructure in the U.S. Southeast to produce biomass at around 20% below the current cost of production.

The acquisition of Pinnacle accelerates the Group’s strategic objectives by adding 2.9Mt of biomass production capacity in 2022, and includes long-term third-party supply contracts to counterparties in Asia and Europe.

Drax says the end of commercial coal operations in March 2021, and final closure of the generating units in September 2022, is expected to result in annual cost savings of £30-35 million once complete. Drax believes this will help to support the financial model for long-term biomass generation at Drax Power Station when the current renewable subsidy schemes end in March 2027.

The UK’s Climate Change Committee (CCC) has set out what is required for the country to achieve its legally binding objective of being net zero by 2050. This includes an important role for BECCS to remove carbon from the atmosphere, creating negative emissions. BECCS is the only large-scale solution for negative emissions with renewable electricity and system support capabilities. Through combining BECCS with its existing biomass generation units at Drax Power Station, Drax believes it could remove millions of tonnes of carbon each year in 2027. In doing so Drax aims to become a carbon negative company by 2030.

The technology to deliver postcombustion BECCS exists and is proven at scale, according to Drax, which adds that in September 2020 Drax commenced a trial of one such technology provided by Mitsubishi Heavy Industries. In addition, Drax is developing innovative technology options, including CCapture, a partnership with Leeds University, IP Group and BP, which has developed an organic solvent which could be used for BECCS.

The Group’s biomass life cycle carbon emissions in 2020 were 109kgCO2e/MWh of electricity (2019: 124 kgCO2e/MWh), almost half the UK Government’s 200kgCO2e/MWh of electricity limit for biomass.

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Drax Sets Sights On Carbon Capture

Bioenergy with Carbon Capture and Storage (BECCS) is an essential negative emissions technology needed for the UK to meet its legally binding net zero by 2050 target and demonstrate global climate leadership, according to UK power generator Drax Group. Work to build BECCS could get under way at Drax as soon as 2024, creating tens of thousands of jobs and supporting a postcovid economic recovery.

By 2027 Drax says its first BECCS unit could be operational, delivering the UK’s largest carbon capture project and permanently removing millions of tonnes of carbon dioxide from the atmosphere each year.

Drax is set to kickstart the planning process for its proposals to

build ground-breaking negative emissions technology. The energy company has already transformed its power station near Selby in North Yorkshire to become the largest decarbonization project in Europe having converted it to use sustainable biomass instead of coal.

In order to deploy BECCS Drax must secure a Development Consent Order (DCO) from the government –—a process which takes around two years to complete, and which will get under way in March.

If successful in its DCO application, and subject to the right investment framework from government, work to build Drax’s first two BECCS units could start in 2024, ready to start capturing and storing up to 9 million tonnes of CO2 a year.

The first phase of the DCO application process includes an informal public consultation this spring. Earlier this year Drax sold its four gas power stations and announced it will not be progressing with plans to develop high efficiency gas power at the Drax site in North Yorkshire.

Enviva Keeps Momentum Going

Enviva reports the integration of the wood pellet production plant it previously purchased in Greenwood, SC is progressing as expected. Enviva has received the necessary permits to expand the Greenwood plant production capacity to 600,000 metric tons per year. Construction is ongoing and the expansion is on track for completion by the end of 2021. Enviva states that performance at the previously purchased Waycross, Ga. plant has consistently met or exceeded its expectations prior to the acquisition.

Enviva continues to commission certain assets and ramp production from existing expansion projects at its wood pellet production plants in Northampton, NC and South ampton, Va. Enviva expects each plant to reach production capacity of 750,000 MTPY by the end of 2021.

Enviva has commenced a series of projects at its wood pellet production plants in Sampson, NC; Hamlet, NC; and Cottondale, Fla. subject to receiving the necessary permits. Enviva expects to invest $50 million in these projects to debottleneck manufacturing pro cesses, eliminate certain costs, and increase production capacity, while reducing GHG emissions. Enviva expects to complete this work by the end of 2022.

Enviva also noted the following continued developments: —Construction of a wood pellet

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production plant in Lucedale, Miss. and a deep-water marine terminal in Pascagoula, Miss. —Development and construction of a wood pellet production plant in Epes, Ala., where Envia has completed the purchase of the project site and commenced preconstruction activities. —Evaluation of additional sites for wood pellet production plants across the Southeastern U.S., which would be exported through its existing terminals and the Pascagoula terminal.

Enviva points to several developments as potentially positively impacting its business: ● In one of the new administration’s first actions, President Joe Biden signed an executive order recommitting the U.S. to the Paris Agreement, the international accord designed to avert catastrophic global warming. This action caps a landmark 12-month period during which the global community, including many of the regulators, policymakers, academics, and businesses in the jurisdictions where Enviva’s existing and prospective customers are located, made unprecedented commitments and significant progress to phase out coal, cut greenhouse gas emissions, and achieve “net-zero” by 2050 in order to limit the impact of climate change. ● In December 2020, the European Union took another decisive step towards legislating the 2050 “net-zero” target into the European Climate Law, when EU leaders from all 27 member states, including heavily coal-dependent countries such as Poland and the Czech Republic, agreed to raise the EU’s 2030 GHG emissions reduction target from 40% to 55% as compared to 1990 levels. EU leaders also reached agreement on an economic recovery package that included more than 110 billion euros of grants dedicated to climate and environmental purposes. The European Council, Parliament, and Commission have now entered into the “trilogue” in order to formally adopt this law. ● The United Kingdom, which has been at the forefront of the renewable energy transition, recently raised its GHG emissions reduction commitment under the Paris Agreement to at least 68% by 2030, up from the previous target of 53% as compared to 1990 levels. Furthermore, through a series of important energy policy publications, including the Prime Minister’s Ten Point Plan for a Green Industrial Revolution, the Energy White Paper “Powering Our Net Zero Future,” and the Committee on Climate Change’s Sixth Carbon

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Budget, the UK government underlined its continued commitment to bioenergy as a source of heat and power and outlined its intention to support Bioenergy with Carbon Capture and Storage (BECCS) as a key negative carbon emissions solution and explore bioenergy’s role in hydrogen production. ● In Japan, following Prime Minister Yoshihide Suga’s “netzero” pledge in October 2020, the country’s Ministry of Economy, Trade and Industry recently unveiled a “Green Growth Strategy Towards 2050 Carbon Neutrality.” The strategy sets the target for renewable energy sources to make up 50% to 60% of the nation’s power supply by 2050 and proposes tax incentives and other support to achieve this goal, including a 2 trillion yen ($19 billion) “Green Innovation Fund.”

In addition to the approximately 3.5 million MTPY of long-term off-take contracts with Japanese counterparties Enviva executed several agreements with Japanese counterparties, including: —A new contract with a major Japanese trading house regarding 20-year, take-or-pay off-take supply for a new biomass power plant. The contract is subject to certain conditions. Sales related to this contract are expected to commence in 2024 with annual deliveries of 240,000 MTPY of wood pellets. —An amendment to increase the volume from 400,000 MTPY to 420,000 MTPY under an existing 20-year, take-or-pay off-take contract with a major Japanese trading house to supply a new biomass power plant. Deliveries under this contract are expected to commence in 2024. —A memorandum of understanding with a major trading house in Japan outlining the terms under which Enviva would supply up to 1 million MPTY to an emerging segment of the Japanese renewable energy market, combined heat and power plants that could be converted from fossil fuels to co-fired or dedicated biomass plants. These facilities are most often co-located with major manufacturing complexes in Japan. The decarbonization of the industrial sector is increasingly important for countries to meet net-zero targets.

As of February 1, 2021, Enviva’s current production capacity is matched with a portfolio of firm, take-or-pay off-take contracts that has a total weighted-average remaining term of 12.8 years.

Enviva reports it owns and operates nine plants with a combined production capacity of 5.3 million

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MTPY in Virginia, North Carolina, South Carolina, Georgia, Florida and Mississippi, and exports wood pellets through its marine terminals at the Port of Chesapeake, Va. and the Port of Wilmington, NC and from third-party marine terminals in Savannah, Ga.; Mobile, Ala., and Panama City, Fla.

Enviva Focuses On Net-Zero

Consistent with its mission to displace coal, grow more trees, and fight climate change, Enviva announced its commitment to become “net-zero” in GHG emissions from its operations by 2030. Although the product Enviva manufactures helps to reduce the lifecycle GHG emissions of its customers, Enviva states it must also do its part within its operations to mitigate the impacts of climate change. In order to deliver “netzero” emissions by 2030, Enviva has committed to the following: —Reduce, eliminate or offset all of its direct emissions. Immediately begin to minimize the emissions from fossil fuels used directly in its operations. As its efforts to minimize the use of fossil fuels, adopt lower-carbon processes, and improve the efficiency of operations will take time and continue to mature, in the interim Enviva will offset 100% of its residual emissions through investments in projects that result in real, additional and third-partyverified net-carbon reductions. Enviva will focus on forest offsets created in the U.S. Southeast as part of its relationships with Finite Carbon and others, building on experience working directly with private landowners. Enviva plans to work with key stakeholders and others who are investing in such high-quality offsets, prioritizing those created from forest management, afforestation, and reforestation projects. —Reduce the emissions arising from electricity purchases in its operations, pledging to source 100% renewable energy for its operations by no later than 2030, with a target of at least 50% by 2025.

Today, all of the fuel utilized in Enviva drying operations is already provided by 100% renewable resources, but it still uses electricity from the grid. Enviva manufacturing operations are located in the U.S. Southeast, where electricity generation relies heavily on coal and natural gas and where market structures make renewable energy supply more difficult than in many other parts of the U.S. Enviva recognizes that efforts are under way to transition the grid in its operating regions to loweremissions sources and Enviva intends to play a positive role in accelerating these trends. “We will work with renewable energy suppliers to generate zero-carbon renewable energy for our operations. We will seek to both maximize the use of on-site renewable energy generation at our facilities, as well as to develop new off-site renewable energy resources physically located in our operating regions where possible.”

Enviva will seek to drive innovative improvements in its supply chain. To address emissions generated as part of its upstream and downstream supply chain, Enviva commits to proactively engage with its partners and other key stakeholders to adopt clean energy solutions.

Given the durability and consistency of its operations, particularly with respect to transportation logistics, Enviva believes its business provides a unique opportunity to test innovative approaches for supply-chain decarbonization. Enviva commits to work with its stakeholders to improve the environmental emissions intensity of trucking, rail and shipping logistics, and commits further to take steps to accelerate and advocate for the development of new solutions and to work with its stakeholders to bring these solutions to market.

Enviva will transparently track and report on its progress. It also commits to disclosing climate-relevant data and risks through CDP (formerly the Carbon Disclosure Project) by the end of 2022.

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New Name Is Woodville Pellets

The former bankrupt German Pellets industrial wood pellet facility in Woodville, Texas that was purchased by Estonia-based Graanul Invest Group in June 2019 now operates as Woodville Pellets.

Graanul Invest Group is the second largest pellet producer in the world and the largest in Europe. The group operates in the field of bioenergy and renewable energy production, forestry and biomaterials development.

Woodville Pellets LLC also has a pellet storage and shipping terminal in Port Arthur, Texas. The pellet plant has a production capacity of 496,000 tons per year. The operations are undergoing new project work.

Graanul Invest Group has 12 modern wood pellet mills and companys annual pellet production capacity is 2.98 million tons

The group owns six combined heat and power plants that are biomass-based units.

Graanul Invest also includes three forestry companies and over 50,000 hectares of forestland in the Baltics. The group plants more than a million trees annually.

Drax Adds Pellet Production Capacity

Drax Group, the major United Kingdom-based electricity producer, which has converted much of its generation from coal-fired to wood pellet fuel, has entered into an agreement to purchase major Canadian-based industrial wood pellet producer Pinnacle Renewable Energy Inc. The all-cash transaction is valued at $657 million (U.S.) (C$831 million), including the assumption of net debt.

Duncan Davies, Pinnacle CEO, comments, “The combination of

Pinnacle and Drax will create a global leader in sustainable biomass with the vision, technical expertise and financial strength to help meet the growing demand for renewable energy products around the world.”

Will Gardiner, CEO of Drax, remarks, “I am excited about this deal which will reinforce Drax’s position as the world’s leading sustainable biomass generation and supply business, delivering to our strategy to increase self-supply, reduce our biomass production cost and create a long-term future for sustainable biomass.”

The transaction is subject to closing conditions, including governmental and regulatory approvals as well as the approval of the Supreme Court of British Columbia. The transaction is expected to close in the second or third quarter of 2021.

Pinnacle is the second largest producer of industrial wood pellets in the world. The company operates nine production facilities in Western Canada and one in Aliceville, Ala., with one additional facility nearing startup in Demopolis, Ala. The company also owns a port terminal in Prince Rupert, BC. Pinnacle has entered into long-term, take-or-pay contracts with utilities in the U.K., Europe and Asia that represent an average of 99% of its production capacity through 2026.

Drax notes the transaction more than doubles its biomass production capacity, significantly reduces its cost of biomass production and adds a major biomass supply business underpinned by long-term contracts with high-quality Asian and European counterparties. Specifically it adds 2.9 million tonnes of biomass production capacity. Pinnacle’s existing joint venture minority partnerships carry over to Drax in the transaction. Pinnacle reportedly currently produces biomass at a lower cost than Drax. This reflects the use of high levels of low-cost sawmill residues. British Columbia has a large and well-established commercial forestry industry, which has in recent years seen increased harvest levels, in part associated with management of a pine beetle infestation, producing good levels of residue material availability for the production of biomass. This infestation has now run its course and alongside other influences on the forest landscape, including wildfire, is resulting in a reduction in the annual harvest and sawmill closures. The industry is adjusting to this with some production curtailment as well as developing approaches to fiber recovery and use that is expected to result in some in- ➤ 35

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