The EU price cap could have "unintended consequences" and be "disruptive" for the biomass market, sector representatives at the US Industrial Pellet Association's annual conference in Miami said on 3 October.
EU energy ministers reached a political agreement on emergency measures on 30 September, including a €180/MWh cap on power prices, and are aiming to formally agree a legal text by the end of this week. The cap would apply for power generators, including intermediaries, until 30 June 2023. It covers non-gas and non-hard coal-fired power — including biomass — sold in the spot market, and it excludes generation under any form of state subsidies. Member states would have the flexibility to set a higher cap or target other technologies and other actors, including energy traders.
A panel of European utilities expressed concerns over the impact the cap. There is "a lot of unclarity" over what the measures will mean for European biomass-fired generators and how they can be implemented at a national level, Danish utility Orsted's director, Soren Alsing, said. But panelists agreed that the measures would not affect 90pc of biomass in the market, as power generated under subsidies and on long-term contracts are not expected to be included in the cap regulation.
There may be "unintended consequences if you wander into the market and put artificial price caps in", UK utility Drax Group's head of fuels, Rich Taylor, said. Although the UK falls outside the EU's price cap, it is not a positive move and would "dislocate the market temporarily", Taylor said.
The cap could result in a "price collapse" in the residential heating wood pellet market, if industrial wood pellet volumes move to the premium segment. Although this would benefit consumers, it could be a "disruptive event" for the wider market, World Bioenergy Association president Christian Rakos said. Subsequent lower prices could be positive for the reputation of the pellet sector and beneficial for consumers, Rakos added.
There are opportunities going forward, as the current situation could be "more in favour of biomass" if planned coal-to-gas conversions are shelved and switched to biomass instead, utility RWE's head of biofuel trading, Martin Dewolff, said.
