Daniel Madrid, trading manager at Generandi, gives his thoughts on how European policy shapes the woody biomass market, ahead of his presentation at the International Biomass Congress & Expo.
Generandi was established in 2011 and specialises in the trading of raw material for the main wood-based products – including industrial wood, biomass woodchips and pellets, pulpwood chips and panel chips. Since 2011, the company has operated as exclusive agents/brokers of Sumitomo Corporation.
Last year Generandi/Sumitomo exported over 850,000 tonnes of woodchips into Europe for the pulp and paper industry (55%) and biomass industry (45%).
At the 2023 International Biomass Congress & Expo, Madrid will focus on how European policy is affecting biomass trading. Bioenergy Insight asked for an overview of the current situation.
European policy is the main driver for the woodchip and pellet markets, Madrid said. It is therefore crucial to understand how legislation affects the markets, to ensure the right short- and long-term decisions are being made.
He went on to discuss the Renewable Energy Directive (RED), which was first introduced in 2009, and which has been updated several times to reflect changes in the EU’s fossil fuel dependence. RED’s primary aim is to promote the use of renewable energy sources, and it establishes binding targets for the share of renewable energy that must comprise the EU’s overall energy consumption. The latest target is 32% by 2030.
However, the new EU directive on renewable energy has caused a lot of controversy in recent years: “Many pressure groups [and] lobbies are fighting hard in the operating bodies of the EU (Parliament, Council, and Commission) to achieve a text that is most favourable to their interests,” said Madrid.
RED II – the first revision of the directive – is in force today. Last December, the European Commission (EC) published guidance on how generators can comply with RED II’s biomass sustainably criteria.
“Biomass is considered renewable and can count towards [Member States´] renewable energy targets if it complies with the EU´s biomass sustainability criteria set out in Article 29 of the RED II introduced in 2018,” added Madrid.
The article stipulates that, for biomass fuels produced from forest biomass, producers must carry out a risk-based assessment on the sourcing countries to ensure harvesting criteria is adhered to, said Madrid. These biomass fuels must also adhere to Land Use and Forestry Regulation (LULUCF) for 2021-2030 at a national level.
“There are many pressure groups that create controversy and claim that biomass is not really a renewable resource, so a new review of the RED was forced and what came to be called RED III was discussed, in which they discussed fundamentally three things,” Madrid commented.
On 30 March, an agreement was reached on the revision of the RED III directive between the European Parliament and Swedish Presidency of the Council.
“In this agreement, many of the points that caused great concern to the biomass industry were eliminated and in general terms we can affirm that the agreement is satisfactory for the sector, although obviously there are points related to the financing and subsidies of generation plants that have hardened and cause some discomfort in the biomass players,” said Madrid.
For Madrid, the most important thing coming out of the agreement related to primary woody biomass is that there will be no new restrictions on feedstocks that are not considered sustainable. This was proposed by the European Parliament and “deeply concerned our sector”.
Nevertheless, there are some concerns in the industry surrounding the wording of the text. Madrid said the text seems inaccurate and subject to interpretations that could cause some controversy – although it is “generally accepted as good due to the threat it posed.”
Disruption adaption
Bioenergy Insight then asked about two recent major shocks to the global economy: the Covid-19 pandemic, and Russia’s invasion of Ukraine. Although the Covid effect has now passed for Generandi, Madrid highlighted some of the ongoing effects of the latter shock to the world’s economy.
All Sustainable Biomass Program (SBP) certificates were suspended in Russia and Belarus from 8 April last year. Therefore, Russian wood pellets and chips could not be used by EU biomass plants. All ENplus certificates were suspended for producers, traders and service providers based in Russia and Belarus from 15 April last year, and last July, the EU banned the import of Russian woody biomass for energy production.
At the same time, Russia banned the foreign trade of wood, or wood-derived raw material, from within the EU – meaning that some North Europe-based paper mills suffered from shortages of material supply.
However, new trade flows originated as a result. This included woodchips from South Africa, Brazil and Uruguay to pulp and paper mills in Finland and Sweden. It also included an increase in demand for biomass wood chips from countries in Southern Europe like Spain, because supply countries in the Baltics suffered a lack of raw material from Belarus/Russia.
Madrid stated that a great challenge facing the industry will be the supply capacity in the medium- to long-term to operate the huge number of energy projects, and the manufacture of second-generational liquid fuels.
“The ambitious targets of the EU in this regard and the size of the companies involved (oil and energy companies) suggest a large increase in demand for biomass products and will force an increase in the flow of supply from places outside Europe,” said Madrid.
As for Generandi, it has seen a lot of activity in 2023. Supply chain flow changes have presented the company with a challenge to which it has responded satisfactorily, according to Madrid, and it has provided it with growth it wants to sustain.
“We believe that the future of biomass and wood-based industries is one full of opportunities and hope, since forestry and the use of agroforestry products lead to healthier forests and more renewable products,” he added. Both the EU and big industries have noticed this, he concluded.
Daniel Madrid is a speaker at the International Biomass Conference & Expo 2023. To view the programme and register, click here.
Exclusive interview: Daniel Madrid of Generandi
