The fact that the Dutch have created a program to earnestly foster sustainability certification of small, North American forests is a testament to how important Canadian and U.S. wood pellets are—or will be—to cofiring operations in the Netherlands. The Dutch want certified wood pellets from North America, up to 3.5 million metric tons per year, and they are spending at least 3 million euros to ensure small landowners across the pond understand that, unless certification by one of the several existing schemes is undertaken, wood pellets manufactured from their raw materials will likely be excluded from this emerging European market.
In 2013, following the Dutch Parliament’s adoption of a national energy transition agreement coordinated by the Social and Economic Council of the Netherlands—an advisory body to the Dutch government—47 stakeholder groups signed what’s known as “the Dutch Energy Agreement.”
Signatories to the agreement include industry, environmental groups, government and others. By signing the agreement, these stakeholder groups committed themselves to reaching a 14 percent share of renewable energy in 2020, and 16 percent in 2023. In addition, ancillary objectives of the agreement include an annual energy savings of 1.5 percent and the creation of at least 15,000 fulltime jobs.
In late 2015, what’s referred to as “the Covenant” was finalized. The Covenant is an agreement between four Dutch power utility companies and five environmental organizations that defines sustainability criteria for biomass used in cofiring. The five Dutch nongovernmental environmental organizations that have signed the Covenant are Greenpeace Nederland, Milieudefensie, Natuur & Milieu, Natuur en Milieufederaties and Wereld Natuur Fonds. The four energy companies are ENGIE (previously GDF-Suez), Uniper (previously E.ON), Vattenfall/Nuon and RWE. Development of the Covenant arose once wood pellets for cofiring were identified as a promising way to help Dutch energy companies reach the 14 percent renewable target by 2020, with the maximum subsidy budget available.
The Stimulation of Sustainable Energy Production, referred to as SDE+, is the Dutch subsidy program that promotes renewable energy production. The SDE+ is an operating grant. Producers receive financial compensation for the renewable energy they generate. As the Dutch government explains it, “Production of renewable energy is not always profitable because the cost price of renewable energy is higher than the market price. The difference in price is called the unprofitable component. SDE+ compensates producers for this unprofitable component for a fixed number of years, depending on the technology used.”
The SDE+ contribution level is dependent on market prices. When energy prices are high, SDE+ payments are less, with consumers paying more. Conversely, when energy prices are lower, SDE+ payments are higher as consumers pay less. “The correction amount is the average energy price per category during the year of production,” the Dutch government states. “The base energy price is the lower limit for the correction amount. The maximum grant is reached when the correction amount is equal to the base energy price. The final payments are calculated per year on the amount of energy produced and the actual energy price.”
Subsidies are allocated for periods of eight, 12 or 15 years, depending on the technology used. Biomass cofiring is eligible for the eight-year subsidy. In the Dutch Energy Agreement, a maximum of 25 petajoules (PJ) of biomass cofiring was agreed upon. Two rounds of SDE+ applications for wood pellet cofiring were available in 2016. Tenders for those rounds were submitted, reaching the 25 PJ maximum. This equates to roughly 3.5 million tons of wood pellets per year for eight years, the duration of the subsidy program for cofiring. All told, upward of 28 million tons of wood pellets are at play here. The catch is that 100 percent of the biomass used as part of the Dutch Energy Agreement, Covenant and subsidy program must be certified sustainable—and while North American wood pellets are often sustainably produced, certification of such, particularly of pellets made from biomass procured from small forest owners, is less than desirable.
According to the National Climate Assessment’s 2014 data, a slim majority of U.S. forestland ownership—56 percent—is privately held by an estimated 11 million individual landowners. Of that privately owned 56 percent, 18 percent is owned by corporations while 38 percent is owned by noncorporate entities, what NCA characterizes as “an aging demographic.”
“Sustainable forestry on U.S. forest lands is largely assured by the strong rule of law in place in the U.S. and highly successful implementation of voluntary best management practices,” states a recently published white paper titled “Sustainable Forestry and Certification Programs in the United States” by the American Forest and Paper Association. “Thus, direct certification of these lands is not necessarily essential to ensuring a sustainable fiber supply.” Perhaps not, but to qualify for markets where certification is required is another story.
The Foundation
The U.S. and Canada are important exporting countries for wood pellets supplied to the Dutch and wider EU markets. An organization, named the Dutch Biomass Certification Foundation, was established under the Covenant to promote and accomplish sustainability certification of small forest owners in North America. The DBC Foundation’s minimum budget is 3 million euros, and this is funded by the four utility power companies that have signed the Covenant and have biomass cofiring capacity.
The foundation’s executive board is comprised of those same four utilities. The five environmental organizations that signed the Covenant also have the right to appoint a member to the executive board “in order to contribute and advise effectively,” the DBC Foundation states, “but as of today, they have decided not to make use of this right.”
In a March 20 press release, the DBC Foundation notes that “most of the biomass that Dutch energy companies cofire is in wood pellet form and originates from North American forests. Many of these forests are owned by small landowners and, while sustainably managed, often are not certified.”
The DBC Foundation commissioned an extensive scoping study last year to define bottlenecks, drivers, intervention options and conditions for stimulating sustainable forest management certification of small forest owners in North America, says Peter-Paul Schouwenberg, chairman of the DBC Foundation executive board.
Small forest owners are defined in the Covenant as those who own less than 1,200 acres. “This study reports an estimated 5 percent of all small forest owners in the United States are certified today,” Schouwenberg tells Pellet Mill Magazine. “DBC will need to collaborate closely with local organizations in the United States and Canada. To enhance this, DBC will appoint a representative in North America. Also, collaboration with existing certification schemes and seeking an active dialogue with relevant stakeholders on the DBC’s work have been highlighted in DBC’s Stimulation Program. In March, DBC started a data research study to obtain further insights to optimize the design of a tailor-made and most effective program of activities under the Stimulation Program. Wood & Co. Consulting was selected to lead this study.”
Stimulation Program
Last year’s scoping study, along with two workshops in Rotterdam and Miami, emphasized the value and need of engaging with local stakeholders in North America, Schouwenberg says. “DBC has an ambitious and challenging objective that cannot succeed without intensive collaboration,” he adds. “DBC also faces an extremely diverse playing field. This is why DBC aims for appointment of a representative in North America and seeks an agile and tailor-made program of activities.”
The DBC Foundation describes its Stimulation Program as “a framework for activities that support reaching its objectives.” The program runs until 2023 when full certification is scheduled to be achieved. For 2017, activities under the program include execution of the aforementioned detailed data research on small forest owners in North America; appointment of a North American representative; development of quick wins, for example, through collaboration with existing certification schemes; seeking an active dialogue with relevant stakeholders on the DBC Foundation’s work; and the development of a communication plan.
“The Stimulation Program is written as a framework to provide flexibility in adjusting its activities over time based on the evolution of the program and any new information and insights obtained along the way,” Schouwenberg says. “For example, the data research study underway now should provide further information to help DBC identify the best possible quick wins. Examples of quick wins might concern collaborations with existing certification programs that already implement initiatives to promote small forest owner certification.”
According to AFPA, there are four primary certification systems in the U.S.: the Programme for the Endorsement of Forest Certification; the Sustainable Forestry Initiative; the American Tree Farm System; and the Forest Stewardship Council.
“All relevant certification standards, including the Sustainable Biomass Partnership, NTA 8080, FSC and other available programs, were part of the discussions that led to the biomass sustainability criteria as described in the Covenant,” Schouwenberg says. “The criteria have now been incorporated in the Dutch government subsidy program (SDE+) that promotes biomass cofiring. To demonstrate compliance with these criteria by the power utility companies, the Dutch government is expected to benchmark existing certification schemes, including SBP, for eligibility still this year.” Schouwenberg explains that, while the name “the Dutch Biomass Certification Foundation” may imply otherwise, the foundation is not a certification scheme in itself. “The establishment of DBC is a specific agreement under the Covenant,” he reiterates. “DBC thus supports reaching the agreed goal in the Covenant of 100 percent certification of woody biomass, at the forest level, used in cofiring in the Netherlands.”
The sustainability criteria for solid biomass concern greenhouse gas emission reduction, forest management principles and chain of custody requirements, according to Schouwenberg. “An important aspect is that woody biomass compliance needs to be demonstrated at the level of the forest management unit,” he says. “Regional risk assessments or sourcing certifications at the pellet mill level are not accepted. For small forest owners, a temporary exception applies, allowing as a first data collection point ‘the first legal owner of the material after the business from which the biomass was sourced’—for example, the pellet mill.”
The clear goals for 2017 are delivery of the data research study by Wood & Co. Consulting, and appointment of a representative in North America. For 2018 and beyond, a provisional set of activities has been drafted, and the foundation will elaborate and adopt a detailed annual plan of activities yearly, Schouwenberg says.
Although the Dutch Energy Agreement allows for a maximum of 25 PJ of biomass cofiring equivalent to roughly 3.5 million tons of pellets, the amount of wood pellets consumed in the Netherlands for cofiring in 2015 was “nearly zero,” says Schouwenberg. “Due to the expiry of the former subsidies for cofiring, wood pellet use was near zero in 2015.” The precise amount was 1,417 tons. “The Dutch market reached around 1 million metric tons of wood pellets in cofiring under the former subsidy scheme,” he adds. “In late 2016, initial subsidy grants under the new SDE+ scheme had been granted. There is no official data yet, but it appears no significant cofiring volumes yet for 2016.”
The new subsidy scheme, SDE+, provides a single budget for all different forms of renewable energy production, Schouwenberg explains. “In a tender process, projects compete for approval in three subsequent phases—with increasing Eurocent-per-kilowatt-hour compensation—within one SDE+ call for proposals,” he says. “As such, the most economical projects are rewarded first until depletion of the available budget.”
The Covenant presents two target dates for reaching 100 percent certification, Schouwenberg says, with 2020 as the ideal, and 2023 as the final deadline. While both targets are sufficiently aggressive, Schouwenberg adds that the obligation to reach 100 percent certification is with the individual power utility companies that cofire biomass and is incorporated as a condition in the SDE+ subsidy program.