Encouraged by government incentives to promote carbon neutral electricity, there is a growing trend in the power sector where coal-fired power plants are converting to biofuels. On the 19th December Britain’s largest coal power manufacturer Drax received the go-ahead to convert a third of its power plant unit in Yorkshire to biomass from coal, after abandoning a £1 billion carbon capture project a few months ago.
Biomass, including with energy from waste, has accounted for a quarter of the overall 29% increase in the amount of electricity generated by renewable energy between 2014 and 2015 .
Regardless of these efforts to switch to more environmentally friendly fuel types, biomass power for a number of reasons carries a reputation with insurers for having losses. This in turn has an effect on insurers’ appetite to take on these types of risk. Insurance however is deal critical and without it, some projects could be refused finance or break their finance agreements. Brokers therefore have a role to educate insurers to the real risks which will enable them to feel comfortable when evaluating a biofuel risk.
The majority of losses have arisen as a result of the fuel stock being poorly stored in facilities that are not entirely designed for purpose. Additionally, there is a gap in knowledge surrounding storage procedures as well as alternative machinery.
One of the biggest problems developers face with biomass-fueled plants is the pre-processing and handling of the fuel source. Biomass firing differs from coal firing in that it requires an additional air supply during the process due to the increased mass of fuel to be combusted. To make sure that this is sustainable, effective risk mitigation is vital to the correct air supply of the biomass fuel when in storage. A lack of air supply during the process increases the risk of spontaneous fire combustion. For example, Tillbury power station was closed in 2013 after a project to convert to biomass. The plant suffered serious fire damage to about three of their storage units.
There exists various technology types fit for biomass firing ranging from the pre-treatment of energy or non-energy specific feedstock to power generation plants.
Being that there is a wide variety of equipment, there is currently little standard in place with regards to the application of the technology.
Various utilities, such as Dominion Resources, are repowering their existing coal facilities so that they can simultaneously burn biomass. However, most power stations implement new technology when converting to biomass without a proper understanding on how to use it.
Biomass is but one of many forms of emerging renewable technology the power industry has seen over the last few decades. Fire risk in the waste industry has generated much negative publicity, making it less attractive to insurers. A good broker can help insurers understand the real risks surrounding this process and how to best manage and mitigate these, enabling them to confidently present these risks to the market. The broker is duty bound to help clients understand their risks in the context of best practice operator’s regime.
For further information, please contact Molly Eldridge, Renewable Energy on 44 (0)20 7558 3447 or email firstname.lastname@example.org