Investing in Climate Change

Biomass as a Renewable Energy Source: Environmental Friend or Foe?

In the transition to a low-carbon economy, renewables like wind and solar enjoy much of the attention. However, other fossil fuel alternatives such as nuclear energy and hydropower are key (if sometimes contested) players.

Despite its significant presence in the world’s energy mix, biomass has had an uneven ride, leading some to question whether it should still be classed as a renewable energy source at all.

Biomass as an Energy Source

Biomass power plants can use a variety of organic inputs to generate energy, including plant material such as sugar cane and wood pellets as well as manure from farm animals. Burning wood pellets is especially common in biomass power plants, with the steam created driving turbines to produce electricity.

As this process shares similarities with that used in traditional coal-fired installations, various legacy fossil-fuel plants have been converted to the energy source in recent years. This is particularly true in Europe, where biomass has become the leading renewable energy source. Biomass currently accounts for around 10% of the EU’s total energy consumption, compared to about 5% of the United States.

Though burning organic matter to generate electricity creates carbon emissions, proponents have argued that biofuel can be considered carbon neutral because plants used to create it naturally absorb carbon dioxide from the environment as they grow.

It also carries one important advantage over renewables such as solar and wind power: biomass power generation levels do not vary with the weather. This means energy providers can easily match electricity supply according to demand at the flick of a switch—an important consideration given that energy storage is still relatively costly, despite falling prices.

Biomass assets have the potential to deteriorate in value as scientific arguments against the energy source harden and governments reconsider their support for the industry.

Biomass Faces Pushback

The arguments in favor of biomass face increasing challenges, particularly given the dominance of wood pellets in the industry. The fact that trees can take decades to grow brings into question the sustainability of the model, raising the prospect of a never-ending gap between carbon emissions and the lengthy process of carbon recapture.

Some firms promote the use of rapid-growing grasses as an alternative to trees. For instance, California-based Giant King Grass seller Viaspace points to data showing that the carbon intensity of generating electricity through biofuel can be comparable to solar and wind power. Viaspace claims its product is ready for use in electricity generation in just six months as opposed to the 20 years required for suitable trees to make wood pellets. However, some express concerns about the impact on land resources of growing crops for energy rather than for food.

In 2019, US environmental group Partnership for Policy Integrity filed a lawsuit against the EU over its support for biofuel. The following year saw a coalition of 32 environmental organizations call on investment management giant BlackRock to divest its 5% stake in the UK’s Drax power plant, the largest wood-burning installation of its kind in the world. The coalition contends that using wood pellets is more detrimental to the environment than burning coal once the immediate impact of felling mature CO2-absorbing trees is considered together with the direct carbon emissions.

With the biomass industry’s current heavy reliance on wood, responsible investment nonprofit ShareAction warns that biomass assets have the potential to deteriorate in value as scientific arguments against the energy source harden and governments reconsider their support for the industry.