Austrian experiences with the introduction of pellets as a fuel Christian Rakos, Energieverwertungsagentur Juha Rautanen, Motiva.

ENERGIEVERWERTUNGSAGENTUR

Austrian experiences with the introduction of pellets as a fuel

Christian Rakos, Energieverwertungsagentur

Juha Rautanen, Motiva

ENERGIEVERWERTUNGSAGENTUREnergy in Austria

Hydropower14,6%

Other Renewables

12,1%

Fossil fuels73,3%

ENERGIEVERWERTUNGSAGENTUR

Renewable energy without Hydropower

Fuel wood60%

Wood wastes16%

MSW5%

Heat pumps 4% Black liquor13%

Others2%

Solar thermal 1,1%Biogas and Biodiesel 1,1%Geothermal 0,1%Wind and PV 0,0%

Source: ÖSTAT 1997

ENERGIEVERWERTUNGSAGENTURWood heated dwellings in Austria

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998

Number of wood heated dwellings

woodchip boilers

pellet boilers

modern logwood boilers

all other dwellings were heated by old logwood boilers or wood stoves

ENERGIEVERWERTUNGSAGENTUR

Sales of domestic pellet boilers in Austria

4201.300

3.300

7.870

13.500

0

2.000

4.000

6.000

8.000

10.000

12.000

14.000

an

nu

al s

ale

s

1997 1998 1999 2000 2001

Quelle: Pelletsverband, 2000

Prognose

ENERGIEVERWERTUNGSAGENTUR

General factors that have supported diffusion kick off

Rapid advances in technology and design

Consumer interest - the first comfortable wood heating systems

Generally positive attitude towards wood as domestic fuel

ENERGIEVERWERTUNGSAGENTUR

Characteristics of the Austrian market for pellets

It is very young: emergence of pellets 1994 significant start up problems (as with any

new market) expansion despite relatively poor economic

frame conditions pellets created high enthusiasm among

public and businesses two markets:

• boilers for single family houses• boilers for blocks of flats

ENERGIEVERWERTUNGSAGENTUR

Main problems for market introduction

1) Pellet supply

2) Pellet delivery

3) Pellet storage at the customer

4) Pellet boiler

5) Installation and service

ENERGIEVERWERTUNGSAGENTUR1) Pellet supply

Supply security: major concern of potential customers!

Quality of pellets: low dust content and mechanical stability is fundamental for small boilers

• high dust content decreases boiler efficiency and causes operation failure

• pellets from waste wood had disastrous effects: slagging of boilers, discontinued operation

ENERGIEVERWERTUNGSAGENTUR2) Pellet delivery

Delivery vehicles must evacuate the dust simultaneously by blowing in pellets

must have adequate pumping force

should be able to weigh the pellets delivered

standardised connections to the house inlet necessary

drivers must be trained (e.g. to inspect the storage room)

ENERGIEVERWERTUNGSAGENTUR

3) Adequate pellet storage room necessary

dry

no electrical installations (danger of dust explosion)

solid walls

dustproof door

ENERGIEVERWERTUNGSAGENTUR4) The pellet boiler

Many companies jumped on the pellets train too fast

unreliable devices were introduced into the market (“testing in the market”)

frequent operational problems - negative impact on the image of heating with pellets

Since 1998 major Austrian equipment producers offer fully reliable boilers

ENERGIEVERWERTUNGSAGENTURTypical technical problems:

Overheating of the boiler: slagging of ashes

High temperature corrosion ash deposition in poorly designed heat

exchangers: up to 50% efficiency loss ash deposition in the burning zone serious back-burn problems unreliable pellet delivery from the storage

room to the boiler

ENERGIEVERWERTUNGSAGENTUR5) Installation and service

Installers have no experience with pellets

consequently they prefer to sell oil boilers

frequent mistakes in installations lead to operation problems

efficient and fast service is still missing (Service network is expensive)

new strategy of most advanced producers: service contract is sold with the boiler, 1 full service every year

ENERGIEVERWERTUNGSAGENTUR

6) Education of other related professionals

Architects: design of pellet storage and boiler room, convenient delivery of pellets

Planners of heating systems

Chimney cleaners: these could provide service of boilers - new business opportunity! Chimney cleaners could be a strategic partner: they know the old boilers that need to be replaced and can promote pellet boilers

ENERGIEVERWERTUNGSAGENTUREconomic situation

Pellet price: approx. 150 EURO/t incl. delivery and VAT (30 EURO/MWh)

Pellet boiler: approx. 10.000.- EURO incl. automatic storage retrieval and VAT

Subsidies: approx. 2000 - 3000 EURO depending on region

Reference cost for extra light fuel oil: approx 30 EURO/MWh; oil boiler: 4400 EURO incl. tank

ENERGIEVERWERTUNGSAGENTUR

How to introduce pellets successfully I

Create public awareness for pellets Demonstrate reliable pellet delivery Establish strict quality standards for pellets Establish strict quality criteria for pellet

boilers (high efficiency, low emissions and reliable operation)

poor boilers are a greater problem for long term market development than expensive boilers!

ENERGIEVERWERTUNGSAGENTUR

How to introduce pellets successfully II

Establish investment subsidies for boilers to kick start market development

Keep poor pellet boilers out of the market (e.g. by excluding equipment that does not meet standards from subsidies)

In DK level of subsidy was directly linked to emission standard - rapid improvements

Subsidies for education of professionals, measures to ensure quality, public relations

ENERGIEVERWERTUNGSAGENTUR

How to introduce pellets successfully III

Establish and test logistics for pellet delivery - ensure there is an immediate impression that supply is no problem

Educate and prepare professionals - especially installers before advertising

Establish a few demonstration plants that represent the state of the art for educational purposes (preferably by experienced technical experts)

ENERGIEVERWERTUNGSAGENTUR

Which market should be addressed first I ?

Large scale heating plants• +/- not sensitive to pellet quality• - very low prices of competing wet biofuels

blocks of flats• + lower specific costs of the boiler• + fewer actors that can be addressed directly• + less resources for fuel logistics and service

network• + can become a niche for developing the structures

to support diffusion in the domestic sector

ENERGIEVERWERTUNGSAGENTUR

Which market should be addressed first II ?

individual housing• + have higher conventional fuel costs than larger

users

• + large market

• + option: pellet stoves as “low barrier system”

• - high marketing costs

• - high initial requirements for fuel supply and service logistics

• - high requirements for education of professionals

ENERGIEVERWERTUNGSAGENTURThe Austrian choice

Individual houses: this choice was made by industry, that was used to deliver to this market. Mainly central heating systems, less stoves

Selected attempts to introduce pellets into the large buildings segment were rather successful locally

Barrier: construction companies do not know qualified planners that realise pellet system

ENERGIEVERWERTUNGSAGENTURSummary I

The introduction of pellets into the heat market requires a comprehensive and complex approach

problems that are not managed promptly can seriously affect the diffusion process

It needs a dedicated actor (institution) that co-ordinates and manages pellet introduction - “system building” is necessary

ENERGIEVERWERTUNGSAGENTURSummary II

One company alone cannot finance system building as all others will take advantage of this

in Austria two organisations have been created for this purpose: Bioenergy Austria and Austrian Pellet Association

public co-financing is very important for such initiatives

investment subsidies for pellet boilers is necessary to overcome high transaction costs and perceived risks of new technology

ENERGIEVERWERTUNGSAGENTURContacts

Austrian Energy Agency, Christian Rakos [email protected]

www.eva.wsr.ac.at

Bioenergy Austria (Industrial association of bioenergy companies): www.bioenergy.at

Pelletverband Austria: Mr Auerbach [email protected]