Tucked between the city of Newcastle upon Tyne and the Scottish border lies Northumberland, the northernmost and most sparsely populated county in England. While Northumberland is home to just 300,000 people, it is also home to a coal-fired power station that in the past three years has captured and held the attention of the entire wood pellet industry.

The Lynemouth Power Station, overlooking the North Sea just southeast of the village of Lynemouth, was built in the late 1960s to support a new aluminum smelter proposed by Canadian mining and aluminum manufacturer Alcan (Alcan was purchased in 2007 by Rio Tinto and is now Rio Tinto Alcan). Alcan was granted permission to build the smelting facility, but to meet the 310 MW of electrical power the plant needed a dedicated power plant would have to be built as well. The facility was designed to generate the 310 MW plus an additional 110, which would be placed onto the national grid. Both the power station and the Alcan smelter were commissioned and brought online in March 1972.

In March of 2012, Alcan decommissioned the smelting operation and all of Lynemouth’s generation began flowing to the national grid. By the end of that same year, Alcan had closed on a sale of the facility to the German energy company RWE.

Biomass Beginnings
Well before the closure of the smelter and sale of the power station, the inclusion of biomass was considered and tested in small volumes at Lynemouth. In the mid-2000s, biomass was identified as a means of driving down the facility’s carbon dioxide output. Small volumes of biomass were first introduced into the facility in 2003 and, in 2004, Lynemouth cofired 10,000 tons of biomass materials, a miniscule amount when considering the plant’s 1.2 million-ton annual coal demand.

Biomass was clearly at the forefront of considerations when the plant changed hands in late 2012/early 2013 and may well have represented the new owner’s best chance to secure a long-term future for the facility. In company statements issued shortly after the sale was finalized, then plant manager Bob Huntington offers, “We are looking at the option to convert to biomass and will make a decision on whether to proceed with this plan in early 2013.” As the plant’s new owners, RWE was hoping to leverage its experience converting the Tilbury Power Station (now closed) to biomass at Lynemouth.

Late in 2013, the Department of Energy and Climate Change notified plant owners that the conversion of the facility had been tabbed by the DECC as one of six biomass conversion projects that would progress toward a final investment decision to be supported by the U.K. contract for difference (CfD) price support program. This decision was met with excitement not only by local politicians hoping to preserve the remaining jobs at the once sprawling facility, but also North American wood pellet producers, as the plant—if fully converted to wood pellets—would require nearly 1.5 million tons of wood pellets annually. Not all biomass projects under consideration made it beyond this step, and the conversion of three boiler units at Eggborough was cut from the list, effectively ending speculation that it would soon be a buyer of wood pellets.

Later that month, the excitement around the project was once again bolstered as DECC concluded that the project at Lynemouth was worthy of continued development, finding the project provisionally affordable. In June of 2014, Lynemouth signed a contract with the government to deliver low-carbon electricity to the national grid. Despite this, the project at Lynemouth still had approvals to gain before the British government could begin to spend additional dollars for any biomass-derived power produced from the plant.

As a member of the European Union, the subsidization of the facility would have to be reviewed by the European Commission to ensure that these public monies were limited to only the necessary investments and that Lynemouth and its owners were not overcompensated for its power. In early 2015, the EC found that initial cost estimates may have been too conservative, the rates of return too high and that the increased demand for wood pellets might distort the global market. On Dec. 1, 2015, however, the EC announced that its inquiry found that British support of the conversion complied with European Union state aid rules and that “the commission is now satisfied that the submitted parameters are robust and present no risk of overcompensation.” Additionally, the EC noted that its investigation did not yield any evidence that a market distortion in the wood pellet sector was likely to arise from the subsidization of the conversion. The decision seemed to pave the way for the conversion, guaranteeing that the plant would be supported by the CfD program through 2027.

In a press release, managing director Vaun Campbell says, “This is fantastic news for the Lynemouth project and the stations 134-strong workforce.  As a full coal-to-biomass conversion, this project is a win win for all involved. The northeast region and the local economy also benefit as supply chains and other infrastructure are created.” Echoing the sentiment of many, Campbell continued, saying, “It has been a long journey with delays to the decision impacting the project but we can finally now move toward hopefully making an investment decision.”

One More Change
Days before press time, the winding path to Lynemouth’s eventual conversion to biomass feedstocks took yet another turn as RWE announced that it had sold the facility to a Czechoslovakian energy firm EPH. Since the announcement, EPH has stated publicly that it fully intends to continue with the plant’s conversion plans and hopes to have the facility fully converted and online by 2017. EPH owns production assets throughout Europe and, in January 2015, closed on the purchase of the Eggborough Power Station, a plant long-considered to be a likely target for biomass conversion.

For now, plant employees and contractors are anxious to begin the conversion work and pellet producers will have to trust that EPH’s purchase decision was fueled in part by EC’s determination that the U.K.’s support of Lynemouth complied with state aid rules and would essentially be guaranteed a positive rate of return until 2027.

Author: Tim Portz
Executive Editor, Pellet Mill Magazine
701-738-4969
tportz@bbiinternational.com