Policy instruments and market development for a successful biomass heating market in Upper Austria

bridgesvol. 27, October 2010 / Feature Articles

By Christiane Egger



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What is biomass heating?

Biomass heating often means combustion of wood (wood pellets, wood chips, or firewood) to generate space heating and domestic hot water.

Biomass is a sustainable fuel that is well-suited for heating homes, businesses, and public buildings. There has been significant innovation in the field of biomass technology during the past two decades, and modern systems are fully automatic with ultra-low emissions. The use of biomass for heating ensures energy independence, supports the forest products economy, and is environmentally friendly.

Biomass heating involves the use of a "carbon neutral" fuel. As a tree grows, it absorbs CO2 from the air and stores it during its lifetime. This CO2 is released in the same quantity at the end of the tree's lifetime, independent of whether the timber is burned or the tree decomposes naturally in the forest. The use of biomass for energy production is therefore part of a closed CO2 cycle with no additional CO2 emissions. This has been recognized by the energy and environmental policies of the European Union. Sustainable forestry management practices ensure that the forested areas (with their respective carbon storage function) are not decreased.

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{access view=guest}Access to the full article is free, but requires you to register. Registration is simple and quick – all we need is your name and a valid e-mail address. We appreciate your interest in bridges.{/access} {access view=!guest} The region of Upper Austria

Upper Austria is one of Austria's nine federal states and is located in the northern part of the country, bordering Germany and the Czech Republic. The region is highly industrialized and accounts for more than 25 percent of national exports. Upper Austria's primary industrial sectors include machinery, automotive industries, metal production, wood processing, information/communication technologies, and renewable energy. Upper Austria is comparable to Connecticut in size and to New Hampshire in population (1.4 million).

The state government has adopted a target to reach 100 percent space heating and electricity from renewable energy by 2030. In-state biomass will play a key role in achieving this target, in combination with significantly strengthened energy efficiency programs.


O.O. Energiesparverband

The O.O. Energiesparverband is the energy agency of Upper Austria. It was set up by the regional government in 1991 to promote energy efficiency, renewable energy sources, and innovative energy technologies. The main target groups are private households, public bodies (e.g., municipalities), and businesses.

The O.O. Energiesparverband supports the regional government in the development and implementation of regional energy programs and helps to promote the market development of sustainable energy production and use. It also manages the Okoenergie-Cluster, the network of renewable energy and energy efficiency companies in Upper Austria.


Biomass heating in Upper Austria

The state of Upper Austria has a leading position in biomass heating: Not only are more than 25 percent of all modern biomass boilers installed in the European Union manufactured in the state, but it has one of the highest densities of small-scale automatic heating systems in the world. Stringent emission standards and cutting-edge technologies have contributed to rapid market development. Biomass energy has emerged as an important economic driver for the state, and the biomass heating industry employs more than 4,500 people.

Modern biomass heating applications include

  • automatic wood pellet heating systems, mostly in single-family homes with bulk delivery
  • automatic wood chip heating systems for commercial and public buildings
  • low-emissions firewood boilers, mainly in rural areas
  • district heating systems supplied by biomass thermal plants
  • large-scale combined heat and power plants supplied by biomass


Biomass market development


Cultivating the biomass heating market

Biomass heating has a long tradition in Upper Austria, but the introduction of innovative technologies and business models in recent years has created a booming market. Several important drivers have contributed to the development of the modern biomass heating industry in Upper Austria.

The first driver was forward-thinking farmers and forest owners who were looking for new sources of revenue and markets for forestry residues in the early 1980s. The business model that emerged was cooperatives of farmers and forest owners that develop, build, and operate small-scale biomass district energy systems. The cooperatives generate and supply heat to local government buildings, schools, businesses, and housing. Today, 300 such biomass district heating networks are in operation.

A second driver was creative entrepreneurs in Upper Austria who sought to minimize the manual labor required to prepare fuels and operate heating systems. These entrepreneurs designed fully-automated, high-efficiency, and user-friendly biomass systems and subsequently pioneered a new form of heating. An important milestone was the introduction of automatic wood pellet heating systems in 1996.

A third driver has been state policy, which has provided stable support to the market for more than 25 years.


Biomass heating today

Currently, advanced biomass technologies provide about 15 percent of the total primary energy supply in Upper Austria and 31 percent of thermal energy. Renewables supply approximately 33 percent of total primary energy in Upper Austria and 45 percent of thermal energy. There are 40,000 automatic biomass boilers in operation in residential, commercial, and public sector buildings. Of these, half are fuelled with pellets and half with wood chips.

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Sticks, carrots, and tambourines for biomass heating

The state has successfully driven its transition toward a clean energy economy through the use of comprehensive plans since 1994. To achieve its ambitious goals, Upper Austria has developed policy packages for different target groups. These packages consist of financial incentives (mostly investment grants), legislation to mandate installation obligations, and promotional activities (energy advice, outreach campaigns, training). These different types of support mechanisms can be thought of, respectively, as carrots, sticks, and tambourines. 
 

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Most support mechanisms are adopted for the long term: The biomass heating grant program, for example, has been in place continuously since the mid-1980s.  
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Success factors for biomass heating programs and action plans:

  • "Policy packages" (consisting of a mix of regulatory, financial, and training/awareness programs) are likely to deliver the fastest market growth by stimulating demand for biomass heating systems while simultaneously supporting the development of cost-effective and good-quality products
  • Clearly defined quantitative targets, supported by well-developed action plans, give confidence to biomass heating businesses 
  • Regular market intelligence is necessary to understand progress, communicate success, and take corrective action when necessary 
  • High efficiency equipment that meets stringent emissions and quality standards is crucial for market transformation 
  • Fuel standardization will support consumer confidence 
  • Heating systems must offer user convenience levels similar to oil and gas 
  • Biomass heating will only gain public acceptance if the fuel is sourced from forests where sustainable forest management practices are in place; understanding and effectively communicating the benefits of biomass market growth beyond climate and environmental protection is critical (e.g., energy independence through local fuels, income for the farming community, local employment in rural areas, innovation, etc.) 
  • Involving farmers and forest owners in the biomass business can help to develop biomass fuel supply chains and provide important support for policy development 
  • Typically, the most promising markets for biomass heating are in areas where oil heating dominates and there is no connection to the natural gas grid. Conversion from oil-based heating to biomass is technically easier (because both require fuel storage) and usually more financially viable; hydronic heat distribution systems in a building also make conversion to biomass more economically attractive 
  • For larger buildings, it might be easier for programs to initially target new construction, and then move to renovation after an initial learning period; biomass heating in new buildings is usually simpler to implement and often less expensive to install than in existing buildings. 
  • Demonstration programs (e.g., the first 10/100/1000 biomass heating systems in a specific market segment) are very useful, especially if the findings are used to design training and funding programs 
  • Training needs to be proactively offered to all actors along the value chain as a part of any policy package; it should target producers, installers, and users of larger systems 
  • Local biomass information campaigns can be very helpful to kick-start markets, especially for private homes or public buildings 
  • A longer term perspective on market development, which takes into account the learning curves of different market actors and the expansion of production and installation capacities, is important for developing a healthy industry. In the long run, it is better to have only a few installations in the first years that work well than to risk having faulty installations during rapid market growth. This perspective includes getting funding programs right by taking a longer-term perspective and avoiding boom-and-bust markets.


Biomass heating industry

A grassroots biomass movement stemming from farmers and forest owners, combined with innovative entrepreneurs and long-term state policy support, has resulted in a vibrant biomass heating industry in Upper Austria. Over the last few years, biomass boiler manufacturing has grown into a flourishing part of Upper Austria‘s economy. In 2009, the in-state biomass boiler manufacturers produced approximately 50,000 boilers. Manufacturing and sales of biomass boilers and stoves employs more than 3,600 people. If fuel production and all related services are included, the biomass heating sector in Upper Austria accounts for about 4,500 full-time jobs. Upper Austrian biomass boiler manufacturers play a leading role on the European market - more than 25 percent of all modern biomass boilers installed in the European Union were "made in Upper Austria." For nearly a decade, all heating installers have included biomass heating in their product and service portfolio in response to customer demand. The transformation in contractor services and consumer awareness has been supported by industry training programs, the vocational school for installers, energy awareness campaigns, and counseling services provided by the O.O. Energiesparverband.


The "Okoenergie-Cluster"

The Okoenergie-Cluster plays an important role in supporting industry development. Biomass boiler manufacturers, installers, ESCOs, designers, architects, and many other stakeholders cooperate in this network to improve products and services and to increase biomass heating market share. Activities include joint promotional campaigns, export activities (for example, market study tours or group stands at trade shows in new markets), and training activities. The network is managed by the O.O. Energiesparverband on behalf of the state government. The network includes 150 companies that employ 6,200 people and generate more than €1.7 billion  ($2 billion) in annual revenue. More information, including a product and partner database in English, can be found at www.oec.at.

Biomass boiler and stove manufacturers in Upper Austria  
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World Sustainable Energy Days

Each year, in Wels, Upper Austria, the O.O. Energiesparverband organizes the World Sustainable Energy Days (WSED), the largest annual conference in this field in Europe. The WSED offer a unique combination of events on sustainable energy production and use, covering energy efficiency and renewable energy sources for buildings, industry, and transport.

Different conferences and seminars - which present the latest technology trends, outstanding examples, and European strategies - and the "Energiesparmesse," an important energy exhibition, offer ideal opportunities to establish new partnerships. The conference makes an important contribution to raising awareness for green energy and energy efficiency. 

In 2011, the World Sustainable Energy Days will take place March 2-4, 2011, and will offer the following conferences and events:

Further information can be found on the conference Web site   www.wsed.at

A full report on biomass heating in Upper Austria is available at www.oec.at/en

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The author, Christiane Egger, is deputy manager of the O.Ö. Energiesparverband, the energy agency of Upper Austria, and the manager of the Ökoenergie-Cluster, a network of 150 companies active in renewable energy and energy efficiency. {/access}