Bloomberg News

Dong to Spend $795 Million Turning Fossil Plants to Wood

April 11, 2012

Dong Energy A/S, Denmark’s state- controlled utility, plans to invest about 500 million pounds ($795 million) to convert three of its coal- and gas-fired power stations to generate heat and electricity from wood pellets.

The Danish plants will have a capacity of about 1 gigawatt, said Thomas Dalsgaard, executive vice president and head of generation for Fredericia-based Dong, by phone yesterday.

“If all goes well then we hope to decide on all the conversions in the first half of 2013 and then the construction phase will last between one to three years so that these three units will be converted by 2015,” Dalsgaard said.

Denmark plans to cut its energy consumption by 12 percent by 2020 from 2006, it said March 28. It already gets 70 percent of its renewable-energy use from biomass such as straw, wood and waste. Lower taxes on biomass than coal and gas power generation encouraged Dong Energy to convert the plants.

The decision on whether to proceed depends on securing environmental permits and long-term agreements with heating customers, Dalsgaard said. Dong, which owns 17 coal and gas- fired power plants, plans to lower carbon-dioxide emissions in power and heat production per energy unit produced to 15 percent of 2006 levels by 2040, according to its website. In 2010, 14.5 percent of the company’s power output came from wind energy.

Biggest Hurdle

The biggest hurdle for the conversions is sourcing biomass, Dalsgaard said. Dong currently uses about 1 million metric tons of wood pellets and 500,000 tons of straw a year at its Danish plants. The conversions would see the figure for wood more than double to 2.5 million tons a year, he said. Dong now sources most of its biomass from the Baltics, Poland and Russia and may begin buying materials from other areas including North America.

Dong has also set up a unit to build bio-refineries. New Bio-Solutions is studying ways to turn agricultural residue and waste such as straw into gas and bio-ethanol, Dalsgaard said.

Dong is developing a full-scale refinery in Denmark, and combining one of its power plants with the “world’s largest” anaerobic-digestion facility, owned by a third party, along with use of bioethanol and waste technology, Dalsgaard said.

Anaerobic digestion breaks down materials in the absence of oxygen to make a biogas that can be used to generate power. A decision on whether to proceed with the project will be taken next year, with the proposed plant due to be working in 2015.

Dong plans projects outside Denmark with partners and is looking to team-up with waste-management businesses in the U.K., as well as considering projects in the U.S. and Asia.

“We’re also having dialogue with some of the oil companies that are eventually going to be the customers for biofuels, so it’s a broad range of partners we’re targeting and we’re having a dialogue with many of them,” Dalsgaard said.

To contact the reporter responsible for this story: Louise Downing in London at Ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg in London at landberg@bloomberg.net


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