30,000 biomass jobs at risk due to remuneration lower than actual costs

The Spanish biomass sector has suffered a serious setback with Order TED/526/2024, which threatens the closure of hundreds of companies and puts more than 30,000 jobs at risk . After months of operating at a loss due to a delay in approving the methodology for calculating its remuneration, the published figures bear little resemblance to the sector's reality. The Order acknowledges a 3% increase in operating and maintenance costs over the last three years , a figure even lower than the Consumer Price Index (CPI), when these costs have actually increased by more than 40%. In particular, the acquisition cost per ton of biomass recognized by the Order, €58, is significantly lower than the actual cost of €70. The difference, exceeding 20%, is forcing hundreds of small and medium-sized enterprises to close, unable to finance their operating losses, and seriously jeopardizes more than 30,000 jobs and activities in rural areas such as the management of agricultural and livestock waste or fire prevention, as surplus forest biomass is not collected.

“Biomass is a generation technology that can operate 24 hours a day and plays a crucial role in the valorization of agricultural and livestock waste, as well as in forest clearing, which is essential for the summer season. Therefore, the Ministry's decision, which forces companies into restructuring or even closure, creating a domino effect on suppliers, is incomprehensible,” states José María González Moya , CEO of APPA Renovables. “As a sector, we urge the Ministry of Economy, Territorial Planning and Environment (MITERD) to urgently update the parameters, recognizing the real costs this technology faces,” González Moya added.

An unrecognized cost increase
In a severely inflationary economic environment, Order TED/526/2024 only recognizes a 3% increase in operation and maintenance costs, a figure lower than the variation of the CPI in the last 3 years, when the reality is that these costs associated with electricity generation with biomass have skyrocketed above 40%.

The cost of acquiring biomass has increased sharply in recent years , as the Russian invasion of Ukraine and subsequent Eur have driven gas prices to record highs. Biomass is an alternative fuel to gas, and its price per ton has risen sharply to over €70. However, the Order only recognizes a cost of €58. This difference of over 20% translates into operating losses for biomass power plants.

Serious consequences for businesses.
Hundreds of small and medium-sized enterprises (SMEs) see this Order as perpetuating the situation of recent months, during which their plants have been operating at a loss . Until now, the current regulations still considered the high electricity market prices of previous years, even though current market revenues for these facilities have plummeted.

“The average price in 2022 was €167.52/MWh, and in that scenario, it was estimated that power plants would receive around €110/MWh from the market in the future. This led to a reduction in other components of their remuneration, relying entirely on a market that has since collapsed. Now the parameters have been updated, but the approved values ​​are far from the actual prices and costs, prolonging the agony of these companies,” explains González Moya.

Last April, the average market price was €13.67/MWh, while these plants invest between €85 and €95 in fuel alone for every MWh generated. “Biomass is a profitable technology if we consider all the benefits: job creation, rural population retention, management of agricultural and livestock waste, reduced fire risk… But the approved parameters do not compensate for either the current situation of the electricity market or the real cost of acquiring biomass,” concluded González Moya.

Risk to jobs linked to rural areas:
Companies in the sector would not be the only ones affected. In addition to the more than 30,000 jobs in the biomass sector, the operation of these plants is fundamental for valorizing agricultural, livestock, and forestry waste, which allows traditional activities in rural areas to survive .

Particularly serious for the environment would be both the failure to utilize biomass from municipal pruning and gardens and the management of forestry waste. In the case of pruning, due to methanization, emissions are 21 times higher. The situation regarding forestry waste is critical in this scenario, especially as the hottest months, and therefore the greatest risk of fire, approach.