Bioenergy in Europe

Bioenergy in Europe: A new beginning or the end of the road?

ISB Global McKinsey Bioenergy in Europe: A new beginning or the end of the road?
Bioenergy in Europe: A new beginning or the end of the road?

Bioenergy faces challenges in Europe, but there is reason to believe it can make a comeback.

When the European Commission announced its long-term climate-change strategy in January 2014, it called for a higher target for the use of renewableenergy sources: 27 percent by 2030. This goal, combined with recent developments in the industry, could open a new and promising chapter for bioenergy in Europe.

In broad terms, the new plan is the natural followup to the “20-20-20” program of 2007 and the 2010 National Renewable Action Plans (NREAPs). The 20-20-20 plan called for a 20 percent reduction in greenhouse-gas emissions (compared with 1990), thereby increasing renewable energy to 20 percent of the power supply and improving energy efficiency by 20 percent.

The NREAPs helped governments figure out the renewable-energy part of the puzzle. At the time, the outlook was for the volume of biomass-based electricity—that is, power derived from wood and other organic materials, such as crops and agricultural residues—to double from 114 terawatt-hours1 in 2010 to 232 terawatt-hours in 2020 (out of a total 3,346 terawatt-hours).

As for heat, the goal was for biomass to grow from 685 terawatt-hours to just over 1,000 terawatt hours. In both cases, biomass has fallen short; the European Union estimated it will reach only 83 percent of its target by 2020.2 What happened? Why has biomass-based energy been growing less than planned? Is there still a place for it in the European energy mix?

Bioenergy Comeback: Three challenges

A bioenergy comeback, however, will require specific barriers to growth to be addressed. There are three major challenges: affordability, efficiency, and acceptance.

Affordability: Making bioenergy cost competitive

Historically, biomass-based power has been generated from low-cost, low-grade waste-fuel streams, such as crop residues and wood chips. These have often been used in small-scale combinedheat- and-power plants that serve industrial sites or municipal-district heating networks.

Efficiency: Industrializing the bioenergy supply chain

Bioenergy feedstocks are abundant, but their potential has not been maximized. The use of biomass for energy is therefore well below the sustainable annual cut volumes of forests.

Acceptance: Defining ‘sustainable bioenergy’

Opinions on the benefits of bioenergy vary widely. The main issues are the environmental standards of non-European biomass imports, and to what extent biomass leads to lower CO2 emissions.

Download the McKinsey Sustainability & Resource Productivity Paper Bioenergy in Europe: A new beginning or the end of the road?

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