Risky Biomass Business: The reputational and financial risks of investing in forest biomass energy

Local campaign against an ‘advanced convesion’ wood biomass plant which developers have failed to manage commission since March 2018. Photo: D.I.A.G., Stop the Barry Incinerator

Joint briefing to investors by the Global Forest Coalition, Environmental Paper Network and Biofuelwatch

Click here to read the briefing.

Summary:

Investors in electricity generated from burning forest wood are facing increasing reputational risks, as well as facing serious financial risks.

Reputational risks stem from the growing awareness and body of evidence showing that forest biomass is far from being a low carbon or even carbon neutral energy source. The climate impacts of forest biomass energy are in many cases as bad as those of coal (for the same amount of energy generated). Furthermore, biomass energy is linked to accelerating forest and biodiversity destruction, as well as to air pollution affecting public health.

Reputational risks can translate into fina-cial risks given the high level of depend-ence of this form of energy on public subsidies. Failure to fully disclose environ-mental, social and governance (ESG) risks in portfolios exposes financial institutions to regulatory risk. Furthermore, there are additional financial risks:

  • Biomass energy provides poor value for money compared to low-carbon forms of renewable energy such as wind and solar power – a trend that will only accel-erate as the cost of wind and solar power continues to fall, unlike that of biomass energy;
  • Bioenergy plants are highly dependent of public renewable energy subsidies and thus vulnerable to any changes in the opinion of policy makers and to reviews of legislation;nEven with subsidies in place, several large biomass power projects have resulted in substantial financial losses for energy companies;
  • ‘State of the art’ or ‘advanced’, high-efficiency biomass projects carry a higher risk of technical failure;
  • Processing and burning woodchips and pellets for energy are associated with a high risk of fires and explosions.