Ottawa plans on expanding its clean technology and electricity tax credits to include heat and electricity produced by burning biomass, as outlined in its fall economic statement.
Biomass is a very broad term, but in this context, it primarily refers to pellets that are created by pressurizing leftover wood or agricultural materials from processing lumber or crops.
Ajay Dalai, the Canada Research Chair on Bioenergy out of the University of Saskatchewan, said Canada is “sitting on a gold mine in terms of biomass availability of products.”
“The amount of bioenergy that we produce in the country, I looked at the data, is about seven terawatt hours compared to one thousand terawatt hours worldwide coming from biomass — a very small fraction coming from the Canadian biomass.”
In 2018, Canada generated over 647 million terawatt hours worth of electricity. A terawatt is equivalent to one trillion watts. For a basic watt-hour calculation, a 100-watt lightbulb draws 100 watts of power at any given moment, so using it for one hour equals 100 watt-hours of power used.
The fall economic statement is proposing to expand eligibility to the 30 per cent Clean Technology investment tax credit to include “systems that produce electricity, heat, or both electricity and heat from waste biomass.”
It also proposes making the 15 per cent Clean Electricity Investment tax credit available for systems “that produce electricity or both electricity and heat from waste biomass, which would be available as of the date of Budget 2024 for projects that did not begin construction before March 28, 2023.”
The government estimates the tax credit would cost $853 million between 2023-24 to the 2028-29 fiscal year, and an additional $1.2 billion from fiscal 2029-30 to 2034-35.
This is welcome news for the Forest Products Association of Canada whose vice-president, Eric Johnson, describes the prior lack of a tax credit for biomass as “a miss.”
“Biomass is a net-zero energy source and use of biomass certainly gives the opportunity for manufacturers to produce cleaner heat, cleaner power and then also for communities to transition off of fossil fuels like diesel, particularly up in the north and around our mills, and be powered by a cleaner source of electricity,” Johnson said.
In the forestry sector, Johnson says much of the biomass used in their processes involves wood like sawdust, bark, branches and other parts of trees he says otherwise would be left to decompose in the process of processing lumber.
Many lumber mills have their own power generation, which Johnson says has moved into co-generation with biomass and coal or natural gas. He says this planned tax credit would help many generators shift to pure biomass.
“What’s necessary in order to do this at that full biomass scale is renewing the technologies that are that are there at the mills to be able to produce thus making them more efficient, so they don’t have to be co-generated with other sources of power,” he said.
However, some environmental groups argue that biomass is not as green as it seems, including Stand Earth.
Richard Robertson, a forest campaigner with the organization, says they recently began a campaign calling on Ottawa to stop subsidizing biomass, with a focus on wood pellet exports to the U.K. and Japan.
“Millions of tonnes are going overseas and they’re eating into primary forests,” Robertson said. “They’re not just taking waste and they’re taking lots of subsidies as well from the U.K.”
The wood pellet industry has been under scrutiny for years. Research published by the Canadian Centre for Policy Alternatives (CCPA) in 2021 found 12 per cent of logged material in B.C. is eventually broken down for biofuel.
Then, a BBC investigation last October reported the Drax Group, a U.K.-based renewable energy company, sources some of its biomass from whole trees in B.C.’s primary forests — not just sawdust and waste wood, as the company claims.
Drax operates the world’s largest wood-fired thermal electricity plant in Yorkshire, U.K., and has a growing monopoly on Canada’s wood pellet industry. Several groups, including Unifor, want Canada’s Competition Bureau to investigate Drax’s dominant position in B.C., which they say could have negative consequences for both forest ecosystems and forest industry employment in the province.
Seven months after the BBC’s investigation broke, the U.K.’s energy regulator launched a formal investigation into Drax to determine whether the company is violating sustainability rules.
In a response to the BBC, Drax maintains they only use sawdust and other waste wood that the lumber industry does not want.
Natural Resources Canada says forest biomass is a “renewable source of feedstock for energy production” as long as it comes from a sustainably managed forest and regrows over time.
Still, Roberston says there are concerns.
“This is really not a clean technology. And I think that’s really what I want to emphasize here. It’s not carbon-neutral either,” he said.
The fall economic statement does describe biomass as a carbon neutral energy solution and says it could be carbon-negative when combined with carbon-capture and storage.
Dalai makes the case that biomass is carbon neutral, as plants use carbon dioxide as part of photosynthesis.
However, he did acknowledge it’s not fully a one-to-one process as it does take energy to condense organic material into biopellets.
The clean technology tax credit of 30 per cent became available on Tuesday and the 15 per cent clean electricity tax credit expansion will be available when Budget 2024 is unveiled.
Accompanying legislation is expected to be introduced in fall 2024.
— with files from The Canadian Press.