E.ON and Envivia Reach Biomass Supply Deal

Germany's E.ON AG, the world's largest utility by sales, and Enviva LP, a leading manufacturer of processed biomass, said in a statement they have signed a multi-year 240,000 metric ton annual wood pellet supply contract starting in 2013. The financial terms of the agreement were not disclosed.

The German energy giant—traditionally focused on coal, gas and nuclear—has stepped up its pursuit of renewables, having slated more than $1.4 billion for offshore wind development, dipped a toe into solar projects and responded to the continent's surging needs for biomass fuel as it moves away from coal in electricity generation.

Enviva, whose waste-derived wood pellet business has grown considerably in recent years due to biomass exports to Europe, is strengthening its operations in the heavily forested Southeastern United States to meet increasing demand from European utilities.

Last November, the pellet producer announced the formation of a joint venture with oil company ConocoPhillips to begin producing torrefied wood pellets for sale to major utilities in the U.S, Europe and Asia. The "drop-in ready" pellets are considered an attractive alternative for reducing carbon emissions while extending the operating life of coal-fired power plants, allowing them to burn the pellets in existing furnaces instead of making costly facility conversions.

Some figures suggest Europe's biomass demand will grow by as much as 65% by 2020. Experts have warned that the continent could face a severe material shortage unless new biomass sources are developed.