On the coordination of the draft amendment to the typical conditions for the supply of biomass

The operator of the Energy Resources Exchange (hereinafter referred to as the Exchange), BALTPOOL UAB (hereinafter referred to as the Operator), taking into account the results of the Operator’s investigation and the proposals expressed by the participants of the biomass market, in addition to the draft amendment to the Typical Conditions of Supply of Biomass (hereinafter referred to as the Conditions of Supply) already sent by the Operator by letter No SD-240284 dated 20-12-2024, hereby submits the following draft of the amendment of the Conditions of Supply for approval: 

1. Obligation to indicate the laboratories that have determined the quality indicators for biomass and to provide test reports from accredited laboratories 

Additional obligations are imposed on the buyer in order to collect data on laboratory tests: 

• when submitting the completed Fuel Quantity and Quality Report in the Electronic Trading System (ETS), indicate the laboratory where the qualitative tests were carried out; 

• if the buyer has had laboratory tests carried out by an accredited laboratory, if the seller rejects the test values provided by the buyer in the ETS, to provide the test reports for the determination of the test values. (Clause 9.1 of the Conditions of Supply). 

“9.1 The buyer, based on the results of laboratory tests carried out in accordance with the established procedure, shall, not later than within 7 (seven) business days after the end of the relevant delivery week, provide the seller with the data about the quantity, and quality parameters of biomass actually delivered during the delivery week and the name of the laboratory where the tests were carried out, by providing the Fuel Quantity and Quality Report via the ETS. If the buyer has had the tests carried out by an accredited laboratory, where the seller has rejected the submitted Fuel Quantity and Quality Report, the buyer must provide via the ETS all copies of the test reports of the accredited laboratories regarding the values of quality indicators rejected by the seller.” 

It should be noted that the Operator has evaluated the proposal of the Exchange sellers to impose a requirement for buyers to submit to the ETS test reports for all qualitative indicators (not only the ones disputed by the seller). Taking  account that, according to the Exchange’s data for one year, a total of approximately 118 000 biomass consignments were delivered under the transactions concluded on the Exchange (with approximately 18 500 Fuel Quantity and Quality Report submitted), buyers collectively carried out approximately 200 000 laboratory tests (for moisture content, ash content and/or calorific value), and that sellers collectively contested a total of 4.7% of the total amount of biomass delivered under the Exchange. The Operator considered that imposing an obligation on buyers to provide reports of all laboratory tests carried out would create an excessive administrative burden. 

Also, in the Operator’s assessment, in case of a dispute between the buyer and the seller regarding the values of qualitative indicators of the delivered biomass, it is sufficient for the EPA to provide only the test reports of accredited laboratories, as, while the seller always performs the tests on the reserve samples in accredited laboratories, the results of the buyer’s tests in non-accredited laboratories would only affect the resolution of the dispute in cases when the differences of the results would fall within the limits of the tolerance limits. 

Accordingly, it is proposed to impose an obligation on purchasers, in case of a dispute on biomass quality indicators, to submit to the ETS only copies of the test reports of accredited laboratories, according to which the seller’s ETS has rejected the biomass quantity and quality indicator values. 

2. Calculating the ash value for calculating discounts 

The operator shall consider that: 

• the Operator’s test results suggest that the results of laboratory tests on subsamples of the same biomass (product SM3) sample may differ significantly; 

• In accordance with points 27 and 28.1 of the Rules for Solid Biomass Accounting (hereinafter referred to as the Rules) and point 14.1.4 of the Energy Exchange Regulation (hereinafter referred to as the Regulation), the samples for the determination of the biomass quality indicators shall be taken and the ash analysis shall be carried out in accordance with the requirements of the applicable standards. However, neither the Regulations nor any other legal acts specify how disputes are to be resolved when the results of laboratory tests carried out by two different accredited laboratories differ substantially; 

• In accordance with Clause 27 of the Regulations and Clause 6.8 of the Conditions of Supply, samples shall be taken and prepared by personnel or a specialised company appointed by the buyer at the time of delivery of the biomass. Therefore, any errors in the analysis that may arise from incorrect sampling and forming shall be the responsibility of the buyer. 

• Even when tested in the same laboratory, significant heterogeneity in the quality of the biomass product SM3 and/or lower quality biomass products may objectively lead to natural significant differences between the quality of the two samples; 

• From the results of the Operator’s test, it follows that the results of tests on 2 different samples from the same load of the biomass product SM3, from the same accredited laboratory, may differ by up to 100%; [1]

Suggests that clause 9.11 of the Conditions of Supply, applicable to disputes between tenderers concerning the quality of biomass and the application of discounts, be amended: 

“ 9.11. If the difference in the quality parameters of the samples tested by the buyer and the seller exceeds the maximum acceptable differences of results specified in paragraph 9.8 of the Conditions of Supply and/or the measurement uncertainty (error) of the test set in paragraph 9.9 of the Conditions of Supply,: 

9.11.1 and If the buyer has performed the tests of samples not in the accredited laboratory, the rule of decision shall apply, under which the parameters of heating value, ash content and moisture content in the biomass sample determined by the seller in the accredited laboratory shall be deemed valid.

9.11.2 If both the buyer and the seller determined the quality parameters of the samples in the accredited laboratory, and both the buyer’s and the seller’s samples were sealed and the seal number was recorded[2] the rule of decision shall apply, under which the parameters of heating value, ash content and moisture content in the biomass sample shall be calculated as an arithmetic mean values of heating value, ash content and/or moisture content determined in the laboratories of the buyer and the seller which shall be deemed valid and binding on both parties.

9.11.3 If the buyer and the seller have determined the ash content of the biomass samples in different accredited laboratories and the buyer’s laboratory’s dry matter ash content is greater than 5 %, for the purpose of the calculation of the seller’s discount provided for in sub-clause 16.4.1 of the Regulation, the allowable maximum acceptable difference in the results shall be 100 per cent of the measured ash content value of reserve sample (relative difference). If the difference between the ash content tests carried out by the buyer and the seller exceeds this allowable maximum acceptable difference, the ash content value of the biomass sample as shall be determined equal to the value determined by the seller’s accredited laboratory.” 

Under the proposed amendment, in the event of a dispute between a buyer and a seller who have been tested by different accredited laboratories as regards the value of the ash content, the dispute would be resolved as follows: 

This decision rule would apply when:

• The tests are carried out in different accredited laboratories (the buyer can retest the seller’s accredited laboratory with an additional sample and the arithmetic average would be calculated);
• The buyer’s ash test indicator is higher than 5%, i.e. the rule only applies to delivered high ash biomass;
• Only applicable for the calculation of discounts the weighted average ash yield of the delivered biomass is higher than the maximum possible value indicated in the biomass product specification, i.e. other decision rules would apply for the rejection and quality determination of the biomass.

Please submit your comments and observations, if any, on the proposed amendments no later than 13 January 2025 to [email protected]

International Biomass Exchange,
BALTPOOL

[1] Excluding outliers (less than the 10th percentile and more than the 90th percentile).
[2] Because samples tested in accredited laboratories must be sealed in all cases.
[3] For example, the buyer has found an ash content of 5.1% in an accredited laboratory and the seller has found an ash content of 4.3%, the applicable ash content – 5.1%
[4] For example, the buyer has found an ash content of 5.1% in an accredited laboratory, while the seller has found a content of 3.9%, the applicable ash content – 4.5%.
[5] For example, the buyer has found an ash content of 5.1% in an accredited laboratory and the seller has found an ash content of 2.5%, the applicable ash content – 2.5%.