Impacts of large scale implementation of second generation biofuel production on other bioenergy production and biomass costs Nordic Baltic Bioenergy 2013 Torjus Folsland Bolkesjø Norwegian University of Life Sciences

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ESTIMATED COST STRUCTURE OF BIOFUEL GENERATION (JET A-1) BASED ON FISCHER-TROPSCH

Cost component

Cost (NOK per liter Jet A-1)

Investment costs

5

Biomass costs

9

Other operating costs

2 Source: Rambøll (2013)

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NORWEGAIN PULPWOOD PRICESS, 1960-2011 (NOK/m3 – FIXED 2000 NOK)

Source: Statistics Norway

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WOOD USE IN NORWEGIAN PULP AND PAPER INDUSTRIES, 2005 VS PREDICTIONS FOR 2014 Unit

Product type

Södra Cell Tofte

Pulp

1900

0

Borregaard

Biochemicals etc

1000

1000

NSI Saugbruks

Paper

700

700

NSI Skogn

Paper

900

675

NSI Follum

Paper

430

0

NSI Union

Paper

280

0

Peterson Moss

Pulp

800

0

Others

Paper, pulp, boards

1045

775

7055

3150

TOTAL

Annual wood use, 2005 (1000 m3)

Sources: Norwegain forest owners association and own data collected from the mills

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Annual wood use, 2014 (1000 m3)

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FUTURE BIOMASS DEMAND FROM POWER & HEAT  Bioenergy production expected to increase in Norway, the

Nordic countries and Europe  Ekxample: Nordic Energy Technology Perspectives (2013) – Biomass assumed to be the largest energy source in the Nordic countries in 2050

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KEY QUESTIONS IN THIS PRESENTATION  How will introduction of large scale second generation

biofuel production affect -

Biomass prices

-

The competitiveness of more mature bioenergy technologies such as bioheat

-

Other forest industreis

…taking into account the recent, and expected future, structural changes in the biomass demand side

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Norwegian Trade Model (NTM) 3.0

 Model is calibrated with detailed data for the entire Norwegian forest

and bioenergy sector

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SCENARIOS ANALYZED  Base – no investment  Investment scenarios – Assuming a plant producing 50 mill liters per year – Wood input requirement of 1 mill m3/year – Analyzing market impacts for different wood input alternatives • Wood input alternative 1: «Spruce» - Technology using spruce only • Wood input alternative 2: «Pine» - Technology using pine only • Wood input alternative 3: «Blend» - Technology using a mix of spruce, pine and non conifers • Wood input alternative 4: «Blend with harvest residues» Equals «Blend» but includes harvest residues as well (30%) www.umb.no

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LOCATIONS ANALYZED - Hordaland - Buskerud - Hedmark www.umb.no

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MODELLED WOOD PRICES IN 2020 Øre/kWh

NOK/m3

Increasing prices from west to east, reflecting demand situation

Generally a rather low price level expected in the base scenario

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MODELLED WOOD PRICES IN 2020 NOK/m3

Decreasing prices from west to east, reflecting local supply differences Increasing prices from west to east, reflecting demand situation

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Øre/kWh

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MODELLED PULPWOOD PRICES IN BUSKERUD IN 2020 Øre/kWh

NOK/m3

Less price impact with higher feedstock flexibility

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MODELLED IMPACTS ON FOREST INDUSTRY (SELECED PARTS) AND BIOHEAT PRODUCTION Biofuel production (mill litres) Product Pulp

Input

50

100

150

200

250

Blend

100.0

99.5

96.2

93.8

90.5

Spruce

100.0

98.0

94.0

88.6

86.0

Pine

100.0

99.6

97.9

86.0

86.0

96.1

92.8

87.3

79.7

76.9

96.2

93.4

92.4

92.3

91.8

95.9

93.1

91.7

91.8

91.9

100.2

100.6

100.9

101.2

101.5

100.3

100.9

101.2

102.2

102.2

100.2

100.3

100.4

100.4

100.4

Blend Bio heat (excl Spruce industries) Pine

Blend Sawnwood Spruce Pine

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MAIN CONCLUSSIONS  The biomass market impact vary significantly between different

locations – As expected, biomass cost increases are lowest on locations with a high local biomass supply, low competition for biomass and low transportation costs

 Feedstock flexibility is important and should be emphasized in

investment decisions  The impacts on production of other wood products can be severe

when different industries are competing for the same biomass qualities – But the model studies for Norway indicate relatively limited impacts in most cases – Bioheat and pulp are the most sensitive products in our analysis

 The development of other wood using industries must be

understood by investors and policy makers

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Thank you! Contact: [email protected]

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