Forest Industry Opportunities:
Everything to gain from renewable fuels
World governments are declaring common and binding policies for the use of renewable fuels. Hand in hand with this, increasing efforts are being made to commercialize the second generation fuels. The forest industry world wide has everything to gain from participating in this actively and increase the value addition of its production.
Increasing Fuel costs
World market prices for most fossil fuel; oil, natural gas and coal have increased very substantially over the last six years. Even if the short term trend is downward, high energy costs will also in the years to come influence both the raw material costs as well as product prices of the pulp and paper industry. Energy costs have been driven not only by the high demand growth from fast-growing economies but also by the measures being taken to reduce greenhouse gas emissions, so far primarily in Europe.
Some of the forest industry products such as building and packaging materials may benefit from a relatively better position compared to competing materials with higher fossil fuel consumption. At the same time also renewable raw materials costs will continue to increase as these are increasingly used as energy raw materials.
The EU renewable energy drive
EU has made good progress towards a common and binding policy on renewable fuels use. The overarching target is that at least 20 % of the EU energy consumption excluding transport fuels should come from renewable sources by the year 2020. Hydro, wind and solar are among renewable energy sources as is biomass. The ambitious goals will certainly increase the pressure on the forest as a producer of renewable, transportable energy raw material. Several of the EU states have a low portion of renewable energy in their current supply, a small land area and high use of fossil fuels. They will struggle to meet the targets with the resources available domestically. Import of biomass will then become a possibility.
National goals for the proportion of renewable energy
for chosen countries set by EU.
Biofuels from Scandinavia and the Americas
The short transport distances from Scandinavia may put this region in focus for possible export of biomass. However, Scandinavia already has a high and increasing local consumption and fairly high prices. Lower prices, high potential and moderate costs of trans-Atlantic bulk transport may make more distant sources in North and South America more attractive.
A
project of interest in this context is the JCE Group Green Circle Bio Energy Inc Wood pellet plant in Florida. The plant is not only large with a capacity of over 500 000 tons per year – with a location close to a deep water port export to Europe can be fully economic. The main bet is though that high energy prices also in the US and elsewhere will create a substantial domestic demand and that low-grade biomass as a rule will be consumed regionally.
EU targets for renewable automotive fuels
The EU is also defining targets for renewable automotive fuels.
By 2020 they shall cover at least 10% of the consumption in each member state. The target is conditional on that this can be achieved in a sustainable way and that technology for this is available. The EU, national governments around Europe together with companies and international venture capital are today developing solutions on a large scale to commercialize so called second generation biofuels. This second generation is meant fuels not based on starch or sugar food crops but on biomass from agriculture or forestry. In this field the forest industry has everything to gain by actively participating.
US targets more ambitious
US targets for renewable automotive fuels are even more ambitious than the European with a target for year 2022 of 36 billion gallons per year out of which 16 billion should have a biomass origin. The
US legislators and administration are also ahead of their EU colleagues in measures to promote technology development in the lignocellulosic fuels area – well over $400 million in federal funding alone has so far been allocated to industrial scale development projects.
US venture capital has also been quick to move into this arean creating a tremendous momentum for the commercialization of lignocellulosic fuels technology.
Biofuels – part of the solution
To successfully meet the challenge that the raw materials cost increases stemming from globally increasing energy costs, the forest industry must continue to increase the value addition of its production. The value addition for the pulp wood based products, pulp and paper, is already high and the industry has well established structures to further improve it. The value addition to the fuel fraction of the forest raw materials is today very moderate with products as power and wood pellets at the top.
Renewable automotive fuel from biomass is much more value-added product and has the potential to drastically increase the revenue of pulp mills. The high product value for second generation renewable automotive fuels depends on two factors. Firstly the value of liquid motor fuels on a heat value basis is substantially higher than for biomass sold as fuel. Secondly, renewable automotive fuels have a much lower taxation than their fossil origin equivalents. As an example, forest biomass delivery free at a Swedish district heating plant today cost €17/MWh while renewable automotive fuel is worth about €110/MWh at the pump excluding VAT.
Energy efficient black liquor gasification
The Chemrec method to convert biomass to renewable automotive fuels, the black liquor gasification route has very high energy efficiency; up to 70% of the energy content of the biomass is transferred to the product. Compare this to combined heat and power production where at best 28% of the energy content of the biomass can be transformed to power. This limits the possible power production, especially for stand-alone pulp mills, as beneficial heat use is limited.
Recently, the RENEW project, an extensive systems study coordinated by Volkswagen with participation of 31 European companies and research institutions and with a total budget of €28 million, was concluded. In the project a number of different thermo chemical pathways to renewable fuels where compared. The Chemrec black liquor gasification route gave both the highest efficiency and the lowest product cost of the studied processes.
Pulp industry to benefit from bio fuels
The pulp and paper industry is uniquely positioned to take advantage of the global effort to introduce renewable fuels. High energy prices increasing the pressure on the raw material base is not only a threat but also an opportunity. Will the industry take it?
Text: Patrik Löwnertz