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BIOMASS SOURCING STRATEGIESNON-TECHNICAL CHALLENGES OF A COMPANY INTENDING TO BUILD A DEMONSTRATION/FLAGSHIP PLANT
EUROPEAN BIOFUELS TECHNOLOGY PLATFORM5TH STAKEHOLDER PLENARY MEETING6 February 2013Hannes LechnerPrincipal, Global BioFutures PracticePöyry Management Consulting
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1. The PÖYRY Group
2. Key Challenges in Biomass Sourcing
3. Examples from other industries
4. Where is all the biomass?
5. Market competitiveness
6. International biomass logistics vs. local sourcing
AGENDA
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THE PÖYRY GROUP - SECTORS & SERVICES
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We deliver best-in-class management consulting and engineering services across our business groups.
Thermal powerHydro powerNuclear energy
Renewable energyTransmission & distribution...
Pulp and PaperChemicalsMinerals processing
Bio-refiningBio-converting (e.g.. pellets)...
WaterWastewaterWaste
DesalinationEnvironmental services...
Roads Rail and urban public transport Tunnels
Real estate developmentConstruction management...
Strategic adviceBusiness developmentOrganizational optimization
Performance improvementMarket analysisValuation, M&A
Engi
neer
ing
1)
Management Consulting
Energy
Industry
Water & Environment
Urban & Mobility
1) Owners & Lenders Engineering, Project Management, (Pre-) Feasibility EPC & EPCM Projects, …
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THE PÖYRY GROUP IN THE BIOENERGY SECTOR
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Strategy development Bioenergy strategy
formulation Market penetration
strategy Comprehensive market
analysis Bioenergy master plans
Change management Analysis of selected
business alternatives Partnership opportunities
/ Investor and downstream partner identification
Procurement strategies Biomass sourcing
strategy Supply/market analysis Scenario analysis Strategy formulation Implementation
Procurement optimisation
Contract evaluation and negotiation
Technology assessment Technology options
evaluation Technology development
benchmarking Audits of novel
technology
Integration of bioenergy inv. to existing plants
Technology partnership opportunities
Energy efficiency assessment
Business operations and planning Business development
and modelling Performance
improvement Competitiveness
benchmarking
Sales plan development Business opportunity
assessment Corporate restructuring Investment analysis and
technical valuation
Bioenergy market analysis Market research and
market advisory Marketing, product and
production strategies Demand, supply and
price forecasting
Identification and evaluation of target customers
Policy analysis and monitoring.
Project services Project identification and
concept development Project pre-feasibility /
feasibility assessments Financial viability
analysis – ports, vessels
Project due diligence / second opinion
Financial valuation of biomass plants –services to financiers
We build our strategic advisory and M&A support on our deep knowledge in the biomass to energy sector; the competence is unique & profound
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WHAT IS A BIOMASS SOURCING MANAGER DOING ALL DAY?
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Making sure that the right feedstock volumeof the right quality arrives at the facility at the
right time at affordable cost.
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Identification of suitable biomass supply regions and sources
Mobilisation of existing surplus volumes
Development of new resources
Bulky materials from dispersed origins
Complex logistics
Seasonality and cyclicality of supply flows
Competition for raw material with other industries
Competition for land and other resources
Price uncertainty and risk of increasing biomass market prices
Regulatory environment and financial incentive schemes
Sustainability requirements and public perception
etc.
KEY CHALLENGES IN BIOMASS SOURCING
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BIOMASS ASSORTMENTS
Pulpwood Logs
Chips / Sawdust Bark Harvesting
Residues
Woody Energy Crops
Herbaceous Energy Crops
Agricultural Residues
Continuous supply ++ + + ++ - - --
Low bulk density ++ + + - + - -
Clean, homogenous fuel
++ ++ -- -- ++ ++ 0
Output per hectare +(+) n/a n/a - ++ ++ -
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Should the conversion technology decide over the feedstock to be used or vice versa?
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Barra do Riacho pulp mill owned by Fibria Celulose – currently largest pulp mill in Latin America
Annual wood consumption: ~10 million green tonnes
Wood supply exclusively through trucks
Directly located in plantation rich area
BIOMASS SOURCING IN THE FOREST INDUSTRY
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The pulp industry can do it…
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Drax Power - largest single electricity generator in the UK with a capacity of ~4 GW
Drax plan to convert three of their six units to biomass, resulting in a total biomass demand of about 8 million tonnes of pellets p.a. by 2015
Wood chip equivalent: 16 million tonnes p.a.
Biomass will be imported from various overseas supply regions
BIOMASS SOURCING IN THE ENERGY INDUSTRY
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Implementation of Drax’s large scale biomass sourcing strategy is feasible and in full swing…but doesn’t come cheap!
The energy industry can do it…
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WHERE IS THE BIOMASS?
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Forest Resources Industry Residues Energy Crops
On a macro level, the world is full of opportunities to source large quantities of biomass.
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WHERE IS THE BIOMASS?
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Local delivered cost for traditional wood assortments vary significantly between regions and influence strategic positioning.
50
75
100
125
150
10 20 30
Indi
cativ
e pu
lpw
ood
cost
s de
liver
ed to
mill
Growth rates (odt/ha/year)
Canada
NW Russia
US SoutheastBrazil
Finland
Portugal
USD/odt
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THE US SOUTHEAST AS FIBRE BASKET
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Understanding current and future fibre flows is key for strategic positioning.
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FOCUS ON US SOUTHEAST
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Biomass markets are highly regional and transportation distance can be the devil.
13
0
10
20
30
40
50
60
70
0 200 400 600 800 1.000 1.200
1,000 odt
USD/odt
Plant site
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COMPETITIVENESS OF BIOMASS CONSUMING INDUSTRIES
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0
50
100
150
200
250
300
Pulp
Pan
els
Bio
ener
gy
Pel
lets
Payi
ng C
apab
ility
(USD
/odt
)
0
50
100
150
200
250
300
Pulp
Pan
els
Bio
ener
gy
Pel
lets
Payi
ng C
apab
ility
(USD
/odt
)
US and Canada Brazil
Possible market entry strategies1. Find a niche in the biomass market and be friendly2. Head on competition with existing consumers3. Build own resource base / vertical integration
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VERTICAL INTEGRATION
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0
0.2
0.4
0.6
0.8
1
1.2
Sto
ra E
nso
Fibr
ia
AP
P/S
inar
Mas
Suz
ano
UP
M
Inte
rnat
iona
l Pap
er Oji
Land
ow
ners
hip
(Mill
ion
ha)
Vertical integrated companies with global forest land ownership or user rights
Pulp producers often show a high level of vertical integration, especially in Latin America and Asia Pacific
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INTERNATIONAL BIOMASS LOGISTICS
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2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
High Central Low
0
50
100
150
200
250
300
US
Sou
th-A
tlant
icU
S E
ast
US
Gul
fBr
azil
NW
Rus
sia
US
Nor
thea
stC
an E
ast
US
Pac
NW
Can
Wes
tC
an L
akes
US
Sou
th-A
tlant
icU
S E
ast
US
Gul
fBr
azil
NW
Rus
sia
US
Nor
thea
stC
an E
ast
US
Pac
NW
Can
Wes
tC
an L
akes
Coastal (~35 miles) Far inland (~575 miles)
US
D /
tonn
e
Levelised capexSeaborn transportInland transportOther variable costsLabourPropanePowerDryer FuelWood
Pellet price projections, CIF ARA, prices real 2011Pellet Supply Cost BreakdownReal 2011 CIF ARA
US
D/G
J
Access to international biomass markets opens up a large resource basket and stable commoditised market might develop…
…but are price levels affordable for biofuel producers?
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BIOMASS PRE-TREATMENT TECHNOLOGIES
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End-user
Catchment area
Aggregation point
Rail lineForest
Chip mill
Net calorific values(GJ/t as delivered)
Logs 8 – 12
Chips 10.2 –13.8
Pellets 17.1 – 17.7
Pyrolysis Oil 16 –19.2
Black Pellets 20.9 – 22.3
Efficient densification technologies can present interesting options for large scale biomass conversion facilities.
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SUPPLYING LARGE SCALE PROJECTS WITH BIOMASS CAN BE DONE
A robust long-term biomass sourcing strategy is key for the success of your project
Proven supply chains for large scale biomass projects do exist
The competitive power of existing players can be very strong
Vertical integration can create peace of mind
The learning curve ahead might be steep but provides lots of fun
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THANK YOU!
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CONTACT:Hannes LechnerPrincipal, Global BioFutures PracticeHannes [email protected]+358 505527336
