New bioenergy business concepts during emission trading in the Baltic Sea Region Pirkko Vesterinen VTT, Jyväskylä

New bioenergy business concepts during emission trading in the Baltic Sea Region

Pirkko Vesterinen

VTT, Jyväskylä

VTT TECHNICAL RESEARCH CENTRE OF FINLAND

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PROJECT PARTNERS:VTT Processes, FinlandUniversity of Jyväskylä, FinlandTallinn Technical University, EstoniaFNR, GermanyEC BREC/IBMER, PolandBIOP Institute, GermanyVapo Oy, FinlandAS Tootsi Turvas, Estonia

FINANCERS:INTERREG IIIBNational and local authorities in each country

BI PINSTITUT


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Background

• Countries within EU have challenging targets to increase the use of bioenergy

• Russia has ample biomass resources • Baltic Sea provides a natural market

area for biomass trade• Trade can be carried out by means of

fuels (wood chips, tall oil, pellets, sod peat…), electricity, emission allowances, JI, green certificates…

• Preconditions of investments in different countries vary

Denmark

Finland

Germany

Sweden Estonia

Latvia

Lithuania

Poland


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Share of bioenergy of the primary energy in the beginning of 2000’s

- varies from marginal to very relevant to the whole energy market

0

5

10

15

20

25

BSR

%

DenmarkEstonia

FinlandGermany

LatviaLithuania

PolandSweden EU-15

EU-250

5

10

15

20

25

BSR

%

DenmarkEstonia

FinlandGermany

LatviaLithuania

PolandSweden EU-15

EU-25

Marginal

Relevant to energy market and prices


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Share of RES-E from the total electricity consumption differs very significantly:

from marginal to dominating

Source: Eurostat

0

10

20

30

40

50

60

70

80

DenmarkEstonia

FinlandGermany

LatviaLithuania

PolandSweden

EU-15EU-25

%

1993199820032010 (target)

1993199820032010 (target)

Marginal

Significant to energy market and prices

-> differences in the share of hydro, typical capacities of plants, CHP/condensing plants, stand-alone/integration to industry


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EU has decided to use of 20 % renewable energy sources by 2020, now the share is under 7 % -

role of bioenergy in each country ?

Background report


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Total RES-E in 2001 and additional potential for bioelectricity according fo FORRES 2020

0

20

40

60

80

100

120

Denmark Finland Germany Sweden Estonia Latvia Lithunia Poland

TW

h

BiowasteSolid biomassBiogas2001

- Largest market volumes for new investments and additional fuel in Germany and Poland, the next largest in Sweden and Finland

- Structure of market (capacities of plants) differs considerably, as well as feasible promotion incentives


8

Total RES-H using biomass in 2001 andadditional potential for 2020 according

to FORRES 2020

0

2

4

6

8

10

12

14

16

18

Denmark Finland Germany Sweden Estonia Latvia Lithuania Poland

Mto

e

Biomass2001

-Additional potential of bioenergy large in each country in the heating sector -Feasible for local and centralised (pellets, bio-oil…) fuel markets


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Examples on Prices on Electricity Generated by Wood Fuels: incentives differ significantly

0

20

40

60

80

100

120

Finland Sweden Lithunia Estonia Germany,5-20 MW

Poland Latvia Germany,5-20 MW

CHP

EU

R/M

Wh

Feed-in tariffCertificates/subsidyMarket price


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GHG Emissions and Kyoto TargetsOld EU-countries have challenging targets, and not sufficient national allocation of emission allowances

within the emission trade

Source: Eurostat

0

20

40

60

80

100

120

140

EUDenmarkEstonia

FinlandGermany

LatviaLithuania

PolandSweden

EU-15EU-25

Index (base year = 100)1993199820032010 (target)

1993199820032010 (target)


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Fuel prices during emission trading (5-20-40 €/ton CO2) in Finland in power production

0 5 10 15 20 25 30 35 40

Heavy fuel oil

Natural gas

Coal

Mill residues

Forest residues

Pulp wood

Peat

€/MWh

Price

5

20

40


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Calculation of production costs of heat and electricity in each country for chosen plants

• Investment estimations for similar plants in each country• Comparison of the heat and electricity production costs

• Case 1: District heating plant, 5 MW, peak load utilization 5000 h/a

• Case 2: CHP plant, 17 MWe / 40 MWth, peak load utilization 6000 h/a

• (Case 3: CHP plant, 3.5 MWe / 16 MWth, peak load utilization 6000 h/a)


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Large variations in heat production costs because of differences in investment and fuel costs

0

5

10

15

20

25

30

Estonia Finland Germany Poland

Variable costs

Fixed costs

EUR/MWh

Heat production costs, 5 MWth, 5000 h/a


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Peak load operation hours should be at 4000 – 5000 h/a, preferably even more. Additional peak load units with low specific investment

costs are needed. Overdimensioning is expensive!

0

5

10

15

20

25

30

35

40

3000 3500 4000 4500 5000 5500 6000 6500 7000 7500

Estonia

Finland

Germany

Poland

EUR/MWh

Peak load utilization, h/a


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Stability of fuel price is important because typical life times are 15 – 20 years. Solutions can be a well-developed fuel market and

technical possibilities for multi-fuel use – preferably both

Heat generation cost sensitivity on fuel price, 5000 h/a

0

5

10

15

20

25

30

Estonia Finland Germany Poland

-10 %

Basic price

+10%

EUR/MWh


16

Long annual operation time is the key for good competitiveness!

Peak load utilization, h/a

0

10

20

30

40

50

60

70

3000 3500 4000 4500 5000 5500 6000 6500 7000 7500

Estonia

Finland

Germany

EUR/MWh


17 Electricity generation cost sensitivity on fuel price, 6000 h/a

0

5

10

15

20

25

30

35

40

45

50

Estonia Finland Germany

-10 %

Basic price

10 %

EUR/MWh

Local conditions have a great impact on the electricity production costs


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Existing pellet production capacity in Baltic Sea countries in 2005 and potential pellet capacity based on

the production of saw mills

0

500

1000

1500

2000

2500

3000

Denmark Estonia Finland Germany Latvia Lithuania Poland Sweden

1000

t/a

Capacity 2005

Capacity potential

• Total capacities 3,896,000 (prod.) and 9,065,000 (pot.) tonnes

• Also other sources of raw material

• Also other uses for saw mill by-products


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Conclusions

• Role of bioenergy varies in different countries significantly: from marginal to dominating in the energy market

• National incentives on bioenergy have significant variations

-> Increase of biomass trade, spot markets

-> Increase of volatility on prices of biomass-based fuels

-> Bioenergy is not anymore only local, but widely utilised source of energy


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THANK YOU FOR YOUR ATTENTION!

Pirkko Vesterinen

[email protected]

ET-Bioenergy project

New Bioenergy Business During Emission Trading

Co-financed by EU BSR INTERREG III B NP

Documents

New bioenergy business concepts during emission trading in the Baltic Sea Region Pirkko Vesterinen VTT, Jyväskylä