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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


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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


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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