Forest-based companies well-positioned to benefit from increasing global use of biomass for primary energy consumption, says Hawkins Wright
September 1, 2008
– Bioenergy has suddenly been catapulted to centre stage in an energy revolution. Biomass currently accounts for about 11% of global primary energy consumption, but in developed countries the percentage is much smaller; just 4.6% in the EU and 3.3% in North America. All this is now starting to change and, according to a new report by Hawkins Wright*, this will have major implications for companies in forest-based industries.
In Europe, the EU has proposed binding renewable energy targets of 20% of final energy consumption and 10% of transport fuels in 2020, up from 9.2% and 2.5% in 2006. The only way governments can hope to meet these ambitious targets for renewable energy is by mobilizing the energy potential of forests.
Bioenergy introduces a completely new set of end-uses for wood fibre which will in future compete for the same forest resource as that used for paper. On the other hand, it is also a tremendous opportunity for forest-based companies which are, in most cases, several steps ahead in terms of their control of biomass resources, whether these be in the forest, in pulp mills or in sawmills.
The main challenge for forest-based companies will be to choose the most appropriate bioenergy strategy; some strategies will involve technologies that may be integrated with a company’s existing operations, while others will necessarily involve a joint venture with a specialist energy company or distributor.
Some technologies are relatively low-tech. For example, for forest companies with access to appropriate fibre there are exciting possibilities in the rapidly growing market for wood pellets. The European market for wood pellets is predicted to grow from around 8.4 million t in 2007 to between 40-80 million t in 2020, depending on regulatory developments in the EU.
Other bioenergy pathways involve more advanced technological processes, many not yet commercially proven. They are higher risk but, by promising to add much more value to the wood resource, offer higher rewards. The so-called thermochemical technologies are the most advanced.
The biochemical pathways – including cellulosic or second-generation bioethanol or biobutanol – offer perhaps the greatest rewards in the long term, but these technologies are still in their infancy. However, given the sums of money being invested in R&D, particularly in the USA, commercial deployment may not be too far away.
Possibly the most interesting opportunities for pulp producers involve developing the energy potential of black liquor. Kraft pulp mills are already major producers of bioenergy, but new black liquor gasification technologies promise to capture the energy values of black liquor far more efficiently, turning a pulp mill into a true biorefinery that produces transport fuels and biochemicals alongside electricity, heat and woodpulp. This could be a potential lifeline for some pulp producers near the top of the cost curve.
There are fundamental questions about the availability of wood to meet the growing demand for bioenergy as well as the existing demand from the pulp, paper, lumber and wood panel industries. The report identifies a surplus of woody biomass in North Ameriica contrasting with a potential shortfall in Europe, a fact that will increasingly drive the development of the trans-Atlantic seaborne trade of wood pellets, chips and other forms of densified biomass.
As it becomes necessary to extract energy wood as whole trees as opposed to simply recovering industrial harvest or processing residues, so the marginal costs of energy wood supply will rise. If forest biomass supplies are to be mobilised to meet governments’ ambitious bioenergy targets, the price of energy wood will necessarily increase. One of the results will be that pulpwood and energy wood buyers must expect to compete more fiercely for favourably located wood.
*The new 200-page study from Hawkins Wright - Energy from Forests: bioenergy and the global forest products industries – looks in detail at the factors driving the development of wood-based renewable energy. It explains the bioenergy technology pathways involving wood, and assesses the outlook for the supply and demand of biomass feedstock. It draws important conclusions concerning the strategic implications for forest-based companies, conclusions that will also be relevant to policy makers, energy companies, traders and investors. Price £4,800. Contact John Bingham for further details (firstname.lastname@example.org. Tel: +44 01963 31096)
About Hawkins Wright…
Hawkins Wright is an independent British consultancy providing a range of strategic, forecasting, market intelligence and business information services to the international forest products industries. For more information visit: http://www.hawkinswright.com