Result highlights

An increased biofuel production will not affect the production of wood products

An increased biofuel production will not affect the production of wood products. While on the aggregated level it is seen that the total production of wood for material use is not largely impacted by increasing bioenergy consumption, there are large sectorial differences. Some material-producing industries are projected to increase their profitability, driven by increased demand for their by-products. The results also indicate that without the additional biomass produced from fast-growing plantations, the pressure to use roundwood directly for energy purposes will increase.

Impact assessment

The implication of three policy scenarios was assessed for each individual EU28 member state and for Sweden in particular. The scenarios include one with enhanced forest protection schemes and two with incremental increases in roundwood product. The chosen approach of integrating the modelling of trade, biomass harvest, material production, and competition for biomass resources between sectors was found essential in examining the complex question of wood use for increased bioenergy demand, within the EU and Sweden.

The estimates are particularly created so that they could be used as exogenous input to the models being used in the project to describe the development in Sweden, thereby allowing them to incorporate a consideration to not only Swedish developments, but also international market developments.

Generally, the results highlight that increased bioenergy demand leads to a stronger pressure on the forests in the EU, i.e. higher harvest levels and more intensive use of forests throughout the EU. In addition, the results show that high future bioenergy demand levels are likely to lead to increased EU biomass imports, especially wood pellets. High bioenergy demand levels are also seen to counteract cascading use of wood, and even lead to increased combustion of roundwood to energy.

While on the aggregate level it is seen that the total production of wood for material use is not largely impacted by increasing bioenergy consumption, there are large sectorial differences. Some material-producing industries (especially sawmill industries) are projected to increase their profitability, driven by increased demand for their by-products to be used for energy, some industries will face increased competition for feedstocks (especially particleboard production). The estimates also show that without the additional biomass produced from fast-growing plantations such as short rotation coppice (SRC), the pressure to use roundwood directly for energy purposes and EU biomass imports will heavily increase.

In terms of the estimates for Sweden, the results show that the short-term demand for wood is close to the full harvesting potential in Sweden. In the period from 2020 to 2040, all demand scenarios display similar levels of high demand that are close to the potential supply. Under high bioenergy demand, harvest levels are projected to stay high over a longer time and particularly impact the harvest levels of pulpwood.

Centralised supply chains are preferable compared to distributed supply chains

Supply chain configurations with high biomass efficiency show a clear economic advantage, as the advantages of economy-of-scale outweigh the cost of longer transportation. Decentralised supply chain configurations can play a role in particular at very high biofuel production levels or under very high biomass competition. Under lower biomass competition conditions, site specific conditions have a strong influence on the preference for either centralised or decentralised configurations.

Centralised vs. distributed supply chains

Biorefineries for the production of fuels, chemicals, or materials can be an important contributor to reduce the dependence of fossil fuels. The economic performance of biorefinery supply chains can be improved by different strategies, such as industrial integration in order to e.g. utilise excess heat and products, economy-of-scale benefits from increased plant sizes, and intermediate upgrading to reduce feedstock transport cost. The identification of cost-efficient supply chain configurations is crucial in order to enable large-scale introduction of biorefineries. Two different case studies are outlined to investigate industrially integrated lignocellulosic biorefinery concepts regarding the impact of different economic conditions on the preferred supply chain configurations.

Case 1: Pyrolysis and catalytic co-gasification with black liquor

Case 1 considered methanol production via black liquor gasification, with the option to also add pyrolysis liquids as a secondary feedstock in order to increase the production capacity (however leading to decreased overall biomass conversion efficiency). The analysis focused on trade-offs between high biomass conversion efficiency and economy-of-scale effects, as well as the selection of centralised vs. decentralised supply chain configurations.

The centralised supply chain was assessed using chemical (kraft) pulp mills as potential production locations. Distributed supply chain was assessed along two paths: pyrolysis at sawmills, CHP plants and stand-alone forest terminals and; upgrading for gasification at chemical pulp mills.

Larger sites are available when allowing all sites than when only considering mills with old recovery boilers. Therefore the total supply chain cost was lower when allowing all sites. This implies that economy-of-scale is favourable, as long as it does not influence the biomass resource efficiency. Co-gasification significantly increases production capacity when the black liquor is limited.

Case 2: HTL and hydro-processing

Case 2 considered biofuel production from forest biomass via conversion to biocrude through hydrothermal liquefaction (HTL). The biocrude was subsequently hydroprocessed to drop-in biofuels at refineries, LNG terminals or natural gas grid connections. The analysis focused on the impact of and interrelation between four cost reduction strategies for biofuel production: economies-of-scale, intermodal transport, integration with existing industries, and distributed supply chain configurations.

Simultaneous implementation of all cost reduction strategies yielded minimum biofuel production costs of 18.1–18.2 € per GJ at biofuel production levels between 10 and 75 PJ per year. Limiting the economies-of-scale was shown to cause the largest cost increase, followed by disabling integration benefits and allowing unimodal truck transport only. Distributed supply chain configurations were introduced once biomass supply became increasingly dispersed, but did not provide a significant cost benefit (<1%). Disabling the benefits of integration favours large-scale centralised production, while intermodal transport networks positively affect the benefits of economies-of-scale.

Overall conclusions

The results show a clear economic advantage for the supply chain configurations with high biomass efficiency, for the cases when the biorefinery was assumed to benefit from an alternative investment credit due to replacement of current capital intensive equipment at the host industry. Decentralised supply chain configurations were only favourable at very high biofuel production levels or under very high biomass competition. Under lower biomass competition conditions, site specific conditions were found to have a strong influence on the preference for either centralised or decentralised configurations. As biofuel production costs still exceed the price of fossil transport fuels in Sweden after implementation of the investigated cost reduction strategies, policy support and stimulation of further technological learning remains essential to achieve cost parity with fossil fuels for the studied feedstock/technology combinations in this spatial-temporal context.

Geography matters

Spatial issues are important determinates for the implementation of large-scale biorefineries. Not predominantly because of transportation costs but because of the spatially rigid industrial structure. The geographic locations of biofuel production facilities should be strategically chosen in order to minimise the total cost of using biofuels. Proximity to biomass resources, possibilities for integration, and distance to biofuel users are aspects that need to be considered.

Spatial issues

Spatial issues are important determinates for the implementation of large-scale biorefineries. Not predominantly because of transportation costs but because of the spatially rigid industrial structure and spatial distribution of current biomass demand. The geographic locations of biofuel production facilities should be strategically chosen in order to minimise the total cost of using biofuels. Proximity to biomass resources, possibilities for integration, and distance to biofuel users are aspects that need to be considered.

The geographically explicit optimisation model BeWhere Sweden was used to investigate the future production of next-generation biofuels from forest biomass in Sweden. Different biofuel routes and technologies were considered, with a special focus on integration with existing industry. Generally, plants with low specific investment costs, i.e., large biofuel production, and/or plants with low specific net biomass transportation costs, due to elimination of the need to transport biomass by-products from industrial plants, occur most frequently in simulations. Because these properties often vary significantly among different individual host industry sites, the results show the advantage and importance of including site-specific data in this type of model.

Industry structure

The biofuel cost consists of the cost for biomass, biomass transportation, investment, operation and maintenance, electricity, fossil fuels and biofuel distribution. Different combinations of biofuel technology and host industry differ significantly regarding the absolute and relative levels of these costs per unit of biofuel produced.

For a given combination of biofuel technology and host industry, the main differences between different individual host industry sites are the specific net biomass transportation and investment cost. The cost for biomass and the capital cost generally dominate the biofuel cost, but the cost for biomass transportation and biofuel distribution can also have a significant impact. These costs are in various ways all dependent on geographical location.

Chemical pulp mills dominate as host industries, due to proximity to feedstock, heat integration benefits, high conversion efficiency and large credits for alternative investments. However, complex integration requires major changes to pulp mill operations. District heating networks offer less complex integration and can also be of interest as hosts, but waste and bio-CHP compete for the heat load.

Key insights

Bioenergy demand is expected to potentially lead to large changes in the composition of bioenergy feedstocks. The results highlight increasing future connectivity between the import of wood pellets, production of SRC, and use of forest-based industrial by-products. The development of the forest-based industry and the bioenergy sector is expected to lead to a strong intensification in the use of EU forests and conversion of other natural vegetation areas.

Site-specific integration opportunities which can be applied on a large-scale may yield significant cost reductions for biofuel production which can outweigh the potential increased cost of feedstock mobilisation at that site. Conversely, site-specific safety issues, site layouts or strategic interests of the host might impede integration. Integration benefits have a particularly profound impact in the early stages of biofuel deployment.

Existing industry thus plays an important but complex role in the implementation of forest-based biorefineries. On the one hand, existing forest industry may face increased competition for feedstock. On the other hand, existing industry can play a role in mitigating future biofuel production costs. This potential synergy benefit must then be shared between the host industry operation and the biofuel production, an aspect which is lacking in current policy.

Increased biofuel targets will, in general, have limited price effects on woody feedstocks

Prices for forest feedstocks in Sweden will tend to increase in the face of increased demand, where the highest price impact is observed for harvesting residues. However, feedstocks markets, on average, will not experience large price spikes in the medium term. Woody biomass markets can handle the additional demand pressure from biofuel production. Even when considering a tightening of competition.

Biofuel targets and scenarios

Scenarios were constructed with biofuel targets ranging from 5 to 30 TWh, under different assumptions on the competitive situation and use of by-products. The price effects of the scenarios is analysed using the spatial price determination model SpPDM.

Aggregate price effects

The results suggest marginal impacts on the prices of forest biomass. The average across spatial-explicit prices varies from 0 to 2.8% across feedstocks and scenario types. However, the distribution of the spatial-explicit price impacts display large variation, with price impacts reaching as high as 8.5%.

We find that the pattern of spatial distribution of price impacts follows relatively well the spatial distribution of demand pressure. However, locations with the highest price impacts show a tendency of mismatch with the locations of the highest demand pressure (e.g. sawlogs). This is an important conclusion that stems from the spatial-explicit structure of the framework developed, and which is missing in other methods that do not use and/or use coarse spatial scales. Hence, from a policy-making perspective, careful analysis should be devoted to the locational linkages for forestry markets of increased biofuel production in Sweden.

Spatial price effects

The results indicate a relatively good match between the spatial location of price impacts and changing demand. Reflecting the dynamics of demand changes, the spatial distribution of the price effect is increasing with the biofuel target. This effect is more pronounced for pulpwood and harvesting residues.

Under high competition, the price effect on sawlogs and stumps are showing a wider spatial distribution. By-products inclusion does not affect the matching of the spatial distribution of price impacts and demand changes.

Price effect on specific wood assortments

For pulpwood and harvesting residues, the price impact is higher under the low competition scenario. For sawlogs and stumps, the price impacts are negligible at low biofuel targets. Under high competition scenario, the price effect on sawlogs and stumps are more spatially distributed, especially for stumps. Non-inclusion of by-products puts more pressure on prices for stumps. The results do not differ substantially when industrial by-products are allowed in the biomass mix.

Key insights

Prices for forest feedstocks in Sweden will tend to increase in the face of increased demand, where the highest price impact is observed for harvesting residues. However, feedstocks markets, on average, will not experience large price spikes in the medium term. Woody biomass markets can handle the additional demand pressure from biofuel production. Even when considering a tightening of competition.

From a policy-making perspective, intervention in the woody biomass markets is not necessary, at least not in the medium term. However, special attention must be given to the locational linkages with respect to forestry markets in Sweden.

Generally, the results highlight that increased bioenergy demand leads to a stronger pressure on the forests, i.e. higher harvest levels and more intensive use of forests. In addition, the results show that high future bioenergy demand levels are likely to lead to increased biomass imports. High bioenergy demand levels are also seen to counteract cascading use of wood, and even lead to increased combustion of roundwood to energy.

Increased biofuel targets will introduce fringe feedstocks to the fuel mix

An opportunity that the forest industry, including sawmills and pulp mills, provides is the availability of by-products that could be used for biofuel production. Three types of by-products are of interest: forest residues, bark and sawdust. The use of falling bark from pulp mills or bark and sawdust from sawmills, is interesting from an economic point of view because the first transportation step can be avoided and no additional investment for biomass handling at the mill will be required. However, for bark there are uncertainties regarding how much that is technically possible to use in e.g., gasification-based SNG production, and if there are additional O&M costs related to the usage.

Biofuel targets and biomass

The demand for biofuels produced from lignocellulosic feedstock is projected to increase significantly in the future, as part of reaching the targets for renewable energy in the transport sector, especially in forest endowed countries like Sweden. However, the potential for increased sustainable biomass usage is still limited, making it important to use the resource efficiently. An opportunity that the forest industry, including sawmills and pulp mills, provides is the availability of by-products that could be used for biofuel production. Three types of by-products are of interest: forest residues, bark and sawdust.

Resource potential

Estimations of the future potential for forest biomass indicate significant prospects for increased biomass supply, compared to the just over 10 TWh per year currently used. The potential for logging residues in 2030 is estimated to 25 to 31 TWh per year. In addition, 13-16 TWh stumps could potentially be harvested, giving a total potential of over four times the current use. The deployment of stumps as biorefinery feedstock is however highly uncertain, due primarily to environmental concerns, but also to technical reasons.

At pulp mills, the bark is removed from the pulpwood before the further processing. Most market kraft pulp mills do not need the bark to satisfy the internal process steam demand. The steam production from the recovery boiler is enough to satisfy the mill process steam demand. At a large Swedish kraft pulp mill, producing 2000 ADt of pulp per day, approximately 70 MW is available.

Sawdust, woodchips and bark are by-products from sawmills. Approximately 15 MW of bark, 20 MW of sawdust and 50 MW of woodchips are produced at sawmills with an annual capacity of 250,000 m3 sawn wood. Part of the by-products (just over 10%), primarily bark, are used to satisfy the internal heat demand.

Synthetic natural gas

Different value chains based on domestic forest biomass for the production of bio‑SNG were evaluated. The results show that the total cost for SNG is dominated by capital cost and the cost for raw materials and is therefore found to be sensitive to the investment cost, as well as the price of raw materials.

A higher SNG production rate will result in significantly lower total cost because the decrease in specific capital cost is greater than the increase in transportation costs. The lowest total cost was found for value chains in which falling bark was dried at pulp mills and transported to the SNG plant. Similar total costs are found for value chains in which forest residues were transported directly to the SNG plant and for value chains in which forest residues were first transported to a pulp mill for drying.

The use of falling bark from kraft pulp mills is interesting from an economic point of view because the first transportation step can be avoided and no additional investment for biomass handling at the mill will be required. However, there is uncertainty about how much bark can be used in the SNG process. No additional costs related to the O&M of an SNG plant were included when bark was used, which could be the case in reality.

The value chain using pellets indicated lower transportation costs, but the total costs were the highest for this value chain due to the relatively high energy use for pellet production, i.e., more pre-treatment than was required for the SNG process to lower transport costs was found unprofitable. Value chains with intermediate products based on forest residues had higher total transportation costs than direct transport of forest residues to the biofuel plant. However, if bark were used the transportation costs became lower. Using the available pulp mill excess heat for drying bark or forest residues is a way to “move” excess heat to another site (the SNG plant) where it could be used for district heating, which increases the revenue for the integrated SNG plant.

Projected price effects will not affect the profitability of investments in large-scale biorefinerie

Generally, the projected increase in demand for forest feedstocks stemming from production targets of 2nd generation biorefineries have little impact on average prices in the short to medium term. The plant costs (capital cost and O&M) have the largest impact on the economic performance, followed by the total feedstock cost (internal or external, depending on case, plus feedstock transportation). The impact of plant costs is most significant for smaller plants while feedstock related costs dominate for larger plants. High transportation cost for the feedstock clearly limits the performance of the large-scale investments.

Feedstock prices

The project has improved our understanding of the spatial price impact on forest markets from the introduction of new high-volume user of forest biomass, such as large-scale biorefineries. Generally, increases in demand for forest feedstocks for production targets of 2nd generation biorefineries have little impact on average prices, in the short to medium term.

For the spatial assessment, a set of plausible future scenarios is outlined for an introduction of large-scale production of transportation biofuel. The assessment is based on price impacts and changing allocation patterns on forest feedstocks. The scenarios included in the analysis represent the projected demand schedule for forest feedstocks in Sweden for incremental biofuel production targets by 2030.

We observe that the highest price impacts do not always match up with locations where demand pressure is highest. This implies that the severity of the competition effect will tend to be more localised, and is affected by local conditions in terms of availability of woody materials and costs.

The results show that feedstock prices will not, in general, increase that much from an increased biofuel production. This implies that the production of considerable volumes of forest-based biofuel is possible, without significantly increasing the competition for the feedstock within the Swedish context. This reduces the uncertainty of feedstock prices for investments in large-scale biorefineries.

From a policy perspective, there is no need for market intervention to secure woody feedstock availability for any particular use or to even-out the argued price effect on the feedstocks from implemented energy policies. Instead, the results suggest that policy-making should focus on the locational linkages of price impacts.

rtainty of feedstock prices for investments in large-scale biorefineries.

From a policy perspective, there is no need for market intervention to secure woody feedstock availability for any particular use or to even-out the argued price effect on the feedstocks from implemented energy policies. Instead, the results suggest that policy-making should focus on the locational linkages of price impacts.

Investment aspects

In general, plant costs (capital cost and O & M) have the largest impact on the economic performance, followed by the total feedstock cost (internal or external, depending on case, plus feedstock transportation). The impact of plant costs is most significant for smaller plants while feedstock related costs dominate for larger plants. High transportation cost for the feedstock clearly limits the performance of the large-scale investments.

The energy performance of the production process has the largest impact on the value chain performance in terms of carbon footprint, while the size of the production plant has the largest impact on the fuel production cost, followed by feedstock transportation costs for larger plants.

Size matters

Our results suggest that, in economic terms, size matters. This is because the specific capital cost decreases with scale of production. Capital cost is not a linear function, contrary to all energy related flows, but decreases non-exponentially per produced unit with increased production (economy-of-scale).

Regarding fuel production cost, the results indicate a significant variation due to scale effects, with smaller plants or integration with smaller mills suffering from high specific capital and O & M costs, thus leading to higher fuel production costs.

We can reach biofuel targets using many technologies and localisation options with reasonable costs

There are many different ways to reach high levels of biofuel production in Sweden, at reasonable costs, and the dependency on specific locations or technologies is not particularly strong. Economy-of-scale and high biomass-to-biofuel conversion efficiencies provide the largest potentials for decreased production costs, which benefits large-scale gasification-based biofuel production, which in turn would require substantial investments in capital intensive production concepts.

The role of the industry

Integration of biofuel production with existing industry was studied, as well as how different parameters affect biofuel production costs, the choice of technologies and biofuels, and the localisation of new biofuel plants. A methodology was developed considering inclusion of detailed, site-specific conditions for potential host industries in the spatially explicit BeWhere Sweden model.

Investment needs

Total and specific investment requirements to meet different biofuel production targets, with and without alternative investments considered, as well as with and without the possibility for alternative investments are analysed. Incremental investment requirement indicates additional cost compared to alternative investment in conventional technology.

The results show a general benefit from integration with forest industries compared with stand-alone localisations. This is especially true when biorefinery investments are done in conjunction with, or as alternative to, other investments on site (e.g. boilers), as the alternative investment credit reduces the biorefinery investment cost. Additional benefits can be gained when the biorefinery investment can replace capital intensive equipment at the host industry, which can significantly improve the economic performance. This demonstrates that the Swedish industry could play a vital role in reaching a cost efficient large-scale implementation of lignocellulosic biorefineries.

Biofuel production costs

Biofuel production pathways that are seen as commercially relevant in the near future were evaluated. The pathways belong to either the liquefaction-hydrotreatment conversion route or to the gasification-synthesis route. A particular focus was put on integration with existing pulp mills and crude oil refineries. The results suggest that the income from biofuel sales is enough to cover the expenditure on commodities, thus all the pathways has a positive specific investment margin.

When comparing with investment cost estimates, both gasification-based and liquefaction-based pathways demonstrate relatively robust profitability for both current and future energy market scenarios and for different production scales.

Key insights

The results indicate significant potential in Sweden for biofuel production from woody biomass by investing in new integrated production plants. However, competing biomass users risk increasing biomass costs at ambitious biofuel production targets. There are many different ways to reach high levels of biofuel production in Sweden, at reasonable costs, and the dependency on specific locations or technologies is not particularly strong.

Substantial total capital requirement for new biofuel production investments is needed, but alternative required industrial investments at the host sites can dampen the effects. The cost of biomass and the biofuel plant capital cost generally dominate the biofuel cost, but the cost for biomass transportation and biofuel distribution can also have a significant impact. Economy-of-scale and high biomass-to-biofuel conversion efficiencies provide the largest potentials for decreased production costs, which benefits large-scale gasification based biofuel production. This stands in contradiction against the current actual development regarding investments in biofuel production, where the trend is towards less capital intensive technology tracks, as well as towards drop-in fuels that can be upgraded in existing refinery infrastructure.