Creating a sustainable and scalable supply chain

Christian Rakos

These are our „oilfields“

easy to find

can be established

slower to produce

never decline if properly managed

produce competitive fuel: 56$/bbl OE

The potential of producing biomass from forests and agricultural land is very large

US DOE: in the US one billion tons per year - equivalent to 3 BBOE could be produced

Annual global primary biomass production: 4500 EJ, Global Energy demand 2007 470 EJ

5% = 225 EJ would cover almost 50% of current global energy demand (World Bioenergy Association)

An example of a pellet supply chain

Waycross, Georgia Plant owned & operated by RWE Production: 750.000mt p.a.

Demand - the essential precondition for establishing supply chains

Demand for pellets for power production has been established by EU policies to reduce CO2 emissions and increase renewable energy use

Demand for pellets for heating is created by their economic advantages (currently 50% cheaper than heating oil)

Pellets use in Europe grows at 20% p.a. and will exceed 20 Million tons by 2015

What are the risks regarding demand?

Dependence on policy: incentives for power production are indispensable

Heat market: weather related change of demand, captured consumers

Preconditions for successful supply chain development

access to sustainable sources of raw material

proper production location

dedicated and certified quality management

efficient logistics

Sustainability of raw material supply is essential

Utilities are under scrutiny by NGOs and insist on sustainability

Requirements include: maintenance of carbon stocks, respect of protected areas, impacts on soil, air and water, respect of need of local communities, of labour rights etc.

EU is considering to publish binding sustainability criteria

How can sustainability be proven?

use of existing forest certification schemes

calculation of CO2 emissions along the supply chain

a dedicated sustainability certification scheme currently discussed by utilities

Criteria for adequate new production locations

Typically outside of central Europe

Close to a fiber basket

Often brown field developments on sites of closed sawmills, boardmills

Close to a harbour, rail access

Pellet quality: ENplus certification

Certification scheme developed to guarantee consistent pellet quality in the heat market

ENplus is now industry standard in the heat market

Now extended to pellets for power

Adds value by reducing risk of buyer

Will allow flexible use of pellets both in heat and power markets

Will include sustainability requirements

Conclusions

pellet markets offer very promising business development opportunities

sustainability of production is both a requirement and an advantage

Professional and certified management of quality is indispensable

Efficient management of logistics is as important as for other commodities

Thank you for your attention!