impact of wood procurement for bioenergy on …

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FRA Spring Board Meeting San Antonio 2007

IMPACT OF WOOD PROCUREMENT FOR BIOENERGY ON TRADITIONAL

MARKETS

FRA’s 2007 Spring Board MeetingMarch 3-5, San Antonio, Texas

Jarmo YlinenPorini Log Oy


Why is the focus on bioenergy increasing?

• European Parliament (political decision-making body of EU) decided in February that it wants to tighten up the usage of renewable energy to 25% of all energy production by 2020 (The European Commission recommended to the Parliament earlier a target of 20%)(Early January this year an international panel on climate change forecast global temperature rises between 1.8C and 4C by 2100)

• Both Parliament and Commission as well as Energy Ministers support to make the target binding for the member countries of EU. Heads of States during the assembly of Council of Europe in March will make a decision about the target

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Why is the focus on bioenergy increasing?

14 February 2007 European Parliament adapted in Strasbourg the following text (extract):

...”the EU strategy on climate change should be based on the following key objectives :– to limit the average global temperature increase to 2°C

above pre-industrialisation levels;– to undertake overall emission reductions for all

industrialised countries of 30% in comparison with 1990 emission levels by 2020 with a view to achieving a reduction in the order of 60 to 80% by 2050”


Traditional wood market in Europe is disturbed by storms

Damaging tree quality, species mixture in the market undesirable, cost of operations increases by 50%, insect damages, landscape value reductions... Jan 2007 - Kyrilldamages in Europe estimated > 50 million m3:

Germany:– about 21 million m3 were damagedCzech Republic– 8-10 million m3 have been damagedSweden– 12-13 million m3 have been damaged in the same areas, where

Gudrun storm damaged just less than 2 years ago 55 million m3

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…and by the Russian activities related to wood exports

The Russian parliament has approved the increasing of roundwood export duties from the current level of 4 euro/m3:

• softwoods and birch logs (>15 cm diam) to Ι 10 euro/m3 by July 2007 Ι 15 euro/m3 by 2008 Ι 50 euro/m3 by 2009

• all species and assortments to 50 euro/m3 by 2011

==> forestry companies getting very, very worried in Finland, Sweden, Estonia, Latvia, Lithuania and some also in Germany and precautionary actions are being made!


…and by the Governments reacting to EU plans and Directives related to renewable energy

• tax incentives for bio fuels• vat reductions or exemptions• green certificates• supply tariffs• investment supports• energy wood harvesting and chipping subsidy•etc

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Impact of wood procurement for bioenergy on traditional markets - an example of three forest chip procurement

scenarios in Finland 2005-2020

Source: METLA


Impact of wood procurement for bioenergy on traditional markets - an example of additional harvesting machines

needed for bio energy harvesting in Finland 2020

Source: METLA

Feller-buncher Forest transport Chipping Long dist transp Stump removals

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Actions by forestry cluster companies to react for changing market 1/5

Forestry companies create new business areas for the energy wood sector such as:• removals of branches from forest

• land preparation

• stump removal

• planting

• management of young stands (cleaning, brushing, tending)

• => to facilitate the above, forestry companies have built/continue building country wide energy wood sub-contractor and power station networks



Companies create new assortments for the energy wood sector such as:• branchlogs

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Companies create new assortments for the energy wood sector such as:• logbudles



Manufacturers create new machines for the energy wood sector such as:• branch bundlers

(bundling machines)

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Manufacturers create new machines for the energy wood sector such as:• logbundles

• planting, cleaning, etc. new technology


Other actions by forestry companies

• Increase harvesting in Russia by investments in Russian companies who have cutting rights and hope that the export duties will not be implemented (at least at a reduced scale)

• Investigate possibilities to invest in their Russían production• Invest in fast growing plantation based pulp production in

South America or Asia• Improve the procurement efficiency by building new or

improving the existing operational management systems• Investigate alternative strategies and sources for raw

materials at factory level• Close down factories, reduce labor, get cheaper labor,

productivity increase programmes

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Other actions by forestry companies

Trimming of procurement organisations :• made simpler -Stora Enso and Metsäliitto both have abolished

the regional procurement organisations and give instead the procurement to their district organisations

• own forests managed by separate company (UPM is an exception)

• employ more procurement people (around 10% by Stora Enso)

• get more wood by the area harvested by integrated wood harvesting, collecting also tree tops and branches and by removing tree stumps

• reworking the log grading rules tougher for better price vs. quality match


Forest bioenergy focusing towards pellets

• more compact size to pack and to transport• no extra water being transported

• Sweden has built some 1,5 million ton capacity with 30 wood pellet plants and is the biggest in Europe

• Finland has the highest percentage of wood based energy out of the total energy consumption in Europe. Pellet manufacturing is not yet at the level of Sweden and consumption of pellets is still low.

• Alholmens Kraft, the largest bioenergy plant in the world is located in Pietarsaari, Finland

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Renewable Energy Sector - Pellet Production and Consumption

Alholmens Kraft, winter 2001, P= 550MWth

World´s Largest BIOENERGY Plant


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ENERGY WOOD CAN BE CHIPPED,EITHER….

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IN THE FOREST, OR


Crusher

AT THE FACTORY

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Forest bioenergy focusing towards pellets: Germany and the Netherlands undergoing major wood market changes

• A law on renewable resources in Germany 2004 was a cause for the most rapid consumption increase in Europe. • Many brown coal power stations have been converted for bioenergy and the wood consumption for energy production increases still rapidly• pellet manufacturing has been as well growing fast exceeding 500,000 tons last year• In Germany the expansion in renewable energy wood demand has created supply shortages and also traditional wood costs have been increasing significantly during 2006• wood cost increases of 10-15% in Finland and Sweden can be explained mainly with good lumber markets.


Renewable Energy Sector - Transports of the rawmaterial to and within Europe are likely to increase rapidly...

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Thank you!

impact of wood procurement for bioenergy on …

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