Case Study Iceland: Bioenergy and Forestry in Treeless land: Establishment of Viable Wood energy supply chain and Forestry

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2 Case Study Iceland: Bioenergy and Forestry in Treeless land: Establishment of Viable Wood energy supply chain and Forestry Introduction What to do if you get lost in a forest in Iceland? Stand up, and you can see your way home over the trees. Probably every forest officer has heard that joke, although it has now become entirely obsolete. Not even every Icelander has realised that the forestry sector of this treeless country has started growing rapidly. Well-trained forestry professionals have co-operated commendably with their international partners and have developed the forestry sector of their country ecologically, economically and socially. Iceland can be highlighted as an example of development of bioenergy from forest. Iceland has enormous geothermal heat reserves and a lot of hydropower. Iceland can be said to be the most developed country when we are talking about use of Renewable energy. More than 80 % of total energy consumption is based on renewable energy. The electricity price is Iceland is the lowest in whole Europe which make the use of biomass challenging. Still, wood energy can be an option. In Eastern part of the country, geothermal heat is very difficult and expensive to search. Base rock is solid and volcanic activity is low, that is why some areas are totally without possibilities to utilise this best known source of energy in treeless land. Hallormstadur near Egilstadir is this kind of area. Luckily Hallormstadur has forests (Picure 1). When the forestry is growing in Iceland, there started to be competitive users of wood which maintain and support more and more the healthy competition and growing of forest businesses in Iceland. Picture 1. Forest close to Harllormstadur. Icelandic Forest Service (IFS) have been measured and monitored the growth and management models of Larch in the same stands over 15 years.

3 Raw Material When first settlements were established to Iceland in AD 874, all lowland areas were covered by trees. Active iron making, agriculture and sheep herding consumed sensitive wood resources and the land was later long time without forests. At the beginning of 20 th century wood planting programmes started and they still continue actively. To find suitable species was problematic, but hardworking Icelanders planted around 150 different species from more than 1000 proveniences to find the most suitable ones. Landowners are encouraged and supported in tree planting and annual planting amounts are about 3.5 million seedlings nowadays. Between 2007 and 2009 planting reached its top with 6 million seedlings per year. The economic collapse after that decreased the funding of planting projects. Current growing stock is 1.2 Mm 3 and annual growth is around m 3. Figures are not high compared to other countries, but Iceland started close to zero and the direction is steeply upwards. Trees are growing well in Iceland because of the fertile volcanic land and good amount of rain. Winter is harsh but not disturbing trees as much as earlier expected. There are only a few insects and animals that can harm the growing forest. At the beginning, planting densities were high, seedlings per hectare, because natural mortality was believed to be over 50%. Later, mortality was found to be much lower and nowadays planting densities are lower, seedlings per hectare. Dominating species are European larch (Larix decidua) and Sitka spruce (Picea sitchensis). Also Aspen (Populus trichocarpa) Scots Pine (Pinus sylvestris) and Norway spruce (Picea abies) are common. Remaining natural forests are nearly all downy birch (Betula pubescens) (Picture 2.) Picture 2. Planted spruce, some remaining natural forests (birch) on background (left) and successfully established larch forests in Iceland (right). Planting of trees needs manpower and subsidies. Establishment of forests and forestry can be challenging but when it is done properly, it will bring new businesses and jobs for region. Dense, fast growing forests need to be thinned or otherwise all trees can die. Harvesting of small diameter trees is expensive and harvesting need to be planned carefully. At the same time, also the use of harvested wood must be developed. Small scale sawmilling and firewood production were good starting points, later, heat entrepreneurship gave business opportunity for the Hallormstadur area, which does not have geothermal heat available. The newest demand for freshly harvested Icelandic trees is ferrocilicium production of Elkem ltd. Fresh, moist wood is needed to tie oxygen, when quartz is altered to ferrocilicium, valuable catalyst and raw material in steelmaking. Without governmental support and strong will of foresters, it would be impossible to establish new forests and forestry to Iceland. More than 90% of Icelandic wants to have more forest but most of Icelandic still thinks that forests are disturbing and blocking the view of landscape. Currently native birch forests and woodland cover 1150 km 2 and cultivated forest cover is 380 km 2. Total forest and woodland cover is 1530 km 2 which is 1,5% of area of Iceland (Figure 1).

4 Figure 1. Map of Iceland forest potential, Source: Presentation made by Lárus Heiðarsson ( Icelanders aim is to use wood biomass sustainable and efficient, increase the value and reduce the climate change effects. Wood is a common material in Nordic countries. It is renewable, ecological and recyclable.

5 Procurement Wood is harvested manually or by harvesters (excavator and forest tractor mounted). Manual harvesting is mainly done in areas which are not possible harvest when using big machines (steep slopes). Man and chainsaw harvesting need also skillful foresters and the job can be dangerous. At the moment 6 tonne excavator with multi-stem Naarva harvesting head (Pentin Paja) is the main method for energy wood procurement. There is no competition between harvesting operators because the work is divided equally for all the entrepreneurs. There are three main operators in Iceland. Normally the harvesting intensity is at least 1000 stems/ha. Mainly wood is harvested using wholetree method if it is used for energy and it is delimbed when it is used for industrial purposes in sawmill or Elkem ferrosilicium plant. For Industrial use, wood is harvested using Swedish Gremo 1050 harvester. The used machine investing payback time is estimated to be eight years and it was needed to provide raw material for the growing industrial need (Elkem). Forest operators get payment from the total work and the payment system is negotiated in the way that all operators are able to survive. Forwarding is done by using tractor (Valmet) and forest trailer (Nokka). After the wood is forwarder to road side storage, it is chipped using a self-built Icelandic chipper and transported to the boiler house by truck. Own made drum chipper is able to chipping both delimbed stemwood as wholetree even some of the branches will be removed from the chips during operation as the feeding table is small. It is important that the storage area is big enough open for wind and sun in order to keep the moisture content low. Picure 3. Icelandic supply chain of wood energy: harvesting operations of Larch in Icelandic using excavator mounted harvest, forwarding using tractor with forest trailer and crane, chipping at roadside terminal and truck transport to the plant. Picture taken by Karri Pasanen, Metla For Elkem the wood is not chipped, it is transported as delimbed stem wood by truck to the plant (Picture??). Loading of the truck is done by the same tractor that is used for the forwarding. The transportation distance is long, 600 kilometer and it took 8-10 hours to deliver one load. Wood is chipped at the plant using a disc chipper. Elkem is also importing wood from outside Iceland by ferry transportation but they are willingness to use local resources as much as it is available. They also keep the local wood better quality as the imported ones.

6 Picture 4. Icelandic supply chain of industrial wood: harvesting operations of Larch in Icelandic challenging condition using harvester, forwarding using tractor with forest trailer and crane, transportation to the plant using truck and chipping of wood at Elkem. Picture taken by Karri Pasanen, Metla Table 1. Cost of Supply Chains of wood energy and industrial use of wood Hallormstadur heating plant ( /m 3 ) Elkem Ferrosilicium plant ( /m 3 ) Harvesting Forwarding Chipping and Transport Transport Chipping 25 14,4 28,8 34,4 15,6 48,1 16,9 Total 67,5 /m 3 (contribution margin 35%) 115 /m 3 (contribution margin 14,1%) Latest trend have been that the gap between revenues and cost have been increased when providing raw material to heating plant. Around 100 truck loads (2900 solid cubic meters) of wood is transported to Elkem. Figure 2. Icelandic supply chain of wood

7 End-use facilities Icelandic forest service owns also a sawmill in Hallormstadur, but wood size and quality are enabling only minor part of removal to be processed for lumber. Firewood is used in Iceland to some extent. For example, pizzerias in Reykjavik need remarkable amounts of firelogs annually. Heat entrepreneurship has challenges in Iceland - like anywhere else. Competing energies are relatively cheap, especially electricity, although Hallormastadur has no geothermal heat available. Heating plant in Hallormstadur generate heat for local spa and hotel as well as some buildings around, including public school. The need of raw material is around 550 solid cubic meters annually. Heating plant needs to compete the availability of raw material with the other wood users but also the changing conditions of energy demand if any of the heated buildings needs to stop their activity. Picture 5. Heating plant at Hallormstadur, close to the Hotel and Spa, Photo taken by Karri Pasanen, Metla New ferrocilicium industry needs fresh wood to its processes, but harvesting costs are high. Ferrosilicon is an important additive in the manufacture of steel products. Elkem Iceland ferrosilicium plant is located close to Reykjavik and have own harbour in order to bring raw material and export products oversea. Elkem Iceland uses a lot of electricity and as Iceland have cheapest electricity price in Europe, the location of the plant is optimal. Elkem Iceland was planned and built by state of Iceland but now owned mainly by different investors. Currently Elkem produce tonne ferrosilicon and could be expand their production to tonne depending the economy in future and owner s decision. In ferrosilicium process quartz and carbon is reacted in high temperature and producing silicon and carbonmonoxide. The carbon that is fed to the system is coming from the wood chips. Wood in their process can be also recycled but they prefer to use fresh wood from Iceland or imported (mainly from Canada). CO 2 emission are getting slightly smaller but are still MT annually which is the highest emission source in Iceland. Icelandic wood is important for Elkem to keep the carbon footprint smaller but also to support local economy and growing forestry.

8 Picture 6. Elkem Iceland is the biggest user of Icelandic wood. Photo taken by Karri Pasanen, Metla

9 Conclusion It is important that internal and external technology and know-how transfer must be done carefully and systems need to be adapted into local operational environment. Wood energy alone is not the solution even for Iceland s energy production, but it can be a local solution in many smaller locations, near or far. Iceland has huge renewable resources which have help a lot to be a successful country in the use of renewables. The key challenge is the step to increase the use of renewables also in transportation. Electric cars might be a solution if the electricity price remains low. However, not all the parts of Iceland can use geothermal or hydropower, therefore the use of biomass has its place and is needed as local solution. Just as elsewhere, Icelandic heating entrepreneurs also have their challenges. There are several energy sources competing with wood, and they are relatively cheap, particularly electricity. A new forest energy plan is currently being worked on for Grimsey Island. It is the only place in Iceland where oil is still used for heating. Icelanders have built a system that suits the conditions in their country and have developed the links in the chain so that a vital and varied forestry sector is now operational in Iceland. If you can establish viable wood energy chain in Iceland, you can do it anywhere!

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