Potential Biomass Demand Impact

Transcription

1 Potential Biomass Demand Impact in the U.S. South Bob Abt NC State University 1

2 Presentations and Data on SOFAC Site html 2

3 American Forest Management SOFAC Thinking global and modeling local Progress Energy Georgia Pacific Plum Creek American Forest t& Paper Hancock knt Natural Rayonier Association Resources Arborgen, LLC Huber Engineered Wood Resource Management Products Services AbitibiBowater International Paper Smurfit Stone CellFor Lanworth Timberland Investment Resources Forestland Group Larson & McGowin Timbervest 3

4 SOFAC Collaborative Research Links to land-use model (USFS) Biomass (UT, Duke, RTI) Alternative elasticities (RTI) Plantation Management (NCASI/Cubbage) Global Economic Situation (OSU) USFS FIA (Ray Sheffield) 4

5 Outline Intro to Model A simulation framework focused on productspecific within-region impacts Recent Biomass Demand Work Potential Policy-Driven Demand Observed Plant Announcements Supply-demand simulations The biomass supply curve Region-specific applications Future Priorities 5

6 Equilibrium i Approach Demand (by product product demands assumed independent) Q d = ƒ(price, Demand Shifters) Supply (by product, region, owner) Q s = ƒ(price, Inventory t-1 ) Constant elasticity functional form 6

7 Demand, Pi Price or Harvest Projection by product Supply- Inventory Shifts by product-owner- region by productowner-region Demand Elasticities iti by product Supply Price & Inventory Elasticities SRTS Equilibrium Equilibrium Price by product Removals by product- ownerregion Goal Program removals by mgt. type/age class Inventory Module by product-owner-regionowner region Inv t+1 = Inv t + Grw - Rem

8 SRTS Model Description Supply starts with FIA harvest distribution change modeled as a function of stumpage price and inventory (by user-defined d product) Model Solution Given the demand for this scenario (by year and product) Given the supply from changing inventory (by region, owner, year and product) Find the price - harvest level and harvest location (region/owner) that clears the market 8

9 SRTS Supply-Side Sid detail Inventory, Growth, Removals and Acres are Tracked By: Region e.g. survey units Owner Private Only (Corp or Non- Corp) Species Group Pine, Soft Hwd, Hard Hwd Mgt. Type Plt Pine, Nat Pine, Mix Pine, Upland Hwd, Lowland Hwd Age Class 5 year 9

10 AL Pulpwood Mkt $/t ton HWD PWD PINE PWD tons 10

11 Current Data Current STATE v20 Last Mtg AL AR FL GA KY LA MS NC OK SC TN TX VA

12 Plantation Acres Corp 16.8 NonCorp 40.6 Total 6 mil acres 5 4 Total Corp yr age class 12

13 Pine Pulpwood G/D

14 Sub-regional Market Results 14

15 SOFAC Biomass Research UT FIA-based Facility Locator Sustainability index State t Level RPS Impacts NC, GA Regional Level RFS analysis (with Duke) Track Logging Residuals Gulf Coast Region Analysis 15

16 Key Factors Examined Demand for wood as an energy source Potential (policy driven) Observed ( announcements are observed many actual plants are potential) What would a woody biomass supply curve look like? How important are logging residuals? Determines timing and size of impact on roundwood markets 16

17 NC RPS Impact (preliminary) Woody Biomass Production and Consumption in NC under the RPS Potential Consumption 300 Trillion BTU Available 40% recovery 70% of renewable from wood 12.5% of renewable from wood 70% Renewable from Wood 40% Recovery Logging Residuals 12.5% Renewable from Wood

18 GA Biomass Demand 18

19 GA Pine Inventory 19

20 NC, SC, VA Potential Impact of RFS Christopher Galik - Duke 20

21 Biomass Supply Curves 21

22 Biomass Supply Curves (preliminary) 22

23 Tracking logging residuals 23

24 Gulf Coast Biomass Impact Demand from F&W Forestry Services 3 new plants 15 proposed or under consideration Emphasis on pine Potential demand of 5.75 mill green tons annually 24

25 Gulf Coast Biomass Impact Demand Scenario.5%/yr demand increase for current products Over 10 yr period ( ) increase demand by.575 mill tons/yr 100% pine Reduce demand by available logging g residuals (45%,35%,25%,15% recovery) 25

26 Gulf Coast PPW Removals 26

27 Demand Increase Gulf Coast Pine Pulpwood Demand Shifts from Biomass sensitivity to residual utilization millio on tons No Biomass Roundwood 45% Residual Recovery 35% Residual Recovery 25% Residual Recoveryer 15% Residual Recoveryer 27

28 Price/Harvest/Inventory Impact 2005= = Gulf States Pine Pulpwood Market.5%/yr demand inc. no biomass demand Price Inventory Removals No Roundwood Biomass Demand Gulf States Pine Pulpwood Market.5%/yr base demand + biomass with 15% residual recovery 200 Max Roundwood Biomass Demand = Price Inventory Removals

29 Higher Prices and Lower Inventory Reduce Harvest Gulf Coast Pine Pulpwood Removal Shifts from Biomass sensitivity to residual utilization millio on tons No Biomass Roundwood 45% Residual Recovery 35% Residual Recovery 25% Residual Recovery 15% Residual Recovery 29

30 What if biomass demand is not price responsive? Gulf Coast "Traditional" Industry Pine Harvest assuming biomass demand is not price sensitive millio on tons No Biomass Roundwood 45% Residual Recovery 35% Residual Recovery 25% Residual Recovery 15% Residual Recovery 30

31 NC Biomass Impact Demand from NC Div For Resources 12 announced or under construction plants Potential demand of 5.17 mill green tons annually 31

32 Demand Increase NC Pulpwood Demand Shifts from Biomass million tons No Biomass Roundwood % Residual Recovery % Residual Recovery 25% Residual Recovery 15% Residual Recovery 32

33 Price/Harvest/Inventory Impact No Roundwood Biomass Demand Max Roundwood Biomass Demand Pine Pulpwood p no demand inc Pine Pulpwood 15% residuals utilization 2005= Price Inventory Removals Price Inventory Removals Hardwood Pulpwood Hardwood Pulpwood % residuals utilization Price Inventory Removals = =100 no demand inc. Price Inventory Removals =100

34 Higher Prices and Lower Inventory Reduce Harvest NC Pulpwood Removal Shifts from Biomass millio on tons No Biomass Roundwood 45% Residual Recovery 35% Residual Recovery 25% Residual Recovery 15% Residual Recovery 34

35 Increased harvest distribution Pine Pulpwood Removals SCPlain NCPlain Pdmt MTN Hardwood Pulpwood Removals SCPlain NCPlain Pdmt MTN mil grn tons mil grn tons

36 What if biomass demand is not price responsive? NC "Traditional" Industry Pulpwood Harvest assuming biomass demand is not price sensitive million tons No Biomass Roundwood 45% Residual Recovery 35% Residual Recovery 25% Residual Recovery 15% Residual Recovery 36

37 Key Points Worst Case Scenario for traditional woodusers or Best Case if you are a timberland owner Everything being considered adds to demand Biomass demand perfectly inelastic (no short run substitutes) No silvicultural response or non-wood substitution 37

38 Key Points On the other hand: Power companies already negotiating long term supply agreements New projects announced monthly Current roundwood prices are very attractive These runs don t include timberland loss (1.5%/yr) Plantation plantings are down significantly 38

39 Key Unknowns Residuals utilization and market development Biomass demand d price responsiveness Realized vs planned biomass demandd Carbon cap and trade 39

40 Likely Outcomes Residuals important but current demand may quickly exceed residual availability Inelastic timber supply means that there will likely be a significant price response Energy companies may utilize roundwood first via long term supply agreements or existing brokerage system Higher wood prices may make other renewable energy source look better and reduce realized biomass demand 40

41 QUESTIONS 41

42 Southern Tree Planting, All States and Owners, ,000,000 Area Planted (Acres ) 2,500,000 2,000,000 1,500,000 1,000, , Alabama Arkansas Florida Georgia Kentucky Louisiana Mississippi North Carolina Oklahoma South Carolina Tennessee Texas Virginia Fiscal Year (G GFC) 2004 (G GFC) 42

43 Does timber supply matter? Since price depends d on supply and demand, seems logical to conclude yes But, in a lot of cases it doesn t matter much: Short run Long run 43

44 Does timber supply matter? Not Much in the Short-runrun Supply (wood available for harvest at a given price) doesn t change quickly Exceptions Weather Seasonal wet/dry periods Hurricanes SPB Most price variation comes from demand fluctuation Most relevant for selling timber 44

45 Does timber supply matter? Not Much in the Long-run Demand shifters (e.g. capacity/technology) will adjust Price tend toward global constant real prices Examples Technology Substitute hwd for pine pulpwood Substitute small trees (OSB) for big trees (plywood) Capacity Pulp capacity decline Shift of capacity to lower cost regions Long-run forecasts relevant to policy, less relevant to current investment 45

46 Does timber supply matter? What about the medium run? 3-15 years some adjustment Who cares about the medium run? Timberland funds and wood-based industry Timing Location Silvicultural ic lt treatments Product price Product mix 46

47 Does timber supply matter? In the medium-run Most price variation still comes from demand But, Next years of supply is already in the ground Behavioral assumptions unlikely l to change significantly 47

48 Does timber supply matter? Medium run supply is relatively predictable Has implications for, Product mix over time Comparative advantage across regions Capacity shifts at the margin 48

49 Does timber supply matter? Current timber supply is linked to future timber demand Over time Age class bubble will work its way through all product classes Across Space New capacity location will be influenced by current timber supply 49

50 Southern Tree Planting, All States and Owners, ,000,000 Are ea Planted (Acre es) 2,500,000 2,000,000 1,500,000 1,000, ,000 0 Alabama Arkansas Florida Georgia Kentucky Louisiana Mississippi North Carolina Oklahoma South Carolina Tennessee Texas Virginia (GFC) (GFC) Fiscal Year 50