Case Study: Product and Process Design Methodologies for Engineering the Forest Biorefinery

Size: px
Start display at page:

Download "Case Study: Product and Process Design Methodologies for Engineering the Forest Biorefinery"

Transcription

1 Case Study: Product and Process Design Methodologies for Engineering the Forest Biorefinery New Energy Systems 19 August 2008 Paul Stuart NSERC Environmental Design Engineering Chair Department of Chemical Engineering, Ecole Polytechnique Montréal, Canada

2 Economic Stalement for Traditional Forest Products Producing Nations The perfect storm of strengthening g dollar, rising energy prices, rising fibre costs, small older mills.

3 Some Forestry Industry Survival Strategies Go for Survival in Commodities, or Make the Most of Our Existing Industry Buy/Build Elsewhere In Emerging Markets, or Make the Most of Our Pulp and Paper Competency in Emerging Economies Diversify Core Business with Marketing & Technological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigms

4 Some Forestry Industry Survival Strategies Go for Survival in Commodities, or Make the Most of Our Existing Industry Buy/Build Elsewhere In Emerging Markets, or Make the Most of Our Pulp and Paper Competency in Emerging Economies Diversify Core Business with Marketing & Technological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigms The Forest Biorefinery!

5 Conventional Kraft Mill ref: Agenda

6 Kraft Mill Biorefinery ref: Agenda 2020 see background papers by Galbe & Zacchi (2002) and Larson et al (2006) 6

7 The Dilemma Forest industry strategists are talking about revenue diversification via the forest biorefinery. do forestry company executives know how to go about designing and implementing biorefinery? How should we apply process systems engineering techniques to address this industry transformation? ti

8 Tembec Temiscaming: Forest Biorefinery?

9 Tembec Temiscaming: Forest Biorefinery?

10 Tembec Temiscaming: Forest Biorefinery?

11 Forest Biorefinery Definition One forest biorefinery definition: = full utilization of incoming i woody biomass for the production of: Wood products Pulp and paper products Energy Chemicals Another (more practical) forest biorefinery definition: = Maximizing the economic value from trees = Improved business model = Corporate transformation

12 The Challenge: Mitigating Risks

13 Objective of this Presentation To present (certain) critical issues that should be considered d by forestry companies seeking to identify promising biorefinery pathways based on biorefinery design activities, consulting activities, and pulp and paper company strategic planning leading to a proposed implementation strategy and multidisciplinary design methodology employing process systems engineering, for exploring the implementation of the forest biorefinery.

14 Presentation Outline Leading companies are implementing the forest biorefinery Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering approaches that we are exploring

15 Presentation Outline Leading companies are implementing the forest biorefinery See 3 survey papers by Thorp, March-May 2008 Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering g approaches that we are exploring

16 2007 UPM-Kymmene CEO Report to Investors

17 Leading Pulp and Paper Companies are Developing Partnerships 17

18 Leading Pulp and Paper Companies are Developing Partnerships

19 Presentation Outline Leading companies are implementing the forest biorefinery Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering approaches that we are exploring

20 Identifying the Right Biorefinery Configuration is Complex

21 Volume-Margin Trade-Offs for the Forest Biorefinery

22 Definition: Building Blocks and Derivatives Waste Co-products or wastes? Chips Biomass Pulp and Paper Mill Yield? Yield? Building Yield? Deriva Block Derivative tive P&P Products $$ Main Biorefinery Products to Market $$$$ Reducing Volumes, Flexible Throughputs Increasing Process Complexity

23 Definition: Petrochemical Value Chains and Product Replacement Biorefinery Platform????

24 Example: Product Replacement in Mature Supply Chain Waste Chips Biomass Pulp and Paper Mill Yield? Yield? Ethanol Ethylene Yield? PE P&P Products $$ Main Biorefinery Products to Market $$$$

25 Definition: Emerging Carbohydrate Platforms and Product Substitution?? Carbohydrate Platform?

26 Example: Product Substitution in Emerging Supply Chain Waste Chips Biomass Pulp and Paper Mill Yield? Lactic Yield? PLA Yield? PLA Acid Polymers P&P Products $$ Main Biorefinery Products to Market $$$$

27 Presentation Outline Leading companies are implementing the forest biorefinery Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering approaches that we are exploring

28 Some Key Competitive Factors Main competitive advantages for forestry companies: Access to biomass availability and harvesting knowhow Existing infrastructure in close proximity to forest biomass Established SC for wood, pulp and paper products Main competitive disadvantages for forestry companies: Lack of capital Lack of product development culture Lack of knowledge of product quality requirement, SC practices etc for new bioproducts

29 Some Lessons Learned from Our Case Studies Thus Far Biorefinery technology will be critical for competitive position in the short-term, term the unique supply chain will be critical for competitive position in the longer-term In order to be competitive in the longer term: product design, before process design Meet profitability targets for varying market conditions by designing for manufacturing flexibility The key to success in the forest biorefinery will be through implementing knowledge-based manufacturing in conjunction with flexible manufacturing and advanced supply ppy chain management

30 Strategic Approach for Implementing the Biorefinery Implementation: compete with all capital spending Phase I Lower Operating Costs: Replace fossil fuels at mill (natural gas, Bunker C), and/or Produce building block chemicals Lower risk technologies Compete internally for capital Phase II Increase Revenues: Manufacture of derivatives Market development for new products Higher process complexity and technology risk Partners essential Select the most sustainable product platform and partner(s) Phase III Improve Margins: Knowledge-based manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc Company culture transformation SCM key to success Strategic Vision: Phase III must determine Phase I

31 Strategic Approach for Implementing the Biorefinery Implementation: compete with all capital spending Phase I Lower Operating Costs: Replace fossil fuels at mill (natural gas, Bunker C), and/or Produce building block chemicals Lower risk technologies Phase II Increase Revenues: Manufacture of derivatives Market development for new products Higher process complexity and technology risk Partners essential Phase III Improve Margins: Knowledge-based manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc Margins improvement is the goal Strategic Vision: Phase III must determine Phase I

32 Phase I: Lower Operating Costs Phase I Lower Operating Costs: Replace fossil fuels at mill (natural gas, Bunker C), and/or Produce building block chemical Minimum risk technologies Generate more free cash flow (EBITDA), in competition with all other capital spending proposals The mill operation remains manufacturing-centric, i.e. produces a commodity and seeks to be a lowcost producer Seek to reduce biorefinery costs by identifying synergies with the existing mill: Utilization of existing infrastructure t to offset equivalent greenfield biorefinery capital cost Exploitation of green credits Possible partnership with technology provider

33 Is Cellulosic Ethanol the Right Product? Today! Source: NREL

34 Ethanol Price Volatility: An Important Risk Source: Gulf Ethanol Corp Peak at 3 $/gal Price volatility due to: Impact of crude oil and natural gas prices Changing balance between supply and demand Diverse feedstock types and their relative competitiveness Energy legislation tax credits and incentives In 4 months: Ethanol prices dropped by half How can companies stabilize margins in the context of volatility and uncertainty? 12 November <1.5 $/gal Source: Gulf Ethanol Corp

35 Biochemical Ethanol Technology 4.2$/gal 2.2$/galg Source: NREL Source: 0.6$/gal NREL

36 Should Biochemical Ethanol be Implemented Today? How can margins be stabilized? July $/gal November $/gal Source: NREL

37 Is Cellulosic Ethanol the Right Product? Implementing the forest biorefinery is about mitigating risk and clearly ethanol represents a great opportunity, but also presents risks These can be mitigated as part of a forest biorefinery product design strategy, e.g.: What derivatives can be made from ethanol? What opportunities are there with by-product lignin? What manufacturing flexibility between products is required, including perhaps producing ethanol from cellulose? Before implementing ethanol production facilities, know what product portfolio your company will ultimately produce

38 Process-centric and Product-centric centric design Towards a Product-Centered Chemical Industry - Rethinking the Role of R&D and its Interaction with Marketing and Business Strategy FOCAPD (2004), and AIChE webcast (2004 see link in background materials) George Stephanopoulos, MIT Chemical Engineering is moving from being process-centric to product-centric Product centered: market trends product specifications components and subsystems chemicals and materials manufacturing systems design 38

39 Start With Phase II: Define your Product Portfolio Product Design first, Process Design second Increase revenues by producing new green organic chemicals Phase II Increase Revenues: Manufacture of Derivatives derivatives Market development for New products Higher complexity and risk technologies Partners with SC Determine promising product portfolios for your company using a market perspective Which are technically feasible? Secure the best partners for securing the value chain Examine the implied company transformation

40 Biorefinery Product Portfolio Wood, Energy, Pulp and Paper Products Minimum Production Maximum Production A *** *** B *** *** C *** *** Biorefinery Products A *** *** B *** *** C *** ***

41 Product Portfolio Identification Innovation Novel product Substitution Technology Push The most appropriate choice for your company Market Pull Process-centric design Substitution Replacement Product-centric design Adaptation

42 Phase III = Enterprise Transformation Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems Phase III Improve Margins: Knowledge-based manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries Process Standardization, e.g., enterprise-wide standardization of processes for product and process development, R&D, finance, personnel, etc. Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating activities Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, inventory management, etc. Market-driven culture to be established through a phased transformation

43 Phase III = Enterprise Transformation Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems Phase III Improve Margins: Knowledge-based manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries Process Standardization, e.g., enterprise-wide standardization of processes for product and process development, R&D, finance, personnel, etc. Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating activities Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, inventory management, etc. Market-driven culture to be established through a phased transformation

44 Supply Chain Design Existing Supply Chain

45 Supply Chain Design The Biorefinery Network

46 Presentation Outline Leading companies are implementing the forest biorefinery Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering approaches that we are exploring

47 Overall Biorefinery Design Framework Promising Biorefinery Technology Products Strategy Product Design LCA Advanced Thermal Pinch Analysis Large Block Analysis of Processes Process Simulation Set of Preferred Biorefinery Configurations MCDM Supply Chain Management Reconciled Process and Economic Data Process Design Preliminary Engineering

48 Presentation Outline Leading companies are implementing the forest biorefinery Key biorefinery concepts and definitions Biorefinery implementation strategy for forestry companies Overall design methodology for the forest biorefinery Some interesting process systems engineering approaches that we are exploring

49 Product family: Which ones create the highest value along the value chain? What are the competitive factors associated with each product family? Risks? Product Design Considerations for the Forest Biorefinery Product opportunities: Which products should be considered as opportunities for replacement/substitution on the market? Which economically attractive product families can be built around them? Are technologies available for the product families, are they emerging? Which perturbing events on the market pose risk? Company detailed analysis and business plan definition Product Portfolio: What will be the impact of product family integration to the existing company portfolio? Is this a unique strategy? Risks? Risks? Partnership Selection: Who are the most promising partners for the candidate new product portfolios? Which partnerships will ensure the value creation while mitigating most of the risks?

50 How Does this Approach Influence Biorefinery Design? Large block analysis of biorefinery technologies WaterTreatment River_Water Chemicals Wood Coal Chips_VPP PreTreatment OPERATIONS-DRIVEN COST MODELLING WoodRoom FiberLine CAPITAL Manufacturing SPENDING costs for EVALUATION new forest biorefinery BL Pulp Bark WL New overhead allocation lower pulp R8 products, e.g. for bioethanol SUPPLY Capital investment CHAIN DESIGN in the longer term Competitive Company-specific production DECISION manufacturing costs MAKING SC is critical costs PowerIsland Capital Risks spending strategy Caustisizing Natural_gas Techno-economic Choosing and uncertainties risk a company-specific must be evaluated assessment and profitable uncertainties Manufacturing biorefinery of technologies flexibility strategy & must markets be exploited Risks and uncertainties systematically Chips_to_Cooking considered in decision-making Purified_waste_Water Woody_biomass FT_Liquid Gasification GTL WQC Corn CornEtOH EtOH

51 Data Processing and Data Reconciliation

52 Chips Chip_silo Chip_wash Chip_screw Wash_reject Wash_reject_out Preheating 1st_stage_refiners 2nd_stage_ refiners Steamer Pulper_main_line C Went_from_pulper Inlet_wtr_preheater_2 Inlet_wtr_preheater_1 Chimney Condensate_to_steamer Latency_chest CW Clean_TMP_steam Water_to_heating_1 Water_heating_out Circulation_water_to_heating_2 Circulation_water_out Activity-Based Cost Accounting 4 TMP Heat Recovery Washing of chips Main line refiners Mill wide data reconciliation M Forest MILL biorefinery INPUTS Raw material Chem cons. VALUE M Process- Driven Cost Modelling Technology Strategy Process Analysis

53 How Does this Approach Influence Biorefinery Design?

54 Energy Planning for the Biorefinery Market product process Mass and energy balances Preferred energy profiles Mill energy planning

55 Energy Planning for the Biorefinery

56 Energy Planning for the Biorefinery Integration of biorefinery Actual P&P mill Biorefinery Energy efficiency projects Thermal pinch methods

57 Integrated Forest Biorefinery: Identifying SC Synergies

58 Extending the Supply Chain to the Forest Biorefinery Existing Pulp & Paper Supply Chain Distribution Raw Material Handling Pulp & Paper Mill Convert. & Finish. Merchants, customers P&P Demand Opportunities SC Research for the FBR Supply Opportunities... A and/or Procurement Cycle B Design of Biorefinery Supply Chain and/or... A and/or Manufacturing Cycle and/or B... A and/or Distribution Cycle and/or B... A and/or Customer Cycle and/or B Chemical Demand Opportunities The FBR SC will be unique, to the Company implementing it.????

59 SC Research Related to Existing Pulp and Paper Mills Sup. Logs Logs Chips Pulp Mill Sup. Ch hips Ch hips Pil les This approach has been shown to yield significant benefits, even for relatively simple product portfolios Sup. Logs Sup p. Chips Logs Chips Chip ps Piles Pulp Mill

60 Aggregation lower level of detail Aggregation higher level of detail Process Work Center - 1 Local Factors Routings Process Work Center - n Local Factors Routings Process Specific Process Specific Cost Script Calculation Cost Script Calculation Process-Based Business Model

61 Supply Chain Considerations for Pulp and Paper Mills Existing Pulp & Paper Supply Chain Distribution Raw Material Handling Pulp & Paper Mill Convert. & Finish. Merchants, customers P&P Demand Opportunities Supply Opportunities... Procurement Cycle SC Design Research of Biorefinery Supply in Chainthe P&P Industry A A A A and/or and/or and/or and/or B Help B mills B to become B Chemical a Demand low cost producer by Opportunities and/or and/or and/or and/or... applying... advanced... analytical approaches Manufacturing Distribution Customer Help Cycle mills to better characterize the utilization of Cycle Cycle resources, and the cost implications of various?? operating regimes at the mill?? Help mills to better manage the complexity of the supply chain

62 Phase III = Enterprise Transformation Can we minimize the impact of price volatility through flexible manufacturing and better SCM? Phase III Improve Margins: Knowledgebased manufacturing and production flexibility Business flow transformation Product development culture Off-shoring, Outsourcing, etc

63 Leading Pulp and Paper Companies are Developing Partnerships Expand the JV in order to have better flexibility? 63

64 Manufacturing Flexibility is critical to the success of fthe forest tbiorefinery To be flexible, we need to: Have different raw material resources Have flexible production lines Be responsive to demand Must be addressed in SC design: Managing the feedstock procurement process Choosing appropriate technology Being close to raw material resources and major markets and having an efficient distribution and transportation network

65 Key Issues Related to the Biorefinery Supply Chain Product Strategy o What are the SC synergies for different product scenarios? o How to enter an existing value chain, at which point? Supply Chain Design o What are the implications of the SC design for different biorefinery product opportunities? o What are the impact of strategic SC design on tactical/operational planning Supply Chain Planning o How can we best manage the complexity of this new SC? o How can manufacturing flexibility be best exploited at the SC level so the product portfolio can be used to mitigate price volatility?

66 Product Design Level Analysis Competitive Strategy SC Strategy Strategic fit? Understanding the market SC responsiveness Type of product Wide range Product variety High quantity Quantity needed Short lead time Desired response time SC efficiency Market volatility Minimizing costs M arket Supp ly Chain

67 Knowledge-Based Manufacturing: Critical Issues s or Cost Net Sales

68 Applying LCA to the Biorefinery Context Boundaries Allocation Indicators Normalization Weighting

69 Applying LCA to the Biorefinery Context Mill 1 Mill 2 Mill N Process pathway 1 Process pathway 2 Process pathway N Product 1 Product 2 Product N Pulp and paper Company FBR projects involve: Many possible products Many possible process pathways Many mill options Potentially very different environmental profile for all possible combinations What products will be manufactured - what do they substitute/replace? What is an appropriate allocation method between pulp and paper, energy and biorefinery products? How does the environmental profile of the biorefinery products compare to the products they replace?

70 Conclusions Implementing the forest biorefinery is more than a capital spending project Risk mitigation associated with the implementation of the biorefinery can be achieved through careful strategic planning, and by employing systematic product and process design methodologies: Start with market-based product portfolio design Partner selection and partnership model are critical, and determining the company s unique biorefinery supply chain Enterprise transformation is implicated, including designing for production flexibility and delivering product with knowledge-based manufacturing

71 Case Study: Product and Process System Design Methodologies for Engineering the Forest Biorefinery New Energy Systems 19 August 2008 Paul Stuart NSERC Environmental Design Engineering Chair Department of Chemical Engineering, Ecole Polytechnique Montréal, Canada