Business models for local energy production. M.Sc. Asko Puhakka North Karelia University of Applied Sciences

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1 Business models for local energy production M.Sc. Asko Puhakka North Karelia University of Applied Sciences

2 Bioenergy in North Karelia University of Applied Sciences Centre for Natural Resources; forestry, agriculture, environment technology and bioenergy Research and development activities: - National and international projects are focused on; - Heat energy entrepreneurship and business models - Pellet technology and promoting the use of pellets - Local economy and regional development - Cross-border co-operation with Russia - Co-operation with companies Education activities: - MSc and BSc (Engineering) in environmental technology - Education for wood energy advisors - International education of wood energy experts Asko Puhakka

3 Heat energy entrepreneurship several stakeholders and challenges Municipality / other clients and heat energy entrepreneurs providing the service Actors along the raw material supply chain Boiler manufacturers Requirements of the municipal energy solution, public tendering process Asko Puhakka

4 Heat energy entrepreneurship several stakeholders and challenges Multiple objectives; politics, environment, economy, technology Competition against the economics of scale Competitive tendering Profitability calculations Demands know-how on technology, economics, legislation, negotiation skills etc. New business models are needed Asko Puhakka

5 Acquisition process of the heating plant The sizing of the heating plant by to the total heating load is very essential. Aim is to cover 80-90% from the total energy demand by wood energy. kw P roduction of m a x im um e ne rgy S um m e r-tim e he a ting of w a te r 5 Hours

6 Heat energy entrepreneurship in Finland Small scale business; business on wood heat based on local wood fuels. Business started in Finland in 1990 s and first heated buildings were small village schools. > Low and limited yearly income! > It was important to learn production, business and taking care of customers Asko Puhakka

7 Heat energy entrepreneurship in Finland Nowadays (2011) there are approximately 455 heat plants which are owned by 160 enterprises. Total heat power is approximately 250 MW Use of bio fuels loose-m³/a Raw material; mainly wood chips but also pellets and peat Average boiler capacity is 550 kw. Asko Puhakka

8 Heat production in Finland by small companies Source: Toimialaraportti / TEM 2010

9 Heat production Business Models in Finland Asko Puhakka International Energy Companies Base of business Strong business, high level knowledge, lot of own capital Challences High profit demand, Local partnership? Energy Companies owned by Municipalities Strong local connection, Based to municipal decission Profit demand to owner municipality National Ltd Companies Network with different partners, Interest of growing Amount of own capital, Achieving local partners Small local Companies Local Co-operatives Typical side business, Using of own machines and raw material Strong local connection, Wide ownership, Raw material in own hands Limited to small scale, Learning by doing Locality, Easy to stay in passive owner s role

10 Asko Puhakka Challences to heat energy business Competition - New actors trying to join the business. Knowledge etc.? New services and business models - Full services to owners of real estates - Planning, sizing and technology solutions, Knowledge development - Municipalities > Acquisition processes - Entrepreneurs > Making offers > Acquisitions; technology, raw material, services Co-operation with companies - Economy management, procurings, education

11 Business models from Europe Bioenergie Pongau, Bischofshofen, Austria - Investments 32 mil. ; heatplants MW and CHP 7 MW. Subsidies 10 milj. + guarantee price for electricity production - 33 km district heating network and 220 customers Ownership: - Local Co-operative 51 % and there is 25 members in total; forest owners, sawmilling companies etc. - Co-operative; Basic payment is 500 and maximum responsibility is 1500 /partner - SWH, State owned forests, is owning 49% of Bioenergie Pongau. Benefits for common ownership: - Raw material resources - Subsidies for investments are available (> 51 % owned by C-O)

12 Business Models from Europe Naehwaerme, Energiecontracting GmbH, Graz, Austria - Company is Ltd, main business is building Heat plants and selling heat - Naehwaerme Company is owned by three companies Business model: - To build up local heating companies of which local and active partners own more than 50 % - NWC offers training courses for local partners on business and on heat production Aim of business model: - To use local resources and knowledge - To use knowledge in planning of heat plants and heating systems - To keep limited demand for own capital.

13 Business Models from Europe Fernheizkarftwer Toblach-Innichen, South Tiroly - Investment 30 mil., CHP-plant (ORC) + Heating Plant and network Subsidies 30 % + guarantee price for electricity Ownership: - Company is Co-operative which is owned by customers, - Partnership payment is 300 /kw partner. Basic connection fee for real estate is typically 2200, incl. 15 m connection pipe. - Energy price level is close to 65 /MWh - Profit is about 0,5 mil. /a > Used to investments Aims for local energy production: - Use of local raw material and - Stable price for energy - Energy production in own hands

14 Business Models from Finland Local energy business in North Karelia There is seven energy co-operatives in North Karelia: - Enon Energia, Kontio Energia, Tuupovaara, Kiihtelysvaara, Länsi- Karjala, Nurmes and Rasivaara. Enon Energia The biggest one! Basic for succes - Good connection to local municipality and forest owners - There is enough persons which are ready to put time on developing and to do basic work - Enough interest - Enough courage - Good partners

15 Local energy business in North Karelia Basic for succes - Good connection to local municipality and forest owners - There is enough persons which are ready to put time on developing and to do basic work - Enough interest - Enough courage - Good partners

16 To know how to do Development projects, education and co-operation Asko Puhakka Mobile