Short Rotation Coppice and Pellet Production on the North Shore. Harnessing Biomass II: Support for Northern Ontario Bioeconomy Initiatives

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1 Harnessing Biomass II: Support for Northern Ontario Bioeconomy Initiatives

2 PROJECT OBJECTIVES The objective of this project is to identify investment potential in the biomass densification supply chain. Specifically, the project addresses the following components: 1. Agricultural biomass feedstock production and the required input prices for densification; 2. Suitable crops, harvest technologies/efficiencies, transportation logistics, and modeled production cost to the farm gate; 3. Pellet mill economics and required input costs for feasibility; 4. Potential market size and geographic reach for densified wood products.

3 STUDY AREA Major Agricultural Zones Major Urban Areas Major agricultural areas suitable for biomass production. Sault Ste. Marie Blind River Greater Sudbury Urban centres close to domestic markets. Shipping ports for bulk transportation to national and international markets. City centres for industrial heating and bioenergy markets.

4 FEEDSTOCK SOURCES SRC, FORAGE CROPS, PRIVATE FOREST, MILL RESIDUES Short Rotation Coppice There are many social and economic reasons for pursuing a feedstock model incorporating these dedicated crops and include; 1) increased development of the agricultural sector resulting in economic growth and development, and 2) establishing secure and consistent long-term capacity for the fibre industry, reducing pressures on crown forests. Generally, these plantations consist of improved willow and/or poplar trees that are harvested on a 3-4 year cutting cycle for approximately years. Once the crop reaches maturity (3-5 years) the plantation is mechanically harvested and left to re-grow for another cutting cycle. The cutting action (coppice) initiates an increased growth response as the trees attempt to maintain the balance of below and above ground biomass.

5 FEEDSTOCK SOURCES SRC, FORAGE CROPS, PRIVATE FOREST, MILL RESIDUES Short Rotation Coppice Potential Landbase and Productivity Total landbase is ~35,000 hectares. Assumes 60% of land is suitable, 30% landowner uptake, yield of 7 ODT/ha/yr

6 FEEDSTOCK SOURCES SRC, FORAGE CROPS, PRIVATE FOREST, MILL RESIDUES Short Rotation Coppice Costs Activity Site Preparation Range of Total Costs / ha (over 22 yr lifespan) Description Herbicide Application $153-$200 Removes all existing vegetation from site. Primary Tillage $150 - $400 Breaks hardpan layers and improves site drainage. Coarsely mixes soils. Secondary Tillage $70-$300 Finely mixes top 25cm of soil and smoothes surface for planting. Plant Material $1200-$4700 Assumes planting cuttings at a density of 10,000 stems/ha. Planting $700-$3125 Using mechanical planter. Maintenance Mechanical Cultivation $1350-$2100 Removes competing vegetation, improves drainage and soil aeration. Fertilizer Application 0-$200 Increases crop growth on less fertile sites. Harvest $4410 Using Biobaler harvester costs of $30/ODT and yield of 21 ODT/ha.

7 FEEDSTOCK SOURCES SRC, GRASS CROPS, PRIVATE FOREST, MILL RESIDUES Private Lands Traditional Forestry Sustainable forestry practices on private lands have the potential to add quality wood to the overall supply mix. MacLeod (2009) estimates that a total of 317,078 m3/yr (~130,000 tonnes/yr) of merchantable wood is growing on all private lands Algoma and Northshore. This equals a total of ~43,000 m3/yr (~18,100 tonnes) unmerchantable tops, limbs and bark. Prices are reported in the range of $46 to $83 per tonne (~$100-$180/ODT). Local experts are in agreement with an average of $45/tonne ($90/ODT) at farm gate.

8 FEEDSTOCK SOURCES SRC, GRASS CROPS, PRIVATE FOREST, MILL RESIDUES Private Lands Juvenile/Opportunity Wood Juvenile wood is defined in this study as small diameter shrubs and trees that can be captured using the same harvesting equipment as with SRC Typical sites containing this material are idled agricultural lands that have abundant growth of undesired tree species. These species may commonly include willow, alder, poplar, birch and a variety of softwoods. Ideal lands are large size fields containing 100% woody vegetation cover, but other types of biomass can abundantly be found on field margins, wetlands and river banks. This material may or may not meet specifications for pellet production depending on species mixtures.

9 DENSIFICATION TRANSPORT, PELLETS AND BRIQUETTES Transportation Round Bales Opportunity Wood SRC Plantation After the biomass has been bailed, it is left at roadside over the winter where it is naturally dried to 15%-25% moisture content (Anderson Group 2011). Reducing moisture content naturally through air drying can be the most efficient cost reduction in the process. Transportation costs for bales can range from $9 to $18 per tonne. Bales per hour Weight per bale 545 kg 545kg Bale size 1.2m x 1.2 m 1.2m x 1.2 m BTU/lb Operation Cost per ODT $22.32 $11.16 Delivery Cost per ODT within 25 kms - 7.8

10 DENSIFICATION TRANSPORT, PELLETS AND BRIQUETTES Pellet Production Average Reported Capital Costs: ~$100/tonne of product Average Reported Operating Costs: ~$60/tonne of product System Components: Primary Grinding/Chipping Screening Secondary Grinding Drying Pelletizing Cooling Other Costs Packaging, Conveyors, Screening, Storage, Installation and Engineering, Administration, Land Lease, Personnel

11 DENSIFICATION TRANSPORT, PELLETS AND BRIQUETTES Briquette Production For machines producing 1000 to 3000 tonnes per year, total cost per tonne over a five year term ranged from $30 to $57. For machines producing 3000 to 23,000 tonnes per year, total costs ranged from $13 to $28 per tonne. Cost include capitol and operating. Pros Hog Fuel/Chips Pellets Briquettes Low capital cost Good fuel for local industrial usage Emerging energy market in Ontario Allows for automated handling Emerging energy market in Ontario Greatest bulk densitiy Lower capital costs Lower operating costs Can be used in existing wood stoves (larger market) Processing can utilize higher moisture content Cons Less efficient transport due to higher moisture content and lower bulk density High initial cost Must be kept dry Manually loading and stacking of logs. Must be kept dry

12 ECONOMIC MODEL Blind River and Area Densification Economic Model (BRADEM) INPUT-OUTPUT General Densification Mill Outputs Discount Rate % 4% Product Type Pellet SRC LANDOWNER Loan Required for Capital? >> No Age IRR Loan Interest Rate % 5% MILL CAPACITY 5 #NUM! Ammortization Period yrs % Mill Line(s) Capacity tonnes/hr % Price Points Mill Efficiency % 95% FEEDSTOCK COSTS Unit Price Moisture Daily Operation Time hrs 24 Content Annual Operation Time days 320 DENSIFICATION MILL SRC $/ODT 80 20% Total Production tonnes/yr Age Hay/Grasses $/ODT 60 15% 5 Mill Residues $/ODT 60 15% PRODUCT ALLOCATION 10 Roundwood $/ODT % Product Moisture Content % 10% 15 Juvenille/Opportunity Wood $/ODT 50 25% Pellets Total Volume PRODUCT MARKET PRICE European bulk % of total 0% 0 Pellets Domestic - premium grade % of total 100% European bulk $/tonne % Domestic - B, C grade % of total 0% 0 Domestic - premium grade $/tonne % Regional Bulk % of total 0% 0 Domestic - B, C grade $/tonne % Other Bulk $/tonne % Briquettes Domestic Bulk % of total 0% 0 Briquettes Residential % of total 0% 0 Domestic Bulk $/tonne % Residential $/tonne % IRR 12.86% 21.63% 23.72% NPV -6,063,614-1,430,836 2,376,970 NPV 519,861 1,649,935 2,578,774 You may only enter values in green coloured cells. Feedstock Allocation and Volume Tables Total Feedstock Requirements ODT/ann. 19,699 Allocation Year> SRC of Total 0% 0% 0% 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Mill Residues % of Total 50% 100% 100% 100% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Roundwood % of Total 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Juvenille/Opportunity Wood % of Total 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Hay/Grasses % of Total 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Total 50% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

13 ECONOMIC MODEL Blind River and Area Densification Economic Model (BRADEM) FEEDSTOCK Capitol Costs Annual Operating Costs Transportation Labour Sub-Model Total $/tonne $/year $/tonne $/WT Use for your own calculations Industrial Chipper 75, Labour 75, SRC 15 hours/day 24 FE Loaders 25, Grinding/Sorting/Debark (Fuel,Energy) 60, Straws/grasses 15 days/yr 310 Tractor + Bio Bailer 200, Equipment Maintenance 25, Mill Residues 15 # of employees 4 Screening/conveyers/other 20, Roundwood (private lands) 15 $/hr 18 Covered Storage Total 160, Juvenille wood (private lands) 15 Annual Cost Property purchase Debarker Bio-Bailer Harvest Costs Grinding 12 Truck offloading system 40, SRC $/ODT 20 Total 360, Juvenille $/ODT 35 Annual Economic Summary Year Total Costs 684, , , , , , , , , , , , , , , , , , ,16 BRIQUETTE PRODUCTION METRICS Equipment and Infrastructure Summary Annual Operating Costs Transportation to Market Capital Operational Total Cost $/tonne $/tonne Variable Total Cost $/tonne Dryer 155, Equipment Maintenance 10, Pellets $/tonne Briquetting Machine 45, Energy (equipment, buildings) 110, European bulk 50 Packaging Machine Labour 75, Domestic - premium grade 25 Secondary Grinding 27, Misc. 5, Domestic - B, C grade 25 Misc. Equipment 15, Other Bulk 18 Storage 20, Fixed Briquettes Buildings 27, Administration 40, Domestic Bulk 18 Misc. Annual Supplies 10, Domestic Residential 25 Land Lease 12, Other Total 289, Total 262,

14 ECONOMIC RESULTS SCALED SCENARIOS, BREAK-EVEN PRICES, GROWERS Scenario Scale Scenarios Capacity (tonnes/yr) SRC1 7,300 SRC2 21,890 SRC3 50,340 Other Scenarios BRQ4 5,000 MIX5 30,000 Product Type Feedstock Drying Cost Market Pellets Domestic Premium Grade (10% MC) Pellets Domestic Premium Grade (10% MC) Pellets Industrial Grade (10% MC) Briquettes (15% MC) Pellets Industrial Grade (10% MC) Residues yr 1-4, SRC yr Residues yr 1-4, SRC yr Residues yr 1-4, SRC yr Residues yr 1-4, SRC & Residues yr % Hays/Grasses, 25% Mill Residues 25% Juvenile Wood 25% Roundwood year 1-4. Substitute 25% SRC year 5 20 for Juvenile Wood. Reduced by 1/3 due to low feedstock MC Reduced by 1/3 due to low feedstock MC Reduced by 1/3 due to low feedstock MC 1/2 drying costs due to low feedstock MC and greater allowable product MC. Full drying costs Local and regional household ($230/tonne) Regional and provincial household ($230/tonne) Regional energy production. ($230/tonne) Local and regional household. ($230/tonne) Industrial, institutional, and power production facilities. ($220/tonne)

15 ECONOMIC RESULTS SCALED SCENARIOS, BREAK-EVEN PRICES, GROWERS Densification project NPV over 20 years at three annual production capacities Project Net Present Value ($ CDN) ,300 tonnes 21,890 tonnes 50,340 tonnes Years

16 ECONOMIC RESULTS SCALED SCENARIOS, BREAK-EVEN PRICES, GROWERS Scenario BRQ4 SRC2 MIX5 Total Product Production (tonnes/yr) 5,000 21,890 30,000 Avg. Costs/yr % of Total Avg. Costs/yr % of Total Avg. Costs/yr % of Total Production Category Feedstock Procurement 316,945 31% 1,467,590 33% 2,078,526 35% SRC and Opp. Biomass Harvesting 68,069 7% 315,187 7% 151,771 3% Primary Chipping/Grinding 60,061 6% 262,656 6% 360,714 6% Drying 45,546 4% 262,656 6% 541,071 9% Densification Process - other than drying 65,066 6% 380,851 8% 523,036 9% Transportation to Mill 74,105 7% 343,135 8% 496,105 8% Transportation to Market 121,998 12% 533,520 12% 527,815 9% Equipment Maintenance - all equipment 50,051 5% 218,880 5% 300,595 5% Personnel 150,152 15% 656,640 15% 901,786 15% Fixed Costs (Admin, Land Lease, etc) 62,000 6% 62,000 1% 62,000 1% Total Annual Cost 1,013,991 4,503,116 5,943,418 Total Production Cost per Tonne $203 $206 $198 IRR at year 10 23% 22% 4% NPV at year ,223 1,649,935 13,638

17 ECONOMIC RESULTS SCALED SCENARIOS, BREAK-EVEN PRICES, GROWERS Prices required for densification project to break even at year 10 Capacity (MT) SRC Feedstock Price 1 Pellet Market Price 2 7,300 $72 $235 21,890 $86 $226 50,340 $91 $223 1 Break-even price for standing volume ($/ODT);; assuming pellet market price is $230 per tonne 2 Break-even price for tonne of pellets. Assuming SRC feedstock price is $80 per ODT Ten year break-even SRC prices for the landowner at different levels of productivity. Yield (ODT/ha/yr) Break-even Price 6 $108 7 $93 8 $81

18 ECONOMIC RESULTS SCALED SCENARIOS, BREAK-EVEN PRICES, GROWERS Net Present Value for Farmer Growing SRC on 50 acres Project Net Present Value ($ CDN) Years Assumes: yield of 7 ODT/ha/yr; selling price $80/ODT

19 PROJECT CONCLUSIONS SRC establishment costs alone are estimated to be $1,130 per acre. Mechanical maintenance costs will vary greatly from field to field and year to year and are estimated to cost approximately $60 per acre per year. A three year harvest is estimated at 8.5 ODT per acre for revenue of $680 per acre (at a market price of $80/ODT). The results of this study indicate that biomass densification can be economically feasible under a number of different circumstances. Given a secure and low cost feedstock supply with low moisture content, densification projects can reach a positive net present value prior to year ten.

20 THANK YOU and SAFE TRAVELLING