Biomass energy facilities require efficient biomass fuel supply markets Brian Cox Executive Officer, Bioenergy Association of New Zealand
Heat plant in New Zealand Heating Plant by Sector Wood Processing 40% Dairy Processing 32% Education 2% Other Manufacturing 4% Meat Processing 9% Hospitals 6% Food Processing 7%
Size of heat plant
New Zealand bioenergy sector Biomass and geothermal are our primary untapped resources Biomass already supplying 16% of NZ energy Potential to do much more Well established conventional combustion technologies Platform for future biofuel technologies and co-products Bioenergy Strategy Achieving economic, employment and environmental benefits Unsubsidised markets Non economic benefits often the main driver Well established and expanding use of wood energy Projects have to be financially robust
New Zealand bioenergy sector Focus on wood and heat to provide the cornerstone for the future market Waste to energy is emerging Landfill methane collection Waste sorting Lacks economies of scale Climate change prime driver Clean air and waterways driver New Government Climate change tools Supports Government involvement
Key message of Bioenergy Strategy - a valuable resource Biomass is a very valuable commodity Can provide heat, transport fuel and electricity Stop treating it as waste Is treated as a problem and not an opportunity How it is treated lowers its value and increases cost as a fuel Transition to a post petroleum era Wider than just energy supply Extraction of biochemicals to replace petroleum feedstock Bioplastics can replace petroleum based plastics We have to start thinking differently about urban waste Rural areas have traditionally used most biomass Urban areas treat it as waste -> a problem, not an opportunity Biomass energy opportunities ~ 50% about the resource available, 30% about the application, 10% about the technology and 10% economics
Heat user - We need an economic heat solution Capital investment significant need certainty that there will be sufficient fuel resources available for the life of this asset Pricing must compete with next best energy supply alternative (i.e.electric, Coal or Natural Gas for thermal energy) Significant capital investment already made Boilers designed to operate on specific fuel source (i.e. Coal or Gas) Significant capital investment required to convert existing boiler fleet to operate on alternative fuel source Long term contracts for fuel supply will be sought with Suppliers
Heat user - We need a reliable and secure energy supply Consistency of a quality energy supply delivered Boilers designed to use a certain specification of fuel Deviations outside of this lead to operational issues Downtime at sites must be avoided Consistency in calorific value (GJ/tonne) of fuel source important Disruptions to fuel supply chain must be mitigated and managed Contingency plans for fuel supply must be in place i.e. stockpiles of fuel to allow continued operation required How will any natural disasters be managed so you can ensure a secure supply of fuel to us? i.e. Recent wind/storm damage throughout Canterbury
Plantation forestry
Forest harvest residues not energy crops
Short rotation crops use agricultural land
Wood energy in New Zealand Wood can economically supply fuel for heat today In transition A wood fuel supply market is evolving Coal as a transition partner 60% coal can be replaced by biomass today Biomass energy perceived as risky Requires continuous supply of wood fuel Mostly small dispersed sources of biomass Lack of long term supply Aggregation of biomass sources Need to improve efficiency of wood fuel supply market for Growth of substitution of coal in heat market To produce transport biofuels To produce biochemicals and biobased products
Wood fuel supply Residues have not been a traded commodity Beyond wood processors Perceived as a waste stream rather than as valuable product Because perceived as waste purchasers want to buy at low price Trading of wood residues outside wood processors is fledgling Supply chain is emerging Contracts are poorly developed An under developed market Theoretically adequate wood fibre but capability of suppliers to deliver fuel is under developed. Concern demand for wood fuel will push up the price of chip for engineered wood products eg MDF Perception that sources of wood residues are limited
Variable quality Common wood fuel supply issues Fuel buyers get what is delivered Sold on weight not quality or classification Good quality chip from the tree often contaminated through poor handling Inefficient processing and handling Low returns for biomass suppliers due to variable quality Energy density is very much lower than coal larger trucks, more frequent delivery higher capacity for fuel storage and handling Biomass handling is very different from coal. Biomass bridges. Bark is fibrous In any market uncertainty increases cost
Fuel options (New Zealand)
All fuels are different
Barriers to use of biomass fuel Perceived risk to investors of reliable consistent fuel supply Perception of long term fuel availability 30 year economic life of heat plant Variable sources of biomass Many small sources of biomass Emerging supply sector Lack of information case studies and up-to-date reference information Diverse industry with many medium sized players few able to fund development and hence need for collective action Cost of coal and gas often lower than cost of bioenergy Biomass normally requires pretreatment Economics improved when biomass processed to be homogenous fuel
Heat plant owners Business risk drives decisions Technology risk is manageable Often a lack of confidence in fuel supply "We have to have security of supply for end to end sustainability, we need to be able to process that milk every day and we don't want to have a plant downtime due to an energy supply issue," Fonterra Want ease of securing fuel Simple to specify Simple to order Ease of delivery Known qualities Reliable consistency Want optimal plant operation
Consequences of perception of poor quality Heat plant owners perceive wood fuel too high risk Heat plant owners stay with what they know fossil Reliable supply Reliable quality Suppliers not making an effort - perception that there is no buyers Fuel sellers getting low prices Using higher quality fuels when low quality would do Not able to optimise fuels available eg wet sawdust Harvesters putting up barriers to access Under performing plant because of fuel issue
What gives investor assurance Perception of quality Move from perception of waste Do they look as if they can provide what you need Dealing with professional industry Demonstrated performance Testing Reporting Communication Fuel testing Seem as an unnecessary overhead Appropriate to the fuel type Provide the test results Independent monitoring of performance Just don t take my word for it Self testing supported by external testing Independent auditing Certification of process Accreditation
Wood energy sector strategy to reduce barriers Focus on conventional heat combustion technology Proven technology Low risk Government owns 52% of heat plant Grow the wood fuel supply market Focus initially on small/medium sized heat plant Use coal as a transition fuel Promote environmental benefits Reduction of emissions to air in urban communities Reduce discharge of organic pollutants to waterways Greenhouse gas reduction Establish user confidence Management of business risks Demonstration
Wood processing residues the best biomass fuel
Biomass collection major cost
Reduce biomass transportation costs
Preparation as a fuel suitable for heat plant
Fuel handling
Fuel storage ensures fuel security
Customer perceptions does this look like quality fuel?
What will give fuel buyers confidence Fuel buyers need to clearly specify what they want Most markets are demand driven Fuel sellers improving marketing of product Markets work well when there is open information Future availability of fuel Market perception Demonstrate fuel quality and reliability of supply Need to treat the market as main stream Need to be able to provide market information Trade needs to be in the open Suppliers being prepared to provide sales information
Sale and purchase issues Often requires multi-opportunities for sourcing fuel Woodlots and shelter trees additional to existing forestry Forest harvesters focused on logs Variability of source increases risk Buyers and sellers miscommunication Need to work together Expectation that growers will give residues away Suppliers where is the demand?, demand where are the suppliers? Buyers and sellers talking past each other Experience at providing specified quality Contracts have often not been specific as to quality Wood fuel not graded Often sold on weight Wood fuel not treated as being valuable - contaminated
A quality framework Accredited Wood Fuel Suppliers Have quality assurance methods Registered Wood Energy Advisers Demonstration of relevant knowledge and experience. Pursuit of best practice Set out industry best practices Technical Guides Continuous Professional Development Short courses Attendance at workshops and webinars Subject to oversight of Professional Standards and Complaints Committee
Technical Guides
Solid biofuel classification Wood chips Compressed firelogs and briquettes Hog fuel Wood pellets Torrefied wood Herbaceous wood fuels Size (P) Moisture (M) Ash (A) Bulk density (BD) Energy density (ED) Urban wood fuels Firewood
Solid Biofuels Specifications for Fuel Types: Chips Moisture properties % by weight (moist basis) M20 20% M30 30% M35 35% M40 40% M55 55% M55 55+% Ash descriptors % by weight (dry basis) A.5 A1 A3 A5 A6+ Bulk Density Kg/m 3 Energy Density MJ/Kg 0.5% 1% 3% 5% > 6% - Actual Value Stated Actual value stated Actual Value Stated If sold by weight
Wide range of types of heat plant
Trade of fuel quality and capital cost Advantage Cheaper boiler plant Less fuel contamination hence less maintenance Disadvantage Expensive fuel Fuel cost will increase with growing demand Limited fuel availability Advantage Cheap fuel Unlimited availability Disadvantage More expensive boiler plant More fuel contamination hence higher maintenance cost Few experienced boiler supplier worldwide
Trade off fuel quality vs capital expenditure
Effect of carbon cost on fuel cost
Wood fuel supplier accreditation To assist suppliers increase sales To reduce risk to buyers To assist move the market from risky to mainstream Vetting and monitoring by independent party Requires demonstration of processes supported by independent testing Demonstration of quality management system Proved results of product testing Customer references Backed up by ability to audit Builds on existing certification schemes Provides a low cost assurance Does not involve a bevy of costly inspectors
Sets out requirements for: Type and quality of fuel Delivery of fuel Certainty of fuel supply Fuel quality verification Payment terms Disputes Variations Health & safety Other standard conditions Model contract
An efficient bioenergy market - The bottom line Improve fuel supply reliability = improved business confidence to move to biomass fuel