Forest Bioenergy in the United States: Current Status and ... · presentation on forest bioenergy for EPA's Stakeholder Workshop: Fostering Constructive Dialogue on the Role of Biomass

Forest Bioenergy in the United States: Current Status and Outlook

Seth Walker Bioenergy Economist

[email protected] April 7, 2016

1 © Copyright 2015 RISI, Inc. | Proprietary Information

Energy From the Forest

• Biomass Power – Stand-Alone Plants – Forest Products Industry

• Wood Pellets – Domestic Heating Markets – Industrial Exports

• Liquid Biofuels – Cellulosic – Pulping by-products – No significant impact in the

US over the near term

© Copyright 2015 RISI, Inc. | Proprietary Information 2

Woodfiber Consumption by Bioenergy Million dry short tons


0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Liquid BiofuelsWood PelletsBiomass Power

Source: RISI

Electricity Generation

• Forest product industries produce 64% of electricity from wood and wood-derived fuels in the US – Little to no growth

• Production at stand-alone biomass power plants has nearly doubled over the past 15 years – 8 million MWh in 2001 – 15 million MWh in 2015


0

5

10

15

20

25

30

35

40

45

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Electricity Production from Wood and Wood-derived Fuels

Million MWh

Stand-Alone PlantsForest Products Industry

Source: EIA

Wood Biomass Power in the United States

• Most significant recent growth in the South

– Dominion Power – VA – Gainesville Renewable Energy – FL

• Historically Northeast was the biggest market

– Little growth due to woodfiber price/availability constraints

• Moderate growth in West peaked in 2005, bottom in 2012

– Sawlog dominated market (lumber production)

– End of housing boom


-

2

4

6

8

10

12

14

16

18

20

North CentralWestNortheastSouth

Source: RISI

Wood Pellet Production

• Emergence of a significant export market to Europe – Driven by renewable energy

and CO2 reduction policies – Primarily UK, Belgium – Displacing coal in power

plants

• Smaller domestic heating market has been around for decades – Low oil prices, warm winters

have really hurt this market


0

2

4

6

8

10

12

14

US Pellet Production Million short tons

NortheastNorth CentralWestSouth ConventionalSouth Industrial Export

Source: RISI

North American Pellet Supply


Development of the European Industrial Wood Pellet Market


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5

10

15

20

25

European Industrial Pellet Demand Million metric tons

OtherSwedenDenmarkBelgiumNetherlandsUK

• Primarily focused in UK, Belgium, Netherlands, Denmark • Countries without a significant amount of domestic resources • Previous reliance on coal

Source: RISI

United Kingdom Policy: Transition period from Renewables Obligation (RO)

to Contracts for Difference - Limited by budgetary constraints (Levy Control Framework) – removal of

Levy Exemption Credits, few units qualified for CfD - European Commission investigating whether CfD violates state-aid

guidelines

Major Players: Drax (3x 660MW units), RWE (400MW), MGT Power (greenfield CHP – mostly wood chips)

Sources: US, Canada, Latvia, Portugal, Brazil

Market Size: ~6-7 million mt

Market Potential: ~9-10 million mt


Denmark Policy: Fossil Fuel tax aversion, FiT (significantly less

impact)

Major Players: Central power stations and district heating Dong, Hofor, Verdo Energy

Sources: Latvia, Estonia, Sweden, Russia, Germany, US

Market Size: ~2 million mt

Market Potential: ~3-4 million mt


Belgium Policy: Green Certificate Program – varies by region

(Flanders and Wallonia) - Flanders shut down pellet consumption for several months in 2014 - Disagreement with Flemish forest products groups

Major Players: Engie - Rodenhuize (Ghent), Les Awirs (Liege) E.ON - Antwerp, Genk (sold to German Pellets) Bee Power Ghent

Sources: US, Canada

Market Size: ~1 million mt

Market Potential: ~3 million mt © Copyright 2015 RISI, Inc. | Proprietary Information 11

Netherlands – Co-firing Policy: SDE+ (guaranteed minimum price of electricity) - Sustainability criteria had to be established (certification requirement ,

limitations of biomass coming from natural forest to plantation conversion) - Smaller holdings exempt for the short term < 1000 hectares

- 2 companies applied in 2015 (RWE, Engie) – unsuccessful (budget) - 2016 budget >2x 2015

Major Players: RWE, E.ON, Engie (GDF Suez)

Sources: US, Canada, Portugal

Market Size: insignificant

Market Potential: ~4 million mt


Why the US South?


15

20

25

30

35

40

45

50

55

2005

:120

05:2

2005

:320

05:4

2006

:120

06:2

2006

:320

06:4

2007

:120

07:2

2007

:320

07:4

2008

:120

08:2

2008

:320

08:4

2009

:120

09:2

2009

:320

09:4

2010

:120

10:2

2010

:320

10:4

2011

:120

11:2

2011

:320

11:4

2012

:120

12:2

2012

:320

12:4

2013

:120

13:2

2013

:320

13:4

2014

:120

14:2

2014

:320

14:4

2015

:120

15:2

2015

:3

North American Delivered Pulpwood Prices - 2005-Present USD/GST - Delivered

Northeast Softwood Lake States SoftwoodBritish Columbia Softwood Eastern Canada SoftwoodNortheast Hardwood Lake States HardwoodEastern Canada Hardwood South HardwoodSouth Softwood

Source: RISI North American Woodfiber and Biomass Markets

Southern Wood Fiber Supply and Demand - 63% of US timber harvest occurs in the South - Nearly 3/4 of all US low grade (pulpwood, residuals and biomass) woodfiber demand is in the South


0

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40

60

80

100

120

140

160Wood Fiber Supply

Roundwood Residual ChipsFine Mill Residues HogfuelForest Biomass Urban Wood Waste

0

20

40

60

80

100

120

140

160Wood Fiber Demand

Pulp and Paper OSBOther Panels Electric GenerationWood Pellets Wood Biofuels

Historical US Softwood Growing Stock Removals by End Use Billion Cubic Feet


0.0

2.0

4.0

6.0

8.0

10.0

12.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Other Bioenergy OSB LVL Plywood Pulp Lumber

Timber Supply Outlook

• Really boring chart! – Stable inventory outlook

• Some transition from managed hardwood to softwood

• Does not include public / reserved lands – Where growing stock

(carbon) is increasing


0

20

40

60

80

100

120

140

160

180

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

US South Private Operable Growing Stock Inventory

Billion Cubic Feet

HardwoodSoftwood

2015 US South Timber Harvest Value and Volume

- Even though sawtimber represent only 28% of total Southern timber harvest volume, it represents 54% of the value. - Conversely, while pulpwood and biomass account for 51% of total timber harvest volume, they represent only 22% of the total value. - Sawlog harvest is still the major driver of forest management in the US South


28%

20%

51%

1%

Harvest Volume

Sawtimber Chip N SawPulpwood/Biomass Other

54%

24%

22%

0%

Harvest Value

Sawtimber Chip N SawPulpwood/Biomass Other

Source: RISI Timber Transaction Price Service

Fiber Paying Capability

- A measure of the relative competitiveness of various wood using industries - Essentially the margin left to pay for wood at breakeven - Bioenergy industries require low cost stable feedstocks


Ability to Pay For

Fiber

Chemicals

Energy

Labor

Materials

Maintenance

Mill OH

Salary

Interest, Depreciatio

n, etc.

Delivery, Commissio

ns, etc.

Sales Price

- Selling Costs

- Financial Costs

- Fixed Costs

- Variable Costs

= FPC 0

25

50

75

100

125

150

Fiber Paying Capability US South Woodfiber Users

$/gst

Market PulpOSBExport PelletsElectricity Generation

Key Takeaways

• Domestic Biomass Power Sector – Opportunistic (needs low cost feedstocks) – Relatively moderate growth – To this point, no significant federal support + low fossil fuel prices

• Rapid emergence of industrial wood pellet export sector – Growth slowing, but a major player in US South fiber markets

• Forest volume/carbon stocks – Stable outlook despite increased consumption – Increased demand > higher price > more supply

• Bioenergy industries bottom of the barrel economically – Not driving forest management practices – Timber management based on value maximization from sawlog

production


See the forest through the trees!


Contact Information

Seth Walker Bioenergy Economist, RISI Bedford, MA [email protected] +1.781.734.8992 Twitter @BioEconomist

21 © Copyright 2015 RISI, Inc. | Proprietary Information

Documents

Forest Bioenergy in the United States: Current Status and ... · presentation on forest bioenergy for EPA's Stakeholder Workshop: Fostering Constructive Dialogue on the Role of Biomass