global wood pellet markets - bioeconomy...

GlobalWoodPelletMarkets:ForecastsforDemand

andWhatabout“black”pellets?

PresentedbyWilliamStrauss,PhD

President,FutureMetricsDirector,MaineEnergySystems

ChiefEconomist,BiomassThermalEnergyCouncilJune16,2016

FutureMetrics

ConsultantstotheWorld’sLeadingCompaniesintheWoodPelletSector

“IntelligentAnalysisandThoughtLeadershipforthePelletSector”

8AirportRoad Bethel,ME04217,USAwww.FutureMetrics.com

WilliamStrauss

40yearsofmakingthermalpowerfromMSWandwood.

Recipientofthe2012InternaConalExcellenceinBioenergyAward.

JohnSwaan

The“grandfatherofwoodpellets”.Recipientofthe2014InternaConal

FoundersAwardforpioneeringinthewoodpelletsector.

SeniorLeadership

FutureMetrics-GloballyRespectedConsultantsintheWoodPelletSector

LesOQen

TheleaderinthedevelopmentoftheUSbulkheaCngpelletmarkets.

FounderofMaineEnergySystems:NorthAmericaslargestpelletboilerand

bulkfuelsupplycompany.

WhyWoodPelletsareanEasySubsRtuteforCoalinPulverizedCoalPowerPlants

•  Woodpelletsareupgradedsolidfuelmadefrombiomass.•  Theyaregrindable.•  Theyaredry(~6%moisturecontent).•  Theyhandleeasily.•  Theyhaveanenergydensityof~18Gigajoules/tonne.Atlowco-firingraRos(lessthan~6%whitewoodpellets)nomodificaRonsarerequired.InsomeapplicaRons,advancedwoodpelletscanbeusedat100%withalmostnomodificaRons.Moreonthislater…

SomeconversaRonsaboutdropincoalreplacementgravitatetoward“bio-coal”.

Bio-coalisessenRallybiomassthathasbeenthroughaprocessthatremovesmuchofthevolaRleorganiccompounds(VOC).Theprocessresultsindarker(someRmes

black)materialthathasahigherenergydensitythanwoodpellets.

Therearetwocommonconversiontechnologies:

TorrefacConSteamExplosion(thermallytreated)

MoreontorrefacEonandsteamexplosionlater…

WhitePellets Brown(steamexploded)Pellets Black(torrefied)Pellets

WhitewoodpelletsarethedefaultsubsRtuRonforcoalinPCpowerplants.

Steamexplodedpellets,whicharewaterproof,arebreakingintothemarket.

The“costperunitofenergy”or$/GJisthekeymetric.

WhataboutAgResidues?

FutureMetricsspecializesinwoodpelletsbecausewethinktheyarethebestalternaRverenewablelowcarbonsolidfuelforpulverizedcoalpowerplants.

Issueswithotherfeedstocks:•  Highinchlorine–corrosionissues

•  Highinmineralsanddirt–erosionissues

•  Lowashfusiontemperature–slaggingandfouling

•  Lowbulkdensity–costlytotransportintermsof$/GJ–largevolumeneededforfuelstorage

•  Grindablity

•  Highmoisturecontentifnotupgradedtopelletsorpre-dried

Source:“Ash-relatedProblemsduringBiomassCombusRonandPossibiliResforaSustainableAshURlizaRon”,FriedrichBiedermannandIngwaldObernberger,AustrianBioenergyCentreGmbH,Sept.,2006

CombinedHeaRngandIndustrialMarkets

IndustrialMarket-TradiRonalBestCase!

13003400 4200 5000

7000 75009000 10000 10000 10000 10000 10000 10000 10000

100100 100

100

5001500

2000

30003800

48005500

6800 8000 9000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

IndustrialWoodPelletDemandForecastfortheEurope,theUK,Korea,Japan,Canada,andUS(thousandsofmetrictonnes)

UK Netherlands Belgium Denmark Sweden Other Korea Japan

source:analysisbyFutureMetrics

WorstCase!(compareto32millionMTonpreviousslide)

PreviousslidesdidNOTincludepotenRalindustrialwoodpelletmarketsintheUSandCanada!

PotenRal(andUSandJapancouldbelarger!)

13003400 4200 5000

7000 7500 9000 10000 10000 10000 10000 10000 10000 10000

100100 100

100500 1500

2000

3000 38004800 5500 6800 8000 9000

20003500

68009000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

IndustrialWoodPelletDemandForecastfortheEurope,theUK,Korea,Japan,Canada,andUS(thousandsofmetrictonnes)

UK Netherlands Belgium Denmark Sweden Other Korea Japan Canada US

source:analysisbyFutureMetrics

Canada–AlbertaandOntarioUS–CleanPowerPlan

PotenRalforUSIndustrialPelletDemand

DashboardisfreetouseattheFutureMetricswebsite.

ProducRonCapacityisAheadofMarketDemand

NorthAmericanProducRonCapacity

Jan-16, $151

Jun-16, $124

Jan-16, $214

Jun-16, $158

$120$125$130$135$140$145$150$155$160$165$170$175$180$185$190$195$200$205$210$215$220$225

May-09

Jul-0

9Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-1

0Sep-10

Nov-10

Jan-11

Mar-11

May-11

Jul-1

1Sep-11

Nov-11

Jan-12

Mar-12

May-12

Jul-1

2Sep-12

Nov-12

Jan-13

Mar-13

May-13

Jul-1

3Sep-13

Nov-13

Jan-14

Mar-14

May-14

Jul-1

4Sep-14

Nov-14

Jan-15

Mar-15

May-15

Jul-1

5Sep-15

Nov-15

Jan-16

Mar-16

May-16

IndustrialWoodPelletsSpotPrice- May2009thruearlyJune2016(CIFARA- atEuroexchangerateateachdatapoint)

US$/MT Canadian$/MT

source:Argus BiomassReport,analysisbyFutureMetrics

GapbetweenCanadianandUS

January-16 $63.12June-16 $34.32

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

13,000,000

14,000,000

2012 2013 2014 2015 2016

USandCanadaIndustrialPellets- SupplyandDemand

ProductionCapacity(at80%ofNameplate)

Exports

ExcessSupply-RightAxis

source: Exports2012-2014datafromUNFoodandAgDatabase,November,2015;2015-16forecastbyFutureMetrics;CapacitybasedonBBIdatabaseinformationfrom2013topresent;AnalysisbyFutureMetrics

TheBadNews…

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

10,000,000

11,000,000

12,000,000

13,000,000

14,000,000

15,000,000

16,000,000

2012 2013 2014 2015 2016 2017 2018 2019 2020

USandCanadaIndustrialPellets- SupplyandDemand- toEUandUKforecastassumessomesupplytoLynemouth,MGT,Langerlo,andDutchmarkets

ProductionCapacity(at80%ofNameplate)

Exports

ExcessSupply-RightAxis

source: Exports2012-2014datafromUNFoodandAgDatabase,November,2015;2015-16forecastbyFutureMetrics;CapacitybasedonBBIdatabaseinformationfrom2013topresent;AnalysisandforecastbyFutureMetrics

FORECAST

TheGoodNews…

Whatarethekeychangesthatarerequiredtomodifyapulverizedcoalpowerplanttobeabletoco-fireindustrialwoodpellets?

•  AtlowblendraRos(lessthan6%pelletstocoal),nomodificaRonsarerequired.

•  AthigherblendraRossomemodificaRonsarerequired:•  Dedicateddrystorageforthepelletfuel(silosordomes)•  Fuelprocessingandtransporttotheburners•  Burners•  Ashhandling

DashboardisfreetouseattheFutureMetricswebsite.

TherearemanylargepowerstaRonsthathavebeenmodifiedtoco-fire(blendingpelletsandcoal)orfullfire(100%pelletfuel).Thereareseveralworldclassfirmsthathaveextensiveexperienceinthedesign,engineering,andimplementaRonofpowerplantmodificaRons.Ramboll-EPCformodificaRonsandconversionswithalonglistofsuccessfulco-firingandfullfiringprojectswww.Ramboll.comDoosanBabcock–Fuelprocessing,handling,andburnersforco-firingandfullfiringwww.DoosanBabcock.comDraxPower–PowerplantoperaRonsatequalorbeQerreliabilitythancoalandnoderaRngwithco-firingandfullfiringwww.drax.com/about-us/our-businesses/drax-power

OPG’sARkokan100%WhitePelletFueledPowerStaRon

OPG’sThunderBaystaRon–Asuperpeakingplantthatrunson100%steamexplodedadvancedwoodpellets

WaterproofArbaflamepelletshavesatinthecoalyardoverwinterwithnodegradaRon.

LYNEMOUTH UK BIOCONVERSION RAMBOLL - OWNERS ENGINEER DOOSAN-BABCOCK - EPC

AlternaRveRtleslide

Drax Power Sta,on – Three 645 MW lines running on wood pellets

Storage domes

Rail unloading

Screening building

Transfer tower

Rail unloading

Screening building

Storage domes

Transfer tower

Boiler and generator

Screening building

-  3 unit conversion -  No impact on

efficiency and no loss of output

- Flexible output

from 200MW to 645MW per unit

Will“black”pelletsimprovetheeconomics?

BothtorrefacRonandsteamexplosionresultinhigherenergydensityandhigherbulkdensitypellets.Inbothprocesses,acomparisonoftheincomingwoodandfinaldensifiedproductprovesthatthelossofmassisgreaterthanthelossofenergy.

ThechangeinbulkandenergydensiResareadvantageoustologisRcs.

Moretonsperunitofvolumeandmoreenergypertonlowersthedeliverycostperunitofenergy.

ButwilltheadvantagesoftheimprovementindensiCesoutweightheincreasedcostsofproducCon?

Thisanalysiswillmeasuretheenergybygigajoules(GJ)permetrictonne.

Thepowerplantsarebuyingenergy.

TheanalysiswillassumethatthebuyeriswillingtopaythesamepriceperGJforanyofthethreetypesofpellets.

Moreontheeconomicadvantageofwaterproofnesslater.

GJ/Tonne kg/m3 GJ/m3 TonnesonShip GJOnboardShipping$/Tonne

ShippingPriceperGJ

White 17.5 650 11.38 39,000 682,500 $17.00 0.971$Torrefied 22.0 650 14.30 39,000 858,000 $17.00 0.773$SteamEx. 19.5 750 14.63 45,000 877,500 $14.73 0.756$

Assumingacostof$17/tonnefora45,000tonneshiploadofsteamexplodedpellets,theesRmatedcostspertonneforshippingpelletsareshownbelow.

Aswouldbeexpected,thetotalvalueofadeliveredshiploadofhigherbulkandenergydensityfuelishigherthanforwhitepellets.

Netvalueofpelletsatforeignport

Marginoverwhitepellets

White $5,187,000 $0Torrefied $6,691,286 $1,504,286SteamExploded $6,820,821 $1,633,821

Theassumedrevenueis$160/tonneFOB.

However,producingtorrefiedandsteamexplodedpelletsrequireshighercosts.

Theanalysisassumesthatpelletfeedstockis$36/greentonne,andfuelfordryingandforsteamgeneraRonforthesteamexplodedprocess,ifneeded,islowergradehogfuelatacostof$20/tonne.

MoreWoodNeeded

Pertonneofpellets-feedstockandfuelat50%andpelletsat5%moisturecontent

TorrefiedSteam

ExplodedWhite

Dryerfuelconsumption(odt) 0.000 0.000 0.133Steamconsumption(tonnesofSteampertonneofPellets) 0.000 1.400 0.000Additionalwoodforreactorsteam(odt) 0.000 0.211 0.000Woodneededtomaketonneofpellets(odt) 1.420 1.150 0.950Totalwoodtomakeatonneofpellets(odt) 1.420 1.361 1.083GreenWoodat50%moisturecontent/tonneofpellets 2.840 2.722 2.165

WoodCost GJonboardWoodCostperGJ

White $2,874,668 682,500 $4.212Torrefied $3,987,360 858,000 $4.647SteamEx. $4,105,800 877,500 $4.679

Valueofpelletsatforeignportin

$/GJ

TotalCostperGJ

NetPerGJbeforeDryStorage

White $7.600 $6.859 $0.741Torrefied $7.799 $7.207 $0.592SteamEx. $7.809 $8.151 -$0.342- =

Thenetofvalueattheport(notyetdeliveredtothepowerstaRon)minusthetotalcosttogetthepelletstotheportisshown.

UndertheassumpConsusedinthisanalysis,whitepelletshavethebestoutcome.

SteamexplodedpelletshaveanegaCvevalue.

Pertonneofpellets-feedstockandfuelat50%andpelletsat5%moisturecontent

TorrefiedSteam

ExplodedWhite

Dryerfuelconsumption(odt) 0.000 0.000 0.133Steamconsumption(tonnesofSteampertonneofPellets) 0.000 1.400 0.000Additionalwoodforreactorsteam(odt) 0.000 0.000 0.000Woodneededtomaketonneofpellets(odt) 1.420 1.150 0.950Totalwoodtomakeatonneofpellets(odt) 1.420 1.150 1.083GreenWoodat50%moisturecontent/tonneofpellets 2.840 2.300 2.165

IfnowoodisusedforsteamgeneraRon,thensteamexplodedpelletsshowposiRvenet.However,energyfromsomesourceisneededforthethermaltreatmentanddrying.

Valueofpelletsatforeignportin

$/GJ

TotalCostperGJ

NetPerGJbeforeDryStorage

White $7.600 $6.859 $0.741Torrefied $7.799 $7.207 $0.592SteamEx. $7.809 $7.719 $0.091- =

NetPerGJbeforeDryStorage

CostofDryStorage/GJ

NetincludingDry

Storage/GJWaterproof?

White $0.741 0.71$ $0.028 NoTorrefied $0.592 0.57$ $0.025 NoSteamEx. $0.091 -$ $0.091 Yes

NetPerGJbeforeDryStorage

CostofDryStorage/GJ

NetincludingDry

Storage/GJWaterproof?

White $0.741 0.71$ $0.028 NoTorrefied $0.592 0.57$ $0.025 NoSteamEx. -$0.342 -$ -$0.342 Yes

Woodneededforsteamreactor Nowoodneededforsteamreactor

IgnoringthesourceofenergyforthermaltreatmentandmoneRzingtheavoidedcostofdrystorage*,steamexplodedpelletsshowanadvantage.

ArigorousmassandenergybalanceanalysiswillrevealtheactualrelaRvevalues.

*Drystoragecostsarebasedon$300perkWofgeneraRngcapacityamorRzedover10yearsata7%discountrate.

WhitepelletsaresRllthelowestcostfuelperGJ

Fordropincoalreplacementforpulverizedcoalsystems,pelletsofanycolorworkatlowco-firingrates.

Howmuchlowertheenergydensityofpelletsareversuscoaldictates

theco-firingraRoatwhichchangestothefuelfeedsystemsandburnersarerequired.

Can“black”pelletsprovidecheaperfuelandworkbeQer?

ThisanalysissuggeststhatthereissRllworktobedone…

Theinputvaluesusedinthisanalysiswillbedifferentfordifferenttechnologies.

ThankYou!www.FutureMetrics.comWilliamStrauss,PhD

MyhomeinwesternMaineisinthisphoto.AlloftheforestyouseeisSFIcerRfiedandismanagedandusedforRmberharvesRng.