Energy Cluster as development tool for the Baltic Sea Region

Karlshamn

The EU has renewed its interest in the Baltic Sea region and in December of 2007 the European Council asked the Commission to present a Baltic Sea Strategy. The strategy, which is to be presented in June of 2009, will be one of Sweden’s main goals during its presidency of the European Council. Sweden believes that the strategy should be a market oriented guide for EU member states in the Baltic Sea region to stake out common priorities regarding investments in infrastructure. The goal is to expedite shared implementations of EU resolutions and harmonise domestic regulations in order to create larger and better regional markets.

Sweden’s proposed Baltic Sea Strategy for the Commission’s final report due June 2009 covers 4 priorities:

1 Environmental challenges for the Baltic Sea region

2 Economic growth and competitiveness

3 Efficient use of resources

4 Prevention of organized crime

The 17th Baltic Sea Parliamentary Conference (BSPC) took place in Visby August 31st – September 2nd of 2008. The main theme for the conference was “Energy Efficiency and Climate Change”. Participating in the conference, in addition to selected representatives from the Baltic Sea region countries, were also representatives from the Council of the Baltic Sea States (CBSS) – the political forum for regional intergovernmental cooperation. Topics covered at the meeting were Baltic Sea region cooperation, climate change and energy efficiency, energy supply and security, eutrophication, maritime policy and the Baltic Sea Action Plan, and labour market and social affairs relevant to the region.

Regarding climate change and energy related issues the national governments, CBSS and the EU were encouraged to coordinate and work together in developing strategies for coming discussions leading up to the UN Climate Change Conference in Copenhagen in the fall of 2009 in order to gain support from the Baltic Sea region for the ambitious CO2 emissions reductions. Other recommendations brought forth in the resolution are increased cooperation to reduce vulnerability and improve adaptability as consequences of climate change impact, strengthen the capacity to support energy cooperation, support the construction and make greater use of land based and offshore wind power plants, support transportation projects for energy and energy providers while minimising environmental risks for the Baltic Sea, and advance effective measures for developing renewable energy, energy efficiency and energy savings.

Sweden believes that enhanced cooperation among the Baltic Sea nations and the EU can increase the energy consumption efficiency. Priorities and resources need to be matched more efficiently and a macro-regional approach is required in the Baltic Sea region to research this problem.

The strategy for the Baltic Sea region agrees with the EU strategy in regards to three prioritised areas of interest:

1. Reduction of greenhouse gas emissions2. Increased supply of renewable energy sources3. More efficient energy consumption

This increased cooperation requires incentives and funding, and in 2007 the Nordic Investment Bank (NIB) decided to increase its contribution towards making the Baltic Sea region more competitive.The debate at the BAFF (Bioalcohol Fuel Foundation) seminar in Gothenburg showed the necessity to differentiate between good and bad biofuels. The EU is now developing sustainability criteria to make this distinction. These criteria will define how much a biofuel must reduce carbon dioxide emissions compared to traditional fuels in order to be called a biofuel. This will probably mean that a biofuel must reduce carbon dioxide emissions by at least 50% over its lifecycle.

The pursuit of alternative or renewable fuels will bring many questions to the forefront. The political task is to set a price on emissions in a neutral fashion in order to benefit the most environmentally sound methods. For Sweden this means to remain open to as many solutions as

possible. Biofuel will be developed further and will contribute to sustainable solutions. But, as the Swedish government’s council on globalisation has pointed out, traditional sources of electricity will continue to play a large role.

The Baltic Sea region Interreg programme points to one strength in particular in that the region has a high capacity for knowledge and development of renewable energy. However, the general knowledge regarding environmental issues has an east-west dimension. In order to improve the situation a holistic approach across various sectors is required.

The strategy of VASAB (Vision and Strategies around the Baltic Sea) for 2010 highlights several environmental goals that build on a transportation system that simplifies environmentally friendly mobility and integrates the region in an effective manner both internally and with the rest of the world. In addition there is a focus on energy production that relies more on renewable energy and environmentally friendly sources of energy production.

During the spring a draft for a regional energy strategy was presented to facilitate energy conversion. The government has been tasked by the county administrative boards (Länsstyrelsen) in Stockholm, Norrbotten, Skåne and Kalmar to in cooperation with the Swedish Energy Agency arrive at a regional energy strategy. The investigation concludes that it is important to secure efficient modes of transport for energy supplies and to plan especially for suitable storage to accommodate the more voluminous biofuels.

For transportation of biofuels from other continents, or even just across the Baltic Sea, maritime shipping is especially suitable. However, efficient biofuel cogeneration plants (CHP) require that the fuel is used and stored in connection to the facilities in closed systems. This is due to among other factors fire safety reasons. But the possibility to temporarily store biofuels near

Efficiency

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Low carbon power

Renewables Natural Gas Base Load

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ports and harbours can be attractive for large ocean faring vessels that can access the Baltic Sea in order to transfer the goods to smaller ships or rail for further transport.

In Sweden’s case hydroelectric and nuclear power cover most of the energy needs. Natural gas from Denmark and Germany make up only 2% of total energy use and there are ambitious plans to further the use of renewable energy and decrease the dependency on fossil fuels. 25% of Sweden’s total energy use is supplied by renewable biofuels. However, it should be kept in mind that almost 40% of our imported oil currently comes from Russia.

Karlshamn’s opportunity to contribute significantly to the Baltic Sea region’s future energy supply.Karlshamn has since long been identified as a suitable location domestically for energy prod-uction. The biggest reasons for this are:

• Access to relatively easily accessible land.

• Access to a large deep water port.

• Access to the main Swedish power grid with possibilities for expansion.

Other factors that make Karlshamn unique from an energy perspective are:

• Large storage capacity for petroleum and chemical products.

• Large reserve and backup power plant.

• Large industrial production of vegetable oils.

• Large operation handling biomass connected to the forestry industry.

• Submarine power cable to Poland.

• High competency in the energy and processing fields.

ENERGY COMBINATION stage 1

Industrial wheat: 345 000 tonnes

Straw: 80 000 tonnes Ethanol plant

Power plant

Nordisk Etanol-produktion AB

Bioethanol 130 000 m3

Solid bio residue

Biogas for heat/elec-tricity 0 – 600 GWh

Refined biogas 0 – 600 GWh

Refinementsteam electricity Bio residue 100 GWh

Karlshamn can

- Comprise a defined cluster in the Baltic Sea region where possibilities for developing new alternative energy solutions for the Baltic Sea region should be pursued.

- Become a toolbox for enhancing the efficiency of traditional energy solutions and complement them with a focus on renewable energy.

- Comprise an essential hub for the region in handling biomass and other fuels.

Ethanol and biogas productionThere is a consortium of Swedish and Norwegian interested parties planning to build a facility for large scale ethanol and biogas production in direct connection to the port area and Karlshamn Kraft AB’s (70% E.ON, 30% Fortum) existing power plant. The permit process is underway and there is an option agreement regarding this establishment.The engineering phase which also covers the quay belonging to the facility has been partially completedWhen completed the facility will produce 260 000 m3 of ethanol and 1 200 GWh of biogas per year according to the permit application. Construction will take place in two stages. Grain and straw will be the raw materials. These will primarily be shipped from the Baltic States, Poland, the Ukraine, Belarus and Kazakhstan. Distribution to the facility will be via shipping from ports on the eastern shores of the Baltic Sea.The facility will produce second generation biogas from its inception. Second generation bioethanol products will be developed in parallel. Finished ethanol will mainly be brought to market via maritime distribution to be mixed with gasoline and to a certain extent to produce E85.Biogas can be distributed in a number of ways: trucks, on rail, on ships and by pipeline. In the project the possibility to connect the facility to the existing gas distribution network in Skåne is considered. The processing will create vast amounts of fertilizer for agricultural use. This fertilizer requires considerably less energy to produce than chemical fertilizers. It can be distributed on trucks, on rail and by boat. Remaining bio residues will be burned as fuel in the power plant that will be built in connection to the facility.

Biogas 600 GWh

Biodiesel ProductionDirectly connected to the oil depot area of the harbour lies Lantmännen Ecobränsle’s facility for the production of biodiesel. According to the permits 110 000 m3 of biodiesel may be produced per year. Biodiesel is used as an additive for B5 as a renewable component of diesel and as the pure biofuel B100.The raw material used for biodiesel production at this plant is rapeseed oil which is delivered via pipeline from the AAK’s (AarhusKarlshamn) facility. Large amounts of methanol are handled in the oil depot and some if this is used as an additive when producing biodiesel.Market ready biodiesel (rapeseed methyl ester – RME) is pumped via pipeline to storage tanks at the oil depot and is then transferred to ships or trucks. Smaller amounts can also be stored in direct connection to the facility and can be transferred to tanker trucks or rail. Renewable energy for the production facility is delivered by AAK mainly in the form of steam.Access to the oil depot, route 29, E22 and rail, as well as access to rapeseed oil, methanol and renewable energy for processing are all important to the biodiesel production in Karlshamn.

Rapeseed oil productionLantmännen Energi and AarhusKarlshamn AB have signed a letter of intent to form a jointly owned company to invest in increasing the capacity for rapeseed oil production both for food and for biodiesel production in Karlshamn. The planned investment of around 400 million SEK will bring a significant increase in capacity compared to what is possible in Karlshamn today and the facility will become the largest in the Nordic countries by a wide margin. By utilising the most modern technology available it will be among the most efficient in the world and will be housed in the AAK industrial area.

Increased cogeneration productionIn order to supply existing and planned industries with steam E.ON is planning to build a cogeneration plant (combined heat and power – CHP) directly connected to the Karlshamn power plant. Using biofuel combined with bio residue from the planned ethanol and biogas facility; steam, heat and electricity will be generated. Steam and heat can be distributed to the industrial and residential district heating networks while the electricity is delivered directly to the electrical power grid.Synergies with the Karlshamn power plant’s existing infrastructure as well as switchgears, laboratories, control rooms, machine shops, personnel, a site dedicated for energy production, etc. make this location especially suitable.

Point of connection for offshore wind powerKarlshamn is connected directly to the main Swedish electricity grid through the Karlshamn power plant. Therefore, Karlshamn is a suitable point of connection for large scale offshore wind power. Within the southeastern part of the Baltic Sea area belonging to Sweden there are several possible sites of interest for wind power development. The combination of an existing maritime power cable to Poland and possible future cables to Latvia/Lithuania makes this part of the Baltic Sea region particularly attractive.Current Swedish goals aim to produce 10 TWh from wind power by 2015. The county administrative board of Blekinge aims for offshore wind power to produce 0,2 TWh by 2020.

Submarine power cable between Latvia/

Lithuania and SwedenBaltic Ring (interconnected electricity supply around the Baltic Sea) was presented in 1998 as a part of the Trans-European Network – TEN. The organisation BALTREL was created with the purpose to successfully steer the project. One of the organisation’s initial meetings took place in Karlshamn in September 1998.From Karlshamn the Nordic grid is connected to the Polish grid via a submarine cable that was installed around the year 2000.Lithuania promised that in connection with its entry to the EU to terminate its use of nuclear power by the year 2009. In all likelihood this will be postponed. In conjunction with terminating nuclear power both Lithuania and Latvia run the risk of having a drastic lack of energy supply. To create an additional submarine power cable connection between Sweden and the Nordic grid and Latvia/Lithuania is seen as essential.Karlshamn is therefore a possible junction for connecting to the main Swedish electricity grid.

Logistics hub for handling biomassThe use of wood as a raw material in the production of energy is expected to increase. Even if it is available in a certain radius around power plants built in areas with forestry industry in all likelihood there will be a need to import wood. There will also be a need for ports where wood pellets and wood chips can be unloaded, primarily from larger ships, to temporary storage and further distribution via rail or smaller cargo vessels. Larger cities in particular lack access to biomass and also often lack the physical space necessary for large scale biomass handling.An important factor that affects the future supply of wood as fuel is how much is imported. Imports primarily are supplied as:

• Pellets from North America, the Baltic States and Finland• Wood chips and whole trees from the Baltic States• Sorted wood or demolition wood from Germany and the Netherlands

Exploitation areas in the vicinity of the Port of Karlshamn as well as access to “cheap” energy also create the right environment for biofuel refinement. For example the district heating network’s surplus capacity can be used for drying biofuels during a large part of the year when the demand for heat is lower. The export of biofuels, wood chips as well as more refined forms, is believed to increase in demand when the time comes to attain the EU environmental and climate goals.

AAKLantmännen Ecobränsle

biofuelRMERapeseed

Karlshamn – Sweden’s Vegetable oil centerLantmännen Ecobränsle

Methanol

Rapeseed oil

GlycerolRapeseed protein

Developing air pollution control E.ON and Fortum’s Karlshamn power plant has a long tradition of development work on various forms of air pollution control. The facility today is the largest peak load and reserve power plant in Scandinavia, which means it has a low utilisation. Anyway, it has still evolved into one of the cleanest power plants of its kind in the world, with catalytic converters for nitrogen oxide removal as well as sulfur scrubbers. The power plant faces an exciting future with increased investments, for example towards developing carbon dioxide separation.

Production of solar cellsIn Vilshult circa 40 km from Karlshamn there is a facility run by PV Enterprise that produces solar cell panels and employing about 30 people. PV Enterprise is a Swedish company that specialises in the development and production of solar cell panels. By utilising innovative, high quality products and a highly automated production PV Enterprise is able to successfully compete in the international rapidly growing market for solar energy.

Regional expansion of the district heating networkDeliveries of excess heat from the various energy combinations in the area will lay the foundation for a continued expansion of the district heating network. Currently considerations to connect Olofström to the existing network in Karlshamn are underway.

Intelligent logisticsAt Blekinge Institute of Technology in Karlshamn there is ongoing research regarding intelligent logistics.The purpose is to use optimisation models combined with mobile communications in order to reduce the mileage of freight transfers. The creation of a modern road tariff system for heavy goods vehicles is a key part of this area. Cooperation with Lithuania in the form of various projects has taken place and now the next focus is on the ITS World Congress 2009. Blekinge and Karlshamn have worked towards developing green transport corridors in several projects; for example in the East West Transport Corridor (EWTC).

The geophysical attributes for developing a strong energy cluster are very favourable west of Karlshamn.

Biodiesel productionLantmännen Ecobränsle’s production capacity is 45 000 m3 of biodiesel produced from rapeseed oil. It is distributed on tanker ships and tanker trucks.

Electric power production1 000 MWKarlshamn power plant: the world’s cleanest oil fired power plant.

Electricity transmissionPart of the Swedish and Nordic main power grids for electricity distribution. Reserves for further connections. 600 MW submarine power cable to Poland.

Storage CapacityCapacity to store in excess of 1 million m3 of petroleum products. Partially used for distribution, partially as strategic or intermediate or storage depot for oil for different countries. Storage capacity for propane of 150 000 m3. This gets distributed to Sweden and to Poland.

Vegetable oil productionAAK AB annually produces circa 110 000 tonnes of rapeseed oil and 160 000 tonnes of rapeseed meal, using circa 270 000 tonnes of rapeseed in the process. The rapeseed oil is used for food and technical use as well as a raw material for biodiesel. The rapeseed meal is sold as a protein feed for the animal feed industry. In addition to rapeseed oil another 200 000 tonnes of other vegetable based oils such as palm and soybean are refined for the food industry.Also, within the Technical Products & Feed business another 85 000 tonnes of fatty acids, 55 000 tonnes of feed fat, and circa 5 000 tonnes of vegetable based lubricants are produced.

Waste heat recovery Fossil fuel free waste heat recovery is today delivered to Karlshamn Energi AB. Deliveries from Södra Cell, Mörrums Bruk 50 MW.Fossil fuel free reserve power from AAK 20 MW.A well developed district heating network exists in the area.

Importation of biomassApproximately 750 000 m3 of wood and wood chips pass through the port of Karlshamn each year. Södra Cell, Mörrums Bruk currently brings more than 1 million m3 of wood to its pulp mill every year.

Kontakt:

Karlshamns Kommun: Anders Wiberg tel: +46 454-30 50 29 anders.wiberg@karlshamn.seE.ON: Henrik Svensson tel: +46 70 588 90 35 henrik.svensson@eon.se Nordisk Etanolproduktion AB: Mikael Runesson tel: +46 454 307155 mikael.runeson@nordisketanol.se Lantmännen Ecobränsle: Per Erlandsson tel: +46 454-827 15 per.erlandsson@lantmannen.comKarlshamn Energi AB: Hans- Inge Bengtsson tel: +46 454-818 00 hans-inge.bengtsson@karlshamnenergi.seKarlshamns Hamn AB: Ulf Sandevärn tel: +46 454-030 50 02 ulf.sandevarn@karlshamnshamn.seAAK AB: Magnus Jörsmo tel: +46 454 82 000 magnus.jorsmo@aak.com

Karlshamn as an energy site today

Main electricity power grid