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EU BIOMASS SUPPLY: POTENTIAL TO REPLACE GAS?WBA Workshop:“Reducing dependence on Russian natural gas with bioenergy”
Silvio Mergner, Pöyry Management Consulting12 May 2014
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AGENDA
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 2
1. Pöyry intro2. The situation: EU biomass market complexity3. Energy and natural gas market dynamics4. EU biomass supply estimation and mobilisation barriers5. Conclusions
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PÖYRY’S BUSINESS SECTORS
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 33
Energy
Forest Industry
Chemicals & Biorefining
Mining & Metals
Transportation
Water
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SERVICES FOR CLIENT’S ENTIRE BUSINESS LIFECYCLE
12 MAY 20144
OperationalImprovement
SiteSupervision
EPCM
EPS/EPC
TechnicalConsulting
Detailed Engineering
BasicEngineering
Project / ConstructionManagement
OutsourcedOperations
ConceptualDesign
O&MManagement
EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS
ManagementConsulting
OperationalExcellence
StrategicAdvisory
EngineeringServices
OperationsSupport
ProjectImplementation
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BIOMASS SUPPLY IN THE EU: A COMPLEX ISSUE (1/2)
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 5
Many feedstocks, processes and ‚bioproducts‘
Value added
Feed
stoc
k
Agro
Wood
Waste
Bio-CHP Torrefied pellets Biodiesel Bio-basedintermediates
Bio-basedspecialty chemicals
Pellets Ethanol Biobased platformchemicals
Biobasedmaterials
Advanced biobasedmaterials from
carbon fibres onwards
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BIOMASS SUPPLY IN THE EU: A COMPLEX ISSUE (2/2)
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 6
Large numbers of stakeholders and development goals affect EU biomass markets
Transport
Consumer
Industry
Resource-efficiency
EnvironmentBiobasedproducts
Innovation
Resource ownersStable energysupply
….and many more
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 7
EUROPE’S ENERGY POLICY CHALLENGES
The EU energy policy challenge is to take into account the competitiveness,security of energy supply and emission reductions all at the same time
1x2
x3
Securityof supply
Emissionsreduction
Cost foreconomy
Price of gasproportional toUS shale gasprice (2014)
Gas 65% Oil 85%
Imports
EU 2020 & 2030 Climateand Energy Policy
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 8
Net imports of natural gas Import dependency
EU NATURAL GAS IMPORTS: CORE COUNTRIES TO FOCUS ON
Imports of natural gas in the EU are dominated by five countries: Italy, Germany,France, the UK, and Spain; import dependency in general is large
-69-66
44
8690
101
103
NL
ATFRANCE
SKLV
CZ
IESI
LUEESEEL
FIBELT
SPAINPT
DKHRRO
UNITED KINGDOMHUPL
BGGERMANY
ITALY
Rest of EU58
Spain 34
United Kingdom36
France44
Germany67
Italy68
Top five importers account for >80%:net import of 249 Mtoe in 2011
(Mtoe) (%)
source: Eurostat
Net importNet export
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GAS MARKET DYNAMICS: IMPACT OF SHALE GAS
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 9
Shale gas production could have a significant impact on the European economyand energy system; Without EU28 additional substitution or reductions in gasdemand, import dependency may increase further
No shale gas in EU Some shale Shale boom
Source: Pöyry
2020 2025 2030
LNG NorwayNorth Africa Russia ConventionalUnconventional
2025 20302020 2020 20302025
(%)(%) (%)100
0
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 10
Scenario-based assumptionsUpper limit
Production & logistics capacityOwnership and sector behaviourReliable statistics & transparency
Environmental policy & legal frameworkCertification standards (e.g. FSC)
Cost of productionCost of supplyEconomics of consumption
Technicalpotential
Environmentalconstraints
Commercialconstraints
Practicalconstraints
REALISTIC BIOMASS SUPPLY PROJECTION: HOW?
Realistic potential must consider relevant constraintsDegree of difficulty
in estimating?
LOW
LOW - MEDIUM
HIGH
HIGH
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 11
OUTLOOK: EU BIOMASS SUPPLY AND DEMAND 2020 / 2030
Views on the EU biomass supply potential going forward vary widely; how much ofthe potential can be supplied sustainably from domestic sources, at what price?
Maxsupply
Minsupply
250211
118
0
100
200
300
400
(Mtoe)
110
2030Demand
2020SupplyNREAP(2020)
140
2010
Combined biomassconsumption in EU 250 Mtoeby 2030 (WBA position paper)
Sector studies address EUbiomass supply potentials:90 to 340 Mtoe
Questions
How big is the gap / surplusreally?
Which technology mix is best topromote within a 2030 policytarget?
EU Biomass Supply and Demand
Combined demand (primary energy)*Forestry
AgricultureWaste
* WBA position paper (5/2014): The future contribution ofBioenergy to the European Energy System
Lines represent supply potentials (range)identified in select studies (EEA, IE, BTG)
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 12
EU28 forest growing stock EU28 removals vs. increment
ADDITIONAL BIOMASS SUPPLY IN THE EU: IS THIS DOABLE?
Sustainable supply potential in European forests is growing; for a realistic pictureon biomass availability three main questions need to be answered1) Are statistics reliable?2) Can the surplus be mobilised directly?3) How will industrial processing capacity develop, impacting cascaded use?
source: Eurostat; calculations by Pöyry
4.4053.957
3.555
+1,1%
2000 20101990
158155144
999581
1990 2000
+0,5%
2010
increment removal
Mtoe equivalent Mtoe equivalent
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 13
FORESTS AGRICULTURE WASTE IMPORTS
22 Mtoe 19 Mtoe(by-products)40 Mtoe(energy crops)
10 Mtoe 22 Mtoe (pellets)12 Mtoe(liquid fuels)
WBA POSITION PAPER: EU BIOMASS SUPPLY INCREASE
The current policy, legal and market situation in the EU is not promoting anincreased use of biomass as formulated by WBA
WB
Apo
sitio
nB
arrie
rs
Significant share of biomass supply increase at risk tomaterialise under current policy, legal and market conditionsP
öyry
FragmentedownershipBiomass notdriving forestmanagement!
Energy cropsoften unattractivefor farmersFragmentedsupply
Only few really! Lower demandfrom heat / powerSupply capacitynot establishedFunding limited
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THE COST OF BIOMASS
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 14
A realistic view on cost of biomass supply chains is key to mobilise1. Untapped domestic supply potential2. Import potential
Biomass atthe source(cellulosic)
Refining(Chips/Bales/Pellets)
Transport(road, rail,ship)
STEP DRIVERS COST RANGE(EUR/odt)
• Distance• Bulk density• Transport mode
• Refining process• Economies of scale• Energy & labour cost
• Crop mgmt & yields• Harvesting efficiency• Market forces
10 - 25
10 - 75
(0) - 100
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BIOMASS CASCADE AND MARKET COMPLEXITY
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 15
Any influence (e.g. subsidies) in the market will affect other streams and shiftpowers: Opposition by key consumers may be strong!
SUST
AIN
ABLE
ANN
UAL
SUPP
LY(F
OR
ESTR
Y)
Sawnwood
Sawlogs & Veneerlogs
SawmillResidues
Pulplogs & otherroundwood
Harvesting Residues
“Un-mobilised supply”
suitableassortments
Otherassortments
Pulp & Paper
Panels
Pellets
Energy
HouseholdHeating
“Un-mobilised”
Waste Wood
SUPPLY UTILISATION “CASCADE” END-USE
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EXAMPLE: THEORETICAL BIOMASS IMPORT POTENTIAL
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 16
Even tight emissions savings targets leave room for a substantial (theoretical!)biomass import potential; how will the regional competitive landscape develop?
Biomass supplypotential within
specified emissions
2.000
0
1.000
1.500
500
(Mtoe)
Withinthreshold
refinedraw
Abovethreshold
Note: outlook 2030-2050 for all biomass sources; emissions savings threshold set to >60% against current fossil fuel comparator (savings200kg CO2eq/MWh); source and calculations: Pöyry
EU
Maximum distances to achieve CO2 emissions savings limitOrange: ‚Raw‘ biomassBlue: ‚Refined‘ biomass
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EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 17
EU biomass: not easily measurable / potential to increase /requires significant imports
Complex matrix of stakeholders
Financial incentives & stable framework: right balance challenging
Replacement of gas: allocation in highest value segment needed
Realising the potential: Mobilisation of untapped biomass
EU commitment to raise domestic biomass supply pre-requisiteSUPPLY CONSTRAINT
Trust in demand development necessary to build import chainsDEMAND CONSTRAINT
Biomass supply
Conclusions
Challenges
SUMMARY AND CONCLUSIONS
Whatever the potential….how do you get it moving?
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HUGE ‚LESSONS LEARNT‘ FROM THE PAST!
12 MAY 2014EU BIOMASS SUPPLY: REALISTIC POTENTIAL TO REPLACE NATURAL GAS 18
sources: www.waldwissen.net; Pöyry
HISTORY TODAY
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THANK YOU !
Contact details:Name: Silvio MergnerMail: [email protected]: +49 171 552 3315