woody biomass for the energy sector in brazil manoel rodrigues neves april, 2012...
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PÖYRY 2April, 2012
1 Woody Biomass for the Energy Sector
Investment Opportunities2
Agenda
PÖYRY 3April, 2012
Source: RENEWABLES GLOBAL STATUS REPORT
Fossil fuels78%
Nuclear2,8%
Renewable19%
Fossil fuels Nuclear Renewable
3%
19%
78%
16%2%
82%
Brazilian Energy MatrixGlobal Energy Matrix
Energy Matrix – Comparison
PÖYRY 4April, 2012
Brazilian Energy Matrix
Renewable Energy Share of Brazil Final Energy Consumption, 2011
· Even though most of Brazilian energy comes from renewable sources, there is a large growth potential for the woody biomass market.
Wind
Biomass
Hydropower
1%
5%
76%Renewable
Energy82%
Fossil Fuels16%
Nuclear2%
PÖYRY 5April, 2012
Brazilian Energy Investments Projection
Source: EPE – Energy Research Business
Current and Foreseen Installed Capacity by Source
05
101520253035
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thou
sand
MW
Hidropower Oil Natural Gas Coal Nuclear Renewable Energy
05
101520253035
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Thou
sand
MW
Hidropower Oil Natural Gas Coal Nuclear Renewable Energy
Approved Projects Planned Projects
0
5
10
15
20
25
30
35
2011 2012 2013 2014 2015 2016 2017 2018 20190
5
10
15
20
25
30
35
2011 2012 2013 2014 2015 2016 2017 2018 2019
PÖYRY 6April, 2012
Biomass Matrix
We are facing a paradigm shift
· Biomass has been the focus of most industries in Brazil and the world
· A 40% growth in biomass demand is foreseen until 2019
Black liquor15,5%
Wood4,5%
Biogas0,9%
Rice husk0,2%
Sugar cane bagass78,9%
6,08
7,628,52
0
1
2
3
4
5
6
7
8
9
2011 2015 2019
Thou
sand
MW
40%
Source: EPE – Energy Research Business
PÖYRY 7April, 2012
267 1.3
22800
23594
2352,631
1,362573
Planted Forests : ≈ 6,5 Mha
Industrial Wood Consumption ≈ 170 M m³
Forest Planted Area
Planted Area (thousand ha) - 2012
Série1
Série2
Série1
Série2
Série1
Série2
Série1
Série2
Série1
Série2
0
500
1,000
1,500
2,000
2,500
3,000
South Southeast Midwest Notheast North
Milh
ares
(ha)
Eucalyptus
Pinus
Eucalyptus74.7%
Pine25.2%
Others0.1%
Pulp and Paper36%
Reconstituted Panels
7%Wood Industry
19%
Charcoal10%
Firewood26%
Others2%
ABRAF 2012
PÖYRY 8April, 2012
0
2236
5 6
54
7
58 53
7 9
90
Pellets Charcoal Firewood Fiber board SolidProducts
Pulp andPaper
Brazilian Forest Based Industries – Eucalyptus Demand Forecast
Eucalyptus demand by sector (million m³)2012 – 2020
Growth/y → 8.2%
Growth/y → 5.7%
6.1
4.9
Volume demand (million m³)
2012
2020
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha
1.2
Current Demand
Future Demand
Current Potential Supply
Deficit
223.7
179.6
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0
Million ha
44.1
Area demand (ha)
PÖYRY 9April, 2012
Woody Biomass Products
Pellets
Charcoal
Wood Chips
Logs
Residues
BriquettesWoody Biomass
PÖYRY 10April, 2012
Wood Pellets
− International Trend
Power Generation
− Green Energy Market
Charcoal Industry
− Main Markets
Energy Wood Primary Markets
PÖYRY 11April, 2012
Charcoal Industry – Brazilian Overview
· 88% of the total production is targeted towards the iron and steel industry
· This industry is one of the main drivers of the economy. It represents 3% of the total steel produced in the world, and 51% in Latin America
Brazil is the biggest charcoal producer and consumer of the world.
Residential14%
Commercial2%
Cement1%
Pig-Iron and Steel66%
Iron Alloys12%
Other4%
PÖYRY 12April, 2012
· Almost the total production aims the internal market
· From 2000 to 2008 the charcoal consumption growth had been 3,5% per year. From 25 to 33 million mdc¹
· From 2009 to 2010 the charcoal consumption decreased 35% due to the global economy crisis
· In 2011 Brazil produced around 27 million mdc¹ of charcoal (69% from planted forests)
Charcoal Industry – Brazilian Overview
1 mdc = 1 cubic meter of charcoal
PÖYRY 13April, 2012
Charcoal Industry – Pig Iron Industrial Clusters
PÖYRY 14April, 2012
· The State consumption is around 60% of the total charcoal produced in Brazil
· The State has around one million ha of energy forests (total 1.4 million ha of Eucalyptus)
· The energy oriented planted forest additional area should reach about 300 thousand hectares in 2020, considering the historical industrial demand growth of 3.5%
Charcoal Industry – Minas Gerais Scenario
· Minas Gerais State concentrates the main players of the charcoal industry
PÖYRY 15April, 2012
· After the crisis the charcoal demand decreased to around 6 million mdc per year
· In 2009, about 70% of the total charcoal came from native wood residues
· It is foreseen that the native wood residues will represent a maximum 20% of the total demand in 2020
· If the production of charcoal gets back to 2007 levels (10 million mdc) there will be an area gap of around 150 thousand ha.
Charcoal Industry – Carajás Scenario
· From 1998 to 2007 the demand increased from 4 million to 10 million mdc per year
Future Planted Forest (1,000 ha)
185
336 151
Supply
DemandBalance/ Deficit
PÖYRY 16April, 2012
Charcoal Industry – Mato Grosso do Sul Scenario
· Mato Grosso do Sul is the most recent pig iron cluster in Brazil
· It is expected that the native wood share of the charcoal production in 2020 would not exceed 10%
· The energy dedicated forest planted area totals 30 thousand ha
· The installed capacity is around 750 thousand tons of pig iron per year, which demands 13,5 thousand ha of plantations per year
· Assuming a sustainable forest management, the current planted area deficit is around 50 thousand ha
Energy forest planted area balance (1,000ha)
17
-81
-64
-100
-80
-60
-40
-20
-
20
40
2009 Demand Balance
Thou
sand
ha
30,000
-80
-50
Supply
DemandBalance/ Deficit
PÖYRY 17April, 2012
Source: ANEEL
Charcoal Industry – Thermal Power Plants in Brazil
· The Brazilian charcoal based thermoelectric industry is still very incipient. There are only 3 plants in Brazil
· Most of the investments aim the pig iron and iron alloys market
· One announced project is located in the State of Minas Gerais
PÖYRY 18April, 2012
Power generation
− Green Energy Market
Charcoal Industry
− Main Markets
Energy Wood Primary Markets
Wood Pellets
− International Trend
PÖYRY 19April, 2012
Thermal Energy – Grains Processing
· The National grain harvest, 2011/2012, should reach 158,4 million tons.
· The energy for heat and steam is largely demanded in the grain production process
· Woodchips is and will remain as the main fuel
· Oil, diesel, and electricity are less viable fuels (environmentally and economically)
PÖYRY 20April, 2012
Thermal Energy – MT Current and Projected Scenario
· Mato Grosso is the largest grain processor in Brazil
· The grain harvest, 2011/2012, will likely reach 34,9 million tons, almost 23% of the total produced in the country
· It is projected a demand increase from “green consumers” of almost 90% of the total market share in 2020
· 7 million m³sob of firewood in 2015· 9 million m³sob of firewood in 2020
Firewood Projected Balance
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2015 2020
Forests Supply
Green Consumers Demand
Energy Demand
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2015 2020
Forests Supply
Green Consumers Demand
Energy Demand
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2015 2020
Forests Supply
Green Consumers Demand
Energy Demand
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2015 2020
Forests Supply
Green Consumers Demand
Energy Demand
PÖYRY 21April, 2012
Thermal Energy – Wood Residues
· The thermal energy trend, based on wood residues, is to increase, since the projected planted area is believed to follow the economy growth
PÖYRY 22April, 2012
Power Generation
− Green Energy Market
Energy Wood Primary Markets
Charcoal Industry
− Main Markets
Wood Pellets
− International Trend
PÖYRY 23April, 2012
· Although the largest pellet production capacities are forecast to remain in Europe, the strong competition for raw material in this continent will drive an increasingly demand by imports from regions with a biomass surplus.
Wood Pellet Market
Russia
Oceania
China
South America
NorthAmerica
EasternEurope
WesternEurope
Global Pellet Production and Consumption – 2010, 2015 and 2020
Japan & Korea4,9
8,511,0
3,4 4,3 5,6
0,0
5,0
10,0
15,0
20,0
25,0
North America
2010
2015
2020
2010
2015
2020
7,710,7
13,010,8
16,4
23,8
0,0
5,0
10,0
15,0
20,0
25,0
Western Europe
2010
2015
2020
2010
2015
2020
2,2 2,8 3,3
0,4 0,6 0,80,0
5,0
10,0
15,0
20,0
25,0
Eastern Europe
2010
2015
2020
2010
2015
2020
0,6 1,4 1,60,0 0,1 0,1
0,0
5,0
10,0
15,0
20,0
25,0
Russia
2010
2015
2020
2010
2015
2020
0,63,0
10,0
0,63,0
10,0
0,0
5,0
10,0
15,0
20,0
25,0
China
2010
2015
2020
2010
2015
2020
0,2 0,4 0,8 0,0 0,1 0,10,0
5,0
10,0
15,0
20,0
25,0
Oceania
2010
2015
2020
2010
2015
2020
0,1 0,4 1,1 0,2
3,85,5
0,0
5,0
10,0
15,0
20,0
25,0
Japan and Korea
2010
2015
2020
2010
2015
2020
0,1 0,4 1,1 0,2
3,85,5
0,0
5,0
10,0
15,0
20,0
25,0
Japan and Korea
2010
2015
2020
2010
2015
2020
0,1 0,4 1,1 0,2
3,85,5
0,0
5,0
10,0
15,0
20,0
25,0
Japan and Korea
2010
2015
2020
2010
2015
2020
Production Consumption0.1
4.07.0
0.1 0.1 0.2
PÖYRY 24April, 2012
1,100
500
500
400
3,300
50
Trade flows in 1,000 tonnes, >50,000
* Intra Western European net trade
Current
Emerging
Global Trade Flows in 2010
Wood Pellet Market
PÖYRY 25April, 2012
Potential Pellet Market - EU
16%
12%
14%
15%
16%
13%
17%
20%
22%
34%
37%
48%
2%
3%
4%
5%
8%
8%
9%
9%
11%
27%
28%
42%
0% 10% 20% 30% 40% 50% 60%
UKBellgium
NtherlandItaly
Poland Czech Rep.
GermanySpain
FranceAustriaFinland
Sweden
· The mandatory EU target of 20% renewable energy by 2020 requires considerable investments on biomass use.
· Wood is a significant source of fuel
· Large Economies have a high burden, e.g. UK
· 66% of the European energy has biomass as main source
· Limited sources of renewable energy
· It will be challenging to meet the targets, despite the efforts and political will
EU Countries Target
PÖYRY 26April, 2012
Brazilian Main Players
PÖYRY 27April, 2012
Major Pellet Producers – Present and Projected
Main Players
The pellet supply structure can change significantly in the next five years..
Pellet Production Capacity by 2015 Investment Intention Projects Announced
1,000 metric tonnes
0 500 1.000 1.500 2.000
Pacific Bioenergy
Lantmännen Agroenergi
Plantation Energy Australia
Graanul Invest
Vyborgskaya Cellulose
VAPO
Magnolia Biopower
JCE Group
German Pellets
Intrinergy
Suzano Energia Renovável
2009 Planned
PÖYRY 28April, 2012
Short Rotation Wood Crops
· Eucalyptus Short Rotation forests present high yield
· The forest plantation is established in highly dense condition
· In Brazil, the species that have been used are special clones of Eucalyptus
· Eucalyptus were chosen envisioning the potential of multiple cycles (coppice species)
PÖYRY 29April, 2012
· Regular Clone· Regular spacing between
trees (3x3 m)· Forest Yield~ 45 (m³/ha/year)· Harvest in 7 years· Low Lignin content
· (regular calorific value)· Can be used to make pulp or
generate energy.
· Special Clone· Short spacing between trees
(high forest density; 3 x 0,5 m up to 1 m)
· Forest Yield ~ 70 (m³/ha/year)· Harvest in 2 – 3 years· High Lignin content
· (high calorific value)· Cannot be used to produce pulp.
Conventional Forestry Energy Oriented Short Rotation Forestry
Short Rotation Wood Crops – Fundamentals
PÖYRY 30April, 2012
Short Rotation Wood Crops - SWOT
Genetically modified Eucalyptus strains offer opportunities for new players in the pellet industry to increase efficiency of the supply chain and to overcome the typical problem of increasing biomass transport cost at larger production capacities.
PÖYRY 31April, 2012
Crash Course - Agenda
1Woody Biomass for the Energy Sector
Investment Opportunities2
PÖYRY 32April, 2012
Brazil’s Potential for Investments in Bioenergy
· High productivity (yield)
· The energy consumption shall increase 9,4% in 2011 along with the economy growth (ANEEL – 2010)
· The energy consumption shall increase an average 4,8% per year until 2020
· The current percentage of biomass in the Brazilian energy matrix is 6,5%. It is forecasted to be around 14% in 2020
· Biomass is considered a good source to supply the energy demand:
· relatively low investment costs· socially right· environmental friendly
PÖYRY 33April, 2012
Brazil – Eucalyptus Market Balance
33
4,9
3,3
3,8
2,3
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
Supply Demand Deficit
Mill
ion
ha
4,9
3,3
2,8
1,2
0,0
1,0
2,0
3,0
4,0
5,0
6,0
7,0
Supply Demand Deficit
Mill
ion
ha
Scenario B - Expected PlantsScenario A - Announced Plants
19951996
19971998
19992000
20012002
20032004
20052006
20072008
20092010
20112012
20132014
20152016
20172018
20192020
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000
Existing Plants Expected Plants Announced Plants
Mill
ion
t
PÖYRY 34April, 2012
0.6 0.40.7 0.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Supply Demand Deficit
Mill
ion
ha
3.72.5
1.6
0.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Supply Demand Deficit
Mill
ion
ha
0.6 0.40.4 0.2
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Supply Demand Deficit
Mill
ion
ha
Brazil – Eucalyptus Market Balance
34
Mature Market
Developing Market
Emerging Market
SupplyCurrent DemandPlanned DemandDeficit
PÖYRY 35April, 2012
Opportunities for Investments in Brazil
· Market Development Level → Low· Risk → High· Opportunities → High
· Market Development Level → Medium to High· Risk → Medium· Opportunities → High
· Market Development Level → High· Risk → Low· Opportunities → Low (spot)
PÖYRY 36April, 2012
Opportunities for Investments – Minas Gerais
· The main woody biomass market in Brazil
· The planted area growth, from 2009 to 2011, was around 8%
· It holds itself 60% of the national consumption of charcoal
· It presents a planted area of 1.4 million ha (1.0 million ha energy oriented)
· MG has a potential to have 6 million ha planted in the future, aiming energy forests
· The Pig Iron sector, despite the crisis, has registered, in 2011, an increase in demand and consequently a price rise
· MG presents a strategic site location attending several different markets
PÖYRY 37April, 2012
Opportunities for Investments – Minas Gerais
· MG has high established goals to decrease the consumption from native forests· Between 2008 and to 2011 – 45% of
the total consumption might have been sourced from native forests
· Between 2013 and to 2016 – 10% of the total consumption
· From 2017 – 5% of the total consumption
· Future projects are required to attend the 2017 goal
PÖYRY 38April, 2012
Opportunities for Investments – Mato Grosso do Sul
· Early Stage Market for the energy sector
· Fibria, Eldorado, Ramires, Vetorial, and Brookfield are some of the players that have envisioned this market
Planted Area Evolution (thousand ha)
113 119
208
265 291
378
476
2005 2006 2007 2008 2009 2010 2011
· Solid drivers for Timberland investment
PÖYRY 39April, 2012
Opportunities for Investments – Maranhão, Tocantins, Piauí
· MA - Suzano has announced an expansion, on its pulp and paper plants. The project is expected to be ready in 2013 in Maranhão
· MA - has potential areas to plant totaling around 10 million ha
· PI - has potential areas to plant totaling about 8 million ha
· TO - has potential areas to plant summing up around 11 million ha
Eucalyptus area evolution (Thousand ha)
2 14 22 32 44 48 666193 107 111
137 151166
37 26
2005 2006 2007 2008 2009 2010 2011
PI
MA
TO
PÖYRY 40April, 2012
Opportunities for Investments – South Region
· The South Region of Brazil holds a consolidated market
· There is not a big range of investment chances besides some spot opportunities
· Creativity is the key word in this developed market
