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Forest Bioenergy in the United States: Current Status and Outlook
Seth Walker Bioenergy Economist
swalker@risi.com 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
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Woodfiber Consumption by Bioenergy Million dry short tons
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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
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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
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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
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0
2
4
6
8
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12
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US Pellet Production Million short tons
NortheastNorth CentralWestSouth ConventionalSouth Industrial Export
Source: RISI
North American Pellet Supply
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Development of the European Industrial Wood Pellet Market
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0
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
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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
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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
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Why the US South?
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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
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0
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160Wood Fiber Supply
Roundwood Residual ChipsFine Mill Residues HogfuelForest Biomass Urban Wood Waste
0
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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
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0.0
2.0
4.0
6.0
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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
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0
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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
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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
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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
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See the forest through the trees!
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Contact Information
Seth Walker Bioenergy Economist, RISI Bedford, MA swalker@risi.com +1.781.734.8992 Twitter @BioEconomist
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