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Bioenergy from forestMr.Ilpo Mattila, Head of Section

Central Union of Agricultural Producers and Forest Owners (MTK)

Eurofonet Conference 20.11.2007

Brussels

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THE ORGANISATION OF MTK, 2007

RURAL ENTREPRENEURSRURAL ENTREPRENEURS

FOREST MANAGEMENTASSOCIATIONS (FMA)

(150)

FOREST MANAGEMENTASSOCIATIONS (FMA)

(150)LOCAL FARMERS ASSOCIATIONS

397

LOCAL FARMERS ASSOCIATIONS397

REGIONAL FOREST OWNERS’UNIONS (10)

REGIONAL FOREST OWNERS’UNIONS (10)

REGIONAL FARMERS UNIONS(16)

REGIONAL FARMERS UNIONS(16)

THE OFFICE OF THE CENTRAL UNION OF AGRICULTURALPRODUCERS AND FOREST OWNERS

Maaseudun Tulevaisuus (Newspaper)

THE OFFICE OF THE CENTRAL UNION OF AGRICULTURALPRODUCERS AND FOREST OWNERS

Maaseudun Tulevaisuus (Newspaper)

164 000 MEMBERS

FORESTOWNERSFARMERS

FUR BREEDERS´ASSOCIATION

FUR BREEDERS´ASSOCIATION

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Coal13.3%

Peat6.4%

Nuclear16.7%

Net import of electricity 3.1%

Hydro power2.7%

Wood fuels 21 %

Oil25.9%Natural gas

10.9%

Heat pumps REF and other

1.0 %

Primary energy sources in Finland, 2005

Wind power 0.02%

Total energy consumption 1,402 PJ ~ 390 TWh ~ 37 Mtoe/a

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Who owns Finnish forests?

Share of Forest Area, %

Source: Finnish Forest Research Institute

Other private2.4%

Pensioners19.8%

Wage & salary earners15.5%

Farmers20.4%

Entrepreneurs3.7%

Forest Industry8.9%

State24.4%

Others4.9%

Private Families 62%*

* 2007-Private families 60%State 26%

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Use of wood fuels and peat in different sectors in Finland in 2004

80% of wood energy is used in forest industry, use in other sectors is growing fast

TW

h

0

10

20

30

40

50

Other industry, condensing powerResidental heatingDistrict heatingForest industry

Blackliquor

Forestchips

Wood residues

from industry

Small scale use of wood

Peat

Most bioenergy (=wood fuels) is used in large scale CHP production

within the emission trade sector without significant subsidies

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0

5

10

15

20

25

30

35

40

loggingresidues

stumps smalldiameter

trees

€/m

3

stumpage price/savingof cost

management

road transport

chipping

forwarding

lifting of stumps

felling & bunching oftrees

Production costs of forest chips

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Average price paid at the plant in Finland

0

2

4

6

8

10

12

14

16

forest chips industry chips sawdust bark

€/M

Wh

2000

2001

2002

2003

2004

2005

2006

2007e

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Heat entrepreneurship – what is it?

Rural small and medium-sized entrepreneurship, in which the entrepreneur is paid according produced heat fuelled by biomass fuels

Forest owners refine the wood fuels into heat and do not sell only raw material MTK has actively developed the operation model as an organisation for forest

owners Currently about 170 heat entrepreneurs managing some 340 plants Total output is about 170 MWth

– Heat produced 400,000 MWh/a

– Use of wood fuels 600,000 m³ loose/a Average boiler output 500 kWth

Largest heating plant is 3.6 MWth

1 solid m3 is about 2.5 loose m3 and about 2 MWh

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Fuels, operation and costs

Solid biofuel as the main fuel, light fuel oil as reserve and for peak load

Forest chips are the most significant energy wood. Full-time entrepreneurs will be main trend in the future – today most of them are

part-timer entrepreneurs Pellet heat entrepreneurship is up and coming Cost structure guarantees stable price of heat

– Capital costs ⅓

– Fuels ⅓ and the average fuel price is 16 €/MWh

– Repairs, maintenance, administration, electricity, saleries ⅓ Earlier initial investment was done by the local authority, currently the

entrepreneur is the most common investor First customers were local municipal real estates and regional heating

companies, currently the share of private enterprises is growing most rapidly

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Small-scale heat entrepreneurshipUSUAL W OOD HEATING

W ood harvestingW ood harvesting

Chipping

Chipping

Operation and m anagement of the p lant Operation and

m anagement of the p lant

Investments InvestmentsReparation Reparation

TransportTransport

Heat d istribution

Heat d istribution

HEATING ENTERPRENEURSHIP

Source: VTT/EUBIONET 2 (www.eubionet.net)

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Number of heat entrepreneurs

0

50

100

150

200

250

300

350

400

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Heating plants

MW

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Heat entrepreneurship in the changing operating environment

Change in the price relations

– Light fuel oil is no longer the biggest competitor as the price has increased 2.5-fold in five years

– The price of heavy fuel oil is sufficient enough to make wood heat more competence in the business

Competition with other heat entrepreneurs and energy utilities has increased

Effort is to increase plant sizes Strengths:

– Flexible way of operation

– Smaller expected return on investment on capital than with energy utilities

– 340 references available in Finland

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Kyyjärvi energy co-operative

Established in 1998 40 members, which are forest owners Managing a 2.5 MW (1 MW + 1.5 MW ) wood chips

plant Heat production about 6,500 MWh/a Plant and network owned by the local authority ”The co-operative owns only the sample devise Wood chips are purchased delivered into the silo at

a MWh price The wood chips cost €16.15/MWh (+ adjustment

payment for the shareholders) Local authority pays €22.95/MWh for the heat,

contract valid indefinitely, price can be negotiated if necessary

Local authority sells district heat at a price of about €43/MWh

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Considerations of the future of heat entrepreneurship

Co-operative thinking will move aside, entrepreneurship will increase Entrepreneurs are also willing to build district heating networks Local authorities will outsource heat production A target of 1,000 heat enterprises in 2010 MTK to be a shareholder in the Biowin (www.biowin.fi) heat enterprise, which

develops a franchising model for heat entrepreneurship Forest owners and rural residents will own the heat companies In addition to local authorities, the heating of the real estates of small and

medium-sized enterprises will be part of the business operations to an increasing extent

Possible introduction of the feed-in tariff will increase competitiveness

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Competition for fuel chips

The procurement of energy wood promotes forestry; a great need for early thinning of forests

Forest industry fears that pulpwood will be used as energy wood

If the forest industry does not need pulpwood, forest owners will sell it as energy in the future

Emissions trading and the EU targets for renewable energy will increase the competitiveness of energy use

The target is to utilise wood as raw material in the forest industry first

Second-generation biofuels are a challenging target for the use of wood

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Unloading wood chips

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Thank you for your attention

More information Ilpo Mattila, email:ilpo.mattila@mtk.fi