low grade wood markets in northeast us 2016inrsllc.com/low grade situation northeast 2016v3.pdf ·...
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Low Grade Wood Markets in Northeast US 2016
Charles Levesque
Innovative Natural Resource Solutions LLC
Phone 603-588-3272
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Sawlogs Pulpwood Biomass
Volume (Tons)
Value ($)
Volume and Value to Landowner of Products from a Timber HarvestNorth East State Foresters 2013
All NH, 2010
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Markets for Low-Grade
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Pulp and Paper
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1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016e
Estimated Pulpwood Consumption by Maine Pulp MillsEstimates Based Upon INRS Data
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Since 1999, the Northern Forest region has lost 11 pulp mills
New York- Deferiet- Lyons Falls
New Hampshire- Groveton- Berlin
Maine- Westbrook- Bucksport- Old Town- Lincoln- Millinocket- East Millinocket- Madison (May 2016)
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Pulp
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ass
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Loss of Low Grade Markets in MaineAnnual Tons (estimated), 2014-2016
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
HardwoodPulpwood
Spruce / Fir Pine / Hemlock Biomass Biomass (displacedby natural gas)
* Biomass displaced by natural gas is at a facility that can use either fuel;
a change in economics of the two fuels would likely result in the resumed use of biomass.
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Pulp and Paper• Pulp and paper mills remain region’s largest consumer of wood
products, and represent significant fixed infrastructure.
• Mills produce a variety of products, including market pulp, communication papers (coated and uncoated), and tissue. Each of these markets is unique.
• The Northern American paper industry has been shrinking, both in output and capacity. Individual mills often do well, but new investment in production is extremely limited in the U.S.
• Maine and New York will remain paper producing states for well into the future
• Expect reduced pulpwood consumption, and reduced prices for pulpwood (a bunch of factors in this one, not just demand).
• The closures are NOT cyclical (they are structural world-wide).
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Challenges to the Pulp & Paper Industry
• You will hearHigh taxes
High energy costs
High wood costs
And so on
• There are all very real, and present real challenges to the industryMills and regions now fighting over a shrinking worldwide pie
• They aren’t the fundamental issue, which is change in the marketplace (reduced world market), and a capital intensive industry that is hard to change with any reasonable speed.
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Biomass electricity
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Wood Energy (cont.)
Innovative Natural Resource Solutions, LLC 12
Biomass Power Plants
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Wood Energy (cont.)
Innovative Natural Resource Solutions, LLC 13
Biomass Power Plants (new)
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Wood Energy (cont.)
Innovative Natural Resource Solutions, LLC 14
Biomass Power Plants (closed)
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Biomass Electricity
(MWh)
“Green” Attributes(Renewable Energy Certificate)
Electricity (MWh)
(Wholesale)
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Average over the next year$47.14
$-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
Average Real Time Wholesale Electricity Prices, ISO New EnglandFutures Prices as of 4/25/2016 9:15 AM
Actual Futures
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0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,0001
99
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Biomass Fuel Use - New HampshireGreen Tons / Year, 1997 -2015
Bio Energy Corporation
Bridgewater Power - Ashland
Burgess BioPower
Concord Steam
DG Whitefield (formerly Whitefield P&L)
Indeck – Alexandria
Pinetree – Bethlehem
Pinetree – Tamworth
PSNH Schiller (Portsmouth)
Springfield Power (formerly Hemphill P&L)
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Biomass Electricity – Fuel Costs (estimated in New England representing a range of plant sizes)
• ~1.6 - ~1.8 green tons of fuel per MWh• That means if biomass fuel is $28 / ton, fuel cost is ~$44.80
to ~$50.40 per MWh (hypothetical)
•Add in staffing, consumables (emissions control), maintenance, debt service, etc. @ $30 to $35 per MWh•Cost of generation (absent profit) is somewhere around
$75 to $85 per MWh• That’s with $28/ton fuel…
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Biomass Electricity – RECs
•Plants need Renewable Energy Certificates (RECs) to operate economically• MA has effectively excluded stand-alone biomass
Set an efficiency standard that cannot be met by a stand-alone facility
Also a forestry standard, which suppliers were responsible for
• CT has a phase-down for biomass beginning in 2018(?)• Biomass a huge economic boost to local regions, forestryand it is the only renewable with ongoing economic benefits• Apparently not as important to Southern New England as
we would hope…
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REC Prices (Connecticut, indicative, broker quote, spring 2016)
$- $10 $20 $30 $40 $50
2017
2016
2015
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What does it take to operate biomass in 2016?
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Revenue Expenses
Electricty RECs (CT) Fuel O&M
• Assumes:
Electricity at current futures price for the next year
RECs at current broker quote
Biomass fuel at $28, 1.7 green tons per MWH
O&M at $30 per MWh
• With these assumptions, this is not an attractive business
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Biomass thermal
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Innovative Natural Resource Solutions, LLC 24
Wood Pellet Plants today
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Innovative Natural Resource Solutions, LLC 25
Wood Pellet Plants 1995
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26
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NH Biomass thermal
• Now have 116 commercial/industrial facilities using wood chips or pellets for heat in NH (up from 30 in 2005)
• Over 1000 residential (homes) using wood pellets in central heating systems
• Economic and Environmental Benefits:
$9.78 million saved in heating costs
$4.7 million direct spending on wood pellets and chips
$29.4 million in total economic benefit to New Hampshire
57,217-ton net reduction in carbon dioxide emissions
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The glass is half full…• We have some good low-grade markets, and are incredibly well
positioned compared to other parts of the country
• We have the forest resource and supply infrastructure (landowners, loggers, entire forest industry ecosystem) that would make other regions jealous
• We live in close proximity to (and are part of) the greatest collection of consumers in the history of the world
• There may never be a better time to be develop a project or technology that uses low-grade, particularly softwood.
• But we are in trouble with low-grade…
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…2001-02 DRED studies
• PSNH had just bought out 2 wood-fired power plants (Alexandria & TIMCO) and about to buy-out a third (Bio-Energy)
• Fears of more buy-outs
• Beginning fears about Berlin and Groveton pulp mills
• Concern for what reduced low-grade markets can do to good forestry and sawmills because residues are so important to their business model.
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…2001-02 DRED studies (cont.)
• Existing biomass power plants
• Pulp and paper manufacturing
• Pellets
• Chip export
• Small-scale gasification
• Process heat / co-location
• Ethanol and biochemicals
• Solid wood composites • Firewood • Animal bedding • Landscaping mulch • Densified logs • Lumber from small-diameter
material • Co-firing with wood at coal-
fired energy plants.
Phase I – review of low-grade market possibilities:
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…2001-02 DRED studies (cont.) Phase I conclusions
• Pulp & paper largest low-grade market – work hard to keep
• Biomass power plants – work hard to keep
• Conduct a feasibility study to determine the economic feasibility of siting a Medium Density Fiberboard plant in New Hampshire
• develop a plan for the use of wood in co-firing at Merrimack Station
• Other remote possibilities: Oriented Strand Board, Ethanol, Chip exporting from the Port of Portsmouth
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…2001-02 DRED studies (cont.)
• MDF would use 300,000 tons /year
• Cost $153 million (2001 dollars)
• Conclusion:
Power costs too high
Wood costs too high
Too distant to market
• NOT FEASIBLE
Phase II – MDF plant feasibility:
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…2001-02 DRED studies (cont.)
• Conclusion of Phase I & II – Only opportunity for large-scale low-grade markets in NH is biomass electricity plants
• To operate in a deregulated market, the wood plants will receive $40/MWh while it costs $54/MWh to produce
• Subsidy needed was $14/MWh or $10.8 million per year for all the plants…
Phase III – Keeping Biomass Electricity Plants
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…2001-02 DRED studies (cont.) Phase III – Keeping Biomass Electricity Plants
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…2001-02 DRED studies (cont.) Phase III – Keeping Biomass Electricity Plants
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Charles Levesque
Innovative Natural Resource Solutions LLC
Phone 603-588-3272Email [email protected]
www.inrsllc.com