In mid-2011, Pulp & Paper Canada reported on the factors affecting competition for fibre between the energy industry and pulp and paper sector. At that point, it was projected that dramatic increases in global demand for wood fibre would outpace supply, due to factors such as increasing global population, rebounding U.S. housing starts, and a dwindling supply of B.C. beetle-killed wood.
As 2013 begins, worldwide demand for wood is increasing slowly. But in Canada – then, as now – we have more than enough fibre for both industries to flourish.
And, because the raw materials for bioenergy and the pulp and paper industry are generally different, there will be little problem for Canada’s pulp and paper companies to access reasonably-priced fibre over the next few years, experts say. There may be some localized tussles, with lowered availability driving up fibre costs to some extent at times, but these are likely to be limited.
“It’s theoretically possible that independent biopower or pellet producers could compete for fibre, if electricity rates paid by utilities for bio-power were significantly increased,” says Jamie Stephen, managing director of TorchLight Bioresources Inc. and a Fellow at the Queen’s Institute for Energy and Environmental Policy at Queen’s University. “However, as it now stands, there is more than enough fibre available – especially in Ontario – to supply bioenergy projects and pulp producers at current prices.”
Wood-fuelled bioenergy processes can include pellet manufacturing, biomass boilers or gasification for heat and power, co-firing pellets with coal, pyrolysis or biomass-to-liquid (BTL) fuel technologies.
Stephen notes that pulp as a commodity holds significantly higher value right now than do ethanol, heat and electricity. “The only way that significant competition for fibre would occur is if pulp prices dropped significantly (which would lead to mill shutdowns anyways), if market energy prices skyrocketed (transportation fuel, electricity, or natural gas/heat), or if government artificially subsidized a bioenergy industry at a level that gave it a significant competitive advantage over pulp producers in the chip market,” he observes. “This would also mean that bioenergy producers were already fully utilizing lower-cost feedstock such as hog fuel and harvest residues.”
Stephen doesn’t believe fibre availability will be a problem “especially when you look at the reduced number of mills in the Canadian pulp industry, the fact that many mills have secured tenure over fibre resources, and the large volume of fibre currently unutilized in the available volume in Ontario.
“I think the bigger issue with be low-cost pulp chip availability in B.C., once the mountain pine beetle-killed pine timber harvest drops significantly,” he comments.
Pellets use residue, pulp uses logs
Dr. Paul Stuart, a professor in the department of chemical engineering at École Polytechnique in Montreal, and the NSERC design engineering chair in pulp and paper industry process integration, also does not believe the growth of the bioenergy sector is going to drive up the cost of fibre through lower availability – mainly because there is very limited direct competition for raw materials. “Pellets and most biomass heat and power projects use residues whereas softwood logs go for pulp,” notes Stuart.
Dr. Tom Browne agrees. “The current low cost of natural gas and the high cost of hauling large volumes of wood out of the bush requires that bioenergy processes use residues as their main feed,” says the biorefinery program manager at FPInnovations in Pointe-Claire, Que. “These projects will ideally use lower-value wood that cannot easily be made into pulp or paper, or solid wood products. Fibre quality is important to pulp, paper and solid wood industries, but less so for bioenergy production, where energy content and moisture content are key.”
Competition will increase
Pellet production is the exception, says Hakan Ekstrom, president of Bothell, Washington-based Wood Resources International. “Pellet producers do have quite stringent specifications for the wood fibre they use, with low acceptance of bark content for example – especially if the pellets are for the residential market,” he says, “Increasingly, pellet producers in Europe and the southern U.S. are competing for the same log that could go to a pulp mill. In Canada, we have not quite reached that point yet since in the Eastern provinces, there is available supply of sawdust and shavings that are less costly than round wood, and in the Western provinces (mainly B.C.), there is still plenty of both residuals and small logs that the pulp mills and pellet manufacturers can use. But times will change and competition will increase.”
Softwood is the most common feedstock for pellet production, but Stephen says there’s a strong market for hardwood pellets as well. When the co-firing (coal and biomass) electrical generation facility run by Ontario Power Generation at Atikokan comes on-line, demand for pellets will be boosted, but he again points to Ontario’s current annual cut being far below the available volume.
Most bioenergy projects can use any species or combination of species. Wood-to-electricity projects (boilers) can accept the largest range of feedstocks, notes Dr. Brooks C. Mendell, president of Athens, Georgia-based Forisk Consulting. “These include ‘dirty’ chips (logging residue that contains bark and needles), urban waste material, such as wood pallet scraps and shavings, and sometimes pulpwood,” he says. “Just-opened wood biopower projects prefer clean material to optimize the efficiency of the facility before loosening the raw material specifications, but pellet plants need clean material on an ongoing basis.”
However, even though raw materials are mostly not shared, some localized competition for the same fibre could start to occur in some areas of Canada. “Neither wood nor residues can be shipped very far economically, so the situation may be very different in two locations as little as 200 or 300 km apart,” Browne notes. “Who wins a fibre auction will depend on who is able to make greater profits.”
“If a pellet plant is closer than a pulp mill to the biomass source, if the pulp mill has alternatives, how much government support exists for biomass projects – these may all be factors [in whether location competition for fibre occurs],” adds Ekstrom. “Beetle wood can go to both industries. Asian and European pellet markets will grow and pellet prices will most likely go up, and that may mean that pellet manufacturers may be able to pay more for raw material.”
Blurring the line
While competition for fibre is expected to eventually increase between the bioenergy and pulp and paper sectors, further blurring of the line between the two industries will be the bigger shift. Feedstocks such as hog fuel and harvest residues (typically not used for pulp production) are often used at pulp plants to provide process heat and produce electricity in an on-site combined heat and power (CHP) plant.
“The pulp and paper industry is already the largest CHP player in the country, which the Green Transformation Program has helped make happen,” Stephen observes. “However, I think Canadian companies could increase their utilization of harvest residues.”
He notes that there has been strong encouragement from government (e.g. the receiving license in B.C.) to further utilize this resource of energy production.
“The Tembec mill in Temiscaming is a good example that produces a variety of products with the goal of overall mill value maximization,” Stephen says. “Bioenergy can literally grow in concert with pulp and paper.”
Mendell agrees. “The pulp and paper sector is best positioned to grow and leverage wood bioenergy opportunities through CHP projects and through enhancing their own on-site use of wood for energy,” he says. “In the U.S., 75% of the existing wood-sourced electricity is generated within the forest products industry.”
Bruce McIntyre, the partner who leads the forest, paper and packaging practice at PwC, also agrees. “The biomass energy sector offers another opportunity to add value to the fibre from forests,” he says, “which should help improve the economics throughout the supply chain, in Canada and beyond.”