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TABLE OF CONTENTS Oct 2012 - 0 comments

Pulp, Paper and Power

More pulp mills have become power exporters in recent years, with consequent benefits to the bottom line. But selling to the grid is a different market with its own challenges.

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By: Peter Caulfield
2012-10-01

To keep their energy costs in line and generate a new source of revenue, a growing number of Canadian pulp mills are using biomass-based cogeneration to produce excess electricity  for the provincial power grid.
Many pulp mills were able to upgrade or install power generation equipment during the period from 2009-2012 with the assistance of the Pulp and Paper Green Transformation Program.
Becoming a power exporter requires each mill to balance its production of electricity with the production of pulp. Sometimes it pays the mills to produce more of one and less of the other, depending on the state of the markets for each product.
Montreal-based Resolute Forest Products Inc., for example, has a network of 14 company-owned hydroelectric and cogeneration facilities with a total installed electricity production capacity of slightly more than 500 megawatts.
Alain Bourdages, Resolute’s director of energy development and procurement, says the company and its predecessor, AbitibiBowater Inc., have been producing cogen electricity since before 1990 and selling some of it to the grid.
“Each of our mills makes its own decision about who it sells to and when,” said Bourdages. “It all depends on the price they can get for the electricity.” Resolute monitors the market price for electricity automatically, with specialized software, and also with a team of energy market buyers and sellers.
Recognizing the value of electricity sales, Resolute is adding electrical generating capacity at another of its pulp mills, after finalizing a power purchase agreement with the Ontario Power Authority. Resolute is installing a condensing turbine at its Thunder Bay mill that will enable it to sell green energy from biomass to the OPA. Bourdages says the project, worth approximately $50 million, should be completed within the next 12 months. The condensing turbine will use steam from a boiler to drive an electrical generator.
“The new high-efficiency turbine allows us to get more energy out of our fuel and use less in the transfer of energy from steam to electricity,” said Bourdages.
Resolute says the new turbine will make it more economically competitive and environmentally friendly. Once the turbine is installed, the Thunder Bay mill will have an electrical capacity of almost 100 megawatts.
Electricity revenue changes
the game
Resolute is one of approximately 20 pulp mills in Canada that either produce electricity from cogeneration now or are developing the capacity to do so. Most are located in British Columbia. BC Hydro says there are 12 pulp mills (and one sawmill) in the province with at least some self-generation capacity. Of the 12 mills, seven have Energy Purchase Agreements with BC Hydro.
In 2013, Nanaimo Forest Products will be added to the list. BC Hydro has signed a 15-year electricity purchase agreement with the company to purchase clean energy from a new 25-megawatt turbo-generation unit that is being built at the Harmac Pacific pulp mill on Vancouver Island.
The new turbo-generation unit will produce electricity from wood biomass and from recaptured steam from the pulping process that will help power the generator.
According to Nanaimo Forest Products, revenues from power generation will improve the company’s business model by adding a fixed revenue stream that is separate from the volatile pulp market.
Just as the cost of purchased electricity can have a significant effect on the bottom line, so too can electricity sales.
Peter Vinall, president and CEO of Fortress Specialty Cellulose, noted last year that a bioenergy deal with Hydro Quebec would net a $100-per-tonne benefit for the dissolving pulp produced at Thurso, Que. The mill buys electricity at the usual industrial rates, and sells the energy it produces to the grid at higher, green energy rates.
More recently, Resolute Forest Products restarted a mill that had been closed for three years, citing an energy purchase agreement as a contributing factor. The company is investing $20-million to restart the mill at Dolbeau-Mistassini, Que., producing soft nip calendered (SNC and SCB) commercial printing paper. Resolute says the decision to re-open follows the conclusion of a deal to sell biomass-based electricity produced at the company’s Mistassini cogeneration facility to Hydro-Québec.
Big players in bioenergy
Like most other kraft producers, Canfor Pulp Holding Inc. uses cogeneration to produce heat and electricity. Brett Robinson, Canfor Pulp’s executive vice-president of operations (and president as of September 30, 2012), says the company produces approximately 105 megawatts of electricity, which represents more than 80% of its total internal requirements.
“The Prince George mill is completely electrically self-sufficient and sells excess electricity to the BC Hydro grid and to our other facilities,” Robinson said. “Export sales to BC Hydro started in 2009.”
Robinson says Canfor currently exports about 10% of its total generation to the grid, all of it from the Prince George mill.
“We have been told that we are one of the largest bioenergy producers in one location, in North America,” he said.
Robinson says electricity sales to BC Hydro contribute 1-5% of Canfor Pulp’s revenues, depending on the pulp cycle, although the company hopes to increase the figure to 15% over an average pulp cycle.
“As far as how we decide how much to sell to the grid, our first priority is to ensure we generate the historical amount the mills require to make pulp and paper,” Robinson said. “That’s what we call our generation base line. Excess power to this historical generation level can then be sold into the grid. Power generation, electrical consumption and power exports are all managed with advanced technology that enables our operators to monitor and control every detail of the process, 24 hours a day, seven days a week.”
Balancing costs vs. revenue
In the future, how much green electricity is produced by Canadian pulp mills and how it is used will depend on a number of factors, one of which is cost.
Paul Lansbergen, lead director regulatory affairs and association secretary of the Forest Products Association of Canada, says the capital cost of a new boiler is $50-$60 million; a new turbine costs $30-$50 million.
“Energy costs have been increasing at an alarming rate and we believe long term this trend will continue,” said Canfor’s Robinson. “Incremental power generation certainly adds to our costs with incremental fuel, energy and resource requirements, but with green energy revenues from power exports, we are currently able to offset the incremental costs while supporting the capital investment.
“The risk here is that biomass has come under a great deal of pressure and costs are rising. Long term green energy contracts sound good, but companies which venture into this field need to be very thoughtful around future biomass supply and costs as a result of competing businesses like the pellet industry that is trying to grow in parallel.”
(The Canadian wood pellet industry produced 1.3 million tonnes of pellets in 2010, operating at only 65% of capacity.)
“Today, pulp, paper and power are a complimentary group of businesses,” Robinson continues, “but green power itself is certainly not at a level that it could support a standalone green field operation.”
Robinson says he is advocating for fair market pricing.
“Jurisdictions across Canada and around the world recognize the higher value of green power,” he said. “Corporations marketing their products as green and sustainable are willing to pay the higher cost of green energy.”
Alternative technology for alternative energy
The supply of cogen electricity also depends on the pulp industry’s ability and willingness to take advantage of technological innovation. FPAC’s Lansbergen says there are new types of energy conversion, such as biomass gasification and pyrolysis, that have the potential to replace the boiler in the cogeneration process.
Canfor’s Robinson notes that a 50-megawatt gas-fired turbine would make a mill self-sufficient in power, with the exhaust steam used for heat.
“Today’s combined cycle gas-fired turbine technology is far more efficient than single-cycle gas turbines,” he said. “It produces triple the amount of energy that single-cycle turbines operating today produce. Plus we have lots of natural gas and it’s low in price now. Natural gas is already used as a heat source in most mills. Why not try to generate some power first, and then use the waste heat to offset existing gas consumers?”
Alberta Newsprint, in fact, has recently announced it will build a natural-gas fired power plant at its mill in Whitecourt, Alta. The company will use the electricity for internal use and sell excess to the Alberta grid.
Wenli Duo, principal scientist of thermochemical processes at FPInnovations in Vancouver, says there are alternative fuels that can be used in pulp and paper mill steam boilers.
“At present, steam boilers in kraft mills use hog fuel and black liquor and mechanical mills use hog fuel,” said Duo, who is an expert on boilers used in pulp and paper mills. “Other fuels may be co-fired with hog fuel to increase efficiency and/or to reduce emissions.”
Examples of alternative fuels which help to burn biomass of high moisture content are tire-derived fuel, which is composed of shredded tires, and coal.
“Adding low sulphur coal by up to 10% to chlorine-containing biomass can substantially reduce dioxin emissions,” said Duo.
Other fuels that can be burned with biomass include shingle waste, agricultural residues and used railroad sleepers (ties).
Duo says not all hog fuel boilers in use at pulp and paper mills today are suitable for co-firing these alternative fuels.
“However, boiler technology is evolving and more advanced boilers, such as fluidized bed boilers, can burn mixed solid fuels,” he said.
A switch to alternative fuels or gas-fired turbines could be step two in the industry’s evolution as a green power producer. For now, most mills are newcomers to electricity sales and working out how to balance the demands and rewards of two distinct products, two markets, and two revenue streams.



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