Forest Biorefinery: Getting on with the job
By Pulp & Paper Canada
The forest biorefinery needs much more than interesting research to get off the ground. What should companies be doing now in order to improve their competitive position in the shorter term, while mov...
By Pulp & Paper Canada
The forest biorefinery needs much more than interesting research to get off the ground. What should companies be doing now in order to improve their competitive position in the shorter term, while moving towards a model of product diversification and better returns in the longer term? What detailed analyses can be made to mitigate the economic and technical risks associated with implementing the forest biorefinery, which can result in improved share value?
Attempts to define the current status of the pulp and paper industry in Canada inevitably become focused on investment performance, even though this approach does not assess the considerable human cost to the country. Be that as it may, the investment performance indicates that in spite of considerable effort by the sector, pulp and paper has lost ground to other investment opportunities. The TSX Paper and Forest sub-index as a percentage of the S&P/TSX index has declined from Jan. 1995 = 100, to Jan. 2005 = 45, to Jan. 2006 = 25 (Bloomberg-CIBC World Markets). A quick analysis of the current stock value of 7 of the largest Canadian forest companies versus their last/best significant peak over 10 years shows that every one is less, the best performer being *72% of their peak and the worst *10%. The PWC Report (PricewaterhouseCoopers Global Forest, Paper and Packaging Industry Survey – 2006 Edition – Survey of 2005 Results) comment for the Canadian pulp and paper industry on the low reinvestment ratio demonstrates “the reduced confidence within the besieged Canadian industry and the anticipated difficulties in realising adequate returns.”
Why is the Canadian pulp, paper and paperboard industry in an “economic stalemate” situation, and increasingly less competitive on a global scale? There are several well-described reasons for this including increasingly limited access to fibre that may become even more difficult in the future, the high Canadian dollar, record high oil prices, and increasing offshore competition. Certain of these factors can be addressed, however increasing offshore competition is a reality that is here to stay, and will further increase in coming years.
In order to place a realistic perspective on competition from emerging pulp and paper producer nations, consider the 1 million tonne per year bleached eucalyptus Kraft pulp (BEKP) mill currently under construction by Botnia-Orion in Uruguay. A systematic BAT analysis was made for the new mill, including comparisons with the best pulp mills in the world. In addition to the advantages of fast-growing forests, advanced processes, state-of-the-art liquor spills collection systems and a more environmentally-friendly footprint, the pulp manufacturing costs in South America for this kind of mill are typically half of those in Canada.
This is a pretty compelling argument in favour of the forest biorefinery, especially when you consider the numerous similar new mills to be built over the next few years in South America and Asia.
What is the emerging vision for the forest biorefinery? One possible definition: a modified mill that manufactures a diversified set of products which may include pulp and paper, and which results in a better business plan than the one that the pulp and paper industry is currently struggling with.
There are any number of possible process flowsheets based on several possible sources of carbon from this product chain (i.e.extractives from bark and foliage, biomass, hemicellulose from wood chips, cellulose for non-paper products, lignin, turpentine and tall oil, PHA/PHB from activated sludge, mixed sludge from the effluent treatment plant, and others) and on important opportunities for symbiosis, or combining pulp and paper mill carbon streams with others such as agricultural or municipal wastes.
There are also more complex flowsheets where, for example, lignin is gasified and transformed into transportation fuels. Finally, there is the concept of process flexibility, i.e. that the forest biorefinery produces a feed suitable for a petrochemical or other platform, so that a variety of products can be manufactured at variable production rates depending on market conditions. There are implications associated with any given flowsheet related to operating flexibility, economies-of-scale, product purity, market size, etc. However, the emerging vision for the biorefinery “winning solution” is not obvious but it is critical that a new direction must be taken.
Regarding the current Product Life Cycle, i.e. pulp and paper products, it is critical to consider a product range rationalization in order to define potential “free room” for new product development. The incremental economics, i.e. new biorefinery products (green electrical power, biofuels, organic chemicals, or bioextractives) need to be supported by a strong R&D culture that would be an essential element to manage in order to successfully implement the forest biorefinery.
The right biorefinery configuration will likely be a unique solution for every mill, including process and product design definition.
What a difference a year has made regarding advances in the forest biorefinery. February of last year was the first time a biorefinery session was held during PaperWeek International in Montreal, and those papers were subsequently published in a dedicated issue of Pulp & Paper Canada (June 2006). Since then, the number of sessions, meetings and conferences on the forest biorefinery have increased dramatically, including those during conferences held by the Canadian Forest Innovation Council (May 2006), the World Congress on Industrial Biotechnology and Bioprocessing (Toronto — July 2006) the IEA workshop on Energy Efficient Technologies and CO2 Reduction Potentials in the Pulp and Paper Industry (Paris — October 2006), the European Conference on Biorefinery Research (Helsinki — October 2006), the Chemical Institute of Canada (Montreal – October 2006), the CQVB and cole Polytechnique (Montreal — November 2006), TAPPI’s Engineering, Pulping & Environmental Conference (Atlanta — November 2006) and the American Institute for Chemical Engineers (San Francisco – November 2006).
And the best is yet to come. PaperWeek International 2007 (Montreal – February) is hosting two days of sessions concerning the forest biorefinery, organized by the newly-created Canadian Forest Biorefinery Network, and TAPPI will soon host a conference on Renewable Energy (Atlanta – May 2007) in order to capture advances in this potential transformation of the forestry sector.
What can we draw from these various meetings in Canada and around the world? The biorefinery problem statement is an unusual one for the pulp and paper industry, where in the past “new” products have typically been variants of existing products. With the forest biorefinery, the industry is seeking to implement entirely new business models with the goal of transforming itself. A few items of note from the meetings:
Several biorefinery pilot and demonstration plants are underway in the U.S. and Europe, while in Canada, to date, there are none.
Significant energy efficiency gains can be achieved if existing mills are retrofitted with energy efficient technologies. Waste heat recovery systems are not widely used, and cogeneration deployment suffers from power market distortions and regulatory uncertainty (IEA Workshop).
It is difficult for the Canadian forest sector to compete with others on the cost of fibre alone. To create value from its supply of quality fibre, the industry needs to collaborate with other industries and sectors in order to develop new and unique products.
There is a risk of looking for the silver bullet. There is almost certainly no technology that provides a single answer to sector sustainability. The Canadian forest sector should consider concentrating on a number of platforms and concepts rather than specific technologies or products (CFIC Report).
The workshop panels (Bioba
sed Industry Workshop held in Montreal, October 23, 2006) emphasized that the commodity culture of the industry must change, and that the stock market must be informed once a clear vision for the biorefinery has been developed. “Rapid Market Analysis” is essential, whose goal to identify products and their markets without considering processes or flow sheets in detail. Joint ventures with companies in other sectors will also be critical for many pulp and paper companies, for their complementary operating and supply chain expertise, and to alleviate the economic stalemate condition of the industry.
It might be said that the more we know about the forest biorefinery, the picture becomes increasingly complex and there are more questions than answers. Consider the following:
How can the pulp and paper industry leverage its unique advantage of access to forest biomass, and harvesting know-how?
What financial models can the pulp and paper industry use to have access to the capital needed to develop the forest biorefinery?
What feedstock synergies are possible? What sectors/companies should the industry establish joint ventures with?
What is the best business model and market strategy (pricing strategy, market penetration strategy, market segmentation strategy…) for pulp and paper products once the product offering from a mill or company has diversified?
Are there opportunities for products that are mature and have an established supply chain, e.g. replacement of specialty petrochemicals with green ones?
What are the possible business synergies between the proposed new product and existing pulp and paper products?
The NSERC Environmental Design Engineering Chair at cole Polytechnique (www.pulp-paper.ca) applies process integration tools to perform systems analysis of pulp and paper processes, and today is focusing on developing methods to assess the forest biorefinery, as well as methods to achieve shorter-term value through the analysis of process and cost data. With its pulp and paper industry partners as well as a new strategic alliance with Natural Resources Canada, our initial activities have targeted what we believe to be the immediate priorities for the industry (see sidebar), including building technologies which can transform the pulp and paper industry into a knowledge-based industry.
In Heather Lynch’s piece entitled “Obsolescence” (see Pulp & Paper Canada December 2006, p.17), the general-manager of R&D at Cascades, Roger Gaudreault, discussed the importance of innovation, the need for new products, and how the time-to-market for new products has dropped dramatically as successful companies have become increasingly more nimble in this context. He ended by asking whether the Canadian pulp and paper industry will improve its ability to innovate or whether we will “waste time and money and opportunity by managing our self-imposed obsolescence.”
Certainly Canada must move quickly if the Canadian pulp and paper industry is to again prosper. Government needs to act quickly, and play an important role to facilitate the changes needed to enhance the likelihood for the biorefinery: “tax rates in Canada are higher than those in virtually any other developed country” (see Avrim Lazar quoted in box entitled “Reducing Taxes an Urgent Priority” — Pulp & Paper Canada December 2006, p.25).
Perhaps the ultimate result of offshore competition will be a significant reinvestment in the Canadian pulp and paper industry which transforms the current business model into one more suitable for today’s economic and competitive landscape. The stock market and company leadership must first be convinced based on sound arguments and business plans. A multidisciplinary approach involving principals of business and technology will be essential, linking to imaginative and innovative opportunities. The correct choice begins with a careful analysis leading to a refined list of possible biorefinery products, and then these choices should be further analyzed through a systematic design process. Product and process design tools exist for a systematic analysis with the objectives of extending product offerings from mills, preserving the value of existing assets, and designing for flexibility. Careful business planning will be key. Innovation will be key, as well as speed to market with new biorefinery products. The constellations may be aligning — let’s get on with the job.