presentation to the fra western region · •fiber feedstock - variable over time, subject to...

Presentation to the

FRA Western Region

Bioenergy Trends and Outlook

Stan Parton Manager, Bioenergy/Biochemical Practice

Forest2Market, Inc.

May 20, 2015

Slide

© 2015, Forest2Market, Inc.

Biomass for Energy (and Chemicals)

• Three ‘non-traditional’ growing end markets which utilize biomass – Solid biofuel for power generation (pellets and wood fuel

chips)

– Liquid biofuels (transport and aviation)

– Biochemicals for renewable end products

• Drivers for growth – GHG reduction - power generation and transportation

– National security – aviation fuels

– Corporate responsibility – Response to consumer demand for sustainable and degradable products – biochemicals

• So where are we along the market development path?

Slide


SOLID BIOFUELS

4

Slide


Biopower Generation Observations

• Collapse of the California biopower industry while

at the same time California launched its carbon

market

• 35 different state RPS – where to invest??

• Legislation introduced for US national RPS

(Federal getting in step with the States)

• A confusing market domestically but the rest of the

world charges on with replacing fossil power

generation with renewables including a large

component of biomass

5

Slide


European Market

• Drivers

– Legally binding aggressive GHG reduction targets

• 2050 - 80%-95% reduction from 1990 emission level

• 2020 – 20% reduction – a long way to go, how to get there?

– Security (and cost) of natural gas (from Russia)

– Continued growth in EU heating market (home,

institutional)

– Collapse in the EU carbon market

• EU is 80% of the global pellet consumption with

little resources to produce their own, especially to

meet any new pellet demand

6

Slide


Global Pellet Demand – 2014

• 24 mm metric tonnes (11 mm Industrial, 13 mm Heating) – UK ~ 36%

– Belgium, Denmark, Netherlands ~ 36%

– Balance of the world ~ 28% • South Korea ~ 4%

• Japan ~ 1%

• South Korea – Majority of supply from Asia, CND ~ 20%

– Price sensitive, sustainability not yet a major concern

• Japan – Majority of supply from CND

– Interest in black pellets

– Sustainability is a consideration

7

Slide


Current and Projected 2020 Market Demand

US supplying approximately 24%:

5.8 million tons

Where will the

global supply

come from?

8

Asia is to grow

about 4 million tons

Global Demand to Double

by 2020

Slide


The West Coast Pellet Producers

9

Announced BC Additions:

Pinnacle – Chase

Pinnacle/Tolko –

Livingston

Coast Tsimshian

Resources- Terrance

General Biofuels – BC?

Slide


10

US South Positioned to meet Growing

EU Demand, PNW/CND Asia Growth

Demand/Production Million Metric Tons

Global Demand (Year 2020) 48.9

Less 80% of Asian Demand (Supplied by Asia and Western North America) (4.5)

Less 50% of North American Heating Demand (Supplied by Northern US/Canada) (2.6)

Net Global Demand (Year 2020) 41.8

Less South Production (Operating + Construction / Startup, Year 2015) (8.8)Less Other Global Production (Operating, Current) (17.9)

Remaining Production Capacity Needed to Meet Global Demand (Year 2020) 15.1

Less Assumed Incremental US South Production Capacity (30% of Announced Projects) (3.1)

Less Assumed Other Incremental Global Production Capacity (30% of Current Other Global Capacity) (6.0)

Potential Incremental Production Capacity from US South (Year 2020) 6.0

Current major export production 13

Under construction or in startup 9

Announced new projects 16

Additional potential projects 10-12 half million ton plants

US South Growth

Slide


• Green and

Yellow operating

or under

construction

• Red proposed

• Moving inland

• A few available

‘prime spaces’

for new projects

11

Pellet Producers by Capacity and Status

Slide


Pellet demand not

the only driver for

price increases – but

a likely contributor.

Other factors include:

• Reduced level of

residue

production

• Sawtimber

oversupply

• Continued strong

Pulp demand

12

Pine Pulpwood Delivered Price Change

(2012-2014)

Slide


• Logistics – basically fixed once a plant site is

selected

• Fiber feedstock - variable over time, subject to

market changes

• Key feedstock factors for project developers

– Availability – Supply/Demand balance

– Sustainability of supply

– Cost

13

Major Factors Impacting Pellet or

Biofuels/Biochemical Plant Location Decision

Slide


Pellet Summary

• Demand for export pellet market continues but

build out slowing as capacity matches current

demand and uncertainty exist related to absolute

future demand,

• National RPS may result in increased demand for

domestic biopower generation.

14

Slide


LIQUID BIOFUELS

15

Slide


Transportation Fuels

• Increasing levels of ‘technical difficulty’ ‘Bio-oil’ Bio-diesel Aviation Cellulosic Ethanol / Chemical

• Corn ethanol is easy (and profitable with corn subsidies)

• Currently represents almost 10% of the gasoline fuel market

• EPA sets the blending requirement for blenders – still waiting for 2014! blending requirement (due in June)

• EPA appears to have bought into Big Oil’s 10% ‘blending wall’.

• Therefore advanced cellulosic fuels must ‘push’ corn ethanol out to get into the market – difficult to do

• Five years ago vs. today – technology and policy

• Makes investment decisions difficult – Abengoa for example

• Op-ed analysis indecision by EPA has cost $13.8 B in investment

16

Slide


Aviation Biofuels

• Promoted as driven by environmental needs but

aviation GHG emission only ~ 2% of global GHG

emissions.

• Actually driven by national security and the military

• Cooperating with commercial aviation to have a

‘drop-in’ equivalent JP-8/Jet A fuel

• With Boeing in Seattle, much of the interest in the

development for aviation biofuels is taking place in

the PNW – Gevo, Butamax, LanzaTech,

17

Slide


BIOCHEMICAL

18

Slide


“It’s Complicated!”

19

Slide


A Highly Fractured Market

• Two basic technical paths – Thermal (syngas – residue, NG competition, limited products)

– Liquid (more complex but makes higher value products)

• Progress being made but much remains to be done technically and ultimately economically.

• Difficult to command a product premium.

• Platform chemicals removed from end products.

• Many companies, including small companies, only working on isolated technical areas of the pathways creating breakthroughs in intermediate platform chemicals and processes

• Many of these companies are small including start-ups who are or will be …..

20

Slide


Bought up by large international chemical

companies

21

Slide


The development of Biochemicals will

continue

• As technical ‘nuts are cracked’

• Multiple isolated processes are linked together creating the full process technology package.

• After all, why make $2/ gallon fuel when you can make $5/pound chemicals?

• The drive for higher value products from the base biomass feedstock will continue.

• This will likely improve the economics of biomass feedstock as higher value products can support higher cost feedstocks (if it is consistent, secure, etc.)

22

Slide


Conclusions

• Pellet market will continue to grow but low margin

product, low capacity-to-pay

• Watch what happens on the national RPS

• Liquid biofuels will develop slowly gated by EPA

• Biochemical is the bright hope but further into the

future

– Good potential use for residues

– Higher margin business than pellets, higher capacity-to-

pay

THANK YOU

23

Forest2Market, Inc.

15720 Brixham Hill Ave, Suite 550

Charlotte, NC 28277

www.forest2market.com

Stan Parton

Manager, Bioenergy Practice

770.925.8349

[email protected]

presentation to the fra western region · •fiber feedstock - variable over time, subject to...

Documents