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New bioenergy business concepts during emission trading in the Baltic Sea Region

New bioenergy business concepts during emission trading in the Baltic Sea Region. Pirkko Vesterinen VTT, Jyväskylä. PROJECT PARTNERS: VTT Processes, Finland University of Jyväskylä, Finland Tallinn Technical University, Estonia FNR, Germany EC BREC/IBMER, Poland BIOP Institute, Germany

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New bioenergy business concepts during emission trading in the Baltic Sea Region

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  1. New bioenergy business concepts during emission trading in the Baltic Sea Region Pirkko Vesterinen VTT, Jyväskylä

  2. PROJECT PARTNERS: VTT Processes, Finland University of Jyväskylä, Finland Tallinn Technical University, Estonia FNR, Germany EC BREC/IBMER, Poland BIOP Institute, Germany Vapo Oy, Finland AS Tootsi Turvas, Estonia FINANCERS: INTERREG IIIB National and local authorities in each country

  3. Background • Countries within EU have challenging targets to increase the use of bioenergy • Russia has ample biomass resources • Baltic Sea provides a natural market area for biomass trade • Trade can be carried out by means of fuels (wood chips, tall oil, pellets, sod peat…), electricity, emission allowances, JI, green certificates… • Preconditions of investments in different countries vary Finland Sweden Estonia Latvia Lithuania Denmark Poland Germany

  4. Share of bioenergy of the primary energy in the beginning of 2000’s - varies from marginal to very relevant to the whole energy market % % 25 25 Relevant to energy market and prices 20 20 15 15 10 10 5 5 Marginal 0 0 Denmark Denmark Finland Finland Latvia Latvia Poland Poland BSR BSR EU EU - - 25 25 Estonia Estonia Germany Germany Lithuania Lithuania Sweden Sweden EU EU - - 15 15

  5. Share of RES-E from the total electricity consumption differs very significantly: from marginal to dominating % 80 1993 1993 Significant to energy market and prices 70 1998 1998 2003 2003 60 2010 ( 2010 ( target target ) ) 50 40 30 20 10 Marginal 0 Denmark Finland Latvia Poland EU-15 Estonia Germany Lithuania Sweden EU-25 -> differences in the share of hydro, typical capacities of plants, CHP/condensing plants, stand-alone/integration to industry Source: Eurostat

  6. EU has decided to use of 20 % renewable energy sources by 2020, now the share is under 7 % -role of bioenergy in each country ? Background report

  7. Total RES-E in 2001 and additional potential for bioelectricity according fo FORRES 2020 120 Biowaste Solid biomass Biogas 2001 100 80 TWh 60 40 20 0 Denmark Finland Germany Sweden Estonia Latvia Lithunia Poland • Largest market volumes for new investments and additional fuel in Germany and Poland, the next largest in Sweden and Finland • Structure of market (capacities of plants) differs considerably, as well as feasible promotion incentives

  8. Total RES-H using biomass in 2001 andadditional potential for 2020 according to FORRES 2020 18 16 Biomass 2001 14 12 10 Mtoe 8 6 4 2 0 Denmark Finland Germany Sweden Estonia Latvia Lithuania Poland • Additional potential of bioenergy large in each country in the heating sector • Feasible for local and centralised (pellets, bio-oil…) fuel markets

  9. Examples on Prices on Electricity Generated by Wood Fuels: incentives differ significantly 120 Feed-in tariff Certificates/subsidy Market price 100 80 EUR/MWh 60 40 20 0 Germany, 5-20 MW CHP Finland Sweden Lithunia Estonia Germany, 5-20 MW Poland Latvia

  10. GHG Emissions and Kyoto TargetsOld EU-countries have challenging targets, and not sufficient national allocation of emission allowances within the emission trade Index (base year = 100) 140 1993 1993 1998 1998 120 2003 2003 2010 ( 2010 ( target target ) ) 100 80 60 40 20 0 Denmark Finland Latvia Poland EU EU-15 Estonia Germany Lithuania Sweden EU-25 Source: Eurostat

  11. Fuel prices during emission trading (5-20-40 €/ton CO2) in Finland in power production

  12. Calculation of production costs of heat and electricity in each country for chosen plants • Investment estimations for similar plants in each country • Comparison of the heat and electricity production costs • Case 1: District heating plant, 5 MW, peak load utilization 5000 h/a • Case 2: CHP plant, 17 MWe / 40 MWth, peak load utilization 6000 h/a • (Case 3: CHP plant, 3.5 MWe / 16 MWth, peak load utilization 6000 h/a)

  13. Large variations in heat production costs because of differences in investment and fuel costs

  14. Peak load operation hours should be at 4000 – 5000 h/a, preferably even more. Additional peak load units with low specific investment costs are needed. Overdimensioning is expensive!

  15. Stability of fuel price is important because typical life times are 15 – 20 years. Solutions can be a well-developed fuel market and technical possibilities for multi-fuel use – preferably both

  16. Long annual operation time is the key for good competitiveness!

  17. Local conditions have a great impact on the electricity production costs

  18. Existing pellet production capacity in Baltic Sea countries in 2005 and potential pellet capacity based on the production of saw mills • Total capacities 3,896,000 (prod.) and 9,065,000 (pot.) tonnes • Also other sources of raw material • Also other uses for saw mill by-products

  19. Conclusions • Role of bioenergy varies in different countries significantly: from marginal to dominating in the energy market • National incentives on bioenergy have significant variations -> Increase of biomass trade, spot markets -> Increase of volatility on prices of biomass-based fuels -> Bioenergy is not anymore only local, but widely utilised source of energy

  20. THANK YOU FOR YOUR ATTENTION! Pirkko Vesterinen pirkko.vesterinen@vtt.fi ET-Bioenergy project New Bioenergy Business During Emission Trading Co-financed by EU BSR INTERREG III B NP

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