Bio-coal market study: Macro and micro environmental factors in the bio-coal sector in Finland

1. Bio-coal market study: Macro and micro environmental factors in the bio-coal sector in Finland Lei Wang 15.02.2013

2. GENERAL INFORMATION Main thesis: Background study and macro & micro factors • Background of the study • Definitions • Current state of the bio-coal business in Finland • Micro and macro environmental drivers for bio-coal in Finland • SWOT summary and conclusion

3. Background of the study • Sustainable energy solutions should embody economic, social and environmental issues, and meet the present energy needs without compromising the ability of future generations to meet their own energy needs. • Share of wood-based bio-energy to Finnish total energy consumption: 20% (85TWh) => 30% (99TWh) by 2020 • Little attention has been paid to the Finnish wood-based bio-coal product and market.

4. Purpose of the study • The general purpose is to identify the current situation of the Finnish bio-coal sector, and outline a comprehensive picture of the macro and micro business environments related to bio-coal in Finland, as well as use a SWOT analysis to suggest guidelines and hypotheses regarding what the Finnish bio-coal business market should improve for future.

5. Key definitions • charcoal, bio-char, char, torrefied wood, torrefied pellets, green coal, black chips, black pellets • puuhiili, grillihiili, TOPpelletti, torefiointi / paahdettu biomassa, biohiilipelletti, and Biocarbon. • bio-coal has been defined as an umbrella concept which covers all solid thermally degraded biomass products produced in the process of pyrolysis, including torrefaction and hydrothermal carbonization with different features and applications.

6. The tri-dimensional approach

7. Current state of bio-coal business in Finland

8. Current state of bio-coal business in Finland • On a non-industrial scale, bio-coal is a seasonal commodity used for grilling and barbequing • bio-char and distillates as a growth enhancer for plants, activated carbon to remove pollutants (purification), soil improver and a by-product application in odour prevention • neither an industrial demand to market bio-coal in Finland, nor a clear price tag on bio-coal • The first bio-coal production plant in Finland is to be built in Ristiina in 2015 on a total budget of EUR 30-40M, and a planned production capacity of 200,000 t/a

9. Macro and micro environmental factors • Policies related to bio-coal • Finland's National renewable energy action plan plays a key role in the bio-coal sector and sets the baseline for its development • energy taxation • tax relief • production and investment subsidies • funding for R&D • and incentives for production and end-uses • but, tax rebates, investment incentives and production incentives are unclear in this sector, and lack specific support for bio-coal end-users.

10. Macro and micro environmental factors • Economic and social environment to bio-coal • the traditional energy sector is highly dependent on imported energy • the traditional energy sector is highly concentrated • the Finnish energy industry owns a variety of energy sources • non-viable bio-coal economic feasibility (350-450€/t [40-50 €/MWh]) • Enhances regional policy, employment and energy security significantly, because its activities evolve around local resources and value addition, leading to diversified local economic development. • The bio-coal sector apparently falls into the needs of constructing the bio-economy (50.75 bn€, 13.5%)

11. Macro and micro environmental factors • Environmental factors for bio-coal • the renewable energy sector could produce of emission reductions equivalent to 4-5 Mtons of CO2 in 2010, and contribute 25-30% of its national reduction target in total by 2020 • Bio-coal and other by-products produced in Finland are considered CO2 neutral • Bio-coal contains superior environmental credentials compared to wood chips and pellets, such as calorific value, energy density, moisture content and degradability

12. Macro and micro environmental factors • Technical factors for bio-coal • harvesting of biomass, chipping, transportation, refining, and conversion • The use of bio-coal will substantially increase the potential ratio of co-firing in standard coal-fired power plants (up to 100% in comparison to about 10% based on wood pellets)

13. Macro and micro environmental factors • Potential demand for bio-coal • coal-fired power plants (The potential market size of replacing coal with biomass fuels in Finland will be about 7-8 TWh/annually) • district heating (CHPs) (more than half the fuel consumed in district heating can be replaced by bio-coal, about 30,000GWh/annually) • small-scale use. (250,000 small-scale central housing heating systems ; 300,000 oil-heated single-family houses)

14. SWOT • Secured biomass supply • Environmental friendliness • Supportive policies. • The entrance requirement for the bio-coal business is relatively low, “early birds” with foresight will win out • Sufficient funds or investment for the launching periods of bio-coal projects.

15. SWOT • As an entirely new business • bio-coal does not have a clear development model • little market information available • non-viable economic structure • distribution channels which are not yet available. • We would like to advise Finnish companies to work out the cost structure, profit feasibility of the bio-coal business and construct a practicable and sustainable biomass supply system

16. SWOT • Opportunities of the Finnish bio-coal sector come along with the national sustainability development policies and construction of a bio-economy. • We would suggest that they focus on decentralised local economic sales, biomass supply and energy end use

17. SWOT • Competition with fossil coal and other wood-based bio-fuels. • Improving its competitiveness requires cooperation and integration along the whole supply chain. • co-firing bio-coal with fossil coal and other bio-fuels can be a perfect point at which to introduce bio-coal to the market with the current energy consumption technology and market structure

18. THANKS!