Bioenergy from forest Mr.Ilpo Mattila, Head of Section

1. Bioenergy from forestMr.Ilpo Mattila, Head of Section Central Union of Agricultural Producers and Forest Owners (MTK) Eurofonet Conference 20.11.2007 Brussels Ilpo Mattila

2. 164 000 MEMBERS RURAL ENTREPRENEURS FOREST OWNERS FARMERS FOREST MANAGEMENT ASSOCIATIONS (FMA) (150) LOCAL FARMERS ASSOCIATIONS 397 REGIONAL FARMERS UNIONS (16) FUR BREEDERS´ ASSOCIATION REGIONAL FOREST OWNERS’ UNIONS (10) THE OFFICE OF THE CENTRAL UNION OF AGRICULTURAL PRODUCERS AND FOREST OWNERS Maaseudun Tulevaisuus (Newspaper) THE ORGANISATION OF MTK, 2007 Ilpo Mattila

3. Coal 13.3% Oil 25.9% Natural gas 10.9% Hydro power 2.7% Wood fuels 21 % Nuclear 16.7% Net import of electricity 3.1% Heat pumps REF and other Peat 1.0 % 6.4% Primary energy sources in Finland, 2005 Wind power 0.02% Total energy consumption 1,402 PJ ~ 390 TWh ~ 37 Mtoe/a Ilpo Mattila

4. Who owns Finnish forests? Wage & salary earners 15.5% Farmers 20.4% Pensioners 19.8% Entrepreneurs 3.7% Other private 2.4% Others Forest Industry 4.9% 8.9% State 24.4% Share of Forest Area, % Private Families 62%* * 2007- Private families 60% State 26% Source: Finnish Forest Research Institute Ilpo Mattila

5. Use of wood fuels and peat in different sectors in Finland in 2004 80% of wood energy is used in forest industry, use in other sectors is growing fast 50 Other industry, condensing power Residental heating District heating Forest industry 40 30 TWh 20 10 0 Black liquor Forest chips Wood residuesfrom industry Small scale use of wood Peat Most bioenergy (=wood fuels) is used in large scale CHP production within the emission trade sector without significant subsidies Ilpo Mattila

6. Production costs of forest chips Ilpo Mattila

7. Average price paid at the plant in Finland Ilpo Mattila

8. Heat entrepreneurship – what is it? Rural small and medium-sized entrepreneurship, in which the entrepreneur is paid according produced heat fuelled by biomass fuels Forest owners refine the wood fuels into heat and do not sell only raw material MTK has actively developed the operation model as an organisation for forest owners Currently about 170 heat entrepreneurs managing some 340 plants Total output is about 170 MWth Heat produced 400,000 MWh/a Use of wood fuels 600,000 m³ loose/a Average boiler output 500 kWth Largest heating plant is 3.6 MWth 1 solid m3 is about 2.5 loose m3 and about 2 MWh Ilpo Mattila

9. Fuels, operation and costs • Solid biofuel as the main fuel, light fuel oil as reserve and for peak load Forest chips are the most significant energy wood. • Full-time entrepreneurs will be main trend in the future – today most of them are part-timer entrepreneurs • Pellet heat entrepreneurship is up and coming • Cost structure guarantees stable price of heat • Capital costs ⅓ • Fuels ⅓ and the average fuel price is 16 €/MWh • Repairs, maintenance, administration, electricity, saleries ⅓ • Earlier initial investment was done by the local authority, currently the entrepreneur is the most common investor • First customers were local municipal real estates and regional heating companies, currently the share of private enterprises is growing most rapidly Ilpo Mattila

10. Small-scale heat entrepreneurship Ilpo Mattila Source: VTT/EUBIONET 2 (www.eubionet.net)

11. Number of heat entrepreneurs Ilpo Mattila

12. Heat entrepreneurship in the changing operating environment • Change in the price relations • Light fuel oil is no longer the biggest competitor as the price has increased 2.5-fold in five years • The price of heavy fuel oil is sufficient enough to make wood heat more competence in the business • Competition with other heat entrepreneurs and energy utilities has increased • Effort is to increase plant sizes • Strengths: • Flexible way of operation • Smaller expected return on investment on capital than with energy utilities • 340 references available in Finland Ilpo Mattila

13. Kyyjärvi energy co-operative • Established in 1998 • 40 members, which are forest owners • Managing a 2.5 MW (1 MW + 1.5 MW ) wood chips plant • Heat production about 6,500 MWh/a • Plant and network owned by the local authority • ”The co-operative owns only the sample devise • Wood chips are purchased delivered into the silo at a MWh price • The wood chips cost €16.15/MWh (+ adjustment payment for the shareholders) • Local authority pays €22.95/MWh for the heat, contract valid indefinitely, price can be negotiated if necessary • Local authority sells district heat at a price of about €43/MWh Ilpo Mattila

14. Considerations of the future of heat entrepreneurship • Co-operative thinking will move aside, entrepreneurship will increase • Entrepreneurs are also willing to build district heating networks • Local authorities will outsource heat production • A target of 1,000 heat enterprises in 2010 • MTK to be a shareholder in the Biowin (www.biowin.fi) heat enterprise, which develops a franchising model for heat entrepreneurship • Forest owners and rural residents will own the heat companies • In addition to local authorities, the heating of the real estates of small and medium-sized enterprises will be part of the business operations to an increasing extent • Possible introduction of the feed-in tariff will increase competitiveness Ilpo Mattila

15. Competition for fuel chips • The procurement of energy wood promotes forestry; a great need for early thinning of forests • Forest industry fears that pulpwood will be used as energy wood • If the forest industry does not need pulpwood, forest owners will sell it as energy in the future • Emissions trading and the EU targets for renewable energy will increase the competitiveness of energy use • The target is to utilise wood as raw material in the forest industry first • Second-generation biofuels are a challenging target for the use of wood Ilpo Mattila

16. Ilpo Mattila

17. Unloading wood chips Ilpo Mattila

18. Ilpo Mattila

19. Thank you for your attention More information Ilpo Mattila, email:ilpo.mattila@mtk.fi Ilpo Mattila