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Today’s Presentation
l Industry Context
l Integrated Forest Products Biorefinery
l Concept
l Forest Products Industry Advantage
l Mill Integration Model
l Product/Offtake Options and Markets
l Initial Economics
l Important Considerations
l Phased Implementation
l Ownership
l Incentives and Credits
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U.S. Forest Products Industry
Context
l Industry encompasses private forest owners and
manufacturers of pulp, paper, paperboard, and
wood products
l Accounts for 6% of total US manufacturing output
l Top 10 manufacturing employer in 42 states with
estimated payroll exceeding $50 billion
l Approximately 140 pulp and integrated pulp &
paper mills in the US – could convert up to 75%
to biorefineries
l Agenda 2020 Technology Alliance provides
leadership for industry biorefinery strategy
l Partnership with industry, government, and academia
l Innovation in processes, materials, and markets
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Integrated Forest Products
Biorefinery (IFBP) Concept
Building Recovery/ Paper, Board,
Forest Pulp Mill Power Plant
Products Mill Other Mills
Pulp
Energy
Chips Energy
Black
Liquor
Optimized Plantations
Fuels/ Fuels/
Chemicals Chemicals
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IFPB: Forest Products Industry
Advantages (2)
l If fully developed and commercialized, IFPB technologies have
potential for significant national benefits:
l Diversified, more secure national energy supply
l Geographically distributed supply source
l Reduced environmental impacts
l Improved energy efficiencies
l
l Carbon benefits include:
l Displace use of natural gas and fossil fuel use in industrial
applications (including power generated using fossil fuels)
l “Green” liquid transportation fuels produced as co-product,
displacing use of petroleum fuels
l Use of energy crops can lead to changes in land
management, increasing the net average carbon stored
per acre
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IFPB: Forest Products Industry
Advantages (3)
l Initial economics are compelling
l Princeton/Navigant study show strong IRR,
potential for significant new revenues, and
possibility of monetizing environmental
benefits
l Private investor studies indicate that after corn
ethanol, biorefineries integrated with pulp
and paper mills show great promise for 2nd
generation biofuels production
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Mill Integration Model
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Mill Integration Model
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Mill Integration Model
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Mill Integration Model
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Mill Integration Model
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IFPB Product/Offtake Options and
Markets
l Electric Power Co-Generation
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IFBP Product Option:
Electric Power Co-Generation
l Forest Products Industry currently generates power for use in
industrial applications and sell to grid
l 60% of energy demand supplied by biomass
l 89% of electricity generated on-site is CHP
l In P&P mill, Tomlinson boiler provides power and chemical
recovery functions
l Gasification elements of IFPB would initially augment, then replace
the Tomlinson boiler
l Key drivers for the forest products partner:
l Improved energy efficiency with increased power output
l Offset purchases of fossil fuels and power from the grid
l Improved emissions profile
§ 80%-90% reduction of NOx and SO2 emissions
§ 80%-90% reduction VOCs and particulate matter
§ Reduction of over 20 million tons carbon emissions
§ Carbon-neutral in relation to greenhouse gas emissions when
combusted
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IFPB Product Option: Fuels and
Chemical Production from
Gasification
Black
Wood Liquor
or or
Residuals
Wood Wastes
Naphtha Fischer -
Ammonia
Tropsch Syngas H2
& urea
Waxes Liquids
Methyl acetate
Acetic acid Ethylne &
Propylene
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Potential IFPB Markets for Fuels
and Chemicals
U.S. Market Size, 2005 Average refinery gate Approximate market U.S.
Physical Units Quads per price (excl. taxes), 2005 wholesale, 2005
yr
FUELS
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Source: Princeton/Navigant
Market Context » P&P Industry Access to Product Markets › Infrastructure
Sources: Paper mills: Lockwood-Post, 2001; Refineries: National Petrochemical and Refiners Association, NPRA United States Refining and Storage
Capacity Report, July 2004 (NPRA data based on DOE EIA’s 2003 Petroleum Supply Annual and covers 149 refineries)
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IFPB Phase 3: VPP Product Value
Chain
Adhesives Films Polymers
Precursors
Fuels Chemicals
Modified lignin Modified fibers
Fermentable sugars
Polymeric lignin Fractionated fibers
Pretreated lignocellulose
Value
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Agenda 2020 Example
VPP Project Plan: Cellulosic Ethanol from
Hemicellulose Decision on Strain
Development Program
Extract
& Analysis Fly-off between the 4 –
6 high potential strains
Large-Scale
Extraction Phase
• Maple 2
• Loblolly Pine Business Case Engineer, Design & Construct
Raffinate
Positive
Verification
Phase
Positive
1 Effects on 1–2 Large-Scale Demonstrations
pulping & Selected Strain
paper quality Scale-up Phase
3
Phase
Secure Funding & Phase 3
Negative
Structure Program 1
ABORT
Negative
Steerin
g ABORT
Team
Phase
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1
0 6 12 18 36
Bonus Offtake Option: Industrial
Gasification
• Provide energy flexibility for industrial
applications in the forest products industry
and across other industry sectors
• Reduce natural gas consumption through the
use of alternative fuels and feedstocks (e.g.,
syngas)
• Replace natural gas used in industrial boilers
and process heaters with biomass-based
gas
§
Sector Natural Residual Distillate LPG/ Coal and Derived Net Other Total Use,
Gas Fuels Fuels NGL Coke Electricity Net
Chemicals 1984 50 9 51 284 602 749 3729
Mining 1268 5 262 0 77 355 631 2598
Pet Ref 948 70 4 33 0 123 2300 3478
Forest Products 659 152 21 9 279 327 1825 3272
Steel 456 29 5 0 48 163 971 1672
Glass 194 3 0 1 0 54 2 254
Aluminum 189 0 1 1 1 246 3 441
Metalcasting 136 0 1 2 0 63 31 233
Agriculture 77 0 339 221 0 221 14 1072
TOTALS 5911 309 642 318 689 2154 6526 16749
Taken from “Profile of Total Energy Use for US Industry”, Energetics, Inc. for the US DOE, 12 / 04.
LPG / NGL = Liquefied Petroleum Gas / Natural Gas Liquids
Table does not include energy sources used as raw materials.
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Options for Integrated Biorefineries and
Industrial Gasifier Systems
l Industrial Owned – Forest Products Industry
l Biomass (agricultural and forest residues) gasification
l Black Liquor gasification in second phase
l Size will depend primarily on overall energy needs of P&P
mill
l Combination of co-generation and fuels/chemicals
production possible
l Proximity to major US refining installations
l Co-location by chemical supplier possible
l
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l
Cost- Benefit Analysis of
Gasification-Based Biorefining
l Key drivers for forest products industry and energy interest in
IFPBs
l Study conducted by Princeton University, Navigant
Consulting, Inc., Politecnico di Milano, and IPST
l Work Performed for the U.S. DOE Under Cooperative Agreement
Number DE-FC26-04NT42260 ($770,000)
l Industry co-funding through AF&PA/Agenda 2020
l Final report available at http://www.agenda2020.org
l Focus on the thermochemical pathway, with various
production scenarios for biofuels, biochemicals and/or
electric power
l Alternative investment considerations for forest products
industry (e.g. Tomlinson boiler) and bioenergy partners
(e.g. other feedstocks and stand alone configurations)
lReduced emissions
lReduced fossil fuel use
Public Sector lImproved energy security & diversity
Benefits lDisplace high-priced and volatile fossil fuels
lThe value of technology leadership
lIncreasing need for clean fuels to meet fuel formulation requirements and new Federal
Renewable Fuel Standard1
Energy lHelps meet rising demand for renewable energy, e.g., Federal Renewable Fuel standard,
Industry state renewable portfolio standards, and state renewable fuels mandates1
Benefits lHelps pulp and paper producers maintain competitiveness in global markets - can help retain
jobs and contributions of this industry to the U.S. economy.
This study
MA
250000 NREL
Liquids Capital intensity
RBAEF
EU study
200000
($/bbl per day)
150000
DMEc
100000 MA
EtOH-2000
FTb 100,000 to 150,000
barrels per day
FTa DMEb FT
50000 DME
DMEa DME-OT FT-OT
MeOH
DME-RC Coal to liquids
Liquids capacity, barrels per day diesel equivalent
FTc
0 Gas to liquids
0 1000 2000 3000 4000 5000 6000 7000 8000
Petroleum refinery
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Key Conclusions of Cost/Benefit
Analysis
l Basic economics and thermodynamic analysis highly positive for gasification
based biorefinery configuration, depending on process and product
l High environmental value to industry, with possible implications for
improving our negotiating position for regulatory relief through Pulp and
Paper Air Sector initiative at EPA
l Current market conditions and potential renewable energy incentives
improve project economics
l Broad options in financing (incremental) capital costs due to interests by
utilities and private equity in biopower and biofuel production capability
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Phased Implementation Approach to
IFPB Implementation and Investment (1)
l Target biomass gasification (forest and agricultural residuals) for today’s
investment
l Gasify untapped waste products from farming and the forest to produce power,
bio-fuels, and/or other chemicals
l Use the waste heat from the refinery to meet the energy needs of existing
manufacturing operations – meets industry partner need for stability in energy
costs and supply
l Sizing of biorefinery capacity will be function of energy requirements: host mill
acts as a heat sink
l Combines both biorefinery production with “industrial gasification”, e.g.
displacing natural gas consumption & fossil fuel consumption at the host mill
l Benefit from credits for increased power production
l Low risk to existing processes and products
l Optimize gas-to-liquids yield and economics
l Softer entry into emerging biofuel markets
l Lay the foundation for expansion opportunities for Phase 2 and 3 as new markets
and technologies develop
l
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Phased Implementation Approach to IFPB
Implementation and Investment (2)
l Phase 2 - Add stream of spent pulping liquors to
gasification
l Phase 3 – Extraction of hemicellulose prior to
pulping or other similar processes
l Must address potential impact on current
production:
l Chemical recovery (phase 2)
l Pulp quality from extracted chips (phase 3) must be
acceptable
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Biorefinery – Phase I Pro Forma
Hypothetical 1000tpd kraft mill
2010 Assumptions / Comments
Revenues
Fischer Tropsch Liquids $61,200,000 FT Liquids at 120% of $47 per barrel of low sulfur light crude
Steam/Hot Water Sold to Mill 9,200,000 25% cost reduction to mill based on natural gas at $5.35 per
Syngas Sold to Mill 3,100,000 million Btu
Total Revenue $73,500,000
Expenses
Variable
Biomass - From Mill 800,000
Biomass - Regional 14,600,000
SR Operating Costs 6,700,000
GTL Operating Costs 5,100,000
Total Variable $27,200,000
Fixed
Management 2,000,000
Management Services 1,300,000
Misc Operating Expenses 1,000,000
Taxes & Insurance 300,000
Total Fixed $4,500,000
Total Expenses $31,700,000
EBITDA $41,800,000 57% EBITDA Margin
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Source: ThermoChem Recovery International, Inc.
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IFPB Ownership/Investment Options
(1)
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IFPB Ownership/Investment Options (2)
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Example of Biomass Availability:
Potlatch Southeast Arkansas Integrated Ag &
Forest Biorefinery
Source
In Forest :
Residues 41
Potential Credits and Incentives
Potentially Available Basis for Credit and Approach to Analysis
Credit
Volumetric Excise Tax Existing 51¢/gallon credit for ethanol
Credit Assumed that in the future the tax credit would be harmonized across all biofuels at the same level
Gasification Investment EPAct 2005, Sec. 1307 contains a gasification investment tax credit allowing 20% income tax credit
as the current ethanol credit, corrected for energy content.
Tax Credit Electricity
Renewable against “gasification-related”
MWh sales investments
into a voluntary “green power” program or to satisfy a mandated Renewable Portfolio
Premium Standard (RPS), e.g. through sale of renewable energy certificates (RECs) or “green tags”.
Value of $20/MWh, indexed to inflation, consistent with existing price for RPS compliance and
Renewable Energy Existing Federal renewable energy production tax credit for open loop biomass.
voluntary green power.
Production Tax Credit $9/MWh for ten years from initial operation, indexed to inflation.
Applies to all incremental electricity generation above Tomlinson level, consistent with existing
Carbon
(PTC) Credit Future
Applied“cap
definitions alland
to of “new trade”
incrementalsystem similargeneration
renewable
renewable to that
generation,” foras
e.g., SO
over allowances
the
in2 the Tomlinson
current level (but in theory,
Massachusetts RPS. may apply to
ALL
$25 renewable generation
per metric tonne CO2, ifindexed
the plant
to is considered
inflation (baseayear“new= generator”).
2010)
Biofuel Performance Superior performance and/or properties of biofuels relative to conventional fuels
Applied to net reductions, including grid offsets and conventional fuel chain offsets.
Premium 10 ¢/gallon for crude FT.
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Source:
Source:
Princeton/Navigant
Potential Credits and Incentives:
Considerations
l Eligibility of the feedstock
l Sustainable production
l Definitions (black liquor, MSW)
l Metrics used for calculating credits
l Caps versus intensity
l Mass, volume, energy content
l Implementation and availability of loan
guarantees
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