Abstract
This chapter analyzes the economic competitiveness of energy based on forest biomass in comparison with energy based on fossil fuels. Under current market conditions, forest biomass is not cost competitive with fossil fuels. Improving technologies regarding production and energy conversion could make forest biomass economically more attractive. In the policy sphere, incentivizing the production of forest biomass, its energy conversion and use, as well as taxing fossil fuels for carbon emissions, could also improve the competitiveness of this renewable resource. The long-term prospects of energy based on forest biomass, including policy measures such as carbon taxation, are still highly uncertain, mainly due to large uncertainty in the future developments of carbon prices. Moreover, accounting for the carbon emissions of energy based on forest biomass itself could further restrict the effect of such measures.
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- 1.
Renewable energy includes a heterogeneous bundle of technologies that use resources such as biomass, wind, solar energy, geothermal heat, tidal power, wave power and other hydraulic power sources to produce energy in the form of electricity, heat, or fuels to be stored and used for power later.
- 2.
Interested readers are referred to Part 1 of this book to explore these issues further.
- 3.
These include the costs of producing or procuring forest biomass itself and converting it into energy.
- 4.
Incentive programmes like Kemera could also encourage the harvesting of more stands at a young age, reducing the potential timber supply in future. This issue is, however, outside the scope of this chapter.
- 5.
Gan and Smith (2006a) reported that at a carbon emission tax of about € 18.71 per Mg CO2 emissions, biomass recovered from logging residues would be economically competitive with coal in electricity production in the USA. Biomass from hybrid poplar plantation would be competitive at a carbon emission tax between € 56.12 and € 93.54 per Mg CO2.
- 6.
This would cause some adverse effects on the availability of wood for material and industrial uses, since the availability of wood is limited. Discussion of this issue is, however, outside the scope of this chapter.
- 7.
Forwarders currently used in Scandinavia forward logs only.
- 8.
Note that this cost reduction estimate is adjusted for the fact that the higher moisture content of the residues slightly increases their transportation cost. Indeed, chipping at the plant was reported by Röser et al. (2011) to be the cheapest option of forest biomass energy production in Scotland, where conditions are not much different from those in Scandinavia.
- 9.
With the increase in demand for forest biomass, the stumpage price for forest residues could rise in the future. An estimate shows that the price could double in Finland and Sweden in the next- 20 years if the historical price path is followed and demand continues to grow. However, the price of fossil fuels fluctuates from time to time for both economic and non-economic reasons (Gan and Smith 2006). The historic trend is upward. This could counter the increasing stumpage price, as the relative price rise for energy could be higher than the stumpage price. In addition, hauling costs could also increase with the demand for forest biomass, as harvesting would move to more remote forest areas (ECF; Sörda, Sveaskog and Vattenfall 2010). However, improving the efficiency of loading and transportation of forest residues could neutralize this increase in costs.
- 10.
The second commitment period of the Kyoto Protocol could also be 2013–2017.
- 11.
- 12.
The values presented in this chapter were converted from GBP to EUR using the average exchange rate during a one-year period (14.11.2011–14.11.2012). The value was estimated using the European Central Bank (ECB) Internet site (http://goo.gl/VpJOm).
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Disclaimer
The authors declare that the views presented in this chapter are entirely their own, not those of Indufor Oy or Helsinki University.
Acknowledgements
The authors cordially acknowledge two anonymous reviewers and Dr Ashraful Alam, co-editor of the book, for their insightful comments, useful suggestions and corrections. Sepul Barua thanks Suvi Anttila, CEO of Indufor Oy for her useful comments and encouraging words while writing the chapter, and Sami Niinimäki, Department of Forest Sciences, Helsinki University, for helping to identify suitable literature. Special thanks to Professor Roy Siddall from Helsinki University for language reviewing the chapter.
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Barua, S., Bonilha, R. (2013). Economic Competitiveness of Forest Biomass Energy. In: Kellomäki, S., Kilpeläinen, A., Alam, A. (eds) Forest BioEnergy Production. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-8391-5_14
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DOI: https://doi.org/10.1007/978-1-4614-8391-5_14
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