Discussions regarding feedstock require a lot of attention at the start of any bioenergy, biofuels or biochemical project. Considering feedstock costs are the largest variable cost component across the life of a project, a thorough analysis is a vital first step. In addition to feedstock cost and supply, a project positioned for success must also pay close attention to wood fuel as a resource.
Many biobased products are developed through extensive processes that use additional energy sources. For example, wood pellet facilities must dry chips before they can be converted into useable wood pellets, which means an alternative energy source is needed to complete the drying process—in this case, wood fuel. Wood fuel is sourced from either sawmill residues or in-woods materials. Sawmill residues are a by-product of the lumber manufacturing process and include bark, sawdust, and shavings. In-woods wood fuel consists of the tree limbs, tree tops and other non-merchantable woody material collected during or immediately after forest thinning or harvest.
These materials contain a signiﬁcant amount of contaminants such as sand and mud, and the moisture content is also variable. As such, this material is typically available at a fairly low cost. Using as much residual wood material as possible to dry wood chips before they are manufactured into wood pellets enables pellet facilities to keep costs down. However, wood fuel is not always readily available.
Wood fuel is expensive for logging operations to recover and transport, and there is little reason for them to do so in the absence of a viable market. However, added demand for wood fuel in the form of a new bioenergy facility is an incentive for more loggers to invest in the equipment and employees needed to bring a larger volume of this material to the marketplace.
To encourage a higher adoption rate, bioenergy, biofuels and biochemicals manufacturers can engage in a number of strategies to incentivize more loggers to invest in wood fuel recovery. Tactics include preferred supplier status, delivery zone allowances, equipment leasing, extended receiving hours, and quick turnaround time for inbound trucks.
Supply agreements are particularly effective, as they establish a guaranteed off-take to the market. For example, a production facility will purchase a sufficient volume of material at a fair market price, thereby reducing the logging operation’s perceived risk and aiding in the acceleration of adoption. A long-term supply agreement appropriately alleviates price risk for both the buyer and the supplier, and also satisfies lenders.
A lack of available wood fuel in any single region is typically a short-term (1-2 year) risk at project startup. To address wood fuel supply, biobased manufacturing facilities can modify market behavior through incentives, or budget for the increased transportation fuel costs needed to travel further from the feedstock procurement zone to secure the wood fuel they need.