Bio Energy

Bio-energy and
Bio-chemicals
Synthesis Report
OUR
NAME
IS
INNOVATION
Table of Contents
Vision 1
1.1
Where are we now?
1.2
Where can we go from here?
1.3
How do we get there?
1.4
What are some key constraints?
Specific Case Studies 11
2.1
Heat and power
11
2.2
Ethanol
20
2.3
Synthetic Hydrocarbons
25
2.4
Energy products: Conclusion
29
2.5
Lignin-based products
30
2.6
Sugar-based platforms
36
2.7
Fibre-based products
42
2.8
The forest biorefinery
45
2.9
Chemicals: conclusions
48
Conclusion 49
Bio-pathways is a joint project

among FPInnovations, FPAC,
the CFS, and the provincial
governments of BC, Qubec and
Ontario. The Focus of the project
was How to support the forest
sector in choosing the right
Transformation Strategies? It
has been a two phase project
with this document beginning
release under the second phase
which had a market focus.
Vision
The new Canadian forest sector will profitably transform its renewable, sustainably managed resource
into a full suite of valuable products including: high-value chemicals and materials; traditional
products such as pulp and paper or construction materials; and energy products such as heat, power
and transportation fuels. This resurgent industry will continue to provide jobs to the population in
rural and small communities across the country, while helping Canada move to a clean energy supply
and reduce its carbon footprint.
1.1 Where are we now?

The Canadian forest sector has access to a large, sustainably managed renewable resource, much of it
grown on land unsuitable for agriculture. This resource contributes a range of green products, produced
in low-carbon facilities, to the Canadian economy. Traditionally, products from forestry are of three
types. Solid wood products include dimensional lumber and a range of panels and composites used in
building manufacture. Pulp and paper products include market pulps, newsprint and other mechanical
grades, fine papers, tissue and towel grades, and packaging materials. Residues are traditionally
used to generate heat and power for use onsite and sale to the grid. However, this model is under
stress. Some products, such as newsprint, are facing a structural decline, with a 60% decline in North
American newsprint consumption since 1999, while others, such as hardwood kraft pulp, are facing
heavy competition from low-cost producers overseas. The highly integrated nature of the industry
means that the decline of newsprint can negatively affect sawmills as well, as they no longer have as
large a customer base for chips generated as by-products from their operations.
1.2 Where can we go from here?

The Canadian forest sector is in a position to deliver even greater benefits in terms of low-carbon
products, whether energy or materials, while improving the industrys bottom line. In order to do
so, new product lines need to be identified, to supplement and strengthen the existing sector and to
generate new revenue and jobs, and to replace product lines which have seen a decline in demand
or are no longer competitive. These products must be based on Canadas advantages, which include
large volumes of certified sustainable harvested wood combined with innovative technologies and
industrial know-how. For illustrative purposes, the current forest sector model can be contrasted with
the petroleum refinery model, Figure 1, where 4% of the feedstock is extracted and converted to
high-value products which generate 42% of the benefits. As seen in the second chart, few products in
forestry can currently replicate this kind of high-return, low-volume, in spite of the green attributes of
the resource, its management and the products generated.
Figure 1. A) Benefits arising from various end-uses of petroleum. Source: T. Werpy, 2009 Bio-World
Conference. B) An approximate plot of the same form for the forestry sector.
This report attempts to illustrate some examples of the potential that exists for the forest industry
to redesign itself to more closely mimic the economics of the petroleum industry model. There are
new businesses, partnerships and products to be developed; some are non-traditional; several will
be smaller volume niche markets, or will involve a larger number of smaller customers, than is the
case today; most will require more due diligence than has often been done to date. There are many
potential opportunities and this report attempts to outline a few of them and highlight some key
guiding factors. The steps to a forest industry model that mimics the value-generating capabilities of
the petroleum industry can be described as follows:
Step 1: collect the feedstock
Step 2: extract products from it generating the highest possible value
Step 3: repeat Step 2, using any residues as the new feedstock. Repeat until all material has been
transformed.
This is illustrated in Figure 2. Products can include traditional and novel ones; the criteria must be to
generate the greatest possible value in each step. Generally, heat and power will be a necessary part
of the mix, but only after all higher value material has been extracted.
Feed
material
Extract
value
Identify
remaining
value
High-value
products
Residue
Heat,
power, fuels
Figure 2. A refinery model based on extracting the largest possible value from a feedstock.
This value-driven, customer-focused approach requires a significant shift in thinking and approach. As
new high-value products will need to be defined and developed, so, too, will new industrial partnerships
and customer relationships. It is likely that in many cases higher value products will mean smaller
markets; Figure 3 illustrates the relationship between market size and value. Cellulose-based fibres
enjoy a world market of the order of 1011 kg, but typical sales prices are of the order of $1/kg ($1000/t).
Specialty celluloses, in contrast, represent a market of 108 kg at prices of the order of $3/kg. For a
sector such as forestry, used to delivering 10 million tonnes of NBSK or 10 million tonnes of newsprint,
moving up the value curve means dealing with a larger number of smaller customers, each likely to
request its own unique set of product performance attributes, or secondary distributors or processors.
Market size / price for co-products derived from biomass

Biomass-deriv ed
Commodities
1012
Biomass-deriv ed
Specialty Chemicals
Biomass der ived

Phar maceuticals
C el lu lo se-ba sed
f ib ers*
1011
1010
Fatty
acids
10
Specialty
Celluloses
10
Galli c
acid
10
106
A ld ehyd es
( Vanillin*, SA, T BA )
M
Esse ntial
Oil s
Sterols*
10
Vi t min s
a
C h t san
io
& deriv ativ es
104
Bioactiv e
Polyphenols
Proanthocyanidins*
Chiral drugs
10
Mal t l*
o
10
Taxans*
ci s- 3- He xen o
l
tran -2-Hexenal
s
101
-1
10
10
10
10
10
10
Market price (US$ / kg)
Figure 3. The relationship between annual market size, in kilograms, and price, in $/kg. Source: Esteban Chornet,
presented at Towards a Technology Roadmap for Canadian Forest Biorefineries, Industry Canada Workshops
held in Montreal and Edmonton, November 2005.
1.3 How do we get there?

There are two parallel routes to transforming the forest sectorboth leading to new, renewable green
products. (In fact it is probable that the reality will be a mixture of these two extremes, and that there
will be activities that combine pieces of both.) These routes can be characterized as follows:
a step-wise modification of existing mills and capacities towards a more diversified bio-based
business model; and/or
build green-field mills for bio-production on conventional forest industry sites or as stand-alone
mills.
In both cases the most rapid commercialization route possible must be taken. Building pilot
demonstration plants at some intermediate stage between the laboratory and full commercialisation reduces technical risk, especially where novel processes or products are involved, but leads to
potentially unacceptable delays where competitors may be moving faster. Rapid commercialisation
must be the goal, and acceptable risk levels need to be revised in light of the urgency of the situation.
In one route, small-scale modifications to existing mills generate revenue from new products in the
short-term and demonstrate new processes leading to these products. This sustains existing jobs and
facilities while taking steps to demonstrate the viability of the new forest sector. These will have to
be small-scale, partly because the technical risks may not be well known, and partly because some of
the markets may be relatively small. The capital costs, in the order of $10M to $50M, are challenging
for the existing industry, but not excessively so, especially if risk sharing opportunities are available.
However, economies of scale mean that the cost per unit of production will be high, so these plants
will have to target high-value products. In turn, current small market sizes for these higher value
products impose an upper limit on scale, independently of the need to verify scale-up parameters.
If the products are high enough value, price supports are not necessary, but help with the initial
capital costs may be needed to offset the capital risk. (It is worth noting that markets for renewable
alternatives have the potential to grow faster than their petroleum-based competitors, so first movers
have the opportunity to capture market share early.)
This route leads to valuable end-products from a sustainable, renewable resource, and will provide
support to existing forestry installations and jobs while displacing fossil fuel-based alternatives.
These end-products may do more than replace an existing petroleum-based product, but may bring
additional benefits due to unique bio-based properties not achievable with conventional raw materials.
This necessarily involves integration with existing sites, including existing or new CHP plants, but the
focus is on pre-commercial scale demonstration plants showcasing high-value products, rather than
full-scale energy or fuel plants.
In a second route, large green-field biorefineries for production of bio-fuels, bio-energy, bio-chemicals
and bio-products are built. In the first route, market size, technical risk and available capital set the
constraints for the production of bio-chemicals and bio-products, but in this case the availability of
biomass, and the cost of collection over large areas, set the constraints for production together with
lack of domestic bio-energy markets and green energy policies.
The value of this approach is to quickly supplement significant portions of the Canadian energy sector,
whether power generation or transportation fuels from fossil sources, to a greener substitute with
resulting reductions in greenhouse gas emissions. Jobs are retained in forestry, and the foundation for
more novel high-value products is set.
1.4 What are some key constraints?

1.4.1 Energy pricing in the absence of carbon cost accounting
Energy prices in Canada today remain low, in spite of concerns around carbon emissions. Natural gas
is at historical lows of about $4/GJ at the hub, compared with long-term averages of about $6.50/
GJ; many forecasters are predicting these low prices will persist for the medium term as shale gas
production comes online. Power prices, whether from coal or hydroelectric generating facilities,
are in the range $50/MWh to $75/MWh for long-term industrial contracts. It will be seen later that
these prices, based on simple economics with no form of carbon accounting, are insufficient to drive
wide-ranging adoption of bio-energy or bio-fuels.
Until recent years, with a couple of exceptions due to geo-political events, inflation-corrected oil prices
have remained in the $US20/bbl to $US40/bbl range since 1946 (Figure 4). Several analysts believe
this is shifting as inexpensive, sweet crude runs out; new production comes largely from high-cost
sources, which implies that long-term oil prices, in the absence of unexpected geo-political events or
energy policies to address carbon or energy security concerns, are likely to be in the range $US70 to
$80/bbl. While this may not be enough incentive for large-scale stand-alone bio-fuel or bio-energy
plants, in particular given a Canadian dollar that minimizes the impact of these prices on Canadian
industry and consumers, it may make production of bio-materials or bio-chemicals more interesting
from a financial perspective.
Figure 4. Inflation adjusted oil prices, in the absence of geo-political events, have remained in the range of
$US20 to $US40/bbl from 1946 to about 2004. With the high cost of new oil finds, are we entering a world
of $US75/bbl oil?
Section 2 outlines the extent to which forestry might contribute to reduced coal usage in electrical
power generation and to reduced petroleum use in transportation fuels, as well as the development
of green products and chemicals.
1.4.2 Plant scale is a function of collection costs
Biomass is local; this arises from its bulky, wet and distributed nature. Biomass-based systems will
be limited in scale by biomass supply costs, which increase with scale due to the larger distances
biomass must be transported. This in turn supports the conclusion that higher value products need to
be considered before conversion of residues to energy products can be considered. By comparison, and
as a result of higher energy densities by volume, fossil fuel-based installations can benefit to a greater
extent from economies of scale than biomass-based facilities. This, in turn, supports the conclusion
that higher value products need to be considered before conversion of biomass to energy products
can be considered, and that bio-based refineries will need to maintain an even greater focus on higher
margin products.
One way of looking at scale is to consider the rate of raw material consumption of a site in terms of its
energy content. Dividing the energy content per unit mass, in GJ, by the mass flow rate into the plant
in units of mass per second provides a measure of scale in terms of GJ/s, or GW. While this does not
take into account the potential value of a feedstock beyond its energy content, it is a useful guide to
relative scale.
Table 1 gives a few examples of petroleum- and wood-based plants. For example, comparing the coal
consumption at Nanticoke with the annual allowable cut in Ontario, it becomes clear that there is not
enough wood to put a significant dent in fossil fuel consumption, although it is possible to displace a
portion of it.
Table 1. Rate of raw material consumption of various plants in terms of energy content per
second (GW). Petroleum 6 GJ/bbl; condensing power from coal assumed at 35% efficiency;
wood 18 GJ/t.
Plant location/Description
Shell refinery, Montreal East (to
be shut in November 2010)
Nanticoke, ON
Saudi-Aramco combined
7 refineries
US petroleum refining capacity
Canadas largest pulp mills
Annual allowable cut (Ontario)
Consumption or product
Capacity, GJ/s (GW)
130,000 bbl/d feed
9 GW oil
3.5 GW electricity production
11 GW coal
1.5 million bbl/d feed
105 GW oil
16 million bbl/d
1100 GW oil
5,000 t/d wood, 2200 t/d pulp

production
1 GW wood feed
13 Mt/y wood
7.8 GW wood feed
With this background in mind, it is possible to start to put some context around the two potential
pathways outlined in the previous section. In one scenario, characterized by constrained financial
resources, it is unlikely that large-scale projects will go ahead in the short term. A step-wise approach,
beginning with small commercial applications attached to existing infrastructure, will serve to prove
concepts and develop markets. Given ongoing historically low energy prices, these projects will have to
include a high-value, non-energy component. As high-value means low volumes, the fit could be good
between the scale of a demonstration plant or smaller mill add-ons and an initial set of customers.In
another future scenario, particularly one characterized by some combination of strong and consistent
policies around energy and carbon, unexpected geo-political events or concerns around security of
supply, the availability of capital for biomass energy projects may increase substantially. It is then
possible to think of larger scale energy solutions. Transportation fuels from biomass are probably
economic when mill gate prices exceed $1.00 per litre; power production from biomass begins to
make sense when power can be sold for $150/MWh or higher. At these prices it begins to make sense
to explore energy opportunities and the relevant economies of scale more carefully, as these markets
are enormous and the margins slim. However, it is clear that these higher prices will not come about
without a consistent policy environment addressing the relative price of low-carbon vs. high-carbon
energy sources, and that the appearance of consistency in the policy will be equally important. (Other
drivers, such as geo-political events or increased demand in Asia, may inadvertently provide the same
incentives.)
Figure 4 illustrates another characteristic of oil prices in the last two decades: increased volatility.
Business cases based on average prices are necessary but a business case that takes peaks and troughs
into account is better. In the case of price volatility, the best industrial model is one that can (relatively)
easily switch outputs (pulp, paper, energy, bio-chemicals, bio-materials) depending on, and to take
advantage of, relative market prices and demand.
These constraints on scale arise because the cost of producing transportation fuels from wood is a
function of two very different drivers. First, economies of scale imply that both capital and production
costs per unit of output will drop as scale increases. On the other hand, feedstock collection costs rise
dramatically as scale increases, due to increased transportation distances. As a result, the optimal
economic plant size for the production of bio-energy will likely be different from the optimum
fossil fuel plant size, particularly given the distributed nature of biomass. Figure 5 shows the costs
for a hypothetical gasification and Fischer-Tropsch (FT) BTL synthesis plant, operated on Canadian
softwood with a harvesting cycle of 75 years. Minimum production costs of about $0.93/litre occur at
a plant size of about 300 million litres, requiring 1.3 Modt/y of wood. This is on the scale of the largest
Canadian pulp mill and would likely require similar or even greater access to forest feedstock.
Plant gate cost per litre, CDN softwood supply

$2.00
$/litre
$1.50
Combined
Feedstock collection
$1.00
Other operating
Capital repayment
$0.50
$0.00
10
100
1,000
10,000
Annual production (m illions of litres)
Figure 5. Cost per litre for a synthetic fossil fuel as a function of harvesting, capital and other operating costs.
Process: biomass gasification and Fischer-Tropsch synthesis. Capital costs are assumed financed over a 25 year
period at 5% interest rate. The minimum plant gate cost of $0.93/litre occurs at a production rate of about 300
million litres, requiring a wood supply of about 1.3 Modt/y. Based on Wright, M. and Brown, R. C., Establishing
the Optimal Sizes of Different Kinds of Biorefineries, Bio-fuels, Bio-prod. Bio-ref. 1:191-200 (2007).
The analysis above can be repeated for combined heat and power (CHP), with the following results:
Heat users in Canadian forestry towns are few and far between. Pulp and paper mills, sawmills, and
some institutional users such as hospitals will have year-round needs; other institutional users such
as colleges will tend to be seasonal. Compared to compact European towns, for example, residential
customers in Canada tend to be very spread out and connection to a new district heating grid may
prove to be relatively expensive. So while there may be regions in Canada where the economics of
district heating make sense, these will have to be evaluated on a case-by-case basis.
CHP provides a positive ROCE when the both heat and electricity are put to productive use (for
example, when electricity is priced at $130/MWh, steam is valued at $8/GJ and feedstock at $76/t).
With the same parameters for power and feedstock, the ROCE is negative when the value of the
steam is not captured.
Integrating CHP with pulp and paper mills or sawmills thus ensures the highest efficiency of the
entire system, making best use of existing biomass supply chains by maximizing overall efficiency of
heat use, providing greatest employment, and providing a supporting leg for existing industry as it
transitions to new products.
CHP on an existing site also represents the best use of existing energy infrastructure, and represents
a stable and secure source of energy. Excess biomass (if any) can be diverted to independent power
producers or other stand-alone energy pathways.
1.4.3 Conclusion
Given the impact of scale and collection costs, and the relatively low cost of fossil fuels in the uncertain
context around carbon taxes, incentives, price stability and volatility, it seems that there are two
possible pathways forward:
At small scales it is critical to identify and aggressively pursue low-volume, high-value co-products.
Residues from these operations can be converted to energy products, which are not likely to be
economic in the absence of high-value co-products. (The exception is energy for internal use
which represents a stable and predictable supply.) Identifying local users of heat may be a limiting
factor on the potential efficiencies. Rapid development of novel, high-value products is feasible
and shows promise in improving the economics of existing forestry installations while displacing
or supplementing fossil fuel-based products. Government support for capital costs for small
demonstration plants in the $10M to $50M range is likely to be important in helping firms absorb
these high, up-front capital costs, and to minimize risk for other partners and investors.
At larger scales, which become possible if relative power and transportation fuel costs increase,
it may become reasonable to consider stand-alone energy or fuel systems where scale is only
limited by collection costs, not by market size. Here again the low local demand for heat in remote
forestry towns is likely to be a limiting factor on efficiencies, although this too may change with
the policy environment. The opportunity exists to move to a higher level of bio-fuels usage, which
can contribute to reducing Canadas greenhouse gas emissions, particularly in jurisdictions with
a higher proportion of fossil fuel-based energy consumption. However, it is clear that high levels
of substitution for fossil fuels will require large portions of the annual allowable cut, and possibly
significant levels of residuals from forest harvesting. Government policies and support to minimize
the gap between production costs of bio-energy and fossil fuel-based energy will likely be important
to encourage investment for large-scale production.
10
Specific Case Studies

2.1 Heat and power
Heat and power are traditional energy products derived from biomass and applications range in size
from residential use through to large utilities. At an industrial level, biomass is already widely used as
a fuel in Canada for this purpose. For example, in 2008, the pulp and paper industry alone produced
more than 273,000 TJ of energy in the form of heat and power from non-fossil fuels [2008 FPAC
Energy Benchmarking Report Summary]. Biomass comprised most of this fuel in the form of black
liquor, bark, sludge and other materials left over from forest manufacturing processes. This represents
the largest fraction of biomass-derived energy used in Canada. The energy was used to satisfy internal
process needs, but some was also sold as power into the electrical grid.
Depending on the rationale for using biomass, the need for feedstock for these purposes can be
nearly limitless. For example, to reduce greenhouse gas emissions (principally CO2) as part of the
implementation of the Kyoto Accord in Europe, many large biomass-fired utility boilers have been
built or planned to supplement coal-fired units. A few as large as 300 MWe have been announced,
although 50 to 100 MWe units are more common. The amount of biomass required at the largest scale
is immense and these projects are usually coupled with announcements of supply agreements for
biomass from many different regions of the world. European utilities are also co-firing wood or wood
pellets at up to 20% by mass with coal as a means of reducing greenhouse gas emissions. This is also
a large amount of biomass per plant. In both cases, favourable currency exchange rates, along with
incentives offered to produce green energy, are such that it has become economic to ship biomass
(principally in the form of bulk pellets) to Europe from as far away as northern British Columbia.
2.1.1 Feedstock
In addition to the bark and other manufacturing residues already used in Canada to produce energy,
additional forest biomass could be (and is) used to make heat, power and transportation fuels in
Canada. Trees from existing harvests, purpose-grown tree crops, roadside residues, thinnings and nonmerchantable or low value stands could all be used for this purpose. To put the amount of available
forest biomass into perspective, Table 2 estimates the total annual allowable cut (AAC) by province
for hardwoods and softwoods and compares it to the harvest volumes taken in 2009. Also included
in the table are estimates of roadside residues based on AAC and actual harvest volumes, as well
as approximate amounts of residues (bark, sawdust, shavings, etc.) available from manufacturing
processes. The definition of AAC varies by province, but is roughly defined as the amount of
merchantable timber that can be sustainably harvested on a long-term basis. Current harvest levels
are substantially below the AAC in all provinces.
Substantial efforts are now under way in most provinces to quantify the amount of economically
available roadside residues and other sources of forest biomass that could be sustainably removed
and put to use, but solid numbers are still difficult to obtain (Figure 6). In typical roadside harvesting
11
operations, full trees are skidded to roadside where they are manufactured into merchantable logs.
Roadside residues become the non-merchantable parts of the stems which can be economically
recovered (e.g., tops, limbs, long butts). This is highly variable, but generally comprise from 15 to
25% of the volume of the merchantable components. Some biomass must be left on site, and an
additional component of the total is uneconomic to recover due to its location (e.g., dispersed across
the cutover), size, contamination or other non-timber resource constraint. These numbers will vary
by province and geography, but provide a reasonable order of magnitude estimate. Estimates of the
volume of wood available from non-merchantable and low-value stands are even harder to come by.
Internal FPInnovations estimates are that these volumes may not be substantial relative to the AAC
by definition they are either difficult to access, slow to regenerate or low in volume of wood. Thinnings
from silviculture and making firebreaks could provide additional amounts of currently underutilized
biomass this is a common practice in Europe.
Table 2. Forest Biomass: Annual Allowable Cut, Harvest Volumes and Residues by Province
Roadside
Residues
based on
AAC
ACC
Actual Harvest
(2009)
Roadside
Residues
based on
harvest
Manufacturing
Residues*
Volume
Mm3
Mass
Modt
Volume
Mm3
Mass
Modt
Mass
Modt
Mass
Modt
BC
84.3
33.7
6.7
75.4
30.2
6.0
6.5
AB
23.1
9.2
1.8
20.5
8.2
1.6
2.4
SK
7.6
3.0
0.6
2.4
1.0
0.2
0.6
MB
9.6
3.8
0.8
0.8
0.2
0.2
ON
32
12.8
2.6
14.7
5.9
1.2
2.6
QC
55
22.0
4.4
29.3
11.7
2.3
6.7
Atlantic

Mass
Modt
19.5
7.8
1.6
16.7
6.7
1.3
2.2
TOTAL
230
92.0
18.4
112
44.8
9.0
21.2

Notes: *AAC and harvest various provincial sources for 2008 - 2009. Manufacturing residues from D. Bradley,
Canada Biomass and Bioenergy Report, 2006
- Mass calculated as 0.4*volume
- Roadside residue calculated as 20% of harvest off cutblock (range 15 to 25%)
Collection and transportation of large amounts of forest biomass from harvest sites to energy plants
entails additional cost. Depending on jurisdiction, harvesting methods and equipment may need to be
revised to allow forest residues to be consolidated alongside roads during harvesting to minimize the
cost of collection. Access to many logging roads is seasonal, and in some cases the terrain and road
12
conditions may not be suitable for chip vans. Densification is necessary probably at two distinct
stages. Initial grinding and size reduction will be required on the logging site to economically bring
the biomass to a central processing station. Although biomass can be used locally as boiler or gasifier
feedstock in this condition, it would still not be dense enough, nor dry enough, for economical long
distance transportation. For this reason, further densifying the biomass to pellets, pucks, bio-oil
or other forms will be needed before transporting the biomass to the plant gate. This means that
additional handling and processing of the biomass is necessary. In cases where co-firing with coal is
contemplated, considerable attention is now being focused on torrefaction, which produces biomass
with attributes (energy density, brittleness, water repellency) closer to that of coal. Conversion of
the biomass to liquid pyrolysis oil at satellite stations near the harvest sites may also be an option,
although as yet unproven.
Total biomass
Merchantable (logging)
Roadside slash
Potentially available
Standing residuals
Silvicultural and ecological retention
Technically available
Comminuted biomass
Cutover slash
Available for new project
Allocated future
Allocated current
Figure 6. Not all residual biomass on a cut block will be available for use. Some must be left on site for silviculture
and ecological retention, more will be too small or scattered for economical collection. Existing contractual
arrangements will also reduce biomass availability for projects.
Although energy content is the key metric for selling biomass as a fuel, other qualities, such as ash
content, friability and dust generation during handling are also important. In general, white wood
pellets are desirable as biomass for fuel because they contain very little ash relative to biomass
from annual crops and grasses. Pellets made from recovered forest residues likely possess a similar,
but smaller advantage over non-wood sources of biomass. Standards for biomass fuels are being
13
developed in many jurisdictions. ASTM standards are being developed in North America, while
European jurisdictions are working under CEN and ISO banners. Individual user and producer groups
are also developing standard specifications that apply to their activities. In general, purchasing
biomass to the highest quality standards (lowest ash, highest calorific value) will be most critical for
low-volume applications such as residential use and small district heat and power systems. For large
power applications, biomass cost will almost always trump quality if a choice is available.
Given the size of the potential energy market versus the amount of available woody biomass (including
forest residues, merchantable and non-merchantable stands), use of other sources of biomass should
be expected. Cereal crops, grasses, agricultural waste, municipal solid waste (MSW) and sorted urban
demolition waste are all available to augment the total amount of biomass available for conversion to
heat and power. In the US, the ORNL Billion-Ton Study [RD Perlack et al., Biomass as Feedstock for a
Bioenergy and Bioproducts Industry: the Technical Feasibility of a Billion-Ton Annual Supply, ORNL,
2005] estimated the available amount of agricultural biomass (excluding that needed for food) to be
greater than 800 million odt, about twice as much as the forest biomass available for conversion to
energy products. Use of these non-forest resources can contribute significantly to necessary economies
of scale for biomass energy plants when they are available to supplement forest biomass. This synergy
may be particularly valuable in provinces with large agricultural landbases.
At least initially, biomass from forest residues may compete directly with agricultural residues and
other marginal sources of biomass because large-scale utility operators will source fuels with the
lowest cost/GJ where these can be delivered to the power plant gate in bulk. For example, sorted
urban waste and MSW often comes with a negative cost to an energy plant because of the offset paid
for avoiding tipping fees in landfills. Projects based on such fuels will enjoy competitive advantage
over forest biomass-based projects due to much lower feedstock costs. However, MSW and other
materials that are currently landfilled will have a negative cost as long as no one wants them. If
large-scale demand arises, there will be a price associated with it, the same as with recovered paper.
Early adopters will sign long-term contracts and be more profitable than later entrants.
2.1.2 Process design and operating costs
The technology for small-scale CHP and district heating applications is fairly mature and well
optimized (at least in Europe), although there will always be new developments in equipment design
and technologies. Few projects at this scale produce both heat and power; most often the desire is
to provide communal heat for aggregations of houses and commercial/institutional buildings. They
are being developed in Canada where the right financial conditions exist, but progress has been
inconsistent. Due to their small size, these projects are very sensitive to local differences in capital
and operating costs and each project has unique combinations that make it difficult to generalize
costs. Competition from conventional energy sources such as natural gas and on-grid electricity is
a significant factor and the most compelling arguments come from off-grid communities where the
delivered cost of power and fuel are substantially higher than the Canadian norm.
14
Higher housing density is a key factor, but European successes with small-scale CHP projects also stem
from putting in decades of sustained effort to optimize every aspect of the projects, from supportive
municipal guidelines and bylaws to highly efficient biomass supply chains, and standard equipment
design and installation practices. Over time, similar efficiencies will develop in Canada as experience
with these projects is gained. The recent announcement by BC Safety Authority [Catherine Roome,
CANBIO 2010, Vancouver, BC] that they will accept some European engineering codes and standards
for equipment imported to the province for CHP projects is a unique step forward in this regard, and
should help to significantly accelerate the adoption of these technologies.
Typically, the core technology is a small biomass-fired furnace to produce hot water for circulation
through buildings, although there are also examples of small gasifiers being used for this purpose in
both Europe and North America. In the latter case, systems have been built that couple the gasifier
to an electricity-producing genset fired on the syngas. Hot water is produced by heat exchangers for
cooling the syngas, and from cooling water circulated around the genset.
Industrial and very large community applications for biomass-based CHP typically fall into the 20 to
100 MWe range. For these installations, capital and operating costs for conventional technologies are
well-known and are dominated, as with most biomass-based systems, by feedstock costs. Most often,
the core technology will be a bubbling bed boiler these are scalable over a wide range of sizes and
are quite forgiving in terms of fuel quality and size distribution. Grate boilers and gasifiers have also
been built for applications at this scale. A key difference between these and the smaller CHP systems
is these are usually steam generators that fall under jurisdictional requirements for pressure vessel
operation. Employee skill levels and manning requirements are more stringentincreasing operating
costs substantially and making them better suited for co-location with an industrial complex operating
on a 24/7 schedule. Finding suitable uses for the heat is also difficult without a large industrial client
operating on a year-round basis.
Fast pyrolysis offers another means by which to consolidate the biomass energy into a fuel that can be
used as a replacement for fuel oil. One such plant the first in the world for this purpose has been
announced by Ensyn and Tolko to be built by 2012 at the site of a large sawmill complex in High Level,
Alberta. Residues from the sawmill will provide the feedstock, and the oil will be used in part to power
several generator sets for production of electricity and providing heat for the complex. At 400 odt/d,
the plant is predicted to produce approximately 85 ML pyrolysis oil/year.
Within North America and much of the rest of the world, coal is the most commonly used fuel for
large-scale utility boilers producing electricity through steam-driven turbines. These boilers are
typically quite large and produce in the order of 400 MWe or more, typically with several boilers on a
single, multi-GW scale site. The Ontario Power Generation complex at Nanticoke is the largest such
North American facility with a current combined power production capacity of about 3.5 GWe. In the
absence of green incentives, biomass has not been used at this scale because it is much less energy
dense than coal and considerably more expensive to collect. However, European and British proposals
for multiple 300 MWe installations are in place that will require biomass supplied from countries on
both sides of the Atlantic and some European utilities now co-fire up to 20% biomass with coal.
15
2.1.3 Market volumes and revenues

Three scenarios have been examined to look at how much forest biomass might be needed to
produce heat and power as a substitute for fossil fuels. These include large-scale substitution of coal,
as is currently practiced in Europe, medium-size CHP installations co-located with existing or new
value-added processing plants, and small-scale district heating opportunities. Since the conversion of
biomass to energy is most economic when the biomass is used locally, it is assumed that the energy
products will substitute for consumption within the boundaries of each province.
Following along the path of European utilities, Table 3 shows the use of coal for generation of electricity
by Canadian province, and the equivalent amount of wood needed to replace the coal at different levels
of substitution. These numbers are large compared to the net annual allowable cut (AAC) for each
province shown in Table 2. If biomass replaced 20% of the coal used to produce electricity in Alberta,
the largest coal-using province, about 75% of the entire AAC for the province would be consumed for
this purpose. In Ontario, it would take nearly 40% of the total AAC to supplant just 20% of the coal
with biomass. A similar analysis holds true of the other regions, with the exception of Manitoba a
very small coal user. Note that these numbers depend on harvesting to the AAC; actual harvest rates
in several provinces, particularly Ontario, were far below the AAC in 2009 (Table 2).
Table 3. Substitution of wood for coal in the production of electricity by province. The table shows
the percentage of the AAC required to substitute biomass for coal. Any numbers less than 20%
might be supplied by roadside residues alone.
Province
Coal for
Electricity4
Equivalent Wood
% of AAC needed for given level of

substitution for coal
3% of coal
Petajoules
10% of coal
20% of coal
Modt
BC
--
--
--
--
--
--
AB
490
630
35
11
38
75
SK
150
190
11
10
35
70
MB
5.4
6.9
0.4
0.3
ON
330
430
24
19
37
Atlantic
114
146
8.0
10
21
Arctic
--
--
--
--
--
--
CANADA
1100
1400
78
17
Assumptions: Coal to steam efficiency 83%, wood to steam efficiency 65%, heat content of wood 18 GJ/t.
Equivalent Wood = [Coal] * [Efficiency of Coal] / [Efficiency of Wood]. Coal consumption for 2004 from Canadas
Energy Outlook, an Update.
4
16
A large amount of the available timber will continue to be converted into high value products such as
pulp, paper and solid wood products, and will not be available for conversion to energy (other than
manufacturing residues already used to make heat and power). If all available forest residues (at 20%
of AAC) in Canada were devoted to coal substitution, they could barely supply sufficient energy to
offset the greenhouse gas emissions of 20% of the coal used to produce electricity. This includes the
roadside residues available in BC and Quebec two provinces that dont produce electricity from
coal. At this scale, it would make sense to look for synergies with other forms of biomass such as
agricultural waste.
It was clear from the Bio-pathways I study that stand-alone power from forest biomass is rarely
economic in the absence of significant financial incentives. In regions where emissions of greenhouse
gases are regulated and the adoption of lower carbon options are encouraged, there is a clear and
significant market for forest biomass as a substitute for coal, most likely in the form of torrified pellets.
The numbers above show that the market is essentially bottomless in this scenario, since the entire
AAC plus available forest residues in coal-using provinces like Ontario and Alberta could not fully
substitute for the use of coal.
However, even with oil prices substantially above historical norms, the cost of delivering coal or natural
gas to the plant gate in North America will almost certainly be substantially lower than providing the
equivalent energy content of biomass. Estimates for the cost of procuring biomass from Canadian
forest residuals range from $66 to $82/odt ($2.80 to $5.50/GJ). Densifying (pelletizing, torrefaction,
fast pyrolysis) costs and delivery to plant gate are additional. Bulk prices for quality white wood
pellets landed at Rotterdam have averaged about $199/odt ($9.95/GJ) over the past three years, while
bagged residential pellets in the US northeast have averaged about $260 ($13.00/GJ). This contrasts
with the delivered cost of thermal coal in Canada at $0.83 to $2.85/GJ [National Energy Board 2009
Reference Case Scenario: Canadian Energy Demand and Supply to 2020; Appendices Table A1.1] and
current natural gas prices of about $4 to $5/GJ at the hub. Many large utility boilers are sited adjacent
to coal mines, and even enjoy common ownership with the mine. For this reason, it is unlikely that
utility owners would ever voluntarily bridge the price gap between biomass and coal, even with
sharply higher oil prices. However, political and environmental incentives in North America have some
utilities considering the addition of biomass to their fuel mix [EPRI-Vista, BC, OPG announcements].
Substituting residual forest biomass for coal at a 10 to 20% level (similar to current European practice)
to reduce greenhouse gas emissions offers a substantial opportunity for the Canadian forest sector.
If stand-alone large-scale power generation from biomass is generally uneconomic without strong
environmental incentives, what about cogeneration opportunities? Co-locating a power generation
plant with a large 24/7 heat user means the efficiencies are much higher than if the plant is designed
for electricity generation alone, even if the power generation potential is reduced by diverting a portion
of the heat to other uses. In Canada, the largest biomass-fired plants in this category are generally
attached to pulp and paper mills. Most burn bark and other very low-value residues (hogged fuel) that
are collected either on-site or from nearby as a consequence of processing logs. Historically, these
boilers have been sized and designed to match the heating needs of the mill, but increased focus is
being placed on power generation. Significant potential for increased power generation from biomass
17
exists in facilities that have excess steaming capacity as a consequence of modernizing and resizing the
pulp/paper operations, or in sawmills that have unallocated processing residues. Recently in Canada,
Pulp & Paper Green Transformation Program funding for the pulp and paper industry has been applied
for this exact purpose, with many pulp and paper mills committed to installing condensing turbines in
the 20 to 50 MW size by 2012. Further gains in biomass power production are still possible from these
and similar plants scattered across Canada.
As a consequence of the already installed capital infrastructure, power from these sources of biomass
can be produced at a lower cost than building a new power facility. Most of these boilers use hogged
fuel and other cheap manufacturing residues and most are operated in conjunction with pulp and
paper mills. Some are located next to sawmills and other industrial plants. These boilers support
the manufacture of value-added products and the associated highly skilled jobs in each plant. While
the financial return for every location will be different, the offset power purchases or added revenue
they could obtain from power production would be a step towards turning these facilities into
sustainable multi-product bio-refineries and provide financial stability for the operation of the entire
plant. Conversely, policies that only incent power production from new independent power producers
and force competition for the same existing cheap biomass supplies may have the opposite effect.
Operations producing higher value products will be negatively impacted due to rising costs, leading to
greater financial instability and the potential loss of employment in the local community.
Location is another consideration for CHP applications, especially on a large scale. The imperatives of
the cost of collection of biomass dictate that CHP plants be located as closely as possible to the source
of the biomass, as well as the user of the heat. These locations tend to be far from population centres
in Canada, and dont always match up with available electrical transmission infrastructure. Significant
transmission bottlenecks also exist, for instance between northern and southern Ontario, and along
the I-5 corridor in the Pacific Northwest.
At a very small scale are local and community CHP plants that provide district heating to residences,
schools and other clusters of small buildings. At these scales, margins are extremely tight, and capital
and biomass supply costs significantly affect the economic viability of projects. A critical consideration
for the economics of these facilities is the question of how to balance the seasonal heat and power
needs. The scale of biomass needed for an individual site is so small that it could be sourced locally in
most parts of Canada, even in urban areas where clean, sorted demolition waste can reach significant
volumes. Procurement and comminution of biomass at this scale requires some thought, since
standard-size grinders and chippers used in the logging industry would be able to produce an entire
years supply of biomass in a matter of days. The most likely location for this type of installation is
off-grid communities, where the cost of delivering diesel fuel can be prohibitive and local jobs can
be created for wood harvesting, collection and comminution. For example, remote communities in
Northern Manitoba were faced with an exceptionally warm spring in 2010, causing ice roads to melt
before the usual years worth of fuel could be delivered by truck. Diesel fuel had to be flown in during
the summer and fall of 2010, at great expense. A local supply of biomass combined with a small CHP
plant would be worth evaluating, even if most of the heat is vented in the summer.
18
2.1.4 Return on capital employed

A sample ROCE calculation for industrial scale CHP, based on data used in the Bio-pathways I project
is presented in Table 4. The return is positive (17%), because both heat and power are fully utilized.
The feed is made up of residues at $76/t, and the power generated is sold for $130/MWh. With power
prices of $60/MWh, the ROCE is 4%. As discussed in Section 2.8, this still makes sense where the heat
and power are used internally and are generated with a residual stream such as black liquor or bark
from operations.
Table 4. ROCE for a 60 MWe CHP plant operated on residues. From Bio-pathways.
Capex
$225,000,000
LP steam, 12 GJ/t @$8.00/GJ
$62,400,000
Steam losses
-$9,360,000
Electricity, 740 kWh/t @ $0.13/kWh
$54,450,000
Net Sales
$107,490,000
Operating costs
Wood, 650 kt/y @ $76/t
$42,980,000
Other
$13,580,000
Total Cash Operating Cost
$56,560,000
EBITDA
Depreciation
$50,930,000
20 years
EBIT
Tax rate
$39,680,000
30%
Net income
Maintenance
$11,250,000
$11,900,000
$27,780,000
2%
$4,500,000
Accounts receivable DSO
35 days
$10,300,000
Accounts payable DPO
45 days
-$6,970,000
Inventory
17 turns
$3,300,000
Capital employed
ROCE
$236,160,000
17%
2.1.5 Conclusions
In the absence of a 24/7 heat user, low feedstock costs, high feed-in tariffs or both are necessary to
make power generation from wood economic. With a large heat user to take waste heat and improve
the overall efficiency, the economics improve. Large heat users in the vicinity of biomass supplies are
limited to large forestry installations, oil and gas extraction facilities, and a small number of mines and
smelters. The existence of sufficient transmission capacity to take the power from remote forestry
installations to Canadian or US population centres needs to be considered.
19
Other heat users near large forestry reserves are hospitals, colleges and municipal infrastructure in
the towns that provide services to the industry. Typically, CHP plants designed for these facilities
are smaller in scale than the boilers attached to pulp and paper mills. At a very small scale are local
and community CHP plants that provide district heating to residences, schools and other clusters of
small buildings. At these scales, margins are extremely tight, and capital and biomass supply costs
significantly affect the economic viability of projects. Although common in northern Europe, there
are very few successful examples of community-based CHP plants in Canada. Low Canadian energy
costs are a key factor. At least one off-grid CHP plant is operating in the native community north of
Chibougamau, QC.
2.2 Ethanol
Ethanol is readily produced from any sugar- or starch-based feedstock, such as corn or wheat, and current
North American production from these sources exceeds 46 BL/y. Most of this production is used as
an additive to gasoline, although other markets exist. With more effort, ethanol can also be produced
from cellulosic materials like wood, grasses and straw. Other alcohols (methanol and butanol) can
also be produced from these feedstocks, and there are significant markets and opportunities for these
products as well. Despite the promise, and significant research and development funding provided to
cellulosic ethanol producers, almost no ethanol is currently obtained from ligno-cellulosic biomass. An
exception is the extraction of ethanol from process filtrates in a Canadian sulphite pulpmill. Although
forest biomass is a suitable feedstock for ethanol production, significant technical hurdles exist for
routes based on fermentation and there are many competing sources of ligno-cellulosic biomass that
may prove easier to convert than woody biomass. There are two major process routes to ethanol; a
bio-chemical pathway based on fermentation of sugars and catalytic conversion of syngases produced
by biomass gasification. The following case study is largely based on the bio-chemical route.
2.2.1 Feedstock
The main advantage of cellulosic biomass for ethanol production is that it largely originates from
non-arable land or from non-food residues. In the case of the bio-chemical route, clean white wood
would be the preferred feedstock from forest resources. Principally, this means sawdust and shavings
from sawmills, or wood chips from sawmills or whole tree chipping. Some harvest residues and forest
thinnings that can be easily debarked might find their way to ethanol production, but the higher lignin
content, debris and inherent variability of such material would make these residues less attractive
for bio-chemical conversion. The second pathway to ethanol and other alcohols from biomass is via
gasification and catalytic conversion of the syngas. This route is essentially agnostic to the source of
biomass, and forest-based feedstocks are entirely suited for conversion to these products.
Significant technical hurdles exist for routes based on fermentation and there are many competing
sources of ligno-cellulosic biomass that are easier and more convenient to convert than forest biomass.
In particular, large quantities of corn stover can be recovered with corn currently used to make
ethanol; proximity to existing processing plants clearly gives this agricultural residue an advantage
20
over forest biomass. Effort in the US has been focussed on fast growing crops like switchgrass that can
be significantly cheaper to comminute than wood [JY Zhu, TAPPI PEERS Conference, Sugar Platform
101, (2010)].
2.2.2 Products
Different grades of ethanol can be manufactured, depending on the intended market. These include
transportation fuels, as a base chemical for the industrial or food industry, or as a feed for the
pharmaceutical industry. However, the largest market by far would be for fuel ethanol and this is
the market targeted by cellulosic ethanol technology providers. Most cellulosic ethanol technologies,
whether through microbial fermentation or gasification, generate by-products that are generally
considered to be waste, but may also find markets. These include gypsum, lignin and other organic
matter, in addition to the ethanol. Some of the organic material will be combusted to supply internal
steam and energy needs. Heat and power are possible by-products from a gasification route.
There are no commercial-size cellulosic ethanol facilities in operation in North America, and
consequently, both capital and operating costs remain a subject of speculation. The biological
approach to producing cellulosic ethanol is very much similar to starch-based ethanol production,
except that the cellulose-containing material has to go through a pre-treatment step prior to enzyme
hydrolysis and fermentation, Due to process similarities, it is reasonable to assume that the scale
of a commercial cellulosic ethanol plant would be similar to a commercial-size corn ethanol plant.
The largest Canadian plant currently produces about 200 ML/y, but several in the US operate at 300
to 400 ML/y [Ethanol Producer Magazine]. Thus, a modern commercial facility producing ethanol
through the fermentation of cellulosic materials might be expected to produce between 200 and 400
ML/y. Plants of this size would consume somewhere between 0.75 and 1.5 Modt/y of wood-based
biomass. Gasification pathways are still at the pilot stage, but would almost certainly have to be at
the same kind of scale to be competitive in a commodity market. Demonstration units proposed by
companies like Enerkem and Range Fuels are in the 30 to 40 ML/y range.
2.2.4 Market volumes and revenue
Nationally, the renewable fuels standard (RFS) requires that 5% of the gasoline sold in Canada be
from renewable sources by the end of 2011. Some provincial standards are different Manitoba has
mandated 8.5% renewable content and Saskatchewan has mandated 7.5% renewable content. In
principle, this opens a huge market for transportation fuels made from forest biomass. Using ethanol
as an example, Table 5 shows the 5-year average of gasoline sales by province, along with the amount
of biomass required to meet the RFS standard from different sources. Roadside residuals based on
the AAC could supply the entire RFS content in gasoline for each province except Ontario. The story
is slightly different when actual 2009 harvest volumes are considered in that case, the roadside
residuals in many provinces would need to be supplemented by other biomass to make up the balance
of the renewable content mandated by the RFS.
21
However, the picture is less rosy when existing production of ethanol from cereal crops is factored into
the equation. Current ethanol production from these crops is estimated to be about 1.7 BL across the
country, and more production capacity is being considered [Canadian Renewable Fuels Association].
This is nearly all of the mandated renewable content in Canadian gasoline and leaves no room for what
is likely to be more expensive competition from forest biomass, especially since the Canadian RFS also
allows certain volumes of the renewable fuel content to be imported from other countries. Waste
from agricultural crops (stover and straw) are almost certainly going to be considered for conversion
to ethanol when these are available in close proximity to existing cereal-based ethanol plants and this
material will offer significant competition to forest biomass.
Table 5: Percent of AAC and 2009 Harvest Volumes Needed to Satisfy RFS for gasoline (based on
bio-chemical ethanol)
Province
(%RFS)
Gasoline
Sales
5-yr avg
(ML)
RFS (ML)
Forest
biomass
needed
(Modt)
% AAC
% roadside
residues
based on
AAC
% 2009
Harvest
% 2009
Roadside
Residues
BC (5%)
4,603
230
0.82
12
14
AB (5%)
5,606
280
1.00
11
54
12
61
SK (7.5%)
2,096
157
0.56
18
92
58
292
MB (8.5%)
1,482
126
0.45
12
59
56
281
ON (5%)
15,903
795
2.84
22
111
48
241
QC
8,704
435
1.55
35
13
66
Atlantic
3,152
158
0.56
36
42
Arctic
65
0.01
Canada (5%)
41,611
2,081
7.43
40
17
83
Notes: Assumes ethanol yield of: 280 L/odt
Renewable fuels standards in the United States are written somewhat differently, with some mandated
production targets set for starch and cellulosic-based ethanol. By 2022, their RFS II calls for 36 billion
gallons of renewable fuel to be blended into transportation fuel, with different targets apportioned to
gasoline, diesel fuel and specific products like cellulosic ethanol. US production of ethanol from cereal
crops is restricted to a maximum of about 15 billion gal/y (~60 BL), and various incentives and funding
mechanisms have been put in place to encourage large-scale development of cellulosic-based product.
One roadblock to using more ethanol in the US is the blend-wall gasoline in the US is currently
restricted to a maximum content of 10% ethanol, and this has been met entirely by starch-based
ethanol. Considerable lobbying is under way to allow this number to rise to 20% to make room for
cellulosic ethanol. These activities may eventually translate to demand for higher renewable content
in Canadian gasoline as well, but likely wont result in significant export opportunities for Canadian
companies, due to the level of incentives offered to US producers and the existence of some tariff
barriers aimed at cheaper ethanol produced from sugarcane in countries like Brazil.
22

The analysis that follows assumes a fermentation plant with a capacity of 200 million litres, requiring
an investment of $315M. Feedstock would amount to 714,000 odt/y; average cost is assumed to be
$100/t. Total annual operating cost would be in the vicinity of $150M. Assuming a plant gate sale
price of $0.65/L of ethanol, total ethanol sales would be $130M. The ROCE in this case is negative
(-20%), with an EBITDA of -$63M/y. Considerable uncertainly rests with these numbers, particularly
with respect to the assumed operating and capital costs. Capital estimates as low as $169M have
been published for similar sized plants based on corn stover and switchgrass as feedstock, with cash
operating costs of about $70M [Ag Marketing Research Center, Oklahoma State University]. The latter
is based on unrealistic (for regional white wood prices in Bio-pathways) feedstock costs of about $50/
odt and the change in capital alone does little to affect the negative ROCE.
According to some technology providers, lignin production could be up to 400 kg/odt of wood
supplied, although this is likely to be optimistic. The most likely use for the lignin is as fuel for the plant.
However, assuming the needed power can be purchased at $0.06/kWh and that 180,000 tonnes can
be diverted for an annual higher value market for lignin at a plant gate sale price of $750/t (see Section
2.5), the corresponding EBITDA would be positive due to new revenue of $135M. The ROCE is now
21%, illustrating the critical role that high-value co-products will play in the economics of any wood
to biofuel plant. The base case (ethanol only) is illustrated in Table 6.
23
Table 6. ROCE of a fermentation cellulosic ethanol plant. From Bio-pathways.

Capex
$315,000,000
Sales
Ethanol, 200 ML @$0.65/L
$130,000,000
Net Sales
$130,000,000
Operating costs
Wood, 714 kt/y @ $100/t
$71,400,000
Other
$60,000,000
$177,000,000
EBITDA
Depreciation
-$47,000,000
20 years
EBIT
Tax rate
-$63,000,000
30%
Net income
Maintenance
$15,750,000
$0
-$63,000,000
2%
$10,710,000
35 days
$12,500,000
45 days
-$21,800,000
Inventory
17 turns
$10,500,000
Capital employed
ROCE
$322,400,000
-20%
2.2.6 Conclusion
The case for ethanol from wood is difficult to make. Yields may not be as high as shown, as many of
these numbers have been demonstrated only at the bench scale or are theoretical calculations based
on total sugar or carbon content. And while it may be technically possible to run a gasification plant
on bark, cheap bark requires a healthy primary industry to generate bark at that price. It is thus not
likely that we will be able to provide the entire country with renewable fuel from wood without the
wood cost being that required for whole logs or chips. So the ROCEs given here may be taken as
optimistic, and the economics generally negative.
Improving the economics would require finding valuable uses for the lignin produced. On a relatively
small scale, for instance in the case of a number of 400 ML/y plants, this means finding uses for
400,000 t/y of lignin per plant. Options exist to burn this amount, or convert it to value-added
products. However, Section 2.5 demonstrates that markets of this volume do not exist today and the
best use of this volume of lignin would be as a fuel for stationary combustion in CHP plants, at a value
substantially less than $750/t. (At 28 GJ/t of lignin and $6/GJ for delivered natural gas, the energy
content of a tonne of lignin is worth $168.)
24
2.3 Synthetic Hydrocarbons

Synthetic hydrocarbons can be derived from a number of thermal conversion processes such as
coal liquefaction, fast pyrolysis or via gasification/catalytic conversion technologies like the FischerTropsch (FT) process. It is diesel fuel made from this latter process that will be the major focus of this
case study. Other products that can be made via thermal treatment/catalytic conversion of biomass
include methane, methanol, ethanol and dimethyl ether (DME).
Bio-diesel in North America is currently being produced mainly through the trans-esterification of
animal fats, soy oil, canola and restaurant fats. The gasification and FT process to produce bio-diesel is
entirely distinct from the trans-esterification process and can be fed with a wide range of carbonaceous
materials. Strictly speaking, the product is not a bio-diesel, but a true synthetic diesel as the chemical
composition of the product is a mix of hydrocarbon chains indistinguishable from petroleum-based
diesel.
2.3.1 Feedstock
Since the FT process requires a gasifier to convert the feedstock into syngas, it can accept a wide
variety of marginal biomass as a fuel. This is also largely true of other thermal conversion processes.
Some attention needs to be paid to feedstock cleanliness, as the downstream catalysts employed to
convert the syngas to liquids can be poisoned by common contaminants like chlorine and sulphur.
For the FT process in particular, the major constraint will be scale of the plant. Due to the high capital
costs of a FT plant, it needs to be built to a very large scale and the footprint of the plant in terms of
feedstock harvesting may be such that it would need to compete for more expensive forms of fibre
than forest residues. In the case of FT plants, it would definitely be advantageous to locate the plant in
regions where other types of biomass, like agricultural waste, were also readily available. Otherwise,
feedstock-related issues are the same as for heat and power, and readers are referred to section 1.2.2.
2.3.2 Products
By using different catalysts and manipulating the C:H ratio of the syngas, a variety of synthetic
hydrocarbons can be produced via the Fisher-Tropsch catalytic conversion process [Fischer-Tropsch
Technology, Steynberg and Dry, 2004]. Depending on the reactor, FT fluids can include straight run
diesel components, waxes, naphtha and olefins. The waxes, naphtha and olefins are further refined
into a wide variety of valuable end-products. The refining technology is similar to that used for petroleum-based crude oil with allowances for the specific components of the FT fluids. Unlike ethanol
or bio-diesel from lipids, syn-diesel can be blended with fossil-fuel diesel at any point in the existing
supply chain and transported to other provinces or the US In the absence of tariff barriers, the US
market represents an excellent export market opportunity due to US Energy Independence and
Security Act of 2007 (EISA) requirements.
In common with other gasification processes, the FT process generates waste heat as a by-product
of cooling the syngas from the gasifier. The FT catalysis reactions are also strongly exothermic and
additional heat is produced during the conversion to FT liquids. Based on balances provided by Steynberg
25
and Dry for coal to FT fluids technology, surplus electricity of between 2.4 and 2.9 MWh/t primary
FT fluids might be produced from a gasification/FT process plant. This option is seldom discussed in
reviews of processes designed to convert biomass to FT fluids, but offers an opportunity that should
be explored further.
Using different catalytic technology, the Swedish firm Chemrec is proposing the production of
methanol and DME synthesized from syngas. DME is a gas at room temperature, with properties
similar to propane. It turns liquid with mild pressurization, and can serve as a fuel for vehicles where
the refuelling infrastructure exists, and where modified vehicles are available. As with natural gas
or hydrogen, extensive use of DME in transportation is unlikely unless the infrastructure is built; a
fungible fuel such as a synthetic diesel will gain widespread use faster.
Fast pyrolysis also affords the means to convert biomass into liquid transportation fuels. Envergent,
a joint venture of Ensyn and UOP-Honeywell was formed to develop the technology necessary to
modify raw pyrolysis oil and make it suitable for direct injection into a gasoline refinery as a crude oil
substitute; much like FT fluids.
Gasification of coal and natural gas, followed by conversion to FT fluids is well established technology.
Operating and capital costs are both high. Typically, these plants are located at the site of stranded
assets that cannot readily be taken to market in their existing form, although Eastman operates
some large coal to FT fluids reactors in the US as part of a large chemical processing complex. No
commercial biomass-based FT conversion facilities are currently in operation, although Choren has
built a 15 ML demonstration plant in Freiberg, Germany that began operation in 2008. A consortium
including Neste Oil and Stora Enso has built a pilot facility adjacent to the Stora Enso pulp mill in
Varkaus, Finland
DME and methanol are both produced from catalytic conversion of syngas, but not via the FT process.
Selectivity and process costs are said to be cheaper, but there are no operating commercial plants
from which to draw experience. The Chemrec technology involves pressurized gasification of black
liquor from pulp mills to produce the syngas, but there is no reason that conventional gasification of
biomass could not also make a suitable syngas for conversion to DME or methanol.
The North American targets for the use of renewable fuel are ambitious. The US EISA requires the
use of 36 billion gallons of renewable bio-fuels by 2022, of which 21 billion gallons must come from
non-corn or starch feedstocks. More than 1 billion gallons of bio-diesel must be included in this mix by
2010, and in increasing amounts in subsequent years. In Canada, the RFS calls for renewable content
of diesel fuel to be at least 2% by the end of 2011. A large market opportunity therefore lies in the
production of FT diesel and other fungible fuels from biomass.
26
In 2009, net sales of low-sulfur diesel fuel in Canada amounted to 23 BL and total diesel sales came
to more than 26 ML [Statistics Canada]. As shown in Table 7, use of harvest residuals could satisfy
the entire renewable diesel content in the Canadian RFS. In fact, nearly all of the total diesel fuel
consumption in Canada could be filled from forest biomass, although it would take most of the AAC.
Table 7. Percent of AAC and 2009 Harvest Volumes Needed to Satisfy RFS for Diesel fuel (based
on FT Diesel)
Diesel
Sales
5-yr Avg,
ML
RFS (2%)
on 5-yr
Avg,
ML
odt
needed
% AAC
% potential
forest
residuals
% 2009
Harvest
% 2009
Harvest
Residuals
BC
3,382
68
287,787
AB
6,407
128
545,285
30
33
SK
2,061
41
175,418
29
18
91
MB
1,072
21
91,222
12
11
57
ON
6,929
139
589,717
23
10
50
QC
4,422
88
376,322
16
Atlantic
2,333
47
198,587
13
15
Arctic
327
27,843
Canada
26,933
539
2,292,180
12
26
Notes: Assumes FT Diesel yield of: 235 L/odt

A 180 ML/y plant would require an investment of $403M and 670,000 odt/y of wood (Table 8). As
with coal-based FT, small fractions of the primary FT fluids can also be converted to other high-value
products and these may significantly increase revenue. Revenue would be $148M/y from FT diesel
and $19M/y in naphtha and other value-added products for a total of $167M/y. Annual operating
costs, other than wood, are estimated at $64M. The original Bio-pathways model for a medium-sized
FT plant had a slightly negative ROCE, but with the value-added products, the ROCE improves to
3.9%. More intriguingly, adding electricity sales converts an EBITDA of $18M to a gain of $62M, This
gives a ROCE of 15%, which again illustrates the importance of co-products. There is considerable
uncertainty in the estimates for capital and operating costs for a medium-scale FT fluids plant, since no
real operating experience has been gained to date. Biomass pricing for this scenario has been assumed
to be for roadside residue, but the plant size is such that sufficient roadside residue is unlikely to be
available within a reasonable transportation distance. Paying pulpwood prices for the biomass would
reduce the ROCE considerably.
27
2.3.6 Conclusion
As with ethanol, the economics of fuel from gasification and FT processes are dependent on very narrow
margins and large volumes. The yields, operating costs and capital costs still need to be evaluated in
pilot and demonstration scale units, and could easily be less favourable than the numbers used here.
The cost of biomass remains a huge component of estimated operating costs; using low-cost residues
may not be possible, given that the medium-size FT plant is roughly equivalent to a medium-sized
NSBK mill. Using low-cost residuals also implies the existence of a healthy, high-value industry to
generate those residues from wood which will cost, in the case of conventional feedstocks such as
northern softwood species, at least $100/odt delivered. Conversion of all available forestry resources
is sufficient to replace all diesel use in Canada, but leaves none of the resource available for other
users.
Table 8. ROCE of a FT diesel plant (original Bio-pathways assessment did not include revenues for
naphtha and other value-added products; ROCE was -1%).
Capex
$403,000,000
Sales
Syn-Diesel, 180 ML @$0.80/L
$148,000,000
Naphtha, 0.195 L/L syn diesel and $0.55/L
19,300,000
Net Sales
$166,900,000
Operating costs
Wood, 670 kt/y @ $76/t
$58,200,000
Other
$72,260,000
$130,500,000
EBITDA
Depreciation
$36,400,000
20 years
EBIT
Tax rate
$16,270,000
30%
Net income
Maintenance
$20,160,000
$4,800,000
$11,400,000
2%
$8,000,000
35 days
$14,000,000
45 days
-$16,000,000
Inventory
17 turns
$7,700,000
Capital employed
ROCE
28
$417,000,000
3.9%
2.4 Energy products: Conclusion

Energy products from wood in Canada must inevitably face the high cost of wood collection and
delivery. As scale increases, operating and capital cost per unit of output decline, but feedstock
costs climb rapidly. The optimum scale is arguably in the 1 GW range for most scenarios, compared
with coal-fired generating stations or petroleum refineries where a 10 GW plant is typical. (A 1 GW
wood-supplied plant consumes about 1.7 Modt/y.) Several approaches may serve to improve the
economics of stand-alone energy plants (whether they generate heat and power, or transportation
fuels).
Use of residues or other low-cost feed is the first area to be explored. Forestry residues are of two
types; those left in the forest, which are likely to be as expensive to collect as merchantable timber,
and those remaining after primary transformation. This second type of residue may be less expensive,
depending on what commercial arrangements can be made with the facility generating them, but only
when the primary transformation step has earned a large revenue stream to compensate. Also, the
volume will be relatively small, so that wholesale replacement of existing energy systems based only
on low-cost residues is unlikely.
Other residues, such as agricultural residues, dedicated plantation crops, fast growing woody biomass
or the renewable portion of municipal waste streams should be looked at on a case-by-case basis. As
with forestry, such biomass is local (and may be seasonal); delivery logistics and distances are critical
parts of this new supply chain, and are outside the scope of this document.
Given the impact of scale and collection costs, and the relatively low cost of fossil fuels in the uncertain
context around carbon taxes or incentives, it seems that there are two possible pathways forward:
At small scales it is critical to identify and aggressively pursue low-volume, high-value co-products.
Residues from these operations can be converted to energy products, which are not likely to be
economic in the absence of high-value co-products. (The exception is energy for internal use which
represents a stable and predictable supply.) Identifying local users of heat may be a limiting factor
on the potential efficiencies.
At larger scales, which become possible if relative power and transportation fuel costs increase, it
may become reasonable to consider stand-alone energy or fuel systems where scale is only limited
by collection costs, not by market size. Here again the low local demand for heat in remote forestry
towns is likely to be a limiting factor on efficiencies. The opportunity exists to move to a higher level
of bio-fuels usage, which can contribute to reducing Canadas greenhouse gas emissions, particularly
in jurisdictions with a higher proportion of fossil-based energy consumption. However, it is clear that
high levels of substitution for fossil fuels will require large portions of the annual allowable cut, and
possibly significant levels of forest residue harvesting. Government policies and support to minimize
the gap between production costs of bio-energy and fossil fuel-based energy will be necessary to
encourage investment for large-scale production.
29
2.5 Lignin-based products

2.5.1 Feedstock
Lignin will be a by-product of many of the processes described so far. Cellulosic ethanol production
based on fermentation pathways will generate a lignin stream, and if ethanol from this process
ever becomes a large-scale commercial reality, there will be huge quantities of lignin to dispose of.
As well, existing chemical pulping processes remove lignin to liberate the cellulose for sale. At this
point, most lignin is burned to generate heat and power; additionally, in chemical pulp mills, the heat
liberated serves to drive chemical reactions that recover fresh cooking liquors from spent liquors. This
use extends well beyond simply generating energy, and is a critical part of the process of separating
cellulose from lignin. That being said, the calorific value of the so-called black liquor, containing lignin
and spent cooking liquors, often exceeds the calorific value required to drive this recovery reaction
by a substantial margin, so that a portion of the lignin can safely be removed without impacting the
ability of the mill to recover cooking liquors. This is particularly true of softwood pulping processes;
hardwood pulping generates less lignin and the liquor thus has a lower calorific value. (Other mill
impacts of lignin extraction are not insignificant and need to be addressed on a case-by-case basis.)
Lignin is a complex, aromatic polymer. Its basic structure is relatively similar across northern softwood
species; hardwood lignin and agricultural lignin are each somewhat different from softwood lignin.
The building block of softwood lignin is primarily coniferyl alcohol whereas hardwood lignin is
composed of equal proportions of coniferyl and synapyl alcohols. The additional methoxy groups on
the aromatic rings of synapyl alcohols prevent the formation of certain linkages (e.g., 5-5 or dibenzodioxocin linkages) which results in hardwood lignins being more linear (less branched) in structure
compared to softwood lignins. Beyond the species-dependency, the properties of lignin will depend
to a very large degree on the process used to produce it. This in turn depends on the purpose of the
process and, ultimately, on the proposed end-use of the cellulose and lignin streams. A wide range of
properties are potentially available and are being mapped as a function of extraction process, added
transformation steps and desired end-use. Lignin properties, characterization and end-use remain
active research fields, and much remains to be learned.
2.5.2 Products
2.5.2.1 Substitute for carbon black

Carbon black is currently used as an additive in almost all rubber products, most importantly rubber
tires for trucks and cars. Carbon black provides the wear and abrasion resistance and tensile strength of
the tire. Carbon black is produced from the incomplete combustion of heavy aromatic hydrocarbons.
Lignin has been tried in tires in the past as a partial substitute for carbon black. In North America there
are only 6 manufactures of carbon black, as shown in Figure 7.
30
Figure 7. North American Carbon Black Capacity

by Company, 2006. Source: Freedonia 2007.
Tires account for nearly 70% of all carbon black demand. The recession of 2008/9 significantly reduced
tire demand and thus carbon black demand. As the economy recovers, demand for carbon black is
expected to return to 2006/7 levels. As the carbon black industry is very concentrated it is difficult
to determine transaction prices, although Columbian Chemical publishes their list prices monthly as
shown in Table 9.
While published list prices are in the $2,200/t to $3,200/t range, representatives of one major tire
manufacturer, which benefits from large purchasing leverage, have revealed verbally that transaction
prices of US$1200/t are common for certain grades while a small rubber compounder revealed prices
of the order of $2200/t. It is possible that the difference reflects volume discounts available to the
tire manufacturer. Further market research is needed to confirm carbon black transaction prices. If
transaction prices of $1200/t are common, production costs could be $1000/t or less, and the forest
sector may need to be prepared to undersell a competitor with production costs in this range.
Table 9. Rubber carbon black list prices, Columbian Chemicals, January 2009, US$ FOB plant.
Grade
US$/metric tonne
N-121
$3262
N-326
$2310
N-550
$2288
N-650
$2239
N-762
$2206
Clearly a robust market strategy for building a substitute for carbon black will be needed. More
information will be needed about the ability of carbon black producers to lower prices, and other
tactics they may be able to employ in the face of a new competitor.
31
Technical challenges also remain. Initial results with rubber compounders are promising, and the
potential for a profitable business in the $750 to $1000/t range is encouraging. The tire market, at
just over 1Mt/y, could easily take all the lignin from all recovery-limited kraft pulp mills in North
America, although this application is more demanding than non-tire uses; rubber users who do not
face regulatory issues around tire safety may be able to move more quickly in generating demand
although at a smaller scale.
2.5.2.2 Substitute for phenol formaldehyde resins

The phenolic nature of lignin has led to its use as a resin for gluing wood-based laminates, such as
kitchen countertops and other decorative applications. This process was in place from the 1940s until
at least the 1970s in one Canadian mill, but was discontinued as petroleum-based resins became
more affordable. These petroleum-based phenol-formaldehyde resins, and more recently isocyanate
resins, have replaced lignin in this application and have benefitted from several decades of continuous
product improvement. Current research has shown that lignin should be able to replace as much as
50% of the phenol in phenol-formaldehyde resins in the manufacture of plywood, and perhaps 30% in
other types of composite wood panels with no major changes in strength properties; further process
and product improvement should improve these figures further. In the light of decisions in several
US states to limit or ban the use of formaldehyde in resins for home building, this is potentially an
interesting market.
As well, less formaldehyde is needed in the resin when lignin replaces the phenol component, thus
providing an added savings. Lower use of formaldehyde in the manufacture of PF resins might also
provide additional advantages in relation to reduced formaldehyde emissions at PF resin plants, wood
product plants and in the market place. Table 10 shows the reduction in formaldehyde consumption in
phenol formaldehyde resin manufacture at various levels of phenol substitution by lignin.
Table 10. Lignin substitution rates and corresponding formaldehyde reduction in panels.
Substitution of phenol by lignin
Reduction of formaldehyde consumption
0%
0%
25%
8.3%
40%
14.5%
Replacing 40% of the phenol with lignin reduces the formaldehyde requirement by 14.5%. In the
recent past phenol prices have been between US$1,000 and $1,200 per tonne. Formaldehyde prices
have been between US$500 and $700 per tonne. By replacing the phenol and saving up to 14.5% of
the formaldehyde, lignin could offer considerable value in this segment.
Phenol formaldehyde resins are primarily used in structural engineered wood products such as
plywood, oriented strandboard (OSB), laminated veneer lumber (LVL) and Glulam beams. They are
also used in general bonding adhesives and molding compounds. Demand for phenol formaldehyde
resins by segment is shown in Table 11.
32
Phenol formaldehyde adhesives are typically 50% solids content, and of the solids, 50% is phenol.
Thus the total phenol volume consumed in the wood panel phenol formaldehyde adhesive market
is between 325,000 and 350,000 tonnes. If lignin replaces 30% of the phenol this would equate to
between 97,500 and 105,000 tonnes of lignin per year. There are also opportunities to replace resins
in other applications, such as foundry resins, adhesives in fibreglass insulation material, binders for
the stabilization of soil during oil drilling and as a binder in brake pads and other automotive products.
Improved thermal stability, anti-oxidant properties, insulation properties and/or shelf life are among
the advantages that might be available.
Table 11. North American phenolic resin markets (tonnes). Source: Freedonia 2002.
1992
1996
2001
2006
2011
Wood panels
959,545
1,149,091
1,236,636
1,302,273
1,409,091
General bonding
379,091
481,818
565,909
590,909
640,909
Molding compound
& other
100,455
109,091
116,818
129,545
145,455
Total
1,439,091
1,740,000
1,921,364
2,022,727
2,195,455
2.5.2.3 Lignin as a feed to carbon fibre production processes

Patents exist pointing to the potential to convert lignin into a feedstock for carbon fibres as a
replacement for polyacrilonitrile. Carbon fibre demand is limited by high prices. Automakers would
gladly use more if the price were lower, and lignin has the potential to do this while still providing new
revenue streams for the forestry sector. However, while resin applications are likely to be marketable
in 1 to 2 years, substantial lignin use in the manufacture of carbon fibre may be 5 to 10 years off.
Carbon fibre is used in aerospace and automotive applications where its low weight is a critical
characteristic. Production rates are low as costs are high; the market demand for a lower cost material
is large. Wide deployment of a natural substitute for polyacrylonitrile in this application would both
reduce the carbon footprint of the production process and improve the fuel economy of the vehicles
in which it is used.
According to researchers funded by the US Department of Energy, annual production of carbon fibre
today is of the order of 50,000 tonnes, at a typical production cost of about $9.50/lb. Of this, the cost
of the raw material, polyacrylonitrile, represents about $5.00/lb ($11,000/t).
Among the larger users, Boeing will require 35 tonnes for each 787 Dreamliner, and Airbus will require
similar amounts for each A380. Automotive manufacturers currently use small amounts in very
high-end automobiles but would use much more in lower-cost vehicles if prices were competitive
with aluminum. This threshold has been identified as $4 to $5/lb, meaning the raw material would
need to be below $2.00/lb. Given the expected yield of carbon fibre from lignin, this represents lignin
prices below $1.00/lb, or $2200/t. At these prices, volumes would be significantly higher than todays
33
production costs permit; 50 kg/vehicle in 500,000 luxury vehicles means 25,000 t/y additional
production, while 25 kg/vehicle in 6 million economy vehicles means 150,000 t/y. (Annual global
automobile production is 64 million units, and the average conventional fibre-reinforced composite
content is about 10 kg/vehicle.)
In the kraft mill, lignin extraction processes require a reaction vessel and a filter of some type. Typical
quoted capital costs for a 50 t/d lignin plant range from $15M to $25M, depending on mill configuration;
prior to installation, time must also be spent modeling the mill to identify other process-related issues
and mill impacts arising from the removal of lignin. Operating costs have been estimated at $200
to $250 per tonne of lignin, mainly due to chemical consumption; it is likely that process integration
activities once the first pilot mill becomes operational will reduce this number.
In mills where the recovery boiler limits the total amount of wood that can be processed, there
will be additional potential to generate added pulp production by unloading the recovery boiler. By
processing more wood, more lignin is generated and this can only be handled if some is diverted
from the recovery boiler. The economic benefits can then be larger if there are no added production
bottlenecks immediately behind the recovery boiler, and if the mill is in a position to sell the added
pulp. Theoretically, each tonne of lignin removed leads to an additional tonne of pulp production, but
this will be site-specific.
Market volumes are likely to be less important than feedstock volumes. The typical 1000 t/d Canadian
softwood kraft pulp mill can theoretically remove 150 t/d of lignin before the calorific value of the
black liquor drops too far to drive the chemical recovery reaction, but a more realistic upper limit is
likely to be 50 to 100 t/d before other production bottlenecks arise, or chemical imbalances in the mill
require large purchases of make-up caustic or acid. With total Canadian softwood pulp production of
about 10 million tonnes, total annual available lignin might not be much higher than 500,000 tonnes.
Hardwood mills generate less excess lignin and their suitability for lignin extraction would need to be
evaluated on a case-by-case basis. The availability of lignin from potential agricultural-based ethanol
plants is unknown and is beyond the scope of this report.
At a calorific value of 28 GJ/t, lignin contains most of the energy content of wood. However, at $6/GJ
for natural gas at the mill gate, the heat value is only $168/t, well below the operating costs to extract
this lignin. (Comparing with oil at $75/bbl, the calorific value of lignin is higher at $350/t.)
Phenol today sell for $0.55/lb, or about $1200/t. Sales of lignin-based resins at $750/t would cover
operating costs and split the remaining difference between lignin producer and resin manufacturer.
This figure also corresponds roughly with estimates of necessary lignin prices for widespread adoption
of carbon fibre in the automotive industry. Added revenue for a 1000 t/d kraft mill selling 50 t/d of
lignin-based products at an average of $750/t would be $13M/y. Added pulp production of 50 t/d,
34
assuming that the recovery boiler is a production bottleneck and that no other bottlenecks exist to
prevent this added production, would generate added revenue of $12M/y at historical kraft pulp prices
of about $650/t. Assuming the net benefit to the mill is a more conservative $100/t of additional pulp
production, the net revenue due to pulp production are $1.7M/y.
Analysis of one Canadian softwood kraft mill showed that extracting 50 t/d of lignin would provide
an additional 50 t/d of pulp production through debottlenecking of the recovery boiler. The revenue
stream in this case (which is likely to be repeated in the majority of Canadian pulp mills) thus consists
of added pulp sales as well as lignin sales. These assumptions havent been modeled in Bio-pathways,
but Table 12 shows just the economic analysis associated with the add-on lignin plant. Lignin sales
were assumed to be $750/t and operating costs were estimated to be $250/t lignin produced. Under
these conditions, the corresponding ROCE is 44%.
Table 12. Preliminary financial analysis of an add-on 50 t/d lignin plant to an existing kraft mill.
Not included in Bio-pathways I; assumes $250/t operating costs.
ROCE, add-on lignin plant
Capex
$20,000,000
Sales
Lignin, 50 t/d at an avg $750/t
$13,310,000
Pulp, 50 t/d at $100/t marginal
$1,750,000
Net Sales
$15,060,000
Operating costs
$4,440,000
EBITDA
Depreciation
$10,620,000
20 years
EBIT
Tax rate
$1,000,000
$9,620,000
30%
Net income
Maintenance
$4,440,000
$2,890,000
$6,730,000
2%
$400,000
35 days
$1,400,000
45 days
-$550,000
Inventory
17 turns
$270,000
Capital employed
ROCE
$21,550,000
44%
At least initially, the market for lignin at $750/t may not exist, and in the early years lignin sales
are likely to be dominated by fuel substitution. The ongoing historically low prices for natural gas in
35
North America make this a losing proposition, as the value of lignin on a straight energy substitution
basis is $168/t, less than the estimated production costs of $250/t. It is likely that the first plant will
experience slow growth in value-added markets as customers are developed, while subsequent plants
will benefit from ground-breaking market development and will have access to value-added markets
from startup. For this reason, government support for a portion of the capital costs of the first plant
would be helpful in reducing the risk.
2.5.6 Conclusion
Lignin extraction and reuse has been, and can easily once again become a valuable method of generating
added revenue in the context of a functioning softwood kraft pulp mill. Old product lines need to be
revived, and new ones devised, but the capital and operating costs do not appear excessive given likely
revenue. The economics are much improved where the mill can take advantage of potential added
pulp production, and where the lignin can be directed to value-added markets replacing natural gas
at current North American prices is not economically sensible except as a stop-gap measure. Table 13
illustrates the total potential market volumes.
Table 13. Potential market volumes for a range of lignin products.
Current market
size,
Mt
Potential revenue
to the forestry
sector, $/t
Total market
volume at 10%
penetration, kt
Revenue at 10%
penetration,
$M
Carbon black
1.4
$1000
140
$140
PF resins
2.2
$750
220
$165
Carbon fibre
0.1
$1500
10
$15
2.6 Sugar-based platforms

2.6.1 Feedstock
Apart from sugars generated from cellulose as described above, sugars can be extracted from the third
component of wood, which is hemicellulose. Generally in papermaking applications, hemicellulose is
welcome as a glue helping to bind fibres together and make a stronger sheet. Hemicellulose can be
removed prior to pulping, but the cellulose stream that arises is generally of poor quality and does not
make a reasonably strong sheet of paper. Hemicellulose extraction therefore makes sense where the
cellulose and lignin streams are not destined for papermaking applications, and in fact is necessary
in the production of viscose-grade or dissolving pulps where cellulose content levels of 96%+ are
necessary.
In the production of dissolving grades of pulp using a kraft pulping process, hemicellulose extraction
processes are usually installed prior to pulping. The resulting stream will in all cases be a fairly dilute
mix of sugars of various kinds, as well as chemicals such as acetic acid or furfural. The chemistry can
be fine tuned to shift the chemical content of the material removed, for instance to produce more
36
furfural and less sugars, or to shift the balance between monomeric and oligomeric sugars, but in all
cases the stream remains a dilute mixture. Separations and dewatering technologies will therefore be
necessary to generate relatively pure streams.
2.6.2 Products
Fermentation to ethanol is a potential pathway, especially if the hemicellulose is from a softwood
supply and is rich in six-carbon sugars such as glucose. (Fermentation to ethanol still doesnt work
very well with the pentose sugars removed from hardwoods.) However, the volumes will be relatively
small, and the capital cost per litre for the fermentation plant and distillation equipment will be high.
While it is possible to produce industrial grades of ethanol at a higher selling price than fuel-grade
ethanol, these markets are relatively small and are dominated, in North America, by a small number
of existing players. In the case of low volumes, or in the case of hardwood supplies, it is better to look
for chemical pathways unless there are other reasons for making ethanol.
A dozen such sugar-based platforms were analyzed in detail by the US Department of Energy in 2004,
and each has its pros and cons. There is no space here to revisit each of these, but xylitol, furfural,
levulinic acid, succinic acid, glycerol and butanol are among the products that are proposed from
hemicellulose. In particular, butanol is a fermentation product that may be more valuable than ethanol,
and where the biology is more tolerant of 5-carbon sugars; this pathway needs better evaluation. As
with other pathways, it is important to ensure that the revenue and margins per tonne of product
reflect the cost of the biomass.
A common process for removing hemicellulose from chips is the Lenzing VISCBC process, which is
designed primarily to produce a viscose grade of pulp. Operating costs for this modified kraft pulping
process are expected to be similar to the equivalent kraft process, with the understanding that the
yield loss arising from hemicellulose extraction means fewer tonnes of production; costs per tonne
may thus be 10% to 15% higher. Capital costs to convert an existing kraft mill will be very site specific,
but figures in the $75M to $120M range to convert a 700 t/d kraft mill to a 600 t/d viscose mill can be
expected based on recent conversions. Further capital costs will be required to extract, separate and
purify saleable chemicals from the sugar stream.
Keeping the hemicellulose stream out of the recovery boiler will also lead to added pulp production in
cases where the recovery boiler is a bottleneck to production. This is especially true of hemicellulose
as this is the wood component with the lowest calorific value; the cost to concentrate the stream and
burn it is barely offset by added steam generation. At the time of writing, added pulp production in a
viscose-grade mill is far more valuable than in a conventional kraft mill, due to much higher prices; the
economics will be driven by this added revenue stream.
37

Market volumes will be limited by availability of the material. The small number of viscose-grade
pulp mills, which is driven by the small (but growing) world market for the cellulose stream, implies
that total sugar availability will be low. In a typical conversion of a kraft mill producing 750 t/d of
market pulp, the typical viscose-grade pulp production rate is closer to 600 t/d. This implies that
the total availability of hemicellulose-based sugars is likely in the order of 42,000 t/y per mill. With
only a few such mills in Canada, annual availability of sugar streams is unlikely to exceed 100,000
t. Furthermore, this stream contains a range of chemicals, all in relatively small quantities. The cost
of extracting and purifying these streams means that relatively high-value markets will need to be
identified. Papermaking and dissolving sulphite mills are another potential source of sugars. Because in
such mills the pulping process is acidic, the sugars are not degraded to saccharinic acids as is the case
at kraft pulp mills. As a result, the residual pulping liquor (called red liquor) at sulfite mills is rich in
sugars. Four such mills exist in Canada from which another 100,000 t/y of sugars could be available.
World-wide, the production of dissolving pulp is in the order of 4 million tonnes. A large portion of this
is from sulfite mills, where the hemicellulose in the red liquor can easily be fermented. Total availability
of sugar streams from kraft dissolving pulp mills world-wide is thus in the order of 300,000 t/y.
Other potential sources of hemicellulose include fermentation-based ethanol plants with pre-hydrolysis
extraction stages. This implies that the ethanol production costs are reasonable and that the ethanol
plant is profitable on its own, since the sugar stream extracted in the pre-hydrolysis stage will be
relatively small.
2.6.4.1 Furfural
Furfural is an example of a product that can be extracted from hardwood hemicellulose streams. The
primary source of furfural today is a wide range of agricultural residues.
Currently priced at $1500 to $1800/t in North America, most production is Chinese and cash costs
of production, including transportation to a West Coast port, are said to be in the order of $700 to
$800/t. It will be necessary to be able to sustain sales prices below this level for extended periods to
remain competitive. World furfural volumes were 365,000 t/y in 2007, of which 272,000 was Chinese;
there are no North American producers today, most having been driven out of business by aggressive
Chinese pricing tactics.
The furfural yield from hardwood hemicellulose streams is likely to be low. A 600 t/d viscose mill can
produce up to 14,000 t/y of furfural. Total Canadian production potential is thus no more than 35,000
t or 10% of the world market. Value of this market, at $1800/t, is $63M; at a more realistic $900/t it
is $31M spread over a small number of mills. The implication is that, while valuable, this will remain a
side-product, with viscose pulp representing approximately $630M/y in revenue for the same mills.
(The added benefit of increased production in the case of a mill where production is limited by the
recovery boiler would be in addition to this calculation, and would be site-specific.)
38
North American demand has been steady at about 20,000 t/y since 2004, although it has been as
high as 45,000 t/y in the past. The decline is due to a drop in North American demand for several
products made from furfural, such as tetra-hydro-furan and furfuryl alcohol. (Demand for these has
grown in Asia as manufacturing processes using these feedstocks have shifted there.) However, the
demand for furfural as a feedstock to make furfuryl alcohol in foundry resins and other applications
remains steady at about 13,000 t/y, and North American producers would appreciate a more stable
pricing and supply arrangement than is currently available from the more volatile Chinese supply. (It
is also possible that some foundry resin manufacturers are buying furfuryl alcohol directly from other
sources, thus increasing the potential size of this market.) A typical viscose-grade mill modeled on the
Lenzing VISCBC process could supply most of this market. However, there exist a number of known
pathways to products such as nylon which are not presently exploited, possibly due to concerns around
Chinese pricing; at least one large chemical company expects to need significant amounts of furfural
in the medium-term.
Lenzing Pulp makes 4000 t/y of furfural from beech sulphite condensate in Lenzing, Austria. This
is almost half of EU production; the remainder comes from almond shells in a Spanish plant. Most
Asian production is used internally and costs are low; Chinese producers face anti-dumping tariffs in
the EU and US. There is no realistic export market at this time, given the small potential volumes and
potential size of the North American market.
Chinese producers remain the primary competitors, with Lenzing holding a large portion of the EU
supply. Discussions with producers of foundry resins have revealed that the volatile supply and pricing
characteristics of the Chinese supply are frustrating, and that a more stable arrangement with a North
American producer could be interesting. Pricing will likely remain an issue. It is possible that increased
demand for xylose, which is among the precursors to furfural, will limit furfural production in China,
thus driving prices up.
Furfural is one of a series of potential products from hemicellulose streams from viscose plants.
While potential volumes are small, so is North American demand. The product is an example of a
value-added side stream which will benefit one or two mills, and it is not likely that large numbers of
mills will develop this product; the purpose of the analysis presented here is to illustrate one of a large
number of smaller niche markets that hold the potential to support the forest sector as it moves to
a refinery-based model. Each mill that moves in this direction will need to identify a range of smaller
niche products, and not all can engage in the same market.
The following economic analysis is hypothetical, and meant to be representative of any number of small
add-on processing facilities making specialty chemicals. Assuming that an existing viscose-grade pulp
mill produces 600 t/d of dissolving pulp and 120 t/d of sugars which are presently sent to evaporation
and recovery for burning, and assuming that 40 t/d of a chemical such as furfural could be extracted
from the sugar stream, annual revenue from chemicals at $1200/t is $17M. (Fermenting the same
stream will generate 5 million litres of ethanol per year, or $3.25M/y at $0.65/L.) This amount of
39
revenue may be overly optimistic, given likely long-term market prices for furfural. Assuming further
that the mill is a converted kraft mill, and that the pulping equipment is capable of operating at a
daily rate of 650 t/d of pulp production, another 50 t/d of viscose-grade pulp may also be produced.
Viscose-grade pulp prices have recently reached highs of $1600/t. Mill operating costs are likely to
be similar to a conventional kraft mill, so where a kraft mill can obtain a net benefit of $100/t on
sales of $650/t, implying operating costs of $550/t, it is reasonable to expect that the net benefit of
a new tonne of viscose-grade pulp production will be, conservatively, at least $500/t. The added pulp
production thus brings in $8.75M for total benefits of $26.25M/y.
Operating costs will be dominated by energy required for concentration of the sugar-rich stream
and distillation of the furfural stream from 6% to 99%+ furfural. This is a function of the content
and concentration of the sugar stream, and the desired end-product; rough estimates lead to a total
operating cost of about $7.1M/y. Net benefits are thus $19.2M/y.
Capital costs will include separations and distillation equipment. Modifications to the pulp mill will
be required if the mill uses the conventional Lenzing VISCBC pre-hydrolysis process, where the sugar
stream is neutralized using white and black liquor, as this damages the sugar stream. Costs will thus
be mill-specific. As an example, modifications to a Lenzing process in Canada have been estimated
at $10M to $12M, while the necessary separations and distillation plant for generating furfural have
been estimated at $15M to $25M. Using the mid-point, a 14,000 t/y furfural plant would cost in the
order of $31.5M. In this example, ROCE is 51% (see Table 14). Assuming a more reasonable $750/t for
furfural generates a ROCE of about 32%.
2.6.6 Conclusion
Pathways from hemicellulose streams to novel chemicals need to be developed, as these can easily
present a bottleneck in recovery boilers in viscose-grade pulp mills. The small volumes available mean
that it should be possible to identify niche markets with reasonably high prices. Different mills may have
to identify different pathways for their streams, due to the small volumes of some of the markets; this
is at least partly offset by the low volumes available from Canadian mills. Extraction, separation and
purification steps remain R&D challenges. The economics of these pathways are not as well defined
as for lignin, where extensive engineering and marketing studies have identified capital and operating
costs, as well as probable sales prices, to a much narrower tolerance, but preliminary estimates show
that reasonable paybacks may be expected for an add-on to an existing viscose-grade pulp mill. As in
the case of lignin extraction, government support for capital investments will significantly reduce the
risk involved and thus promote more rapid implementation.
40
Table 14. Hypothetical financial analysis (not in Bio-pathways) of an add-on furfural plant to
an existing hemicellulose pre-extraction stage in a dissolving pulp mill. Extraction of 1 tonne of
hemicellulose is assumed to yield 1.25 additional tonnes of pulp production.
ROCE, add-on furfural plant
Capex
$31,500,000
Sales
Lignin
$0
Hemicellulose to furfural (40t/d)
$17,000,000
Ethanol
$0
Pulp, 50 t/d at $500/t marginal
$8,750,000
Net Sales
$25,790,000
Operating costs
$7,100,000
EBITDA
Depreciation
$18,690,000
20 years
EBIT
Tax rate
$17,110,000
30%
Net income
Maintenance
$1,580,000
$5,140,000
$11,970,000
2%
$630,000
35 days
$2,470,000
45 days
-$880,000
Inventory
17 turns
$420,000
Capital employed
ROCE
$34,150,000
35%
41
2.7 Fibre-based products

Fibre-reinforced composites are a key component of a large range of products. The fibres are often
made of glass, and this represents an opportunity to identify potential uses of wood fibre as a
substitute. (Portions of this section were contributed by Yawer Khan of the Forest Products Association
of Canada.)
2.7.1 Feedstock
Canadian softwood forests generate some of the best fibre in the world. Light, strong, flexible and
renewable, it has a host of useful properties. There are a range of applications other than paper or
construction materials where the advantages of a northern softwood fibre could be valuable:
As a replacement for glass or other fibres in fibre-reinforced composites. The automotive industry,
in particular, is very interested in this approach, since the replacement fibre would be renewable,
recyclable and possibly lighter. (Other benefits remain to be proven at the R&D stage.) There are
two major pathways:
- loose fibrous material fed to various injection molding equipment with plastic pellets;
- fibrous mats, resembling paper, serving in fibreglass sheet applications.
As a replacement for insulating panels in building envelopes. This is addressed in the synthesis report
on building materials.
The ability of the pulp and paper and fibreboard sectors to tailor fibre properties to end-user needs
is very valuable. From coarse, porous, bulky sheets resembling a crude newsprint sheet (and possibly
made using idled newsprint assets) to fine, strong kraft fibres and everything in between, a serious
evaluation of potential products and pathways needs to be undertaken.
One major concern will be the chemical compatibility between fibre and various polymeric matrices.
This is an area of active research.
Some of these markets will be small. For instance, Magna International, a Canadian automobile parts
manufacturer, already makes a load floor for the rear of mini-vans and SUVs which incorporates
recycled cardboard in a honeycomb composite structure. The outer layers are currently fibreglass with
a polyurethane matrix. If each panel is about 1 m2, the fibreglass mat has a basis weight of 300 g/m2,
and each panel requires two such mats (one for each side), each vehicle will require 600 grams of fibre
for this application. Multiplied by Magnas estimate of 6 million minivans produced annually in North
America, this is only 3600 t/y demand. However, there are many more applications for fibreglass
mats; another manufacturer makes headliners and consumes another few thousand tonnes per year.
Interior door panels in a typical automobile weigh 3 kg; at 4 panels per vehicle and 6 million vehicles,
and with a 10% substitution by wood fibres, the total annual wood fibre demand for this application
might be another 7,500 tonnes.
42
Potential markets exist for a forestry manufacturer willing to pursue a larger number of smaller
customers than is the case today. The fibreglass market is a growing one where demand typically
exceeds supply. A CAGR of 6.3%, leading to a market of US$8.4B by 2015 is expected. The current
market for reinforcement applications is 4 to 5 Mt/y worldwide today, with the US market at 1.1 Mt
for textile glass.
The four largest producers control 52% of the market, with Owens-Corning and PPG controlling 26%.
China Fiber Glass represents 12% of world production; the volumes produced in Asia are expected to
increase substantially in the near future, although Chinese producers are increasingly the target of
EU anti-dumping tariffs. While only one Chinese firm appears in the top 4, Chinese production was
37% of world capacity in 2007. Automotive parts suppliers have verbally expressed concerns around
volatility of Chinese pricing, and the reduction in North American production capability, and (as with
furfural) a stable North American supply might be interesting.
Worldwide, growth is expected to be high in the glass wool insulation market, while textile fibreglass
demand may be limited by competition from natural fibres. In the US, textile glass is expected to
grow to 1.3 Mt by 2013. Applications include reinforced plastics where improved strength and other
properties will be required to move into more demanding applications. Quoted list prices are typically
in the order of $0.90/lb, or $2000/t. However, the Chinese industry exported 790 kt of fibreglass in
2006, and the emergence of anti-dumping tariffs in EU jurisdictions implies that Chinese producers
may be able to drop their transaction prices substantially before losing money.
Among the existing producers of composites reinforced with natural fibres is Greencore, a spin-off
from University of Toronto research activities. Greencore produces pellets containing wood fibres and
resin for use in interior panels for automobiles and other products. The company is currently moving
to demonstration scale following initial development of their proprietary technology at the University
of Toronto.
With a US market for textile glass of 1.3 Mt in 2013, a 10% penetration represents a relatively small
tonnage compared to typical Canadian pulp and paper mills. Additional markets in the glass wool
insulation market would increase this to about 3 Mt. Two potential scenarios exist for moving into this
market, depending on the results of ongoing R&D work.
If fibre can be produced using existing pulp mill lines with little or no modification, small runs can be
produced in a number of mills without impacting the ability of the plant to revert to conventional
paper-making grades the rest of the year. The market would allow for several mills to supply a range of
relatively small customers at very low capital cost. The principal capital expense would in this case be
some form of flash dryer or other drying process, and (possibly) equipment to produce fibre in a form
suitable for use in injection or extrusion processes.
43
If the ideal fibre characteristics require substantial modifications to existing pulp mill equipment, the
equipment can then be used only for composite markets and will no longer be suitable for paper
making grades of pulp. In this case, there is in all probability room for only a few such conversions in
Canada before production reaches 10% of US demand, or 300 kt.
Table 15. Hypothetical financial analysis of a conversion from TMP to composite grades of fibre
(not in Bio-pathways). Annual production is 70,000 tonnes, corresponding to a small- to mid-size
TMP line. Capital costs are for illustrative purposes only; identifying the necessary changes to
existing capital stock has not been done largely because the product development work is under
way.
ROCE, TMP conversion to 70 kt/y fibre-to-composite plant
Capex
$100,000,000
Sales
Fibreglass substitute @ $1000/t
$70,000,000
Net Sales
$70,000,000
Operating costs
Wood
$7,368,421
labour (fixed + var)
$4,970,000
Power
$3,500,000
Heat
$1,470,000
Other
$3,000,000
$20,308,421
EBITDA
Depreciation
$49,691,579
20 years
EBIT
Tax rate
$44,691,579
30%
Net income
Maintenance
$5,000,000
$13,407,474
$31,284,105
2%
$2,000,000
35 days
$6,712,329
45 days
-$2,503,778
Inventory
17 turns
$1,194,613
Capital employed
ROCE
$107,403,164
41.61%
This case is illustrated in Table 15, with highly hypothetical estimates for capital conversion costs to
an existing, fully depreciated mill. Here an existing 200 t/d TMP plant is converted to produce 70,000
44
t/y of fibreglass substitute, which sells for $1000/t at the plant gate. Wood is assumed to cost $100/t,
with a 95% yield to useable fibre. Power in the TMP plant is assumed to be 800 kWh/t, implying only
the primary refiner is required; total power required is 1000 kWh/t at $0.05/kWh. Heat for drying is
assumed to require 3.5 GJ/t, supplied by natural gas in a flash dryer at $6/GJ. (It is possible that some
of this drying energy may be provided by waste refiner heat.) Labour and other costs are assumed
equal to energy costs, a good approximation in existing TMP plants where wood, labour and energy
costs are relatively similar in scale. The big unknown is capital cost; assuming a very high capital cost
of $100M, ROCE is still a respectable 42%, and lower capex requirements will only improve this figure.
Proper due diligence, following appropriate product development at the R&D scale in partnership with
end-users is warranted.
2.7.4 Conclusion
The market for fibreglass is small compared to potential volumes available from Canadian pulp mill
assets, and the number of wood fibre suppliers to a natural fibre composite market will be small
if conventional pulping lines in the order of 200 t/d are converted. However, the revenue can be
interesting and the capital required may be low; proper due diligence is required to evaluate and
guide the ongoing R&D and product development activities. Collaboration with companies such as
Greencore may be an interesting approach; partnership with end-users to properly define the required
properties will be critical.
2.8 The forest biorefinery

It is so far clear that with wood delivery costs at $100/t, a range of stand-alone energy products is not
economically viable unless effective oil or power prices are significantly higher, or if low-cost residues
can be identified. In the first case, it is uncertain whether effective oil prices can be driven high enough
to incent bio-fuels or bio-energy projects without contributing to a recession; in the second, low-cost
residues will be those generated onsite from other production processes making higher value products.
These residues are not truly low-cost, as it still costs $100/t to collect and deliver them regardless of
end-use, but by their availability, their poor suitability to higher-value products, and the necessity of
doing something with them, they represent an opportunity to enhance the overall value of the plant.
Essentially, low-cost residues imply the existence of a high-value economically viable product line.
Current examples include diverting sawdust and bark from a sawmill to a pellet, gasification or
pyrolysis plant, or generating industrial-grade ethanol from spent sulfite cooking liquors. Both are
examples of the biorefinery, which is defined as an integrated site or group of sites, making a range of
products from a bio-feedstock: the primary process extracts very high-value products, the secondary
one a lower value product from the residues arising from the primary step, and so on until the final
residue is converted to energy. The current forestry model is such a biorefinery, where the highest
value products are construction materials; residues in the form of chips are converted to pulp and
paper products; and residues in the form of spent cooking liquors, sawdust or bark, are converted to
heat and power. Table 16 illustrates the conversion of an existing kraft mill to higher value products, in
line with this structured approach to value creation.
45
Table 16 illustrates where the wood goes in a kraft mill, and what the revenue is for each of the
streams. (The benefit due to organics to recovery is the heat and power which would otherwise have
to be generated through purchased fossil fuels or from the grid.) Table 16 also illustrates a potential
kraft mill biorefinery, where 2.5% of the wood is removed as a hemicellulose stream and converted
to furfural, the remainder of the hemicellulose is converted to ethanol, 5% is removed and converted
to lignin-based products, and 40.5% goes to the recovery system. (The remaining 5% is sewered and
generates no value, as in the first case.) While the value of heat and power generated drops from $68
to $52, the revenue from new products increases to the extent that added revenue of $33 is generated
for each tonne of wood consumed.
Table 16. Benefit per tonne of wood consumed
Kraft mill
Kraft pulp
Organics to recovery
Mass flow
42.0%
53.0%
Heat
Power
Flow to sewer
Total benefit per tonne of wood
5.0%
100.0%
Kraft mill biorefinery

Kraft pulp
Furfural from hemicellulose
Lignin to resins
Ethanol
Mass flow
42.0%
2.5%
5%
0.0%
40.5%
Heat
Power
Flow to sewer
Added benefit
12.5%
100.0%
Dissolving pulp biorefinery

Dissolving pulp
Furfural from hemicellulose
Lignin to resins
Mass flow
37.0%
2.5%
2.5%
45.5%
Heat
Power
Flow to sewer
Added benefit
46
12.5%
100.0%
Revenue/t
$750.00
Benefit
$315
$91.76
$36.00
$0
$49
$19
$0
$383
Revenue/t
$750.00
$1,200.00
$750.00
$182
Benefit
$315
$30
$19
$0
$91.76
$36.00
$0
$37
$15
$0
$415
$33
Revenue/t
$1,100.00
$1,200.00
$750.00
Benefit
$407
$30
$19
$91.76
$36.00
$0
$42
$16
$0
$514
$131
The benefits of converting to dissolving pulp are also clear. The value of avoided energy purchases
climbs to $58 as more solids are diverted to the recovery boiler, and the total benefit compared to the
kraft mill case increases by $131 per tonne of wood consumed.
Table 16 also illustrates the revenue accruing from a tonne of wood consumed. While this does not
include the added capital and operating costs of the biorefinery, it provides a good first approximation:
if a process earns less per tonne of feed than the current mill, overall economics are likely to be poor.
They will certainly be poor if the revenue is less than the cost of providing the raw feedstock.
A more detailed analysis has been completed to show the economics of such a biorefinery, in particular
the return on capital employed (ROCE). Results are shown in Table 17, where the costs and benefits of
each component are evaluated individually and then as an integrated whole.
Table 17. Hypothetical economics of a dissolving pulp biorefinery ($M except prices per tonne or
per litre). Not in Bio-pathways.
Base case
Furfural
Lignin
Dissolving
pulp
$31.50
$17.00
$100.00
CHP
Overall
$220.00
$30.00
$398.50
$33.14
$431.92
Capital costs
New capital spending
Existing capital stock
Total capital employed
$33.51
$17.90
$343.10
Production (tonnes, litres)
17,857
17,857
264,286
$1,200.00
$750.00
$1,100.00
Net sales
$21.43
$13.39
$290.71
$59.06
$384.59
Operating costs
$10.47
$11.20
$105.07
$48.46
$177.35
EBITDA
$10.96
$2.19
$185.64
$10.60
$207.24
ROCE
27.69%
7.25%
49.11%
26.99%
42.98%
Pessimistic version
Furfural
Lignin
Dissolving
pulp
CHP
Overall
$37.80
$20.40
$120.00
$264.00
$36.00
$478.20
Price per tonne, per litre
Capital costs
New capital spending
Existing capital stock
Total capital employed
$39.42
$21.00
$400.81
$38.13
$504.47
Net sales
$17.14
$10.71
$232.57
$47.25
$307.67
Operating costs
$12.12
$12.99
$122.39
$48.46
$198.48
EBITDA
$5.03
-$2.27
$110.18
-$1.21
$109.19
8%
-16%
22%
-8%
17%
ROCE
47
The assumptions are the same in Tables 16 and 17. Total capital employed includes maintenance capital,
inventory and accounts receivable and payable calculated using standard factors. In the base case, the
overall ROCE is 43%. The pessimistic version still shows an overall ROCE of 17%. The assumption in
this case is that all expenses are increased by 20%, and all revenue decreased by 20%, when compared
to the base case. Furfural and pulp show a positive ROCE, and the benefits of the other streams need
to be evaluated on the basis that keeping them out of the recovery boiler is likely to allow higher pulp
production redirecting 35,700 t/y of lignin to recovery instead of novel products, for instance, may
reduce pulp production by up to 35,700 tonnes. The resulting loss in pulp sales of $43M/y will influence
the overall profitability of the mill; this and other impacts need to be looked at on a mill-by-mill
basis.
2.9 Chemicals: conclusions

Opportunities exist to move the forest sector to a range of novel value-added products. These are
likely to be smaller volume markets than the traditional, multi-million tonne per year markets that
pulp and paper or solid wood providers are used to, and will therefore require a new focus on market
development, new product development, customer segmentation and delivery of a larger number of
smaller orders than might be the case today.
While the markets are likely to be small, they are also likely to be profitable, especially where the
refinery concept is adopted.
48
Conclusion
The vision stated at the beginning of this report is simple: The new Canadian forest sector will profitably
transform its renewable, sustainably-managed resource into a full suite of valuable products including:
novel, high-value chemicals and materials; traditional products such as pulp and paper or construction
materials; and energy products such as heat, power and transportation fuels. This resurgent industry
will continue to provide jobs to the population in rural and small communities across the country,
while helping Canada move to a clean energy supply and reduce its carbon footprint.
The Canadian forest sector has access to a large, sustainably managed, renewable resource which
contributes a range of green products, produced in low-carbon facilities, to the Canadian economy.
However, this model is under stress as some products face structural decline while others face stiff
competition from low-cost producers. The highly-integrated nature of the industry means that the
decline of one sector hurts the others. New or revitalized industry segments are needed to fill these
gaps in the traditional supply chain.
The Canadian forest sector is in a position to deliver even greater benefits in terms of low-carbon
products, whether energy or materials, while improving its bottom line. In order to do so, new
product lines need to be identified, to supplement and strengthen the existing sector and to generate
new revenue and jobs. These products must be based on Canadas advantages, which include large
volumes of certified sustainable wood harvests combined with innovative technologies and industrial
know-how, along with advantages that bio-based materials have over their petroleum-based
analogues. The petroleum refinery model, where 4% of the feedstock is extracted and converted to
high-value products generating 42% of the benefits, should be a model for this new forest sector.
There are new businesses, partnerships and products to be developed: some are non-traditional;
several will be represented by smaller volume niche markets, or will involve a larger number of smaller
customers, than is the case today; most require more due diligence than has been done to date. The
steps to a forest industry model that mimics the value-generating capabilities of the petroleum
industry can be described as follows:
Step 1: collect the feedstock
Step 2: extract products from it generating the highest possible value
Step 3: repeat Step 2, using any residues as the new feedstock. Repeat until all material has been
transformed.
Products can include traditional and novel ones; the criteria must be to generate the greatest possible
value in each step, and to commercialise the novel products and integration opportunities as quickly as
possible. Generally, heat and power will be a necessary part of the mix, but only after all higher value
material has been extracted. This value-driven, customer-focused approach requires a significant shift
49
in thinking and approach. As new high-value products will need to be defined and developed, so too
will new industrial partnerships and customer relationships.
There are two parallel routes to transforming the forest sector. Both lead to new, renewable, green
products. (In fact it is probable that the reality will be a mixture of these two extremes, and that there
will be activities that combine pieces of both.) These routes can be characterized as follows:
a step-wise modification of existing mills and capacities towards a more diversified bio-based
business model; and/or
build green-field mills for bio-production on conventional forest industry sites or as stand-alone
mills.
In one route, small-scale modifications to existing mills generate revenue from new high-value
products in the short-term and demonstrate new processes leading to these products. Small market
size for some products, potential for high technical risk and lack of available capital set the constraints.
This approach sustains existing jobs and facilities while taking steps to demonstrate the viability of the
new forest sector. This necessarily involves integration with existing sites, including existing or new
CHP plants, but the focus is on pre-commercial scale demonstration plants showcasing high-value
products, rather than full-scale energy or fuel plants.
In a second route, large green-field biorefineries for production of bio-fuels, bio-energy, bio-chemicals
and bio-products are built. The availability of biomass, the cost of collecting it over large areas, and a
lack of domestic bio-energy markets and green energy policies set the constraints.
In either case the quickest path to commercialization must be taken, as high-value, low-volume
markets by definition may not have room for a lot of players. Given the urgency of the situation facing
the forest sector, acceptable risk levels need to be revised if emerging markets are not to be taken by
competitors.
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ABOUT THE AUTHORS

TOM BROWNE
RORY GILSENAN
Tom Browne is currently the program manager for

the Sustainability and Forest Biorefinery portfolios
in FPInnovations. In this capacity he has worked to
build Canadas forest biorefinery R&D portfolio,
in partnership with industrial, government and
academic partners. Toms current areas of focus
include biorefinery processes, energy use in pulp
and paper processes, mechanical pulping processes
and calendaring. In addition to his responsibility
for Biorefinery research at FPInnovations, Tom is
also the Program Manager for Mechanical Pulping.
Rory Gilsenan is Chief, Resource Economics and

Bioenergy for the Canadian Forest Service (CFS)
of Natural Resources Canada in Ottawa, Ontario.
He has been with the CFS since 2003, working
primarily on bioenergy and climate change issues.
Rory currently leads a team that is focussed
on economics and policy questions related to
forest sector transformation. An economist since
1991, hes a graduate of the University of British
Columbia. Prior to joining the CFS, Rory worked
in both the public and private sectors, including
ten years with The World Bank, where he worked
on Environmental Assessment and sustainable
development issues in the Middle East and Africa.
Ph.D. in Chemical Engineering (McGill University),

M.Sc. Chemical Engineering (McGill University),
B.Sc. Mechanical Engineering (McGill University).
Email: [email protected]
MICHAEL PALEOLOGOU
DOUGLAS SINGBEIL
Doug Singbeil is a principal scientist and group
leader for the Thermochemical and Corrosion &
Materials Engineering Groups in FPInnovations. He
is currently responsible for the delivery of strategic
information and research related to the application
of thermochemical technologies to FPInnovations
member companies and research partners. In
addition, he has more than 26 years experience at
FPInnovations providing materials solutions to the
international pulp and paper industry.
MSc in Metallurgy (University of British Columbi.
BSc Honours in Chemistry (University of British Columbia).
Michael Paleologou is a Principal Scientist in the

Chemical Pulping Program at FPInnovations.
He is currently leading projects on black liquor
processability and combustibility as well as the
recovery and use of lignin from black liquor and
methanol from evaporator condensates. Over the
last 22 years at FPInnovations, he has developed
several commercial systems and processes that
enable pulp and paper mills to operate at higher
levels of system closure while recovering valuable
chemicals and energy.
B.Sc. and Ph.D. degrees in Chemistry from Simon
Fraser and McGill Universities, respectively.
FPInnovations, its marks and logo are registered trademarks of FPInnovations.

2011 FPinnovations. All rights reserved.
www.FPInnovations.ca
570 St-Jean Blvd.Pointe-Claire,

QC Canada H9R 3J9
www.FPInnovations.ca

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Bio-energy and

Where are we now?

Where can we go from here?

How do we get there?

What are some key constraints?

Specific Case Studies 11

Heat and power

Energy products: Conclusion

The forest biorefinery

Bio-pathways is a joint project

1.1 Where are we now?

1.2 Where can we go from here?

Market size / price for co-products derived from biomass

Biomass der ived

Market price (US$ / kg)

1.3 How do we get there?

1.4 What are some key constraints?

Capacity, GJ/s (GW)

130,000 bbl/d feed

3.5 GW electricity production

1.5 million bbl/d feed

5,000 t/d wood, 2200 t/d pulp

7.8 GW wood feed

Plant gate cost per litre, CDN softwood supply

Annual production (m illions of litres)

Specific Case Studies

Silvicultural and ecological retention

Available for new project

2.1.3 Market volumes and revenues

% of AAC needed for given level of

2.1.4 Return on capital employed

Electricity, 740 kWh/t @ $0.13/kWh

Total Cash Operating Cost

Accounts receivable DSO

Accounts payable DPO

Notes: Assumes ethanol yield of: 280 L/odt

2.2.5 Return on capital employed

Table 6. ROCE of a fermentation cellulosic ethanol plant. From Bio-pathways.

Total Cash Operating Cost

Accounts receivable DSO

Accounts payable DPO

2.3 Synthetic Hydrocarbons

Notes: Assumes FT Diesel yield of: 235 L/odt

2.3.5 Return on capital employed

Naphtha, 0.195 L/L syn diesel and $0.55/L

Total Cash Operating Cost

Accounts receivable DSO

Accounts payable DPO

2.4 Energy products: Conclusion

2.5 Lignin-based products

2.5.2.1 Substitute for carbon black

Figure 7. North American Carbon Black Capacity

2.5.2.2 Substitute for phenol formaldehyde resins

Reduction of formaldehyde consumption

2.5.2.3 Lignin as a feed to carbon fibre production processes

Pulp, 50 t/d at $100/t marginal

Accounts receivable DSO

Accounts payable DPO

2.6 Sugar-based platforms

2.6.4 Market volumes and revenue