Analyzing the Fuel Market

Report
Analyzing the
fuel market
Erik Axelsson, Profu
Wood Energy and Cleantech
Profu was established 1987 and has
since then been an independent
research and consultant company.
The company works with strategic
analysis within the fields of energy
and waste management and has
today 20 employees.
Profu
Profu
Workshop, 24 August 2011
Profu
Research and consulting company
Internationally
Waste
Nationally
Locally
Energy
Profu
Environment
Outline
• The importance of analyzing the fuel market
• Drivers for wood fuel prices – experience from the
developed Swedish wood fuel market
• Development of district heating in European– results
from the Pathways project
• Bio energy flows in Europe
Profu
• How to construct consistent energy price scenarios
Profu
The importance of analyzing the
fuel market
Profu
Energy prices are decisive for profitability
Energy prices are not stable
Price of “tops and branches” in Sweden 1994-2010
Profu
Source: Swedish Energy Agency
Profu
Energy prices can be local
Policy instruments can have a great impact
Profu
Source: Noordpool and Svenska Kraftnät
Profu
One needs to understand the
(local) energy market to be able to
run profitable energy companies
Outline
• The importance of analyzing the fuel market
• Drivers for wood fuel prices – experience from the
developed Swedish wood fuel market
• Development of district heating in European– results
from the Pathways project
• Bio energy flows in Europe
Profu
• How to construct consistent energy price scenarios
Wood fuel is a significant part of the Swedish
energy system
Profu
Source: Swedish Energy Agency
Fuel for district
heating 1981
Bränslemix
Bränslemix 2001
Bränslemix 2001
Bränslemix 1981
RT-flis 2% Övrigt 3%
RT-flis 2% Övrigt
3%
Kol 2%
Kol 2%
Olja 7%
Olja 7%
Övrigt 5%
Övrigt 5%
Spillvärme
3%
Spillvärme 3%
Avfall
5% 5%
Avfall
Naturgas 6%
Naturgas 6%
3%3%
KolKol
El 3%
1981
Trädbränsle 28%
Trädbränsle 28%
El 3%
Tallbeckolja 3%
Värmepump 14%
Värmepump 14%
Torv 5%
2001
Hetvatten 9%
Tallbeckolja 3%
Torv 5%
Avfall 11%
Hetvatten
Biogas 1%
9% 9%
Spillvärme
Olja 84%
Olja 84%
Spillvärme 9%
Avfall 11%
Biogas 1%
Värmeleveranser ca 46,5 TWh
27 TWh
ThereVärmeleveranser
is a established
market
Värmeleveranser
27 TWh
for wood
fuel in DH in Sweden,
which Profu follows
Värmeleveranser
Fossilt bränsle
9%
El
3%
ca 46,5 TWh
Biobränslen
49%
Värmepumpar
9%
Spillvärme
8%
2015
Biogas
2%
2008
Avfall
15%
Source: Waste Refinery
Profu
Torv
5%
Supply and demand sets the wood fuel price
Price
Oil Substitution
Supply
CHP
Transportation fuel
Profu
Quantity
Factors that decrease supply of wood fuel
• Decreasing activity in saw mills
• Increasing activity in pulp mills
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• Decreasing use of new wood fuel fractions, such as
stumps and residues
Factors that increase demand for wood fuel
• Increasing demand of district heat
• Decreasing use of waste fuel
• Increasing price of electricity certificates (e.g. due to
poor development of wind power)
• Strong development of biofuel production
(transportation fuel based on biomass)
Profu
• High export to other regions/countries
Scenario with high wood fuel price:
• Saw industry stagnates but pulp industry flowers.
• Stumps etc. are not used intensively
• Increasing demand of district heat and decreasing use
of waste fuel
• Increasing price of electricity certificates (e.g. slow
development of wind power)
• Strong development of biofuel production
(transportation fuel based on wood)
Profu
• High export of wood fuel to other countries
Profu
By analyzing factors that influence fuel
prices (e.g. wood fuel) one can make more
qualified projections of the future fuel
price.
Development of the European
district heating:
Profu
Results from the Pathways project
Pathways to Sustainable
European energy systems
• Five year interdisciplinary project
• More than 40 researches
• More than 30 topics – e.g. DH
• Two main pathways are proposed:
 Policy Pathway, more demand side oriented
 Market Pathway, more supply side oriented
Profu
Se more on:
www.energy-pathways.org
Profu
Potential for DH in Europe
Development of DH in Europe
Market
Profu
Policy
Development of DH in Europe
Bio mass
Natural
gas
Market
Profu
Policy
Profu
Increasing use of wood fuel in district
heating is expected in Europe, but level of
increase depends on the characteristics of
the pathway of the European energy system
Profu
Bio energy flows in Europe
Bio energy trade is a cost effective
option for meeting CO2 emission
targets
Hansson and Berndes (2009)
Profu
Future bioenergy trade in EU – modelling trading
options from cost -effective perspective.
Bio mass supply in Europe
Profu
Source: Refuel, 2008.
Supply of biomass and total energy use
Profu
Source: Refuel, 2008 and Eurostat, 2011.
Supply of wood fuel compared
to total energy use
Profu
Flow of bio energy
Example of expected bio energy
flows in Europe
Profu
Hansson and Berndes (2009)
Profu
Sweden is not seen as a major net exporter
of bio energy, while the Baltic states are.
Outline
• The importance of analyzing the fuel market
• Drivers for wood fuel prices – experience from the
developed Swedish wood fuel market
• Development of district heating in European– results
from the Pathways project
• Bio energy flows in Europe
Profu
• How to construct consistent energy price scenarios
Profu
Comparison of two investment
options
Heat:
80 MW
NG:
185 MW
Bio CHP
NGCC
Elec.:
28 MW
Inv: 100 M€
O&M: 1.2 M€/yr.
Elec.:
83 MW
Inv: 95 M€
O&M: 0,9 M€/yr.
Which option is more robust in a future
(2030) energy market?
Profu
Biomass:
98 MW
Heat:
80 MW
Energy price scenarios
What: Different energy price scenarios that
outline possible cornerstones of the
future energy market.
“Package sensitivity analysis”
Use: Analyze robustness of (future)
investments with long life time.
Important: Consistency within each scenarios.
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It is not: Energy price prognosis
Principle method for constructing consistent price scenarios
Fossil fuel prices on the European
commodity market
Policy instruments
Fossil fuel market model
Fuel prices and well-to-gate CO2 emissions
Electricity market model
Electricity price and associated CO2
emissions
Bio energy market model
Biofuel price and CO2 emission
consequences of marginal use of biofuel
Price and reduction of CO2 emissions for heat
Profu
Heat market model
Construction of scenarios
High and low fossil fuel prices are combined with high
and low prices for carbon emissions, to give scenarios
with consistent price relations.
High
Low
Price on carbon emissions
High
Low
Sc 2
Sc 1
Price of electricity and
wood fuel for sceanrio 1
And so on
Profu
Fossil
fuel
prices
Principle method for constructing consistent price scenarios
Fossil fuel prices on the European
commodity market
Policy instruments
Fossil fuel market model
Fuel prices and well-to-gate CO2 emissions
Electricity market model
Electricity price and associated CO2
emissions
Bio energy market model
Biofuel price and CO2 emission
consequences of marginal use of biofuel
Price and reduction of CO2 emissions for heat
Profu
Heat market model
Electricity market model
Profu
The electricity price is set to the production cost of
the build-margin technology with lowest cost of:
1. Conventional coal
2. Coal with CCS
3. NGCC
(4. Nuclear)
Principle method for constructing consistent price scenarios
Fossil fuel prices on the European
commodity market
Policy instruments
Fossil fuel market model
Fuel prices and well-to-gate CO2 emissions
Electricity market model
Electricity price and associated CO2
emissions
Bio energy market model
Biofuel price and CO2 emission
consequences of marginal use of biofuel
Price and reduction of CO2 emissions for heat
Profu
Heat market model
Bio energy market model
Price of wood fuel i set to willingness to pay for two
optional marginal user of wood fuel:
1. Co-combustion in coal power plants.
2. Biofuel producers
Price
Price
Oil Substitution
CHP etc
Oil Substitution
CHP etc
Supply
Supply
DME
production
Co-firing in
coal power
plants
Quantity
Co-firing in
coal power
plants
Quantity
Example of energy market scenarios (around 2030)
Fuel prices
1
2
3
4
90
90
130
9
90
9
90
14
113
130
14
113
Policy instruments
1
2
3
4
Carbon price (€/tonne)
20
50
20
50
RES-E support
(€/MWh)
20
10
20
10
Crude Oil (USD/barrel)
Natural gas (USD/Mbtu)
Coal (USD/tonne)
Profu
Scenario
Principle method for constructing consistent price scenarios
Fossil fuel prices on the European
commodity market
Policy instruments
Fossil fuel market model
Fuel prices and well-to-gate CO2 emissions
Electricity market model
Electricity price and associated CO2
emissions
Bio energy market model
Biofuel price and CO2 emission
consequences of marginal use of biofuel
Price and reduction of CO2 emissions for heat
Profu
Heat market model
Example of energy market scenarios (around 2030)
Electricity market
3
4
NGCC
Coal
Coal
CCS
54
722
75
345
59
722
80
140
Fuel market
1
2
3
4
Wood fuel price (€/MWh)
24
30
27
32
NG price (€/MWh)
- incl. CO2-price
33
40
47
54
Base load build margin
El. price (€/MWh)
CO2 (kg/MWhel)
1
Coal
2
Profu
Scenario
Comparison of two investment
options
Heat:
80 MW
NG:
185 MW
Bio CHP
NGCC
Elec.:
28 MW
Inv: 100 M€
O&M: 1.2 M€/yr.
Elec.:
83 MW
Inv: 95 M€
O&M: 0,9 M€/yr.
Which option is more robust in a future
(2030) energy market?
Profu
Biomass:
98 MW
Heat:
80 MW
Profu
Comparison of two investment
options
Profu
Comparison of two investment
options
Profu
Comparison of two investment
options
Profu
Remember!
Thank you for your attention 
Profu
Götaforsliden 13 nedre, 431 34 Mölndal
031-720 8396/8390, www.profu.se
[email protected]

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