Potential Biomass Demand Impact on Forest Markets and Resources

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Potential Biomass Demand Impact on Forest Markets
and Resources

• Bob Abt
• NC State University
• bob_abt_at_ncsu.edu

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Context

• Forest resource modeler focused on regional
  outlooks for the medium run 5-20 years.
• Usually take current inventory, growth, and
  removals as a starting point
• Then look at the impact of various demand
  scenarios

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AFPA 1/14/09
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Bioenergy Approach

• The challenge of projecting emerging bio-energy
  markets
• A few unknowns which technologies, using which
  feedstocks, at what scale, where, and when?

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Key Factors Examined

• Demand for wood as an energy source
• Potential (policy driven)
• Observed (announcements are observed many
  actual plants are potential)
• What would a woody biomass supply curve look
  like?
• How important are logging residuals?
• Determines timing and size of impact on roundwood
  markets

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Outline

• Policy Driven Scale
• Implied by NC RPS
• Implied by national RFS regionalized
• Relative to Logging Residuals
• The Relationship between Residuals and Roundwood
  Feedstock Supply
• Announced Capacity Regional Case Study
• Role of Residuals
• Impact on Economic / Physical Sustainability
• Impact on Traditional Forest Based Industry

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NC RPS Impact
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NC RPS Impact
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Potential Impact of RFSChristopher Galik - Duke
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Biomass Supply Curves
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Gulf Coast Biomass Impact

• Demand (2008) from FW Forestry
• 3 new plants
• 15 proposed or under consideration
• Emphasis on pine
• Potential demand of 5.75 mill green tons annually

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Gulf Coast Biomass Impact

• Demand Scenario
• .5/yr demand increase for current products
• Over 10 yr period (2007 2016) increase demand
  by .575 mill tons/yr
• 100 pine
• Reduce demand by available logging residuals
  (45,35,25,15 recovery)

AFPA 1/14/09
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Where is the wood now where will it be in 20
years
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Gulf Coast PPW Removals
AFPA 1/14/09
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Demand Increase
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Price/Harvest/Inventory Impact
No Roundwood Biomass Demand
Max Roundwood Biomass Demand
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Higher Prices and Lower Inventory Reduce Harvest
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What if biomass demand is not price responsive?
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Caveats

• Worst Case Scenario for traditional wood-users
  or Best Case if you are a timberland owner
• Everything being considered adds to demand
• Biomass demand perfectly inelastic (no short run
  substitutes)
• No silvicultural response, energy crops, or
  non-wood substitution

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Caveats

• On the other hand
• Power companies already negotiating long term
  supply agreements
• New projects announced monthly
• Current roundwood prices are very attractive
• These runs dont include timberland loss
  (1.5/yr)
• Plantation plantings are down significantly

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Market-Sustainability

• Residuals could be important but current demand
  will quickly exceed residual availability
• Inelastic timber supply means that there will
  likely be a higher price than harvest response
• Energy and biofuel firms are looking at roundwood
  first
• Resulting higher wood prices may make other
  renewable energy sources look better and reduce
  realized biomass demand
• Timing - this is the transition period
  recession for traditional forest product
  industries boom for bio-energy makes
  roundwood use more attractive

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Policy

• Expansive policies focused on demand and
  technology
• Restrictive policies focused on supply (e.g.
  certification, natural stands, residuals)
• Not a good combination, will likely lead to
  unanticipated policy leakage
• Incentives and outcomes will result from
  interaction of energy, forest, agriculture,
  environmental, and carbon policy

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QUESTIONS