Heat Energy Entrepreneurship A Successful Business Model

1
Heat Energy Entrepreneurship A Successful
Business Model

• M.Sc. Asko Puhakka
• North Karelia University of Applied Sciences
• Asko.Puhakka_at_pkamk.fi

2
Heat energy entrepreneurship several
stakeholders and challenges

• Municipality and heat energy entrepreneurs
  providing the service
• Owners and the equitable owners of the real
  estates
• Actors along the raw-material supply-chain
• Requirements of the municipal energy solution
• Multiple objectives politics, environment,
  economy, technology
• Competition against the economics of scale
• Competitive tendering
• Profitability calculations
• Demands know-how on technology, economics,
  legislation, negotiation skills etc.

3
Acquisition process of the heating plant
The sizing of the heating plant by to the total
heating load is very essential. Aim is to cover
80 - 90 from the total energy demand by wood
energy.
4
What is heat energy entrepreneurship

• Small scale business in rural areas, where the
  product to sell is heat produced by bioenergy
• Business started in Finland year 1992 and first
  heated buildings were small schools in villages
• Nowadays approximately 300 heat plants which are
  owned by 150 enterprises
• Cooperative or limited company 113 heat plants,
  entrepreneur or group of entrepreneurs 183 heat
  plants
• Total heat power is approximately 150 MW
• Produced energy 350 000 MWh/a
• Use of biofuels 510 000 loose-m³/a
• Mainly wood chips but also pellets and peat
• Avarage boiler capasity is 500 kW

Source JSP/ Alanen
5
Business volume in the heat energy enterprise

• Example 500 kW
• Solid fuel boiler 500 kW
• Fuel Woodchips
• Amount of produced heat/a 1200 MWh
• Annual fuel consumption 1900 m³ (loose)
• Heated building volume Approximately 27 000 m³
• Length of the grid 400 m
• Investment costs of the plant 300 000 VAT
• Business volume
• Total price of the heat 68 / MWh, containing
• 48 heat production maintenance work
• 20 capital costs
• Annual business volume 68 1200 MWh 81 600

6
Fuels and prices

• With biofuels the basic heat load, oil for
  reserve and peak load.
• In the beginning the most common raw material was
  wood chips from delimbed trees. Nowadays fuel is
  mostly whole tree chips and the share of residual
  chips from final cuttings is increasing.
• Nowadays typical way is to bind the price of
  energy to pricebasket which includes prices of
  oil, wood chips, peat etc.

Source JSP/ Alanen
7
Benefits for municipality and entrepreneur

• Municipal finances
• Savings in operational and investment costs
• Reduced governmental overload
• Employment and income impacts
• Increased use of local labour
• Support for the existing employment (e.g.
  contractors)
• Creation of new business opportunities
• Positive impact because small-scale supply
  systems should not displace large-scale systems
• Neither should they harm seriously any competing
  activities
• Security of heat supply

8
Benefits for municipality and entrepreneur

• For the entrepreneur heat energy entrepreneurship
  provides
• Extra income and support for existing livelihoods
  (farming forestry, transportation)
• Improved young forest management,
• Use for under utilised harvesting equipments
• Important to ensure the reliability of the heat
  production
• Operational reliability
• Technical reliability
• Need for good contracts between the entrepreneur
  and customer (usually municipality)

9
Accumulating felling head
10
Chipping by Kesla drum chipper
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Chipping for transportation
12
Supplying wood chips to storage
13
An example of Eno Energy Cooperative

• Based on Eno energy cooperative society
• - Business started at 1999.
• - Heating stations in Eno and Uimaharju.
• - Supply of forest chips
• 70 stem chips from small diameter stems
• 20 bark chips
• 10 chips from logging residue
• - Use of forest chips approximately 6000-7000
  m3/year.
• 50-60 of the raw material is from the members
  of the energy cooperative society.
• Source Jussi Kupari

14
Case Eno Energy Cooperative

• Employment effects

Source Jussi Kupari
15
Case Eno Energy Cooperative

• Employment effects of the expected use of fuel.
• Oil 0,12 man years
• Peat 1,4 - 1,6 man years
• Forest chips 2,2 - 8,6 man years
• The employment effect of the production chain of
  forest chips in Eno is 4,9 man years.

Source Jussi Kupari
16
Greenhouse gas emissions from the production of
forest chips

• Production of forest chips.
• - Chips from logging residues

Source Jussi Kupari
17
Total greenhouse gas emissions

• Total greenhouse gas emission from production and
  use.

Source Jussi Kupari
18
Case Eno Energy Cooperative

• The expected use of fuel approximately 12 000
  MWh.
• Greenhouse gas emissions from energy production
• Light fuel oil 3700 t CO2-ekv
• Peat (50 ) and
• forest chips (50 ) 2300 - 2400 t CO2-ekv
• Forest chips 160 t CO2-ekv
• Source Jussi Kupari

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Case Eno Energy Cooperative

• Steady price of forest chips
• Subventions ? The whole tree chips are also
  competitive

Source J. Kupari, P. Hakkila
20
Case Eno Energy Cooperative

• The price of produced energy for the consumers.

Source Jussi Kupari
21
Legislation base to notice the environmental
aspects

• The Court of Justice of the European Communities
  noted that environmental aspects can be used in
  the comparison of tenders
• Helsinki city bus transportations case, L-513/99
• Austria Wienstom case, C-448/01
• introduced as high as 45 weight for the
  environmental aspects.
• Environmental aspects are evident part of the
  assessment criteria of the public procurement
  procedure that is noted also in the European
  Community directives 2004/18/EC and 2004/17/EC.
• Emissions from fuel (CO2 equivivalent) could be
  assessment criteria making heat mill procurement
  decision
• One possibility is convert fuel emissions to
  euros with the aid of tradable emission credit
  prize