The Balance of Power CEPI workshop, 30 November 2005, Brussels European Paper Week

The Balance of Power Introduction Armando Cafiero - Chairman Managing Director of Assocarta, Italy

The Balance of Power The importance of energy CEPI Directors and Managers

The Balance of Power Renewable Energy Sources Bernard de Galembert, CEPI Forest Director

5 European context on RES EU White Paper on renewable energy sources RES-Electricity Directive « Intelligent Energy for Europe » Programme EU policy options on RES-Heat Communication on RES

6 European context on RES Johannesburg Renewable Energy Coalition (JREC) « We express our strong commitment to the promotion of renewable energy and to the increase of the share of renewable energy sources in the global total primary energy supply. » Communication on “The share of renewable energy in the EU” (May 2004) Forthcoming Biomass Action Plans “with a clear approach to securing adequate supplies of biomass through European, national and regional/local action”.

7 Wood availability – RES as a threat 7

8 Renewable energy Promote the use of wood as a source of renewable energy (Green certificates, Feed-in tariffs, Investment subsidies, etc.) Competing use of woodDistorted wood market

9 Wood availability Forecasted industry demand Supply of wood under historical management Supply of wood under new management million m 3 of roundwood Shortfall under historical management Shortfall under new management 27 million m 3 89 million m million m 3 36 million m 3

10 Declaration of Intent – RES as an opportunity 10

11 Declaration of Intent on RES BAU Declaration of intent Declaration of Intent period 1,000 TJ 49% of TPEC 56% of TPEC 2003: 52.4%

12 Future activities 12

13 Guidance document: Guidance document: « For an effective implementation of the EU RES policies » Better mobilisation of wood Support policy to be based on a proper assessment of the wood market Encourage the production and use of energy crops Subsidies targeted to improve the efficiency of technologies Parallel improvement of mobilisation conditions for wood and for secondary raw materials Subsidiarity should not lead to discrepancies in biomass definitions Encourage R&D in the field of RES

The Balance of Power Climate Change Esa Hyvärinen, CEPI Environment Director

15 Energy & Climate Change in the pulp and paper industry Development of certain energy-related parameters since 1990: Pulp and paper production has increased by 53%. Energy efficiency has improved and specific electricity consumption per tonne of production has decreased by 13%. Pulp and paper industry has become more self-sufficient in energy; electricity production has increased by 74%. More than 93% of the electricity generated on-site is done with the help of CHP. About 52% of the fuels used are biofuels. As a result, specific CO2 emissions have decreased by 25%, but the absolute emission increased by 9%.

16 Energy & Paper Industry Energy is a key input for the pulp and paper industry: Up to 30-35% of production costs. 42% of electricity used is produced on site. The industry still purchases 66 TWh of electricity per year. Policies affecting on energy have a direct impact on the pulp and paper industry.

17 Energy & Climate Change in the pulp and paper industry Basically all CO 2 emissions from the pulp and paper industry result from combustion. Therefore, if someone says ‘climate change’, a mill manager would hear ‘energy’. The costs pulp and paper mills face as a result of climate change policies are two-fold: Costs from the reduction of own emissions – manageable to certain extent. Costs faced by power producers passed through the electricity prices – price takers.

18 Climate Change and EU Emissions Trading Scheme The way emissions trading has developed has been probably a surprise to everyone; In general the price of allowances was expected to be around EUR 10 / t CO 2 ; Low allowance prices at the beginning, followed by a strong increase during the summer; Strong increase of electricity prices – up to 40% since the beginning of Costs were expected to come from; Compliance with the quotas each installation has; Increase of electricity prices due to marginal pricing mechanism. Pricing in the opportunity cost of allowances received for free exceeded even the worst expectations.

19 Climate Change and EU Emissions Trading Scheme

20 Climate Change and EU Emissions Trading Scheme Basic dilemma of the pulp and paper industry: Costs raise in the EU but product prices are set on the global market; Cost pass-through is not possible without loosing market shares.

The Balance of Power Energy efficiency Danny Croon, CEPI Environment Manager

22 What is energy efficiency? In most cases depends on in which context it is used Large number of references with more or less comprehensive attempts to define the term The Commission published its Green Paper on Energy Efficiency in 2005 (Green Paper on Energy security of supply of 2000 as background) Does not contain a definition on energy efficiency Initiating a broad discussion on how to curb rising energy use in EU and arrive at a reduction of 20% by 2020 To improve energy efficiency via (amongst others) Use of best technology Promotion of cogeneration

23 What is energy efficiency? The draft directive on energy end-use efficiency and energy services defines energy efficiency as: ‘A ratio between an output of performance, service, goods or energy, and an input of energy’ This definition seems to be more or less as « specific energy consumption » and it does not take into account e.g. the product grade and the rate of capacity which are of essential influence on figures of specific energy consumption in our industry

24 BREF on energy efficiency Driving force: European Climate Change Programme (ECCP) adopted October 2001 Promote effective implementation of energy efficiency provisions in the IPPC Directive Prepare a special horizontal BREF addressing generic energy efficiency techniques, giving voluntary guidance Content (amongst others): Approaches and methodologies for energy use optimisation and energy efficiency Descriptions of good energy efficiency methods and techniques applied in several sectors (CHP included)

25 BREF on energy efficiency Technical Working Group on energy efficiency in industrial installations: kick-off meeting in May 2005 Currently discussing energy efficiency in industrial installations: how should it be defined? Paper production from sulphate pulp may serve as an example of energy efficiency improvements (e.g. reducing energy losses or using waste energy for power production) To reserve the term energy efficiency for measures that are taken with the main purpose to use the energy in a better way To make agreements on what type of measures that should be called energy efficiency improvements Draft version of BREF on energy efficiency available early 2006 for consultation (finalised 2nd part of 2006)

26 Energy Efficiency in the European Pulp & Paper industry The pulp & paper industry is energy-intensive but is also an energy efficient industry The high cost of energy has always been a major incentive and continuous driving force to improve energy efficiency Improved energy efficiency via co-generation (combined heat and power) CHP: 30–35% energy saving compared to conventional technology In 2004: 43% of the electricity used was produced on-site, i.e. nearly 50 TWh 93% of this 50 TWh (being 46,5 TWh) is produced via CHP; the remaining bit (7%) is produced via wind & hydro installations

27 Energy Efficiency in the European Pulp & Paper industry Comparing 2004 with 1990, the specific primary energy consumption decreased by 11% thanks to an increase in process technology efficiency and CHP investments The European pulp and paper industry naturally continues to strive for increased energy efficiency, but cost/efficiency has to be taken into account and recognised Furthermore… Each unit is unique: differences in raw materials: recovered paper, wood, coatings, fillers… different processes: de-inking, pulping, coating… different products  impossible to compare mills with each other Energy efficiency is a mill specific question

28 Energy Efficiency in the European Pulp & Paper industry The efficiency of both paper production and energy production can be improved by: the development of process monitoring skilled and motivated personnel availability of reliable process information Changes in the use and maintenance of mills and power plants are the most feasible measures Heat and fuel consumption can successfully be reduced by : closing of water circuits (decrease use of water) and efficient heat recovery of secondary energy Drying of moist fuels (increase heat value of biofuels) offers a opportunity for increasing the energy efficiency of power plants Efficient usage of biomass based CHP is natural in our industry

The Balance of Power The energy challenge Peter Nygren, SCA

The Balance of Power Energy market liberalisation Augustijn Van Haasteren, DG Competition

The Balance of Power Conclusions Armando Cafiero - Chairman Managing Director of Assocarta, Italy