How woodheat can be cost effective – good practices Key stakeholders Workshop New Forest, England, 9-10 March, 2011 Jyrki Raitila VTT Technical Research Centre of Finland

2 16/02/2014 Co-operative

3 16/02/2014 General Strengths Strong local commitment Resources from members (fuel, labor) Benefits to local community Shared risks Challenges Usually learning by doing – lack of expertise Easy to stay as a passive member Locality limits growth (unless more customers in the same community)

4 16/02/2014 Vakkalämpö co-operative Basic facts Nominal output 0.7 MW (Ariterm boiler) – district heating Annual heat production 2,500 MWh Fuels: 95 % wood chips (1,500 m 3 -solid = 1,200 tonnes), 5 % oil (15,000 liters) Investment 250,000 (2002) By municipality Operation of the heating plant and fuel supply outsourced to the co- operative

5 16/02/2014 Vakkalämpö (2) Members 3 farmers and a local forestry society (association of forest owners) Forestry society gives forest management advise to forest owners and assists in forest management operations and in wood sales may organize harvesting operations Fuel supply Forestry society supplies 80 % of the fuel, farmers 20 % Mechanized harvesting chains Mainly whole trees from cleanings and thinnings (= low value wood) Both forestry society and farmers employ entrepreneurs for fuel supply operations

6 16/02/2014 Vakkalämpö (3) Business New contract for plant operation and fuel supply each year between the municipality and co- operative Fuel suppliers are paid according to the energy content of the supplied woodfuel (/MWh) Vakkalämpö is paid according to the amount of energy (MWh) supplied to the municipality Members gain a separate payment for running the plant (paid by the hour) Chipping with a tractor powered chipper (Kesla)

7 16/02/2014 Vakkalämpö (4) Cost effectiveness Wood fuel supply chains mostly in the hands of trained professionals Wood fuel harvesting chains integrated into round wood supply (same machines and operators) Reliable heating system, easy to maintain Good contracts through tendering and experience Customer pays for heat or for the calorific value of wood (MWh)

8 16/02/2014 Kuortaneen energiaosuuskunta (KEO) Basic facts Three plants with the following nominal outputs: 1 MW (district heating, boiler by Sykäke), 0.7 MW (old peoples home, boiler by Ariterm), 0.3 MW (church retreat center, boiler by Ariterm) Annual heat production 6,000 MWh Fuels: 2,400 m 3 -solid (= 1,900 tonnes) of wood chips, 450 m 3 -bulk of sod peat, 180 tonnes of wood briquettes, 30 tonnes of reed canary grass and 25,000 liters of oil Operation of the heating plant and fuel supply outsourced to the co-operative

9 16/02/2014 KEO (2) Members 10 farmers and woodland owners Fuel supply Members supply 1/3 of the wood chips, other local woodland owners the rest Mechanized harvesting chains Mainly whole trees from cleanings and thinnings (= low value wood), some stem wood too Most harvesting is organized by a local forestry society, chipping by a local contractor Wood briquettes from own mill and reed canary grass from local farmers Baled reed canary grass

10 16/02/2014 KEO (3) Business Long term contract with the municipality and church Fuel suppliers are paid according to the energy content of the supplied fuel (/MWh) Members get a better price for wood fuel Customers pay a one time connection fee, monthly basic fee and for used energy (/MWh) KEO sells wood briquettes also As the business has increased, they have hired a manager An Adelmann BP550 wood briquette machine

11 16/02/2014 KEO (4) Cost effectiveness All biomass fuels come from the same region, wood fuels within 25 km Harvesting outsourced to professionals Reliable heating system, easy to maintain, yet flexibility to use various biomasses Good fuel selection, dry fuels (briquettes and peat) can be blended when more heat is needed Customer pays for heat or the calorific value of wood (MWh)

12 16/02/2014 Small heating enterprise

13 16/02/2014 General Strengths Use own machines, skills and other resources Flexible Business oriented (contracts, service, effectiveness) Challenges Learning by doing – including mistakes Often limited to place Limited resources (capital in particular) Financial and technical risks

14 16/02/2014 Ekowatti Oy (Ltd.) Basic facts Nominal output 1 MW (Ariterm boiler) Annual heat production 4,000 MWh Fuels: 95 % wood chips, 80 % from forest and 20 % from wood residues (2,600 m 3 -solid = 2,000 tonnes), 5 % oil (25,000 liters) Investment 500,000 (2004) By themselves Sell heat on a turnkey basis

15 16/02/2014 Ekowatti (2) Owners Owner of a small window frame workshop Metsäpirkka Ky – harvesting and forest management company Bookkeeping company Building maintenance company Fuel supply Metsäpirkka supplies 80% of the fuel, the window frame workshop 20% Mechanized and manual harvesting chains Mainly whole trees from cleanings and thinnings (= low value wood) Employ local entrepreneurs for fuel supply operations

16 16/02/2014 Ekowatti (3) Business Long term contract with customers, all customers in an industrial area Fuel suppliers are paid according to the energy content of the supplied fuel (/MWh) Customers pay a one time connection fee, monthly basic fee and for used energy

17 16/02/2014 Ekowatti (4) Cost effectiveness Owners have a good mix of different skills and expertise Wood fuel supply chains in the hands of one of the owners (professional in forestry) Cost and quality management easy Proven boiler technology, reliable company delivered the plant Long term contracts and solid customers Customer pays for heat (MWh)

18 16/02/2014 Large energy and biofuel companies

19 16/02/2014 General Strengths Usually enough resources ($, £, ) Business oriented, experienced Can operate in a large area Challenges Lack of local commitment – have to win local trust in small communities High demands for profit SME heating might be too small for them

20 16/02/2014 Vapo Oy (Ltd.) Vapo is the leading supplier of local and renewable fuels, bioelectricity and bioheat, and environmental business solutions in the Baltic Sea region The Group has five business areas: Local Fuels, Heat and Power, Pellets, Garden and Environment, and Vapo Timber Oy Tailored heating solutions based on local biofuels in Finland Photo: Vapo Oy

21 16/02/2014 Vapo (2) Small and medium sized heating business Network of local heating plants Invested by Vapo or the customer Several business models Turnkey, Vapo in charge of the whole supply chain of heat (like a heating entrepreneur) – Vapo can buy old heating facilities Heating and fuel supply outsourced to Vapo – Vapo rents the plant and network Fuel supply outsourced to Vapo Franchising Fuel supply Wood pellets from own mills Other solid biomass fuels from their own supply chains Use contractors and thus avoid investments in own machines Photo: Vapo Oy

22 16/02/2014 Large companies and bigger SMEs Cost effectiveness Use a subcontracting model Effective network No own capital in machines Use their own expertise in organizing business and contracting Can effectively add value to bulk products and optimize the use of raw materials (e.g. timber, wood fuel) Operate in the whole country and can compete effectively

23 16/02/2014 VTT creates business from technology