Fuelling the Future

The stage is being set for the biomass, bioenergy, and bioproducts industry to take some giant leaps forward. Difficulties with other sources of energy, e.g., unrest in Middle East oil-producing regions, skyrocketing gasoline prices, and nuclear energy troubles in Japan, are reinforcing that wood can play a role as a reliable, renewable energy source. U.S. President Barack Obama is pushing for an end to oil subsidies; the European Union is looking at a 200–260-million cubic-metre fibre deficit by 2020 under its current renewable energy policies; and China has a growing demand for wood that can’t be met by its own stocks.

The increasing need for wood-based heat, power, transportation fuels, chemicals, and other products will result in fierce global competition for wood fibre supply, according to a February 2011 PwC report entitled Growing the Future: Exploring New Values and New Directions in the Forest, Paper & Packaging Industry.

Although the production and use of traditional paper products is expected to decrease, novel uses of wood fibre will increase, says the report. And fibre demand is expected to increase faster than supply. That will increase the value of forests, both for their fibre supply and their conservation value, affecting the way we access fibre and creating a paradigm shift from the mindset of simply obtaining fibre to that of collecting and using it in the most efficient and effective manner possible. And that will involve changes in three key areas: business models, value chains, and fibre markets.

The current forest products industry will need to strengthen its core business performance while exploring opportunities for new partnerships outside the forest industry. Many corporations in the biotech, petroleum refining, and chemical industries have the capital, experience, and expertise to invest in developing complementary bio-based products. An example is Weyerhaeuser and Chevron’s 2008 joint venture to develop renewable transportation fuels from wood.

The value chain from fibre to end product will expand and become much more complex. Traditional operations will need to consolidate to remain competitive, while expanding into novel products. Fibre use will be designed with its end of life in mind, likely ultimately heat and power, with no waste and no landfill, predicts PwC. There will be new competitors, but also new opportunities for new types of business collaboration and research. Many pulp mills may become biorefineries, producing multiple products such as heat, power, chemicals, fuels, and pulp, allowing product switching based on market demand and price.

PwC expects changes not only in the way fibre is used, but also in the way it’s traded in the marketplace. The energy sector will likely set the base demand for biomass, so international fibre exchanges should emerge to provide determinable pricing mechanisms as for other internationally traded commodities. Biomass aggregators might also gain importance in providing customers with a steady, dependable fibre supply.

So there look to be some great opportunities for continued success in the biomass industry for companies that are looking ahead, building the necessary relationships within and outside the forest industry, and adapting their business models accordingly.