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Assessment of wood processing options at Ngawha - incorporating geothermal energy; Wood Energy Industrial Symbiosis project.

Peter Hall, Samantha Alcaraz, Brain Carey & Barbara Hock

Cover photos - Industrial complex; geothermal heat & power and multiple wood processing operations (sawmilling, pulp, paper and tissue); Location of Ngawha - Google Earth

Report information sheet

Report title Assessment of wood processing options at Ngawha - incorporating geothermal energy; Wood-energy Industrial Symbiosis project.

Authors Peter Hall (Scion), Samantha Alcaraz (GNS Science), Martin Atkins (University of Waikato)

Client MBIE

MBIE contract PROP-37659-EMTR-FRI number

SIDNEY output 58703 number

Signed off by Paul Bennett

Date March 2017

Confidentiality Confidential (for client use only) requirement

Intellectual © Forest Research Institute Limited. All rights reserved. Unless property permitted by contract or law, no part of this work may be reproduced, stored or copied in any form or by any means without the express permission of the New Zealand Forest Research Institute Limited (trading as Scion).

Disclaimer The information and opinions provided in the Report have been prepared for the Client and its specified purposes. Accordingly, any person other than the Client uses the information and opinions in this report entirely at its own risk. The Report has been provided in good faith and on the basis that reasonable endeavours have been made to be accurate and not misleading and to exercise reasonable care, skill and judgment in providing such information and opinions.

Neither Scion, nor any of its employees, officers, contractors, agents or other persons acting on its behalf or under its control accepts any responsibility or liability in respect of any information or opinions provided in this Report.

Published by: Scion, 49 Sala Street, Private Bag 3020, 3046, New Zealand. www.scionresearch.com

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Executive summary The wood energy industrial symbiosis project is aimed at determining opportunities to group expanded wood processing based on our existing forest resource with either complimentary wood processing or other industries such as dairy and meat processing where energy supply and demand is potentially symbiotic. Incorporating geothermal energy where it is available is part of the opportunity assessment. Opportunities vary by region. This study focusses on Ngawha (Northland) which is the only site in New Zealand, outside of the Central , with industrially exploitable geothermal resources.

Key results Northland has current and future wood supply excess to its 2016 processing capacity. This supply is largely L grade (large knot) saw logs, along with some S grade and chip grade logs. The expansion of primary processing of the L and S grade logs would add to the residual wood supply. The total opportunity is in the order of 720,000 m3 per annum with 400,000 m3 of L grade logs along with ~100,000 m3 per annum of S grade and 220,000 m3 per annum of chip logs. For the Ngawha site specifically the volume realistically available is reduced somewhat from the Northland total as some of the volume is too far from Ngawha to be realistically available despite the generally good (central to the forest resources) location of the Ngawha geothermal resource.

The Ngawha geothermal field has several wells and the resource is well understood. Currently there is 25MWe of electricity generation at Ngawha, with consented expansion for another 50MWe. This is significant in relationship to local consumption, with 25MWe being 70% of the Far Norths electricity demand and 75MWe being 50% of Northlands electricity demand. There is a variable amount of heat potentially available for industrial processes, depending on the development of electricity production. A cluster of primary and secondary processing was developed based on financial analysis; return on capital employed (ROCE).

If primary solid wood processing was based at Ngawha, geothermal heat would significantly reduce the demand for the wood processing residuals to be burnt for process heat, allowing this material to be processed into value added products. Processes that show promise under conditions as at Q4 2016 are;

- OEL™ (engineered structural lumber product) - Plywood (industrial grade) - OSB (reconstituted panel product) o With the residuals from all three going to a plant with terpene extraction followed by wood pellet manufacture

This cluster of operations would consume around 0.7 M m3 of logs and 185k m3 of residues. The capital weighted ROCE was ~22% to 23%. This cluster would consume a significant proportion of the electricity from one of the prosed 25MWe units proposed for Ngawha, along with 170MWth of geothermal heat.

There is estimated to be sufficient geothermal heat resource in the field to run the current 25MWe power plant, an additional 25MWe of power generation and the 170MWth heat demand.

Implications of results There is significant potential to leverage the wood resource processing opportunities by clustering them at Ngawha, and using the residuals for value added processing instead of heat fuel.

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Assessment of wood processing options at Ngawha - incorporating geothermal energy; Wood-energy Industrial Symbiosis project.

Table of contents

Executive summary ...... 3 Introduction ...... 5 Methods ...... 7 Results and discussion ...... 7 Northland wood resource ...... 7 Ngawha geothermal resource ...... 9 Location ...... 9 Current development Status and Future Development ...... 10 Stored Heat ...... 11 Northland wood processing plant & log demand ...... 12 Northland wood supply over current demand, over time and by grade ...... 12 Wood supply to Ngawha ...... 16 WoodScape analysis of processing options ...... 18 Conclusions and Recommendations ...... 22 Acknowledgements ...... 23 References ...... 23 Appendix 1 - Ngawha map ...... 25 Appendix 2 - log supply and demand volumes; Northland ...... 26

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Introduction

The wood energy industrial symbiosis project is aimed at determining opportunities to group expanded wood processing based on our existing forest resource with other industries such as dairy and meat processing. Incorporating geothermal energy where it is available is part of the opportunity assessment. The use of geothermal heat within a traditional wood processing plant changes the processing opportunities that are possible. For example - a sawmill generally uses its residues, such as bark and sawdust, as fuel to provide heat for kiln drying of sawn lumber. If there is an alternative heat source such as geothermal steam available then this residual material can be used for manufacture of other products; wood pellets, bark briquettes, tannins, resins, particle board etc. It could also potentially be used as solid fuel at non-wood industrial processing sites with heat demand some distance away from the geothermal wells.

Opportunities vary by region; based on the wood supply, existing wood processing demand, geothermal resources and industrial heat demand from non-forestry industries. Potential expansion of wood processing is part of the analysis, along with associated displacement of fossil fuels used for heat.

This study focusses on Ngawha (near Kaikohe, , Northland Region) which is the only site outside of the Central North Island (CNI) with industrially exploited and exploitable geothermal resources.

The wood resource in Northland is currently at a peak of production (MPI 2016b) and harvest volumes are expected to drop over time. However, the processing capacity in Northland does not consume all the current and potential future harvest and there is potential to expand processing capacity to increase on-shore processing and reduce the export of raw logs. This on-shore processing would increase employment and GDP in the Northland region.

The question is; at what scale and what product, as there are many potential options and economies of scale generally favour larger plants. The answer to this largely driven by the potentially available wood supply (log grade and volume).

The location of the geothermal field generally dictates the location of the processing plant that wishes to use the heat, as steam cannot be transported much more than 1.5 to 2.0 km (max. 3km) without substantial costs and losses. Transport of heat in the form of hot water can be up to 20km, depending on the required temperature at the demand end and the original source temperature. The Ngawha site is centrally located in Northland (Figure 1), adjacent to a number of plantation forests and approximately 120 km from the deep water port at Marsden Point.

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Figure 1 - Northland; showing Ngawha geothermal field and plantation forests; with 25km increments of distance (red circles).

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Methods

The wood resource in Northland is described using Ministry of Primary Industries data and publications (MPI 2016, a, b & c.). This data indicates the expected wood availability from the Northland plantation forests estate over time (see Appendix 1 for map). Specific volumes of wood availability for a given year are based on MPI 2016b, Scenario 3 (Appendix 2). This scenario smooths the wood supply using a split non-declining yield approach to reduce the impact of variation in annual planting rates, and to reflect the reality of log harvesting.

Further analysis of this wood supply data is described using the Scion biomass supply model (Hock et al 2012), which gives estimates of volume by distance over time to a specific location. This model was run centred on the Ngawha geothermal site.

Current wood processing capacity and log consumption is described, based off a wood processing database derived from a range of sources; published (Vaney & Nielson 2014 and 2016, WoodWeek Newsletter) and unpublished. This database is updated with changes to the wood processing infrastructure as mills open, close or change capacity.

From these data an estimate of log volume available over time; above existing processing capacity and demand can be derived. This volume can be broken down into 4 broad categories; pruned logs, S grade sawlog, L grade sawlog and chip / pulp log. The sawlog volume was obtained from MPI 2016b and an estimate of the S grade and L grade split was derived from PRad_Calc and MPI data on regional planting by regime in Northland MPI 2016a).

Based off these volumes potential wood processing options are identified using the WoodScape model (Jack et al 2013). This analysis incorporates the effect of geothermal heat on processing both in terms of the cost of energy and in freeing up residuals (bark, sawdust etc.) for use in other processing options.

Geothermal data (historical and current) on the Ngawha field is also used to determine the potential of the field to provide industrial heat and power; and / or the use of the waste heat from a power plant for low-grade heat. Current and consented heat use for electricity generation is described, using data from GNS and the Ngawha Geothermal Resource Company.

Results and discussion

Northland wood resource Wood availability by grade is shown in Figure 2 (MPI 2016b - Scenario 3). Notable features are the steady decline in pruned log volume and the sharp drop in total volume post 2035. Data beyond 2045 (in all graphs in this section) is speculative as it assumes replanting of forests harvested from 2015 onwards. Chip grade log volume declines from around 900 thousand m3 per annum to 500 thousand m3 per annum by 2038.

The majority of sawlogs in Northland fall into the S category (Figure 3), but there are large variations in volume available over time. L grade log supply is in the order of 400,000 m3 per annum, based off the projected low points out to 2050 (Figure 3).

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Figure 2 - Northland wood availability

Figure 3 - Northland sawlogs by grade (S and L)

Table 1 shows the length, diameter and knot size specifications for S and L grade logs. These specifications, especially small end diameter (SED) and knot size, dictate possible processing options.

Table 1 - dimension specifications for S and L grade logs Length SED Max. knot (m) (cm) size (cm) S1 4.8 - 6.1 40 6 S2 4.8 - 6.1 30 6 S3 3.7 - 4.7 20 6 L1 4.0 - 5.5 40 12 L2 4.0 - 5.5 30 12 L3 4.0 - 5.5 20 12

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Ngawha geothermal resource

Location The Ngawha Geothermal Field is located approximately 5 km east of Kaikohe, Northland (Figure 4), and is the only high temperature (> 200°C) geothermal system in New Zealand located outside the Taupo Volcanic Zone (TVZ) in the Central North Island (CNI).

The Ngawha Geothermal Field has few natural surface features, apart from the springs adjacent to Ngawha Springs Village which, although modest in flow, are valued for their cultural and therapeutic properties. There are several lakes with geothermal inputs and also some soda springs. This geothermal field is located within a broad topographic depression at an average elevation of 200 m above sea level and surrounded by gently rolling terrain. The local geology based on surface and geothermal well exposures consists of greywacke that is overlain by the Northland Allochthon. The Ngawha Geothermal Field is bordered to the north and west by Pleistocene basalt lava flows and minor scoria cones of the Kerikeri Volcanic Group.

Figure 4 - Ngawha Geothermal Field location and wells drilled to date. The DC Resistivity boundary zone (yellow shading) is a surface indication of the likely geothermal reservoir extent based on geophysical interpretation.

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In 1998, Ngawha Geothermal Resource Co. Ltd (a joint venture between Top Energy and Tai Tokerau Maori Trust Board) began operating the Ngawha geothermal power plant and commissioned two 5 MWe binary units (Table 1, Figure 2). Resource consents were granted for a 12 year period with conditions that the development should not cause any detectable changes to the surface features (hot springs) which have cultural value.

Subsequent scientific investigation showed the plant’s output could be expanded without affecting the Ngawha geothermal field’s reservoir pressure. The field operations produced about 10,000 tonnes/day of geothermal steam and fluid until 2008 when the development increased to 25 MWe with production rates up to 25,000 tonnes/day following Top Energy completion of its Stage 2 expansion plan (Table 1, Figure 3).

From its inception, Ngawha was designed and built to facilitate 100% reinjection, minus the loss of dissolved gases (c. 2%), and subsequent refinements have enabled emergency shutdown discharges to also be fully injected. This avoids any discharge of geothermal fluids to catchment. Re-injection wells are at the periphery of field, and have a typical depth of 1 km, while supplementary injection of freshwater is also available to mitigate any potential reservoir pressure decline.

The Ngawha Power Station’s output is fed into Top Energy’s network and then connected to the National Grid, via the Top Energy’s sub-station near Kaikohe. The Ngawha Power Station consistently produces around 70% of all electricity consumed in the Far North, which reduces the community’s exposure to possible National Grid failures to the south.

Table 2 - Summary of current production at the Ngawha geothermal power plant (NZ Geothermal Association1). Total Annual Power Year No of Type of Installed Energy Plant Commis- Status Units Unit Capacity Produced Name sioned (MWe) (GWh/year) Ngawha 1998 2 B 10 1 Operating 200 Ngawha 2008 1 B 15 2 Total - 3 Operating B 25 200

Current development Status and Future Development As of 2017 there are 8 wells in use to support the stage 1 and 2 25 MWe development, three for production (NG4, 9 and 12) and five for injection (NG2, 11, 16, 18, and 27) Summary of current generation at Ngawha:

 Regulator: Northland Regional Council  Upstream Developer: Top Energy Ltd  Downstream Developer: Top Energy Ltd  Operator: Ngawha Generation  Plant Type: Binary  Principal supplier: Ormat  Flash pressure: 11/12 bara  Steam flow: 85 t/h  Brine flow: 950 t/h  Resource Temperature2: 228°C  Maximum measured Temperature2: 301°C

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 Enthalpy 950 kJ/kg  Number of wells drilled: 18  Well Type: 3 production, 5 injection, 2 other  Averaged Well Depth: 1 km  Maximum Well Depth: 2.3 km

Ngawha is a significant energy resource. The data collected and analyses performed to date do not provide a definitive estimate of the upper size of the Ngawha resource. Certainly the drilled area delineates a known hot region of around 12 km2. However, some tests indicate it might be a much larger resource.

Investigations to date have identified a large, but relatively low enthalpy, resource with the wells producing fluid at 225 to 230°C with high levels of dissolved minerals including boron and mercury. Thirteen of the wells were tested, of which six were good producers with a mean fluid enthalpy of about 975 kJ/kg.

The current total installed capacity is 25 MWe while its generating capacity including the next two stages has been assessed at 75 MWe using reservoir simulation techniques. Top Energy obtained consent in 2015 (Appeal resolved in April 2016) to develop the geothermal reservoir and install an additional 50 MWe of generating capacity in two 25 MW stages. Investigations are currently progressing to assess the best approach for the upcoming development up sizing. The main challenge for the development is control of the reservoir pressure to prevent impact on the natural springs.

Top Energy has expressed interest in developing a Heat Park for direct heat use after the implementation of the next 25 MW generation stage. The heat park initially had a focus on industrial use for processing mill able timber (Martin Jenkins 2015). This processing was focussed on a sawmill and thermo-mechanical pulp mill combination, which was subsequently analysed in more detail by Indufor (2016). The pulp mill part of this processing option does not seem likely to develop at this time.

Current known direct heat uses are for hot pools bathing at the Waiariki Pools, Ngawha Springs, where the natural geothermal springs fill various pools.

The Ngawha geothermal field is characterised by the large volume of gas (mainly CO2) given off by the field, and the fluids extracted.

Stored heat and useable heat The remaining stored heat based on the increment of the next two 25 MWe stages is estimated at 1700 PJ (current revised assessment). The simulation modelling (as commissioned by Top Energy) used to assess the two by 25 MWe increments is significantly more sophisticated than the stored heat assessment. For each 25 MWe power plant usable energy available at the surface (not stored heat in the ground) from the 25,000 tonnes per day of geothermal fluid to be extracted from the field per unit is about 15 TJ/day (175 MWth or 5.5 PJ / annum) if the fluid is re-injected at 85 degrees C.

The current 25MWe power generation plant draws around 1050 tonnes per hour of fluid. Around 99% of this fluid is reinjected at 85 to 95oC. Some additional fluid (18 t/hr of water) is also injected to supplement this and maintain field pressure.

The draw on the field from this geothermal power use of 1050 tonnes per hour with an enthalpy of 950 kJ/kg gives a calculated energy content of around 8.7 to 8.8 PJ per annum (Burnell, 2016). The additional power generation which is proposed and consented would be in two additional amounts of 25MWe (Table 3), but spaced several years apart

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to allow monitoring of the field to see the effect of the increasing use on the pressure and temperature within the field and any effects on the surrounding hot springs.

Table 3 - incremental heat draw from increasing power generation. PJ per MWth per annum annum Current 25 MWe (2017) 5.5 175 With + 25MWe (2020) + 5.5 = 11.0 350 With + 25MWe (2023) + 5.5 = 16.5 525

Northland wood processing plant & log demand Scion maintains a wood processing data base that was initially derived from a range of sources, including Vaney and Nielson 2014. The information in the database has been updated as mills open (e.g LumberCube), close (e.g LumberCube, Verda) and change their structure (e.g. Red Stag). This database was used to make estimates of log demand by grade from wood processing mills in Northland.

The total log demand from current processing operations (#18) in Northland is in the order of 1.88 million m3 per annum. Of this around 255,000 m3 is pruned log, 1,000,000 m3 is S grade, 90,000 m3 of L grade and chip / pulp log of around 500,000 m3. Of the chip log demand, around half is chipped and exported as chip. Sawn lumber exports were 36,000 m3 from a total regional production of 430 to 440,000 m3. New Zealand’s total export of sawn lumber is around 1.85 million m3 per annum.

Log exports from Whangarei for the year ending September 2016 were approximately 2.891M m3 (MPI 2016d) and 261,000 m3 of log equivalent as chip.

There was some movement of chip logs and / or sawmill chip from Northland to the Central North Island, the volume is unknown but is believed to be substantial.

The 2016 wood availability was in the order of 4.190M m3 (MPI 2016b). Clearly an opportunity exists for the expansion of processing, but in order to determine what processing we need to look at the supply / demand by log grade.

Northland wood supply over current demand, over time and by grade Northlands log supply over time by 4 principal log grades (pruned, S sawlog, L sawlog and chip) were estimated and compared to current demand from existing mills. From this, the log supply potentially available for expanded processing was derived (Appendix 2). These data are shown in Figures 4 to 7.

Pruned log demand is currently around 250,000 m3 per annum, which is just below the current supply level (Figure 5). However, the pruned log resource declines over time and post 2025 is insufficient to meet the current mill demand. By 2035 there is a deficit gap of around 200,000 m3 per annum between supply and demand. There is little opportunity in pruned log processing, but there would appear to be an opportunity for forest growers in Northland to consider pruning as an option on some of their resource, in order to create greater future supply and alleviate the projected shortfall.

There is no opportunity to resolve this shortfall in the short to medium term (<20 years) as silvicultural regimes are set for any plantings older than age 5. Anything older than age 5 which has not been pruned cannot be retrospectively pruned effectively. Large scale pruning now would only affect pruned log supply post 2039.

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Based on these figures there is no opportunity to expand processing which requires pruned logs (appearance grade products).

Figure 5 - Pruned log supply versus demand

Demand for S grade logs is around 1,000,000 m3 per annum and there is sufficient supply to more than meet this in the long term (Figure 6). The potentially available volume fluctuates substantially over time but there would be a minimum of 100,000 m3 of potential processing expansion; if the log harvest is smoothed. This data appears to be in conflict with current concerns around availability of logs to Northland mills, but it should be noted that there were exports of logs from Northland of ~2.8M m3. The recent (2016) issue of supply to Northland mills is more about being able to purchase the logs as opposed to whether the logs exist. Further, it should be noted that there is latent capacity in the Northland sawmilling infrastructure that could absorb some of the potentially available S grade supply should the demand for sawn product be sufficient. Mills currently taking pruned logs may move to S grade in the future as the pruned log supply declines. The opportunity around S grade logs is therefore modest.

Figure 6 - S grade log supply versus demand

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The largest opportunity to expand processing occurs with L grade logs (large knot size). Supply of L grade logs varies over time (Figure 7), but as current usage appears to be modest (90,000 m3 per annum) the potential volume for expanded processing based on L grade logs is in the order of 350,000 m3 per annum. This is sufficient to supply a medium scale industrial sawmill or industrial plywood mill. Other options are engineered wood products such as OEL™.

Figure 7 - L grade log supply and demand

Current demand for chip logs within Northland is around 250,000 m3 per annum (Figure 8). This is substantially less than the supply, enabling the export of chip logs and sawmill chip; and supply of these products to other regions in New Zealand (Central North Island) where pulp chip demand currently exceeds supply. The minimum excess of chip logs occurs around 2037, with a volume of 220,000 m3.

Figure 8 - pulp grade log supply and demand

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A further consideration is the effect on chip supply if primary log processing was to expand based on the volume estimates above. Table 4 shows that there is potential for an integrated processing site with a log intake capacity of around 700,000 cubic metres per annum of log equivalent.

Table 4 - Summary of potential volumes for expanded processing Potential long term Potential increase in Log grade expansion in primary mill chip volume, processing volume, m3 p. a. m3 p.a. Pruned - - S grade 100,000 30,000 L grade 350,000 105,000 Pulp grade 220,000 - Total 670,000 135,000

Further to this, there would be a quantity of other residuals, such as bark, sawdust, sander dust, shavings, off-cuts etc., the volumes of residuals, and their type (including the chip volume) depends on the type of primary processing. This volume of residuals is likely to be in the order of 15% (75,000 green tonnes) of the total log intake, and if geothermal heat is available, as at Ngawha, then this would not be required as fuel to provide process heat and therefore becomes available for processing into a range of products.

If a plywood mill takes a significant volume the type of residues and by-products changes - with less chip being produced. The chip would be replaced by log round-up flakes from the ply lathe and the small diameter cores from the peeled logs.

Potential for and effect of afforestation in the Northland region Another option to consider is the potential for afforestation (new forest area planted) to provide increased future wood supply. A recent study (Harrison, Hock and Yao, 2017 in prep.) has identified that there is around 21,880 hectares of land in Northland that could be afforested and return a profit to landowners.

If we assume a direct sawlog regime and a 28 year rotation with the afforestation spread evenly over 28 years (which gives a sustainable increase in wood availability) we can estimate the increase in wood supply over time, and to some extent the log grades produced. The yield per hectare is likely to be 640 m3 per ha, and off 780 ha per annum gives a potential harvest of 499,000 m3 per annum. The grade split and volume per annum is shown in Table 5.

Table 5 - estimated increase in harvestable volume from new afforestation in Northland Log grade Volume (m3) % Volume (m3) per ha per year S grade 423 67 334,000 L grade 6 1 5,000 Chip grade 200 32 159,000 Total 629 100 498,000

These logs would increase the S grade supply, but even if the first new plantings occurred in 2017 there would not be any effect on supply until 2043 to 2045. This is just after the low point in S grade supply which occurs at around 2037 to 2042 (Figure 6). Therefore whilst afforestation would have benefit on wood availability in the long term it will not affect the scale of the plant that can be built in based on the short to medium term supply.

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Wood supply to Ngawha An important consideration when locating wood processing is the transport distance of the logs to the processing site, and the distance of the processing site to an export port. These factors affect transport costs, delivered feedstock costs and delivered to wharf costs of products. Figure 9 shows the potential log volume by distance available to Ngawha for various time periods out to 2035. The low point in Northland wood supply occurs at around 2036 to 2040, so the long term supply is similar to that available at 2035. 160 kilometres is considered to be a high haul distance to get logs to a mill. A 175km Haul distance captures the bulk of the Northland wood resource.

Figure 9 - Log supply by distance from Ngawha for different time periods.

Landing residues The volume of landing residues that are potentially available to Ngawha by distance and over time are shown in Figure 10.

Figure 10 - landing residue availability

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The cost of harvesting, processing and delivery of landing residues to Ngawha in chipped form are shown in Figure 11. Up to 40,000 tonnes per annum could be delivered for <$50 per green tonne.

Figure 11 - Cost supply curve for landing residues

A further potential fibre resource is residues on cutover harvested by ground based systems (Figure 12). There is a greater volume of cutover residues potentially available, however, the extra costs of harvesting these residues reduces their ability to compete at a pulp log price (~$50 / green tonne).

Figure 12 - cutover residue availability

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Figure 13 shows the cost supply curves for cutover residues, with around 8,000 green tonnes per annum being available at <$50 green tonne.

Figure 13 - cost supply curve for cutover residues

The transport distance from Ngawha to Marsden Point is 120km, which is likely to cost $22 to 23 per tonne for movement of processed product.

WoodScape analysis of processing options Based on the analysis of potential wood supply the WoodScape model was used to identify promising wood processing options. This assessment is focussed on the larger opportunities, which are L grade logs, pulp logs and the residuals from the expanded primary processing of the L grade logs. Pruned logs were not considered as the long term supply is very limited and the opportunity around S grade logs is limited and most of this material could be absorbed by the existing processors (sawmills, LVL mills) as they have latent capacity. However, S grade logs combined with L grade logs give a significant opportunity. Chip grade logs also present a long term opportunity.

The initial focus is on processes which take L-grade logs (or K grade export equivalent). Examples of processes which can take L grade logs are; industrial saw mills, industrial plywood mills, and Optimised Engineered Lumber™ (OEL™). Secondary processes which can take the product from these for further manufacturing (e.g. re-manufacture, glulam and CLT) were considered; as are processes which run off residuals such as sawdust, shavings, bark. The use of in-forest residues as a supplement to processing residuals is considered.

The return on capital employed (ROCE) of a range of wood processing options are shown in Figure 14. These were derived in the WoodScape model (Jack, Hall, Goodison & Barry, 2013). These ROCEs are for green field plants, using geothermal heat as appropriate to the process and use last 12 month average prices for logs and products.

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Figure 14 - ROCEs of wood processing options

A further selection based on this is required, based on the suitability of the available log supply by type and volume to the various technologies.

The log supply is mainly L grade, with a smaller amount of S grade and a variable amount of chip grade log.

For primary processing the processes that have high ROCES and fit with the log grades available are; - L grade, OEL™ (100,000 m3 of logs per annum) - S and L grade, industrial plywood (350,000 m3 of logs per annum) - Chip grade; oriented strand board (OSB), (245,000 m3 of logs per annum)

These plant scales are at the upper limit of the supply of logs, but some scaling back of the size of the plant would be possible to better fit the supply. This study is aimed at a high level identification of options that would potentially fit with the resource, but just as importantly with the geothermal and electricity resource and with each other.

Residual production and use If the primary wood processing options outlined above were implemented, they would use geothermal heat and geothermally generated electricity. Their residuals, which on sites without access to geothermal heat would be combusted to produce heat or for combined heat and power, can be used for other purposes.

The estimated volume of residues from the OEL™, plywood and OSB plants are shown in Table 6.

Table 6 - processing residuals Residue type Green odt Source plant tonnes per annum per annum Bark 23,000 11,000 All Sawdust 16,000 6,000 OEL™ Ply log round-up* and cores** 50:50 split 165,000 66,000 Plywood Sander dust 9,000 4,000 Ply and OSB Chip 25,000 10,000 OEL™

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*round-up - before a log being peeled for plywood generates a continuous veneer, there are shards or flakes of wood taken off by the lathe knife from the non-cylindrical outer part of the logs, e.g. nodal swellings.

**core - the centre of the log that is unable to be peeled on the lathe and has low density

The chip, sawdust and ply round-up are all clean wood (220,000 m3 equivalent), and can be used for further processing. The ply round-up and cores could be used as feed stock for OSB. The various materials could be combined, homogenised in terms of size (hammer milling) and used for a range of products such as wood pellets or particle board. One of the options modelled that fits with the resource is a wood pellet plant that has extraction of resins and terpenes as a precursor to making the pellets.

Capital cost and ROCEs of cluster The capital costs of the various plants and their ROCEs are shown in Table 7 The capital weighted ROCE of the cluster is also shown.

Table 7 - capital costs and ROCE’s of a possible cluster Capital cost ROCE Volume Plant ($M) % k m3 p.a. in OEL™ 19.0 35.2 100 Plywood (industrial) 119.0 20.0 350 OSB 74.3 25.2 340 Terpene and pellets 20.4 21.6 180 Total 233.7 - 1120 Capital weighted ROCE 22.9

The use of the residuals from plywood and OEL™ in some plant (such as the resin, terpene and pellets) is essential, as an outlet for the residuals is required for the primary processing to function without a substantial financial penalty for dumping residuals.

The ROCEs of some other common wood processing options (sawmilling, LVL, MDF, remanufacture,) shown in Figure 14 are lower than those of plywood and OSB etc. Hence these options are not analysed here, but could be looked at in more detail.

There are a range of variations to consider, the OEL™ plant has a high ROCE and therefore the capacity of this option could be increased and increase the ROCE of the cluster. However, the OEL™ technology is still to be fully commercialised, with the first full scale plant under development, so some caution about this option is warranted.

A key point is that there a number of options that could be considered, and the lack of development of the sawmill / pulpmill options should not be seen as the end of the potential to develop greater wood processing at Ngawha. These options are traditional approaches and consideration should be given to alternative markets, products and technology options including emerging New Zealand based developments.

Impact of in-forest residues supply At cost similar to chip logs, some fibre resource will be available supplied from harvest residues from forest areas adjacent to Ngawha. This volume will vary over time, but is in the order of 40,000 tonnes per annum. There is a further quantity of in-forest harvest residues from cutover that is potentially available. These residue are generally regarded as low quality and most use has been as boiler fuel which has limited value at a processing site with geothermal heat. However, some of the landing residue volume

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would potentially be suitable for OSB feedstock. Some could also be used in the terpenes and pellet plants.

Energy demand of cluster The total energy demand of the cluster (electricity and heat) for each plant was calculated in the WoodScape model and are shown in Table 8.

Table 8 - Electricity and heat demand for potential new plant Electricity Plant type Plant size; m3 per demand Heat demand annum of log* in (kWh p.a.) (GJ p.a.) OEL™ 100,000 5,997,000 144,000 Plywood 350,000 50,715,000 3,124,000 OSB 345,000 29,000,000 640,000 Resin, terpene & pellets 185,000* 12,091,000 784,000 Total 97,830,000 4,692,000 *in log volume equivalent

The electricity demand would require a generation plant of approximately 14MWe. A 25MWe electricity generator would produce around 197,100,000 kWh p.a., so the addition of a 25MWe geothermal electricity plant to Ngawha would more than cover electricity demand of the expanded wood processing.

The heat demand calculation is at the plant, some loss of efficiency between the well and the plant will increase the heat demand; this is estimated at 30%, so demand from the field would be around 6.7 PJ.

The heat demand of ~6.7 PJ is well within the consented draw; and so there should be sufficient heat to do both the power and heat required for the wood processing cluster outlined.

The development of such a large direct heat use at Ngawha could impact on the development of the third stage of the proposed Ngawha power plant, as the heat demands is as much as is consented for the third of the 25MWe power generation units.

Employment and GDP of the wood processing cluster The impact of the 4 wood processing plants on employment is shown in Table 9.

Table 9 - Employment (direct and indirect) and GDP for the wood processing options in the Ngawha cluster Employment Employment Induced Total GDP Plant direct indirect employment employment $M OEL 27 31 14 72 $50 Plywood 193 161 72 373 $181 OSB 184 213 96 493 $145 Terpenes & Pellets 20 49 22 90 $30 Total 370 454 204 1028 $413

These employment and GDP numbers are substantial and would give a boost to the local economy. These numbers are in excess of those likely to be created by a 25MWe or 50MWe power plant (estimated at; employed direct (35), employed indirect (41), Induced

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employment (6), total employment (77) $139M, (WoodScape based on a 60MWe wood fuelled combined heat and power plant with fuel cost set to $0)).

Options Given the consented draw an option to consider is a smaller expansion of electricity generation with the remaining consented draw going to direct heat for wood processing. This would still allow for 1 X 25Mwe expansion of power generation and a wood processing site with a ~10 to 15MWe power plant and 150 to 210MWth in direct heat use.

Conclusions and Recommendations

There is a substantial wood resource available in Northland that could be used for on- shore processing. Much of this resource is currently exported as unprocessed sawlogs or raw wood chip.

The volume of logs available varies over time following past planting trends, and by grade depending on existing local demand.

There are substantial volumes of L-grade logs available, which could be supplemented by a smaller volume of S grade logs. These logs are suitable for primary solid wood processing. There is also a substantial volume of chip log available.

Analysis of primary wood processing opportunities identified; OEL™, industrial plywood, and OSB as processes that have high ROCEs under current (2016/2017) market conditions and fit the log resource in the long term.

Other primary processing options that may warrant further investigation are Industrial sawmilling, CLT.

The residuals from the three primary processors are sufficient to supply a resins and terpenes extraction operation, allied with a wood pellet plant.

The Ngawha geothermal field has existing commercial use (25MWe power generation) and has consent for a further 50MWe in two 25MWe stages (2020 and 2023).

The cluster of wood processing plants described has a demand of around 14 MWe and a heat demand of up to 210 MWth. These would fit within the currently consented draw on the field, although the heat demand may be in competition with some of the additional electricity developments.

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Acknowledgements Scion wishes to acknowledge the support of the Ministry of Business, Innovation and Economics for the funding of the Industrial Symbiosis project.

References

Burnell J. (2016). Statement of evidence of Dr John Burnell for Northland Regional council and far North Distract Council hearing concerning a resource consent application by Ngawha Generation Limited for expanded operation of Ngawha geothermal filed; public hearing in Kerikeri on 10-14 August 2016.

Martin Jenkins 2015. Tai Tokerau Northland Growth Study. Opportunities Report February 2015. Published by Ministry of Primary Industries.

Ministry of Primary Industries (2016a). National exotic forest description - 1 April 2015. Prepared for the Ministry for Primary Industries by Indufor Asia Pacific Limited. https://www.mpi.govt.nz/news-and- resources/open-data-and-forecasting/forestry/new-zealands-forests/. Accessed December 2016

Ministry of Primary industries (2016b). Wood Availability forecasts - Northland 2014. Prepared for the Ministry for Primary Industries by Indufor Asia Pacific Limited. https://www.mpi.govt.nz/news-and- resources/open-data-and-forecasting/forestry/new-zealands-forests/. Accessed December 2016

Ministry of Primary industries (2016c). Wood Availability forecasts - New Zealand 2014-2050. Prepared for the Ministry for Primary Industries by Indufor Asia Pacific Limited. https://www.mpi.govt.nz/news-and-resources/open-data-and-forecasting/forestry/new-zealands- forests/. Accessed December 2016.

Ministry of Primary industries (2016d). Quarterly trade. https://www.mpi.govt.nz/news-and- resources/open-data-and-forecasting/forestry/wood-product-markets/. Accessed December 2016.

Indufor 2016. Pre-feasibility of a Mechanical pulpmill complex in Northland; local impact component, Resource analysis, market analysis. MPI technical paper 2016/72. Prepared for MPI by Indufor. http://nzgeothermal.org.nz/nz_geo_fields/ (accessed 16 February, 2016)

Vaney J. and Nielson D. (2014). The New Zealand Forest Products Industry review. 2014 Edition. Dana Publishing.

Vaney J. and Nielson D. (2016). The New Zealand Forest Products Industry review. 2016 Edition. Dana Publishing.

Jack M., Hall P., Goodison A. and Barry L. (2013). WoodScape study - Summary report. Scion project report for the Wood Council of New Zealand. http://woodco.org.nz/images/stories/pdfs/woodscape/woodscapesummaryreportfinal1_web.pdf

Hall P., Jack M., Barry L. and Goodison A. (2013). WoodScape study - regional wood processing options. Scion report for the Wood Council of New Zealand (Woodco). http://woodco.org.nz/images/stories/pdfs/woodscape/woodscaperegionalreportfinal2_web.pdf

Hall P., Hock B., Alcaraz S., Climo M. and Heaphy M. (2016). Wood Energy Industrial Symbiosis 2016 Progress Report - Aim 3. Scion Internal Report (SIDNEY No. 57986) to MBIE.

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Hock, B. K., Blomqvist, L. B., Hall, P., Jack, M., Wakelin, S. J. (2012, December). Understanding forest-derived biomass supply with GIS modelling. Journal of Spatial Science 57(2), 213-232

Jack M., Hall P., Goodison A. and Barry l. (2013). WoodScape study - summary report. Scion report for the Wood Council of New Zealand (Woodco).

Geothermal Energy; Resources, Production, Stimulation (1973). Edited by Paul Kruger, Carel Otte. Stanford University Press. Stanford, California. http://www.woodweek.com/

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Appendix 1 - Ngawha map

Map of Northland Plantation forests and roads - Yellow circle indicates 100 km from Ngawha

Note - given the wander factor of the roads, a straight line distance of 100km is likely to convert to a transport distance of 140 to 160km.

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Appendix 2 - log supply and demand volumes; Northland

Northland supply & demand summary; 000's of m3 per annum

Available Pulp log Pulp log Available Pruned Pruned pruned S grade S grade Available L grade L grade Available demand supply pulp log demand Supply log demand supply S grade demand supply L grade 2014 250 931 681 250 450 200 784 2,177 1,393 10 632 622 2015 250 924 674 250 414 164 784 2,210 1,426 10 642 632 2016 250 917 667 250 379 129 784 2,243 1,459 10 651 641 2017 250 814 564 250 280 30 784 2,075 1,291 10 602 592 2018 250 783 533 250 295 45 784 1,796 1,012 10 521 511 2019 250 777 527 250 286 36 784 1,543 759 10 448 438 2020 250 782 532 250 261 11 784 1,512 728 10 451 441 2021 250 787 537 250 279 29 784 1,493 709 10 446 436 2022 250 848 598 250 362 112 784 1,382 598 10 413 403 2023 250 854 604 250 350 100 784 1,388 604 10 414 404 2024 250 883 633 250 367 117 784 1,352 568 10 404 394 2025 250 839 589 250 286 36 784 1,439 655 10 442 432 2026 250 785 535 250 186 -64 784 1,557 773 10 478 468 2027 250 795 545 250 204 -46 784 1,535 751 10 472 462 2028 250 767 517 250 152 -98 784 1,597 813 10 490 480 2029 250 768 518 250 153 -97 784 1,594 810 10 490 480 2030 250 732 482 250 86 -164 784 1,685 901 10 503 493 2031 250 745 495 250 110 -140 784 1,656 872 10 495 485 2032 250 731 481 250 81 -169 784 1,689 905 10 505 495 2033 250 711 461 250 39 -211 784 1,737 953 10 519 509 2034 250 711 461 250 30 -220 784 1,743 959 10 521 511 2035 250 644 394 250 32 -218 784 1,420 636 10 609 599 2036 250 584 334 250 41 -209 784 1,266 482 10 543 533 2037 250 522 272 250 32 -218 784 1,147 363 10 491 481 2038 250 469 219 250 22 -228 784 1,037 253 10 445 435 2039 250 482 232 250 37 -213 784 1,044 260 10 448 438 2040 250 540 290 250 66 -184 784 1,205 421 10 402 392 2041 250 540 290 250 44 -206 784 1,259 475 10 420 410 2042 250 540 290 250 14 -236 784 1,329 545 10 443 433 2043 250 596 346 250 23 -227 784 1,455 671 10 485 475 2044 250 659 409 250 32 -218 784 1,593 809 10 531 521 2045 250 656 406 250 26 -224 784 1,578 794 10 554 544 2046 250 650 400 250 14 -236 784 1,592 808 10 559 549 2047 250 658 408 250 7 -243 784 1,614 830 10 567 557 2048 250 731 481 250 33 -217 784 1,752 968 10 615 605 2049 250 774 524 250 32 -218 784 1,857 1,073 10 652 642 2050 250 775 525 250 36 -214 784 1,852 1,068 10 651 641

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Appendix 3 - full list of ROCEs from WoodScape analysis

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