Generic Public Client Report

Assessment of wood processing opportunities aligned with industrial heat demand in Southland Wood Energy Industrial symbiosis project – Aim 3 resource convergence opportunities Peter Hall & Barbara Hock (i) Report information sheet Report title Assessment of wood processing opportunities aligned with industrial heat demand in Southland Authors Peter Hall & Barbara Hock Scion Client MBIE MBIE contract PROP-37659-EMTR-FRI number SIDNEY output 60405 number ISBN Number Signed off by Paul Bennett Date March 2018 Confidentiality Confidential (for client use only) requirement Intellectual © New Zealand 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, Rotorua 3046, New Zealand. www.scionresearch.com 2 Executive summary This report presents analyses of the current and projected wood resource and wood processing along with existing heat demand in Southland and Clutha with the aim of identifying wood energy industrial symbiosis opportunities. Key results The Southland region has a limited supply of Pinus radiata logs excess to its processing capacity. However, there are increasing supplies of Douglas fir logs over time and potential to add some sawlog supply from the Eucalyptus nitens harvest. Clutha has a larger long term supply of Douglas fir than Southland. The supply of wood residues from forest harvest and wood processing were determined. For forest residues Southland has a long term supply of 50,000 green tonnes per annum of landing residues and a further 20,000 green tonnes per annum of cutover residues. Clutha has similar volumes. Southland also has an abundant supply of lignite and coal which fuel a number of primary processing industries (e.g. dairy and meat processing). This analysis looks at the potential for expanded wood processing based on the currently unused log supply with integrated process heat supply to non-wood processing such as dairy factories and freezing works. When looking at log supply in the Southland region, using the territorial authority boundaries is not necessarily the most useful, and the log supply in the Clutha district was included as part of the analysis due to its scale and proximity. There is significant heat demand across Southland and Clutha, largely from dairy and meat processing. There are a range of location options in Southland and Clutha where expansion of wood processing could be collocated with dairy or meat processing with the wood residues that are not required by the wood processing operations making a useful contribution to the heat demand currently generated from fossil fuels (coal and LPG). Capital investment of $80 to $140M would be required, with a RA ROCE of 20 to 26%. Impacts on employment and GDP are substantial, but vary with the scale of the wood processing installed. There are substantial numbers of jobs that could be generated from these wood processing developments, along with the associated GDP gains. These gains depend on the decision to have one larger site or two smaller sites. For example, a large wood processing cluster located near Balclutha would have a capital weighted RA ROCE of 26% and would create 1296 jobs (direct and indirect, with an increase in GDP of $270 million per annum. This site could displace coal or gas fired heat demand and reduce GHG emissions by up to 22,000 tonnes per annum. Implications of results There are opportunities to co-locate expanded wood processing with existing coal, lignite and LPG demanding sites based on the Douglas fir resource in Clutha and Southland. The processing would be a mix of primary (sawmilling) and secondary (cross laminated timber and remanufactured lumber) along with the production of engineered wood products from K grade logs. 3 Assessment of wood processing opportunities aligned with industrial heat demand in Southland: - Wood Energy Industrial symbiosis project – Aim 3 resource convergence opportunities Table of contents Executive summary ............................................................................................................................ 3 Introduction ......................................................................................................................................... 5 Methods .............................................................................................................................................. 7 Wood resource ................................................................................................................................ 7 Wood processing demand .............................................................................................................. 7 Heat plant and heat demand .......................................................................................................... 7 Biomass supply model .................................................................................................................... 7 WoodScape model.......................................................................................................................... 7 Energy supply data ......................................................................................................................... 8 Results and Discussion ...................................................................................................................... 8 Southland wood supply ................................................................................................................... 8 Southland wood processing demand ........................................................................................... 14 Southland and Clutha log and chip exports .................................................................................. 16 Wood processing expansion options for Southland & Clutha ...................................................... 16 Coal supply & demand, Southland and Clutha. ............................................................................ 18 Electricity demand and supply – Southland & Otago ................................................................... 19 Gas demand supply – Southland and Otago ................................................................................ 19 Industrial heat demand - Southland .............................................................................................. 20 Industrial heat demand - Clutha .................................................................................................... 20 Wood processing expansion opportunities ................................................................................... 21 Southland and Clutha opportunity separately ............................................................................... 23 Discussion ........................................................................................................................................ 27 Estimate of economic impacts ...................................................................................................... 27 Conclusions ...................................................................................................................................... 28 Glossary ........................................................................................................................................... 29 Acknowledgements .......................................................................................................................... 29 References ....................................................................................................................................... 30 Appendix A - Wood processing plants - Southland .......................................................................... 31 Appendix B - Wood processing plants - Clutha District.................................................................... 32 Appendix C – Eucalyptus plantation area Southland & Clutha ........................................................ 33 Appendix D - Residue production and energy demand by processing type .................................... 33 Appendix E – NZ energy costs; 2017 ............................................................................................... 34 4 Introduction The Wood Energy Industrial Symbiosis project is aimed at determining opportunities to group expanded wood processing with other primary processing industries, such as dairy and meat, based on the; existing forest resource, processing infrastructure, and available wood supply. Local energy supply and demand is also considered. Constraints

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