Hawkes Bay Wood Energy Industrial Symbiosis Project – Aim 3 Resource Convergence Opportunities

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Assessment of wood processing opportunities aligned with industrial heat demand in Hawkes Bay 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 Hawkes Bay

Authors Peter Hall & Barbara Hock Scion

Client MBIE

MBIE contract PROP-37659-EMTR-FRI number

SIDNEY output 60404 number

ISBN Number

Signed off by Paul Bennett

Date March 2018

Confidentiality Confidential (for client use only) requirement

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

Executive summary

This report presents analyses of the current and projected wood resource and wood processing along with existing heat demand in Hawkes Bay with the aim of identifying wood energy industrial symbiosis opportunities. This analysis focusses on opportunities to align expanded wood processing with existing coal demand.

Key results A substantial coal to heat demand exists at Awatoto, 8 km south of the post of Napier, with 3 boilers at 2 sites consuming 1,050 GJ p.a. of coal, the equivalent of 153,500 tonnes per annum of green wood.

There are sufficient residues from in-forest harvesting to meet a substantial proportion (2/3rds) of this energy demand. Delivered cost estimates for this material are $9 to $10 per GJ.

Horticultural and municipal wood waste is estimated at an additional 39,000 green tonnes per annum (275,000 GJ).

There is a further coal demand at Wairoa (meat works) with an annual fuel demand of 304,000 GJ or 44,000 green tonnes of wood. There are sufficient in-forest residues in the Wairoa district to meet around half of this demand and sufficient wood supply to allow expanded wood processing (OEL™, 100k log in per annum) to be located at Wairoa, with sufficient wood residues to meet the rest of the demand. The plant at Wairoa would require around $57 million of capital investment and would have a RA ROCE of 37%. It would provide 81 direct jobs and 216 indirect and add $159M to GDP whilst reducing GHG emissions by 30,000 tonnes per annum.

There are no coal fields in Hawkes Bay, and coal has to be transported into the region to meet the coal demand. Delivered cost of coal is estimated to be in the order of $7 to $9 per GJ.

There is a significant quantity (1.35M m3 per annum) of logs being exported from Hawkes Bay via the Port of Napier and this represents an opportunity to expand wood processing. Based on the available log volumes by grade a cluster of financially viable wood processing options were identified; - Big squares; K grade - OEL; K grade - Sawmill; S & A grade o Lumber to CLT o Lumber to remanufacture - Possibly a small OSB mill; pulp grade.

These wood processing operations are estimated to have a combined capital weighted risk adjusted return on capital employed of ~32%.

The spare processing residues from these operations, over their own demands for heat fuels would meet the rest of the Awatoto coal demand

These processing plants would require substantial capital investment (~$204 million). However, they would provide up to 566 direct jobs and up to 1,503 jobs when indirect and induced employment are included. The total increase in GDP would be in the order of $518 million per annum. GHG reductions would be in the order of 15,000 tonnes per annum.

Assessment of wood processing opportunities aligned with industrial heat demand in Hawkes Bay: - 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...... 8 Energy supply data ...... 8 Results ...... 10 Hawkes Bay wood supply ...... 10 Hawkes Bay wood processing demand ...... 12 Hawkes Bay log and chip exports ...... 12 Estimated log availability - Hawkes Bay ...... 13 Wood processing expansion options for Hawkes Bay...... 14 Coal demand, Hawkes Bay...... 15 Gas demand – Hawkes Bay...... 16 Industrial heat demand – Hawkes Bay ...... 16 Wood processing expansion opportunities ...... 17 Wood processing options ...... 17 Wairoa ...... 19 Hawkes Bay opportunities to co-locate wood processing with heat demand ...... 21 Discussion ...... 23 Conclusions ...... 23 Acknowledgements ...... 24 Glossary ...... 24 References ...... 25 Appendix A - Wood processing plants – Hawkes Bay ...... 26 Appendix B - Residue production and energy demand by processing type ...... 27 Appendix C – NZ energy costs; 2017 ...... 28 Appendix D – Industrial heat Gas Demand; Hawkes Bay ...... 29 Appendix E - Cumulative wood supply to Awatoto by transport distance, over time ...... 30

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 (including its heat demand), and available wood supply. Local energy supply and demand is also considered. Any constraints on supply of electricity, coal and gas are considered.

Opportunities vary by region, depending on the wood resource (including changes in supply over time), existing wood processing demand, energy infrastructure and demand for industrial heat.

Previous regional studies in the Wood Energy Industrial Symbiosis project have focussed on Kawerau, Ngawha and Gisborne (Hall 2013, Hall et al 2016, Hall et al 2017a, and Hall et al 2017b). A report on Southland is also in preparation (Hall & Hock, 2018). The ability to access geothermal heat had a significant influence on the results for Kawerau and Ngawha, as the use of geothermal heat can displace the use of wood residues for heat fuel, allowing them to be moved to other sites with a heat demand, or to be used for feedstock for further processing. Gisborne is distinctive as it has a substantial wood resource, limited existing wood processing, is far from coal mines and is reliant on gas and electricity infrastructure which has some limits on its capacity. Southland has a more species diverse wood resource than many other regions and a very large lignite resource; as well as some large heat using industries (dairy and meat processing).

This study is focussed on Hawkes Bay (Figure 1). The Hawkes Bay region includes Wairoa and the Mahia Peninsula in the North (Wairoa District), Napier City, Hastings District (which includes the Heretaunga Plains) and Central Hawkes Bay District (actually the southern part of the Hawkes Bay region including Waipukurau / Takapau). It extends from the coastline in the east to the Tararua, Ruahine, Wakarara and Kaweka ranges in the west.

Figure 1 – Hawkes Bay region

The plantation forest area and some key infrastructure is show in Figure 2. There is a rail link from Wairoa to Napier. The map shows the rail going past Wairoa to Gisborne, but that section is not in service (and is not being repaired) after suffering storm damage some years ago. The rail link also extends south to Woodville and Palmerston North. This map shows the extensive area of forest in Wairoa district and the northern part of the Central Hawkes Bay. There are many small areas of plantation forest scattered across southern Hawkes Bay.

Figure 2 – Forests and transport infrastructure – Hawkes Bay

Methods

Wood resource The Hawkes Bay wood resources are described in the Ministry of Primary Industries (MPI) National Exotic Forest Description (NEFD), (MPI, 2016). This data shows species by age class and area, and along with the MPI yield tables this allowed prediction of potential wood availability over time. It also allows the prediction of forest harvest residues derived from the potential harvest volumes, based off estimates of the proportion of a crop that is discarded on cutover and at landings (Hall, 1998).

Further data is available from the MPI wood availability forecast for Hawkes Bay (MPI, 2014). Scenario 3 from the Hawkes Bay wood availability forecast (MPI, 2014) was used for estimates of the Pinus radiata resources as it was deemed to be the most likely of the possible future wood supply and harvest volume options. Estimates for volumes from other species were derived from the NEFD.

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 5 broad categories; pruned logs, S, A and K grade sawlogs, and pulp / chip grade log. The sawlog and pulp log volumes were obtained from MPI 2016b and an estimate of the S grade, A grade and K grade split for unpruned sawlogs was derived from the forest growth model Radiata Pine Calculator Version 4 Prad_Calcv4.0) (Knowles 2007) and MPI data on regional planting by regime in the Hawkes Bay region (MPI 2016a)

Wood processing demand Wood processing demand was derived from a range of sources and is held in a wood processing database (Scion, 2017). A key reference was Vaney and Nielson 2016 along with industry news letters (WoodWeek, Friday Offcuts) and industry contacts. Further information was derived from on-line searching (e.g. NZTIF website) and Google Earth. The wood processing industry is dynamic and a complete dataset of all wood processors is not publicly available, therefore the data does not capture all wood processing. However, the Scion wood processing database captures all the major wood processors along with many of the smaller and secondary processors such as remanufacturers and post / pole yards. The dataset has 224 wood processing sites identified nationally, with 11 in Hawkes Bay (Appendix A). Data included covers mill location, product type, log volume intake, product output, presence and size of heat plant and estimates of residues produced and used for heat, by mill.

Heat plant and heat demand Current use of industrial heat was derived from the EECA heat plant database (2014) with updates from other work in the Wood Energy Industrial Symbiosis project. This dataset provides information on heat plant by location, size, loading, industry and fuel type. It also informs the wood processing database as it identifies heat plant by industry type. The heat demand of the existing wood processors was also estimated from data from the WoodScape study (Appendix B).

Biomass supply model Scion has developed a GIS based biomass supply model (BSM), (Hock et al, 2012). This model allows data on forests, wood processors and other sources of woody biomass (e.g. Municipal wood waste) to be analysed and to show volumes of wood residue available by distance from a selected delivery point, over time. Delivered cost can also be assessed, allowing for stumpage costs, harvesting cost by terrain type and transport costs by distance.

WoodScape model Once the data on log supply and demand has been derived, the processing opportunities can be assessed using the WoodScape model (Jack et al 2013). This model allows the techno-economic analysis of a broad range of wood processing technologies, which are selected from a list of 115 options (type and scale), aligning with the volume and grade of logs available. The model has data on 49 different wood processing technology options (types).

Energy supply data Energy supply costs for New Zealand were gathered (MBIE, 2017) or estimated (Appendix C).

Coal There are no coal resources in Hawkes Bay (Figure 3). Any coal used in Hawkes Bay has to come from Waikato or Manawatu-Wanganui. Coal transport would largely be via road / truck as there is no rail link into Hawkes Bay (Figure 2) from Waikato. There is potential for coal to come into Hawkes Bay via the rail link to Palmerston North.

Figure 3 – North Island coal fields

Electricity There are 9 electricity generation stations in Hawkes Bay. Five are hydro, 1 is a wood fuelled cogeneration plant at OJI Fibre Solutions at Whirinaki (PanPac), and there are three diesel fuelled plants, including the peaker plant at Whirinaki, which has a large installed capacity (155MW) but is run only intermittently and only generates on average around (9GWH). Ravensdown at Awatoto uses waste process heat to generate steam and electricity.

Hawkes Bay’s electricity plant generates around 560 GWh per annum, and the local demand is estimated at 1,970 GWh (EECA energy end use database, 2012 data), so there is room to meet some electricity demand from local generation. The main import of electricity is via the 220kV line from Taupo to Napier.

Gas All New Zealand’s producing gas fields are in Taranaki (on or off-shore). There is a link to these fields and Hawkes Bay via a gas pipeline (Figure 4). The gas pipeline does not extend to the Wairoa District. There are some gas boilers (Appendix D) in the Central Hawkes Bay and Hastings Districts as well as Napier City.

Figure 4 – New Zealand gas pipeline (red) network

Results

Hawkes Bay wood supply Potential log supply over time in Hawkes Bay is shown in Figure 5. Pruned log volumes decline over time with long term sustainable supply availability in the order of 250,000 m3 per annum. Pulp log supply is relatively steady at around 500,000 m3 per annum. Unpruned log supply is mostly in excess of 1.5 million m3 per annum in the long term. However, this volume needs to be considered by grade (Figure 6). The proportions by 3 key grades (S, A and K) are similar.

Figure 5 – estimated log supply in Hawkes Bay

Figure 6 – unpruned log supply by grade

Forest Residue supply There are always in-forest residues associated with forest harvesting, with there being two distinct locations where in-forest residues are produced; logging landings and on cutover (at stump). The estimated volume of these is shown in Figure 7. The two different types of residues have different costs, and the greater the volume that is demanded, the higher the average delivered cost will be, as longer transport distances will be required to access increasing volumes. Volumes fluctuate over

time in line with harvest volumes. Figure 6 shows that in Hawkes Bay the cheaper residues (from landings) will have a long run supply of around 75,000 cubic metres per annum (515,000 GJ). These residues are likely to cost in the order of ~$8 to $9 per GJ delivered (Hall 2017). Cutover residues which will be slightly more expensive have a long run supply of around 55,000 m3 per annum (370,000 GJ), with an estimated typical cost of ~$9 to $10 per GJ.

Figure 7 – in-forest residues supply – Hawkes Bay

Figure 8 shows the cost of in-forest residues by increasing demand and fluctuation in supply over time. Increasing demand to a particular supply point increases the transport distance. This analysis was carried out with the Scion GIS based biomass supply model (Hock et al 2012) which assesses the volume of forest harvest and harvest residues by distance from a specific supply point (Awatoto in this case).

Figure 8 – Cost supply curve for in-forest residues delivered to Awatoto

Hawkes Bay wood processing demand The wood processing sites in Hawkes Bay are shown in Table 1 (Appendix A).

Table 1 – Hawkes Bay region wood processing Processing Type No. Intake, Chip Chip Wood Fuel m3 p.a. intake, Production Residues at m3 p.a. m3 p.a. mill; equiv. equiv. m3 p.a. equiv. TMP pulp mill 1 400,000 200,000 - Sawmills 6 890,000 - ~200,000 - Engineered beams etc. 1 5,000 - - 500 Remanufacturing 1 10,000 - - 500 Wood fuel briquettes 1 1,100 - - - Recycled wood 1 5,000 - - 1000 Posts & Poles 1 5,000 - - 250 Total 11 1,316,100

Hawkes Bay has 11 wood processing sites identified. These range from the OJI Fibre Solutions (PanPac) pulp and sawmill site near Napier which takes a total of around 1.14 million cubic metres of logs per year, to 5 smaller sawmills, two small remanufacturers, two sites that work off residues and recycled wood and a post and pole yard. Of these sites 8 have boilers and 6 of these are running on wood residues. There is one mill with a gas boiler and one running on waste oil. The total log demand by grade for these sites is presented in Table 2.

Table 2 – log demand form Hawkes Bay wood processors Pruned S grade A grade K grade Pulp Other Cubic metres 130,000 385,000 370,000 - 400,000 12,000 per annum

The OJI Fibre Solutions pulp mill at Whirinaki (adjacent to the large sawmill) also takes around 200,000 green tonnes per annum of sawmill chip. This is effectively all the sawmill chip produced in the Hawkes Bay region.

Hawkes Bay log and chip exports Log exports from Hawkes Bay are shown in Figure 9. These volumes have climbed steadily over the last 10 years and in 2017 were in the order of 1.35 million m3. Given that MPIs predicted volume available for harvest in 2107 was ~2.5 M m3 and the processing demand is ~1.3M m3 the difference between the harvest volume available and the local log processing demand is being exported.

Figure 9 – Log exports Napier

Chip exports from Napier are shown in Figure 10. The decline in chip export volumes aligns with the data that shows local sawmill chip production and chip demand from the pulp mill being in balance.

Figure 10 - Chip exports from Napier

Estimated log availability - Hawkes Bay The long term estimated volume of logs available for expanded wood processing are shown in Figure 11, these figures are the available log supply, less the existing demand from local processors.

Pruned log volume is highly variable with very small volumes available around 2038, but for long periods the supply is in excess of 100,000 m3 per annum. Pulp log availability is consistently above 100,000 m3 per annum. Volumes of S and A grade logs are variable with low points around 2038 to 2040. However for long periods there are likely to be in excess of 100,000 m3 per annum of these grades available. There are substantial volumes of K grade logs (500,000 m3 per annum) available long term. There are few local processors with a demand for K grade logs.

Figure 11 – estimates of Pinus radiata log availability by grade

The volume of non-radiata logs (MPI 2016) is shown in Figure 12. This total includes Douglas fir, cypresses, other softwoods, eucalyptus species and other hardwoods. The volume available varies between 10,000 m3 per annum in the early 2020s but is in excess of 30,000 m3 per annum from 2030 onwards.

Figure 12 – Non-Pinus radiata species log supply

Wood processing expansion options for Hawkes Bay When log supply and demand data is combined for Hawkes Bay, we can determine some long term opportunities (Tables 3 and 4) based on log volumes not required for existing processing.

These volumes dictate the type of wood processing that could be developed and this has an effect on the wood energy demand / wood residue supply as some wood processing is energy intensive (MDF) and some is not (big squares & sawmilling). They also generate differing levels of residuals (Appendix B).

Unpruned Pinus radiata sawlog volumes in Hawkes Bay are expected to be made up of approximately 1/3rd each of S (small knots, <6 cm), A (medium knots, <10 cm) and K grades (large knot, <15 cm) (Table 4).

Table 3 – long term wood supply and demand; Hawkes Bay Log type Long run supply m3 per annum

Radiata pruned 700,000 to 0 Radiata S ~100,000 Radiata A ~100,000 Radiata K ~500,000 Radiata pulp ~100,000

Table 4 – Pinus radiata log prices (NZ national 12 month average, $ per tonne delivered to wharf or mill) Average Grade Dimension Specifications Price P1 Peeler Sed 400mm, knot size = 0, length 3.7m to 4.8 m $179 P2 Sed 300mm, knot size = 0, length 3.7m to 4.8 m $144 Export P Sed 360mm, knot size = 0, length >4.0m $163 S1 Sed 400mm, knot size =6cm, length 4.8m to 6.1m $123 S2 Sed 300mm, knot size =6cm, length 4.8m to 6.1m $123 S3s Sed 300mm, knot size =6cm, length 3.7m to 4.7m $114 L 350 Sed 350mm, knot size =13cm, length 4.9m to 6.1m $116 A Sed 300mm, knot size =10cm, length 3.7m to 6.1m $125 K Sed 200mm, knot size =15cm, length 11 to 12 m $117 KS Sed 200mm, knot size =15cm, length 3.6m to 4.0m $116 KI Sed 2600mm, knot size =25cm, length 4m $110 Posts & Poles Variable – low taper, small knots, small diameter $ 92 Pulp Sed 100mm, knot size =no limit, length 3.7m $ 49 *prices will vary by forest location

Coal demand, Hawkes Bay. There are three sites in Hawkes Bay with coal boilers; an 11 MW boiler at a meat works in Wairoa, two 4.9 MW boilers at a wool processing site at Awatoto (Figure 12) which is adjacent to a 25 MW boiler at a fertiliser works also at Awatoto. In total there is 46.4 MW of installed coal fired boiler capacity with 35MW of this at Awatoto. These boilers are summarised in Table 5.

Table 5 – coal fired boilers in Hawkes Bay Sector Location Size, Fuel Fuel Tonnes of MW demand Demand wood GWH GJ P.a. equivalent, p.a. Meat Wairoa 11.3 84.2 304,000 44,000 Wool Awatoto 4.9 33.2 120,000 17,500 Wool Awatoto 4.9 33.2 120,000 17,500 Fertiliser Awatoto 25.3 225.0 810,000 117,500 46.4 375.6 1,354,000 196,500

The coal demand at Awatoto is approximately equivalent to 153,500 green tonnes per annum of wood fuel. With 35,000 tonnes going to the wool scour and 117,000 to the fertiliser works.

Figure 13 – Awatoto is an industrial area located on the coast to the south of Napier (orange highlight)

Gas demand – Hawkes Bay. There are 13 sites in Hawkes Bay with gas fuelled heat demand (See Appendix D). Several of these sites have multiple boilers, with 31 boilers in total. Many of the boilers are small and they range in size from 0.25 to 5.4 MW. Total installed capacity is 57.9MW with an estimated fuel demand of 1,361,000 GJ or the equivalent of 197,000 tonnes of green wood fuel per annum.

Industrial heat demand – Hawkes Bay Based on the EECA 2014 Heat plant database and updates by Scion, University of Waikato and GNS there are 49 boilers in Hawkes Bay. These range in size (MW) of installed capacity. These boilers occur on 28 separate sites, there are a number of facilities that have multiple boilers. The largest site is 61 MW. Total installed boiler capacity in Hawkes Bay is 215 MW, with an annual output of 1460 GWh. This equates to a fuel demand of 6.184 million GJ (equivalent to 869,000 green tonnes of wood). Of the boilers in Hawkes Bay, 6 are already wood fuelled. The installed wood fuelled boiler capacity is 93 MW (Table 6).

Table 6 – Heat plant – Hawkes Bay Fuel No. of Installed GWh per Green tonnes of boilers capacity, annum wood equivalent MW Gas 31 57.9 378 197,000 CNG 2 2.7 8.2 5,023 LPG 2 0.6 2.5 1,350 Diesel / LFO 4 14 106.5 55,565 Coal 4 46.4 376 197,000 Wood 6 93 589 377,353 Total 49 215 1460 834,000 Total non-wood 43 122 871 456,000

Summarising the data on wood residues from both in-forest and current wood processing sources (Table 7) shows that there is insufficient woody material from in-forest residues to make a significant impact on the entire heat demand. However, focussing on the solid fuel (coal) demand shows a significant opportunity to displace coal demand. The existing wood processing operations are in wood fuel deficit, or at least unlikely to contribute a substantial amount of fuel to other users.

Table 7 – Wood residues versus Hawkes Bay heat demand Total In-forest residues available 120,000 Wood process residues available - 11,000 Total wood residues available 109,000

Wood processing expansion opportunities The sawlog volume available needs to be looked at by grade (Table 3) which are principally driven by log diameter and knot size. These grades dictate the possible end use options, and wood processing options which are appropriate.

Wood processing options The WoodScape model was run based on log and wood product prices as of 2017. The down select of suitable processing options was done post the initial financial analysis to ensure that no promising options were overlooked. The WoodScape model calculates a range of financial metrics; return on capital employed (ROCE) internal rate of return (IRR) and net present value (NPV) as well as employment and GDP data.

The model runs in Excel and has had the @Risk add-in (Monte Carlo risk analysis) included in it so that the ROCE results can be risk adjusted for the variability in key inputs (feedstock cost, product price and exchange rate).

Wood processing options that were promising based on 2017 prices are shown in Figure 13. Only those processing options with risk adjusted (RA) ROCEs of over 10% and suitable for the available wood supply type and volume are shown.

Note; - the main opportunity is 500,000 m3 per annum of K grade - secondary opportunities, 100,000 m3 per annum of pulp and 100,000 m3 per annum of S and A grade. - variable opportunity = pruned log volume, some will go out of the region (i.e. to Taupo or other mills in the CNI), possibly to Gisborne.

In the long term pruned log processing expansion has some risk. Whilst there is around 250,000 m3 of potential volume available for much of the time out to 2050, there is a period around 2037 - 2038 where pruned log supply would be negligible.

Figure 13 – RA ROCEs for processing options

Processing options with high risk adjusted ROCE’s that fit with wood resource (Table 3) are; - Manufacture of Big Squares from K grade logs. - OEL™ using K grade logs. - Appearance and / or structural sawmill, o with a CLT plant (associated with the sawmill) o + Remanufacture of appearance grade products (associated with the sawmill) - OSB has an attractive ROCE and there is sufficient volume of pulp logs to make this viable at a modest scale (100,000 m3 per annum). - Plywood is marginal for supply with a ROCE of 23.9%, and would have to use a mix of log grades to make an industrial ply.

It should be noted that the OSB potential mill size at 100km3 per annum would be small by world standards (about ¼ of the size of most new mills). The New Zealand market for OSB is currently limited as it is not a product that has been made in NZ, although there are some imports.

The capital weighted RA ROCE of the cluster is shown in Table 8. The different types of processing have different capital intensities and this needs to be considered when comparing the options.

Table 8 – capital costs and RA ROCEs of a cluster suitable for the Hawkes Bay resource. Scale Capital Cost RA Capital weighted Process m3 of logA or (millions) ROCE% RA ROCE % lumberB in p.a. Appearance / Structural 200,000A 30 26 - sawmill CLT 70,000B 65 34 - OEL™ 300,000A 57 37 - OSB small 100,000A 26 26 - Big Squares 200,000A 8 32 - Remanufacture 30,000B 18 24 - Total log processing 700,000 121 - 32 Total lumber processing 100,000 83 - 32 Total, all processing 800,000 204 - 32

Wood processing expansion aligned with heat demand sites

Table 9 - Wood residues available from high RA ROCE opportunities – Hawkes Bay resource Volume Product Chip Residues Residues Residues Process Feedstock in m3 out m3 m3 le Produced used for fuel GJ GJ GJ Appearance / S & A Structural grade 200,000 112,000 57,000 248,000 210,000 48,000 sawmill logs CLT Lumber 70,000 60,000 - 69,000 - 69,000 OEL™ K grade 300,000 171,000 - 296,000 133,000 163,000 OSB small Pulp logs 100,000 58,000 - 152,000 383,000 -231,000 Big Squares K grade 200,000 128,000 30,000 262,000 0 260,000 Remanufacture Lumber 30,000 23,000 - 48,000 0 48,000 Total 900,000 552,000 87,000 1,075,000 726,000 349,000

The wood fuel residue supply from this wood processing cluster is in the order of 340,000 to 350,000 GJ per annum.

The coal demand at Awatoto wool scouring plant is 240,000 GJ. Clearly there is an opportunity to align expanded wood processing in Hawkes Bay with existing coal fired primary processing. Further, there is a large demand at the fertiliser works also at Awatoto, and co-firing wood with coal to meet some of this demand is also an option.

Further, there is the in-forest wood reside resource to consider. This material could be as much as 100,000 green tonnes per annum. This would have an energy value of 0.69M GJ and would cost in the order of ~$9 per GJ delivered.

Wairoa To some extent Wairoa can be looked at separately to the rest of Hawkes Bay due to the transport distances. However, as per the rest of Hawkes bay there is likely to be a significant opportunity around large knot (K grade) sawlogs.

There is a small quantity (~1,000 green tonnes per annum) of wood processing residues available from the two small sawmills in Wairoa, above their own demand (both have wood fired boilers for timber drying).

There is a site specific heat demand in Wairoa, at the meat works, which burns coal. The annual demand for this was estimated (Table 3) as 304,000 GJ or 44,000 tonnes of green wood equivalent.

In-forest residue volumes in the Wairoa region are estimated to be in the order of 26,000 to 50,000 green tonnes per annum. Using the low point in supply (26,000 green tonnes, around 2036) as the long run supply volume, there is insufficient resource from this source to meet all the meat plants heat demand. However, there is also the opportunity to expand wood processing located in Wairoa.

A promising option for expanded wood processing at Wairoa would be an OEL™ plant with a log intake of 100,000 m3 per annum, and an excess residue supply of 163,000 GJ (23 to 24,000 green tonnes). Together with the in-forest residues this would be sufficient residues to meet the heat demand form the meat works from wood.

Orchard residues – Hawkes Bay Orchard residues are a further potential resource for creating wood fuels in Hawkes Bay and it has been estimated (Hall 2018) that there are around 230 to 240,000 GJ per annum of this material available. This material is principally removals of over-mature orchard and vineyards.

Municipal wood waste. A further small resource would be municipal wood waste. This has been estimated at 45,000 GJ per annum (Hall 2018).

Economic impacts of expanded wood processing Along with the capital investment required to build the cluster outlined in Table 8, there will economic impacts on the region, in terms of employment and GDP. These were estimated using the WoodScape model and shown in Table 10.

Table 10 – employment and GDP from the expanded wood processing cluster Employment GDP millions of Direct Direct + Indirect $s per annum OSB 127 340 69 CLT 80 214 136 OEL™ 81 216 159 Remanufacture 105 281 46 Big Squares 90 230 50 Sawmill 83 222 58 Total 566 (439*) 1503 (1163*) 518 (449*) *excluding OSB

Hawkes Bay opportunities to co-locate wood processing with heat demand Figure 14 - Location of large coal burning heat demands near Napier and Wairoa.

There are a number of gas burning industrial heat biolers in Hakes Bay (Figure 15). These would not necessarily be simple to convert to using wood, but the map does show clusters of heat demand.

Figure 15 – location of gas and oil burning heat plant in Hawkes bay

Discussion

The opportunity for expanded wood processing in Hawkes Bay is going to be diverse if it is going to make the most of all of the potential log supply and secondary wood processing opportunities as there are a range of log grades potentially available, which dictate a range of processing options.

There is potential for significant expansion of primary solid wood processing, making big squares, sawn lumber and OEL™. There are also opportunities for secondary processing (CLT and Remanufacturing) aligned with the sawmilling and using sawn lumber as their feedstock.

The potential for OSB looks promising based on the RA ROCE, but the log supply is modest in the long term and maybe insufficient to make building a new mill attractive.

The expanded wood processing cluster suggested generates residues over the amount that they would consume themselves; especially if OSB is excluded, as this process is energy intensive. This residue material along with in-forest and horticultural residues could supply all the heat demand derived from coal at Awatoto.

Conclusions

There is a cluster of industrial heat demand in and around Napier. Some of this demand is met by coal imported from outside the Hawkes Bay region.

There is sufficient in-forest harvest residues to meet around 2/3rds of this coal demand. Further there is potential wood fuel available from horticultural and municipal waste sources, this is estimated to be sufficient to meet ¼ of the coal demand.

Hawkes Bay has a mix of current wood processing including, TMP, sawmilling, engineered wood products, posts, poles and remanufacturing. These processors are largely self-sufficient in wood fuels.

The log exports from Hawkes Bay via the Port of Napier represent a varied opportunity to expand wood processing, including; - Sawmilling, 200,000 m3 per annum in, S and A grade o CLT, 70,000 m3 per annum lumber from sawmilling o Remanufacture, 30,000 m3 per annum, lumber from sawmilling - OEL™, 200,000 m3 per annum log in, K grade - Big Squares, 300,00 m3 per annum log in, K grade - OSB, 100,000 m3 per annum log in, pulp grade.

These processing plants would generate spare residues in the order of 50,000 green tonnes (345,000 GJ) per annum. This would allow all of the coal demand at Awatoto to be met from wood if this resource was combined with the other wood residue streams.

The cluster of wood processing outlined here would cost in the order of $204 million to build.

They would generate up to 566 direct jobs, 1503 jobs of indirect and induced employment is included and increase GDP by up to $518 million per annum.

There is a case to be made for expanded wood processing in Hawkes Bay that can be supported in the long term by the existing forest resource that would increase employment and GDP whilst reducing GHG emissions by around 15,000 tonnes per annum.

Acknowledgements

Scion wishes to acknowledge the contribution of the following to this project;

Energy Efficiency Conservation Authority for granting access to the heat plant database heat plant database

Ministry of Primary Industries data; National Exotic Forest description and the Wood availability forecasts, as well as other data on wood product production and exports.

Samantha Alcaraz, GNS and Malachy Carey at Eagle / ESRI; for assistance with mapping.

Glossary

Big Squares = large dimension lumber, sawn from logs, with the intention of further sawing at a later stage

CLT = cross laminate timber, an engineered wood product from making structural elements in buildings OSB = oriented strand board, a reconstituted panel product made from flaked pulp logs OEL = Optimised engineered lumber, structural lumber product made from defect free lengths of wood sawn from K grade logs and finger jointed / laminated TMP = Thermo-mechanical pulp GJ = GigaJoule GDP = gross domestic product GHG = green house gas

References

EECA Heat plant database (2014). Database updated by CRL Energy Ltd on Behalf of the Energy Efficiency and Conservation Authority https://www.bioenergy.org.nz/documents/resource/heat-plant-database-report-august-2011.pdf

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

Hall P (2017). Residual biomass fuel projections for New Zealand – indicative availability by region and source. Scion contract report for the Bioenergy Association (of New Zealanfd0. Sidney No. 59041.

Hall, P Alcaraz S and Hock B. K. (2017). Assessment of wood processing options for Gisborne – Wood energy industrial symbiosis project; Aim 3 resource convergence opportunities. Scion Report to MBIE. Sidney No. 58704.

Hall P., Alcaraz S, Carey B. and Hock B. K. (2017). Assessment of wood processing options at Ngawha – incorporating geothermal heat; Wood Energy Industrial Symbiosis Project. Scion Report to MBIE. Sidney No. 58703.

Hall P. (2017). Scion Wood processing database – 2017 update.

Hall P (2017). WoodScape model – 2017 update.

Hall P., Hock B., Alcaraz S., Climo M. and Heaphy M. (2016). Wood Energy Industrial Symbiosis 2016 Progress Report – Aim 3; Energy resource and heat demand mapping. Scion Report to MBIE. Sidney No. 57986.

Hall P. (2013). Analysis of wood processing opportunities in Kawerau using the WoodScape model. Scion contract report for Kawerau District Council. Sidney No. 51627. http://embracechange.co.nz/media/downloadable-pdfs

Hall P (1998). Logging residue at landings. New Zealand Forestry. May 1998

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

Ministry of Business and Innovation (2017). Energy in New Zealand 17.

Ministry of Primary Industries (2016). A national exotic forest description as at 1 April 2015. https://www.mpi.govt.nz/news-and-resources/open-data-and-forecasting/forestry/new-zealands- forests/

Ministry of Primary Industries (2014). Wood availability forecasts – Hawkes Bay 2014. Prepared for the ministry of Primary Industries by Indufor Asia Pacific Limited. https://www.mpi.govt.nz/news- and-resources/open-data-and-forecasting/forestry/new-zealands-forests/

Appendix A - Wood processing plants – Hawkes Bay

Appendix B - Residue production and energy demand by processing type

Process Heat Sawdust % Bark % Offcuts Residue energy Energy of infeed of infeed Shavings generated; demand; etc., GJ/m3 of GJ/m3 of % of infeed product product Sawmill 2.10 12 4 11 3.4 MDF 3.50 3 4 9 2.8 LVL 10.00 3 4 41 6.0 Plywood 10.00 3 4 41 6.0 OEL 3.10 16 4 12 4.2 Particle board 4.05 3 4 9 2.7 Kraft pulp 10.00 0 4 1 1.9 OSB 6.6 3 4 3 1.1 Big Squares 0 4 4 1 1.0 CLT 0.54 1 0 1 0.10

Appendix C – NZ energy costs; 2017

Appendix D – Industrial heat Gas Demand; Hawkes Bay

Tonnes of green Fuel demand, wood equivlaent Sector Size MW GJ p.a. p.a. Food processing 1.4 18,215 2,640 Food processing 1.4 9,250 1,341 Food processing 1.1 16,772 2,431 Food processing 5.4 124,592 18,057 Meat / Skins Processing 0.95 8,691 1,260 Meat / Skins Processing 4.8 106,782 15,476 Meat / Skins Processing 4.8 106,782 15,476 Meat / Skins Processing 0.6 20,919 3,032 Meat / Skins Processing 1.4 31,145 4,514 Meat / Skins Processing 1.4 48,811 7,074 Meat / Skins Processing 0.428 14,922 2,163 Meat / Skins Processing 0.313 10,913 1,582 Meat / Skins Processing 0.6 15,552 2,254 Meat / Skins Processing 0.25 5,562 806 Meat / Skins Processing 5.6 88,704 12,856 Meat / Skins Processing 1.2 19,008 2,755 Meat / Skins Processing 1.2 19,008 2,755 Meat / Skins Processing 1.2 19,008 2,755 Wood Processing 3 108,864 15,777 Wood Processing 1 36,288 5,259 Other Manufacturing 4.5 125,418 18,176 Other Manufacturing 2.8 78,038 11,310 Other Manufacturing 2.9 91,970 13,329 Other Manufacturing 1.1 32,425 4,699 Other Manufacturing 1.1 32,425 4,699 Other Manufacturing 1.137 31,689 4,593 Other Manufacturing 1.137 31,689 4,593 Other Manufacturing 1.44 40,134 5,816 Other Manufacturing 0.75 20,903 3,029 Other Manufacturing 1.8 12,808 1,856 Other Manufacturing 1.2 33,445 4,847

Appendix E - Cumulative wood supply to Awatoto by transport distance, over time

km 2017 2022 2027 2032 2037 5 66 - - - - 10 382 - - - - 15 14,089 14,689 4,046 1,831 - 20 23,854 21,261 5,939 5,220 2,991 25 59,894 59,735 25,668 22,688 12,725 30 92,301 98,011 90,506 87,812 46,197 35 173,731 195,487 148,313 134,701 68,833 40 274,007 440,251 320,258 161,323 89,980 45 325,257 524,105 392,372 209,292 124,398 50 400,129 691,813 517,008 244,004 154,717 55 472,720 806,393 609,598 282,715 171,134 60 613,598 1,064,712 786,792 341,646 209,560 65 703,847 1,246,100 985,780 469,082 295,665 70 790,158 1,523,007 1,328,028 721,398 532,660 75 850,422 1,745,575 1,689,079 1,027,404 794,617 80 905,589 1,836,139 1,795,924 1,142,617 916,957 85 967,798 1,956,655 1,971,481 1,302,623 1,012,654 90 1,047,614 2,051,301 2,018,219 1,343,772 1,040,101 95 1,093,387 2,100,445 2,046,739 1,405,841 1,138,895 100 1,124,504 2,131,047 2,081,152 1,486,073 1,258,848 105 1,148,290 2,206,073 2,251,139 1,633,749 1,345,177 110 1,227,885 2,342,151 2,441,954 1,785,311 1,404,456 115 1,366,082 2,550,415 2,721,685 2,026,118 1,535,983 120 1,546,305 2,955,437 3,210,107 2,314,392 1,712,711 125 1,766,707 3,277,160 3,538,126 2,537,668 1,915,705 130 2,017,707 3,621,476 3,863,303 2,767,565 2,119,265 135 2,305,648 3,973,801 4,199,254 3,017,416 2,341,913 140 2,515,660 4,220,959 4,448,037 3,243,708 2,569,169 145 2,754,483 4,515,704 4,750,844 3,530,117 2,801,651 150 2,919,032 4,721,125 4,999,200 3,773,079 2,998,439 155 3,078,317 4,891,418 5,139,894 3,952,985 3,212,693 160 3,228,857 5,100,632 5,354,128 4,095,500 3,341,589 165 3,381,765 5,269,450 5,513,522 4,235,484 3,479,600 170 3,630,952 5,729,208 5,900,801 4,426,180 3,645,040 175 3,997,060 6,511,434 6,609,582 4,697,687 3,792,315 180 4,358,875 7,323,018 7,271,975 4,907,702 3,976,500 185 4,618,408 7,698,870 7,571,000 5,098,138 4,155,155 190 4,848,911 8,005,359 7,863,796 5,361,978 4,378,121 195 5,093,748 8,324,667 8,186,090 5,688,831 4,637,384 200 5,248,801 8,653,403 8,639,280 6,027,814 4,864,439