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

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