WOODY BIOMASS FOR THE ENERGY
SECTOR IN BRAZIL
Manoel Rodrigues Neves
April, 2012
manoel.neves@poyry.com
Agenda
1
Woody Biomass for the Energy Sector
2
Investment Opportunities
PÖYRY
April, 2012
2
Energy Matrix – Comparison
Global Energy Matrix
Brazilian Energy Matrix
2%
16%
Nuclear
2,8%
3%
19%
Fossil fuels
78%
78%
Fossil fuels
Nuclear
Renewable
19%
82%
Renewable
Source: RENEWABLES GLOBAL STATUS REPORT
PÖYRY
April, 2012
3
Brazilian Energy Matrix
Renewable Energy Share of Brazil Final Energy Consumption, 2011
Nuclear
2%
Fossil Fuels
16%
Wind
1%
Biomass 5%
Renewable
Energy
82%
Hydropower 76%
 Even though most of Brazilian energy comes from renewable sources, there is a
large growth potential for the woody biomass market.
PÖYRY
April, 2012
4
Brazilian Energy Investments Projection
Current and Foreseen Installed Capacity by Source
MW
Thousand
MW
Thousand
Approved Projects
35
35
35
30
30
30
25
25
25
20
20
15
20
10
15
15
5
10
10
0
55
00
Planned Projects
35
30
25
20
15
10
2010
2011
2012
2013
2014
5
2015
2016
2017
2018
2019
0
Hidropower
Oil 2015Natural
Coal
Energy
2011
2012 2013 2014
2016 Gas
2017 2018
2019 Nuclear2011 Renewable
2012 2013 2014
2015 2016 2017 2018 2019
2010
2011
Hidropower
2012
Oil
2013
Natural Gas
2014
Coal
2015
2016
Nuclear
2017
2018
2019
Renewable Energy
Source: EPE – Energy Research Business
PÖYRY
April, 2012
5
Biomass Matrix
We are facing a paradigm shift
 Biomass has been the focus of most
 A 40% growth in biomass demand is
industries in Brazil and the world
foreseen until 2019
40%
Black liquor
15,5%
9
7,62
8
Biogas
0,9%
Sugar cane
bagass
78,9%
Rice husk
0,2%
7
Thousand MW
Wood
4,5%
8,52
6,08
6
5
4
3
2
1
0
2011
2015
2019
Source: EPE – Energy Research Business
PÖYRY
April, 2012
6
Forest Planted Area
Série1
Planted Area (thousand
ha) - 2012
Série2
Eucalyptus
74.7%
Série1
Pine
25.2%
Série2
267
1.3
Others
0.1%
Série1
800
Série2
22
Planted Forests : ≈ 6,5 Mha
Firewood
26%
594
23
Others
2% Série1
Série2
Pulp and Paper
36%
Série1
Série2
Eucalyptus
2,63
1
Pinus
ABRAF 2012
235
Charcoal
10%
Wood Industry
19%
573
1,362
Reconstituted
Panels
7%
Industrial Wood Consumption ≈ 170 M m³
PÖYRY
April, 2012
7
Brazilian Forest Based Industries – Eucalyptus Demand Forecast
2012 – 2020
Eucalyptus demand by sector (million m³)
58
90
54
53
36
22
Fiber board
6
9
7.07.0
5.05.0
4.04.0
3.03.0
2.02.0
Firewood
Volume demand Million
(millionha
m³)
Solid
Products
Pulp and
Paper
Area demand
(ha) ha
Million
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
223.7
2020
2012
1.01.0
0.00.0
Charcoal
7.07.0
6.06.0
5.05.0
4.04.0
Pellets
ha
Million
7 ha
5Million
6.06.0
Million ha
Million ha
3.03.0
2.02.0
1.01.0
0.00.0
0
7
6.1
179.6
4.9
44.1
1.2
Current Demand
Future Demand
Current Potential Supply
Deficit
PÖYRY
April, 2012
8
Woody Biomass Products
Charcoal
Wood Chips
Briquettes
Residues
Logs
Pellets
PÖYRY
April, 2012
9
Energy Wood Primary Markets
Charcoal Industry
− Main Markets
Power Generation
− Green Energy Market
Wood Pellets
− International Trend
PÖYRY
April, 2012
10
Charcoal Industry – Brazilian Overview
Brazil is the biggest charcoal producer and consumer of the world.
Pig-Iron and Steel
66%
 88% of the total production is
targeted towards the iron and
steel industry
Cement
1%
 This industry is one of the main
Commercial
2%
drivers of the economy. It
represents 3% of the total steel
produced in the world, and
51% in Latin America
Residential
14%
Other
4%
Iron Alloys
12%
PÖYRY
April, 2012
11
Charcoal Industry – Brazilian Overview
 Almost the total production aims the internal market
 From 2000 to 2008 the charcoal consumption
growth had been 3,5% per year. From 25 to 33
million mdc¹
 From 2009 to 2010 the charcoal consumption
decreased 35% due to the global economy crisis
 In 2011 Brazil produced around 27 million mdc¹ of
charcoal (69% from planted forests)
PÖYRY
April, 2012
1 mdc = 1 cubic meter of charcoal
12
Charcoal Industry – Pig Iron Industrial Clusters
PÖYRY
April, 2012
13
Charcoal Industry – Minas Gerais Scenario
 Minas Gerais State concentrates the
 The State consumption is around 60%
main players of the charcoal industry
of the total charcoal produced in Brazil
 The State has around one million ha of
energy forests (total 1.4 million ha of
Eucalyptus)
 The energy oriented planted forest
additional area should reach about 300
thousand hectares in 2020, considering
the historical industrial demand growth
of 3.5%
PÖYRY
April, 2012
14
Charcoal Industry – Carajás Scenario
 From 1998 to 2007 the demand increased
 It is foreseen that the native wood residues
from 4 million to 10 million mdc per year
will represent a maximum 20% of the total
demand in 2020
 If the production of charcoal gets back to
2007 levels (10 million mdc) there will be
an area gap of around 150 thousand ha.
Future Planted Forest (1,000 ha)
185
 After the crisis the charcoal demand
336
decreased to around 6 million mdc per year
 In 2009, about 70% of the total charcoal
Demand
Balance
/ Deficit
151
Supply
came from native wood residues
PÖYRY
April, 2012
15
Charcoal Industry – Mato Grosso do Sul Scenario
 Mato Grosso do Sul is the most recent pig
iron cluster in Brazil
 The installed capacity is around 750
thousand tons of pig iron per year, which
demands 13,5 thousand ha of plantations
per year
 Assuming a sustainable forest
management, the current planted area
deficit is around 50 thousand ha
Energy forest planted area balance
(1,000ha)
40
20
30
 It is expected that the native wood share of
the charcoal production in 2020 would not
exceed 10%
Thousand ha
-
Demand
-20
Supply
totals 30 thousand ha
2009
Balance
/ Deficit
Demand
Bala
-40
-50
-60
-80
 The energy dedicated forest planted area
17
-6
-80
-81
-100
PÖYRY
April, 2012
16
Charcoal Industry – Thermal Power Plants in Brazil
 The Brazilian charcoal based thermoelectric industry is still very incipient.
There are only 3 plants in Brazil
 Most of the investments aim the pig iron and iron alloys market
 One announced project is located in the State of Minas Gerais
Source: ANEEL
PÖYRY
April, 2012
17
Energy Wood Primary Markets
Charcoal Industry
− Main Markets
Power generation
− Green Energy Market
Wood Pellets
− International Trend
PÖYRY
April, 2012
18
Thermal Energy – Grains Processing
 The National grain harvest, 2011/2012, should reach
158,4 million tons.
 The energy for heat and steam is largely
demanded in the grain production process
 Woodchips is and will remain as the main fuel
 Oil, diesel, and electricity are less viable fuels
(environmentally and economically)
PÖYRY
April, 2012
19
Thermal Energy – MT Current and Projected Scenario
 Mato Grosso is the largest grain
 It is projected a demand increase from
“green consumers” of almost 90% of the
total market share in 2020
processor in Brazil
 The grain harvest, 2011/2012, will likely
reach 34,9 million tons, almost 23% of the
total produced in the country
Firewood Projected Balance
 7 million m³sob of firewood in 2015
 9 million m³sob of firewood in 2020
Forests
ForestsSupply
Supply
Forests
ForestsSupply
Supply
Green
GreenConsumers
Consumers
Green
GreenConsumers
Consumers
Demand
Demand
Demand
Demand
Energy
Demand
Energy
Demand
Energy
EnergyDemand
Demand
1010
1010
99
99
88
88
77
77
66
66
55
55
44
44
33
33
22
22
11
11
00
00
PÖYRY
April, 2012
2008
2008
2009
2009
2010
2010
2015
2015
2020
2020
20
Thermal Energy – Wood Residues
 The thermal energy trend, based on wood residues, is to increase, since the projected
planted area is believed to follow the economy growth
PÖYRY
April, 2012
21
Energy Wood Primary Markets
Charcoal Industry
− Main Markets
Power Generation
− Green Energy Market
Wood Pellets
− International Trend
PÖYRY
April, 2012
22
Wood Pellet Market
 Although the largest pellet production
capacities are forecast to remain in Europe, the
25,0
25,0
strong competition for raw material in this continent will drive an increasingly demand by
2010
20,0
25,0
imports from regions with a biomass
surplus.
2015
15,0
2010
Global Pellet Production and Consumption
– 2010, 2015
20,0and 2020
2020
25,0
20,0
20,0
15,0
11,0
0,2
5,0
15,0
8,5
10,0
4,9
3,4
4,3 5,6 10,0
2010
2015
10,023,8
Western
5,0
Europe 16,4
2020
13,0
2010 10,7
7,7
2015
10,8
0,0
North
2020
5,0
America
0,0
North America
0,0
Western Europe
25,0
2010
20,0
2015
15,0
3,0
3,0
0,6
25,0
0,6
0,0
2015
7.0
2020
Production Consumption
2010
2010
5,5
3,8 2015
2015
2020
2020
d Korea 2010
2015
0.1 0.1
2
2
2
2
2
2015
2020
2010
20,0
China
South
America
2015
15,0
4.0
0.1
2
2020
2010
3,3
2,2 2,8
10,0
2010
2015 0,4 0,6 0,8
15,0
Russia
2020
2015 &
Japan
5,0
2020
1,4 1,6 10,0
Eastern
Europe
0,6
25,0
Korea
2020
0,0 0,1 0,1
Eastern
2010
5,5
0,0
3,8
Europe
2010
5,0
20,0
Russia
2015
1,1
0,1 0,42015
0,2
202015,0
China0,0
2020
Japan
and Korea
10,0
10,0
10,0
2010
5,0
2010
2015
0.2
2020
10,0
2010
Oceania
2015
5,0
0,0
0,2 0,4 0,8 0,0 0,1 0,1
2020
Oceania
PÖYRY
April, 2012
23
Wood Pellet Market
Global Trade Flows in 2010
400
1,100
500
3,300
500
50
Trade flows in 1,000 tonnes, >50,000
Current
Emerging
* Intra Western European net trade
PÖYRY
April, 2012
24
Potential Pellet Market - EU
 The mandatory EU target of 20% renewable energy by 2020 requires considerable
investments on biomass use.
 Wood is a significant source of
fuel
EU Countries Target
Sweden
Finland
Austria
France
Spain
Germany
Czech Rep.
Poland
Italy
Ntherland
Bellgium
UK
 Large Economies have a high
42% 48%
28%
27%
37%
burden, e.g. UK
34%
22%
11%
 66% of the European energy has
20%
9%
biomass as main source
17%
9%
8% 13%
5%
4%
3%
2%
0%
 Limited sources of renewable
16%
8%
energy
15%
14%
 It will be challenging to meet the
12%
16%
10%
20%
30%
40%
50%
60%
targets, despite the efforts and
political will
PÖYRY
April, 2012
25
Brazilian Main Players
PÖYRY
April, 2012
26
Main Players
Major Pellet Producers – Present and Projected
The pellet supply structure can change significantly in the next five years.
.
Pellet Production Capacity by 2015 Investment Intention Projects Announced
Suzano Energia Renovável
Intrinergy
German Pellets
JCE Group
Magnolia Biopower
VAPO
Vyborgskaya Cellulose
Graanul Invest
Plantation Energy Australia
Lantmännen Agroenergi
Pacific Bioenergy
2009
0
500
1.000
Planned
1.500
2.000
1,000 metric tonnes
PÖYRY
April, 2012
27
Short Rotation Wood Crops
 Eucalyptus Short Rotation forests
 In Brazil, the species that have been
present high yield
 The forest plantation is established in
highly dense condition
used are special clones of Eucalyptus
 Eucalyptus were chosen envisioning the
potential of multiple cycles (coppice
species)
PÖYRY
April, 2012
28
Short Rotation Wood Crops – Fundamentals
Conventional Forestry
 Regular Clone
 Regular spacing between




trees (3x3 m)
Forest Yield~ 45 (m³/ha/year)
Harvest in 7 years
Low Lignin content
 (regular calorific value)
Can be used to make pulp or
generate energy.
Energy Oriented Short Rotation Forestry
 Special Clone
 Short spacing between trees




(high forest density; 3 x 0,5 m up
to 1 m)
Forest Yield ~ 70 (m³/ha/year)
Harvest in 2 – 3 years
High Lignin content
 (high calorific value)
Cannot be used to produce pulp.
PÖYRY
April, 2012
29
Short Rotation Wood Crops - SWOT
Genetically modified Eucalyptus strains offer opportunities for new players in the pellet
industry to increase efficiency of the supply chain and to overcome the typical problem
of increasing biomass transport cost at larger production capacities.
PÖYRY
April, 2012
30
Crash Course Agenda
1
2
Woody Biomass for the Energy
Sector
Investment Opportunities
PÖYRY
April, 2012
31
Brazil’s Potential for Investments in Bioenergy
 High productivity (yield)
 The energy consumption shall increase 9,4% in 2011
along with the economy growth (ANEEL – 2010)
 The energy consumption shall increase an average 4,8%
per year until 2020
 The current percentage of biomass in the Brazilian
energy matrix is 6,5%. It is forecasted to be around 14%
in 2020
 Biomass is considered a good source to supply the
energy demand:
 relatively low investment costs
 socially right
 environmental friendly
PÖYRY
April, 2012
32
Brazil – Eucalyptus Market Balance
Scenario A - Announced Plants
Scenario B - Expected Plants
7,0
7,0
2,3
6,0
3,8
4,0
3,0
4,9
2,0
3,0
1,0
1,0
0,0
0,0
Demand
Deficit
2,8
4,0
2,0
3,3
Supply
1,2
5,0
Million ha
5,0
Million ha
6,0
4,9
3,3
Supply
Demand
Deficit
35
30
Million t
25
20
15
10
5
0
Existing Plants
Expected Plants
Announced Plants
PÖYRY
April, 2012
33
33
Brazil – Eucalyptus Market Balance
Emerging Market
6.0
Mature Market
6.0
Million ha
5.0
4.0
3.0
2.0
1.0
0.0
0.6
0.7
0.4
0.5
Supply
Demand
Deficit
0.5
4.0
1.6
3.0
2.0
3.7
2.5
1.0
0.0
Supply
6.0
Demand
Deficit
Developing Market
5.0
Million ha
Million ha
5.0
Supply
Current Demand
Planned Demand
Deficit
4.0
3.0
2.0
1.0
0.0
0.2
0.6
0.4
0.4
Supply
Demand
Deficit
PÖYRY
April, 2012
34
34
Opportunities for Investments in Brazil
 Market Development Level → Low
 Risk → High
 Opportunities → High
 Market Development Level → Medium to High
 Risk → Medium
 Opportunities → High
 Market Development Level → High
 Risk → Low
 Opportunities → Low (spot)
PÖYRY
April, 2012
35
Opportunities for Investments – Minas Gerais
 The main woody biomass market in Brazil
 The planted area growth, from 2009 to
2011, was around 8%
 It holds itself 60% of the national
consumption of charcoal
 It presents a planted area of 1.4 million ha
(1.0 million ha energy oriented)
 MG has a potential to have 6 million ha
planted in the future, aiming energy forests
 The Pig Iron sector, despite the crisis,
has registered, in 2011, an increase in
demand and consequently a price rise
 MG presents a strategic site location
attending several different markets
PÖYRY
April, 2012
36
Opportunities for Investments – Minas Gerais
 MG has high established goals to decrease
the consumption from native forests
 Between 2008 and to 2011 – 45% of
the total consumption might have been
sourced from native forests
 Between 2013 and to 2016 – 10% of
the total consumption
 From 2017 – 5% of the total
consumption
 Future projects are required to attend
the 2017 goal
PÖYRY
April, 2012
37
Opportunities for Investments – Mato Grosso do Sul
 Early Stage Market for the energy sector
 Solid drivers for Timberland investment
 Fibria, Eldorado, Ramires, Vetorial, and
Brookfield are some of the players that
have envisioned this market
Planted Area Evolution (thousand ha)
476
378
265
291
208
119
2006
2007
2008
2009
2010
2011
PÖYRY
April, 2012
38
Opportunities for Investments – Maranhão, Tocantins, Piauí
 MA - Suzano has announced an expansion,
 MA - has potential areas to plant totaling
on its pulp and paper plants. The project is
expected to be ready in 2013 in Maranhão
around 10 million ha
 PI - has potential areas to plant totaling
about 8 million ha
 TO - has potential areas to plant summing
up around 11 million ha
Eucalyptus area evolution (Thousand ha)
37
26
PI
93
137
151
166
TO
107
111
32
44
48
66
2008
2009
2010
2011
61
2
14
22
2005
2006
2007
MA
PÖYRY
April, 2012
39
Opportunities for Investments – South Region
 The South Region of Brazil holds a
consolidated market
 There is not a big range of investment
chances besides some spot opportunities
 Creativity is the key word in this developed
market
PÖYRY
April, 2012
40
THANK YOU!
CONTACT:
MANOEL NEVES
MANOEL.NEVES@POYRY.COM
(55) (11) 3472 6957
PÖYRY
April, 2012
41