Economic viability of utilizing biomass energy from young stands—The case of Finland

Abstract

Abstract The European Commission's White Paper has set clear targets with respect to supplying biomass for power generation. However, at present generating energy from biomass seems to be more expensive than producing energy via e.g. mineral oil fuels. In Finland, energy wood thinning in young stands has been subsidized by the government since the late 1990s. This paper focuses on analyzing the economics of the procurement of biomass energy from young stands in Finland. We apply a feasibility approach that determines an overall financial attractiveness of the procurement process. Technically, feasibility is calculated by applying a costing model, which allows a detailed accounting from the stand all the way to the power plant. Analyses are based on experimental data from 20 young stands, and alternative thinning methods as well as sensitivity analyses on tree characteristics, energy prices, government subsidy level and production costs are addressed. The results indicated that energy wood thinning would be financially viable if thinning removal is at least 42 m 3 ha −1 , average stem volume is larger than 15 l and energy price (at power plant) corresponds to at least €12 MWh −1 . However, without government subsidy, the bioenergy procurement from young stands turned out to be unprofitable, regardless of thinning removal and average stem volume. Production cost changes (range: −15% to +15%) and energy price changes (from €10 to €14 MWh −1 ) had a significant effect on financial performance, implying that careful planning on target selection is needed.