Energy efficiency investments in Kraft pulp mills given uncertain climate policy

Abstract

Energy efficiency measures in pulp mills can potentially reduce the consumption of biofuel, which can instead be exported and used elsewhere. In this paper a methodology is proposed for analysing the robustness of energy efficiency investments in Kraft pulp mills or other industrial process plants equipped with biofuelled combined heat and power units, given uncertain future climate policy. The outlook for biofuel and electricity prices is a key factor for deciding if energy efficiency measures are cost competitive. CO2 emission charges resulting from climate policy are internalized and thus included in electricity and biofuel prices. The proposed methodology includes a price-setting model for biofuel that assumes a constant price ratio between biofuel and electricity in the Nordic countries. Thirteen energy efficiency retrofit measures are analysed for an existing Swedish Kraft pulp mill. Special attention is paid to heatintegrated evaporation using excess process heat. Four possible energy market development paths are considered that reflect different climate policies. Pulp mill energy efficiency investments considered are shown to be robust with respect to uncertain climate policy. Copyright # 2006 John Wiley & Sons, Ltd.