The effects of rising energy costs and transportation mode mix on forest fuel procurement costs

Abstract

Abstract Since fossil fuels have been broadly recognized as a non-renewable energy source that threatens the climate, sustainable and CO2 neutral energy sources – such as forest fuels – are being promoted in Europe, instead. With the expeditiously growing forest fuel demand, the strategic problem of how to design a cost-efficient distribution network has evolved. This paper presents an MILP model, comprising decisions on modes of transportation and spatial arrangement of terminals, in order to design a forest fuel supply network for Austria. The MILP model is used to evaluate the impacts of rising energy costs on procurement sources, transport mix and procurement costs on a national scale, based on the example of Austria. A 20% increase of energy costs results in a procurement cost increase of 7%, and another 20% increase of energy costs would have similar results. While domestic waterways become more important as a result of the first energy cost increase, rail only does so after the second. One way to decrease procurement costs would be to reduce the share of empty trips with truck and trailer. Reducing this share by 10% decreases the average procurement costs by up to 20%. Routing influences the modal split considerably, and the truck transport share increases from 86% to 97%, accordingly. Increasing forest fuel imports by large CHPs lowers domestic competition and also enables smaller plants to cut their procurement costs. Rising forest fuel imports via ship will not significantly decrease domestic market shares, but they will reduce procurement costs considerably.