The Feedstock Challenge Sustainable Affordable Reliable Available Woody Biomass is all of these now a nd it can cost ½ of ag biomass Unique Considerations in the Evaluation of ForestOriginated RFS2 Feedstock ID: 708168
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Slide1Slide2
Sustainable, Affordable, Reliable, Available
The Feedstock ChallengeSlide3
Sustainable, Affordable, Reliable, Available
Woody Biomass is all of these – now
a
nd it can cost ½ of
ag
biomassSlide4
Unique Considerations in the Evaluation of Forest-Originated RFS2 Feedstock
Stan PartonManager – Bioenergy/Biochemicals PracticeForest2MarketJune 10, 2015Slide5
EPA Rules for RFS2 Qualified Materials
Apparent intent to prevent unintended consequences. Prohibits: Harvest from federal landsTree harvest of natural standsHarvest in ecologically sensitive areasConversion of land (natural forest or agricultural) to plantationsAllows feedstock from:Natural Stands – slash and pre-commercial thinnings onlyPlantation Stands – slash and thinnings
Plantation must have been established by 12/19/2007 and actively managed since that time
Establishment and management must be documented
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Forest Sourced RFS2 Qualified Feedstock
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Two ‘Practical’ Feedstock Types
Pulpwood - First commercial thinnings from plantationsResidue - Slash from natural or plantation stands
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Forest RFS2 Feedstock Market Realities
RFS2 qualified material is currently available and moving in the existing wood supply chain.Existing users of this material are indifferent about using RFS2 versus non-RFS2 materials.Users are not paying a premium for RFS2 material.RFS2 material is not currently distinguished in the supply chain from non-RFS2 material.Acquiring RFS2 certified material will likely require an economic
incentive above
the current
market
price.
To
cause existing users to vacate their demand
To provide certification required to secure RINs
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Critical RFS2 Supply Chain
Questions9
As woody biomass exists in the forest products supply chain - Slide10
Analytical Requirements to Answer the Questions
Determine current proportion of RFS2-qualified material in the market distinguished from non-RFS2Assess likelihood that existing market participants’ demand for RFS2 material may be modified in response to demand for RFS2 material from the biofuels producerEstimate the resulting cost of RFS2 materials necessary to motivate traditional users to vacate their demand Analyze the future availability of RFS2 and non-RFS2 feedstock materials based on demand from all users10Slide11
Theoretical Supply Basin Analysis – How will supply redistribute?
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Reallocation of Forest Materials – Elements of Analysis
Calculate the split of existing flow of materials in the market into RFS2 qualified and non-qualified materials
12
Analyze the historic and current roundwood supply and demand for feedstock in the proposed project’s supply basin
Determine
the amount of current supply that would be RFS2 eligible and how much is currently being
used by competitors
Calculate the split of existing and future
inventory
into RFS2 qualified and non-qualified materials
Forecast feedstock supply and demand of RFS2 and non-RFS2 material utilizing econometric models of demand, forest
growth
and yield
Determine if sufficient non-qualified feedstock exists to meet the demand of traditional users either within or outside
the
project supply basin
Compare forecasted demand of users who do not require RFS2 material to the available
non
-RFS2 material within
the
project supply basin
If necessary, compare the demand of users who do not require RFS2 material to additional available feedstock
(RFS2 and non-RFS2) outside
of the basinSlide13
Reallocation of Forest Materials – Elements of Analysis
Calculate the cost to existing users to vacate their demand of RFS2 qualified feedstock
13
Calculate the cost necessary to prompt traditional users to vacate RFS2 demand in favor of non-RFS2 material in the basin or for any material outside of the project supply basin
Determine competitors’ “capacity-to-pay” and therefore ability to vacate
RFS2
demand
Compare competitors’ “capacity-to-pay” to that of the energy project’s
Calculate the cost of RFS2 material to the energy project,
including:
Cost of existing users to secure non-RFS2 feedstock materials
plus
A premium to motivate the existing users to vacate their demand
for RFS2 materials
plus
A premium for supply certification to secure
RINsSlide14
Conclusions-Forest Originated Feedstocks
Great financial motives exist for using forest originated feedstock.However, in order to determine their availability, sustainability of supply and cost, analysis of the supply basin, existing users and market behavior must be employed. The diligence analysis is complex and relies ondetailed knowledge and date of the forest and forest products sector, its current and future demandUtilizing advanced forest growth and yield models Industry economic models
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Stan Parton
+1 770 925 8349stan.parton@forest2market.comwww.forest2market.com