Second-generation biofuels: impacts on bioheat production and forest products markets

Purpose – Second-generation biofuel is regarded as a sustainable alternatives to fossil energy in transportation where electricity is not feasible. The main purpose of this study is to analyze how large-scale second-generation biofuel based on wood may affect the competitiveness of more mature bioenergy technologies such as bioheat through competition in the biomass market. The impacts on forest industries are also included. Design/methodology/approach – An economic model for the energy and forest sectors based on partial equilibrium modeling is used to quantify the impacts of four different locations of biofuel production in Norway. Findings – The results show that there are regional variations in biomass price effects depending on local raw material availability and costs of transport and import. Technologies allowing for a larger variety of wood biomass qualities will face lower biomass prices than technologies using only one species as raw material, causing less reduction in the production of bioheat and forest industrial products. For Norway specifically, the paper concludes that even if there is a potential for both increased bioheat generation and large-scale biofuel production, the production of second-generation biofuels based on domestic wood resources will cause a 5-20 percent reduction in bioheat generation depending on the scale of biofuel production. Research limitations/implications – This study demonstrates how impacts on biomass markets from establishment of biofuel production vary quite substantially with location, production level and choice of feedstock. One main finding is the quite large biomass cost impact that is seen in the model runs when introducing large-scale biofuel production. Increased biomass costs reduce the profitability and this must be taken into account when establishing a biofuel installation. Originality/value – The originality of the paper is the analyses of biofuel impacts with a detailed model for biomass supply as the bioenergy and forest sectors.