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Juuso Parviainen & Jenna Ojala

1. Description of the product or technology.

Wood chips are small pieces of wood and they are made by mechanically cutting or crushing large pieces of wood. Raw material for wood chips include small diameter wood, harvesting residues, stumps and low quality wood that is not suitable for other wood refining industries. In addition to heat and power plants, wood chips are used in apartment buildings and farms for energy production. The most notable qualities in wood chips considering energy production are humidity, chip size and volume density. (Metsähakkeen markkinahinnan kehitys ja hintaan vaikuttavat tekijät, 2013)

The moisture content of recently cut wood can be as high as 60 percent of total weight. Moisture content is the most important factor when considering energy content of wood chips. In small factories and apartment buildings moisture content should be less than 40 percent and in large factories less than 50 percent of total weight. Smaller factories also require less variation in chip size. (Metsähakkeen markkinahinnan kehitys ja hintaan vaikuttavat tekijät, 2013)

Wood chips are considered carbon neutral in bioenergy production. The carbon emissions are assumed to bind back into new wood biomass. The raw material for wood chips is wood so it is considered a renewable energy source by the European Union. This means that the policy goals for increasing the use of renewable energy sources apply to wood chips and it is a viable subject for incentives. (Metsätilastollinen vuosikirja 2013)

2. Description of the market.

The use of wood chips has always been dependent on the price of alternative energy sources in Finland. The availability of biomass for wood chips can be estimated from theoretical total biomass of forests and the amount of annual allowable cuttings. However this theoretical availability can only be achieved by making the forest owners interested in selling their forests biomass for energy. It has been estimated that the requirements for renewable energy production by the European Union can be fulfilled to the target value of 38 percent of total energy production in the year 2020. (Riittääkö metsähake?, 2013)

 

 

Picture 1. Prices of fuels used in power plants to generate heat. (Black = natural gas, purple = coal (CHP), green = peat, light blue = coal, orange = wood chips, dark blue = natural gas (CHP) (Tilastokeskus, Energian hinnat (Energy prices))

 

 

Picture 2. The use of raw material for wood chips in Finland (1000 m3) (From top to bottom: total, small diameter wood, logging residues, stumps, large roundwood, other) (Luonnonvarakeskus, metsätilastot)

 

3. Description of the policy measures.

The use of wood chips is encouraged in Finland by paying harvesting and chipping support for energy wood. The demand of wood chips can be increased with the legislation to support energy production with renewable sources of energy. The law guarantees subsidies in addition to the market price of energy produced with wood chips. The subsidies are granted by the energy bureau of Finland (Energiavirasto). The incentives were based on the carbon dioxide emissions in 2011 and 2012. As of the beginning of year 2013 the subsidies have declined because of the taxes on energy production with peat. (Metsätilastollinen vuosikirja 2013)

In Finland, we have feed-in tariff which purpose is to compensate the difference in costs of wood chips compared to other energy sources, especially peat. Feed-in tariff is paid for a plant, which uses chipped wood to produce electricity and has been registered to feed-in tariff system. Feed-in tariff is paid as variable subsidies, when the price depends of the amount of electricity produced. (Laki uusiutuvilla energialähteillä tuotetun sähkön tuotantotuesta (1396/2010))

Subsidies for energy wood harvesting can be granted in Finland by Metsäkeskus. KEMERA is a support system for sustainable forest use. A subsidy can be granted to harvest low-grade timber in areas where the profitability would otherwise be poor. (Luonnonvarakeskus, Metsäkeskus)


4. Evaluation of the effect of this measures.

The use of wood chips has increased drastically since the year 2000 (Picture 1). When considering the total energy consumption of Finland, it indicates that the increase in wood chip use has nothing to do with increased energy consumption or production (Picture 3). It seems like the legislation and the target levels of renewable energy use in Europe are working and that the targets are achievable.

Picture 3. Total energy consumption in Finland. (From top to bottom: electricity import, other, peat, wood based fuels, water and wind power, nuclear power, natural gas, coal, oil) (Tilastokeskus)

 

The price of wood chips are directly linked to the taxation on peat. It should also be noted that the investments in other wood refining industries affect the availability of raw material for wood chips. For example the new factory being built in Äänekoski by Metsä Group is estimated to consume 6 percent of annual allowable cuttings in Finland. This may lead to challenges in acquiring raw materials in certain locations of Finland and might even affect the changes in subsidies for wood based fuels.

If we wouldn´t have KEMERA-subsidies for collecting energy wood from forests, it wouldn´t be profitable. It costs very much to collect small-diameter trees from forests and the price, which is paid of energy wood, is very low. I think that subsidies have helped to collect small-diameter trees from forests and so on it has increased the amount of available raw material for wood chips.


5. References.

Mikko Kärkkäinen. 2013. Metsähakkeen markkinahinnan kehitys ja hintaan vaikuttavat tekijät. Available at: https://www.doria.fi/bitstream/handle/10024/91500/Mets%C3%A4hakkeen%20markkinahinnan%20kehitys%20ja%20hintaan%20vaikuttavat%20tekij%C3%A4t.pdf?sequence=2

Metsätilastollinen vuosikirja 2013. Available at: http://www.metla.fi/metinfo/tilasto/julkaisut/vsk/tietotaulut/2013/Luku9_2013_TT_Mets%C3%A4hakkeella_tuotetun_s%C3%A4hk%C3%B6n_tukij%C3%A4rjestelm%C3%A4.pdf

Asikainen, A. & Anttila P. 2013. Riittääkö metsähake? Metsätieteen aikakauskirja 4/2013.

Metsäkeskus. Available at: http://www.metsakeskus.fi/energiapuu#.VqkUtvmLSUl

Laki uusiutuvilla energialähteillä tuotetun sähkön tuotantotuesta (1396/2010). Available at: http://www.finlex.fi/fi/laki/ajantasa/2010/20101396


Statistics for energy prices:

Tilasto: Energian hinnat [verkkojulkaisu]. 
ISSN=1799-7984. 3. Vuosineljännes 2015, Liitekuvio 3. Voimalaitospolttoaineiden hinnat lämmöntuotannossa . Helsinki: Tilastokeskus [viitattu: 27.1.2016].
Available at: http://www.stat.fi/til/ehi/2015/03/ehi_2015_03_2015-12-14_kuv_003_fi.html


Statistics for total energy consumption in Finland:

Motiva. Available at: http://www.motiva.fi/taustatietoa/energiankaytto_suomessa/energian_kokonaiskulutus


About KEMERA: http://www.metla.fi/metinfo/sustainability/SF-2-financial-instruments.htm