Forest bioenergy network design under market uncertainty

The forest industry is transforming itself in order to foster new product development by utilizing forest biomass. However, market instability of all types of forestry products has significant impact on the transformation approach of the industry. In this regard, we propose a two-stage stochastic optimization model to evaluate the proficiency of adding new assortments including terminals and bioenergy to existing forest supply chain, taking into account uncertainty of demand and price of final products. The model assesses the optimal bioenergy or biofuel processes among the potentials. A multicut L-shaped decomposition method is implemented to provide a profitable network design for any future scenario. Finally, the proposed model and algorithm are demonstrated through a case study in Newfoundland, Canada. The result shows that the stochastic solution creates a higher value compared to deterministic one. Moreover, risk metrics including variability index and downside risk are quantified to provide a clear vision for risk-averse decision makers.