Forest-based biofuel production in the Nordic countries: Modelling of optimal allocation

Biofuels have been promoted as a likely avenue for the future transportation energy mix. Hence, production of biofuels using lignocellulosic feedstocks, such as forest-based biomass, is expected to increase globally. Forest biomass abundance and experience with applying biomass conversion technologies gives the Nordic countries an advantage in catering to biofuel production capacity investment. Yet, given uncertainties in the techno-economic variables of biofuel conversion technologies, as well as differences between the Nordic countries in terms of labor costs, bioheat market prices and electricity and forest biomass costs and prices, it is unclear which of the Nordic countries are comparatively attractive for future investment in forest-based biofuel production capacity. In this paper, we quantify how techno-economic cost components of a novel forest-based biofuel production technology affect optimal allocation of biofuel production capacity in the Nordic countries at a regional level. We apply a scenario analysis approach using an endogenous biofuel capacity investment module in the Nordic Forest Sector Model (NFSM). In each scenario, we alter the techno-economic features of the technology and quantify total biofuel production allocation volume in each region and at a national level. We find that optimal capacity allocation is affected by the type of feedstock used in the technology and will affect existing industries dependent on forest feedstocks. Electricity selling or purchasing will have little effect on allocation because it comprises a small revenue or cost proportion. Bioheat may affect allocation, but this will depend on local demand. Finally, labor costs may affect allocation, but this will depend on the labor intensity, which changes with scale. The results are relevant for policy incentives to proliferate future forest-based biofuel production in the Nordic countries.