Biomass Gasification Integrated With a Pulp and Paper Mill – The Need for Economic Policies Promoting Biofuels

Paper in proceeding, 2010

In this study we analyse economic policy support for biofuels, with the aim to determine the amount of support necessary to make investments in a gasification based biorefinery producing DME (dimethyl ether) profitable for a pulp and paper mill. As a case the integrated Swedish pulp and paper mill of Billerud Karlsborg is studied, using mixed integer linear programming and different future energy market scenarios. The results show that the required support is strongly connected to the price ratio of oil to biomass, with the support ranging from 10 EUR/MWh biofuel (lower than the present tax exemption of 14 EUR/MWh) to 61 EUR/MWh. The required support is shown to be sensitive to changes of the capital cost, but not to the pulp and paper production rate of the host mill. It is concluded that strong policy instruments will be required for forest industry based biorefineries to be desirable for the future.