Erik Ling and Semida Silveira

3.1. BIOENERGY IN TRANSITION

The next ten years will be decisive in terms of turning biomass into a major modern and reliable energy supply source globally. The ongoing development of bioenergy technologies and the know-how and liberalization of energy markets, allied to increasing international trade with biofuels, and policies supporting emissions trading and green certificates are likely to create favorable conditions for a larger utilization of bioenergy.

Also for countries such as Sweden, where bioenergy already occupies a very significant place in the total energy mix, the conditions for the development and utilization of bioenergy are changing rapidly. In this chapter, we look briefly at what has been accomplished in Sweden in the past few decades, and discuss three major drives that both open opportunities and bring new challenges to the bioenergy segment. These drives need to be considered in the design and implementation of robust strategies for the sector. They refer to the internationalization of the bio­energy segment, integration of bioenergy systems with other production processes, and mainstreaming of bioenergy as a major energy source.

Further, we discuss more specific tasks that the Swedish bioenergy segment will have to deal with in the near future. These tasks are related to the energy supply source, integration within the forest industry, reduction of C02 emissions and development of a competitive bioenergy industry. The matrix format of our analysis is illustrated in Table 3.1. Though this discussion is focused on conditions observed in Sweden where bioenergy has evolved closely linked with forestry activities, we believe that it serves as a reference for other countries which are either contemplating the utilization of bioenergy or wanting to benefit from the formation of biofuel markets.

3.2. BIOMASS UTILIZATION IN SWEDEN

During the last few decades, the Swedish energy sector has undergone substantial changes. In short, nuclear power and biomass have become major energy sources,

31 Bioenergy — Realizing the Potential

© 2005 Dr Semida Silveira Published by Elsevier Ltd. All rights reserved.

while the utilization of fossil fuels was radically reduced (Silveira, 2001). Total energy supply went from 457 TWh in 1970 to 616 TWh in 2002. However, in 1970, fossil fuels corresponded to 80 per cent of the total energy supply in the country compared with 38 per cent in 2002 (Swedish Energy Agency, 2003).

Sweden has reached remarkable progress in the utilization of renewable energy, not least in comparison with other OECD countries. In 2002, almost one-third of the total energy supply in the country came from renewable sources, mainly hydro­power, biomass and windpower. As a result of focused attention on the national energy potential throughout the last few decades, biomass has attained a particular place in the Swedish energy system. Today, it corresponds to approximately one-fifth of the total energy used in the country, and is the number one energy source outside of the transport sector1 (Swedish Energy Agency, 2003).

Figure 3.1 shows the development of the biofuel utilization in Sweden. Solid biomass, peat and waste supplied 98 TWh of energy in 2002, which compares with about half as much in 1980. Biomass is used in the forest industry, district heating and single-family houses for provision of heat and power through a variety of generation and end-use technologies. Despite the progress already achieved, the existing biomass resource base allows further development of bioenergy in the country. National estimates have indicated that an annual energy potential of approximately 160 TWh could be reached by 2010 using Swedish biomass sources only (Lonner et al., 1998). [2]

Taxes and investment grants have played a decisive role in enhancing the competitiveness of bioenergy in Sweden (Bohlin, 2001). Fossil fuels have been taxed in the form of CO2 taxes, sulfur taxes, NO* taxes and the general energy tax[3]. Investment grants have also been provided for the establishment of bioenergy plants. Since energy and environmental taxes have distinguished between types of users and energy carriers, certain segments have been particularly encouraged. This has been the case for district heating. In 2002, biomass responded to 35.5 TWh, or approximately 65 per cent of the total district heating consumed in Sweden, compared with a very marginal contribution two decades earlier.

The share of district heating in Sweden is high by any international comparison. Nevertheless, there is a significant potential to use more district heating based on biomass, if such systems can be established in areas with more sparsely distributed heat demand. One-third of the Swedish single-family houses are still being heated with electricity. Further development of the district heating system can help release electricity from the heating system for use elsewhere, while also making the country’s total energy system more efficient. The conditions through which this may become possible are further discussed by Sandberg and Bernotat in Chapter 8.

The conversion of heating systems away from electricity in single-family houses has occupied the attention of energy planners in Sweden for a long time but the progress achieved has been limited. Besides convenience to end-users, electricity prices have been relatively low in the past, while initial investments to shift systems are high for a household. Getting a bioenergy equipment installed has proven time consuming for potential users who are not familiar with the new technologies, biofuel distribution chains, permissions needed and incentives available. Beyond that, users have been reluctant to install bioenergy systems due to the more intensive maintenance required in comparison with fossil — or electricity-based heating systems. Meanwhile, heat pumps have gained popularity. Today, however, bioenergy is probably the most cost-efficient alternative for heating single-family houses in Sweden. The market seems to have reached a critical mass of installed units to prove this and, with further incentives being provided, bioenergy use in single-family houses is bound to increase.

The forest industry is the major producer and user of bioenergy in Sweden. Of the 51 TWh of biomass used in the industrial sector in 2002, about 80 per cent were used in the pulp and paper industry. However, this should not be understood as a result of energy policy incentives, as there are synergies that favor bioenergy utilization in the sector. Pulp and paper production is very energy intensive, and the annual use of energy in the sector can vary significantly from year to year due to variations in markets for forest products.

Though Swedish policies have been quite successful in enhancing the use of biomass for heat production, the same cannot be said about the fuel mix in power generation and transport. Only 6TWh of electricity and 0.5 per cent of the total amount of fuel used in the transport sector came from biomass in 2002. When it comes to electricity, the same incentives provided for heating were not considered possible. It is increasingly difficult for Sweden to tax electricity generation very differently from neighboring countries due to the integration of electricity markets. Moreover, it is believed that the competitiveness of energy-intensive segments of the Swedish industry would be severely affected if they were obliged to pay electricity prices much higher than today. For that reason, these sectors have been exempted from the various taxes that might otherwise have favored a fuel shift.

As for the transport sector, the main barrier to change has been the lack of alternatives, that is, a competitive renewable alternative to fossil-fuel-based trans­port. A competitive alternative has to cover the whole chain from biofuel produc­tion to biofuel adapted vehicles, to infrastructure for storage and distribution. However, ethanol has already been introduced in Sweden mixed with gasoline. Two factories are producing 57 000 m3 of ethanol for use as transport fuel in Sweden. Research on alternative motor fuels has received continuous support since 1975 (Zacchi and Vallander, 2001). A pilot plant to produce ethanol from lignocellulosic materials such as agricultural wastes, wood and municipal waste has been established recently.