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The value of flexibility for pulp mills investing in energy efficiency and future biorefinery concepts

Journal article
Authors Elin Svensson
Thore Berntsson
Ann-Brith Strömberg
Published in International Journal of Energy Research
Volume 38
Issue 14
Pages 1864-1878
ISSN 0363-907X
Publication year 2014
Published at Department of Mathematical Sciences, Mathematics
Pages 1864-1878
Language en
Links dx.doi.org/10.1002/er.3195
https://gup.ub.gu.se/file/141424
Keywords energy efficiency, forest biorefinery, process integration, investment under uncertainty, multistage stochastic programming, energy price scenarios
Subject categories Optimization, systems theory, Chemical Engineering, Chemical manufacturing engineering, Business Administration

Abstract

Changing conditions in biomass and energy markets require the pulp and paper industry to improve energy efficiency and find new opportunities in biorefinery implementation. Considering the expected changes in the pulp mill environment and the variety of potential technology pathways, flexibility should be a strong advantage for pulp mills. In this context, flexibility is defined as the ability of the pulp mill to respond to changing conditions. The aim of this article is to show the potential value of flexibility in the planning of pulp mill energy and biorefinery projects and to demonstrate how this value can be incorporated into models for optimal strategic planning of such investments. The paper discusses the requirements on the optimization models in order to adequately capture the value of flexibility. It is suggested that key elements of the optimization model are multiple points in time where investment decisions can be made as well as multiple scenarios representing possible energy price changes over time. The use of a systematic optimization methodology that incorporates these model features is illustrated by a case study, which includes opportunities for district heating cooperation as well as for lignin extraction and valorization. A quantitative valuation of flexibility is provided for this case study. The study also demonstrates how optimal investment decisions for a pulp mill today are influenced by expected future changes in the markets for energy and bioproducts.

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