Rationalisation of forest based wood chip production

Rationalisation of Forest Based Wood Chip Production Lecture presented at the Third International Wood Heating Show at Mulhouse, France, September 13–16, 2001.

By: Ebbe Leer Head of Development Section Hedeselskabet, Forest and Landscape Klostermarken 12 DK – 8800 Viborg DENMARK Tel.: +45 87 28 11 86 E-mail: el@hedeselskabet.dk

Per Rasmussen Director, International Operations Hedeselskabet, Forest and Landscape Klostermarken 12 DK – 8800 Viborg DENMARK Tel.: +45 87 28 11 75 E-mail: pra@hedeselskabet.dk

In order to provide a common point of reference I will begin with a short introduction to Danish energy policy and the conditions within Danish forestry.

Danish Energy Policy Following the "oil crisis" at the beginning of the seventies Denmark, as one of the first countries in the world, formulated a specific energy policy. The policy is founded on three pillars: Increased Supply Security • Diversification of fuel types (to move away from total dependence of oil from the Middle East) • Versatile supply (several suppliers from different geographic areas) • Increased domestic supply (oil / gas extraction from the North Sea, bio-fuels etc.)

Reduced Resource Consumption and Environmental Impact • Co-generation of electricity and heat ( all markets using heating are to be exploited for electricity production) • Reduction of the consumption (for instance better insulation of houses and buildings) • Cleaner fuels (natural gas and bio-fuels) Increased Share of Renewable Energy • Bio-fuels (straw and wood) • Wind power • Solar energy Naturally, the policy has subsequently been revised several times. The principal pillars remain basically unchanged but environmental aspects including the use of renewable energy play an ever-increasing role. The development scenario planned for renewable

energy in accordance with the latest energy action plan presented by the Danish government - " Energy 21" - corresponds to an annual increase from app. 60 to 230 PJ. It is important to stress that the energy policy approved by Government has so far been followed in broad terms. Two instruments have been used to regulate the development: • “Central economy directives” (in particular for the power- and district heating plants compelling them to use certain types of fuels, forced co-generation of electricity and heat etc.), and • Taxes on fuel types, which are unwanted or have a low priority.

In addition, over the years a considerable budget has been provided for research, development and support to new technology projects.

Danish Forestry The size of the Danish forestry sector is relatively modest. The total forest area covers app. 450,000 hectares equivalent to 11% of Denmark's total area. During the past 100 years, the forest area has doubled and the present political target is a two-fold increase in the area over the next 100 years.

There is in total some 20,000 forest properties in Denmark which 18,000 have an area less than 20 hectares (equals 17% of the forest area). Some 130 properties are larger than 500 hectares (equals 50% of the area).

Compared to Central Europe, the number of public-owned forests in Denmark is low and comprises only 31%. Some 46% of Danish forests are privately owned and foundations, shareholding enterprises and associations own another 23%. In Denmark, there are no forests owned by the forest industry.

One third of the forest area consists of broad-leaved trees while two thirds are coniferous.

The total annual harvested volume amounts to app. 2-mill m³ round wood, of which 1/3 is hardwood and 2/3 softwood.

The capacity of the sawmills is well developed but the country suffers from lack of industrial capacity for exploitation of inferior wood qualities, which cannot be used by the sawmilling industry. Denmark has no pulp and paper industries.

The Wood Chip Market A district heating plant can be found in any Danish town or larger village. In smaller towns, the district heating plant is normally owned collectively by the consumers, whereas in the larger towns the municipality is in charge of the supply. Consumers are in most cases free to decide whether or not to hook up to the municipal or council supply but often more than 90% of the households are connected.

A number of the district heating plants use wood chips as fuel and thereby constitute by far the biggest customers for the forest based wood chips. Depending on the size of the town, the consumption of the individual plant varies between app. 10,000 and 60,000 cubic meters per year (4,000 - 22,000 m³ solid wood equivalent). In addition to the district

heating plants a number of larger buildings, particularly in rural areas, are heated by stoker-fed boilers. In most cases, however, the fuel used is wood pellets and not wood chips.

Apart from the state forests, which carry out joint marketing and sale, most privately owned forests do not as a rule market and sell wood chips for fuel. Instead, the sale is carried out by forest owners associations or by some 10 independent traders. The largest Danish supplier of wood chips for fuel is Hedeselskabet, Forest and Landscape (HFL) with approx. 40% of the total domestic sales.

HFL enters into delivery contracts with the district heating plants, buys the wood from the forest owners, carries out the practical operations such as felling, chipping and transport and ensures that the district heating plants at any time have the required buffer stock.

In the past, when wood chip heating was relatively unknown, it was common to enter into long-term delivery contracts with a duration of up to 10 years.

Today’s contracts are framework contracts and usually run from three to five years, subject to an annual price negotiation which, in the worst case, may lead to a discontinuation of the contract. Normally, the co-operation between HFL and the district heating plants, as customers, is long term and very stable.

Annual price negotiations take place during the winter, where the price for supply during the coming year is agreed. The agreed price will be valid from the following summer and the year to come. The price level is primarily based on developments in the pulpwood market. The long-term price contracts also help to stabilise the market.

In addition to undertaking supply guarantees and holding sufficient buffer stocks HFL also takes on the risk involved in variations in the calorific value of the wood chips, caused by differences in moisture content. Wood chips are sold to the district heating plants on the basis of the theoretical calorific value, which is calculated from weight and moisture content. Payments to forest owners are based on volume, adjusted to reflect differences in dry matter density (irrespectively of moisture content).

The Importance of Wood Energy to the Forestry Sector The implementation of the energy policy has been of decisive importance for the Danish forestry sector and today about 600,000 mÂł (1/4 of harvested volume) are sold for energy purposes annually. Wood chips constitute some 225,000 mÂł of this with the balance being traditional firewood.

Another reason why the wood fuel market in Denmark is so important is the lack of a domestic industry, which uses the low-grade wood qualities that cannot be used by ordinary sawmills. Large transport costs for export of pulp wood result in low prices being offered to forest owners and, as a consequence, fuel chips become a competitive alternative.

A very efficient chipping process compounds the competitiveness of the fuel chips, in particular for small dimensioned trees, where several trees can be chipped simultaneously.

Chipping is an important competitive alternative in Denmark for the following forestry operations: First thinnings in young stands Clearing of first generation stands of Pine on marginal land Removal of harvesting waste Landscape management What is quite unique for Denmark is the fact that the chips play such an important role in connection with early thinnings. For instance, all young stands in forests managed by HFL are thinned by chip harvesting at least once and wood from thinnings comprises approx.

2/3 of the total chip volumes supplied.

This system is made possible partly because of the favourable market position of wood chips in Denmark, partly as a result of dense planting where the first commercial thinnings are made at an average canopy height of 8 metres.

Production of Wood Chips from Thinnings The trees are felled during winter / early spring and are left to dry over summer. This way, all needles are shed before chipping and most of the nutrients are left behind in the forest.

However, the system could potentially increase the risk for mass propagation of the bark beetle “Ips typographus� and is therefore subject to constant monitoring. Individual trees are, however, too small and the stands too dark to form a suitable breeding place. On top of that, HFL has developed a method of damaging the bark in connection with the felling in order to render the breeding conditions near impossible. The method has not bee used so far but is available for application when conditions so dictate.

The felling of trees to open up skidroads is carried out with a chain saw and the trees are subsequently chipped. The selective thinning between the skidroads is carried out with a feller-buncher, which can place the felled trees in and aligned with the skidroads, in a favourable position for chip harvesting. The feller-buncher works fast with a felling unit capable of felling and positioning 2-3 trees at a time. The performance is typically about 250 trees an hour.

Chipping is done with a self-propelling, front fed chipper, equipped with a bin capable of holding some 14 m3 of chips. The chipper carriage is only 2,25 – 2,50 m wide. Transport of chips to roadside is by a small forwarder equipped with a high tipping device. The entire system is specially developed for this purpose. The performance of a chipper combined with a forwarder is typically 60 - 80 cubic meters of wood chips per working hour.

The chips are tipped into containers placed at roadside in the forest. Flatbed lorries transport the containers with wood chips to the district heating plants. More than 90% of the wood chips are delivered directly from the chipper to the customer. The buffer stock capacity at the customers normally corresponds to one week of consumption.

The chip consumption by district heating plants varies, of course, considerably over the year and the production of chips in the forest must match this variation. Production of wood chips is regulated by varying the number of work hours put in and by selecting large stands with a high chip production potential in winter and scattered landscape clearing tasks in summer. In late summer when the wood reaches minimum moisture content a

buffer stock for the following winter comprising some 5-8 % of total annual production is built. This buffer is partly used to compensate for production problems due to machine breakdown or adverse weather conditions and partly to maintain a uniform production over the year.

Work operations in Danish forestry are normally not very comprehensive. The average chipping operation is seldom above some 500 cubic meters, and consequently the chipper has to be moved quite often. The frequent movement of machinery puts great demands on work planning. It is especially important that the transport containers are well scheduled. There has to be sufficient transport capacity to solve the task, but movement of empty containers is, of course, undesirable.

The person in charge of production, plans, documents and prepares the operation well in advance. Maps and descriptions of required operations in a suitable geographical area (comprising 1-2 weeks of work) are handed over to the chip harvesting crew. The crew makes detailed work plans, handles the transportation by lorries and maintains the necessary communication with forest owners and the person in charge of operations at the district heating plants. The crews typically function as self-managing work groups with responsibility for own work and the necessary mandate to carry out all operations required.

Rationalisation of the Forest Based Wood Chip Production In the last two decades a significant rationalisation of the production has taken place.

Since HFL began producing wood chips back in 1981, work time consumption has been reduced from app. 40 to app. 5 minutes per cubic metre for felling, chipping and the transport to roadside. This has been possible through development and application of specialised machinery in the wood chip production, combined with training of staff and delegation/sharing of responsibilities.

HFL has been very much at the forefront of this development as Denmark has been one of the only countries (if not the only) to develop a commercial production of wood chips based on early thinnings. Rationalisation has been, and still is, a ‘must’ because of decreasing sales prices and increasing labour costs.

In the years to come, HFL expects to more than double (in terms of quantity) the wood chip sales. From the forest owner's point of view, this development raises hopes for stable prices but as production costs continue to increase the need for continuing rationalisation remains.

HFL increasingly believes that, under Danish conditions, with a number of quite small, privately owned forests, it will difficult to progress further through development of even more productive machinery. The capital costs of such advanced machinery are out of proportion with the generally small chipping operations. As a consequence, HFL has decided in the near future to focus efforts on improvements in planning and logistics.

We are already making a targeted effort to increase the average size of the individual chipping operation and the number of jobs in a given geographical area. The instruments we apply are discounts to those forest managers who successfully combine several tasks into larger orders and who manage to coach the forest owners into accepting more

rational production systems. If HFL wants to cope with the international competition the owners of small forests must be coaxed into a closer co-operation.

Own studies and studies by Danish forest research institutions demonstrate that the method used by HFL, is financially superior for chipping of whole trees, whether from thinnings or from clearcuttings.

In landscape management, in use of wood residues from harvesting operations and in a number of other tasks we make use of larger but relatively cheaper semi-mobile chippers, working at roadside or in connection with centrally located storage areas. The same type of machinery is used for chipping of harvesting residues and for reject logs or parts of logs, a waste product generated in connection with production of round wood for the sawmilling industry.

The increase in installed production capacity which is a necessity for HFL in the years to come to counter increasing demand will be based partly on semi-mobile chippers.

In future, our strategy will be to have up to 75 % of wood chip production done by the economically efficient and productive, mobile chippers, working all year round. This very intensive production will then be supplemented by less intensive chipping of compressed wood residues and fuelwood grade round wood (mostly surplus particleboard round wood) based on stationary or semi-mobile chippers. When demand for wood chips for energy purposes is temporarily weak such chippers can conveniently be applied in landscape management and other open-area services.