Case Study: Product and Process Design Methodologies for Engineering the F Bi fi Forest Biorefinery New Energy Systems New Energy Systems 19 August 2008 Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair Department of Chemical Engineering, Ecole Polytechnique Montréal, Canada
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Case Study:yProduct and Process Design
Methodologies for Engineering the F Bi fiForest Biorefinery
New Energy SystemsNew Energy Systems19 August 2008
Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair
Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada
“Economic Stalement” for Traditional Forest Products Producing Nationsg
The “perfect storm” ofstrengthening dollar, risingg g genergy prices, rising fibre costs, small older mills….costs, small older mills….
Some Forestry Industry Survival Strategies
Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg
Some Forestry Industry Survival Strategies
Go for Survival in Commodities, or Make the Most of Our Existing IndustryBuy/Build Elsewhere In Emerging M k M k th M t f O P lMarkets, or Make the Most of Our Pulp and Paper Competency in Emerging EconomiesEconomiesDiversify Core Business with Marketing & Technological Partners or Make the MostTechnological Partners, or Make the Most of Our Existing Value Chain by Migration to New Business Paradigmsg
One forest biorefinery definition:f ll tili ti f i i d bi f th= full utilization of incoming woody biomass for the
production of:• Wood products• Pulp and paper products• Energy• ChemicalsChemicals
Another (more practical) forest biorefinery definition:
= Maximizing the economic value from trees = Improved business model= Corporate transformation… Corporate transformation…
The Challenge: Mitigating Risks
Objective of this Presentation
To present (certain) critical issues that should b id d b f t i kibe considered by forestry companies seeking
to identify promising biorefinery pathwaysb d bi fi d i ti itibased on biorefinery design activities, consulting activities, and pulp and paper
company strategic planningcompany strategic planningleading to a proposed implementation
strategy and multidisciplinary designstrategy and multidisciplinary design methodology employing process systems
engineering, for exploring theengineering, for exploring the implementation of the forest biorefinery.
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefinery
See 3 survey papers by Thorp, March-May 2008
Key biorefinery concepts and definitionsKey biorefinery concepts and definitionsBiorefinery implementation strategy for forestry companiesforestry companiesOverall design methodology for the forest biorefinerybiorefinerySome interesting process systems engineering approaches that we are g g ppexploring
2007 UPM-Kymmene CEO Report to Investorsto Investors
Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships
17
Leading Pulp and Paper Companies are Developing Partnershipsare Developing Partnerships
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
Identifying the Right Biorefinery Configuration is Complex…Configuration is Complex…
Volume-Margin Trade-Offs for the Forest Biorefinerythe Forest Biorefinery
Definition: Building Blocks and Derivatives…and Derivatives…
Waste Co-products or wastes?
PulpB ildi D iYield? Yield? Yield?
ChipsBiomass
and PaperMill
Building Block Derivative
Derivative
Yield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
Reducing Volumes, Flexible Throughputs…
Increasing Process Complexity
Definition: Petrochemical Value Chains and Product Replacementp
Biorefinery Platform ?
? ??
Example: Product Replacement in Mature Supply Chain…in Mature Supply Chain…
Waste
PulpEth l Eth l PEYield? Yield? Yield?
ChipsBiomass
and PaperMill
Ethanol Ethylene PEYield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
Definition: Emerging Carbohydrate Platforms and Product SubstitutionS
??
CarbohydratePlatform ?Platform
Example: Product Substitution in Emerging Supply Chain…in Emerging Supply Chain…
Waste
PulpL ti PLA PLAYield? Yield? Yield?
ChipsBiomass
and PaperMill
Lactic Acid
PLA PLA Polymers
Yield? Yield? Yield?
P&P Products
$$ Main Biorefinery Products to Market $$$$
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
Some Key Competitive Factors
Main competitive advantages for forestry companies:Access to biomass availability and harvesting knowAccess to biomass availability and harvesting know-howExisting infrastructure in close proximity to forest biomassEstablished SC for wood, pulp and paper products
Main competitive disadvantages for forestryMain competitive disadvantages for forestry companies:
Lack of capitalL k f d t d l t ltLack of product development cultureLack of knowledge of product quality requirement, SC practices etc for new bioproductsp p
Some Lessons Learned from Our Case Studies Thus Far…
Biorefinery technology will be critical for competitive position in the short term the unique
Case Studies Thus Far…
competitive position in the short-term, the unique supply chain will be critical for competitive position in the longer-termI d t b titi i th l tIn order to be competitive in the longer term: product design, before process designMeet profitability targets for varying market
di i b d i i f f iconditions by designing for manufacturing flexibilityThe key to success in the forest biorefinery will be y ythrough implementing “knowledge-based manufacturing” in conjunction with flexible manufacturing and advanced supply chain g pp ymanagement
Strategic Approach for Implementing the BiorefineryImplementing the BiorefineryImplementation: compete with all capital spending
at mill (natural gas, Bunker C), and/orProduce “building block” chemicals
derivativesMarket development for new productsHigher process
l it d
manufacturing and production flexibilityBusiness flow transformation
Lower risk technologies
complexity and technology riskPartners essential
Product development cultureOff-shoring, Outsourcing, etc…g
Margins improvement is the goal
Strategic Vision: Phase III must determine Phase I
Phase I: Lower Operating Costs
Generate more free cash flow (EBITDA), in competition with all other capital spending proposals
Phase I Lower Operating Costs:
The mill operation remains manufacturing-centric, i.e. produces a commodity and seeks to be a low-cost producer
Operating Costs:Replace fossil fuels at mill (natural gas, Bunker C), and/orProduce “building p
Seek to reduce biorefinery costs by identifying synergies with the existing mill:
Utili ti f i ti i f t t t ff t
block” chemicalMinimum risk technologies
Utilization of existing infrastructure to offset equivalent greenfield biorefinery capital costExploitation of green credits
Possible partnership with technology provider
Is Cellulosic Ethanol the Right Product?the Right Product?
Today!Today!
Source: NREL - 2006
Ethanol Price Volatility:An Important RiskAn Important Risk
Price volatility due to:Impact of crude oil and natural gas
Peak at ≈3 $/gal
pricesChanging balance between supply and demandDiverse feedstock types and theirDiverse feedstock types and their relative competitivenessEnergy legislation – tax credits and incentives
Source: Gulf Ethanol Corp
In 4 months: Ethanol prices dropped by half…
12 November <1.5 $/gal
pp y
How can companies stabilize margins in the context of volatility and
Source: Gulf Ethanol Corp
yuncertainty?
Biochemical Ethanol Technology Technology
≈4.2$/gal
≈2.2$/galg
Source: NREL - 2006≈0.6$/galSource: NREL - 2006
Should Biochemical Ethanol be Implemented Today?Implemented Today?
How can
July 2007 Scenario @ 3 $/gal
margins be stabilized?
November 2007 Scenario @ 1 5 $/galScenario @ 1.5 $/gal
Source: NREL - 2006
Is Cellulosic Ethanol the Right Product?
Implementing the forest biorefinery is about mitigating risk
g
mitigating risk… …and clearly ethanol represents a great opportunity, but also presents risksThese can be mitigated as part of a forest biorefinery product design strategy, e.g.:
What derivatives can be made from ethanol?What derivatives can be made from ethanol?What opportunities are there with by-product lignin?What manufacturing flexibility between products is
i d i l di h d i th l frequired, including perhaps producing ethanol from cellulose?
Before implementing ethanol production facilities, know what product portfolio your company will ultimately produce…
Process-centric and Product-centric designProduct centric design
“Towards a Product-Centered Chemical Industry - Rethinking theChemical Industry - Rethinking the Role of R&D and its Interaction with Marketing and Business Strategy” FOCAPD (2004), and AIChE ( ),webcast (2004 – see link in background materials)
George Stephanopoulos,
MIT
Chemical Engineering is moving from being process-centric to product-centricp pProduct centered: market trends product specifications components and subsystems chemicals and materials
38
subsystems chemicals and materials manufacturing systems design
Start With Phase II: Define your Product PortfolioProduct Portfolio
Product Design first, Process Design second
Increase revenues by producing new “green” organic chemicalsPhase II
Increase Revenues:Manufacture of DerivativesManufacture of derivativesMarket development for New productsHi h l it
Determine promising product portfolios for
Higher complexity and risk technologiesPartners with SC
Determine promising product portfolios for your company using a market perspective
Which are technically feasible?Secure the best partners for securing theSecure the best partners for securing the value chain…Examine the implied company transformation
Biorefinery Product Portfolio
Wood, Energy, Pulp and Paper Products
Minimum Production Maximum Production
A *** ***
B *** ***
C *** ***
Biorefinery Products
A *** ***
B *** ***B
C *** ***
Product Portfolio Identification
Innovation
Novelproduct
Substitution
Technology P h
Market P ll
product
The most appropriate
fPush Pull
S b tit ti R l t
choice for your company
Substitution ReplacementProcess-centric
design Product-centric design
Adaptation
Phase III = Enterprise Transformation
Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems
Transformation
Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries
Phase III Improve Margins: countries
Process Standardization, e.g., enterprise-wide standardization of processes for product and process development R&D finance personnel etc
Knowledge-based manufacturing and production flexibilityBusiness flow development, R&D, finance, personnel, etc.
Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating
transformationProduct development cultureOff shoring g
activities
Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, in entor management etc
Off-shoring, Outsourcing, etc…
inventory management, etc.
Market-driven culture to be established through a phased transformation
Phase III = Enterprise Transformation
Supply Chain Restructuring, e.g., simplifying supply chains, negotiating just-in-time relationships, developing collaborative information systems
Transformation
Outsourcing & Offshoring, e.g., contracting out manufacturing, information technology support; employing low-wage, high-skill labor from other countries
Phase III Improve Margins: countries
Process Standardization, e.g., enterprise-wide standardization of processes for product and process development R&D finance personnel etc
Knowledge-based manufacturing and production flexibilityBusiness flow development, R&D, finance, personnel, etc.
Process Reengineering, e.g., identification, design, and deployment of value-driven processes; identification and elimination of no value creating
transformationProduct development cultureOff shoring g
activities
Web-Enabled Processes, e.g., online, self-support systems for customer relationship management, in entor management etc
Off-shoring, Outsourcing, etc…
inventory management, etc.
Market-driven culture to be established through a phased transformation
Supply Chain DesignExisting Supply Chain
Supply Chain DesignThe Biorefinery Network
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
Overall Biorefinery Design Framework
Promising Biorefinery Products
Technology Strategy
Framework
Products Strategy
Product Design
ReconciledAdvanced
LCA Supply ChainManagementProcess
SimulationReconciled
Process andEconomic Data
Thermal PinchAnalysis
L Bl k
Set of PreferredBiorefinery
ConfigurationsLarge Block Analysis of Processes
Configurations
MCDMProcess Design
Preliminary Engineering
Presentation Outline
Leading companies are implementing the f t bi fiforest biorefineryKey biorefinery concepts and definitionsBi fi i l t ti t t fBiorefinery implementation strategy for forestry companiesO ll d i th d l f th f tOverall design methodology for the forest biorefinerySome interesting process systemsSome interesting process systems engineering approaches that we are exploringexploring
Product Design Considerations for the Forest Biorefinery…for the Forest Biorefinery…
Product opportunities:Which products should be considered as opportunities for
replacement/substitution on the market?Which economically attractive product families can be built
around them?Are technologies available for the product families, are they
emerging?
Product family:Which ones create the
highest value along the value chain?
Which perturbing events on the market pose risk?What are the competitive factors associated with each product family? Company detailed
analysis and business plan
Product Portfolio:What will be the impact of
business plan definitionRisks?
Risks?What will be the impact of product family integration to the existing company portfolio?Is this a unique strategy? Partnership Selection:
Who are the most promising partners for the
Risks?
Who are the most promising partners for the candidate new product portfolios?Which partnerships will ensure the value creation
while mitigating most of the risks?Risks?
How Does this Approach Influence Biorefinery Design?
Large block analysis of biorefinery technologies
Influence Biorefinery Design?
WaterTreatmentRiver_Water
R8
Chemicals
technologies
WoodRoom FiberLineWood
Bark
BL
WL
Pulp
OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery
products, e.g. for bioethanolN h d ll ti l l
OPERATIONS-DRIVEN COST MODELLING• Manufacturing costs for new forest biorefinery
products, e.g. for bioethanolN h d ll ti l l
CAPITAL SPENDING EVALUATION• Capital investment in the longer termCAPITAL SPENDING EVALUATION• Capital investment in the longer termSUPPLY CHAIN DESIGNSUPPLY CHAIN DESIGN
PowerIsland Caustisizing
Bark WL
Coal Natural_gas
WQCChips VPP
• New overhead allocation → lower pulp production costs
• Techno-economic risk assessment and uncertainties of technologies & markets
• New overhead allocation → lower pulp production costs
• Techno-economic risk assessment and uncertainties of technologies & markets
• Competitive manufacturing costs• Capital spending strategy• Competitive manufacturing costs• Capital spending strategy
• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited
• Company-specific SC is critical• Risks and uncertainties must be evaluated• Manufacturing flexibility must be exploited
DECISION MAKING• Choosing a company-specific profitable
biorefinery strategy
DECISION MAKING• Choosing a company-specific profitable
biorefinery strategyWQC
GasificationWoody_biomass
GTLFT_Liquid
PreTreatment
Chips_VPP
Chips_to_Cooking
Purified_waste_Water
uncertainties of technologies & marketsuncertainties of technologies & marketsg y pg y p• Risks and uncertainties systematically
considered in decision-making• Risks and uncertainties systematically
considered in decision-making
CornEtOH EtOHCorn
Data Processing and Data ReconciliationData Reconciliation
Activity-Based Cost Accounting
Clean_TMP_steam
TMP Heat Recovery
5
4
Steamer
Inlet_wtr_preheater_2
Chimney
Inlet_wtr_preheater_1
CW
Circulation_water_to_heating_2
Circulation_water_out
Condensate_to_steamer
Water_heating_out
Water_to_heating_1
Chip_silo
Chip_wash
Chip_screw
Wash_reject
Chips
Preheating
2nd stage refiners
Went_from_pulper
M
1st_stage_refiners
Latency_chest
Main line refinersWashing of chips Mill wide data reconciliation
3
21
Process-
Wash_reject_out
M
_stage_Pulper_main_line
C
MILLForest biorefinery
INPUTS VALUE
Raw material
Driven Cost Modelling
1
25
INPUTS VALUE
Raw materialRaw material
…
Chem cons. Technology Strategy
3
4
5Raw material
…
Chem cons.
…
Process Analysis
How Does this Approach Influence Biorefinery Design?y g
Energy Planning for the BiorefineryBiorefinery
Market product process Mass and energy balances Preferred energy profiles Mill energy planning
Applying LCA to the Biorefinery ContextBiorefinery Context
Boundaries
Allocation
Indicators
Normalization
Weighting
Applying LCA to the Biorefinery ContextBiorefinery Context
Mill 1 Process pathway 1 Product 1
FBR projects involve:Many possible productsMany possible process pathways
Pulp and paperCompany
Mill 2 Process pathway 2 Product 2
Mill N Process pathwayN Product N
pathwaysMany mill options
Potentially very different environmental profile for all possible combinations
What products will be manufactured - what do they substitute/replace?
N
substitute/replace? What is an appropriate allocation method between pulp and paper, energy and biorefinery products?How does the environmental profile of the biorefinery products compare to the products they replace?
Conclusions
Implementing the forest biorefinery is more than a capital spending project…p p g p jRisk mitigation associated with the implementation of the biorefinery can be achieved through careful strategic planningachieved through careful strategic planning, and by employing systematic product and process design methodologies:
Start with market-based product portfolio designPartner selection and partnership model are critical and determining the company’s uniquecritical, and determining the company s unique biorefinery supply chainEnterprise transformation is implicated, including designing for production flexibility and deliveringdesigning for production flexibility and delivering product with knowledge-based manufacturing
Case Study:yProduct and Process System Design
Methodologies for Engineering the F Bi fiForest Biorefinery
New Energy SystemsNew Energy Systems19 August 2008
Paul Stuart ([email protected]) NSERC Environmental Design Engineering Chair
Department of Chemical Engineering, Ecole PolytechniqueMontréal, Canada