Rethinking the Value of Forest Logs – Is It Time for an Energy Grade (“E-Grade”)?

25th July 2023

The New Zealand Government has set a plan in motion to decarbonise the economy with a net zero greenhouse gas emissions target by 2050. Part of this process involves the development and implementation of emissions reduction plans for energy and industry sectors – the key users of energy for process heat and electricity generation. Other users of fossil fuels (e.g. the transportation sector) are also exploring ways to adopt lower emissions or zero emission fuels and vehicles.

Various projects are now underway to explore the use of bioenergy as an alternative energy source for fossil fuels for industrial process heat, electricity generation, and liquid fuel manufacture. New Zealand’s plantation forestry sector, with some 1.76 million hectares of planted resources (as of December 2022), offers the largest source of potential bioenergy fibre. Margules Groome’s “back of a napkin” calculation of the potential interest in bioenergy from forests could lead to more than six million green tonnes per year being utilised for energy production; this equates to more than 20% of New Zealand’s total current production from planted forests.

Obviously, the scale of the demand for forest fibre that is used for energy will depend on the cost of such fibre, the competition for fibre (from both energy demand and other users of wood fibre), and the economics of alternative energy sources for process heat, electricity generation, and transportation fuels. Suffice it to say however, the potential demand for energy from forests is significant and because of this, we believe the New Zealand forestry industry to be on the precipice of a paradigm shift in the way it operates.

Up until now, the “business as usual” approach to sourcing bioenergy from forest fibre has focused on the residues produced from both harvesting and wood processing operations. Residues are often seen as a waste byproduct, and any demand for such byproduct is welcomed on the basis that it provides a low revenue way of disposing of the waste that could otherwise incur a cost of disposal (especially on steep slopes). However, the term residue is fast becoming redundant. All residues, whether forest or wood processing residues, now have a value – as determined by the quality of their calorific potential. This energy value provides an opportunity to explore how we approach forestry operations. In particular, we see the opportunity for rethinking how we approach harvesting, and we start this journey by defining an entirely new grade of log – the “Energy Grade” or “E Grade” log.

The concept of the E-Grade log is simple; to develop a grade that reduces waste, improves harvesting efficiencies, lowers transportation costs, and provides a cleaner fibre. That said, the specification of an E-Grade log can be broad – limited only by the safe transportation and the dimension limitations of any wood chipping facility. In essence, if it can be picked up, chipped, and burned (or pelletised), then it is viable.

A recent visit by Margules Groome to a steep slope harvesting crew (using a tethered machine) provided an opportunity to explore and discuss how the E-Grade log would benefit the crew. It is important to note this crew was operating in a region that did not have a pulp market, has poor domestic opportunities, and the lowest value grades were being sold to the port as set lengths. We discussed the idea of how we could improve operations if there were an opportunity to supply a potential domestic location with a theoretical E-Grade specification allowing:

•  Any length of log
–  Preference for longer lengths for lower cost transport on a bolstered truck.
–  Shorter lengths and other material in bin trucks.
•  Virtually no quality requirements as all sweep, degrade, sapstain, and other defects would be allowed.
•  No restrictions on branches and bark debris.
•  No small-end diameter requirements so long as it can be transported safely.

We realised the key to working with an E-Grade log is how it could affect harvest operations and productivity. To reach the potential energy demand from forest fibre in New Zealand, it is unavoidable that roundwood currently being sold into solid wood markets will be diverted to bioenergy. Given the volatility of export market pricing, the concept of the E-Grade log will be most useful where domestic pulp markets do not exist and suppliers are looking for more value stability. We believe the concept could also lead to the following benefits:

•  Provide an efficient way of capturing residue volume in log form by diverting log lengths away from being sold as low value export grades – resulting in lower transportation and handling costs. This is particularly important in regions where markets are only interested in fixed length log sorts.
•  Reduce the number of cuts and handling required by processor heads in the field and on the skid. Delimbing would be minimised in the field, and only on larger diameter sections of the log on the skid.
•  Reduce the required landing size and associated engineering costs due to the:
–  Reduced number of sorts which could be as low as five in regions with limited domestic options (two pruned, two A grade, and an E Grade), and
–  Reduced piling of residue and offcuts, and the space needed for such material.
•  Reduce environmental risks due to smaller landings and less “birdnesting” of forest waste.
•  Provide the opportunity to derive value from sapstained fibre such as from trees that are wind thrown on exposed edges created from road lining.
•  More competitive harvesting rates due to:
–  Higher productivity from less handling on the landing, and
–  Higher throughput of recovered volume over the weighbridge (counting volume that the contractor would not otherwise get paid for).
•  Higher quality of fibre due to less soils and other contaminants.
•  Less handling of material at the processing plant / chipper.

We see this concept of an E-Grade log as the beginning of a new era for growing fibre in New Zealand. While the pellet plants, sustainable aviation fuel facilities, and wood fired furnaces are being explored, the real opportunity is for the forestry sector to be there at the coalface (pun intended) while the bioenergy industry develops, working with the various bioenergy users to develop a robust E-Grade market that meets energy needs while improving the value of forestry returns.

For more information on this topic contact Margules Groome.