3 Jul 2020
EUR 60 million
Financial institutions and SMEs
Finnish forest industry company UPM-Kymmene Oyj is developing its business to create more with less. A promising new product is a renewable diesel made of crude tall oil residue from pulp mills. The renewable diesel can be used in any diesel engine and will contribute to reaching the European Union’s 2020 targets. Vice President Petri Kukkonen of UPM Biofuels says efficient use of raw materials is a value in itself and a means to improve competitiveness.
UPM will start production of the renewable diesel as soon as it can start up its new refinery in southeastern Finland this summer. The project indicates the magnitude of what to expect from UPM and its peers in the forest industry in the coming years.
“Finding new ways to use all parts of a tree to produce sawn timber, plywood, pulp, paper, heat and electricity, composite materials, biodiesel and so forth, enables us to peform better,” Kukkonen says. “The more efficient you get, the better the economy is.”
The bold undertaking to build what will become the world’s first advanced wood based renewable diesel production plant stands in stark contrast to the cautious attempt by spring to blossom here in Lappeenranta this first cold and bleak week of May. The air is filled with the characteristic scent of pulp.
“The smell of money,” someone whispers as Kukkonen guides a group of Finnish journalists through UPM’s installations at Kaukas in Lappeenranta, some 225 kilometres south east of Helsinki. The forest industry companies in Finland have been rethinking their strategies during recent years to research and develop new products in addition to their traditional products. Naturally, the interest towards UPM’s renewable diesel is strong, especially here in Finland.
The renewable diesel refinery is currently being built at the outskirt of UPM Kaukas integrated production site. The area is about 200 hectares, the size of 280 soccer fields, and contains a saw mill, a paper mill, a pulp mill, a biofuel power plant producing electricity and district heating, and a research and development centre. This is the work place of some 1,200 people, 50 of which will be operating the finalised refinery.
Construction of the refinery started in February 2012, and these days the very last few metres of piping is being welded into place. Engineers are checking that the pipes really are connected and that valves actually are opening the right ways. With a total of 50 kilometres of pipes over 10 floors, there is plenty to check.
UPM’s total investment cost for the renewable diesel refinery is about EUR 150 million. NIB is co-financing the project with a 7-year maturity loan of EUR 50 million. UPM says the technology to refine tall oil is based on the company’s R&D and co-operation with Danish catalysis company Haldor Topsøe A/S, another loan customer of NIB. UPM employs around 21,000 people and it has production plants in 14 countries.
UPM’s refinery investment in Lappeenranta is the first of its kind globally. The task of scaling the tall oil-to-renewable diesel process from laboratory conditions into a full fledged oil refinery requires a lot of trials and adjustments to succeed.
“We are the first company in the world to start this type of biodiesel production plant, so it is not possible to give an exact date for when we can start it, but we will this summer,” says Production and Technology Director Teemu Lindberg. “It’s not just to push a button, we are making industrial history here.”
The main raw material for the renewable diesel is crude tall oil, which is a residue from chemical pulp production. By further processing crude tall oil UPM can utilise the wood it uses for its pulp production in a more efficient way without increasing wood harvesting.
The renewable diesel is clasified as a second generation fuel, meaning it is made from residues or waste from other processes. UPM reckons that tall oil from its three pulp mills in Finland will cover more than 50% of what’s needed here in Kaukas. The rest will be purchased from other mills.
The EU pushes biofuels
The refinery will produce 100,000 tonnes renewable diesel, called BioVerno, annually. One of the benefits of the renewable diesel is that it significantly reduces greenhouse gas emissions, up to 80% in its purest form compared to standard fossile diesel.
However, renewable diesel is usually blended with standard diesel fuel due to costs and scarcity. Demand for the renewable diesel is supported by the EU 2020 strategy targeting a minimum of 10% usage of biofuels in transportation, and 20% of energy supply to come from renewable sources in all EU member states before year 2020.
According to Hart Global’s biofuel outlook, demand for biodiesel in the EU area is set to increase 7% annually until 2020. UPM Biofuels negotiates with different distributors in the Baltic Sea region but has not yet signed any contracts. Petri Kukkonen expects to sell the BioVerno with a premium to other biodiesel products.
“That is because of its chemical product quality and that it is a second generation biodiesel fuel,” Kukkonen says.
20,000 kilometres test run
Tests done by UPM and the VTT Technical Research Centre of Finland found no difference in fuel consumption between the BioVerno and standard diesel. The test confirms earlier tests showing that UPM’s biodiesel works just as well as fossil diesel and suits all diesel engines.
The VTT test used a blend of 20% of UPM’s BioVerno and 80% standard fossile diesel on four Volkswagen Golf 1.6 TDI cars. The cars were driven 20,000 kilometres each and the trial looked at fuel functionality in the engines as well as fuel consumption.
“After the test we found no changes to the engines running on the biodiesel fuel blend,” says Juhani Laurikko, Principal Scientist at VTT.
The way ahead
UPM will continue to integrate bio and forest industries with products made of renewable raw materials that are recyclable, such as biocomposites such as pulp and plastics, biofibrils, biochemicals and CO2-neutral energy.
“We also have several other new and promising biochemical developments that are not yet in commercialised operations,” Kukkonen says.
Altough UPM is focusing its resources on the construction of the Lappeenranta biorefinery, the company has plans to start new biorefineries also elsewhere. The European Commission recently awarded UPM a grant of EUR 170 million for a solid wood-based biorefinery project in Strasbourg, France. The biomass-to-liquid type of biorefinery would turn logging residues, wood chips and bark into BioVerno fuel. The grant is from the European Commission’s New Entrant’s Reserve NER300 fund, which supports innovative renewable energy technology.
According to Kukkonen, UPM will make a final decision on the Strasbourg Biorefinery later this year. He says UPM’s long term strategy is to become a significant producer of biodiesel in the future, targeting its renewable diesel business to account for more than EUR 1 billion of its annual turnover.
“The plan is for UPM Paper Europe and North America to account for less than 50% of UPM’s turnover within quite a short time span,” Kukkonen says.