How European pulp and paper mills adapted to the new energy transition reality

After a year of record-high inflation, we look at how European pulp and paper mills have adapted to the new reality, with examples of energy-transition-related investments announced or completed in 2022

Our key findings

  • Mills are investing in technologically advanced boilers that can incinerate waste and biofuels with minimal fossil CO2 emissions.
  • A number of pulp mills are starting to benefit from refining biomass, which can increase their electrical self-sufficiency.
  • Alternative energy initiatives, such as a dependence on biogas and solar power, are being explored in Europe.

All paper grades in Europe depend on energy, therefore price volatility can have huge consequences. This article provides context to the market shifts of 2022 and some of the mill changes that were created in response.

A vulnerable paper landscape before the energy crisis

As per the chart below, we can see the Fastmarkets estimate of the average fuel mixes used for each paper grade in the EU. These estimates reflect the landscape before the recent energy crisis, which caused adjustments at many mills, most importantly reducing the share of the high-cost or low-supply gas wherever possible.

Tissue seems to be the most vulnerable paper grade due to the high dependency on gas of the mostly non-integrated and relatively small-scale operations. Since we have not heard of many switches to alternative fuels, we assume that this high vulnerability still largely exists.

On the other hand, the high share of wood-based integrated pulp and biofuels usage in kraft paper production have probably kept that sector’s average energy costs the least affected of all the paper grades. With natural gas accounting for more than 45% of the fuel used in the European paper industry, the risks to production when the European Union was confronted with its worst energy crisis in decades were clear.

Mills converting waste material into energy

In response to the energy cost increase, many pulp and paper mills have invested in technologically advanced boilers that are able to incinerate varying mixes of waste and biofuels with minimal or even zero fossil CO2 emissions.

This had already proven to be a very effective way to cut energy costs even before the recent crisis, but the cost competitiveness of steam and co-generated electricity produced from these fuels, compared with producing them from fossil fuels, has vastly improved in the last year when fossil fuel and electricity prices soared.

In northern Europe, pulp and paper mills have a long history of supplying district heating to the surrounding community, but we are now seeing a new wave of similar projects in central Europe as well. Rondo Ganahl’s Frastanz mill in Austria plans to build a new waste material power plant, which will help meet both the energy needs of the paper mill and the corrugated packaging plant as well as supply energy to the local district heating network.

Unfortunately, new plants have a relatively high barrier to entry, as a company must first obtain environmental permits and then get the equipment, which typically takes well over a year to as much as three years from an order to turn-key delivery, and then finally obtain feedstock, all of which are increasingly difficult and costly to procure.

Pulp mills as bio-refineries

Pulp mills have a strong potential to benefit from refining biomass in a versatile way. Metsä Board’s Husum mill in Sweden recently reported the successful start-up of a new recovery boiler and turbine, increasing the mill’s electricity self-sufficiency from 50% to 80%.

An energy efficiency increase of a pulp mill enables lignin extraction from black liquor, which also frees up recovery boiler capacity which is a typical pulp production bottleneck. The new evaporation plant of Södra’s Mönsterås pulp mill in southern Sweden, which is scheduled to start up early this year, will include preparedness for lignin extraction.

Another popular trend in recent years has been biomass-fired lime kilns, which can already be found at multiple European pulp mills. Most recently, the Swedish Svenska Cellulosa AB (SCA) Containerboard’s Obbola kraftliner mill replaced the two oil-fired lime kilns with a new biofuel-fired lime kiln, following similar investment in 2015 at its other Swedish mill in Munksund. This means that, during routine operation, industrial processes at both of SCA Containerboard’s kraftliner mills are fossil-fuel-free.

Self-sustaining alternative energy is on the rise

SCA has previously stated its intention to continue to grow in the energy sector through investment and organic growth. It recently acquired its first wind farm with the purchase of 36 wind turbines in Markbygden, in the Piteå municipality area of northern Sweden.

Many European mills, especially in Southern Europe, have installed solar panels. While solar power may not necessarily be enough to satisfy the mill’s total electricity needs, it can still be used, for example, in areas like heating or cooling, lighting and ventilation. For example, Smurfit Kappa has launched solar energy projects in Spain, the latest being a €6-million investment at the Sanguesa mill, whose current external electricity consumption and dependency will be reduced by 7%.

Also perhaps one of the most pioneering alternative energy initiatives comes from Norway, announced by Norske Skog’s Skogn mill. Together with local farmers and other stakeholders, the company will explore the opportunity to collect livestock waste for production of environmentally sustainable biogas. Even if biogas production from livestock waste as such is nothing new or unusual in Europe, the large-scale participation of a paper mill certainly is. Livestock waste has a low energy and dry matter content, so it is necessary to make large-scale investments to ensure an economically sustainable project.

Another alternative to natural gas is light fuel oil, which can be used in many gas-fired boilers, combustion turbines and lime kilns, although that may mean investments to storage tanks, as fuel oil does not come from a pipeline like gas.

Reducing consumption eludes most mills

However, probably the most efficient way to cut energy costs is to reduce consumption. Most pulp and paper mills have multiple energy-saving opportunities, but only a few have reached the best available energy efficiency.

In most cases, the best return on money can be achieved with investments to the highest energy-consuming processes, such as refining, pumping and drying on paper-making, while in kraft pulp mills, the combination of evaporation, recovery boiler and turbine efficiency typically makes the biggest cost-competitiveness difference in a regional comparison.

To read the full version of this article subscribe to Fastmarkets news service, or to discover more about our new Cornerstone energy consumption tool talk to our team today. The tool gives visibility into the detailed consumption data by machine at every mill and for every product produced.

Case Study

Learn how to monitor packaging prices using cost and price indices and understand the underlying cost drivers, from material cost to labor, energy and more. Examples include cartonboard, liquid container and paper bag.

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