Opportunity cost of several methods for determining forest biomass terminal locations in Northern Sweden

Abstract

Long distance transportation of forest biomass is often unavoidable because the biomass is dispersed over large land areas. This is a problem that limits the development of biorefineries all over the world. The use of biomass terminals where forest biomass is transported to, stored, processed (mostly by mobile machinery), and reloaded can facilitate more environmentally friendly and efficient transportation to a biorefinery. The challenge is to identify the locations that should be selected for terminal establishment in order to minimize the cost of biomass procurement. In this study, locations for terminal establishment are proposed based on an optimization method (Combopt) that simultaneously minimizes the harvesting, transportation, and terminal costs for round wood and logging residues. The outcome of this method was compared with several other methods imitating situations with limited knowledge to estimate potential opportunity costs of potential knowledge deficiency when selecting terminal locations. The results of the Combopt method suggest that six terminals are required in order to minimize the overall cost of satisfying the estimated demand from the biorefineries. The opportunity cost of alternative terminal selection methods ranged from 3.1 to 35.4 million SEK (0.5–6.1% of total procurement cost). Methods that considered biomass relatively close to terminals had lower opportunity costs, together with methods minimizing transportation and terminal cost for the most common wood assortment. The methods and results could be applicable in other parts of the world were similar problems exists in forestry and other industries.