Transport Network Optimization for Wood Pellets from Brazil to Europe

As biomass trade starts to emerge in the international arena, this market starts to gradually take its form. Many rules to standardize the biomass market are relatively new or still absent. New opportunities but also new challenges emerge with the increased presence of biomass in the global trade market. Biomass is the oldest source of energy in the world and also the only energy source that can provide energy in a continuous base. Apart from that, Biomass is one of the energy sources that has made the gradual decrease of world’s dependency on coal and petroleum possible. Despite the strong advantage of being a clean energy source and able to increase security of energy supply, its peculiar characteristics makes the gradual swap from fossil fuel to biomass a difficult task. Its low-density, expensive densification process and costly transport logistics makes biomass supply expensive. Governmental incentives and schemes supporting the use of biomass is so far the most efficient way to make this commodity competitive. The main objective of this thesis is to find the most cost efficient transport network of the proposed route. Apart from that, this thesis also aims to set a hierarchical framework for the transport network of wood pellets from Brazil to Europe. Brazil, the origin country is expected to become a frontrunner in the wood pellet business. All the necessary conditions to become a major producer of wood pellets are present in Brazil: Climate, land availability, availability and low cost of its working force and conversion technologies. The final destination, Northwest Europe is a region that has become one of the main wood pellet consumers in the world. For the Port of Amsterdam, the ambition to become one of the main hubs of Biomass, stimulates initiatives to investigate the real prospects of Brazilian pellets export to Europe. Despite all technology improvements, densification costs for wood pellets still represents a big share of pellets final price. This thesis revealed that approximately 53% of final pellet costs in Brazil is represented by production cost. The other 47% is determined by logistic costs. Production costs are identified to be around $76/ton, Road transport in Brazil $20/ton, Brazilian Port costs $5/ton, Ocean maritime costs $35/ton, European Port costs $5.5/ton and Barge for pellets distribution into Europe $3/ton. These figures were calculated taking into consideration a handymax ship carrying 47.000 tons of pellets. On the logistics side, road transport and ocean transport costs have been found as the two main components helping to increase pellets final price. Coastal location of pelletizing plants is a determining factor of supply chain profitability. Moreover, all the Transport Networks proposed face trade offs as a form to become more cost efficient in transporting wood pellets to Europe. By improving one aspect of the network, another aspect worsens. The average cost for ready to burn and delivered wood pellets in the Brazil-Europe route were found to be ranging from $142-173/ton. Finally, from all Transport Networks introduced Multiport Network was accessed as the most cost efficient network.