New stock exchange to create a transparent and sustainable biomass market

Date: 18/04/2018

Wood chips for energy purposes have formerly had an immature existence as a raw material with opaque prices and no official marketplace. The new stock exchange, BiomassPool, aims to create a transparent market with competitive prices and sustainability as central parameters.

Biomass such as wood waste and wood bi-products is a key factor in the green transition of Denmark and the rest of the world. Until now, it has had an opaque existence as raw material compared to other products such as grain, coal or power.

But not for much longer. BiomassPool is a brand new Danish stock exchange, where thermal plants and Combined Heat and Power plants can trade wood chips at transparent prices with professional contracts and a requirement for sustainability.

“The stock exchange have already made arrangements with three plants, District Heating Fyn, Hillerød and Assens as well as three unnamed suppliers”, says Kenneth Lykkedal, CEO and Founder, who developed BiomassPool through the past years and got a few investors on board.

The first auction, where purchase orders from the plants are matched with bids from possible suppliers, takes place in a few weeks. “By creating an effective marketplace, biomass will elevate into a new era and become a raw material in line with e.g. grain, sugar, coal and power”, says Kenneth Lykkedal.

Prices increased 30%
According to Kenneth Lykkedal, the price on wood chips has increased 30% the past few months. Due to a wet winter it has been difficult to extract wood chips from the forests in Denmark and in the surrounding countries. Concurrently, straw-fired plants have extorted pressure on the demand for wood chips, due to shortage of straws as a result of a wet harvest in the late summer. “It has been impossible to monitor the price increase, but we will be able to when the trading enters the real world”, he says. Until now the trading of wood chips and other tree products have occurred in relation to the motto: ‘every facility with own procedure and preferred supplier’. It is also the facilities, which gain the most with the new marketplace, and it is their responsibility to encourage suppliers to make business, Kenneth Lykkedal explains.

Sustainability and competition
District Heating Funen usually incinerate 110,000 tonnes of wood chips for DKK 50 million a year and is one of the country’s biggest buyers of wood chips. Their production manager Morten Brunse is satisfied with the new trading platform.

With a check mark in his purchase orders, he is now able to ensure that he is solely matched with suppliers who can prove that their wood chips comply with the sustainability requirement for forest replantation etc. Requirements, which are specified in the voluntary business agreement between the Danish plants and government.

“Through the stock exchange we are able to ensure that the trading corresponds to market conditions – something that is very important for us as a municipally-owned business, but has been very difficult until now due to the lack of transparency. Additionally, we naturally hope that the openness will strengthen the competition between the suppliers”, says Morten Brunse, who in the ongoing season bought almost 200,000 tonnes of woods chips, because straw has been difficult to obtain.

In practice the auctions proceed like this; buyers and vendors can make an offer until 9.30 am on Tuesdays, after which the auction begins at 10. The interested suppliers can then choose to adapt their prices, so the match the submitted orders which can vary regarding e.g. the sizes of the wood chips and delivery the following week or the next year.

At first, the buyers seem to gain the most but there are also advantages for the supplier. Amongst other things, the duration on a delivery offer from the supplier currently involves a couple of months without the supplier ensuring a sale. At a stock exchange, you know much faster if a quantity has been sold and if not, it can be offered to other potential costumers.

Source: Dansk Energi