Views on the international marketfor energy biomass in 2020:results from a scenario study

Jussi HeinimoDepartment of Energy and Environmental Technology,

Lappeenranta University of Technology, Lappeenranta, Finland, and

Ville Ojanen and Tuomo KassiDepartment of Industrial Management, Lappeenranta University of Technology,

Lappeenranta, Finland

Abstract

Purpose – The purpose of this paper is to clarify the alternative future scenarios for the internationalbiomass market until the year 2020 and identify underlying steps needed toward a vital working andsustainable biomass market for energy purposes.

Design/methodology/approach – Two scenario processes were conducted for the study. Aheuristic, semi-structured approach, including the use of preliminary questionnaires as well as manualand computerised group support systems (GSS), was applied in the scenario processes.

Findings – The scenarios estimated that the biomass market will develop and grow rapidly as wellas diversify in the future. The scenario analysis shows the key issues in the field: global economicgrowth including the growing need for energy, environmental forces in the global evolution, thepotential of technological development in solving the global problems, capabilities of the internationalcommunity to find solutions for the global issues, and the complex interdependencies of all thesedriving forces.

Research limitations/implications – Further research is needed involving analysis of theprobabilities of the technological and commercial elements in each scenario. It is also important toconceptualise the scale and directions of biomass trade streams and determine the influences of thescenarios from the viewpoints of different actors.

Practical implications – The results of the scenario processes provide a starting point for furtherresearch analysing the technological and commercial aspects of the scenarios and foreseeing the scalesand directions of biomass streams.

Originality/value – In this study, scenario processes supplemented by a GSS are applied forinvestigating the future development of the biomass market.

Keywords Group decision support systems, Energy sources, Energy management, Globalization,Sustainable development, Finland

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1750-6220.htm

The authors are deeply grateful to the participants in the scenario workshops as well as IEABioenergy Task 40, EUBIONET II, and Andrea Ramırez Ramırez at the Copernicus Institute ofUtrecht University for their contribution to the realisation of the international scenarioworkshop. This work has been conducted with the financial support of the ClimBus technologyprogramme of the Finnish Funding Agency for Technology and Innovation (TEKES).

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Received 12 March 2008Accepted 21 July 2008

International Journal of Energy SectorManagement

Vol. 2 No. 4, 2008pp. 547-569

q Emerald Group Publishing Limited1750-6220

DOI 10.1108/17506220810919063

1. IntroductionGlobal supply of energy is facing several increasing challenges. Energy consumption ison a moderate increase, especially in rapidly developing countries. The overall size ofthe world energy market nearly doubled between 1971 and 2003, driven by rapidexpansion in energy use in the developing world, where population and energy activityhave grown. The International Energy Agency (IEA) has projected an increase inprimary energy demand of 1.6 per cent per year until 2030, when the cumulativeincrease will be equal to half of current demand. At present, fossil fuels – oil, coal, andnatural gas – dominate the world energy economy, providing 80 per cent of the world’sprimary energy supply of 449 EJ/yr (IEA, 2005).

Increased international awareness of climate change has increased internationalcollaboration on environmental issues. Most of the industrialised countries havecommitted themselves to a significant decrease in greenhouse gas emissions up to 2012in ratifying the Kyoto Protocol. In the light of the UN’s Climate Change Conference2007 held in Bali and the ambitious targets of the European Union for renewableenergy, the mitigation of climate change will remain a strong trend over the next fewdecades. One of the most important means of attaining this goal is to increase theproportion of total energy consumption from renewable energy[1] sources. In addition,efforts to decrease dependence on fossil fuels and to diversify the energy supply arealso important factors promoting the use of renewable energy sources.

Biomass[2] is the largest source of renewable energy at present, coveringapproximately 11 per cent of the world’s total energy consumption (IEA, 2005). Severalstudies have researched the production potential of biomass for energy at local,regional, and global levels (Berndes et al., 2003). Most of the studies estimated that theuse of biomass for energy production can be increased considerably from the currentlevel over the current century, when fossil fuels become scarce and more expensive. Inview of the Kyoto Protocol, the use of biomass for energy production will increaseespecially strongly in the industrialised nations, which are aiming to decreaseemissions of greenhouse gases. The market for biofuels[3] is developing rapidly andbecoming more international. For example, the areas from which biofuels are procured,especially by large biomass users, are expanding quickly, and more biomass thanbefore is being sourced from abroad, including from other continents. It hasbeen observed that some areas have a biomass potential that exceeds their ownconsumption and that in some other areas the demand for biofuels surpasses the localproduction potential (Ranta, 2005; Smeets et al., 2007). Consequently, some areas seemto be becoming net suppliers of bioenergy[4] to areas that have fewer biomassresources.

Although biomass has the potential to become a more important source of energy,the remarkable increase in biomass use for energy requires parallel and positivedevelopment in several sectors, and there will be plenty of challenges to overcome. Avital and well-functioning international biomass market will be one of the key factorscombining the production potential and the growing demand for biomass. Thedecisions made by politicians, the strategies of market actors, and the direction ofresearch activities will have a significant influence on the future development of thebiomass market, and because of this several stakeholders and other partieshave ambitions to contribute to the development of the market. To support the positivedevelopment of the market and to make the most of the development, a more

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comprehensive understanding of the market dynamics is needed. For instance, thereshould be an increase in awareness of factors affecting future developments and inknowledge of interactions between the markets for biomass and other bio-products.

Systematic and proven methods are available for foreseeing alternative developmentpaths and increasing capabilities to confront unexpected development. Scenarioplanning is one of the most frequently applied methods for evaluating futuredevelopment routes. Several earlier scenario studies have investigated the futuredevelopment of energy and environmental issues on a global scale. For instance,the Intergovernmental Panel on Climate Change (IPCC) has created scenarios focusingon the future development of greenhouse gas emissions (IPCC, 2000). In addition, Brownet al. (2001) have studied scenarios focusing on a clean energy future. Their studyconcentrated on how the clean energy technologies are able to address the challenges ofthe energy and environment sector. Also Shell has utilised scenarios to identifyopportunities and challenges in the global business environment (Shell, 2005). Themethods of group assessments and group decision support systems provide tools for thescenario process to efficiently collect and refine knowledge from experts. Variousexamples of the successful application of the decision support system in scenarioresearch can be found; for instance; in the multi-period scenario development (Blanningand Reining, 2002), for the assisting decision makers in the promotion of renewableenergy sources (Georgopoulou et al., 1998) and in the strategic innovation processes(Bergman, 2005). In this study, scenario processes supplemented by group supportsystems (GSS) are applied to investigate the future development of the biomass market.

The main objective of the study is to clarify the alternative future scenarios for theglobal biomass market until the year 2020, and, on the basis of the scenario process, toidentify underlying steps needed towards a vital, functional, and sustainable biomassmarket for energy purposes. The sub-objectives that are addressed in the research areto determine and analyse the main factors influencing the development of the biomassmarket. Two equivalent scenario processes were conducted for this study. The firstwas carried out with a group of Finnish experts, and the second involved aninternational group.

This paper is organised as follows: an overview is presented of the biomasspotential and trading for energy. Then, the research methods and process that areutilised to meet the objectives are introduced, before the results from the scenarioprocess are presented. Following that, the results and the process are analysed and theresearch process discussed. Finally, conclusions are presented.

2. Overview of biomass potential and energy trading2.1 The long-term potential of biomass in the world’s energy supplyDespite the current minor role of bioenergy, biomass has, in the longer term, thepotential to become a much more significant component of the world’s energy supply.A review of 17 studies carried out in 2002 revealed widely different conclusions on thecontribution of biomass in the global energy supply – from below 100 EJ/yr to morethan 400 EJ/yr in 2050 (Berndes et al., 2003). However, it was clarified nonetheless thatthe largest biomass production potential will lie in large-scale energy plantationslocated in areas with a climate favourable for maximising the production of biomass.The major reason for the differences is that the most crucial parameters – landavailability and yield levels in energy crop production – are very uncertain and are

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subject to widely varying opinions. Recently, several new studies have addressed theissue (Hoogwijk et al., 2005; Smeets et al., 2007). In the most optimistic scenarios,bioenergy offers more than the current global energy demand, without competing withwood production, forest production, and biodiversity. Table I gives a summary ofbiomass production potential in the light of the latest studies, by biomass category, andshows the assumptions made in the determination of this potential. The biomassproduction potential as described in the latest studies seems to be best inLatin America, Sub-Saharan Africa, and Eastern Europe, as well as Oceania and Eastand North-East Asia, which have the most promise of becoming important biomassproducers in the long-term (Faaij and Domac, 2006).

2.2 International trade of biomass for energy purposesIn many areas, at regional and national level, the biomass production potential cannotmeet the demand. Typical examples are industrialised countries such as EU members,the USA, and Japan. On the other hand, there are areas where biomass productionpotential exceeds local demand – e.g. many areas of Sub-Saharan Africa andLatin America. However, local use of biomass is often more reasonable than exporting,and for this reason imported biomass will constitute only a limited proportion of theglobal energy use of biomass.

Ethanol, vegetable oils, fuel wood, charcoal and wood pellets are the most importantproducts that currently are internationally traded for energy purposes. Nevertheless,the international trade volume for these products is much lower than that for biomassfor other purposes. The scope of international trading of biomass for energy purposesin 2004 has been estimated at 0.8 EJ/yr. The trading represents approximately 5 per centof the total use of biofuels in industrialised countries. Indirect trade of biofuels throughtrading of industrial round wood and material by-products composes over two thirdsof the trade, with the remaining amount accounted for by products that are tradedprimarily for energy purposes, bioethanol, palm oil and wood pellets being the mostimportant commodities. It can be expected that also increasing amounts of othervegetable oils (e.g. soybean oil or jatropha oil) and solid biomass streams will be traded(Heinimo and Junginger, 2007).

Taking the local production and usage potentials into account, Hansson andBerndes have estimated the global biofuels trade flow potential between world regionsto be, in favourable conditions, 80-150 EJ in 2050 (Hansson and Berndes, 2006), whichcan be seen as a theoretical upper limit for international biofuels trade. Compared to thelong-term potential, the development of international trade of biomass for energy use isin its initial stage.

3. Methodology3.1 Scenario planningScenario planning is a structured strategic planning method that is used to makeflexible long-term plans. It is applied to policy planning; in organisationaldevelopment; and, more generally, when strategies are needed for testing againstuncertain future developments. Scenario planning is a method for learning about thefuture by understanding the nature and impact of the most uncertain and importantdriving forces affecting the future. Usually, scenario planning yields 3-5 divergingscenarios descriptive of a future situation. In a scenario, hypothetical situations are

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potentials

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interspersed with expected extrapolations of trends to list a combination of events thatdescribes how a situation might occur. The scenarios usually include plausible butunexpectedly important situations and problems that exist in some small form in thepresent day. Scenarios are possible routes to the future, but they do not represent anykind of probabilities in the future development. Scenario creation expands people’sthinking and simultaneously increases knowledge and understanding of the unknownsubject. Scenario planning helps policy-makers to anticipate hidden weaknesses andinflexibilities in organisations and methods. When disclosed years in advance, theseweaknesses can be avoided or their impact reduced more effectively than if similar,real-life problems were considered under the duress of an emergency. Scenarioplanning is especially useful when the research object is facing changes and when theuncertainty of the research question is high and there are multiple resolutions to theissue (Borjesson, 2007).

Earlier literature (Schwartz, 1996; Wack, 1985) emphasises that scenarios differfrom forecasts. For instance, according to the definition of Schwartz (1996), scenariosare “alternative plausible stories that may show how the world might develop”.Scenario planning approaches have been used in various organisations for decades;General Electric and Shell (Schoemaker and van der Heijden, 1992; Wack, 1985; Verity,2003) are well-known examples of large firms that have been among the pioneeringadopters of scenario approaches as strategic management tools. In strategic planning,scenarios are argued to be especially efficient when uncertainties related to businessand the future play a significant role in the industry (Walsh, 2005). However, scenariosmean different things for different people (Schoemaker, 1993) and can be analysed ondifferent levels quite flexibly. The flexibility and widespread applicability and the factthat the scenario literature demonstrates several schools of thought may, however, alsolimit their everyday use in companies (Verity, 2003) or lead to misuse of scenarios(Godet and Roubelat, 1996). At their best, however, they can aid in facilitating andstructuring the interaction between an organisation and its environment, sharingand disseminating individuals’ personal knowledge, illuminating future possibilitiesand threats, and building a holistic understanding of the alternative views of the future(Bergman, 2005; Schoemaker, 1993; Schwartz, 1996; Wack, 1985; Wilson, 2000).

The above-mentioned schools of scenario planning can be basically categorised asfalling into two main groups:

(1) the intuitive style, which emphasises alternative views, challenging implicitassumptions and organisational learning; and

(2) the formal style, which emphasises the use of computers, models, and processesgrounded in analytical rigour (Verity, 2003).

On the other hand, we can distinguish among three approaches as suggested byBergman (2005):

(1) the intuitive (Schwartz, 1996; Wack, 1985);

(2) heuristic (Schoemaker, 1991; van der Heijden et al., 2000); and

(3) statistical (mathematical) models (Godet, 1994).

Mathematical models for scenario development often become complex and thus mightnot be easily applicable for the purposes of this study, while, on the other hand,

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approaches that rely solely on intuitive processes in scenario development mightprovide results that are not reliable enough. In this study, the process model can betreated as a heuristic approach aiming to obtain a holistic picture of the issue with thehelp of a semi-structured phased process, which also includes some elements of anintuitive approach.

The construction of scenarios typically can be seen as a process with several phases.In the earlier literature, different authors present numerous ways to implement theprocess and different numbers of phases in the process. For example, Schoemakeridentified a total of ten steps for completing the scenario process (Schoemaker, 1993). Inhis review of previous literature, Walsh (2005) summed up the process in six mainphases:

(1) identification of future actionable issues or drivers of change;

(2) creation of a framework for conceptualising data pertaining to issues or drivers;

(3) development and testing of a large number of scenarios (e.g. 7-9);

(4) reduction to smaller numbers of ultimate scenarios (e.g. 2-4);

(5) construction of scenarios; and

(6) examination of scenarios and identification of issues arising from them.

Basically, the process can be simplified into four main phases as follows (Bergman,2005):

(1) Structuring the scenario process. This includes background analysis of thescenario context and delimitation of the focus.

(2) Exploring the scenario context. This includes determining the main stakeholdersand driving forces and the key environmental uncertainties that are changingthe operational environment. Also the significance of the main driving forces isexplored.

(3) Development of scenarios. This phase provides alternative future scenariosrelated to the issue being considered.

(4) Implementation of the scenarios. Stakeholders can formulate strategies thataccount for environmental changes and exploit future opportunities with anacceptable risk level. Scenarios also serve as a platform for the evaluation ofnew business ideas and policies, assessing their market potential and possibleimpacts, through, e.g. posing “what if” questions.

3.2 Group support systems in the scenario processScenario processes can be implemented flexibly in many ways and by using differentmanual and computerised group work methods or decision support systems inprocesses. If scenarios are used in the proper way and with the help of suitablemethods, there is a possibility of preventing the impact of important contributors todecision failure – namely, bounded rationality, a tendency to consider only externalvariables, the stickiness and friction of information and knowledge, and mental modelsthat include decision premises or policies (Chermack, 2004).

Thus, far, relatively few studies have focused on the use of GSS in the scenarioprocess. However, GSS have shown their possible efficiency in scenario processes aswell as in other areas of strategic planning. For instance, Blanning and Reining (2002)

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have studied the possibilities of GSS in multiperiod scenario development.Additionally, there are general benefits in supporting a group to promote itsco-operation and effectiveness via GSS, among them parallel communication amonggroup members, equal and anonymous opportunities to contribute ideas and opinions,elimination of exaggerated domination of a single participant in a meeting, thepossibility of rapidly determining the area of agreement and disagreement of the groupmembers, and management of the schedule and agenda of the meeting, as well aseffective automatic electronic documentation capabilities (Jessup and Valacich, 1992;Turban and Aronson, 1998).

These points may be helpful also in the scenario process, as the typical features ofscenario processes are complexity, uncertainty, and interdependency (Schoemaker,1993). When the context and focus of the study concern especially an emerging market,such as the international biomass market as in this study, the benefits of GSS haveeven greater potential in promoting the scenario process. Today’s GSS laboratories aredesigned to look like an ordinary meeting room with computers for each participant.GSS are equipped with software that aids and supports group decision-making. GSSlaboratories usually allow 10-14 persons’ participation for efficient group work to meetthe targets set (Elfvengren, 2006).

3.3 Process approach of the studyThe approach of the study involved collecting and refining tacit knowledge of experts toclarify the visions for the international biomass market. Figure 1 depicts the process thatwas followed in two separate and partly parallel processes, each with a separate group ofexperts participating. The scenario process can also be seen as a heuristic process(Schoemaker, 1991) with intuitive and systematic elements, and it can also been seen as a“participative” scenario process (Rotmans et al., 2000) wherein business decision-makersand policy-makers also play a significant role and thus does not involve only a smallgroup of technical experts who are to be responsible for design and development ofscenarios. The process in its entirety takes several months to complete.

The preliminary work for structuring the scenarios was carried out with the help ofliterature reviews concerning the issue and two preliminary questionnaires. The aim ofthe preliminary questionnaires was to collect a list of driving forces influencing thebiomass market as initial data for the workshops. Both questionnaires were carried outvia the Internet by means of the Webropol software tool. The questionnaire sent tointernational experts, which mainly concentrated on driving forces, included 11questions. It was sent to the workshop participants and the members of the EUBIONETII project. Driving forces were elicited by asking which factors promote or hinder thedevelopment of the bioenergy market and the use of bioenergy in the transportationsector; in energy production; and in the generation of heat, electricity, or both. In total, 14experts from 27 responded to the questionnaire. The scope of the questionnaire sent toFinnish experts was larger: it focused both on scale-type questions and on gathering thedriving forces influencing the international biomass market. In addition, in the Finnishquestionnaire the questions on, e.g. driving forces, were posed from the Finnish point ofview. The questionnaire in the Finnish scenario process was sent to a total of 90 experts,of whom 32 answered. The questionnaire contained, all in all, 21 scale-type items andopen questions concerning the development of the international biomass market fromthe Finnish point of view. The respondents represented companies, research and

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Figure 1.Phases of scenario

processes applied in thestudy

Preliminary questionnaireon driving forces

Literature reviews Expert knowledge

Mapping of theinfluencing driving forces

Clustering of thedriving forces

Evaluation of thesignificance of the clusters

Definition of Scenarios’dimensions and preliminary

naming of scenarios

Formulation of scenariosand presentation of

formulated scenarios

Formulation of preliminaryvalue networks and

business models relatedto the scenarios

Adjusted scenarios

SWOT analysis andcommenting on scenarios

Fine-tuned scenariodescriptions

Analysis of the scenarios

Expertise of workshopparticipants

Further research

WORKSHOP

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development organisations or teaching institutions; public authorities; and otherassociations or interest groups.

A significant proportion of the work was completed in two equivalent intensiveone-day workshops that included the phases from “Mapping of the driving forces”through “Formulation of preliminary value networks and business models” (Figure 1).The results of the preliminary questionnaire (i.e. the experts’ opinions on the maindriving forces of the international biomass market, and the literature reviews) werethen analysed and utilised as preliminary data for the workshops. The participants inthe workshops then expressed their opinions on the additional driving forces. The firstworkshop was conducted from the perspective of Finnish actors and the second froma global perspective. A total of 27 experts participated in the workshops, in which thetentative scenarios were formulated. The international scenario session was held inthe Policy Lab of Utrecht University in The Netherlands, and the Finnish session wasat the GSS laboratory of Lappeenranta University of Technology. Both groups ofexperts applied the same process approach. The first half of the workshop wassupported by computerised GSS, with the same software, GroupSystems, utilised inboth cases.

By means of computerised support systems, the workshop participants could veryefficiently and anonymously generate a large number of ideas for driving forcessimultaneously in about 10 min. Then the participants also had the possibility tocomment anonymously on the ideas generated and ask questions about them. Thesetwo steps together took about 20 min.

After that, so-called clusters –, i.e. groups including similar types of driving forces –were created and named through a general discussion. The driving forces were thengrouped into appropriate clusters. A suitable number of clusters is generally six to tenclearly distinct groups. The clusters’ significance in relation to the development of theinternational biomass market was then evaluated by the workshop participantsanonymously with the help of the GSS. The scale used in the voting was 1-10(10 ¼ very significant cluster).

The latter parts of the workshops were supported by manual group work. First, thewhole group of participants formulated the scenario dimensions, through a generaldiscussion and partly on the basis of the prioritised groups of driving forces.Alternative future development routes (i.e. scenarios) were then named and positionedon a map of dimensions, showing the drivers and areas emphasised in each scenario.The experts then formulated one to two pages of tentative descriptions of each scenariothe scenarios in smaller groups, including the state of the international biomass marketin 2020, the driving forces influencing the development, and the path leading to thefuture state. In the Finnish workshops, the participants also had time for preliminarydiscussion of value chains, networks, and actors related to the scenario, in the samesmall groups. The international workshop had difficulties to run to time and adiscussion on value networks was passed. Each group presented their scenariodescriptions, and the others commented on the presentation. The researchers followingthe sessions took notes about comments and ideas came up.

After the workshops, researchers adjusted scenario drafts were sent them to theparticipants for comments. The participants were also asked to consider the strengths,weaknesses, opportunities, and threats included in the scenarios. As a result, the scenariodescriptions were validated and further fine-tuned and analysed by the researchers.

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In addition, they perfected SWOT analyses for analysing strengths, weaknesses,opportunities, and threats of each scenario.

4. Results4.1 Preliminary surveysDespite the different perspective of the preliminary questionnaires amonginternational experts and in Finland, the gathered driving forces concerned the sameissues on a large-scale, e.g. the price competitiveness of bioenergy, subsidies, taxes,R&D, imbalance between supply and demand, international agreements andsustainability. In addition, both the international and Finnish bioenergy expertsagreed that the trade of liquid biofuels will develop strongly.

At an international level, the most frequently mentioned promoting factors ofinternational biomass trade were the high fossil fuel prices together with environmentalissues and national or international agreements, action plans and legislation. In addition,research and development activities, e.g. new technology development, subsidies andsharing knowledge “how to utilise biomass resources”, were considered as an enhancingfactor for the utilisation of bioenergy. A remarkable observation is that the number ofpolitical promoting factor was the largest. It can be deduced that political decisions andactions probably are the most effective way to enhance the development of the bioenergymarket and the utilisation of biomass. An important factor, which can hinder thedevelopment of the utilisation of biomass, is logistics. At the moment, there aredifficulties all the way from the collection of biomass from the source to the utilisationand commercialisation: for instance low competitiveness because of a free energymarket, high supply chain costs, lack of capital and appropriate technology andexpensive investments. In addition, biomass is considered difficult to handle and use atthe consumer level. The sustainable availability and production of biomass is alsoquestioned. The most hindering factors can be related to economical, social andtechnological issues. Decision-making of politicians does not seem to be a hinderingfactor at least on a large-scale, although at the moment there are, according to experts, nosufficient financial incentive systems and standardisation.

Finnish experts think that the bioenergy sector will grow and diversify in Finland inthe future. The entire bioenergy sector, except the production and use of peat, isexpected to grow steadily or strongly. Over half of the respondents agreed that inFinland especially the production of forest chips and wood pellets will develop verystrongly. Also the domestic use of wood pellets and production of liquid biofuels areestimated to grow slightly or quite strongly. There was no remarkable differencebetween the opinions and answers of different respondent groups.

4.2 Driving forces and clustersIn the international scenario workshop, in total, 81 separate driving forces affecting thebiomass market were ideated. The driving forces were grouped into 10 clustersrepresenting larger entities (Table II).

Economical and political aspects are the first ones in order of importance whenthinking about the development of the international bioenergy market. The economycluster consists mainly of efficiency, cost-efficiency and competitiveness issues, andthe policy cluster is compounded of a great variety of political instruments, e.g.agreements, taxes, subsidies and obligations. They also include the largest amount of

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driving forces, ten in the economy and seventeen in the policy cluster, which alsoimplies their significance in the development of the international bioenergy market.The number of different driving forces in the environment cluster is not at the level ofthe economy and policy clusters, but it became clear during the workshop discussionthat environmental driving forces, e.g. climate change, emission targets and the use offossil fuels, have a remarkable role in the development of the international bioenergymarket.

Even if the consumer and social clusters are at the tail end in the order ofimportance, they contain important and maybe crucial driving forces which canchange the pace of the bioenergy trade. Ultimately, customers and consumers are thekey factors in the development of bioenergy trade because their positive opinions couldmake large-scale bioenergy trade acceptable. Also social aspects have to be taken intoaccount to ensure sustainable development all over the world, e.g. the expansion ofinternational trade may cause unfavourable development in poor areas if large-scaleexport of local biomass starts. According to the international experts, a balancedapproach between social, economical and environmental issues is needed.

In the Finnish scenario drafting during a first part of the workshop, 77 separatedriving forces were delineated and the forces were grouped into six clusters (Table II).It can be noted that the economy and policy clusters are in the first place in order ofimportance in influencing the development of the international biomass market. Thelow deviation of the economy and policy clusters indicates the unanimity of theparticipants about their significance. The group of economical driving forces consistsfor instance of price, cost and economy development, whose changes strongly affect the

Cluster Number of driving forces per cluster Significancea Deviation

International workshop1. Economy 10 8.57 1.162. Policy 17 8.50 1.563. Environment 7 8.00 1.844. Technology 8 7.50 1.835. Production 7 7.29 2.136. Trade 8 6.86 2.147. Communication 7 6.79 1.538. Consumers/suppliers 4 6.57 2.509. Entrepreneurs 9 6.14 2.44

10. Social 4 5.86 2.85Total 81Finnish workshop1. Economy 12 8.55 0.932. Policy 18 8.45 0.933. Competition 15 7.18 1.404. Environment 7 5.82 1.335. Technology 17 5.55 1.976. Globalisation 8 5.09 1.51Total 77

Notes: aThe mean value of the votes. The scale used in the voting was 1-10 (10 ¼ very significantcluster)

Table II.Clusters of driving forcesin the workshops

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consumer habits of energy and therefore are linked with the development of biomass.The policy cluster includes agreements, taxes and legislation, and in addition, theharmonisation of the biomass market. Finnish experts agreed that, together withthe economy and policy clusters, competition issues have an important role in theinternational biomass market. Within the competition cluster, attention is paid amongother things to different usage for example in the case of forest biomass, i.e. bioenergyproducers and forest companies are competing for forest biomass in some cases.Finnish experts also recognised that globalisation creates special features on thebioenergy market even if it is put in the tail end in order of importance. In addition toglobal energy consumption issues, Finnish experts also highlighted the challenges thatseparate energy policies and cultures create. A global market and trade necessitatenetworking and international co-operation, which can be challenging for smallercompanies.

4.3 ScenariosThe clusters and their significance were taken into account in definition of thescenario dimensions. In both workshops, globalisation and economic and politicalconsiderations were included in the scenarios representing the state of the internationalbiomass market in 2020 (Figures 2 and 3). In the international workshop, four scenarioswere drafted. The Finnish workshop for one crafted three preliminary scenario descriptions.

Figure 2.Scenarios created by the

international group ofexperts. Scenario

dimensions are as thetitles of axes presented asnormal text and the names

of scenarios in italics.Central ideas of each

scenario are presented intext boxes

Economy andwelfare

Environment andPolicy

Global Local

“Rich global village” “Rich local village”

“Green prosperous” “Small is beautiful”

Regional barriers limit theglobal trade, and emphasisis on the local market withrelatively small actors, as

well as on economicperformance and the

maximisation of economical welfare.

In the “Green prosperous”World, emphasis is on the

global market and importantglobal actors as well as on

environmental, policy relatedand social aspects and

driving forces.

The energy consumption hasdecreased and the emphasisis on the local market withrelatively small actors, aswell as on environmental,policy-related and social

aspects and driving forces.

Emphasis is on theglobal market and

important global actors, aswell as on economic

performance andmaximisation of economic

welfare. The world is seen asa papradise full of biomass

ready for utilisation.

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The international workshop ended up using scenario dimensions similar to IPCC (2000).However, the clusters and their importance were naturally taken into account in the craftingof the scenario descriptions. A comprehensive descriptions of the scenarios are found inHeinimo et al. (2007).

In the Finnish workshop, the ideas were grouped into six clusters, economy and policybeing the most important groups. Also in the international workshop the clustersincluding driving forces related to economy and policy were considered as the mostimportant groups among the ten clusters that were created. The policy cluster alsocontains the largest number of driving forces in both cases, and driving forces in it have aninfluence on each alternative scenario created. It also stresses the significance ofpolicy-making in the development of the international biomass market. Although theenvironment cluster was not the first in order of importance, environmental aspects havenotable roles in the scenarios of both workshops. A significant observation is that theinternational experts agreed that communicational aspects, such as motivation andpromoting the image of bioenergy as well as customer awareness, are important, togetherwith other forces, in enhancing the development of the international biomass market andtrade. In addition to the communication aspect, consumer and entrepreneur perspectiveswere highlighted more in the international workshop than in the Finnish workshop. Theinternational group of experts stressed stable investment and market conditions asan enhancing factor. Finnish experts, in turn, partly concentrated on more detailed aspectsof the international biomass market, in the technology cluster, for instance.Besides, the technology development, quality aspects were also strongly emphasised.

Figure 3.Scenarios created by theFinnish group of experts.Scenario dimensions areas the titles of axespresented as normal textand the names of scenariosin italics. Central ideas ofeach scenario arepresented in text boxes

Policy and environment“The EU rolls”

Technology and competition“Technological vision”

Global and economy“Energy capitalism”

The emphasis of the scenario is onenvironmental issues that strongly

affect the politics of the energysector. The EU has also become theforerunner of renewable energy,and

energy consumption has grown.

“Technological vision” stressesthe importance of know-how,

technology and efficiency.Distributed energy systems are in use in both heat and

electricity production.

“Energy capitalism” is a scenariowhere commodity exchange of biofuels has become true andlarge quantities of bio-based

products are traded.

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It was recognised in the Finnish workshop that international standardisation related to thetechnical characteristics of biomass fuels is an important subject promoting thedevelopment of the biomass market.

A significant observation is that the international experts agreed thatcommunicational elements, such as motivation and promoting the image of bioenergyas well as customer awareness, are important, along with other forces, in enhancingthe development of the international biomass market and trade. In addition to thecommunication angle, consumer and entrepreneur perspectives were highlighted morein the international workshop than in the Finnish one. The international group ofexperts stressed stable investment and market conditions as an enhancing factor.Finnish experts, in turn, concentrated in part on more detailed aspects of theinternational biomass market – on the technology cluster, for instance. Besides,technology development, quality aspects were strongly emphasised.

5. Discussion5.1 Evaluation of the scenariosReviewing the scenarios and the intermediate results of the processes, includingthe preliminary questionnaire, driving forces, and clusters, enables identification of thescenarios that will lead to the most desired outcome. Accordingly, the worst scenarioscan be identified. The international biomass market is a broad issue, and, depending onthe position and viewpoint of the stakeholder, analysis will yield various outcomes asthe most desired scenario.

The key characteristics of the scenarios crafted by the international group arerepresented in Figure 4. When considering the volume of international biomass trade,“Rich global village” would most likely result in the most voluminous trading globally.Also a strong fear of high fossil fuel prices intensely boosts the growth of internationalbiomass trade. However, the biomass trade is only seen as a means to gain economicprosperity and it is centred into the hands of a few leading players, who set the rulesand dominate the market. The activity as a whole is effectiveness orientated and thelarge trade volumes and internationalisation of the biomass market are not the onlygenerally accepted objectives concerning the international bioenergy trade. The mainpriority along with the large trade volumes is to develop the biomass market accordingto the principles of sustainable development. The overall attitude in “Rich globalvillage” might be too self-centred to meet this objective. “Small is beautiful” for onewould be a proper option in terms of sustainable development, because people areaware of environmental issues and it can be called a “recycling society”. However, ifdoes not qualify because it is an isolated community and trade barriers are set toprevent the development of international trade. “Rich local village”, on the other hand,would be the worst case scenario, because its two main priorities are the localisation ofthe biomass market and economic performance, paying less attention to ecologicalaspects. On the grounds of the objectives, large trade volumes internationally and theuse of biomass in accordance with sustainable development, “Green prosperous” seemsto be the scenario with the most desired results. It rises to the challenge of extensiveinternational trade and sustainable development of the biomass market.

The key characteristics of each scenario from the Finnish workshop are representedin Figure 5. From the global perspective of the vital and well-functioning biomassmarket, “The EU-rolls” would be the future state to reach for because a cohesive

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Figure 5.The main features of thescenarios created by thegroup of Finnish experts

Policy and environment“The EU rolls”

Technology and competition“Technological vision”

Global and economy“Energy capitalism”

· Harmonised subsidies in the EU· Wide import of bio-based products to the EU· Security of energy supply· Environmental issues· European-wide green electricity certificates· Clear usage targets of bioenergy

· Commercialisation of key bioenergy technologies· Decentralised and efficient production units· Biofuels commercially available (spot-market, exchanges)· Certified biomass products· Biorefineries

· Free trade and global market of biomass· Procurement of biofuels from different continents· Acquiring large land areas· Conflicts between local people and big companies· No subsidies for bioenergy and agricultural production

Figure 4.The main features of thescenarios created by thegroup of internationalexperts

Economy

Environment andPolicy

Global Local

“Rich global village” “Rich local village”

“Green prosperous” “Small is beautiful”

· Trade barriers (import duties)· Economic performance· Local market· Limited resources· Efficiency in terms of economical welfare

· Certification system for sustainable bioenergy trade· International agreements steering the development· Education· Positive public opinion for bioenergy

· Isolation/localisation· Low international trade· Recycling society· Environmental awareness

· Trade from key locations· The EU as a leader· Focus on existing resources· No trade barriers· International commodity market of biomass· Fear of high fossil fuel prices

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biomass market area has taken form, and incentive and subsidy systems have beenharmonised. Also clear use-targets of biomass and bioenergy are set to stronglyenhance the use of biomass and bioenergy. In addition, environmental aspects affectthe development of the biomass market according to the general objective connectedwith the biomass market development. The other two scenarios – “Technologicalvision” and “Energy capitalism” – are not as wide in their outlooks.

From the Finnish national point of view neither the “EU-rolls” nor “Energycapitalism” would be the best choice for which to strive. In “Energy capitalism”, thepossibilities of a single state to influence the energy market have decreased, and the“EU-rolls” will lead a remarkable import of bio-based raw-materials and fuels.“Technological vision”, for one, would be the future state of bioenergy markets tostrive for in terms of Finnish success. Finland has a vast amount of technologicalknowledge and long-term experience on the utilisation of wood in energy production.In addition, Finland has know-how to conduct research and development activities inthe field of bioenergy, which are the main priorities in the “Technological vision”scenario. In addition to the research and development activities, attention shouldbe paid to basic research in the field of bioenergy. Finland should also promotethe production of liquid biofuels and heat and power production in decentralisedproduction units, which would improve economical vitality in all parts of the country,pull down regional unemployment and reduce, e.g. the transportation costs ofraw-material from source to production unit as well as enable more efficient usageof by-products, e.g. from harvesting and other local production of bio-basedraw-materials. In this scenario, forest derived biomass is an important source ofenergy and Finland has the great potential to benefit from it. Finland should emphasisemore and more the significance of the knowledge related to the whole forest energychain. Also integrating the production of liquid biofuels into forest industry and plantsopens up new opportunities. As a whole, Finland should invest in a position as ahigh-level bioenergy technology and knowledge society and thus improve itscompetitiveness at the global level.

One strong similarity can be found between the scenarios created by theinternational and the Finnish experts: all scenarios foresee increased utilisation ofbiomass as an energy source. In addition, all scenarios include a few other commonfeatures that can be regarded as critical factors defining the future development ofthe biomass market:

. price competitiveness of bioenergy;

. energy policy (taxation, subsidies, and R&D);

. imbalance between biomass supply and demand (resources);

. international agreements;

. sustainability issues of the utilisation of biomass; and

. strong development of liquid biofuels in the coming years.

From the standpoint of a vital and well-functioning international biomass market, thescenarios “Green prosperous” and “The EU rolls” will have the most desirableoutcome. These scenarios include several ideas about the actions that should berealised before the desired state is achieved. At a global level, the fundamentalrequirement for a well-functioning international biomass market is the removal of

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trade barriers. The global “green” policy derived from international climateagreements also has to be prioritised. A strong policy is needed to guide actionstoward global and sustainable development of the biomass market. At a regional level,such as in the EU, national subsidy schemes for bioenergy often distort the market forbiomass and result in several separate market areas for biomass. The global biomassmarket has to be seen as an opportunity, and countries should recognise theimportance of worldwide co-operation to ensure the positive development of the globalbiomass market. A well-functioning certification system ensuring that biomass isproduced in a sustainable way is seen as a needful tool to promote the market.Dissemination of information to consumers is important because positive publicopinion has a strong influence on politicians. It is impossible to develop the biomassmarket if, at the customer level, biomass is regarded as an unsustainable energysource. “Green prosperous” stands for a strongly developing biomass market full ofopportunities. Therefore, attention must be paid to research and developmentactivities, which should concentrate on the development of production technologiesand make use of potentials of new raw-material resources (e.g. crops) as well as onbusiness opportunities. In the EU, the emphasis should be shifted from national energypolicy measures toward harmonised subsidy systems for bioenergy. Furthermore, theimport of biomass to the union should not be limited by political measures but seen asa cost-effective and sustainable measure to achieve the challenging climate targets.Also strong coupling of environmental elements and biomass market development isnecessary.

5.2 Discussion of the methodology and the scenario processThere exist alternative methods of future studies which can be applied to clarify thefuture views of international biomass market. Generally, future studies can includemethods for, e.g. collecting information, refining and integrating information, and forcreating alternative views on future.

In this paper, the main emphasis was to clarify the alternative scenarios in anemerging market. For this purpose, the use of widely known and utilised scenarioprocess approach was a clear choice and methodological starting point in the researchdesign. However, the scenario process itself, as a whole, may include severalalternative supportive methods that can be utilised.

In this study, the good access that researchers had to expert networks to Finnishand global networks made it well possible to utilise the expertise knowledge in theearly phases of the research. For collecting the information that in this case was relatedto the influencing factors and driving forces of biomass market development, aweb-based expert survey was implemented. Other type of alternative orcomplementing methods in this type of research can be, e.g. studying political,economic, social, technological, environmental and legal factors in a structured wayapplying PESTEL analysis (Walsh, 2005) or collecting expert information via DELPHImethod (Linstone and Turoff, 1975). Some aspects of these and also the availablequantitative statistics were utilised in this study for complementing the informationcollected from the chosen experts.

The collected driving forces were then also revisited and complemented in theGSS-based workshop. On the basis of earlier experience and the general benefits ofusing GSS in the complex problem areas, the use of GSS was here limited to the early

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phases of the workshop. The creation of scenarios was made by manual group workafter the structuring and categorisation of driving forces with the help of the GSS.

On the basis of a synthesis of various methodological choices we developed thenovel approach which is presented in Figure 1. The aim of the phased process was tooptimise the benefits of various supporting tools by using them in the right phases ofthe process in a right way. The use of GSS in this heuristic scenario process isgrounded on the basis of its expected efficiency and quality of results in this problemarea, which:

. is wide, complex and not easily structured by nature;

. requires the participation of large number of experts who may have divergentopinions on topic; and

. will have future influences on multiple areas, people and organisations.

According to the direct feedback given by the participants in the process and theworkshops, GSS were seen as a positive means for achieving the objectives specified.The main benefits of the workshops were mentioned to be efficiency and productivity,better handling of the whole complex issue, anonymity in respect of sensitive issues, agood work atmosphere, and open discussion of the subject. Criticism was relatedmainly to the handling of the schedule and lack of time. For instance, in theinternational workshop the description work on the scenarios would have requiredmore time because the discussion was very lively in the small groups, participantsrepresented very different types of organisations and cultures, and there were alsolanguage barriers in relation to some concepts. On the other hand, to achieve success inthe scenario process in general and a multidisciplinary viewpoint on the complex issue,it was very important to have a heterogeneous group of people, representing differenttypes of organisations, as well as different socio-economic and cultural factors,influencing the description of alternative scenarios. As a whole, the internationalbiomass market forms a complex and extensive subject and therefore there were slightdifficulties in putting the pieces together.

6. Conclusions and recommendationsThe development of the international biomass market is a very broad issue, the generalcharacteristics of which are:

. complexity;

. uncertainty; and

. interdependency.

Because of these characteristics, a heuristic, semi-structured approach to the scenarioprocess was presented, including the use of preliminary questionnaires as well asmanual and computerised GSS.

The international group of experts saw economic development and welfare versusenvironmental and social policies as the main driving forces at a global level. Thecontradiction between economy and environment is not visible in the scenarios inthe form of a particular level or speed of economic development. This may dependon the fast development of technologies in each case, though in different directions.The other dimension in the scenarios of the international expert group was global

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versus local aspects in the evolution of the world energy economy as driving forces inthe scenarios. Also, here the outlooks are different at a general level, but bothdevelopments appear positive on the whole. A critical observer might say that theeconomy may not attain at the local level the economic benefits associated withthe global word.

The Finnish expert group consciously applied a Finnish perspective on the energyfuture of the next few decades. According to them, in total, three dimensions featuredin the alternative driving forces of the energy future: EU domination in the “The EUrolls” scenario, global market forces in the energy market in “Energy capitalism”, anddomination of technology and competition in the “Technological vision” scenario. Allof these scenarios bring different and varying elements into the energy future for asmall open economy such as Finland.

An overall conclusion drawn from this scenario analysis is that of the enormousopportunities related to the utilisation of biomass as a resource for global energy use inthe coming decades. The current use of bioenergy is about 50 EJ/yr, and the potential ofbiomass as an energy source in 2050 ranges from the current level of use to 400 EJ/yr.This range is so wide that serious questions arise relating to conclusions based onthese analyses. More research is needed to understand future bioenergy evolution. Thescenario analysis does, however, show the key issues in the field:

. global economic growth, including a growing need for energy;

. environmental forces in the global evolution;

. the possibilities of technological development for solving global problems;

. the capability of the international community to find solutions for these globalissues; and

. the complex interdependencies of these driving forces.

The study could be criticised for the fact that its key element – “the biomass trade atthe global level” – became too dominant a factor in the evaluation. This may havebiased the results toward utilisation of bioenergy.

The scenarios were seen as a useful tool for analysing the complex, uncertain, andinterdependent whole of energy development at the global level. The scenarios arepossible routes to the future. They do not represent any kind of probabilities related tofuture development. The scenarios created give only one overview of how the use ofbioenergy and biomass markets may look in 2020. Despite this, the scenarios offer agood overall view of the alternative future states of the international biomass marketand therefore suggest that there is not only one possible path to take but are severalalternative ways. The creation of the scenarios does not mean that one and only onescenario will be the reality in the year 2020; in fact, the scenarios may be realised inparallel. This may help to identify possible future events and development in thecoming decades.

The scenarios created in the study reinforce the picture of the future of theinternational biomass market as a complex, multi-layered subject. Many different andcredible alternative future states show that the biomass market will develop and growrapidly as well as diversify. The results of the scenario process also open up newdiscussion and provide new information and collective views of experts for thepurposes of policy-making. For firms, the scenarios provide knowledge that can be

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utilised in strategic decision-making and, e.g. in technology roadmapping ofalternative future development routes. The tentative scenarios at the firm level needto be focused on more precise action scenarios and on ways to develop new businessmodels and innovative product and service concepts for dealing with the challenges ofthe future in the international biomass market.

Further research is needed here also, for analysis of the probabilities of thetechnological and commercial aspects of each scenario as well as on what each scenariomeans in quantitative terms. For the practical use of the scenarios, it is also importantto conceptualise the scale and directions of biomass trade streams and determine theinfluences of the scenarios with the help of quantitative research from the viewpointsof different actors in the value network.

Notes

1. This refers to renewable non-fossil sources of energy (wind, solar energy, geothermal energy,wave and tidal energy, hydropower, biomass, landfill gas, sewage treatment plant gas andbiogas).

2. This refers to the biodegradable fraction of products, wastes, and residues from agriculture(including vegetable and animal substances) and forestry and related industries, as well asthe biodegradable fraction of industrial and municipal waste.

3. Fuels produced directly or indirectly from biomass. The biofuel may have undergonemechanical, chemical, or biological processing or conversion or may have had a previoususe. The term refers to solid, gaseous and liquid biomass-derived fuels.

4. This refers to energy derived from biofuel.

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Corresponding authorJussi Heinimo can be contacted at: jussi.heinimo@lut.fi

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