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1 s2.0 B9780444634337500778 Main
1 s2.0 B9780444634337500778 Main
1 s2.0 B9780444634337500778 Main
Abstract
Biorefinery is emerging as a possibility for improving the business model of forest
products companies, however introduces significant market, technological and financial
challenges which must be systematically addressed. For sustainable design decision
making, economic, environmental and social criteria should be addressed. Different
tools are required to analyze the performance of potential biorefinery strategies from
each of these perspectives. Such tools provide relevant criteria to be used by a multi-
criteria decision-making (MCDM) framework. This paper presents a systematic
methodology for designing the biorefinery which uses PSE tools, including market
analysis, techno-economic study, cost accounting, pinch analysis, life cycle assessment
(LCA), supply chain (SC) analysis, and ends with an MCDM framework for identifying
promising strategies for a given company. Such methodology aggregates the impacts
into sustainability scores and helps evaluate strategies based on an overall performance.
products and technologies, capabilities of existing SC assets, and potential partners. The
practical way is to employ a hierarchical methodology that addresses these factors in a
stepwise manner. Biorefinery strategies are defined given the competitive position of
the company. Then, PSE tools are applied to evaluate each strategy. Finally, an MCDM
framework is used to identify the best strategy specific to the company’s values. This
paper presents such systematic methodology for designing the biorefinery using PSE
tools. The methodology includes market analysis, techno-economic study, cost
accounting, pinch analysis, LCA, SC analysis, and MCDM. The basic idea of this
methodology was presented in FOCAPD 2009 and was published in Computers &
Chemical Engineering special issue (Mansoornejad et al., 2010).
2. Problem statement
A forestry company plans to implement biorefinery and wants to identify profitable
product/process portfolios, partnership models, robust SC strategies, and promising
economic and environmental implementation strategies. PSE tools are employed in a
step-wise manner, provide criteria and assign score to each strategy from a specific
perspective. The unpromising strategies are screened out in each step based on the
scores. Via an MCDM and by using all provided criteria, few remaining strategies will
be compared and the most promising strategy will be identified.
3. Methodology
Figure 1 depicts the hierarchical design methodology.
product portfolios (Chambost & Stuart, 2009). First, a list of potential products,
processes and partners (procurement, technology provider, transportation, sales) is
defined based on the competitive position of the company, i.e. access to feedstock,
potential markets in its vicinity, existing processes and SC assets, and financial position.
Product opportunities are investigated based on market, economic and product specific
information such as product functionalities, market size and growth, market saturation
and basic margins. In the second stage, product families are ranked using a SWOT
analysis which helps identifying strengths, weaknesses, opportunities and threats of
each product within each family. The outcome of this methodology is a set of ranked
product portfolios defined based on company’s competitive position. In the next steps of
the hierarchical methodology, product portfolios are evaluated using PSE tools which
analyze return on investment (techno-economic analysis), environmental performance
(LCA), flexibility, i.e. which set of products introduces a better potential for flexibility
(SC analysis), sustainable partnership models (SC analysis).
3.2. Techno-economic analysis identifies feasible technologies that can be
employed for producing targeted products (Hytonen & Stuart, 2010). After identifying
feedstocks and their prices, existing and emerging technologies are identified and
process options are defined. Next, capital and operating costs, revenues and profitability
are estimated as a function of plant capacity, and sensitivity analysis of internal rate of
return (IRR) is performed. Finally, risk assessment is carried out and unpromising
process options are screened out. Moreover, relevant criteria such as capital efficiency
(ROCE) are generated in this step to be used in the final MCDM. Cost accounting
techniques are employed to reflect the cost components of total production cost into
profitability estimation so that an accurate estimation is achieved. Pinch analysis
explores the potential ways of integrating biorefinery processes to the company’s
existing processes and affects the definition of process options. The combination of
product portfolios, process technologies and their phased implementation, i.e. the
definition of phases in which the strategies are implemented, form the biorefinery
strategies and are further analyzed by other tools.
3.3. LCA assesses the environmental impacts of strategies by translating mass and
energy quantities into local, regional and global environmental impact categories, and
provides several criteria for decision making. The LCA methodology starts with the
definition of goal and scope, functional units and system boundaries. Then, depending
on the context of the analysis, cut-off procedure can be applied to exclude the impacts
of similar process/products. Consequential LCA is performed on product portfolios to
study the incremental environmental consequences of integrated biorefinery projects.
Furthermore, attributional LCA is done on individual products to identify the absolute
environmental impacts. Next, life cycle impact assessment (LCIA) is performed using
models such as Simapro, which translate life cycle inventory to environmental impacts.
Finally, the results are normalized to be used in the MCDM. In this way, environmental
aspects of a strategy are quantified in terms of several criteria such as GHG emissions.
3.4. SC analysis takes into account volatilities of feedstock/product price and
demand, and calculates SC profitability under different market conditions. SC metrics,
showing the SC performance in a dynamic market, have been developed to quantify the
SC robustness and flexibility against market volatility (Mansoornejad et al., 2013). SC
analysis involves the following: for the defined product/process options, few design
alternatives representing different levels of process flexibility are defined and their
capital and operating costs are estimated. Next, for each design alternative different SC
network alternatives are defined and their investments are calculated. Market scenarios
558 B. Mansoornejad et al.
are generated and a tactical SC optimization model is run for each combination of
process/SC network and for every market scenario, to identify the most profitable
combination under all market conditions. This combination constitutes the optimum
level of flexibility and SC network. A metric of robustness (MR) (Eq.(1)) is defined to
quantify the robustness of each alternative under volatile market conditions. The metric
represents an aggregate deviation of the downside profits from the base case profit. The
lower the deviation is, the more robust the system will be. Moreover, a metric of
flexibility (MF) (Eq.(2)) has been used, which shows the extent to which the production
volume diverges from the nominal production rate. For further details on the metrics,
the reader is referred to Mansoornejad et al. (2013).
MR (¦ PrB PrSc PrB ) 1 (1) MF ¦¦ (¦ C
p m t
mpt Cmp
N
¦C
t
N
mp ) (2)
Sc
PrB is the base case profit, PrSc is the profit for scenario Sc, Cmpt is the amount of
product m produced on process p in time period t and CNmp is the amount of product m
produced on process p by the nominal production rate.
3.5. MCDM is finally carried out using all provided criteria in order to identify the
best biorefinery strategy. Economic, market and environmental dimensions are
incorporated into a single MCDM framework which attributes a unique sustainability
score to each defined biorefinery strategy and ranks them from a sustainability
perspective (Sanaei & Stuart, 2012). In the next section, a case study, which focuses on
SC analysis, is presented.
4. Case studies
After market and techno-economic analyses of a kraft mill, two strategies are identified;
strategy A includes lignin precipitation in the first phase and production of two PF
resins in the second phase. Strategy B consists of bio-oil production by fast pyrolysis in
the first phase and production of PF resins in the second phase from extracted lignin.
Two process/SC network alternatives are defined for each strategy (Figure 2).
SC network
Strategy Phase I Phase II
alternative
the optimum flexibility and SC network alternative for the defined options. The SC
model (Mansoornejad et al., 2013) is a tactical MILP model that maximizes SC profit
by identifying the optimum balance of contract/spot sales, transported feedstock and
product, and production and inventory levels. Market scenarios are generated to
represent different market conditions. SC model is run for each process/SC network
alternative for all market scenarios. The results are shown in Figure 3 for strategy A-1.
Profit
Profit - Levels
– Level ofofFlexibility
Flexibility -–Market
Market Scenarios
scenarios Profitability
Profitability– -Level
Levelsof
of Flexibility – Market
Flexibility - Market scenarios
Scenarios
90
50
(%)
45
80
($MM)
scenarios
28-30
changes and small capital are needed
ROI (%)
18-20
ROI
Profit
Sc.5
Optimistic 14-16 Sc.1 24-26
Profit
Market Scenario
Sc.6
For high levels of flexibility, major Sc.7
Market Scenario
Sc.4 35
60 22-24
12-14 24
14 Sc.5 Sc.9
Sc.1 changes and high capital are required
Market
Sc.8
50
Market
Sc.8 30 Sc.4
22
12 Sc.7 0 6 12 18 24 30 Sc.6
Sc.9 30
25
30
25
20 Pessimistic MF
Volume (%) (%)
Flexibility 20
10
Pessimistic
10 0
0 Target level of flexibility where it
MF (%)
Volume Flexibility (%) (a) (b) (c) MF (%)
Volume Flexibility (%)
leads to maximum profitability
16 5
Robustness
12 4
IRR (%)
8 3
4 2
0 1
A-1 A-2 B-1 B-2
1
35
0.9
30 29.0
0.8
NRR (Non-Renewable Resources)
25 0.7
Sustainability score
20.0 0.6 MR (Metric of Robustness)
20
17.0 0.5 QR (Quality revenue)
15 14.0
0.4 CPC (Competitive Production Cost)
10.0 ROCE (Return on Capital Employed)
10 0.3
7.0
IRR (Internal Rate of Return)
0.2
5 3.0
0.1
0 0
A-2 B-2
(a) (b)
5. Conclusion
A design methodology is presented to incorporate PSE tools for biorefinery strategic
decision making. This methodology analyses biorefinery strategies from different
perspectives and can be applied for sustainable decision making by aggregating the
economic, environmental, and business metrics. A strategy may be strong in some
aspects, e.g. have strong economic performance, but poor in another aspect, e.g. have
poor environmental impacts. Using MCDM, decision makers can analyse and select
strategies based on the overall performance of strategies. This work can be extended by
incorporating social metrics, as social equity is the third pillar of sustainability.
References
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