Using Optimization under Uncertainty to Study Different Aspects of Process Integration Investment Decisions – The Example of Lock-in Effects

Paper in proceeding, 2010

New climate and energy policy instruments and the changed energy market conditions that follow call for the pulp and paper industry to improve their energy efficiency and reduce their CO2 emissions. However, through the concept of the forest biorefinery, these changes also offer an interesting opportunity for the industry to diversify and potentially grow their revenues. When considering uncertainties regarding the future prices of energy and wood-based products, a systematic methodology is needed to make better informed investment decisions. Our previous research in this field has focused primarily on development of such a methodology based on stochastic programming, process integration tools, and energy market scenario models. The aim of this paper is to apply the methodology to study one important aspect of the process integration investment decision, namely the risks associated with lock-in situations. Lock-in effects are expected when investment decisions in conventional technology today are made without considering the competitiveness of emerging technologies that might enable a pathway to the forest biorefinery through manufacturing of valueadded products. This is illustrated with the example of district heating co-operations and lignin extraction. The systematic approach enables quantitative assessment of the importance of lock-in effects in the decision-making process.