|Olga Smirnova||Peter the Great St. Petersburg Polytechnic University, 29, Politechnicheskaya St., St. Petersburg 195251, Russia|
|Ekaterina Kharitonova||Financial University under the Government of the Russian Federation, 49, Leningradsky Pr., Moscow 125167, Russia|
|Ivan Babkin||Peter the Great St. Petersburg Polytechnic University, 29, Politechnicheskaya St., St. Petersburg 195251, Russia|
|Valentina Pulyaeva||Financial University under the Government of the Russian Federation|
|Mark Haikin||St. Petersburg Mining University, 2, 21 Lines, Vasilievsky Island, St. Petersburg 199106, Russia|
Currently, the energy industry is tending toward a global expansion of the use of renewable energy sources, thereby contributing to economic development. In the Russian Federation, such transformation is particularly important in terms of enhancing the involvement of excessive wood waste in production. In this regard, processing wood waste into pellets has proven to be highly beneficial. Apart from increasing the efficiency of the harvested wood and reducing the fire hazard in waste storages, it also positively influences the structure of energy balance in specific regions, creating an impetus for the development of small businesses in the country. This paper aims to assess the economic effects of biofuel production together with the efficiency of processing wood waste into pellets as a factor in the development of small business in the Russian Federation. Net present value (NPV) is used as the main analytical tool to assess economic efficiency. A general scientific analysis of the open data is also applied, including analytical reviews of the Russian ministries and international organizations. As a result, the paper estimates the prospects of using wood biomass in the energy industry, provides options for establishing capacities of microenterprises engaged in pellet production, and considers the expected economic effect for various levels of capacity utilization. The scientific novelty of this paper is centered on the design of a biofuel production scheme from wood waste (wood pellets) for a small-business enterprise with minimum labor and production costs. The paper is highly practice oriented, as it substantiates the economic efficiency of pellet production by small businesses in the Russian Federation in accordance with current legislation and state subsidies. Overall, this paper provides enough evidence to seriously consider the prospects of wood pellet production in order to expand the share of renewable sources in the energy balance of the country.
Biofuels; Economic efficiency; Renewable energy source; Small business; Wood pellets
One of the most important trends observed in the global energy market is its gradual shift toward wider use of renewable energy sources (RES). This transformation is extremely beneficial for the Earth’s climate, as the gradual abandonment of carbon-containing fuel and energy resources (FERs) leads to a significant reduction in carbon dioxide (CO2) emissions. Though the decarbonization of energy is taking place worldwide, its intensity in different regions is determined by numerous factors, such as the level of technological development (Budiyanto et al., 2011; Qosasi et al., 2019), the prospects of environmental legislation, the availability of natural energy resources, and the role of specific countries in the international division of labor (Konnikov et al., 2020).
Industrially developed countries widely promote respect for nature by developing and implementing technologies that preserve the environment, thus automatically transforming the fuel and energy balance (FEB), both within individual countries and globally (Nayaka and Bhushan, 2019; Shahbaz et al., 2020; Vankov et al., 2020). According to previous studies, the economic success of RES development depends on the utilization of various biomasses that can be processed and used as environmentally friendly biological fuels, thereby replacing primary FERs (Ugwua and Enweremadu, 2019).
Wood pellets have been gaining popularity in the global energy market since the second decade of the 21st century and have steadily increased in production and consumption, which is expected to exceed 40 million tons and a total value of more than $9 billion by 2020. Significantly enough, the most drastic increase has been observed in the recent decade when the figures doubled. Despite certain fluctuations in statistics on production and consumption, the global demand for wood pellets is expected to increase to at least $18 billion by 2027. Remarkably, almost half of the pellets’ volume is produced in North America (the United States and Canada) and China. According to the 2020 data, Russia ranks fifth among world leaders, with an annual production of about 2 million tons (Gemco Energy, n.d.). The bigger picture shows that Russian pellet exports did not exceed 0.9 million tons in 2015. If such a pace of development is maintained, Russia will be able to move up to the second position among the world’s leading exporters, following the United States, leaving Canada, China, and the Baltic States behind.
Europe is the main consumer of wood pellets in the world (Statista, 2019). In turn, North America is expected to see a growing demand for pellets by an average of 7–8% per year due to the gradual abandonment of the consumption of hydrocarbon FERs (Gemco Energy, n.d.).
Wood pellets are produced and consumed at greater rates, as the reserves of easily mined FERs are drying out, and the effects human activity cannot be neglected any longer (Picchio et al., 2020). As a response to these urgent problems, timber waste can be effectively used in the production of wood pellets, especially taking into account the fact that its share sometimes reaches more than 15% of the initial raw materials. What is more, environmental problems associated with the need to store these wastes are becoming less acute (Scherhaufer et al., 2018).
Since the pellets are produced without any chemical additives, they are currently considered the most environmentally friendly biofuel used. In addition, when burning, the pellets emit the same amount of CO2 as during the natural decomposition of wood (Sippula et al., 2017). What is more, wood in general has been proven to exert less damage on the environment compared to fuel oil (Paolotti et al., 2017).
This paper aims to assess the efficiency of wood pellet production as a factor in the development of small business in the Russian Federation. To achieve this goal, the paper aims to do the following:
1. Evaluate the prospects of using wood biomass to maintain the country’s FEB.
2. Develop a range of capacities potentially applied by the microenterprises engaged in pellet production.
3. Calculate the expected economic effects of different production capacities.
The scientific novelty of the research is centered on the design
of biofuel production from wood waste (wood pellets) by a small-business
enterprise with minimum labor and production costs.
According to the results obtained from this paper, Russia shows sufficient potential to transform the energy balance toward a wider use of RES, including wood biomass, which, for now, remains largely unclaimed, posing a fire-related threat to storage areas. The economic calculations allow for the conclusion that pellet production in micro-business conditions is viable. In addition, with a production capacity of 300 kg/h, it would pay off within six years, even at a minimum selling price, and if a transportation subsidy were acquired, this period would be reduced to five years. Taking into account real global prices, investments in the wood pellet business may turn out to be twice as lucrative, provided that no force majeure takes place and that proper competitiveness of Russian production is ensured. Having considered three modes of capacity utilization, we can conclude that profit can be obtained in the second operation year and, with greater capacity utilization, in the first year.
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