GOOD PRACTICE: Kuhmon Lampö (Kuhmo s Heating)

Kainuun Etu Oy, PP6 in C2CN project Kainuu region, Finland GOOD PRACTICE: Kuhmon Lampö (Kuhmo s Heating) Renewable energy ( The sun is our income, Waste is our Food, Air, water, soil is healthy and We are native to our place from the Limburg Principles) District heating (sustainable construction from the Lead Market Initiative, in particular sustainable urban centres) Life Cycle thinking (Principle 1) and Reduce (Principle 3) from the 5 Eco design principles 1 Kuhmon Lämpö Ltd., Photo: Sirkku Rautio GENERAL DESCRIPTION OF THE GOOD PRACTICE (1) Own electricity production 20 000MW/h for sale and 4 000 Mw/h for own use (Kuhmon saha & Lämpö). (2) Less oil: By using by-products, i.e. sawdust, bark and forest woodchips produced by the Kuhmo Oy (saw mill) By using combustion gas (i.e. fuel gas) reclamation (3.2 MW) Saves 300 litres of oil per hour Increases quality produce dried briquettes 1 Ecodesign principles (1)Life Cycle Thinking means considering the full life cycle impacts of a product, packaging or service. This includes material extraction, manufacture, distribution, retail, use and end-of-life. Completing a Life Cycle Assessment (LCA) can make a comparison between different design options allowing the least damaging option to be selected. (2)Design for Disassembly considers the easy separation of different types of material from a product once its useful life has come to an end, to allow for effective recycling. (3) Reduce the negative impact of a product on the environment, for example by removing hazardous chemicals or materials, without compromising the design. (4) Re-Design the product or product system, for example by re-designing the product to take advantage of more sustainable materials and cleaner production methods. (5) Re-Define a product or service into a solution that makes commercial sense whilst being sustainable, for example considering whether a car is the best solution to move from A to B. 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 1 sur 12

Volume of heated buildings is 750 000 m3, including different business premises and private houses in the city centre. District heat replaces light fuel oil (about 1 700 000 l/a) (3) Less industrial chemical fertilisers: Using ash from Kuhmon Lämpö power plant replaces conventional chemical fertilisers used to fertilise forests. KEY INNOVATIVE FEATURES: Kuhmo City is an excellent example of a local co-operating enterprises using bioenergy. Heating of buildings is based on efficient use of district heating and thermal entrepreneurship. Normal features: district heat and waste wood (bark, sawdust) recovery in thermal process. Aims of co-operation: to improve and increase local energy self-sufficiency and business reduce light fuel oil use (avoid emission trading charges) launch local heating business to reinforce use local raw materials, high degree of the processing aims at benefitting from all available forms of energy promoting the regional economy, policy goals and employment There are three extra elements of effective innovative features: Producing briquettes Combustion gas reclamation (utilisation) By-product wood ash use as fertilizer/nutrition in forest. Kuhmo (sawmill) Ltd. and Kuhmo Lämpö (heat and electricity) Ltd. act as pioneers in loss (waste) energy recovery (recycling) process. Companies use combustion gas (flue gas) resulting from reclamation. This means that 3.2 MW of heat energy is recovered and at the same time 300 litres of oil per hour is saved. Saw dust from the saw mill is dried using combustion gas, and the dried saw dust is compressed into briquettes. This kind of model is not used widely. The combustion waste, ash, is now used as fertilizer in peatland forest nearby. Kuhmon Lämpö has three boilers: 18, 12 and 10 MW with the total fuel use of 170 GWh/a. The majority, 18 MW of back-pressure boiler (CHP, combine heat and power, unit) can also be produced electricity for 5 MW power. CRITERIA USED TO EVALUATE THE GOOD PRACTICE: All aspects in thermal producing/heat production has taken into account and exploited. At the same time environmental pollution has been reduced. 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 2 sur 12

MAIN OBJECTIVES OF THE GOOD PRACTICE Create a profitable and sustainable business and at the same time ensure energy sufficiency through renewables and reuse of wood waste Synergy between the public and the private sector (public private partnership) District heating expansion Sustainable, specialised employment in Kuhmon Lämpö Replace light fuel oil (Heat containing combustion gas saves 300 litres of oil / h; also increase quality of dried briquettes) Decrease oil use and increase local wood energy (especially by-products) Electricity production (20 000MW/h for sale and 4 000 Mw/h for own use) Produce (briquettes) 30 000 t/y RESULT & IMPACT INDICATORS USED TO ASSESS THE GOOD PRACTICE: (1) PROFITABILITY Nowadays district sales to Kuhmo Ltd about 80 000 MWh, Kuhmo City about 60 000 MWh Electricity production about 23 000 MW/h. for sale 20 000 MW/h own use 4 000 MW/h Decrease oil use and increase local wood energy (especially by-products) Ash (produced 900-1000 t/a) is used as fertilizer to the forest (distribution area ~120 ha/a). Financial benefits about 50 000 / a, Logistic expenses, cheap fertilizer (2) ENERGY REPLACEMENT, ELECTRICITY & HEATING PRODUCTION RESULT INDICATOR: Volume of heated buildings is 750 000 m3, including different business premises and 450 buildings (from private houses to business premises) in the city centre. IMPACT INDICATOR: District heat replaces light fuel oil (about 1 700 000 l/a) RESULT INDICATOR: Boiler combustion gas (i.e. exhaust gas) resulting from reclamation (3.2 MW); Saves 300 litres of oil per hour IMPACT INDICATOR: Increases quality with dried briquettes; Solid material includes only 10% water (before 52%) RESULT INDICATOR: Ash (produced 900 t/a) is used as fertilizer to the forest (distribution area 120 ha/a). RESULT INDICATOR: Produce (briquettes) 30 000 t/y 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 3 sur 12

The Use of Fuels in District Heating Plants in Kainuu 1998-2009 1400 1200 GWh 1000 800 600 400 Fossils Peat Wood Other 200 0 1998 2002 2005 2006 2007 2008 2009 (3) SUSTAINABLE EMPLOYMENT & ECONOMIC GROWTH RESULT INDICATOR: Growing sustainable employment; 15 staff in Lämpö Oy IMPACT INDICATOR: To use local labour during new equipment investments IMPACT INDICATOR: All new investments contribute to economy of the company. Picture 3 Picture 4 Picture 3: briquettes production equipment Picture 4: ready briquettes for delivery Photographer: Timo Karjalainen ACTORS DIRECTLY INVOLVED IN THE GOOD PRACTICE: Improves the synergy between Kuhmo Saha, City of Kuhmo and Kuhmo Lämpö. Co-operation between Kuhmon Saha (saw mill) Ltd and City of Kuhmo Kuhmon Saha (saw mill) Ltd: to ensure profitability City of Kuhmo view: employment & local heating business TRANSFERABLE ASPECTS Public private partnership approach 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 4 sur 12

Public (national support) & associated policies: funding up to 30% from TEM because of promotion of new technology Business model Technological approach Combustion technology: Pyroflow Compact-boiler 18MW CHP-unit (Aalström, Finland), 1992. 13MW Heat 5MW Electricity Rotating grate 12MW boiler (Sermet), 2001 12 MW Heat Grate-boiler 10MW (Urbas, Austria), 2009 Aw gas condenser 3.2MW (using for the raw material drying = briquettes) Investment (boiler & saw gas condenser) 5,4 M ISSUES TO ADDRESS IN THE FUTURE Timber price and availability impact on profitability Emission trading impact Financial support for renewable energy (produce & use) Financial or investing support for electricity generated by combusting wood Mechanical forest industry is a necessary requirement for executing energy production at issue in Kuhmo. If there is no sawmill, there is not any by-products, no drying of saw dust and no briquetting. If there was not the saw mill, district heat would be produced by using woodchips from nearby forests or the virgin wood would be imported from Russia. TECHNICAL BACKGROUND OF THE GOOD PRACTICE The self-stabilisation method for ash Combustion ash (grate ash) and fly ash (removed from flue gas) are mixed together to optimise the moisture per cent of ash. The mixture is mixed well and clamped to asphalt field. The material (mixed ash) is stabilised in clamp for few months when the mixture gets lumped into finger tip size lumps. The nutrient content of ash is then analysed. The mixture is transferred into forest where it is spread using a harvester with a special applicator. The malnutrition state of the forest is first detected by analysing the nutrient content of the needles. The quantity needed for fertilising the forest is then calculated using the data from ash and needle analysis. The ash replaces conventional chemical fertilisers used to fertilise forests. The ash, as well as, the nutrients in it are returned to forest where is originally came from. The ash fertiliser is mainly used in peat land forests, and there are plenty of those in Kainuu aka half of the forest area in Kainuu. 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 5 sur 12

Picture 4. Ash clamp. Photographer: Timo Karjalainen HISTORY, CONTEXT, and SOME FIGURES In 2008 to 2010 Kuhmo Lämpö and Kuhmo Oy will invest altogether 15 million euros to bioenergy. In 2010 the 7million investment on are finalised when the Ministry of Economy and Emplyment (tms.) funded the project by 30 per cent which equals about 2 million euros. The financing was allocated by the Minister Mauri Pekkarinen for the funds allocated to new technology energy investments. According to ylijohtaja Aimo Aalto, the energy projects in Kuhmo are linked together tightly. The profitableness of the projects is based on the fact that both projects can be carried out. The state subsidy decisions along with the obvious energy and business advantages are beneficial for the climate as well and for the employment of the region. Various Beneficiaries There are several actors that benefit from the whole project idea of Kuhmo Oy and Kuhmon Lämpö Oy. During the project the condensing equipment for cooling the flue gas is built into the Kuhmo Lämpö power plant. The equipment investment is 1.9 million euros. Due to the fact that this kind of equipment is being used for the first time in Finland it is considered as new technology and thereby the investment is entitled to the investment subsidy even though the power plant itself is part of the emissions trading system. The investment subsidy provided by the Ministry covers 30 per cent from the total investment (i.e. 0.57 million euros). Less Oil By using the condensing process for the flue gas in Kuhmo Lämpö PP it is meant to dry the by-products, i.e. sawdust and bark, produced by the Kuhmo Oy (saw mill) and forest woodchips. The drying process is done by building a new byproduct dryer using new technology for the Kuhmo Oy mill. The investment cost for the dryer is 4.7million euros from which the subsidy is 30 per cent aka 1.41 million euros. Due to the new dryer Kuhmo Lämpö Oy can reduce the use of fuel oil remarkably by 4500 MWh annually and at the same time increase the electricity production. The investment reduces the carbon dioxide emissions by 90% from the current rate which equals 1200 tonnes per year. The investment has climate impact as well as economical impact in the form of improving the employment rate in the area during the construction phase. Kuhmo Oy sells its by-products for the use of energy production and due to the drying process the quality of energy wood is improved, Aalto comments. The amount of new customers joining the district heat network has increased during the past few years. Customers (from private houses to business premises) have mainly changed the old oil heating system into the district heating. This amount of customers equals about 500 600 m3 less consumed fuel oil. 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 6 sur 12

The price of the district heat is about 20 to 40 per cent of the price of the fuel oil when the investment costs are excluded. When comparing the prise of district heat to woodchips and pellets the costs are about the same when the investments costs are excluded. If the investment costs are included, the district heat investment is 20 to 40 per cent cheaper than oil, pellet or woodchip. This value is dependent on the type of the real estate. Kuhmon Lämpö Ltd. (local energy company producing electricity and district heat) was founded in 1980. Managing director of Kuhmon Lämpö is Mr. Markku Piirainen. Kuhmon Lämpö Ltd. is owned by City of Kuhmo and Kuhmon Saha Ltd. (local sawmill). The energy company produces both electricity and heat energy in Kuhmo using sawdust, bark and forest woodchips (produced by the Kuhmo Oy, saw mill) as fuel. Kuhmon Saha Ltd: Kuhmo Oy is a privately owned company, founded in 1955. Production started in 1959. Expert in timber (sawmill) using the latest sawing technology. Since 1955 Kuhmo Ltd. has acquired an enviable reputation as a dynamic, international and independent sawmilling enterprise with a heartfelt commitment to quality, customer focus and the environment. Our timber comes from the forests of Kainuu in Northern Finland and is distributed under the trademark URSUS, which is Latin for bear. Statistics of Kuhmon Saha: Employees 145 Capacity 350 000 m3 of timber Species 85% pine (redwood) and 15% spruce (whitewood) Kiln capacity for whole production 9 progressive, 20 chamber kilns, joinery- and shipping dry Sawing technology Chipper-canter, circular saw lines. Grading Colour camera grading, both unseasoned and dry Processing Green split, re-sawing and planning Deliveries By sea, rail and lorry. Direct deliveries to customers yards by lorry Kuhmon Lämpö Ltd., Photo: Sirkku Rautio Overall Kainuu region has huge forest energy resources. The forested area is more than two million hectares. Refining high quality fuels from local energy resources offers great potential for the development of the region. Kuhmo is a City of 10 000 inhabitants on the eastern border of Kainuu, Finland and the European Union. Distance to Kajaani is 100 km and to the Russian border Vartius village 65 km. Ecologically sustainable economy is respected in Kuhmo. The production chain of mechanical wood processing extends from the forests of Kuhmo to Middle Europe, Asia and Africa, and the wood processing development network Woodpolis is in charge of productisation of wood construction as an international network. The forests of Kuhmo (and overall in Kainuu) have been certified. 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 7 sur 12

Statistics of City of Kuhmo: Kuhmo municipality founded in 1865 Turned into a city in 1986 Total area 5 458 km² Land area 4 821 km² Forest area 4 652 km² Water area 637 km² Unemployment percentage 17.4 (April 2010) Energy consumption and energy sources in Finland - INFORMATION ON ENERGY CONSUMPTION & SOURCES IN FINLAND FORTHCOMING Much more wood energy must be used in the near future to help meet Finland s target to increase renewable energy s share of national energy consumption to 38% by 2020. The national climate and energy strategy aims that the amounts of energy generated from wood chips should triple from today s levels by 2020. As we can notice from the statistics (Figures 1 and 2) Kainuu is forerunner to use of wood energy in Finland and in EU level. This is based on excellent wood energy knowledge and production (in harvesting, logistic and production fields). Table 1. Fuel use 2009, district heating plants and power stations Fuel use 2009, district heating plants and power stations Renewable energy Renewable energy Municipality Coal Heavy fuel oil Light fuel oil Peat Wood Other TOTAL fuels proportion GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa % Kajaani 91,0 28,0 0,1 232,5 509,0 22,4 882,9 531,4 60,2 Kuhmo 0,0 0,0 1,0 0,0 214,2 0,0 215,2 214,2 99,5 Suomussalmi 0,0 2,2 0,0 0,0 63,0 0,0 65,2 63,0 96,6 Sotkamo 0,0 12,0 0,3 74,4 8,8 0,0 95,5 8,8 9,2 Vuolijoki 0,0 3,0 1,4 26,9 0,0 0,0 31,2 0,0 0,0 Vaala 0,0 0,0 2,0 9,3 4,5 0,0 15,8 4,5 28,5 Paltamo 0,0 0,0 0,0 0,0 12,0 0,0 12,0 12,0 100,0 Puolanka 0,0 1,6 0,0 0,0 18,5 0,0 20,2 18,5 91,9 Hyrynsalmi 0,0 0,4 0,0 0,0 13,6 0,0 14,0 13,6 97,5 Ristijärvi 0,0 1,8 0,0 4,6 0,0 0,0 6,4 0,0 0,0 TOTAL 91,0 49,0 4,8 347,7 843,6 22,4 1358,4 866,0 63,8 In Kainuu overall the use of peat has decreased by nearly 294 GWh since 2008. Figure 2 Energy sources in Finland 2008 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 8 sur 12

Wood directly or indirectly accounts for as much as one fifth of the total energy used in Finland. The largest users of wood energy are forest industry companies, who produce large quantities of energy from residual wood such as bark, sawdust and woodchips, as well as the wood-based by-products of pulp and paper making processes, including black liquor. Following the Finnish National Strategy, Finland has been forerunner in carbon neutral field and further development continues. Bioenergy is an environmentally friendly source of renewable energy that does not result in any emissions of fossil carbon, and can be considered carbon-neutral when organic biofuels are obtained from sustainable sources. Using bioenergy instead of energy obtained by burning fossil fuels helps to combat climate change while also reducing emissions of other harmful pollutants such as sulphur dioxide. Table 2 Fuels use in Kuhmon Lämpö Oy Fuels use in Kuhmo lämpö Ltd. 2006-2009 Year Coal Heavy fuel oil Light fuel oil Peat Wood Other Total Renewable energy fuels GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa GWhpa % Renewable energy part 2006 0,0 5,0 0,0 0,0 148,0 0,0 153,0 148,0 96,7 2007 0,0 3,4 0,0 0,0 171,0 0,0 174,4 171,0 98,1 2008 0,0 0,0 2,0 0,0 168,9 0,0 170,9 168,9 98,8 2009 0,0 0,0 1,0 0,0 214,2 0,0 215,2 214,2 99,5 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 9 sur 12

Heating businesses produce heat for local district heating systems. They mainly use fuels based on wood originating from their own forests or other nearby forests. In addition to procuring fuels, heating businesses work alone or in cooperatives to run district heating systems in practice, and they gain income from the heating bills paid by the premises heated within the schemes. Almost 200 local heating businesses have been established around Finland. Earlier most of the customers of such businesses were municipal district heating schemes, but the number of corporate commercial heating purchasers has increased recently. At the moment some 400 local heating schemes around Finland buy heat from small-scale heating businesses, and business is increasing fast. It has been estimated that around Finland there is potential for more than a thousand such schemes in all. Nowadays technology allows also use cooling system technology by district heat technology. The Use of Fuels in District Heating Plants in Kainuu 1998-2009 1400 1200 GWh 1000 800 600 400 Fossils Peat Wood Other 200 0 1998 2002 2005 2006 2007 2008 2009 BIOHOUSING CATALOGUE Heating related equipment data from Finland, Italy, Spain, France and Austria have been collected and are displayed through web pages including: Relevant technical details of the equipment, and also emission and efficiency data Information on manufacturers, importers and resellers http://www.biohousing.eu.com/index.asp?init=1&initid=21240 SOURCES: 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 10 sur 12

Kuhmon Lämpö: Managing Director Markku Piirainen Kuhmo Oy, www.kuhmo.eu Kuhmon kaupunki / City of Kuhmo, www.kuhmo.fi/index.asp?language=2 Kajaani University Consortium: Project Manager Timo Karjalainen Motiva: Ltd: Speciality in Energy and Material Efficiency 0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 11 sur 12

0542 C2 C2CN _ CP3 Good practices in Industry_ Kainuun Etu PP6 : KUHMON LÄMPÖ Oy Page 12 sur 12