Methodology for identifying promising retrofit integrated forest biorefinery strategies -- Design decision making under uncertainty

Forest biorefinery is increasingly been considered as potential future business for traditional forest industry, and a more environmentally benign approach for supplying the demand of energy, chemicals and materials for the society. The forest biorefinery is partly based on the same principles, and it targets the same market sector, as traditional petro-chemical industry. However, the forest industry possesses a unique advantage over the chemical industry that is the long experience in bio-based feedstocks and their processing. The current pulp and paper (P&P) industry's competitiveness in traditional P&P countries due to ageing assets, high energy costs, strict regulations and high environmental expectations from the public, makes however the investment decision making challenging and thus gives rise to additional pressure on the design and decision making processes to help identifying the right opportunities.;The objective of this thesis is to develop a methodology to improve the link between retrofit process design, cost accounting and capital investment decision making activities to further enhance the investment decision making process for forest biorefinery. The methodology is applied in a case study considering retrofit biorefinery implementation into a kraft P&P mill.;The methodology consists of step-wise decision making starting with pre-screening of retrofit design alternatives based on traditional techno-economics and risk analysis, followed by an advanced decision making procedure. This second decision making step uses a novel framework combining process design and simulation through cost accounting models, based on activity-based costing principles, to strategic investment decision making process. The cost models linked to process simulation are able to accurately represent the manufacturing costs of all products after retrofit biorefinery implementation, and on the other hand, these models are able to provide useful financial measures of short- and long-term performance of the projects and the facility for strategic investment decision making. Moreover, risk analysis using stochastic multivariate analysis can be utilized since all performance metrics are explicitly quantified.;Results of the case study application of the framework show, that systematic analysis of external uncertainties can provide critical information about the worst-case scenario project performance already in the project pre-screening stage. Moreover, multivariate stochastic analysis enables a more objective assessment of the uncertainties instead of using subjective scoring methods. Furthermore, the analysis results of the retained retrofit design alternatives using the developed framework clearly quantified the cost-impacts of the retrofit projects. These impacts vary between alternatives because of different integration potential and system constraints. In the case of normal process design and capital appropriation process, this cost information would be available only for the implemented project when it is operating. The change in the core business cost competitiveness can be especially important factor for the higher cost producers of commodity P&P products. Evaluation of the intensities of different strategically important performance criteria, such as capital performance or feedstock paying capability, based on this more accurate operating cost data showed that even though short-term project performance criteria were preferred, good facility-level performance based on the multi-criteria decision making (MCDM) panel had an important role in the overall ranking. The final ranking of the alternatives differed from that of using only a single criterion, project profitability. The attribute importance preferences of mill and company personnel from varying positions demonstrated the multi-faceted nature of this strategic investment decision making problem. Moreover, using sensitivity analysis in the MCDM was also able to illustrate the impact of the panellists' preference differences on the ranking. In summary, the complete methodology was able to narrow down a large amount of P&P mill retrofit alternatives first to a set of potential candidates and further to a most potential process-product combination, and thus was able to systematically link the different analysis activities in a manufacturing firm to aid investment decision making.;Identification and management of the process and business level characteristics and uncertainties of retrofit forest biorefinery implementation is required in the strategic investment decision making. Currently, many methods are applied in different functions of the business life-cycle to analyse similar characteristics and impacts of uncertainties for varying purposes: at process level, retrofit and greenfield process design methods and tools are applied to investigate project feasibility and profitability for potential operational and strategic projects; at business or facility level, advanced cost accounting methods are used to analyse manufacturing system cost-performance, financial reporting is conducted to report business performance periodically, and group decision making is utilised in strategic planning and investment decision making.;Future work includes the expansion of this framework into the strategic investment decision making at the corporate level, to further enhance the asset management and strategic planning. Furthermore, operations-performance analysis can be included in the framework to obtain flexible forest biorefinery designs with good strategic fit.