Sugar does not have to be produced using natural gas
If we can use biofuels to make jam, then we most certainly can use biofuels in a sugar mill as well. So how come Nordic Sugar hasn´t replaced their natural gas boiler at Örtofta sugar mill with a biofuel boiler earlier? The warning signs among gas users have been many, long before the Ukraine crisis.
For instance, the production of fruit puree and other foodstuffs by Bob/Orkla in Kumla is powered by a recently installed pellet-fired plant replacing its predecessor that was run on LPG.
The other day, the national daily newspaper “Dagens Nyheter” (DN) published an article about Swedish companies that have been badly affected by the high energy prices in southern Sweden. According to the article, many companies are now facing multifold price increases on energy and gas used in production.
When it comes to electricity use, we can understand people´s shock when prices suddenly climb higher than ever before. With gas, however, companies should have been aware of the risk that comes with being dependent on fossil fuels. Out of the companies mentioned in the article by Dagens Nyheter, two are still heavy users of fossil natural gas.
Sweden´s only sugar mill
Nordic Sugars’ sugar mill in Örtofta is currently Sweden´s only sugar mill. Due to increasing gas prices, the company decided to transport 15 percent of its sugar beet harvest to Denmark to produce the sugar there instead. The Danish sugar mills mainly use oil as it is cheaper than gas which has increased tenfold during the last year.
In addition, there is no guarantee of being allocated enough gas. It is surely about money, but for the climate, oil releases more carbon dioxide than gas per energy unit. Not to mention the emissions from longer transport.
Nordic Sugar should have seen the warning signs
- The sugar mill in Örtofta is one of Sweden´s food industries included in the European Emission Trading System (ETS) with the highest emission rights. According to the Swedish Environmental Protection Agency´s statistics for 2021, the sugar mill released 106 212 tonnes of carbon dioxide but only had emission rights for 76 433 tonnes. This means they must pay for 29 779 emission rights where one tonne costs about EUR 80, a total of SEK 24 million.
- During the past years emission rights prices have steadily increased. In 2018, the price started increasing from EUR 5 per tonne to around EUR 25 to 30 per tonne. Last fall, emission rights started reaching EUR 80-90 per tonne, which is what we are seeing today.
- Natural gas and oil prices also started increasing last fall, long before the Ukraine invasion. The war has, however, reinforced the price increase on gas, while the oil price has slightly decreased.
Should Nordic Sugar have foreseen this dramatic development and acted accordingly? This is not certain, even though the food industry has been facing a climate transition driven by higher energy prices, higher carbon tax, and more expensive state aid and emission rights.
Increased carbon tax
Companies within the food industry, that are not included in the ETS and have no emission rights, are today receiving a hefty increase in carbon tax, an increase that took off in 2011 and was completed in 2018. The same companies are also receiving an increase in energy tax, meaning they pay the same amount of tax as the average household and service company. This is one reason why Orkla in Kumla (Bob) decided to change from fossil fuels to renewable biofuels (pellets). Many other companies in the food industry have done the same during the past years.
Although fossil fuel and emission rights prices were relatively low a few years ago, it is not certain that a company such as Nordic Sugar should have continued its dependency on fossil fuels.
Companies with pellet boilers
Other comparable companies have acted differently. One example is AAK in Karlshamn that refines vegetable oils. Many years back, the company installed a pellet boiler and is now one of Sweden´s biggest industrial consumers of wood pellets.
In 2021, AAK in Karlshamn released 5 159 tonnes of fossil carbon dioxide but had emission rights for 24 804 tonnes. This results in an excess of 19 645 tonnes of emission rights, worth around SEK 16 million SEK. While Örtofta must pay an expensive fee for their emission rights, AAK in Karlshamn can make a profit from their low emissions, thanks to pellet consumption.
On 22 February this year, AAK announced they are installing two 18 MW biofuel boilers at their facilities in Århus, Denmark. The investment is calculated to decrease carbon emissions by 45 000 tonnes a year, corresponding to 90 percent of their emissions today.
The fuel in the boilers is a byproduct of the manufacturing, shea flour, and the new energy plant will be finished in 2023. Apart from lowering emissions, the investment will save AAK around SEK 100 million a year.
In DN´s article, the current situation for the paper manufacturing company, Klippan is also disclosed. For them, energy prices have been so high that they have had to close their factory from time to time. Their mill uses both natural gas and a lot of electricity, so just like with any company reliant on fossil fuels, they too should be encouraged to change to biofuel production. A good role model for this could be Sofidel in Kista, that also produces fine paper. A year ago, the company signed a deal with Meva to install a new biofuel boiler that uses gasification technology developed by Meva. The facility is predicted to decrease its carbon emissions by 8 500 tonnes a year.
Households are also affected
It is not only the industries that are trapped in a gas dependency in southern Sweden. But so are the few thousand households that heat their houses with natural gas. Unlike oil boilers that have virtually gone extinct in Swedish households, Swedes have held on to most natural gas boilers.
The gas grid has also slowed down the expansion of district heating, as seen in municipalities such as Vellinge, Kävlinge, Båstad, and Laholm that all lack district heating, unlike almost all other Swedish municipalities. Right now, there is some expansion happening in Laholm, while Kävlige basically said no to district heating in 2017 as the municipal housing company only agreed to a very limited expansion. However, this summer a new district heating company has been created, that now can receive support from the Swedish Environmental Agency’s climate investment support programme “Klimatklivet”, a total of SEK 9 million in support for investments of SEK 28 million.
During the last few years, Klimatklivet has been successful in stimulating investment away from fossil fuel consumption. Many actors have even used the money to decrease the use of fossil gas specifically. Now we will have to wait and see how the new government decides to proceed with Klimatklivet.