Wood as an energy source in the Kraft pulp-paper industry of the southeastern United States

This is a study in the economics of deriving energy from wood. Its objective is to provide guides to industry managers that will enable them to better assess wood's fuel potential. It is written with this business audience in mind.

An introductory section describes the "energy crisis" as nothing more than a radical shift in relative prices, requiring that a significant investment be made in capital assets designed to economize on high-cost, fluid fuels. A second discusses wood fuel supply within the context of the total timber supply. Heightened demand for fuelwood unleashes both opposing and complementary forces that affect the supply of wood fiber. These are described. A continuum is developed to show how the marginal cost of deriving effective energy from wood changes depending on the level of subsidy provided by other joint-products of the log. One chapter is devoted to a comparison between wood and fossil fuels on the basis of caloric value, combustion efficiency, environmental impact, and fuel form conversion.

Final sections set forth guides for profit-maximizing fuel selection:

• A case study of Continental's Hopewell, Virginia, Kraft linerboard mill is used to develop a linear programming model that selects the optimal wood-coal mix for a combination boiler.

• A short-run analysis section discusses wood sourcing and allocation between energy and fiber uses. Four methods are described: Least-Cost Sourcing, Conversion Surplus Valuation, Relative Fiber Valuation, and Return-to-Capital Valuation. The last approach is shown to be superior.

• Finally, a long-run analysis section looks at risk in capital investment for energy assets, and defines it in terms of semi-variance. A simulation approach is described that allows one to calculate an index of risk for various fuel system investment alternatives.