Joensuu Biocoal

The transition from fossil to renewable raw materials requires a variety of solutions. There are currently very few short- and medium-term alternatives for coal as an industrial raw material, slowing the reduction of emissions in industries such as steel and cement production in comparison to other sectors.

Joensuu Biocoal Oy plans to build the first industrial-scale torrefied biomass production plant in Finland to process forest-industry side streams for industrial use. Wood-based products can replace fossil raw materials and torrefied biomass could be a working solution in the medium term on the way to carbon-neutral industry- achieved for example with a gradual transition towards green hydrogen.

The biomass produced by the plant will primarily be used to replace coal as a raw material for industrial processes, such as metal and cement manufacturing. In the future, however, torrefied biomass has more valuable potential applications in carbon sequestration and its use in for example soil improvement and rainwater filtration is being studied actively.

The facility will be built on the plot of the Iiksenvaara heat and power plant operated by Savon Voima. As a condition for the Climate Fund’s funding, the wood raw material for the biomass must be obtained from domestic, certifiably sustainable timber and must meet the requirements of the Act on Biofuels, Bioliquids and Biomass Fuels.

The Climate Fund’s investment decisions are guided by a three-tiered set of criteria. The preconditions for funding are a credible plan for at least self-sustainable business, verifiable added value from the state’s contribution to the project’s overall funding, and alignment with the six environmental objectives of the EU’s sustainable investment network, i.e. the “do no significant harm” principle.  Other aspects in the investment decision include emission reductions and other impact, such as business potential.

The project has significant emissions reduction potential and the estimated annual emissions reduction potential is 140 Kt CO2-eq once fully in operation. The estimated cumulative emission reduction potential of the Joensuu demonstration plant, without considering potential future carbon sequestration products, is 0.7 Mt CO2-eq over ten years. The calculation of the emissions reduction potential can be impacted in the future by alternatives as well as the definitions for biomass emissions.

The interest on the Climate Fund’s capital loan is priced at the market rate listed in the EU’s reference interest rate table. In other words, the Climate Fund is entitled to the market rate on its capital loan. The Climate Fund’s €5 million capital loan is allocated to the construction of the facility in Joensuu, and the purpose of the project is to demonstrate the viability of the torrefied biomass production plant on an industrial scale. The capital loan also includes a conversion right in the event of an increase in the company’s value.

The Climate Fund has revised its impact assessment by reviewing the ten-year emissions reduction potential of the 2021 investment targets for the first time.