Development of local and regional forest based bioenergy in Norway - Supply networks, financial support and political commitment

Abstract

This paper explores reasons of growth of new bioenergy firms in Norway. Norwegian authorities have a stated goal of doubling the use of bioenergy by 2020, as a way of developing the renewable energy sector and providing opportunities for rural employment. However studies shows that there are difficulties concerning the profitability in the sector. We approach the question from a supply chain perspective using a comparative case method. Five cases of local and regional forest based (wood chips) supply of heat in three regions were studied. The actors in the supply chains normally specialize in one or two stages in the chain and sell fuel and/or heat to municipal institutions and district heating plants. In all cases national financial support was important for releasing critical investments at various stages in the chains. Local political involvement was vital for the establishment of the chains, through influencing perceptions and ideas and through various techno-economical adaptations. Moreover, all focal actors in the chains were engaged in forest-related businesses and they benefit from using resources and obtaining income in different, related supply chains. Hence, they exploit “economies of scope”. The links across supply chains make it relevant to study them as supply networks rather than chains. This also has managerial consequences. The profitability in the chains seems still quite modest, but nevertheless they contribute in increasing the share of bioenergy in Norway. Actors' exploitation of “economies of scope”, local political engagement and national instruments for financial support are important factors in this development.