Climate change and dwindling fossil energy resources in the future for the fast growing world’s population have been the main driving forces to develop the idea of producing energy, chemicals and materials from renewable resources. Biomass is one of these renewable resources that can be used to produce a variety of bio-products. Similarity between the chemical elements in biomass and crude oil has provided an opportunity to produce a set of renewable products from biomass using biorefinery technologies that can directly replace or substitute existing fossil-based products in the market (Hernandez 2013). Biorefineries can be stand-alone or integrated into the existing facilities, which the former has gained more attention in the agricultural-based context while the latter is targeted in the forestry sector. In a greenfield biorefinery context on one hand, stakeholders have a pre-defined product strategy aiming to achieve a competitive advantage by increasing their market share through producing green products. Thus their main driving force is growing market share. On the other hand, the main driving force of focusing on biorefinery as a transformational strategy in the forestry sector is staying in business and be competitive in the longer term. Over the past few years, the forestry industry in North America has been facing significant challenges mainly due to the declining market demand, increasing competition with the global low-cost producers, increase in energy cost and also the aged facilities in their pulp and paper mills. These issues have forced forest products companies to look for a transformational strategy. Integration of the biorefinery as a set of emerging technologies into the existing pulp and paper facilities would help them with business transformation by the manufacture of an expanded product portfolio. They have some competitive advantages for biorefinery implementation including the existing infrastructure at their pulp and paper facilities, having the engineering know-how, having a good access to biomass, existing supply chain networks, as well as process integration potentials at a mill.
Biorefineries can have various possible configurations because of the variety of biomass, production processes and products. However not all biorefinery strategies are sustainable, and each strategy has its particular associated risks. Using the investor perspective, in this case either the forest products companies or agricultural sector companies, it is critical that unsustainable
strategies can be screened out from the list of biorefinery possibilities during the strategic early design stage.
According to the classical definition, aggregation of three economic, environmental and social pillars can be called sustainability. Although social pillar conceptually is important, on a practical level it is generally more linked to the economic or environmental performance. Since technology needs to serve the market, performance of a strategy in terms of its success in the market (market competitiveness) especially in the context of emerging technologies like the biorefinery, is crucial to be assessed along with other aspects of sustainability. This shows the necessity of competitiveness analysis as a pillar of sustainability assessment in order to evaluate the success of the product portfolio to get the market share and their capability to be competitive with the existing main players in the market. A sustainable investment option must not only generate a reasonable profit, but should also be environmentally benign, and remain competitive for the longer-term.
Traditionally the performance of projects has been typically assessed using profitability criteria commonly presented by Internal Rate of Return (IRR) or Net Present Value (NPV). However, from an investor perspective, biorefinery projects should not only be profitable in the short-term, but also should have a robust business model to enable value creation in the long-term while mitigating risks. They should also guarantee business viability under the probable poor market conditions, due to the risk associated with the market price volatility of bioproducts. In addition, they need also to be capable to be implemented at the full scale in order be first to the market given the risk associated with project execution. Considering all challenges for having access to biomass, biorefinery projects should also have the potential to secure low-cost access to biomass over the long-term. Moreover they should be able to compete on market prices with the existing producers to create margins. In addition to the economic and competitiveness opportunities, they should also guarantee better environmental performance compared to the fossil-based competitive product portfolio available in the market. These facts confirm the necessity of developing a set of representative sustainability criteria by which different biorefinery strategies can be well distinguished.
Sustainability assessment of biorefinery strategies is complicated because of employing conflicting criteria, and also due to the large uncertainties associated with information for these
emerging technologies at the strategic level of design, which can cause decision failures if it is ignored in project selection. As an inseparable component of any business, decision makers would face risks (Van Bossuyt, Hoyle et al. 2012). Whenever risk exists, each individual decision maker has his/her own attitude toward risk (Schuwirth, Reichert et al. 2012).
Taking this into account, in order to make a realistic and wise decision, not only sustainability and uncertainty should be taken into account, but also the level of risk aversion among the stakeholders should be addressed in any strategic design decision making.
The choice of a biorefinery strategy is not made by individuals but by multi-disciplinary stakeholders who together can be risk averse or risk prone. It is always hard to get multi- disciplinary stakeholders together, and if it can happen, sustainability along with uncertainty and attitude toward risk should be presented in a practical and interpretable format to facilitate the complexity of decision making and make it manageable for the stakeholders. However, the challenge is how a company can translate these concepts (sustainability, uncertainty and attitude toward risk) and bring them into their strategic decision making for biorefinery strategies.
This needs a systematic approach by which the sustainability of biorefinery strategies under uncertainty and risk can be assessed in strategic design decision making, and then can be applied in both greenfield and retrofit biorefinery contexts.
Developing this systematic approach is the main motivation for the research presented in this thesis.
1.2 Hypotheses and objectives
The ultimate goal of this thesis is to present a systematic approach by which sustainability of biorefinery strategies, in both greenfield and retrofit context, can be assessed taking into account uncertainty associated with this emerging technologies and considering risk attitude of decision makers. Based on that, the main hypothesis of this work is as follows:
o Main Hypothesis: multi-criteria decision making (MCDM) can enable companies to address sustainability under uncertainty and risk, in a practical way at the strategic level of biorefinery design decision making which can be illustrated in both greenfield and retrofit contexts.
This overall hypothesis has been divided into two sub-hypotheses as follows:
o Specific Hypothesis 1: There is a set of practical and interpretable evaluation criteria using which strategic decision makers having different perspectives will be able to identify and reject undesirable biorefinery strategies in a single day format.
o Specific Hypothesis 2: By considering uncertainty in sustainability assessment and by quantifying risk attitude of decision makers the basis of decision making is changed.
The problem statement and the hypotheses dictate development of a systematic approach that can address the concepts of sustainability, uncertainty and risk attitude of decision makers in strategic decision making in order to identify promising biorefinery strategies. Considering that the main objective of this thesis is as follows:
o Main Objective: To develop a systematic approach for early stage design decision making by evaluating sustainability criteria under uncertainty and quantifying the risk attitude of decision makers.
The accomplishment of the main objective has been tied to following sub-objectives:
o Specific Objective 1: To develop and evaluate a set of necessary and sufficient sustainability criteria for biorefinery systems, and to refine them to a set of important criteria to keep decision making manageable.
o Specific Objective 2: To quantify both uncertainty in sustainability and risk attitude of decision makers in order to involve them in strategic decision making and to compare the final decision using the same panel with and without considering the these two concepts.
1.3 Thesis organization
This thesis has been written in five chapters. In Chapter 1, the relevant literature is reviewed in order to identify the gaps in the body of knowledge. Chapter 2 presents first the methodology that has been followed in this study to meet the objectives and then presents the developed systematic approach that by which sustainability of biorefinery strategies can be assessed under uncertainty and risk. At the end of Chapter 2, the case studies to which the methodology is applied are introduced. Chapter 3 synthesizes the results obtained in the process of demonstrating
the methodology. In Chapter 4, overall conclusions are given, followed by Chapter 5 which presents the contributions to knowledge and recommendations for future work.
In Appendices A to F the articles that were published in or submitted to peer-reviewed scientific journals are presented. A complementary publication (book chapter) is presented in Appendix G.