Technological learning and cost reductions in wood fuel supply chains in Sweden

With its increasing use, the production costs of primary forest fuel (PFF) have declined over the last three decades in Sweden. The aims of this study are to quantify cost reductions of PFF production as achieved in Sweden over time, to identify underlying reasons for these reductions, and to determine whether the experience curve concept can be used to describe this cost reduction trend. If applicable, the suitability of this concept for future cost reduction analysis and for use in other countries is explored. The analysis was done using average national PFF price data (as a proxy for production costs), a number of production cost studies and data on annual Swedish production volumes. Results show that main cost reductions were achieved in forwarding and chipping of PFF, largely due to learning-by-doing, improved equipment and changes in organization. The price for wood fuel chips does follow an experience curve from 1975 to 2003 (over nine cumulative doublings). The progress ratio (PR) is calculated at 87%. However, given the uncertainty in data on PFF price and annual production volumes, the PR may range between 85% and 88%. It is concluded that in combination with the available supply potential of PFF and with bottom-up assessment of cost reduction opportunities, experience curves can be valuable tools for assessing future PFF production cost development in Sweden. A methodological issue that needs to be further explored is how learning took place between Sweden and other countries, especially with Finland, and how the development of technology and PFF production in these countries should be combined with the Swedish experiences. This would allow the utilization of the experience curve concept to estimate cost developments also in other countries with a large potential to supply PFF, but with less developed PFF supply systems.