Bioeconomy and the Regional Economy: The Örnsköldsvik Biorefinery Cluster

By Gunnar Lindberg & Jukka Teräs

Bioeconomic development in Örnsköldsvik in Sweden has a specific feature of strong clustering activity around the 'Biorefinery of the Future' initiative, but how did the regional biorefinery cluster develop over time to become one of the most interesting Nordic regional bioeconomy initiatives? What is the future of the Örnsköldsvik biorefinery?

The Örnsköldsvik region faced a serious downturn during the 1990s, when many local businesses closed, downsized, or relocated to more central regions of Sweden. This resulted in the loss of around 5,000 jobs in the Örnsköldsvik region (Arbuthnott, 2011). However, the regional decline created a sense of urgency among the local actors to create new industries and jobs in the region. The idea of generating activities based on the novel biorefinery initiative, together with the increasing popularity and awareness of clustering initiatives, paved the way for a regional biorefinery cluster in the Örnsköldsvik region. The cluster company SP Processum was founded in 2003 to gather local and regional actors, including the municipality and the local power plant.

The cluster development received an additional boost in 2005 when Processum received its first VINNVÄXT funding for the development of the Biorefinery of the Future project. VINNVÄXT is the Swedish innovation agency's programme for 'regional growth through dynamic innovation systems', and it awards winning initiatives with 10-year funding to develop competitive research and innovation milieus. In 2013, the Swedish Industrial Research Institute (SP) bought 60% of Processum's shares, and the cluster is now part of the Swedish government's science partner initiative; today the cluster company itself employs 17 people.

Development of the bioeconomy initiative

SP Processum's Biorefinery of the Future VINNVÄXT project is the flagship project of the Örnsköldsvik bioeconomy. Its purpose is to accelerate development in the field of biorefining woody biomass. In other words, the project is intended to be a collaborative effort by its member companies, academic partners and the local community to create, promote and invent products and processes based on lignocellulosic feedstock in a triple-helix set-up.

The bioeconomy is a competitive and knowledge-intensive sector, and to be competitive the cluster uses 80% of its funds for research and innovation. All research is conducted in an open innovation network setting, and there are professors from Umeå University within the cluster organ. The remaining funds are devoted to building the innovation system and helping to develop the member firms. In the past three-year period, substantial resources have been devoted to scaling up promising projects. To facilitate this scaling up, a unique set of pilot equipment has been developed that can take technologies from the laboratory scale to a first-demonstration scale, and a regional test bed has been created. In this way, SP Processum has created an open test bed (a pilot park) that can be used by member companies and collaborators, as well as universities.

Today, the cluster has 21 member companies, and most of these are in one way or another connected with the forest industry, the chemical industry or the energy industry (Figure 1). Some of these are large forest and paper industries, while others are smaller research and technology firms. They base many of their new ideas on existing capital investments in pulp and paper mills. As an investment in an average-sized biorefinery could easily amount to 1.5 billion euros, a large number of endeavours within biorefining are dedicated to converting existing mills and infrastructure into biorefineries. The same reasoning applies to energy-sector utilities. The cluster's main strategy in biorefining is to improve existing mills, to create more value, new chemicals and new materials, and to turn residual streams into products and thereby increase both economic efficiency and the efficiency of feedstock usage. In other words, once woody biomass has been processed into the main product (e.g. pulp and paper), the numbers of complementary products and complementary streams in a biorefinery set-up are maximized. This thinking will also decrease the generation of waste from the production sites and improve the environmental footprint of the industry even more.

The average yearly turnover for SP Processum has been 23.5 million SEK. All their activities are devoted to biorefining R&D and cluster development. VINNOVA spends 6 million SEK every year through the Biorefinery of the Future project, and regional actors put up an equal amount to match this funding. An extra 12 million SEK per year has been supplied from EU structural funds, member companies and public and private research funds (regional and national), as well as funding from FP7 and similar EU sources.

Figure 1: The members of the Biorefinery of the Future cluster.

Geographically, the focus of the cluster is along the coastal area of northern Sweden; the original cluster started in the Domsjö development area in Örnsköldsvik, but now extends from Piteå in the north to Iggesund in the south. Today, the core of the cluster in terms of the number of companies is located in the region of Örnsköldsvik - Umeå. Many of the member companies are multinational, which means that the core region sometimes extends as far as Brazil, India or Canada. Over the past two years, intense co-operation with the chemical industries on the west coast of Sweden has been initiated by the Processum cluster and the 'Hållbar kemi' cluster in Stenungsund.

The universities in the region are not officially included in the cluster, nor are the regional financing bodies and development authorities. However, the cluster co-operate intensively with these actors of the helix as well. They are represented on the board of Processum and take part in activities such as membership meetings and project meetings. Thus, the structure is open to all parties of the helix. Non-member companies can also be part of the structure at several levels. However, the only formal owners are SP and 'Processums Intresseförening' (the association).

Regional and national impact of the activities

It would seem evident that an important aspect of the bioeconomy cluster in Örnsköldsvik is the national influence that this activity has had on the development of the bioeconomy. When the Biorefinery of the Future project began, many of the big pulp and paper companies in Sweden were relatively uninterested in the biorefinery field. The example of Domsjö and the VINNÄXT cluster, combined with a decline in the demand for paper products, has inverted the situation. Today, almost all the big pulp and paper companies have entire units working on biorefining and new businesses, and the Swedish chemical industry has taken a bio-based route. In Sweden, SP Processum has been an early and successful example that has inspired others and accelerated this development.

The challenge now lies on the political side. According to SP Processum, the political will for change is often lacking in terms of tax incentives, biofuel quotas or other measures. The technologies are ready for scale-up, but the demand for green solutions is insufficient. A couple of years ago, almost all the planned scale-ups to the industrial scale were aborted. One of these was the big gasification plant planned for the Domsjö mill. The failure to invest in Domsjö was a very clear example of the situation in Sweden today. Based on our case studies in the Nordic countries, we know that this situation is not unique. However, there are now bioeconomy panels developing (e.g. in Denmark) and fresh bioeconomic strategies being developed (e.g. in Finland). It will be interesting to see whether these ambitions can influence the playing field for substantial (and expensive) bioeconomic investments in the long term.

The actors in the cluster believe that a large part of value creation in the short run will take place within existing companies rather than within start-ups. This is mainly related to the huge investment costs and the economies of scale in the industry. However, recent trends in new technologies and the need for entrepreneurs to develop businesses around waste-stream conversion make it clear that new businesses also need to be developed. These new businesses have proven more important than previously believed in terms of bringing new processes and products to the market. Large global companies alone will be unable to handle this systemic change in the bioeconomy.

What is the future for the bioeconomy in the region?

Based on interviews with regional and local actors in Örnsköldsvik, the bioeconomy sectors are considered to be important. The actors perceive that the bioeconomy and the forest sector in general have a strong position in the regional development programme, and they see some positive impacts in developing this field. There are many municipalities, counties, firms and universities in the region that have the same ambition, and they are collaborating on branding the region, focusing on the social, technical and economic aspects of the regional bioeconomy. For the smaller region of Örnsköldsvik, the bioeconomy is an important sector today. For the larger region, including the city of Umeå, the bioeconomy has a less strong position because the economy is rather diversified and other sectors are more important. However, the universities in Umeå (a technical university as well as a branch of the agricultural and forestry university) are involved in bioeconomic development in Örnsköldsvik. One feature of this is that the region is becoming more integrated in terms of aspects such as the labour market, because high-tech employment is being created in Örnsköldsvik and people are commuting from Umeå for these opportunities. Interaction with Umeå, as well as national and global relationships in the field of bioeconomy, may contribute to the long-term development of new parts of the regional economy. The perception is that the regional interaction will spill over to other sectors as well, with increased interaction between the two cities.

The Örnsköldsvik bioeconomy, especially the build-up phase of the biorefinery initiative, is an essential part of regional change, based on accumulated knowledge and natural resources in the region. The industrial downturn of the 1990s paved the way for the biorefinery initiative; there was a 'sense of urgency'. The cluster organization acted as the key regional development tool in bringing the actors together, and it has delivered and communicated a systematic, long-term approach that is definitely needed in bioeconomic regional initiatives. In conjunction with this, the role of the national institute VINNOVA has been significant in guaranteeing the long-term approach to the Örnsköldsvik bioeconomy, which is probably necessary to continue this development and reach the next stage of bioeconomic development in the region.

From a bioeconomic perspective, the biorefinery cluster in Örnsköldsvik is unquestionably a success story. However, the questions are how great an impact on regional development this geographically confined and rather high-technology cluster has had on employment, societal systemic change and the development of other sectors, and to what extent it has had multiplier effects on the economy. It is a fact that firms have been created (and sustained), and they are finding new ways to make use of the region's forests, which may not be required for paper in the long run. However, there is a challenge in linking such a knowledge-intensive cluster to 'wider' aspects of rural and regional development. If markets and funding were available, there would be more job creation because plants would be built for other forms of refinement of forest products, and production scales would increase for those firms developing products such as ethanol, coal and proteins. Moreover, there is an obvious temporal dimension to the question of regional development - in the long run, economic activities, attractiveness and labour markets may evolve because of the narrower-sector growth taking place today. However, an integrated vision for the region would seem to be a necessary tool to enable this development to take place.

Back to Nordregio News Issue 4, 2014