Silva Green Fuel, a joint venture company of Statkraft and Södra with 51% and 49% stakes is planning to construct a biofuel demonstration plant that can produce second generation biofuel from forest feedstock.

The plant will be constructed with an investment of NOK500m ($59.7m) and will be located in Tofte in the Norwegian municipality of Hurum. For this plant, Steeper Energy, a Danish-Canadian company is expected to supply the technology.

Construction of the plant is expected to begin in next February and is scheduled for completion in 2019. Enova will provide 25% of the total finance for the project.

Statkraft stated that the demo plant is being constructed to test the technology for continuous production of advanced (second generation) biofuel. The demonstration plant will also be used to test various types of raw materials.

The plant will initially use feedstock from the forestry industry. However, it may potentially use all biodegradable materials.

The company said that there is a vast market potential for biofuel. Ten biofuel production lines in Norway and Sweden could produce up to 1.5 billion litres annually, which is equivalent to meet about 13% of fuel used for road transport in the two countries.

Statkraft president and CEO Christian Rynning-Tønnesen said: "Advanced biofuels will be important for the transition from fossil to renewable energy consumption in the transport sector. As Europe's largest supplier of renewable energy, Statkraft is championing an industry development that will contribute to the green shift."

Silva Green Fuel was formed in 2015 to establish commercial production of advanced biofuel based on forest raw materials. A full-scale production line is expected to have a capacity of between 100 and 150 million litres of biofuel each year.

The company stated: "Initially, the product is intended for heavy road transport. However, the aim is to qualify the biofuel for use in the aviation industry."