1
Burton English, Jamey Menard, Marie Burton English, Jamey Menard, Marie Walsh, and Kim JensenWalsh, and Kim Jensen
Professor, Research Associate, Adjunct Professor, Research Associate, Adjunct Professor, and Professor, University of Professor, and Professor, University of
Tennessee.Tennessee.
ECONOMIC IMPACTS ECONOMIC IMPACTS RESULTING RESULTING FROM CO-FIRING BIOMASS FROM CO-FIRING BIOMASS FEEDSTOCKS IN SOUTHEASTERN FEEDSTOCKS IN SOUTHEASTERN UNITED STATES COAL-FIRED UNITED STATES COAL-FIRED PLANTSPLANTS
2
BACKGROUNDBACKGROUND
• Electricity from CoalElectricity from Coal– US electricity from coal-firing>50% of electricity US electricity from coal-firing>50% of electricity
generatedgenerated– Southeast 60% from coal-firing (DOE/EIA, 2001)Southeast 60% from coal-firing (DOE/EIA, 2001)
• Share of air emissions from coal burningShare of air emissions from coal burning– 2/3 sulfur dioxide (SO2/3 sulfur dioxide (SO22))– 1/3 carbon dioxide (CO1/3 carbon dioxide (CO22))– 1/4 nitrogen oxide (NO1/4 nitrogen oxide (NOxx))– also adds particulate matter in the air also adds particulate matter in the air
• Biomass feedstocks Biomass feedstocks – agriculture residuesagriculture residues– dedicated energy cropsdedicated energy crops– forest residuesforest residues– urban wood wastesurban wood wastes– wood mill wasteswood mill wastes
have lower emission levels of sulfur or sulfur have lower emission levels of sulfur or sulfur compounds and can potentially reduce nitrogen compounds and can potentially reduce nitrogen oxide emissionsoxide emissions
Acid rain damage to forests-Great Smoky Mountains higher elevations rainfall is up to 10 times as acidic as normal precipitation in the park and fog is often 100 times more acidic
3
BACKGROUNDBACKGROUND• Biomass crops raised for the purposes of energy Biomass crops raised for the purposes of energy
production is carbon neutralproduction is carbon neutral• With co-firing, rather than 100 percent biomass use, With co-firing, rather than 100 percent biomass use,
continuous supply of biomass is not as critical continuous supply of biomass is not as critical (Demirbas)(Demirbas)
• Credits for offsetting SOCredits for offsetting SOxx emissions, currently priced emissions, currently priced at $100 per ton, provide an incentive for co-firing at $100 per ton, provide an incentive for co-firing (Comer et al.)(Comer et al.)
• Costs of conversion of power plants for co-firing are Costs of conversion of power plants for co-firing are relatively modest, depends on % percent co-fired relatively modest, depends on % percent co-fired
• Power companies also have potential to obtain Power companies also have potential to obtain marketable value through offsetting COmarketable value through offsetting CO22 for for greenhouse gas mitigation. Replacing coal (a net greenhouse gas mitigation. Replacing coal (a net COCO22 emitter) with biomass (a net zero CO emitter) with biomass (a net zero CO22 emitter) emitter) offers means to reduce COoffers means to reduce CO22 while maintaining while maintaining operational coal generating capacity (Comer et al.)operational coal generating capacity (Comer et al.)
4
BACKGROUNDBACKGROUND• DOE projects that by 2025, biomass DOE projects that by 2025, biomass
electricity production will increase from 38 electricity production will increase from 38 billion to 78 billion kWhsbillion to 78 billion kWhs
• Electricity from municipal solid waste, Electricity from municipal solid waste, including waste combustion and landfill gas, including waste combustion and landfill gas, is projected to increase from 22 billion to 34 is projected to increase from 22 billion to 34 billion kWhsbillion kWhs
• Factors likely to facilitate this growth Factors likely to facilitate this growth include: include: – changing air pollution standards changing air pollution standards – potential benefits to rural economies potential benefits to rural economies – capacity pressures on solid waste capacity pressures on solid waste
facilities facilities – forest fire control policies to limit the forest fire control policies to limit the
amount of understory brushamount of understory brush
5
Feedstocks forest residuesprimary mill residuesagricultural residuesdedicated energy crops (switchgrass) urban wood wastes
2% Co fire 15% Co fire
Base $0Low Carbon
Tax $70High Carbon
Tax $120
Economic Impacts
Economic Impacts
• producing/collecting/transporting the feedstockproducing/collecting/transporting the feedstock• retrofitting the coal-fired utilities for burning the retrofitting the coal-fired utilities for burning the
feedstockfeedstock• operating co-fired utilitiesoperating co-fired utilities• coal displaced from burning the feedstockcoal displaced from burning the feedstock
Study ScenariosStudy Scenarios
6
Study AreaStudy Area
• Power plants studied were Power plants studied were associated with Southeastern associated with Southeastern Electric Reliability Council Electric Reliability Council (SERC) (SERC)
• 8 states – AL, GA, KY, MS, NC, 8 states – AL, GA, KY, MS, NC, SC, TN, VASC, TN, VA
• Trading regions within the eight Trading regions within the eight states were identified. These states were identified. These regions were based on the regions were based on the Bureau of Economic Analysis Bureau of Economic Analysis Trading AreasTrading Areas
Plants AL, GA, KY, MS, NC, SC, TN, VA
77
71
47
40
13
73
29
48
75
38
15
78
69
35
18 19
83
80
21
17
23
7425
70
37
49
24
79
41
28
27
16
36
76
44
39
84
43
20
4546
26
42
72
22
82
14
13
2020
/
Economic Trading Areas
7
Modeling SystemModeling System
ORIBAS• GIS-based transportation model • estimates delivered costs of biomass to power plant facilities
ORCED• dynamic electricity distribution model estimates price utilities can pay for biomass feedstocks• models the electrical system for a region by matching the supplies and demands for two seasons of a single year
IMPLAN• uses input-output analysis to derive estimated economic impacts• creates a picture of a regional economy to describe flows of goods and services to and from industries and institutions
Priceof
FeedStock
Location ofPower plant
Cost and Location of Bio-based ResourceTransportation Expense
8
ORIBASORIBAS
• GIS-based transportation model used to estimate the delivered costs of biomass to hypothetical power plant facilities (Graham et al., Noon et al.) • Complete road network for each state• Waste, residues, and dedicated crop feedstocks are distributed across each county for a given state • Location and level of demand for residue • Attempts to supply the bio-based feedstocks to the power plant at lowest cost
9
ORCEDORCED
• Dynamic electricity distribution model estimates price utilities can pay for feedstocks• Models electrical system for region by S and D for two seasons of a single year • Supplies are defined by up to 51 plants, extensive definitions of their operations, costs, and emissions• Demands are defined by load duration curves for each season, with gradually increasing demands based on hourly demands • As amount of residues demanded increases, cost of fuel for generation increases• Coal costs at each plant vary by scenario depending on emission costs prescribed by a given scenario• A maximum price is determined for residue at the plant gate • Price then used to determine if sufficient quantities of residue exists to meet the amount demanded by the co-fire scenario
• Each ton of SOEach ton of SOxx produced produced
has a negative value of $142 has a negative value of $142 also, there is a $2,374 per ton also, there is a $2,374 per ton NONOxx pollutant value in addition pollutant value in addition
to the low or high carbon taxto the low or high carbon tax
10
IMPLANIMPLAN• Input-output analysis creates a Input-output analysis creates a picture of a regional economy to picture of a regional economy to describe flows of goods and describe flows of goods and services to and from industries and services to and from industries and institutions institutions
•Direct impacts-changes in Direct impacts-changes in final demand for a sector’s final demand for a sector’s product product • Indirect impacts-change in Indirect impacts-change in inter-industry purchases due to inter-industry purchases due to the change in final demand the change in final demand from the industry directly from the industry directly affectedaffected• Induced impacts-changes in Induced impacts-changes in the incomes of households and the incomes of households and other institutions and the other institutions and the resulting increases/decreases resulting increases/decreases in spending power as a result in spending power as a result of the change in final demandof the change in final demand
Impacts are estimated for Impacts are estimated for A. One-time only impact in the A. One-time only impact in the
Construction SectorConstruction SectorB. Annual Operating Cost B. Annual Operating Cost
Impacts Impacts 1)1) Electrical generationElectrical generation2)2) Growing/collecting of Growing/collecting of
the bio-based feedstockthe bio-based feedstock3)3) TransportationTransportation4)4) Coal miningCoal mining
11
A. One Time Conversion CostsA. One Time Conversion Costs
• 2 % co-fire 2 % co-fire →→ $50/kw $50/kw • 15% co-fire 15% co-fire →→ $200/kw $200/kw
• Plant capacity x capacity factor=kilowatts produced.Plant capacity x capacity factor=kilowatts produced.• Kilowatts produced x co-fire level assumed (2% or 15%) x Kilowatts produced x co-fire level assumed (2% or 15%) x
either the $50 or $200 investment cost=total investmenteither the $50 or $200 investment cost=total investment• Million dollar investment was proportioned through the Million dollar investment was proportioned through the
economy and assigned to the appropriate IMPLAN industry economy and assigned to the appropriate IMPLAN industry sectors (Van Dyke) sectors (Van Dyke)
• Each ETA was then impacted with a million dollar investment Each ETA was then impacted with a million dollar investment for both the 2% and 15% co-firing scenariosfor both the 2% and 15% co-firing scenarios
• To determine the impact of the investment stage within an To determine the impact of the investment stage within an ETA, the total investment required for all power plants within ETA, the total investment required for all power plants within the ETA expressed in millions of dollars was multiplied by the the ETA expressed in millions of dollars was multiplied by the multiplier for TIO, employment, and value addedmultiplier for TIO, employment, and value added
12
B. Annual Operating CostsB. Annual Operating Costs Impacts of the change in operating costs for Impacts of the change in operating costs for
the facilities in the study also required the the facilities in the study also required the identification of the IMPLAN industry sectors identification of the IMPLAN industry sectors to capture the change in annual costs that to capture the change in annual costs that would occur at the power plant facilitywould occur at the power plant facility
1)1) Power GenerationPower Generation -IMPLAN sector -IMPLAN sector representing electricity production was representing electricity production was modified to reflect an increase in annual modified to reflect an increase in annual machinery repair expenditures, and machinery repair expenditures, and employment compensation was increased to employment compensation was increased to reflect the additional labor requirements reflect the additional labor requirements
13
2) Bio-based Feedstock Costs2) Bio-based Feedstock Costs
• For each of the feedstocks, costs were For each of the feedstocks, costs were distributed across the appropriate distributed across the appropriate IMPLAN input sectors IMPLAN input sectors
• Non-labor costs were used to adjust the Non-labor costs were used to adjust the current production function of the current production function of the sector most likely to provide the outputsector most likely to provide the output
14
2) Bio-based Feedstock Costs2) Bio-based Feedstock Costs
• A new model was created for each bio-A new model was created for each bio-based feedstock with adjusted based feedstock with adjusted production function coefficients production function coefficients reflecting the new activity in the reflecting the new activity in the economyeconomy
15
2) Bio-based Feedstock Costs2) Bio-based Feedstock Costs
• Total industry output, employment, and Total industry output, employment, and value-added multipliers were then value-added multipliers were then generated for each bio-based feedstock generated for each bio-based feedstock
• These multipliers were multiplied by the These multipliers were multiplied by the cost of producing/collecting the cost of producing/collecting the feedstock that ORIBAS indicated would feedstock that ORIBAS indicated would be used by the power plant and the be used by the power plant and the economic impact that co-firing would economic impact that co-firing would have in the areas where the feedstock have in the areas where the feedstock originated was estimatedoriginated was estimated
16
Proprietary Income ImpactsProprietary Income Impacts
• Value paid for the bio-based feedstock was Value paid for the bio-based feedstock was predetermined and based on the scenario predetermined and based on the scenario characteristics characteristics
• The difference between the predetermined The difference between the predetermined value and the cost of growing/collecting the value and the cost of growing/collecting the residue was estimated and assumed to residue was estimated and assumed to impact the sector’s proprietary income that impact the sector’s proprietary income that generated the feedstockgenerated the feedstock
• An impact analysis on proprietary income An impact analysis on proprietary income was conducted in each ETA. The multiplier was conducted in each ETA. The multiplier generated times the total change in generated times the total change in proprietary income served as an estimate of proprietary income served as an estimate of the impacts that would occur as a result of the impacts that would occur as a result of an increase in profit with in the regionan increase in profit with in the region
17
3) Transportation3) Transportation• Total transportation sector impacts were Total transportation sector impacts were
determined by summing costs of the determined by summing costs of the amount transported to the facility over all amount transported to the facility over all trips and residue typestrips and residue types
• The result was a change in total industry The result was a change in total industry outputoutput
• Input-output multipliers for the BEA’s in Input-output multipliers for the BEA’s in which the power plants are located were which the power plants are located were then used to estimate the impact on the then used to estimate the impact on the economy, the job market, and value-addedeconomy, the job market, and value-added
18
4) Coal Mining4) Coal Mining
• Decrease in coal use with co-firingDecrease in coal use with co-firing• Decrease in final demands on coal Decrease in final demands on coal
mining sectormining sector
19
ResultsResults
• Residue Use and Energy ProductionResidue Use and Energy Production• Characteristics of Coal ReplacedCharacteristics of Coal Replaced• Economic ImpactsEconomic Impacts
– Total Industry OutputTotal Industry Output– JobsJobs– Value-addedValue-added
20
Feedstock Energy Content
Total Residue
Total energy Content
Electricity Produced
From Residues
MMBtu/ton metric dry tons MMBtu Kwh Low Carbon/Co-fire 2% Ag. Residue 15 17,537 263,051 77 Forest Residue 16.5 931,078 15,362,794 4,501 Mill Waste 16.5 722,643 11,923,610 3,494 Dedicated Crop 15.5 1,658,249 25,702,860 7,531 Urban Waste 16.5 791,379 13,057,755 3,826
Total 4,120,886 66,310,069 19,429 Low Carbon/Co-fire 15% Ag. Residue 15 90,950 1,364,246 400 Forest Residue 16.5 7,773,136 128,256,751 37,579 Mill Waste 16.5 5,860,687 96,701,331 28,333 Dedicated Crop 15.5 6,321,000 97,975,497 28,707 Urban Waste 16.5 3,688,579 60,861,558 17,832
Total 23,734,352 385,159,383 112,852 High Carbon/Co-fire 2% Ag. Residue 15 18,945 284,178 83 Forest Residue 16.5 861,089 14,207,975 4,163 Mill Waste 16.5 705,602 11,642,426 3,411 Dedicated Crop 15.5 1,625,695 25,198,279 7,383 Urban Waste 16.5 748,939 12,357,493 3,621
Total 3,960,271 63,690,351 18,661 High Carbon/Co-fire 15% Ag. Residue 15 143,958 2,159,363 633 Forest Residue 16.5 7,012,248 115,702,088 33,901 Mill Waste 16.5 7,315,194 120,700,694 35,365 Dedicated Crop 15.5 11,021,469 170,832,762 50,054 Urban Waste 16.5 3,537,423 58,367,474 17,102
Total 29,030,290 467,762,380 137,054
Res
idu
e U
se a
nd
Ele
ctri
city
Pro
du
ctio
n
21
/
Agricultural Residues -- Low Carbon 2%
/
Agricultural Residues -- Low Carbon 15%
/
Agricultural Residues -- High Carbon 2%
/
Agricultural Residues -- High Carbon 15%
Agricultural Residues(Tons)
0 - 2,500
2,500 - 5,000
5,000 - 10,000
10,000 - 25,000
25,000 - 50,000
Ag
ricu
ltu
ral
Res
idu
es
22
Fo
rest
Res
idu
es /
Forest Residues -- Low Carbon 15%
/
Forest Residues -- Low Carbon 2%
/
Forest Residues -- High Carbon 2%
/
Forest Residues -- High Carbon 15%
Forest Residues(Tons)
0 - 30,000
30,000 - 60,000
60,000 - 90,000
90,000 - 120,000
> 120,000
23
Mil
l W
aste
s
/
Mill Residues -- Low Carbon 2%
/
Mill Residues -- Low Carbon 15%
/
Mill Residues -- High Carbon 2%
/
Mill Residues -- High Carbon 15%
Mill Residues(Tons)
0 - 60,000
60,000 - 120,000
120,000 - 180,000
180,000 - 240,000
> 240,000
24
Sw
itch
gra
ss
/
Switchgrass Residues -- Low Carbon 2%
/
Switchgrass Residues -- Low Carbon 15%
/
Switchgrass Residues -- High Carbon 2%
/
Switchgrass Residues -- High Carbon 15%
Switchgrass(Tons)
0 - 30,000
30,000 - 60,000
60,000 - 90,000
90,000 - 120,000
> 120,000
25
Urb
an W
aste
s
/
Urban Wastes -- Low Carbon 2%
/
Urban Wastes -- Low Carbon 15%
/
Urban Wastes -- High Carbon 2%
/
Urban Wastes -- High Carbon 15%
Urban Wastes(Tons)
0 - 35,000
35,000 - 70,000
70,000 - 105,000
105,000 - 140,000
> 140,000
26
Characteristics of Coal Replaced by Bio-Based Characteristics of Coal Replaced by Bio-Based FeedstocksFeedstocks
Base-2% co-fire 355,412 0.94 $12,487,292 3,344 Low Carbon, 2% co-fire 3,251,073 1.33 $91,389,091 43,160 Low Carbon, 15%co-fire 18,198,976 1.24 $525,177,225 225,992 High Carbon, 2% co-fire 3,251,073 1.33 $91,389,091 43,160 High Carbon, 15%co-fire 23,987,425 1.32 $678,951,258 317,708
Sulfur Replacedtons
Coal Valuedollars
Sulfur%
Coal Replacedtons
27
Impacts by Sector and ScenarioImpacts by Sector and Scenario
BaseLow Carbon
2%Low Carbon
15%High Carbon
15%Total Industry Output ($1,000)Transportation $2,995 $29,862 $432,973 $27,559 $533,618Operating $1,011 $9,231 $51,556 $9,231 $68,154Coal Replacement ($15,512) ($110,063) ($596,173) ($110,063) ($805,137)Bio-based Feedstocks $18,854 $331,425 $1,516,413 $330,239 $2,458,748
Total Annual Impact $7,349 $260,455 $1,404,770 $256,967 $2,255,383Investment (Non-annual) $7,577 $71,204 $1,830,102 $71,204 $2,367,249
Transportation 34.9 342.1 5,042.90 315.7 6,095.90Operating 8 71.7 407.4 71.7 530.5Coal Replacement -126.9 -899.6 -4,881.90 -899.6 -6,586.50Bio-based Feedstocks 180.8 4,368.10 20,195.40 4,368.90 32,570.60
Total Annual Jobs 96.8 3,882.30 20,763.80 3,856.70 32,610.50Investment (Non-annual) 67.8 631 19,210.40 631 24,559.10
Transportation $1,514 $15,042 $216,183 $13,886 $269,693Operating $467 $4,237 $23,632 $4,237 $31,298Coal Replacement ($7,980) ($56,193) ($304,500) ($56,193) ($411,191)Bio-based Feedstocks $9,031 $127,288 $595,140 $126,773 $941,027
Total Annual Impact $3,032 $90,375 $530,456 $88,704 $830,826Investment (Non-annual) $3,344 $32,248 $962,418 $32,248 $1,249,153
Value Added ($1,000)
Jobs
High Carbon2%
28
Key FindingsKey Findings
• 2% co-fire, some plants do find residue at 2% co-fire, some plants do find residue at lower costs than coal plus sulfur emissions lower costs than coal plus sulfur emissions costs costs
• 15% co-fire, paying sulfur emissions cost is 15% co-fire, paying sulfur emissions cost is more economical than burning residue more economical than burning residue
• Are areas now that would benefit from Are areas now that would benefit from generating electricity using forest residues, generating electricity using forest residues, mill wastes, and urban wastes mill wastes, and urban wastes
• In fact, nearly 2,500-kilowatt hours of In fact, nearly 2,500-kilowatt hours of electricity are produced using these electricity are produced using these residues replacing 355,000 tons of coalresidues replacing 355,000 tons of coal
• Each state, with the exception of Kentucky, Each state, with the exception of Kentucky, consumes some residueconsumes some residue
29
Key FindingsKey Findings• Low Carbon and High Carbon emissions Low Carbon and High Carbon emissions
cost scenarios-amount of residues cost scenarios-amount of residues consumed will significantly increase from consumed will significantly increase from 4 million metric dry tons (Base) to 23 (Low 4 million metric dry tons (Base) to 23 (Low Carbon) and 29 (High Carbon) million Carbon) and 29 (High Carbon) million metric dry tonsmetric dry tons
• Estimated $1.4 to $2.2 billion impact that Estimated $1.4 to $2.2 billion impact that occurs to the Southeast Region under the occurs to the Southeast Region under the 15% co-fire levels with Low Carbon and 15% co-fire levels with Low Carbon and High Carbon emission cost scenarios, High Carbon emission cost scenarios, respectively. Concurrent with this respectively. Concurrent with this increase in economic activity is an increase in economic activity is an estimated increase of 25,000 jobsestimated increase of 25,000 jobs