economics of forest biomass and bioenergy jianbang gan texas a&m university matthew langholtz...

Economics of Forest Biomass and Bioenergy

Jianbang Gan

Texas A&M University

Matthew LangholtzSFRC UF/BioResource Management Inc.

Alan W. Hodges

University of Florida

Woody Biomass Outreach TrainingSeptember 11-12, 2007

Objectives

• Understand the costs and benefits of forest biomass and bioenergy (Jianbang Gan)

• Create supply curves using local information (Matthew Langholtz)

• Understand the economic impact of using woody biomass for bioenergy production on local communities (Alan W. Hodges)


Costs and Benefits of Forest Biomass and Bioenergy

Jianbang Gan

Texas A&M University

Outline

• Production costs and cost comparisons– Feedstocks– Biofuels (electricity, ethanol, etc.)

– CO2 offsetting

• Benefits to landowners

• Summary and implications


The Fact

Costs and benefits vary from case to case.

Costs of Delivered Logging ResiduesAverage:– $28/dry ton or $5.80/MWh (marginal cost)– $33/dry ton or $6.80/MWh (full cost)

Source: Gan and Smith 2006


Cost Composition of Delivered Logging Residues (Chipping at Roadside)

27%

30%

4%8%

31%

Trucking

Chipping atLandingForwarding

Cutting to Heaps

OrganizationalCosts

Source: Oijala et al. 1999


Costs of Other Forest Biomass

• Biomass from fuel reduction thinnings (USDA Forest Service 2005)

– $30-40/dry ton or $6.20–8.30/MWh (cut & skid)– $34-48/dry ton or $7.00–9.90/MWh (cut/skid/chip)

• Short-rotation woody crops (Gan and Smith 2006)

– $52/dry ton or $10.84/MWh


Comparison to Coal

• Delivered Coal - $5.32/MWh (national average)• Logging residues are almost as competitive as coal.• Fuel reduction thinnings and short-rotation woody crops are

more expensive than logging residues.

Source: Gan and Smith 2006, USDA Forest Service 2005


Electricity Production(New plants using integrated gasification combined cycle)

• Conventional coal system - $35/MWh• Biomass systems


Note: In some other cases, biomass may be more competitive.


Electricity Production (cont’d)• Logging residues (average cost)

– $47/MWh (marginal cost)– $50/MWh (full cost)



How Can Biomass Be More Competitive?

• Reduce fuel costs by improving the efficiency in growing, procuring, transporting, and processing forest biomass

• Reduce non-fuel costs through improving efficiency in energy conversion (from biomass to secondary energy)

• Tax CO2 emissions or provide incentives/credits for carbon displacement


Co-firing Biomass with Coal

• A near term, low cost option of using biomass for electricity production

• Up to 15% of fuel input (in heat) can be substituted with biomass.

• Installation costs:– $50 per kW of biomass generation in cyclone

boilers– $150 to $300 per kW in pulverized coal boilers

• Drawbacks: slagging, etc.• Utility experience has been mixed.


Ethanol Production Costs

• Current average ethanol production costs– Corn

ethanol: $1.25/gl

– Cellulosic ethanol: $2.50/gl

Source: Stanley Bull 2006


Wood Pulp, OSB vs. Ethanol

• Wood pulp or OSB is still more profitable and less risky than ethanol.

Source: Peter Ince 2007


Pellet Production Costs• $25/ton without drying• $36/ton with drying

Source: Sudhagar Mani 2006


Carbon Credits

• Forest bioenergy is carbon neutral.

• Using forest biomass for electricity generation can displace CO2 emissions from coal-fired power plants.

• Carbon markets are still under development (Chicago Climate Exchange, http://www.chicagoclimatex.com). Source: Chicago Climate Exchange


CO2 Emission Displacement

• CO2 price: $3.50/ton (Chicago Climate Exchange)

• Average displacement cost using logging residues for electricity generation:

$16/ton CO2 (marginal cost)

$19/ton CO2 (full cost)



Impact of Global CO2 Emission Reduction on Cost Competitiveness

• 20-30% CO2 emission reduction



Impact of Carbon Taxes on Cost Competitiveness

• CO2 emission taxation - $25/ton CO2



Potential Benefits to Landownersfor Forest Biomass/Bioenergy Production

• Revenue from biomass sales• Savings on site preparation costs in forest

regeneration (logging residues)• Reduction in the risk of wildfire and disease/pest

outbreaks• Opportunity for stand improvement and restoration

of damaged stands• Potential carbon credits


Summary

• Production costs, in general, remain a major barrier to forest biomass and bioenergy development.

• Some market niches for biomass/bioenergy exist.

• Co-benefits could be significant.

• Using forest biomass for electricity generation is a viable option for mitigating CO2 emissions.

• Logging residues are a less costly biomass source from conventional forests (except for mill residues).


Implications for R, D&D

• Find market niches for forest biomass/bioenergy• Reduce costs

– via technology development/improvement (including technologies for both feedstock and energy production)

– via management• Integration of forest biomass/bioenergy production with existing

forest management• Coordination of forest bioenergy production with the production

of fiber and wood products

• Policy: Get co-benefits counted– Incentives for biomass/bioenergy production and consumption– Better coordination and integration of energy, environmental,

agricultural, forestry, and rural development policies

Local Biomass Supply Curve Construction


Matthew LangholtzSFRC UF/BioResource Management Inc.

Outline

• Supply curve introduction.

• Example supply curve construction in Excel


Related Documents

Community Economic Profiles

Fact Sheet: Sources and Supply

Appendix: Do-It-Yourself Supply CurvesAssessing the Economic Availability of Woody Biomass

www.interfacesouth.org/woodybiomass


http://www.interfacesouth.org/woodybiomass

Background: two axes for two questions

1. How much supply?2. At what price?



Resource

Quantity (green

tons/year)

Delivered Price

($/green ton)Urban wood waste 50,000 $15.00Forest thinnings 150,000 $35.00Logging residues 100,000 $30.00


$30

$15

Urban wood waste:

$15/ton

Forest thinnings: $35/ton

150,000 tons/year Logging residues: $30/ton 100,000 tons/year

$35

50,000 tpy 150,000 tpy

Price ($/green ton)

Supply (tons/yr)

300,000 tpy



Example Supply Curve


Twenty-eight Supply Curves


DIY Supply Curves Example

From: Do-It-Yourself Supply Curves, available at www.interfacesouth.org/woodybiomass


Economic Impacts of Biomass Electric Power Generation

Alan W. Hodges

University of Florida


Forest Resource Mgmt & Timber

Production

Rest of United States

and World

Economy

Wholesale & Retail

Distribution

Exports

Resident Population Employee

Households

Input & Service

Suppliers

Local Consumption

& Intermediate

Demand

Economic Structure of the Wood Energy Industry

Jobs: Labor/ Wages

Local Economy Goods & Services and Monetary Flows

Imports (Leakages)

Consumer Household Spending (Induced

Effects)

Purchased Inputs

(Indirect Effects)

Logging & Forestry Services Wood Energy

Industry

Local & State

Government

Personal & Business

Taxes

Electric Utilities and Other Wood

UsersLogging,

Landscape, Transportation

Services

Plant Engineering, Construction, Infrastructure


The economy is driven by consumption or final demand, including exports, and local purchases.

Model constructed for a specific region.

Represents economic linkages between industries, households, and governments in terms of purchases and expenditures.

Regional Input-Output (I-O) Economic Models

Parts and transportation

Utilities

Labor

Exports

Household consumption

Value added remanufacturing

BackwardLinkages

ForwardLinkages


IMPLAN System• Microcomputer system for I-O model construction and impact analysis.

• Software licensed by MIG, Inc. since 1995 (www.implan.com) at low cost ($450).

• Regional economic database for US states and counties, updated annually, purchased separately ($500-$2600).

• Data includes Industry Output, Employment, Value Added (509 Industry sectors), Labor income, Property income, Taxes, Final Demands, Transfer payments, Commodity trade, Capital investment.


•Direct Effects: direct change in industry output, expenditure or employment •Indirect Effects: change in input purchases (supply chain) due to direct effect•Induced Effects: change in employee household personal consumption expenditures due to direct and indirect changes •Type I: (direct + indirect) / direct•Type II: (direct + indirect + induced) / direct (income or employment based)•SAM: includes income effects of household s, government spending, investment, transfer payments

Economic Multipliers


Functional Economic Areas of the United StatesSource: US Dept. Commerce (2004)


Typical Capital Costs for a 20 or 40 MW Wood-Fired Power Plant

IMPLAN Sectors

Expense Description 20 MW ($) 40 MW ($)

39 Site preparation (heavy industrial) 800,000 1,000,000

40 Water, sewer, and pipeline construction 100,000 150,000

238, 285Power boiler, heat exchangers, turbine and generator set manufacturing

44,500,000 81,000,000

394 Initial fuel delivery (trucks) 300,000 500,000

429Financing cost (Funds, trusts, and other financial vehicles)

1,500,000 2,500,000

431 Site acquisition (Real estate) 1,000,000 1,000,000

445Permitting (Environmental and other technical consulting)

500,000 600,000

Total 48,700,000 86,750,000

Source: Carlson Small Power Consultants, Redding, CA.


Typical Operating Costs (1st Year) for a 20 or 40 MW Wood-Fired Power Plant

IMPLAN Sectors

Expense Description20 MW

($)40 MW

($)

14, 18 Wood fuel cost (logging ag. & forestry support services) 4,409,166 9,827,229

30 Utility interconnection 100,000 155,000

31 Start up fuel-gas (natural gas) 25,000 50,000

32 Utilities-electric 50,000 75,000

150 Consumable chemicals 330,000 660,000

238 Power boiler and heat exchanger maintenance 50,000 90,000

285 Turbine and generator set maintenance 50,000 90,000

428 Insurance 160,000 260,000

434 Mobil equipment lease 90,000 120,000

439 Other routine and periodic maintenance 1,000,000 1,650,000

445 Environmental costs 100,000 160,000

451 Management overhead 100,000 120,000

452 Office expenses 110,000 140,000

460 Ash disposal 60,000 120,000

499 Property tax 470,000 800,000

10006 Salaries and benefits (Value added) 1,260,000 1,820,000 Total Operating Costs 7,964,166 16,137,299

Source: Carlson Small Power Consultants, Redding, CA.

State

20 MW 40 MW

Average Max Min Average Max Min$ million

AL 4.02 4.03 4.00 9.96 10.37 9.55AR 4.94 5.02 4.85 11.18 11.44 10.91FL 4.03 4.70 3.37 9.92 11.23 9.05GA 3.39 4.76 2.47 8.04 11.65 5.70KY 3.94 4.48 3.57 9.72 10.52 8.79LA 3.62 3.62 3.62 9.10 9.10 9.10MS 4.09 4.62 3.56 10.16 10.52 9.80NC 2.88 2.88 2.88 7.37 7.37 7.37OK 5.88 5.88 5.88 12.97 12.97 12.97SC 3.91 4.08 3.74 9.83 10.30 9.37TN 4.60 4.64 4.53 11.88 12.10 11.58TX 2.81 2.81 2.81 6.43 6.43 6.43VA 3.93 4.06 3.81 10.13 10.22 10.04All 4.01 5.88 2.47 9.83 12.97 5.70

Wood Fuel Costs for Biomass Power Plants in Selected Communities in Southern States

Economic Impact Measures

Total output impacts—the effect on sales revenues of all businesses in a local economy resulting from a change in industry activity.

Value added impacts—the effect on personal and business income in the local area.

Employment impacts—the effect on the total number of fulltime, part-time and seasonal positions in the local area.


Construction Impacts of 20 and 40 MW Wood Power Plant in Selected Counties

County, State

20 MW Plant 40 MW PlantOutput (Mn$) Jobs Value Added

(Mn$)Output (Mn$) Jobs Value Added

(Mn$)LEE, AL 4.96 60 2.90 5.95 72 3.42SHELBY, AL 40.89 317 18.86 71.18 549 32.48SALINE, AR 4.14 52 2.30 4.93 61 2.67UNION, AR 4.04 46 2.31 4.84 55 2.72ALACHUA, FL 8.04 81 4.27 10.78 107 5.46CLAY, FL 7.58 74 3.75 10.26 98 4.82LEON, FL 7.80 74 4.11 10.68 100 5.38NASSAU, FL 6.66 63 3.29 9.01 82 4.19SANTA ROSA, FL 37.66 335 15.42 65.45 578 26.32COWETA, GA 7.55 49 2.67 5.60 59 3.15DOUGLAS, GA 7.59 69 3.64 10.16 90 4.60MURRAY, GA 3.13 31 1.74 3.77 39 2.05UNION, GA 4.02 47 2.23 4.84 57 2.64CLARK, KY 5.02 54 2.98 7.91 85 4.67LAUREL, KY 4.48 54 2.59 5.40 64 3.06TRIMBLE, KY 2.83 36 1.54 3.37 43 1.77LIVINGSTON, LA 34.97 328 17.19 61.17 504 29.87DE SOTO, MS 4.83 59 2.65 5.81 70 3.14WARREN, MS 4.35 54 2.41 5.23 64 2.83BUNCOMBE, NC 7.89 74 3.90 10.72 98 5.06ORANGE, NC 45.27 379 25.95 78.73 653 44.88LA FLORE, OK 5.79 65 2.46 7.83 83 3.04OCONEE, SC 4.18 45 2.35 5.01 54 2.77ANDERSON, TN 6.68 57 3.59 9.09 76 4.72BLOUNT, TN 4.94 48 3.00 5.93 58 3.58SEVIER, TN 6.74 59 3.51 11.54 229 7.00MONTGOMERY, TX 7.80 64 4.15 10.63 85 5.45CHESTERFIELD, VA 43.83 222 22.14 76.22 372 38.24FLUVANNA, VA 3.93 40 2.14 4.72 50 2.51

County, State

20 MW Plant 40 MW Plant

Output (Mn$) Jobs Value Added

(Mn$)Output (Mn$) Jobs Value Added

(Mn$)

LEE, AL 12.40 210 7.63 25.25 447 15.69SHELBY, AL 11.35 125 7.28 24.33 276 15.76SALINE, AR 11.75 239 6.98 24.24 522 14.47UNION, AR 12.84 226 7.39 25.18 461 14.51ALACHUA, FL 13.52 196 8.38 27.54 413 17.08CLAY, FL 11.73 182 7.10 25.30 420 15.35LEON, FL 13.41 156 8.55 27.14 318 17.35NASSAU, FL 10.80 137 6.71 23.06 297 14.56SANTA ROSA, FL 12.47 147 7.70 25.94 307 16.18COWETA, GA 9.51 160 5.52 18.41 331 10.71DOUGLAS, GA 7.96 75 4.46 14.21 130 7.84MURRAY, GA 6.22 54 3.09 11.99 100 5.73UNION, GA 11.28 214 6.81 24.34 482 14.82CLARK, KY 5.02 54 2.98 7.91 85 4.67LAUREL, KY 12.33 240 7.02 25.23 519 14.34TRIMBLE, KY 2.83 27 1.71 4.57 43 2.75LIVINGSTON, LA 9.64 158 5.73 20.38 349 12.19DE SOTO, MS 8.27 155 5.18 16.70 356 10.83WARREN, MS 11.87 182 7.12 23.74 375 14.30BUNCOMBE, NC 12.84 242 7.59 26.65 546 15.77ORANGE, NC 10.81 177 6.91 22.08 393 14.07LA FLORE, OK 8.22 85 3.88 15.78 155 7.38OCONEE, SC 10.76 220 5.98 23.16 508 12.86ANDERSON, TN 11.51 216 6.94 24.96 510 15.08BLOUNT, TN 14.40 266 8.63 31.48 629 18.91SEVIER, TN 8.90 216 5.65 18.24 509 11.94MONTGOMERY, TX 11.32 154 6.79 21.73 314 13.03CHESTERFIELD, VA 13.08 187 7.84 28.46 437 17.07FLUVANNA, VA 9.56 218 5.51 20.42 501 11.89

Operations Impacts (1st yr) for 20 and 40 MW Wood Power Plant in Selected Counties

Employment Impacts of Operations for 20 and 40 MW Wood Power Plant in Selected Counties

County, State Direct (M$) Indirect (M$)Induced

(M$)Total (M$)

LEE, AL 6.89 1.07 4.44 12.40SHELBY, AL 6.94 1.03 3.38 11.35SALINE, AR 7.65 1.02 3.08 11.75UNION, AR 8.21 1.43 3.20 12.84ALACHUA, FL 6.79 1.49 5.24 13.52CLAY, FL 6.28 1.31 4.14 11.73LEON, FL 7.49 1.40 4.52 13.41NASSAU, FL 6.47 1.25 3.08 10.80SANTA ROSA, FL 7.51 1.36 3.60 12.47COWETA, GA 5.47 1.10 2.94 9.51DOUGLAS, GA 4.13 1.07 2.76 7.96MURRAY, GA 4.26 0.83 1.12 6.22UNION, GA 7.30 1.26 2.71 11.28CLARK, KY 2.92 0.57 1.53 5.02LAUREL, KY 7.34 1.31 3.68 12.33TRIMBLE, KY 2.22 0.26 0.36 2.83LIVINGSTON, LA 6.36 1.08 2.20 9.64DE SOTO, MS 4.67 0.68 2.92 8.27WARREN, MS 7.49 0.98 3.41 11.87BUNCOMBE, NC 6.76 1.44 4.64 12.84ORANGE, NC 5.80 0.98 4.03 10.81LA FLORE, OK 5.57 1.27 1.39 8.22OCONEE, SC 6.81 1.20 2.75 10.76ANDERSON, TN 7.55 0.96 3.00 11.51BLOUNT, TN 7.88 1.70 4.82 14.40SEVIER, TN 5.34 0.68 2.88 8.90

MONTGOMERY, TX 6.05 1.48 3.80 11.32CHESTERFIELD, VA 7.10 1.55 4.43 13.08FLUVANNA, VA 6.57 1.04 1.95 9.56Average 6.27 1.13 3.17 10.57

Direct, Indirect, and Induced Output (Revenue) Impacts of Operations (1st yr) for 20 MW Wood Power Plant in Selected Counties

Direct, Indirect, and Induced Output (Revenue) Impacts of Operations (1st yr) for 20 MW Wood Power Plant in Selected Counties

Average Employment Impacts (Jobs) by Industry Sector for Wood Power Plant Operations in Selected Counties

Aggregated Industry Sector (NAICS)20 MW Plant 40 MW Plant

Jobs Percent Jobs Percent

Agriculture, Forestry, Fisheries, Hunting 92 54.1% 226 61.2%Mining 0 0.0% 0 0.0%Utilities 1 0.5% 1 0.4%Construction 4 2.4% 8 2.1%Manufacturing 1 0.7% 2 0.6%Wholesale Trade 2 1.0% 3 0.9%Retail trade 10 5.9% 19 5.2%Transportation & Warehousing 1 0.7% 2 0.6%Information 1 0.4% 1 0.3%Finance & insurance 4 2.4% 7 1.9%Real estate & rental 3 1.7% 5 1.4%Professional- scientific & tech services 16 9.3% 27 7.2%Management of companies 1 0.6% 1 0.4%Administrative & waste services 4 2.4% 7 1.9%Educational services 1 0.4% 1 0.3%Health & social services 6 3.5% 12 3.1%Arts- entertainment & recreation 1 0.5% 2 0.5%Accommodation & food services 6 3.7% 12 3.2%Other services 5 2.8% 9 2.6%Government & non NAICs 12 6.8% 22 6.0%Total 170 100.0% 370 100.0%

Employment Impacts by Occupational Group for Operations of a 40MW Wood-Fired Power Plant in Alachua County, FL

Occupational Group Jobs

Farming, Fishing, and Forestry 98.7

Other Non-specified 48.8

Office and Administrative Support 34.2

Transportation and Material Moving 28.4

Sales and Related 20.3

Food Preparation and Serving Related 14.2

Architecture and Engineering 10.9

Installation, Maintenance, and Repair 10.0

Management 9.5

Production 9.2

Healthcare Practitioners and Technical 7.4

Building and Grounds Cleaning and Maintenance 6.5

Business and Financial Operations 6.3

Construction and Extraction 5.8

Personal Care and Service 5.4

Healthcare Support 4.0

Computer and Mathematical 3.3

Education, Training, and Library 2.6

Life, Physical, and Social Science 2.4

Arts, Design, Entertainment, Sports, and Media 2.2

Community and Social Services 1.5

Legal 1.1

Protective Services 1.0

Total 333.6

Questions, concerns, or ideas?


economics of forest biomass and bioenergy jianbang gan texas a&m university matthew langholtz...

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