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Energy From Biological Processes

July 1980

NTIS order #PB81-134769



Foreword

This assessme nt respo nds to a reque st b y the Sena te C om mittee on C om me rce,Sc ience , and Transpo rta tion for an eva luation of the e nergy po tential of va rioussources of plant and animal matter (biomass). This report complements an earlierOTA report on the Ap plica tion of Solar Tec hnology to Tod ay’ s Energy Nee ds in eval-uating the major solar energy resources available to the United States. The findingsalso will serve as part of the material to be used in an upcoming OTA assessment ofsynthetic fuels for transportation.

This volume presents analyses of prominent biomass issues, summaries of fourbiomass fuel cycles, a description of biomass’ place in two plausible energy futures,and discussions of policy options for promoting energy from biomass. The four fuelcycles —wood, alcohol fuels, grasses and crop residues, and animal wastes —werechosen because of their near- to mid-term energy potential and because of the pub-lic interest in them. A second volume presents technical analyses of the resource

base, conversion technologies, and end uses that provide a basis for the discussionin this volume. Also included in volume I I are various unconventional approaches tobioenergy production as well as the use of biomass to produce chemicals.

We are indebted to the members of the advisory panel and to numerous indi-viduals who have given so extensively of their t ime and talents in support of thisassessment. Also the contr ibut ions of several contractors, who performed back-ground analyses, are gratefully acknowledged.

JOHN H. GIBBONSDirector

///



Energy From Biological Processes Advisory Panel

Working Group on Photosynthetic Efficiencyand Plant Growth

.

Contractors and Consultants

Iv



Energy From Biological Processes Project Staff

[Lionel S Johns, Assista nt Direc to r, OTA

Energ y, Ma te rials, a nd Internat iona l Sec urity Division

Richard E. Rowberg, Energy Program Manager

Tho ma s E. Bull, Proje c t Di rec to r

A. Jenifer Robison, Assista nt Projec t Direc to r

Audrey Buyrn*

Steven Plotkin, Environmental Effects

Richard Thoreson, Economics

Franklin Tugwell, Policy Analysis

Peter Johnson, Ocean Kelp Farms

Mark Gibson, Federal Programs

Administrative Staff

Marian Growchowski Lisa Jacobson

LiIIian Quigg Yvonne White

Supplements to Staff

David Sheridan, Editor

Stanley Clark

OTA Publishing Staff

John C. Holmes, Publ ishing Officer

Kathie S. Bo ss Deb ra M. Da tc her Joanne Heming



AcknowledgmentsOTA thanks the following people who took time to provide information or review part or all of the study

VI



Contents

1.

2.

3.

4.

5.

Volume ll

1. Resource Base

11. Conversion Technologies and End Use

\ll



uses should be examined to determine the most economic strategies for in-troducing methanol, especially in the transportation sector.

Both the quantity of biomass that can be obtained on a renewable basis,and the economic, environmental, and other consequences of obtaining itwill depend critically on the behavior of growers and harvesters. For example,careless forest management could substantially reduce the amount of woodavailable for energy and result in severe environmental damage. In addition,production of ethanol from grains and sugar crops and other uses of croplandfor energy (except crop residues) can compete with feed and food crop pro-duction and thus lead to more rapid inflation in food prices. At the same time,the needed expansion of acreage in intensive crop production, as well as anyoveruse of crop residues, will add to the already damaging rate of erosion onU.S. cropland.

Both the energy potential of biomass and the problems inherent inachieving that potential raise three main policy issues that Congress mightchoose to address.

First, vigorous policy support will be necessary if bioenergy use is toreach 12 to 17 Quads/yr by 2000. This support could take the form of econom-ic incentives to accelerate the introduction of bioenergy and to promote theestablishment of reliable supply infrastructures.

Second, because of the unresolved questions about the biomass re-source base, the way the complex and interconnected markets will respond,and how constraints will change with time, incentives for bioenergy devel-opment should include provisions for periodic review and adjustment. In thecase of grain ethanol, this reevaluation might occur when planned distillerycapacity approaches 2 billion gal/yr—the level at which conservative econom-ic calculations indicate that significant food price increases might begin. Inthe case of wood and other Iignocellulosic materials, a formal review of thecondition of the forests and soils might be instituted when 5 Quads/yr ofthese materials are being used for energy.

Third, bioenergy currently remains a low priority in the Departments ofEnergy and Agriculture— the Federal agencies able to directly influence thespeed and direction of development. The aggressive promotion of bioenergytherefore will require a reorientation of Federal program goals, as well as ex-tensive coordination among Federal agencies, and among National, State,and local governments.



1



Chapter 1.—SUMMARY

Page

Energy Potential From Biomass. . . . . . . . . . . . . . . 3Combustion and Gasification. . . . . . . . . . . . . 4Alcohol Fuels . . . . . . . . . . . . . . . . . . . . . . . . . 6 1.Anaerobic Digestion . . . . . . . . . . . . . . . . . . . 8 2.

Potential for Displacement of Oil and Natural Gas. 9 3.Economic Considerations . . . . . . . . . . . . . . . . . . . 9Environmental Impacts.. . . . . . . . . . . . . . . . . . . . 10Social Impacts . . . . . . . . . . . . . . . * . 13Policy Considerations . . . . . . . . . . . . . . . . . . . . . 14

FIGURES

Page

U. S. Energy Use in 1979 . . . . . . . . . . . . . . . . . 4 .Potential Bioenergy Supplies . . . . . . . . . . . . . 5Sources and Uses of Alcohol Fuels FromBiomass . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6



Chapter 1

SUMMARY

Energy f rom the conversion of wood andother p lant mat ter represents an importantunderexploited resource in the United States.As renewable, abundant, and domestic energyresources, these and other sources of biomass

. can help the United States reduce its depend-enc e o n imported o il. The a mount o f energysuppl ied by b iomass, now re lat ive ly smal l ,could expand rapidly in the next two decades. — a period when the Nation’s energy problemswill be particularly acute.

At p r e s e n t , signif icant uncertaint ies aboutland avai labi l i ty and qual i ty , energy conver-

sion costs, market characterist ics, and otherfactors hinder the analysis of the biomass po-tential or the way the complex, varied, and in-terconnected markets wil l respond to bioener-gy deve lopment . A l though the uncer ta in t iesare very real, they are not debilitating. Generaltrends can be discerned and analyses of themcan be used in formulat ing pol icy, a l thoughmany of the specific detaiIs wiII have to be re-fined as more information becomes available.Nonetheless, policy makers will have to weighthe uncertaint ies careful ly in devising work-able strategies for promoting bioenergy.

Energy Potential From BiomassA very substantial amount of energy, as much

as 12 to 17 Quads/yr, depending on croplandneeds for food production, could be producedfrom biomass sources in the United States by theyear 2000. (Current U.S. energy consumption is79 Quads/yr (figure 1); oil imports are 7 millionbb l/d or ab out 16 Qua ds/ yr) This energy c ouldcome from numerous types of biomass, includ-ing wood, grass and Iegume herbage, grain andsugar c reps, c rop residues, animal manure,food-process ing wastes , o i l -bear ing p lan ts ,

kelp from ocean farms, and many other materi-als (figure 2). But, the overwhelming majorityof this energy wouId come from woody or I ig-nocelIuIosic materials such as wood from com-merciaI forests (up to 10 Quads/y r); various.types of herbage, especially grasses and leg-umes, from existing pastureland and hayland(perhaps as much as 5 Quads/yr with proper

. plant development and a low demand for newcropland for other uses); and crop residues(about 1 Quad/y r).

Consequently, if the United States wishes to at-

tain the full potential of biomass energy in thenext 20 years, processes for converting wood,grass, and crop residues to usable energy shouldbe emphasized, and ways of harvesting and col-lecting these materials must be promoted thatwill avoid severe environmental damage. Be-

cause of the difficulty of collecting large quan-tities of these materials in a single place, con-siderable emphasis wil l have to be placed onprocess designs that may be applied in small-to m ed ium-sc a le fa c i li t ies. The m a jor p roc -esses for convert ing sol id b iomass fuels tomore usable energy forms are direct combus-t ion, a i rb lown gasi f icat ion, and a lcohol fuelssynthesis. The principal concerns about har-vesting these materials are: 1 ) that wood fromex is t ing fo res ts be co l lec ted in a way tha t

maintains the long-term productivity of forest-Iand for alI of its uses, and increases, or at leastdoes not hinder, the production of t imber suit-able for lumber and paper pulp, and 2) thatsufficient crop residues be left in place to pro-tect the soil from excessive erosion.

Energy also can be obtained on a sustainedbasis from: 1 ) grains and sugar crops and somefood-processing wastes used to produce etha-nol (perhaps 0.2 Quad/y r), 2) animal manureused to produce biogas (up to about 0.3 Quad/ yr), and 3) various other processing wastes (lesstha n 0.1 Quad / y r). The e nergy p ote ntial fromother sources such as aquatic plants (e. g., kelp)and o i l -bear ing ar id land p lants cannot beassessed with any certainty at present, buttotal energy production from these sources islikely to be small before 2000 (less than 0,1Quad by 1990). Finally, municipal solid waste

3



4 q Energy From Biological Processes

Figure 1.—U.S. Energy Use in 1979

Total = 78.7 Quads/yr

Natural gasimports

20/0

SOURCE Office of Technology Assessment; and Monthly Energy

c e

Review, Energy Information Administration, Department of Energy, February 1980

could be a signif icant source of bioenergy; itspo t en t i a l i s d i scussed i n a p rev i ous O T Ar e p o r t .

Combustion and Gasification

Combustion of wood (including paper-pulpingliquor) is the major energy use of biomass today,with about 1.2 to 1.3 Quads used annually forprocess energy in the forest products industry,and 0.2 to 0.4 Quad/yr in home heating, f ire-places, and other uses (e. g., charcoal grills).W ood combus t i on , primari ly in the forestproducts industry, is l ikely to expand to 4 to

5.5 Quads/yr by 2000 as a result of increasedenergy prices without any new Government in-centives.

‘tnergy and Mater/a/s From Mun/c/pa/ So//d Wa$te (Washing-

ton, El (’ Ott Ice ot Technology A~w+~ment, July 1979), OTA-,A’4-Y 1

The development of reliable, fairly automatic,airblown gasifiers that can be mass produced and

attached directly to natural gas or oil-fired indus-trial boilers or used for crop drying or other proc-ess heat would greatly aid the introduction of en-ergy from wood and other biomass into industrialsectors other than the forest products industry.G as i f i ca t i on o f wood o r he rbage (e . g . , g rass ,crop residues) is more practical for providingprocess heat than direct combust ion. In addi-t ion, the cost of converting from oil or gas to a q

biomass gasif ier probably wi l l be lower thanthe cost of convert ing to direct combust ion inmany cases. Some gasif iers are avai lable to-

day, but their widespread acceptance wi l l re-quire further development and demonstrat ion,which may take 2 to 5 years.

Both direct combust ion and gasif icat ion ofwood are economical ly compet i t ive wi th com-bust ion of middle dist i l late fuel oi l in manysituations today.



Ch. 1—Summary q5

Figure 2.— Potential Bioenergy Supplies (notincluding speculative sources or municipal wastes)

.

.

High total = 17 Quads/yr

SOURCE Off Ice of Technology Assessment

Agricultural

processing

Animal wastes

manure 20/0

Low total = 6 Quads/yr

Commercial forests: an excellent source of energy from biomass



6 qEnergy From Biological processes

Alcohol Fuels

Biomass conversion to alcohol is the onlysource of liquid fuels for transportation fromsolar energy that uses available technology.These liquids are ethanol (grain alcohol) andmethanol (wood a lcohol ) ( f igure 3) . Despi te

their names, both alcohols can be made from avariety of feedstocks. Methanol can be manu-factured from any relatively dry plant materi-al , not just wood, whi le ethanol can be pro-duced from the same material as well as fromgrains, sugar crops, and fermentable wastes.Both alcohols can be used as standalone fuelsor b lended wi th gasol ine. As components ofblends, they have the valuable property of rais-ing the octane level of the gasol ine to whichthey a re ad de d. The a lc ohols a lso c ould b eused as the sole fuel in modified automobilesin captive fleets [over 10 percent of the auto-

mob i les) , i n combust ion tu rb ines , and as adiesel fuel supplement in diesel engines bui l tfor dual-fuel use.

Because of varying production and deliverycosts and differences in the value of alcohol to

potential purchasers (including automobile modi-fications that may be needed to use the fuel),there is no single oil price at which fuel alcoholwill suddenly become competitive. However, atcorn prices of $2.50/bu, some fuel ethanol fromgrain could be competitive without subsidies asan octane-boosting additive to gasoline-i. e., in

gasohol-at crude oil prices as low as $20/bbl (re-tail gasoline prices at $1.05 to $1.15/gal). Grainethanol produced and marketed under less favor- -

able conditions (but at the same corn price) maynot be competitive without subsidies until oilprices approached $40/bbl (gas prices at $1.85 to$2.00/gal). Similar “competitive ranges” for bothalcohols as stand-alone fuels are $35 to $55/bblcrude oil for methanol and $40 to $50/bbl crudeoil for ethanol (corn at $2.50/bu). Even whenaverage crude oil prices are in the range given,i t must be expected that viable ethanol mar-kets may not exist in some areas with lowert h a n a v e r a g e e n e r g y c o s t s , h i g h i n t e r e s tcharges, or other less-than-optimum condit ionsfor ethanol production and sales.

Both ethanol and methanol from biomass arelikely to be more expensive than methanol from

Figure 3.—Sources and Uses of Alcohol Fuels From Biomass

SOURCE: Off Ice of Technology Assessment.



Ch. 1—Summary q 7

.Photo credit. Iowa Development Commission

An hydrous ethanol can be blended with gasoline

for direct use in unmodified vehicles

coal. However, unless a liquid fuel surplus devel-ops, all liquid fuel sources-including ethanol andmethanol from biomass—will remain important indisplacing imported oil, and less expensive coalliquids are not likely to eliminate the need for liq-

uid fuels from biomass.

Current ly , the only fuel a lcohol being pro-duced from biomass is ethanol from grain andsome processing wastes. Total capacity to dis-t i l l grain into ethanol may reach 100 mill ion to200 million gal/yr by the end of 1980 (about 0.1to 0.2 percent of U.S. gasoline consumption).Wood- to -methano l fac i l i t i es p robab ly can bebu i l t w i t h ex i s t i ng t echno l ogy , a l t hough no

plants current ly exist in the Uni ted States.Herbage-to-methanol plants need to be dem-onstrated.

Onfarm ethanol product ion is technical lypossible but currently is constrained by prac-t ica l and economic considerat ions. What isneeded is the development of highly automat-ic distilling equipment that is small, safe, and

.inexpensive, and can produce dry ethanol aswell as dry distillers’ grain using crop residues,grasses, wood, or solar heat as fuels. In addi-t ion, farmers wil l need technical assistance to

ensure safe and eff icient operat ion and main-t enance o f such equ i pmen t . Neve r t he l ess ,some farmers already are proceeding with on-farm disti l lation because it provides them withsome degree of I iquid fuel self-suff iciency andit allows the diversion of limited quantities ofgrain to energy.

At ethanol production levels as low as 2 billion

gal/yr–but possibly higher if certain market ad-justments prove to be feasible–competition be-tween food and energy uses for American grainharvests could begin to drive up grain prices. This

f inding is based on an economic model thatuses conservat ive but plausible assumptions.In cases of severe food-fuel competit ion, con-sumers could end up paying several dollars inhigher food costs for each gallon of grain etha-nol produced. This ind i rect cost could makeethanol the most expensive synthetic fuel. Be-cause o f the uncer ta in t ies about the ac tua llevel of ethanol production at which the food-fuel competit ion wil l become severe, Congressmay wish to carefully monitor the U.S. and in-ternat ional grain markets and reexamine etha-nol product ion incent ives as product ion movesabove 2 bilIion gal/yr.

Mo re op t i m i s t i c app ra i sa l s i nd i ca t e t ha thigher levels of ethanol production from cornare possible without affecting food prices sig-nificantly. This higher threshold is based on op-timistic assumptions about the extent to whichthe corn d ist i l lery byproduct wi l l reduce de-mand for soybeans and about the cost of bring-ing new crop land in to p roduct ion . A l thoughcorn-soybean switching reduces the acreage ofnew cropland needed to meet both feed andfuel demands, serious questions remain abouthow much substitution actual ly will occur, the

price incentives needed to cause the shift, theproduct ivi ty of new cropland, and other fac-tors that could reduce crop switching’s theo-ret ical potent ial . Unt i l these matters are re-solved, it would appear imprudent to assumethat crop switching can allow higher levels ofethanol product ion without major impacts onfood and feed prices.

It also has been suggested that ethanol dis-tilleries could switch to wood or herbage (usingprocesses currently under development) when

c om pe t i t ion w ith food de velops. OTA’ s ana l -ysis indicates, however, that signif icant foodprice increases could precede the commercialava i lab i l i t y o f compet i t i ve wood or herbage-to-ethanol processes. Al though some of thet ec h no lo g ie s c u rre n t ly u n d e r d e v e l o p m e n tmay provide competit ive processes before this




occurs, there are still substantial economic un-certainties. Moreover, the investment neededfor the swi tch could be very high–nearly asmuch as the ini t ial investment in the grain-based distilleries.

Another concern w i th e thanol f rom gra ins

and sugar crops — more so than with methanolproduction from wood and herbage — is the en-ergy balance. About the same amount of en-ergy is required to grow these crops and con-vert them to ethanol as is contained in the eth-anol itself. Nonetheless, a net savings of premi -

um fuels (oil and natural gas) can be achievedin most cases if ethanol distilleries do not usepremium fuels in their boilers. Moreover, withe i t he r e thano l o r me thano l , more p rem iumfuel can be saved (up to the energy equivalentof about 0.4 gal of gasoline per gallon of alco-hol)’ if the alcohol is used as an octane-boost-ing additive to gasoline, rather than solely forits fuel value (e. g., as in most onfarm uses).This additional savings occurs because it re-quires less energy for most oil refiners to pro-duce a lower octane gasoline.

Therefore, saving the maximum amount ofpremium fuel in ethanol production requires:1) that ethanol distilleries not use premium fuelsin their boilers, and 2) that the alcohol beblended with a lower octane gasoline than thatwhich the gasohol will replace rather than beingused as a standalone fuel. If these two conditions

are met, each gallon of ethanol can save nearlyone gallon of premium fuel. There a re, howe ver,unresolved questions about the most econom-ic strategies for using methanol fuel to replaceoil. The entire liquid fuels system —from refin-ery through various end uses — needs to beanalyzed to develop an optimum strategy.

q See box D on p 38 for a discussion of the uncertainty associ-

ated with this estimate

Most cars in the exist ing automobile f leetprobably can run on gasol ine-alcohol blendscontaining up to 10 percent ethanol with onlyminor changes in mileage and performance.Some automobiles, however, wi l l experienceproblems– potentially more severe with meth-anol than with ethanol — such as surging, hesi-tat ion, stal l ing, and possibly fuel tank corro-s ion. Because new cars are being manufac-t u r e d t o a c c e p t e t h a n o l - g a s o l i n e b l e n d s , t h e -

problems with this fuel are likely to disappearwith time. With methanol blends, however, theu n c e r t a i n t i e s a r e g r e a t e r . I f s u b s t a n t i a l a u t o - -

m o t i v e p e r f o r m a n c e p r o b l e m s d o e m e r g e ,other addi t ives may have to be inc luded insuch blends.

Anaerobic Digestion

Full use of the manure resource for producingbiogas will require the development of a varietyof small, automatic digesters capable of using awide range of feedstocks. This is because ap-proximately 75 percent of the animal manurethat can be used to produce biogas is locatedon re la t i ve ly smal l , conf ined an imal opera-tions of several different types — chickens, tur-keys, cattle on feed, dairy cows, and swine.

The p rinc ipal c ost of a nae robic d igestion ofmanure is the capital cost of the digester sys-tem . Therefo re, de velop ing less expe nsive d i-

gesters and introducing incentives and financ-ing schemes that lower the investment cost tofarmers will greatly improve the prospects forthese energy systems.

In addition to its energy potential, anaerobicd iges t ion i s va luab le as par t o f a manuredisposal technique. The digester effluent alsomay serve as a protein supplement in animalfeed, although its exact value for this purposehas not been established. Either of these possi-bi l i t ies could improve the economics of on-farm digestion significantly.

.

.



Ch. l—Summary . 11

ging pressure on some environmentally fragilelands; and the displacement of more harmfulenergy sources, especialIy coal.

The p ote ntial da ma ge s from biom ass ene rgydevelopment include substant ial increases in

soil erosion and in sedimentation of rivers andlakes and subsequent damage to land and wa-ter resources, adverse changes in or loss of im-portant ecosystems, degradat ion of esthet icand recreat ional values, local ai r and waterpolIution problems, and occupational hazards,These d am ag es, al though no t inev itab le, ap -pear l ikely to occur for a number of reasons.First, some of the less intensive agriculture andforestry operations from which biomass supplymechanisms would be derived already cause

serious pol lut ion problems. Second, biomassfeedstock suppliers as well as conversion facil-

i t ies may be hard to regulate because thechoice of appropr iate controls and manage-ment techniques is very site specific, making itdi f f icult to develop effect ive and enforceableguide lines for environm enta l prote ct ion. Therealso are Iikely to be a great multitude of smallsources, thereby creating a significant monitor-ing a nd enfo rcem ent p roblem. Third, the exist-ing economic and regulatory incent ives forbiomass suppliers and users to protect the en-vironment are weak. Finally, some of the cur-rent ly most popular biomass alternat ives —alcohol from grains and wood stoves for resi-dential heating–have a high potent ial for en-vironmental damage, The major dangers fromgrain alcohols are the erosion and ecosystemdisplacement that would be caused by expand-ing crop acreage to increase production, whilelarge increases in wood stove use may lead toserious publ ic health problems from part icu-late air pollution.

I t a lso has been suggested that long-termlosses in forest or crop productivity will result

from declines in soil organic matter associatedwith residue removal and high-intensity (shortrotat ions, whole-tree harvest ing) forest man-agement . However , the degree of these im-pacts is somewhat speculative at this time.

Alternative biomass feedstocks have sharply

d i f f e ren t po ten t i a l s f o r env i ronmenta l dam-age. I n order of increasing potential, they are:1) wood- and food-processing wastes, animalwastes, and collected logging wastes (no sig-nif icant potent ial); 2) grasses (most appl ica-tions should have few significant adverse im-pacts); 3) crop and logging residues (some po-tent ia l for harm i f mismanaged, speculat ivepotent ial for long-term damage to product iv i tybecause of loss of soil organic matter); 4) otherwood sources (high potential but theoreticallycan be managed); and 5) grain and sugar crops(highest potential).

Several public policy strategies are availableto reduce the environmental problems associ-ated with obtaining and converting these feed-stocks. For example, incentives for environ-mental control may be strengthened by accel-erat ing regulatory programs assoc iated wi thsection 208 of the Clean Water Act for controlof nonpoint source pol lut ion, or by di rect ingtax incent ives and d i rec t a id to operat ionspract ic ing proper si te select ion and manage-ment. Some problems with small-scale suppli-ers and users of biomass might be alIeviated byincreasing the avaiIability of information anddirect technical assistance. In addit ion, R&Dcould be accelerated in some key areas, in-cluding: 1 ) design of safe small-scale conver-sion systems, especialIy wood stoves and fur-naces; 2) determining the env i ronmental ef -fects of certain poor ly understood pract icesand technologies (e. g., whole-tree harvesting);and 3) assessing the effects of various biomasspromot ional and env i ronmental control s t rat -egies.




.

Social Impacts

Biomass energy development is likely to bemore labor intensive than increased productionof conventional fuels (coal, natural gas, oil) in thenear term. Thus, increases in employment dueto bioenergy wil l occur in resource harvesting(agricul ture and forestry); manufacture, dis-tr ibut ion, and servicing of conversion equip-

ment (gasif ie rs, bo i le rs, st i ll s, ana erob ic d i -gesters, wood stoves); and the const ruct ionand operation of large-scale conversion facil-ities (generating plants, alcohol fuels plants).

Due to biomass fuel t ransportat ion costs,most of these employment increases will arise

.

at small, dispersed rural sites near the resourcebase. If bioenergy development becomes a ma-

jor cont r ibutor to U.S. energy suppl ies, the new jobs could al leviate unemployment and under-employment among rural residents— especial-ly in agricultural and forested areas, shift therural age distribution to a younger population,

and help to revitalize rural areas. Agriculturalareas, in part icular, wi l l benef i t f rom the de-gree of liquid fuels self-sufficiency afforded byonfarm distillation as well as the overall ener-gy con t r i bu t i on f r om anae rob i c d i ges t i on .Moreover, if commercial alcohol fuels produc-t i on i s managed p rope r l y , t he Na t i on as a



Ch. l—Summary . 13

An example of controlled silviculture: limited area clearcutting followed by replanting

.w h o l e will benefit from the reduced depend- mining, o i l and gas ext ract ion). In addi t ion,ence on imported oil. On the other hand, to the smal l -scale conversion technologies (woodextent that bioenergy is subsidized, it wil l at- stoves and onfarm sti l ls) are currently more

+ tract investment and jobs at the expense of dangerous than the energy sources they re-other sectors. place.

However, increased bioenergy production alsocould result in increased rates of accidental in-

juries and deaths in energy-related occupations.Consequently, safer biomass harvesting and con-version methods need to be developed and im-plemented. Occupations associated with bio-energy (logging, forestry, agriculture) generallyhave higher occupational injury rates than do

jobs in conventional fossil-fuel sectors (coal

Finally, any increased food prices caused by

bioenergy production would fall disproportion-ately on the poor because the purchase of foodtakes a greater share of their disposable income.Increased food prices also would raise farm-land pr ices, which could increase economicpressures on small farmers and further concen-trate ownership of agricultural land.



Chapter 2

INTRODUCTION.



Chapter 2.-- INTRODUCTION

Page TABLE

Contents of Volume Il . . . . . . . . . . . . . . . . . . . . . 17Resource Base . . . . . . . . . . . . . . . . . . . . . . . . 17 PageConversion Technologies and End Use . . . . . 18 1. Select Conversion Factors . . . . . . . . . . . . . . . 19

%



Chapter 2

INTRODUCTION

In recent years, rapid ly r is ing fuel pr ices,deplet ing domest ic oi l and gas reserves, thedeficit in the U.S. balance of trade, and thepossibil i ty of polit ical interruption of oil sup-plies have led to a search for less expensive,

“ more reliable domestic energy sources. In ad-dition, a number of factors, such as uncertainenergy demand growth, soar ing const ruct ioncosts, di f f icul ty in plant si t ing, and the en-.v i ronmental problems associated wi th coal ,have led some energy producers and consum-ers to question the appropriateness of the largecentralized energy systems that have been de-veloped over the last 30 years.

All these concerns have focused attentionon energy from biological processes, or bio-

mass—primarily energy uses of plant materiala n d o f m u n i c i p a l , i n d u s t r i a l , a n d a n i m a lwastes. Biomass represents a renewable do-mestic source of liquid and solid fuels that canbe used in relatively small decentralized ener-gy systems. In addit ion, if biomass resourcesand conversion processes are managed proper-ly, they have a much lower potential for envi-ronmental damage than coal and coal -basedsynfuels.

This report analyzes the potent ial of bio-logical processes as a renewable domest ic

source of solid, liquid, and gaseous fuels andchemical feedstocks. The report assesses thebioenergy resource base, conversion technol-ogies, and end uses; analyzes the environmen-ta l and socia l impacts that could accompany

.the widespread use of bioenergy; and identi-f ies pol icy opt ions that would promote com-mercia l izat ion and proper resource manage-

r ment. I n addit ion, the report highl ights re-search and development needs and bioener-gy’s potential for displacing premium fuels.

Because of the large number of biomass fuel

cycles (one recent study identif ies more than1,000 such cycles), not all of them could beana lyzed in th i s repor t . Rather , a de ta i ledanalysis is presented of four fuel cycles thatare l ikely to contribute signif icant amounts ofenergy within the next 20 years, will contribute

to energy self -suff iciency within a part iculareconomic sector , or wi l l provide a source ofliquid fue ls. These four fue l cyc les are: 1) woo dfor gasif ication, alcohol fuels production, anddirect combust ion; 2) grain and sugar crops foralcohol fuels production; 3) grass and legumeherbage and crop residues for combustion ora lcohol fuels product ion; and 4) animal ma-nure for anaerobic digestion (biogas). (A fifthfuel that could contribute substantial amountsof energy — municipal sol id waste— is ana-lyzed in another OTA report and is not dis-cussed here. )

Volume I of this report is organized as fol-lows:

chapter 3 highlights the central issues sur-r o u n d i n g b i o e n e r g y a n d s u m m a r i z e sOTA’s findings on those issues;chapter 4 presents an overview of the fourfuel cycles, including their technical fea-tures, economics, environmental impacts,and social implications, and their poten-tial to displace conventional fuels; andchap t e r 5 ana l yzes po l i cy op t i ons t ha twould encourage the introduct ion of thefour fuel cycles into U.S. energy supplies.

Contents of Volume II

Volume II presents a detailed analysis of thetechnical features of the four fuel cycles aswelI as other forms of bioenergy; these includethe resource base, conversion technologies,and end use. The subjec ts cove red in volume I I

include:

Resource Base

q

q

Forestry: estimates of the standing timber in-ventory, current harvests, potential growth,

h a rv e st in g c o st s, f a c t o rs a f f e c t i n g w o o davailabil i ty, practical energy potential, envi-ronmental impacts, and research, develop-ment, and demonstration (RD&D) needs.Agriculture: estimates of plant growth andcrop y ie lds , c rop land ava i lab i l i t y , cur ren t

17



a

Chapter 3

ISSUES AND FINDINGS

9



Chapter 3.— ISSUES AND FINDINGS

Page

How Much Energy Can the United States GetFrom Biomass? . . . . . . . . . . . . . . . . . . . . ., . . 23Wood From Commercial Forestland . . . . . . . 24Grass and Legume Herbage . . . . . . . . . . . . . . 24Crop Residues . . . . . . . . . . . . . . . . . . . . . . . . 26Ethanol Feedstocks . . . . . . . . . . . . . . . . . . . . 27Manure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Agricultural Product Processing Wastes . . . . 27Other Sources . . . . . . . . . . . . . . . . . . . . . . . . 27Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

What Are the Main Factors Affecting the Reliabilityof Energy Supply From Biomass? . . . . . . . . . . . 30

What Are the Economic Costs and Benefits of

Biomass Fuels?. . . . . . . . . . . . . . . . . . . . . . . . 31

What ls the Potential of Biomass for DispIacingConventional Fuels? . . . . . . . . . . . . . . . . . . . . 34

Does Gasohol Production Compete With FoodProduction? . . . . . . . . . . . . . . . . . ..**.***. 39

Can Biomass Feedstocks Be Obtained WithoutDamaging the Environment? . . . . . . . . . . . . . . 39

What Are the Major Social Effects of BioenergyProduction? . . . . . . . . . . . . . . . . . . . . . . . . . . 43

What Are the Problems and Benefits of Small-Scale Bioenergy Processes?. . . . . . . . . . . . . . . 44

Tec hnic al and Eco nom ic Conc erns ofSmall-Scale Wood Energy Systems. . . . . . . 44

Tec hnical and Eco nom ic Conc erns ofSmall-Scale Ethanol Production. . . . . . . . . 45

Tec hnic al and Eco nom ic Conc erns ofSmall-Scale Anaerobic Digestion. . . . . . . . 46

Environmental Effects of Small-ScaleBiomass Energy Systems , . . . . . . . . . . . . . 46

Page

Social Considerations of Small-ScaleBioenergy Production. . . . . . . . . . . . . . . . . 47

What Are the Key RD&D Needs for Bioenergy s

Development? . . . . . . . . . . . .OO. . . OO 48

What Are the Principal Policy Considerations forBioenergy Development? . . . . . . . . . . . . . . 49 ~

TABLE

2. Gross Energy Potential From BiomassAssuming Maximum Rate of Development . . 25

4567

8

FIG URES

U.S. Oil Consumption in 1979. . . . . . . . . . . . . 23Fuel Uses for Biomass . . . . . . . . . . . . . . . . . . 24Selected Bioenergy Costs. . . . . . . . . . . . . . . . 31Net Displacement of Premium Fuel perAc re o f New C rop land Broug ht IntoProduction ., . . . . . . . . . . . . . . . . . . . . . . . . . 34Potential Environmental Damages/BenefitsFrom Supplying Biomass Feedstocks. . . . . . . 40

BOXES

A. —What Effects Could Ethanol ProductionHave on Food Supplies and Prices? . . . . . . 28

B. – How Do Ethano l and Metha nol Com pa reas Liquid Fuels From Biomass? . . . . . . . . . . 36

C. –What Is the Energy Balance for EthanolProduction and Use?. ... , . . . . . . . . . . . . . 37 ~

D. — Energy Savings From Etha nol’s Oc ta neBoost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38



.

.

.

.

Chapter 3

ISSUES AND FINDINGS

How Much Energy Can the United States

Get From Biomass?

As much as 17 quadrill ion Btu (Quads) per However, the quantity of

year could be produced from biomass so u r c e s tua lly w ill b e use d fo r e ne rg yby 2000. Seventeen Quads/yr is the energy nected to the economics ofequivalent of about 8.5 mi l l ion bbl /d of oi l , lecting the biomass materials

biomass that ac-is intimately con-growing and col -a n d c o n v e r t i n g

and would be over 20 percent o f current U.S. them to usable energy as well as to the de-energy consumption of 80 Quads/ y r ( see figu re mand f o r o the r uses f or the b iomass and f o r4 ) . Assuming U.S. energy use c limb s t o 100 the land , w a te r, and energy used t o g row it .Quads/yr by 2000, biomass could make a sub- Numerous other factors also will influence bio-s tan t i a l c on t r i bu t i on t o t he admin i s t ra t i on ’ s energy consumpt ion, inc lud ing the long- termgoal of 20-percent solar at that time. goals and esthetic preferences of landowners,

Figure 4.– U.S. Oil Consumption in 1979

Electricgeneration

90/0

Demand supply

Total oil consumption = 37 Q u a d s(45% of tota l energy co nsump tion)

SOURCE Monthly Energy Review Energy Information Admlmsfration Department of Energy February 1980

23

I —,1 .-



24 . Energy From Biological Proc esses

and the env i ronmental ef fects of obtainingbiomass and converting it to energy. If crop-Iand availability is the only limiting factor, upto 12 Quads/yr could be available from bioen-ergy. However, al l of the above factors to-gether could limit bioenergy use to 6 Quads/yrby 2000. The various forms of bioenergy (seef igure 5) and thei r potent ia l contr ibut ions tothis 6 to 17 Quads— assuming the demand isthere— are shown in table 2 and discussedbriefIy below.

Wood From Commercial Forestland

Wood f rom commerc ial forest land* is thelargest potential source of bioenergy. Most ofthis could be obtained from the byproducts of

‘Commercial forestland is defined as forestland that IS at least

10 percent stocked with forest trees or has been in the recentpast, has not been permanently converted to other uses, and iscapable of producing (although it may not be currently) at least20 ft ‘/acre-yr of commercial timber Parks and wilderness areas

are not commercial forest land, but many privately owned wood-Iots are

Figure 5.—FueI

wood processing, such as sawdust and spentpaper-pulping l iquor, and from the byproductsof increased forest management pract ices,such as collecting logging residues, convertingstands (via clearcutting and replanting) to treeswith a higher market value, thinning stands toenhance the growth of the remaining trees, ando ther management t ec hn iques . A t l eas t 4Quads/yr of energy probably wi l l be produced .f rom wood by 2000 wi th l i t t le or no Govern-ment act ion, and as much as 10 Quads/yrcould be produced with appropriate incentivesand forest management practices.

Grass and Legume Herbage

Another source of bioenergy is increasedgrass and legume herbage production on exist-ing hay land and on both cropland and non-cropland pasture. P roduc t i on c ou ld be i n -

creased by applying ferti l izers and managingthe crops to maximize energy production. By2000, some of the more level grasslands will beconverted to row and close-grown crops (such

.

Uses for Biomass

[ SteamElectricitySpace and water heatingCooking

Process heat (e.g., crop drying)SteamSpace and water heatingElectricityCookingStationary engines

Regional fuel gas pipeline

.

“

SOURCE Office of Technology Assessment



Ch. 3—issues and Findings q 2 5

Table 2.—Gross’ Energy Potential From Biomass Assuming Maximum Rate of Development(does not include projected demand)

Gross energy potential’ (Quad/yr)

Source Biomass 1979 1985 2000

Commercial forestland (includes mill wastes)

Hayland, crop land pasture, and noncroplandpasture

Cropland used for intensive agriculture

(Grain and sugar crop option).

.

(Grass or short-rotation tree option)

Manure from confined animal operations

Agricultural product processing wastes

Other

Wood 1.4- 1.7

Grass and legume herbage o

Crop residues o

Ethanol (from grains 0.004 (50and sugar crops) million gal/yr)

Grass or short-rotation treesc

o

Biogas (for heat and electricity) Less than 0.001

0.01

Less than 0.1

3 - 5

1-3

0.7-1

0.08- 0.2b

(l-3 billiongal/yr)

0.3- 1.6b

0.1

0.1

Less than 0.1

5-10

0 - 5b

0.8- 1.2

0 - 1b

(0-12 billiongal/yr)

0 . 5b

0.1 -0.3

0.1

Unknown

Total 1.4- 1.7 5.3-11 6- 17d

aDoes not Include deductions for cultivatlon and harvest energy, losses. or end-use efflclencYbThese Categories are not addltlve because they use some of the same land

cAssumlng 4.ton/acre. yr yield In 1985 and 6-ton/acre.yr In 2000.dupper l[m(t~ ,n 2000 for vfood, ~ra~~ and /egume herbage CrOp res)dues, and blogas In addition, about 2 billion gal/yr of ethanol are assumed tO be produced from

grains and sugar crops


Photo credit USDA —Soil Conservation Service

The fuel value of wood harvested during thinning operations is an added incentive for intensified forest management



26 Ž Energy From Biological Processes

as corn and wheat) to supply food and feed re-quirements, reducing the amount of Iand thatcould be avai lable to grow grass and legumeherbage for energy. On the other hand, if thedemand for food and feed is less than ant ic i-pated relat ive to the avai lable cropland andsome of the land in herbage production is re-planted wi th fast -growing grass, legume, ort ree hybr ids, the bioenergy potent ia l of th island cou ld inc rease. There i s , however , noassurance that cropland will be available forenergy uses in 2000, and attempting to obtainenergy f rom c rop land (o ther than f rom c ropresidues) could lead to inflation in food pricesin the long term.

Crop Residues

About 20 percent of the material left in thefield after grain, rice, and sugarcane harvests(crop residues) could be a source of bioenergy.( Th e o t h e r 80 p e r c e n t o f c r o p r e si d u e s i sneeded t o p ro tec t t he s o i l f rom e ros ion o r

would be lost during harvest or storage. ) For anaverage crop yield, about 1 Quad/yr of cropres idues c ou ld be c o l l ec ted and us ed f o r en - ,ergy without exceeding current soi l erosionstandards. Local variations in crop yields, how-ever, might limit the reliable and usable supplyto about 0.7 Quad/yr. This supply is l ikely to in- ‘crease in rough proportion to increases in cropproduc t ion.

Photo credit USDA, David Brill

High-yield grasses could be a significant source of bioenergy




.

Ethanol Feedstocks

The principal limit on energy uses of grainsand sugar crops is the potential for farm com-modity price increases as energy crop use risesand the amount of inflation in food prices thatis acceptable for energy product ion (see boxA). It is l ikely that at least 1 bi l l ion gal/yr ofe t h a n o l f r o m g r a i n s and sugar crops —orenough to displace approximately 60,000 bbl/dof gasoline or about 0.8 percent of current gas-oline consumption — can be produced withoutinf lat ionary impacts in the farm sector. Con-servat ive economic calculat ions indicate thatfarm commodity price rises could begin to besignificant at the 2-billion-gal/yr level. * De-pending on the actual response in the agricul-tural sector–the amount of new land broughtin to produc t ion, the degree to which gra ins

can be bought in expor t markets , and theamount of crop switching** that is practical —it may be possible to obtain sti l l more ethanolwithout excessive infIation.

A product ion capacity of s l ight ly more than3 billion gal/yr might be achieved by mid-1985i f construct ion s tarts on 20 new 50-mi l I ion-gal/yr distilleries during each of the years 1981,1 98 2, a n d 1 98 3. Th i s p r o d u c t i o n c a p a c i t ycouId displace about 1.5 to 2.5 percent of cur-rent gasoline use. However, if significant farmc o m m o d i t y p r i c e increases resul ted, they

wouId Iimit growth in capacity.Beyond 1985, the land avai lable for inten-

s ive product ion of energy crops could ei therincrease or decrease, depending on future de-mand for food, the average yields achieved,and the food pr ice r i ses needed to inducefarmers to br ing new land into product ion.There are, however, plaus ible scenarios inwhich no surplus cropland capable of support-ing row and close-grown crops wilI be avail-able for energy feedstock production by 2000.

*SEW “Alcohol Fuels” In ch 5 and app B

* *The most productive crop for ethanol production that IS be -

ing grown on large areas of U S cropland IS corn Because the

byproduct of producing ethanol from corn can be ~ubstltuted to

a certain extent for soybean production, the I nflat Ionary Impacts

of ( ropla nd expa ns Ion are reduced as long as the byproduct I S

f uliv ut it Ized (5ee bOX A)

To the extent tha t c rop land is a vailable fori n t ens i v e energy c rop p roduc t i on , greaterquantit ies of l iquid fuel can sometimes be ob-tained per new acre cultivated and with moreben ign env i ronmenta l impac t s by p l an t i ngfast-growing grasses, legumes, or short-rotation

trees (Iignocellulose crops) rather than grainsor sugar crops (see “ What is the Pote nt ia l ofBiomass for Displacing Conventional Fuels?”).The approximate quanti t ies of biomass avai l-able with this option also are shown in table 2.

Manure

About 0.3 Quad/yr of biogas (methane-car-bon dioxide gas mixture) could be produced byanaerobic digest ion of the manure from con-fined livestock operations. Much of this biogaswould be used for heat or to generate electrici-

t y for use onfarm and for sa les to e lec t r i cutilit ies. The e co nom ics of p roduc ing the bio-gas, however, may limit its energy potential toless than 0.1 Quad by 1985. Improvements indigester technology could reduce the costs sothat much of the manure could be used for en-ergy by 2000.

Agricultural Product Processing Wastes

The m ajor ity of b yprod uct s f rom the fo od -processing industry already are used for ani-mal feed, chemical product ion, or other non-

energy uses. About 0.1 Quad/yr, including sug-arcane bagasse, orchard prun ings , cheesewhey, and cotton gin trash, either are beingused (e. g., some sugarcane bagasse and cheesewhey) or could be available for energy.

Other Sources

Energy also can be obtained f rom var iousunconventional types of biomass, such as oil-bearing plants, arid land crops, native range-Iand plants, and both freshwater and saltwateraquat ic p lants . Many unconvent iona l c ropswould have to be grown on land suitable fortradit ional crop product ion and their potent ialwould be limited partly by the availabil ity ofthis land. The arid land crops, however, couldbe cultivated on cropland where there is slight-l y l es s ra i n fa l l o r i r r i ga t i on w a te r t han i sneeded to cultivate traditional crops success-fully. Freshwater plants might be cultivated in



Ch. 3—issues and Findings q 29

.

channels near exist ing bodies of water or inbasins constructed on land unsuitable for cropproduct ion . Sa l twater p lan ts such as ke lpmight be cultivated on large ocean farms builtto support the plants near the surface of thewater, without compet ing for land or for food

and f iber product ion. Kelp current ly is cul t i -vated off the coast of China, and is harvestedf rom natura l ke lp beds of f the coast of theUni ted States and e lsewhere for the produc-tion of emulsif iers. Water-based plants appearto have a potential for high yields. * At present,however, technical and economic uncerta in-t ies about yields, harvest ing and cult ivat iontechniques, and land avai labi l i ty are too greatto assess the long-term potential of these bio-energy sources.

Total

The a mo unts of ene rgy a vai lable f rom thevarious major biomass sources are not com-pletely addit ive. The conversion of some for-estland (perhaps as much as 30 miIIion acres or6 percen t o f the commerc ia l f o res t land) tocropland and other uses is not likely to have alarge effect on the availability of wood energy.Simi lar ly , there is no d i rect re lat ionship be-tween the energy that can be obta ined f romanimal manure or agr icu l tura l product proc-essing wastes and the other categories. * * How-ever, the various cropland categories are inter-

dependent and the quant i t i es o f b ioenergythat can be available are difficult to predict.

St rong demand for land for in tensive agr i -culture, either for food and feed or for energy,would decrease the quant i ty of hayland andc rop l and pas t u re . O n t he o t he r hand , i n -creased grain or sugar crop production couldincrease the quantities of crop residues slight-

‘Frrergy From Ocean Kelp Farms (Washington, D C Off Ice ofTechnology Asw$sment, draft, June 1979), to be published ascomm Ittee print

*See “Unconventional Crops” In VO I II

* ‘Price changes for farm commodltles, however, can change

the demand for and production of the products of con f[ned anl-ma I operations and thereby Inf Iuence the energy obtained from

anlma I wastes

ly, al though the marginal qual i ty of much ofthis new cropland would l imit the amount ofresidue that could be removed. Final ly, im-provements in crop yields could increase theland avai lable for energy product ion and theamount of energy obtained from this land.

These factors are likely to have only a smallinfluence on the 1985 estimates for bioenergysupply. By 2000, however, the uncertainties arequi te large because both future crop y ie ldsand demand for food are unknown. Demandfor addit ional cropland in the Eastern UnitedStates a lso could resul t i f i r r igat ion watershortages develop on western croplands. Fur-thermore, if there is a large shift from corn-fedto grass-fed beef in order to increase the sup-ply of corn for ethanol, then the quant i t ies ofgrass avai lable for energy would decrease.More cropland would be avai lable by 2000,however, if the conversion of cropland to otheruses, such as subdivisions and industrial parks,is halted. 2

Because of these uncertainties, no truly sat-isfactory estimate for the upper I imit for ener-gy from the agricultural sector can be derived.The higher total for 2000 given in table 2–17Quads/yr-–has been calculated by assumingfirst, that the upper limit of 65 million acres ofcropland can be used for energy product ionand that this land is planted with grasses yield-ing an average of 6 ton/acre-yr, and s e c o n d ,

that about 2 bil l ion to 3 bil l ion gal/yr of etha-nol could be produced by crop subst i tu t ions(e. g., corn for soybeans). This would result inabout 5.1 Quads/yr of grass, 1.2 Quads/yr ofcrop residues, and 0.2 to 0.3 Quad/yr of etha-nol, bringing the total to about 6.5 Quads/yrfrom these sources.

‘Otto C Doerlng, “Cropland Ava/Jab/llty fo r Btomass Produc-

tion,” contractor report to OTA, Aug 6, 1979, see also R I Dlder-

lksen, et al , “Potential Cropland Study, ” U S Department of

Agriculture, Soil Conservation Service, Statlstlcal Bulletln No

578, October 1977, and Env/ronmenta/ Qua/lty The Ninth Annua/Report o~ the Council on Environmental Qual/ty (Washington,

D C Council on Environmental Quallty, December 1978), GPOstock No 041-001 -00040-8




What Are the Main Factors Affecting the Reliability of

Energy Supply From Biomass?

Increasing reliance on bioenergy means ty-ing energy supply to complex nonenergy mar-

kets and to raw mater ia ls whose supply andp r i c e c a n b e e x p e c t e d t o f l u c t u a t e w i t hchanges in growing condit ions. Insofar as thecountry’s overall energy system is concerned,however, the reliability of biomass fuels is like-ly to become an important issue only whenvery large amounts enter the supply stream.

In the case of wood, the resource with thegreatest energy potential, there may be uncer-ta in ty concern ing bo th p r i ce and ava i lab i l i t yof raw materials for energy production, espe-cially for new users of this resource. Within the

forest products industry, which is likely to ac-count for much of the expansion to the level of5 to 10 Quads/yr in the next two decades, aportion of supply often is assured because thematerial used for energy is a byproduct of on-going operations. Even when use exceeds theavai lable byproducts, forest products compa-nies are l ikely to be in a posit ion to securea d d i t i o n a l w o o d f r o m e s t a b l i s h e d s u p p l ysources.

Outside of this sector, however, supply relia-bi l i ty may pose a greater problem because of

compet i t ion, of ten local ized, between the for-est products industry and other users of wood.This is because in some areas traditional forestproducts industries may require a large part ofthe wood being harvested. In those cases, tem-porary shortages of woodchips would af fectthe fuelwood users the most, because the for-est products industries would bid up the priceof chips to sat isfy their process requirementsand the other wood users would have to ab-sorb most of the temporary shortage. In otherareas, where fuel uses for wood dominate, sup-p ly variations would tend to be less severe.

Experience within the forest products indus-try indicates that even with a large wood sup-

ply infrastructure, there wi l l be seasonal andyearly price and supply variat ions. Therefore,wood energy appears more a t t rac t i ve to users “

who can switch to other fuels during tempo-rary shortages and when pr ices are h igh, orw h o a r e a b l e t o m a k e l o n g - t e r m s u p p l y a r - -

rangements.

For ethanol produced from grains and sugarcrops, price and supply are Iikely to be subjectt o t he same unce r t a i n t i es t ha t a f f l i c t f a rmcommodi t ies in general : weather, pests anddisease, in ternat ional and domest ic market

conditions, changes in land values. Energy-ori-en ted fa rm programs and increased fue l o rcrop buffer stocks may be desirable to assuresupply stabi l i ty and to cont ro l energy pr icefIuctuat ions.

To a lesser extent these uncertainties alsomay be expected in the case of heavy depend-ence on grasses and crop residues. Biogas fromthe digest ion of animal wastes is unl ikely toplay a large enough role in domest ic energysupply to cause concern, although it, too, mayfluctuate somewhat as a result of changes in

l ivestock populat ion and feeding pract ices.But agricul ture is highly sensit ive to energysupply f luctuat ions, and the rel iabi l i ty of on-farm st i l ls and digesters wi l l be an importantfactor in commercial izat ion.

In the very long run , one o f the advantages -

of bioenergy is that it is renewable and neednever be depleted provided that the land re-m a i n s d e d i c a t e d t o t h i s u s e . P o o r m a n a g e - -ment, however, may damage the resource basethrough erosion and deforestat ion and forcean eventual decline in production.



Ch. 3—Issues and Findings Ž 31

What Are the Economic Costs and Benefits

of Biomass Fuels?

Because biomass fuels are relat ively bulky

and have a low fuel value per pound, their fuel

costs (see figure 6) are highly site specific andmay pose economic constraints not shared by

.petroleum or natural gas. For example, thesecharacteristics make the distance between pro-ducer and user crucial in calculat ing total en-

. ergy costs; as distance increases, total trans-portation costs rise sharply. These costs andthe d ispersed na tu re o f the resource basemean that bioenergy users wil l only have ac-cess to a l imited number of suppliers and thuswi l l be sens i t i ve to supp ly f l uc tua t ions andprice increases.

Bulkiness, perishabil ity, and the solid formof biomass fuels (at least as initially produced)also make costs and benefits for users highlydependent on their skills and their willingnessto subst i tute labor and more complex conver-

sion systems for the famil iari ty and conveni-ence of conventional Iiquid and gaseous fuels.

Another ma jo r economic obs tac le i s tha tusers must invest more in equipment and in fa-ci l i t ies for storing fuel and disposing of ash.Equipment costs may be reduced in the futurewith the development of intermediate-Btu gas-if iers that can be coupled directly to existingboilers, but users still will have to make largerinvestments than are necessary for oil or gas.In effect, users will be substituting capital aswell as biomass energy for depleting oil andgas resources. As pr ices for these premiumfuels rise, the higher capital costs of biomass

substitution can be justif ied on a I ifecycle costbasis, but users and their bankers must take along-term perspect ive or the large in i t ia l in-vestments wil l not be profitable.

Figure 6.—Selected Bioenergy Costs(1980 dollars)

Wooda

(Direct combustion orgasification and

combustion)

Ethanol from combdelivered to the autoservice station

Methanol from wooda

delivered to autoservice station

Methanol from herbagec

delivered to autoservice station

Biogas from anaerobicdigestion of animalmanure— 100,000turkeys

500 swine

$2.25 $7.00

I I$12.50 $17.60

- 0 0$13.40

$16.50 $25.00

I 4$2.00 $4.00

t i

I I $12.00I 1

$24.00

$5 $10 $15 $20 $25Dollars per million Btu

aWood at $30/dry ton.bCorn at $2.501bu.cHerbage at $45/dry ton.

SOURCE: Office of Technology Assessment




Wood energy economics are by far the mostfavorable among the biomass options. The fuelvalue of wood for heating can be derived fromt he p r i ce o f #2 f ue l o i l , wh i ch was abou t$0.90/gal in January 1980. Adjusting conserva-tively for the higher cost of a wood conversionuni t and for i ts lower conversion ef f ic iency,th is o i l pr ice corresponds to wood at about$90/dry ton, or approximately twice the 1979average price of delivered pulpwood. Further-more, wood fuel users should not have to paypulpwood prices because fuel-grade t imber isgenerally of lower quality.

Init ial ly, large quantit ies of fuel can be re-moved from the current inventory of low-qual-i ty t rees standing on commercia l forest land.However, the key to renewable fuelwood sup-p l ies i s i n tens ive management o f th i s land

once it has been cut over at least once. Inten-sive silviculture is also critical to the expansionof conventional forest products, because fuel-wood and conventional products are economi-cally symbiotic. Revenues from fuelwood salesof fset management costs that eventual ly in-crease the y ie ld per acre of sawt imber andpulpwood. In turn, expansion of the lumberand pulp industry increases logging residuesand mill wastes that can be used as fuel. Totake advantage of this two-way relationship, along- te rm perspect i ve i s requ i red . I f l and-owners make long-term plans, then the result-ing improvement in forest product economicscould make up to 10 Quads/yr of wood energyavailable without mining the resource base ofstanding t imber or restr ict ing feedstock sup-pl ies for convent ional forest products. But, ifsi lvicultural practices do not become more in-

.

.

q

Photo credit Department of Energy

Wood energy harvests, as part of good forest management, can convert forestssuch as this to commercially productive stands




tensive and extensive, removals can outpacenew forest growth, and forests may indeed be-come a nonrenewable resource.

The distillation of grain ethanol for gasoholmay already be economical, without tax cred-its, with corn priced at $2.50/bu (or other grains

comparably priced) and crude oi l at $30/bbl.However, grain prices f luctuate and, partially

. as a result of greater demand for dist i l lat ionfeedstocks, could rise faster than the price ofo i l . Th is uncer ta in ty may d iscourage inves t -ment in new disti l lation capacity or, once dis-.t i l ler ies are bui l t , i t may raise the specter offood price inf lat ion as demand for feedstockscompetes with demand for feed and food (seebox A).

On the other hand, having secure domest icethanol suppl ies during the next decade may

j us t i f y cos t s pe r B t u o f l i qu i d f ue l muchgreater than the price per Btu of imported oil. *The p ote ntially high c ost of etha nol from foo dand feed crops could be warranted as an insur-ance p remi um aga i ns t i mpo r t i n t e r rup t i onsand because ethanol displacement of importsmay s l ow t he ra t e o f g row t h o f O PEC o i lp r i ces . Whi le p roduct ion cos ts can be es t i -mated on an objective basis, judgments are un-avoidable regarding the value of import d is-p l acemen t

Virtually no grasses or crop residues current-ly are used for energy even though, along withwood, they offer the greatest resource poten-t ial in the long run. Processes for convert ingthese plant materials into methanol, or woodalcohol, must sti l l be demonstrated but a simi-

‘ St>e Robert Stobaugh and Daniel Yergln, [ner~y Futufes, pp47-55 for a dlwusjlon of the real cost as opposed to the market

pri( e ot Imported oil

Iar process for wood probably is feasible withcommercial technology. Est imated total costsare competitive with or somewhat more expen-sive than ethanol f rom feed and food crops,and def ini tely more expensive than methanolf rom coal . However, methanol f rom l ignocel -Iulose can be produced in much larger quan-t i t ies than gra in ethanol , wi thout dr iv ing upprices of other basic commodities, by more in-tensive management of lower qual i ty pasture-land and cropland that may not be needed forfood production in the foreseeable future.

Crop residues and Iignocellulose crops alsocan be used in intermediate-Btu gasif iers thatare being developed to be coupled to an exist-ing oil- or gas-fired boiler, thus making it un-necessary to replace existing boilers in order toshift away from premium fuels. With this near-

ly commercia l technology, I ignocel lu lose b io-mass may become compet i t i ve over a w iderange of medium to small industrial and com-mercia l appl icat ions. In addi t ion, gasi f ierscould be used onfarm for corn drying and forirrigation pumping.

The e c onom ic s of p rod uc ing biogas from ma-nure through anaerobic digest ion are uncleardue to l im i ted sc ien t i f i c and techn ica l da ta .However, it is the only biomass fuel consideredthat would not compete d i rect ly wi th the pro-duc t i on o f any o t he r economi c commod i t y .

Rather, the byproduct digester effluent may bewor th more than the raw manure feedstockand is also less polluting. I n either case, biogas’greatest economic value is its contribution toenergy self -suff iciency for farmers, enabl ingthem to displace purchased fuels at their retailcost and allowing normal farm operations tocon t i nue when conven t i ona l f ue l s a re no tavailable.




t he corn cou ld have a ne t annua l p remiumfuels displacement of the energy equivalent ofnearly 15 bbl of oiI per acre of marginaI crop-Iand brought into product ion, i f the ethanol isused as an octane-boosting addit ive i n gaso-hol. Other grain and sugar crops have loweryields per acre or an uncertain byproduct cred-i t and thus would displace substant ial ly lesspremium fuel,

In p rac t i ce , however , severa l fac to rs w i l ll imit the potential premium fuel displacement

q per new acre for corn. First, as ethanol produc-tion increases the price of corn is expected torise and dist i l lery feedstock and animal feedbuyers wi l l sh i f t to other gra ins unt i l the i rprices equalize with corn. Second, as the pro-portion of DC (or similar gluten byproduct) inanimal feed increases, its value as a soybeanmeal substitute declines. Finally, much of thepotential croplands are poorly suited to corn.

Thus, as the fuel alcohol industry is develop-ing, the best energy use of medium-qual i tycropland brought in to product ion is to growcorn and use the byproducts fulIy. But as etha-nol product ion increases and the potent ial forcrop substitution decreases, cuItivating grassesor other crops with high dry matter yields wil lbecome more effect ive in displacing conven-tional fuels. As shown in figure 7, these cropsalready have a greater displacement potentialthan corn when the DC byproduct is not used.

With improved grass yields per acre, their dis-p lacement potent ia l could be greater regard-less of whether or not the byproduct is used asa soybean substitute. Nevertheless, other crop-switching schemes may be possible and theywarrant further investigation.

The sec ond fac tor that w ill b e impo rta nt indetermining how much convent ional fuel bio-mass can displace is the choice of conversionp rocesses . As d i scussed p rev i ous l y , wood ,grasses, crop residues, and other I ignocel lu-Iosic materials represent the greatest quan-

tit ies of biomass available in the near to mid-term. The three processes for using these feed-stocks are direct combustion, gasif ication, andl iquefact ion to alcohol (methanol or ethanol).Gasi f icat ion and d i rect combust ion are themost energy-e f f i c ien t p rocesses and l i qu idfuels production the least, but taking advan-

tage of the octane-boosting properties of alco-hols in gasoline blends can make the optionsmore comparable. *

Of the th ree conver ted energy fo rms themost versat i le is a lcohol whi le the least isdirect combustion. Alcohol fuels can be used

in the transportation sector as well as for allthe stationary fuel uses for which one can usesynthet ic gas from biomass (see box B for acomparison of ethanol and methanol as I iquidfuels from biomass). Used as a standalone fuel,10 Quads/yr of biomass converted to the alco-hols technical ly may be able to d isp lace a l -most 5 Quads/yr (equivalent to about 2.5 mil-lion bbl/d of fuel oil) of oil and natural gas by2000. As an octane booster in gasoline-alcoholblends, alcohol has a higher net displacement(see boxes C and D), but that displacement isl i m i t ed because t he i nc reased sav i ngs de -creases wi th b lends having a h igher a lcoholcontent. I n addit ion, alcohol-fueled automo-bi les could be 20-percent more eff icient thantheir gasoline counterparts. Taking these fac-tors in to account would resul t in a d isp lace-ment of about 3 mi l l ion bbl /d of o i l in thetransportation sector. * *

D i rec t combust ion i s l im i ted by ex is t ingtechnology to applications such as boilers andspace and water heating. Policy and econom-ics already are acting to remove premium fuelsfrom the large boiler market in favor of coal or

electricity Therefore, combustion of solid bio-mass will join coal and direct solar in compet-ing for displacement of oil and natural gas. Ifused pr imar i ly in the resident ia l /commercia lsector, it may be technically possible for directcombust ion o f b iomass to subst i t u te fo r asmuch as 9 Quads/yr of o i l and natura l gas(equivalent to about 4.5 million bbl/d of oil) by2000.

Gasif icat ion may provide the largest poten-tial for displacement even though it is l imitedto stationary sources. This is because it can be

used for applications, such as process heat, forwhich solid fuels are not practical and which,therefore, would otherwise cont inue to needoil or natural gas. These uses, plus space and

‘See “Energy Balances for Alcohol Fuel” In VOI I I

* *See the dlscusc.lon on fuel dl~placement at the end of ch 4



36 Ž Energy From Biological Processes

Box B.--How Do Ethanol and Methanol Compareas Liquid Fuels From Biomass?

Ethanol from grains and Methanol from Iignocellulosic Ethanol from Iignocellulosicsugar crops materials. materials

Comm ercial read inessCommercial technology and - Commercial technology with oneplants in operation. facility using wood in the plan-

ning stages; needs to be demon-strated using grasses and residues,etc.

Uncertain; could be constrainedby nonenergy demand forcropland.

Expected to be about the same asfuel methanol but probablygreater than methanol from coal.

If used as an octane-boosting ad-

ditive and distilled without usingpremium fuels will have a posi--

tive net premium fuels balance;balance would be negative ifused as a standalone fuel andproduced from energy-intensivesources of grain.

New car warranties cover use of10% blends; manageable problemin small number of cars withphase separation, fuel filter clog-ging; rubber and plastic coulddeteriorate in some cars.

Limited due to production poten-tial; would require engine modifi-cations; would improve auto effi-ciency.

Can be used in diesel enginesfitted for dual fuels; will displaceup to 30 to 40% of diesel fuelper engine.

Can be used in stationary applica-tions (e.g., gas turbines); minorend-use modifications will beneeded.

strained by the Ieadtime for con-structing new facilities.

Production cost par BtuExpected to be about the same asfuel ethanol although probablygreater than methanol from coal.

Net gasoline displacementWill have a positive net premium

fuels balance. If used as anoctane-boosting additive could becomparable to or perhaps slightlybetter than grain ethanol, buteconomic and most energy-effi-

rJtems need to be determined.

New car warranties do not coveruse of methanol blends. greaterpotential for phase separation,vapor lock, and materials damagethan grain ethanol; may requireother additives.

Use as standalone fuelConsiderably greater potential;will require engine modifications;would improve auto efficiency.

Use in dieselComparable to grain ethanol.

Use in stationary applicationsComparable to grain ethanol.

Needs to be developed anddemonstrated to be economical

Uncertain due to R&D needs.

Uncertain; if produced with cur-rent technology would be moreexpensive than ethanol fromgrain or methanol; after R&D -

could be comparable.

Expected to be comparable to

methanol if premium fuels notused as distillery boiler fuel.

Same as grain ethanol.

Comparable to methanol,

Comparable to grain ethanol.

Comparable to grain ethanol.

Potential for environental damage in obtaining the feedstockHighest potential. No significant potential for waste Comparable to methanol.

products as feedstock; somepotential for crop residues butnot if managed properly; high

potential for wood if not man-a g e d p r o p e r l y .Potential for air pollution atend use

Mixed effects in mobile sources; Same as grain ethanol. Same as grain ethanol.mainly improved emission char-acteristics in stationary sources,but effects of potential increasein aldehyde emissions are uncer-tain.

.

*

.




Box C.-What Is the Energy Balance for Ethanol Production and Use?Roughly the same amount of energy is required to grow grains or sugar crops and convert

them to ethanol as is contained in the ethanol itself. Consequently, if premium fuels (oil and natu-ral gas) are used to supply this energy and if the ethanol is used solely for its fuel value (e. g., as inmost onfarm uses), then ethanol production and use could actually result in an increase in U.S.

consumption of the premium fuels. (Note that no such problem exists with methanol production.)A net displacement of premium fuels can be achieved, however, by taking three steps. First, if

the distillery is fueled by coal or solar energy (including biomass), then in most cases less premi-um fuel will have been used to produce the ethanol than it contains. For most sources of grainsand sugar crops, each gallon of ethanol will contain the energy equivalent of 0.2 to 0.5 gal of gas-oline mo re than the e nergy ’ neede d to grow a nd ha rvest the c rop. (The ac tual value will depe nd onfarming practices and yields.) In some extreme cases, such as grain sorghum grown in poor soil,howe ver, the fa rming energy ma y still be g rea ter than the energy c ontent o f the resultant ethano l.

Second, if the ethanol is used as an octane-boosting additive to gasoline, rather than for itsfuel value alone, then substantially more premium fuel can be displaced. Because the oil refineryrequires less energy if it produces a lower octane gasoline, the energy equivalent of up to 0.4 galof ga soline c an b e saved at the refinery for eac h ga llon of e thanol used as an o ct ane-boo sting a d-ditive (see box D for a discussion of the uncertainty associated with this estimate). An additionalsaving ma y be o bta ined a t the po int of use b ec ause auto mob iles ap pe ar to ob tain better mileag ewith gasohol than would be expected from its energy content alone. Various road tests have re-sulted in widely varying estimates for the size of this savings, but laboratory tests and the averageof all road test data are consistent with a savings of 0.15 gal of gasoline per gallon of ethanol withthe existing fleet. (See vol. II “Use of Alcohol Fuels.”)

Third, d istilleries can take adva ntag e o f the feed value —and consequent energy credit — for

their byproduct (distillers’ grain or DG). With the feed rations commonly used today, DC can be asubstitute for soyb ea n meal* or other protein conc entrate . The c redit for displac ing soyb ea nmeal is the energy eq uivalent of slight ly less than 0.1 ga l of g asoline p er ga llon of e thanol.

The ab ove fac tors co mb ine so that e ac h ga llon of etha nol prod uce d from c orn has the po ten-tial to displace premium fuels with the energy equivalent of up to 1 gal of gasoline. Whether thispotential is actually achieved will depend primarily on the fuel used in the distillery and the enduse of the ethanol.

*M Poos and T. Klopfenstein, “Nutritional Value of By-Products of Alcohol Production for Livestock Feed,” Animal Sci-ence Publication No. 79-4, University of Nebraska, Lincoln. Claims that DC can reduce the amount of corn needed in ani-mal feed are based on studies using feed rations substantially different from those used commercially and therefore are notapplicable (see “Fermentation” in vol. II).




residues — or re-ing excess amounts of cropmoving any amounts from some erosive lands — will expose soils to significantly increasederosion and subsequent damage to water qual-ity and even to land productivity if the erosionis allowed-to continue long enough. Poor log-ging practices also can cause erosion, streamdamage, and even increased f lood danger inextrem e c ases of o vercutting. Timbe r remo valon some sites can lead to mass movements of

soil, such as slumps or Iandslides, to reforesta-t ion fai lures, and to damage to valuable eco-systems or recreation areas. FinalIy, transfor-mation of areas to single species managementmay cause a decline in the variety of plant andanimal species supported by the forests.

Even with accepted management practices,signif icant environmental damage may be un-

qesthetic changes

I I

avoidable if large acreages of annual crops aregrown for alcohol production. Unless currentlyunproven strategies for crop switching andre formula t ing l i ves tock feed are successfu l ,t h e l a r g e - s c a l e p r o d u c t i o n o f e t h a n o l f r o mgrains and sugar crops will requ i re p lac ingmillions of new acres into intensive crop pro-d u c t i o n . Th e l a n d a v a i la b l e f o r su c h p r o d u c - tion generally is more erosive and may be lessproduct ive than exist ing farmland, leadin g t o

significant increases in already damaging lev-els of farmland erosion as well as in the use ofagricultural chemicals.

An addit ional concern is the possibi l i ty ofsubtle, long-term declines in soi l quali ty andforest productivity as a result of the shorterrotat ions and increased removal of b iomassassoc ia ted wi th in tens i f ied fo res t manage-



Ch. 3—issues and Findings q 41

ment. Similar concerns have been expressedabout possible long-term soil and productivitydamage associated with the collection of cropresidues, even when in compliance with Soi lConservation Service erosion standards. Thecurrent state-of-knowledge does not allow de-

finit ive conclusions about either the extent ofany possible damage or the potential for man-. aging it.

Final ly, al though intensive t imber manage-ment could increase the quantity and improve

, the quality of the timber available, it also willchange the character of the forests. Removinglogging residues and increasing stand conver-sions and thinning wiII lead to more uniform,open forests with a higher proportion of even-age, single-species stands. I n addition, popula-tions of birds, animals, and insects that depend

on dead and dying trees or large litter woulddecline, while other species would increase innumber. Flat, easily accessible lands probablywould undergo more extensive changes in for-est character whi le s teep or env i ronmental lyvulnerable lands should be less affected be-cause harvesting often is more expensive there.These changes will be objectionable to manyenvironmental groups, especial ly those con-cerned w i th preserv ing natura l ecosys tems,although other groups concerned with promot-ing hunt ing or increas ing publ ic access maywelcome such changes.

Although it is diff icult to predict the behav-ior of biomass suppliers — and, thus, the envi-ronmental impacts assoc iated wi th obtainingbiomass feedstocks– several factors wi l l beimportant in influencing this behavior.

First, regulatory incentives for controlling im-pacts general ly are not strong. The Environ-mental Protection Agency’s (EPA) section 208program to control nonpoint source water pol-lution has been slow in getting started, and itsfuture effect iveness is unclear. Although theForest Service appears to have good regulatory

control of s i lv icultural pract ices on nat ionalforest lands, which include some of the mostenv i ronmental ly vulnerable wooded lands inthe United States, regulation at the State levelgenerally is hampered by insufficient agency

staff or weak laws as well as by a traditionalemphasis on forest fire prevention rather thansilvicultural management. This is particularlyt r u e o f p r i v a t e w o o d l a n d s i n t h e E a s t e r nUnited States, where 70 to 75 percent of thepotent ia l for increased forest product ion ex-

is ts . Most of these eastern woodlands areowned privately in smalI lots, making supplierbehavior particularly diff icult to predict.

Second, economic incentives for protectingthe env i ronment are mixed. Al though goodmanagement may prevent some environmen-tal damages that direct ly affect crop produc-tivity and growing costs, many of the benefitsof such management accrue to the public or tofuture generat ions rather than to the growerand harvester. For example, agricultural ero-sion is most damaging to water quality, and

the major benef ic iar ies of eros ion prevent ionare the downstream users of the protectedstream. Any damage to productivity is in mostcases a very long-term effect, while financialstrains on farmers force them to value short-term gains. On the other hand, the high costsof pest ic ides, erosive t i l l ing, and other main-stays of high-technology farming are leadingmany farmers to switch to practices that maybe less damaging to the environment. In forest-ry, there may be pressures to harvest vulner-able si tes and to “poach” wood with environ-mental ly damaging harvest ing methods. On

the other hand, foresters operat ing on moresuitable sites have a positive incentive for en-vironmentalIy sound management provided bythe long-term reward of good pract ices — amore economicalIy valuable forest.

Th e st r e n g t h o f t h e i n c e n t i v e s f o r a n dagainst environmental protect ion depends onthe changing c i rcumstances assoc iated wi ththe great variety of f inancial conditions, cropalternatives, management plans, and physical/ env i ronmental condi t ions appl icable to bio-mass production. In the absence of strength-

ened regulations, including careful monitoringof soiI and water quality, or stronger positiveincent ives for protect ion, some port ion of afuture biomass supply may be obtained in anenvironmentalIy costly manner.



42 . Energy From Biological processes

.

Photo credit USDA —Soil Conservation Service

Increased incentives for environmental protection may be necessary to avoid

careless logging practices on vulnerable sites




.

What Are the Major Social Effects of

Bioenergy Production?

Bioenergy product ion could bring a variety

of c ha nge s to soc iety. The m ost imp ortan t ofthese probably wi l l be the effects on energy-re l a ted emp loy ment , on ru ra l c ommun i t i es ,and on qual i ty of l i fe. Some of these changesare more l ikely to be perceived as benefic ialwhiIe others will be seen as detrimental,

I n most cases, biomass energy developmentwill be more labor intensive than the increaseduse of conventional fuels, such as coal, oil, ornatural gas, and therefore will result in more

job s pe r Quad of ene rgy p rod uce d. These job sare likely to occur in agriculture and forestry,

in small- and medium-size businesses manufac-turing conversion equipment (e. g., digesters,gasifiers, wood stoves, stills), and in the con-struction and operation of large-scale conver-sion faci l i t ies such as electric-generat ing sta-tions and alcohol fuel plants.

Biomass energy resources also tend to bemore highly dispersed than conventional ener-gy sources. Feedstock transportation costs andother factors wi l l mean that employment inh a rv est in g , c o n v e rsio n , a n d re la t e d se c t o rsalso is likely to be dispersed. Thus, bioenergy

development will avoid the public service im-pacts and problems of secondary developmentthat can be associated with centralized devel-opment of fossil fuels in rural areas. Rather, inrural areas current ly experienc ing unemploy-ment and underemployment, the increased re-source management and cap i ta l inves tmentassociated with biomass energy are Iikely to bewe lcom ed . These fa c tors should ma ke it ea sierfor rural areas to plan for and achieve long-term economic growth.

In addition, biomass energy will be valuedby society for its potential to reduce consump-tion o f imp orted foreign o il. This d isplac em entw i l l be par t i cu lar l y va luab le in agr icu l ture ,which is especial ly sens i t ive to fuel supplyinterrupt ions, but which could achieve a de-gree of l iquid fuels or energy self-suff ic iencythrough onfarm dis t i l lat ion and anaerobic di -

ges t ion, as wel l as inc rease farm income

through energy crop production.Bioenergy production, however, is not with-

out problems. First, the rates of reported occu-pational injuries and il lnesses in agriculture,forestry, logging, and lumber and wood prod-ucts are significantly higher than the nationalaverage for all private industries. The rates perworker for logging and for lumber and woodproducts are approx imately tw ice those forbituminous coal mining or oil and gas extrac-t ion, whi le those for agriculture and forestryare comparable to coal, oi l , and natural gas.

Unless safer harvest ing pract ices and equip-ment are developed and used, increased log-g ing and agr icu l tura l produc t ion for energycould result in unacceptable levels of occupa-t ional in jury and increased expendi tures forworkmen’s compensation. EventualIy, safetycould become an issue in labor-managementrelations as it has in the coal mines, increasingthe potential for strike-related supply interrup-tions in wood energy.

Second, the use of commodities for energycould lead to competi t ion with tradit ional usesof these commodities. This competition couldinc rease farmland and poss ib ly fores t landprices, and, together with the resulting land in-flation, also could increase the price of food orresul t in changes in American dietary habi tssuch as less consumption of meat. If the de-mand for food continues to rise, Americans ul-t imately could be forced to choose betweenrelatively inexpensive food and relatively inex-pensive fuel. Moreover, increases in U.S. foodprices are likely to increase the cost of food onthe internat ional market. Some countries wi l lnot be able to afford food imports, and others

wi l l export crops now used domest ical ly forfood.

I t should be emphasized that the potent ialfor competi t ion between bioenergy and agri-culture involves only a small f ract ion of thetotal biomass resource base, but that fractionis capable of causing a major confI ict . How-



44 qEnergy From Biological Processes

ever, because of uncertainties about the tim-ing and magnitude of investment in biomassconversion and about the future demand forfood, it is not known at what level of bioenergy

What Are the Problems andBioenergy Processes?

The d ispe rsed nature of muc h of the b io-mass resource tends to favor its use in small-scale, dispersed applications, In some cases,facilities as large as 50-MW electric-generatingpIants may be feasible, but the ful l use ofresources Iike wood probably wiII require con-siderable participation by small-scale users. Inother cases, such as grain ethanol, obtaining

sufficient feedstock for large-scale conversionfacilities is not a problem, but there is interestin small-scale onfarm production as a meansof achieving some degree of liquid fuels self-sufficiency for farmers and as a way for themto divert some of their grain from the marketwhen prices are low.

Some of the questions that potential small-scale users of bioenergy and biomass conver-sion facilities probably should ask are: 1 ) whatfuel do they want and will it be used onsite orsold? 2) what is the cost and reliability of their

feedstock supply? 3) what fuel will be used forthe convers ion fac i l i t y (e . g . , on farm d is t i l -leries)? 4) how expensive, safe, reliable, andautomat ic is the conversion faci l i ty? and 5)what are the indirect effects of using or con-verting the biomass (e. g., dependence on asingle buyer, potential crop rotation schemes,etc.)? The more important aspects of thesetechnical and economic concerns about small-scale wood energy use, onfarm alcohol pro-duct ion, and anaerobic d igest ion, as wel l asthe environmental and social effects of these

systems, are considered below.

Technical and Economic Concerns ofSmall= Scale Wood Energy Systems

At present, small-scale wood energy systemspr imar i l y a re l im i ted to d i rec t combust ion(wood stoves) and airb lown gasi f icat ion ( for

p r o d u c t i o n p r i c e s w i l l b efected or when these pricecome unacceptable.

substantial lyincreases will

af -

be-

Benefits of Small-Scale

smal l industr ia l boi lers and process heat) .Smal l methanol p lants could be developed,but the costs are highly uncertain at present.

Where sufficient quantities of wood can beo b t a i n e d f o r l e s s t h a n $ 6 0 t o $ 1 0 0 / c o r d( rough ly $60 to $100/dry ton) , burn ing thewood in ef f ic ient wood stoves or furnaces is

compe t i t i ve w i th home hea t i ng o i l cos t i ng$0.90/g al. The a c tual wo od c ost tha t is c om -petitive will depend on the relative efficienciesand costs of the conventional and wood heat-i ng sys tems . Howeve r , w i t h w o o d - b u r n i n g

stoves or furnaces, it often is necessary to feedthe unit manually, and frequent ash removaland cleaning are necessary for continued safeand efficient operation. It also may be neces-sary to prepare the wood by cutting and split-ting the logs. These factors will limit the use ofwood for home heating to those people who

are will ing to undertake these activities, whovalue the use of local or renewable energy sup-pl ies, or who use the wood as an insurance

against shortages of their conventional homeheating fuel.

With small-scale wood-fired industrial boil-ers, investment cost is the primary constraint.Wood-fueled boilers cost about three times asmuch as comparable oil-fired systems, and un-t i l lending inst i tut ions accept a wood-fueledfacility as a reasonable investment because oflower fuel costs, potential users may have dif-

ficulty financin g a conversion to wood energy,Also, due to uncertainties about the reliabilityof wood fuel suppl ies and conversion equip-ment, many potential users may wait to investin wood boilers or gasifiers until they can ob-tain long-term wood supply contracts or, in thecase of gasifiers, until more operating experi-ence has been accumulated.




.

I f re l iab le , easy to use gas i f ie rs becomewidely available, however, the number of pos-sible uses for biomass wouId increase to in-clude process heat, and the cost of retrofittingsmall industrial operat ions for biomass couldbe less than for direct combustion. Moreover,

users could return to oil or natural gas if tem-porary wood shor tages deve loped and theothe r fuels we re a vailable. This c ould red uc eor el iminate most of the potent ia l problemswi th us ing wood energy in smal l indus t r ia lfac i l i t i es , but cou ld pose load managementproblems for gas ut i l i t ies i f large numbers ofgasifiers were in operation.

Technical and Economic Concerns ofSmall-Scale Ethanol Production

Technically, it is relatively easy to produce

ethanol containing 5 percent or more water insmall, labor-intensive distilIeries. This alcoholcould be used as a supplement to diesel fuel inretrofitted diesel engines and it probably canbe blended with vegetable oil (such as sunflow-er seed oi l ) and used as a replacement fordiesel fuel, In either case, however, the ethanolp r o b a b l y w o u l d c o s t a t l e a s t t w i c e t h elate-1979 cost of the diesel fuel i t would re-place, In addit ion, i f the ethanol-vegetable oi lb l end i s us ed , t he d i es e l eng ine p robab l ywould deliver less power than with diesel fuelunless the engine is modif ied to al low more

fuel to enter the combustion chamber.

With s l ight ly more sophis t icated equipmentand special chemicals, dry ethanol suitable forblending with gasoline could be produced on-farm, but the costs are likely to be consider-ably higher than for large distilleries with cur-rent technology. Process developments, par-ticularly in the ethanol drying step and in auto-matic monitoring of the disti l lery, could makethe costs competitive.

If ethanol from grains or sugar crops is used

as a farm or other s tandalone fuel , the netdisplacement of premium fuel (oi l and naturalgas) is considerably less than if the ethanol isused as an octane-boost ing addit ive to gaso-line. For some feedstocks and regions, onfarmproduct ion and use of ethanol actual ly wi l llead to an increase in premium fuel usage. Inessence, the farmer wouId be buying more fer-

t i l izer, pest ic ides, and other energy-intensiveproducts in order to avoid buying diesel fuel;in some cases the net result would be that thecosts of the farming operat ion would continueto be very sens i t i ve to energy pr ices . Forfarmers who could expand their acreage under

cul t ivat ion, the t radeof f between diesel fueland other energy-intensive products would berelatively direct. For those who cannot expandtheir acreage, the choice is between the dieselfuel, plus other energy-intensive products thatcould be saved by not cultivating part of theiracreage, versus the ethanol that could be pro-duced by not sel l ing part of thei r crop. De-pending on the specif ics of the markets andGovernment regulat ions, however, the supplyof ferti l izers, pesticides, and similar productsmay be less prone to temporary shortages thandiesel fuel, and this strategy might be effective

as an insurance against diesel fuel shortages.

The least expensive distillery options assumethat the disti l lery byproduct sti l lage would befed to animals in the area without being dried.This stillage, however, can spoil within 1 to 2days and the farmer would have to changefeeding prac t i ces to avo id feed contamina-t i o n .4 I f there are insuff ic ient animals in thearea or feeding wet still age proves to be im-p rac t i c a l f o r t he f a rmer , t hen t he s t i l l agewould have to be dried, which would increasethe cost and energy requirements of the etha-

nol product ion.

Onfarm dist i l leries avai lable today requireconsiderable moni tor ing and other labor forsafe and reliable operation. For example, stillsinvolve risks of fire, explosion, and exposure tomoderately i r r i tat ing chemicals .5 Proper train-ing and well-bui l t equipment can reduce therisks, but the need for monitoring could makeit impractical to operate stil ls during planting,

‘t W Klenholz, D L Rosslter, et al , “Craln Al coho l Fermen-

tation Byproducts for Feeding In Colorado, ” Department of Ani-mal Science, Colorado State University, Fort Collins

‘N I rving Sex, “Dangerous Properties of Industrial Chemi-

cals, ” Van Nostrand R~lnhold Co , New York, ?11975 by Litton

E d u c a t i o n a l P u b l i s h i n g , Inc The hazard categor ies are “ N o n e ,

Slight causes readily reversible changes which disappear after

end ot exposure, Moderate may Involve both Irreversible and re-

verjl ble c hange~ not severe enough to c a use cleat h or permanent

Injury, a ncf High ma v cause cfea th or permanent Injury after very

short exposure t o sm a I q u a n t t Ies ‘‘



46 qEnergy From Biological processes

harvest, and parts of the summer. However,less than ful l- t ime operation would raise theethanol costs and make it less feasible to relyon the d ist i l lery byproduct for animal feed.This points to the need for a highly automatedoperation, which will increase the cost of theequipment.

Farmers producing ethanol also will have tosecure a fuel for their distilleries. Crop residuesor grasses may be one possibility, but technol-og ies fo r conven ien t ly burn ing or gas i fy ingthese fuels onfarm are not avaiIable at presentand in some regions the grasses and residuesalso are not available. Where wood is avail-able, this could be used. Alternatively, solar-powered equipment suitable for ethanol distil-lation probably can be developed, but it is notcurrently available and the costs are uncertain.Using biogas from manure digesters to fuel

distil leries is technically possible, but the di-gester would add substantial ly to the invest-ment costs and special financing designed tolower capital charges probably would be nec-essary for most smalI operations.

In the most favorable cases, it may be possi-ble to produce wet ethanol onfarm in a labor-in tens ive opera t ion fo r $1 /ga l p lus labor . *Used in diesel tractors, this is about twice thelate-1979 cost (per Btu) of the diesel fuel i tcould replace. There is, however, insuff icientexperience with onfarm production to predict

costs accurately and this estimate may be low.

Nevertheless, the large subsidies currentlyapplied to ethanol have created a market pricefor the ethanol that is significantly higher thanthe production costs. Consequently, in somecases it may be possible to produce wet etha-nol onfarm and sell it profitably to large distil-leries for drying. If profit margins decrease,however, onfarm ethanol production with cur-rent technology would be, at best, marginal incomparison to large distilleries.

For some farmers, however, the cost or laborrequired to produce dry or wet ethanol may beof sec ond ary imp ortanc e. The va lue o f somedegree of fuel self-sufficiency and the abilityto d iver t l im i ted quant i t ies o f c rops whenpr ices are low may outweigh the inconveni-

‘See “Fermenta t ion” in VOI II

ence and cost. I n other words, they may con-sider onfarm ethanol production to be an in-surance against diesel fuel shortages and ameans of raising grain prices.

Technical and Economic Concerns of

Small-Scale Anaerobic DigestionThe p r inc ipa l c onc erns reg a rd ing on fa rm

anaerob i c d iges t i on o f an ima l manure to p ro - duce biogas are the investment cost of thedigester system and the need to use the biogasef fec t ively. The c ap i ta l cha rge s and invest-m e n t c o s t s s h o u l d d e c r e a s e a s d i g e s t e r s b e -come commercia l . But , at Ieast in the nearterm, attractive financing arrangements wouldaccelerate commercial ization.

The farmer’s ability to use the biogas energyeffectively also will play an important role in

determining the economics. Many digesterswill produce more energy than can be used onthe farm but in a form that cannot be sold easi-ly (the biogas or waste heat). Furthermore, thefarm’s energy use may have to be managed inorder to reduce daily peaks that would makethe economics of using biogas less attractive.Also, the operation may have to be expandedto include such things as greenhouses so thatall of the e nergy p rod uce d ca n be used . To theextent that the biogas is used to generate elec-tricity onfarm, the economics also will depend

heavily on the prices that the electric util ity iswill ing to pay for wholesale electricity and thecharges for backup power.

Environmental Effects of Small- ScaleBiomass Energy Systems

The smal l -sca le b iomass sys tems, espec ia l lyenergy conversion sys tems such as woodstoves, onfarm stills, and anaerobic digesters,create both opportuni t ies and problems for en- -vironmental control.

Smaller systems afford some opportunities

for using the assimilative capacity of the en-vironment for waste disposal that are imprac-tical for large centralized systems. For exam-ple, liquid wastes from small ethanol and bio-gas plants often can be safely disposed of byland application. Large plants may find this op-tion closed to them because of difficulties infinding sufficient land.



Ch. 3—issues and Findings 47

This ad vanta ge ma y be o verbalanc ed by sev-eral problems associated with small-scale op-erations. Effective “high technology” controls,such as water recycling, often are unavailableto smaller plants. Monitoring and enforcing en-vironmental standards are complicated by the

larger number of s i tes. Poor maintenance ofequipment and training of operators as welI asad hoc design may present potentially signifi-cant safety as welI as environmental problems.

As ide f rom d i f ferent cont ro l opt ions andregulatory problems, the size of biomass facil-ities affects the nature of their impacts, Effectsthat are primarily local in nature, such as dam-age from fugit ive dust, toxic waste disposal,and the effects of secondary development, areless severe at any site but occur with greaterf requency . Emiss ions o f po lycyc l i c organic

mat ter, general Iy not a problem wi th largecombustion sources, may be a significant prob-lem with smaller less efficient sources such aswood stoves. Final ly , regional ai r pol lut ionproblems caused by the long-range transport

of pollutants associated with the tall stacks oflarger plants are t raded for increased localproblems caused by emissions from low stacks.Th is la t ter e f fec t might inc rease State andlocal governments ’ incent ive to requi re ade-quate controls, because the major air polIutiondamages from energy conversion facil it ies willno l onger oc c ur hundreds o r t hous ands o f

miIes away.

Social Considerations of Small-ScaleBioenergy Production

The soc ia l imp ac ts of c om me rc ial-sc ale b io-energy product ion discussed above are notnecessarily applicable to small-scale systems.For example, although new jobs will be associ-ated wi th the manufacture, dis t r ibut ion, andservicing of smaIl-scale conversion equipment,obtaining the fuel for and operating the equip-ment are more Iikely to be associated with ad-ditional personal labor or a second family in-

come. Similarly, if bioenergy development fo-cuses on small-scale systems it is less likelythat competition with nonenergy users for re-sources would occur, because in the sectorswhere compet i t ion could be harmful , smal lersys tems w i l l a l low greater cont ro l over the

amount of the resource base that is devoted toenergy.

On the other hand, some social considera-tions are more likely to arise with, or would beexacerbated by, an emphasis on smal l -scalesystems. For example, smaller systems pose ad-ditional health and safety problems, includingthe hazards to amateur woodcutters, the riskof house f i res f rom improperly instal led ormaintained wood stoves, and f i res or explo-sions from leaks in small stills. I n addition,small stills may represent a source of alcohol

that is at t ract ive to minors but can containpoisonous impurities such as fusel oil, acetal-dehyde, and methanol.

Small-scale systems also will be more dif-f icult to regulate than commercial-scale tech-nologies. The primary concerns here are theBureau o f Alcohol, Tob ac c o, a nd Firea rms pe r-mi t t ing and other requi rements des igned toprevent unauthor ized product ion or dis t r ibu-t ion of beverage alcohol, and environmentalregulat ions intended to protect publ ic healthf rom the process chemicals in dis t i l lery ef -fluents and from the uncontrolled combustionof solid, liquid, and gaseous fuels.

Lastly, smaller systems probably will have agreater impact on lifestyles. Even with the de-velopment of relat ively automatic equipment,small-scale bioenergy conversion wil l requireindividual labor — personal or hired — in orderto ensure a reliable supply of energy. For somepeople, the increased price of traditional ener-gy sources may not be a sufficient incentive tooutweigh the convenience of delivered energy.This co nvenienc e fac tor may b e the p rimaryc o n s t r a i n t o n t h e w i d e s p r e a d a d o p t i o n o f

small-scale systems.




.

.

What Are the Principal Policy Considerations for

Bioenergy Development?

The issues discussed above point out the

potent ial benef i ts and problems of increased

re l iance on b iomass energy sources in theUni ted States . B ioenergy i s both renewableand domestic and wouId therefore help reduceU.S. dependence on cost ly and insecure im-ported oil and on depleting fossil fuels. How-ever, bioenergy also may have important, butdiff icult to predict, effects on the environmentand on prices for food, feed, f iber, and land.The pr imary po l i cy cons iderat ions that areraised by the potential problems and benefitsof bioenergy development are reviewed below.

First, a number of measures have been pro-posed or passed by Congress to promote newenergy sources of all kinds, and many of thesewil I improve the prospects for investment inbioenergy. However, bec aus e o f t he w iderange of biomass feedstocks and convers iontechnologies, many bioenergy systems wouldbenefi t more from pol ic ies careful ly tai loredto these feedstocks and technologies. Thesecould inc lude programs to prov ide informa-t i on and t ec hn i c a l as s i s t anc e t o b i oenergyusers and to develop reliable supply infrastruc-tures for energy uses of biomass resources.

Second, because of uncertainties about thesources of bioenergy feedstock suppl ies, thein t roduc t ion o f b iomass energy should bemonitored carefully. For example, if commodi-ty prices rise i n response to bioenergy develop-ment , Congress might choose to reevaluatepromotional policies and adjust them if neces-sary, For this reevaluat ion, legis lators could

. use measures such as “sunset” provisions andprice and quantity thresholds for subsidies, aswelI as statutory requirements for the reviewof existing policies. In addition, rapid develop-

ment , demonstrat ion, and commerc ial izat ionof economic processes for producing ethanol

and methanol f rom I ignocel lu los ic mater ialswould reduce the energy demand for gra insand sugar crops.

Uncertainties about future biomass resourceharvesting and management practices make itimportant to moni tor the env i ronmental im-pacts of bioenergy development as well. Forexample, with proper management the quanti-ty and quality of timber avaiIable for wood en-ergy and for tradit ional wood products couldincrease, Without such management, however,harvesting fuelwood could cause severe waterpollution as well as declining land productivi-ty. Other bioenergy sources threaten environ-mental problems of simiIar importance. Conse-quently, the environmental effects of obtain-ing al l major biomass resources should bemoni tored, and new and expanded programsand incentives should be used to encouragesound resource management practices.

I n addition, using biomass for energy and forchemical feedstocks will l ink economic sectorsthat prev ious ly were independen t o f eac hother. These links could have significant insti-tut ional impl icat ions for regulat ion, such asthat related to antitrust.

Finally, concerns have been raised about themagni tude and durat ion of bioenergy subsi -dies. Gasohol, for example, already receivesFederal and State subsidies in the form of taxexemptions that can total as much as $56/bblof ethanol. * Such subsidies, especially if theyare continued for long periods of time, distortconsumer perceptions of the true cost of bio-energy.

‘See “Alcohol Fuels” In ch 5



Chapter 4

FUEL CYCLES AND THEIR IMPACTS

Chapter 4.–FUEL CYCLES AND THEIR IMPACTS

Page

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53Environmental lmpacts–Generic Concerns 53

Decentralized Conversion Facilities. . . 53Feedstock Production . . . . . . 54

Reduction in Use of AlternativeEnergy Sources.. . . 55

Carbon Dioxide Balance. 56- Social Implications – Generic

Wood . . . . . . . . . . . . . . . . . . .I n t r o d u c t i o n ,TechnicaI Aspects

E c o n o m i c s , .Environmental Effects

C o n c e r n s 57

. . . . . . . . . . . . . 5959

60. . 68

75Potential Effects of Increased Fuelwood

D e m a n d 75Good Forest Management — How Likely

Is It? 80

Page

C o n c l u s i o n s 81Wood Conversion Impacts 81

Soc ia l I m pac t s 83Alcohol Fuels. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87

I n t r o d u c t i o n , 87T e c h n i c a l A s p e c t s 90

E t h a n o l 92M e t h a n o l 95

E c o n o m i c s 96Ethanol ., .”.. 96Methanol . . . . . 102General Aspects of Alcohol Fuels 103

E n v i r o n m e n t a l E f f e c t s 104Obtaining the Feedstock 104E t h a n o l P r o d u c t i o n 107Methanol Produc t ion .108Alcohol Use .108

Social Impacts 109



Page

Crop Residues and Grass and Legume Herbage. .. 112Introduction. . . . . . . . . . . . . . . . . . . . . .. ...112Technical Aspects . . . . . . . . . . . ..., .. ....113Economics. . . . . . . . . . . ................117Environmental Effects . . . . . . . . . . . . . . . ...119

Obtaining the Resource . . . . . . . . . . . . . . 119Conversion. . . . . . . . . . . . . . . . . . . . . . . , .120

Social Impacts.. . . . . . . . . . . . . . . . . . . . ...121Anaerobic Digestion of Animal Wastes. ... ... ..123

Introduction. . . . . . . . . . . . . . . . . . . . . .. ...123Technical Aspects . . . . . . . . . . . . . . . . . . . . .124Ec onomics. . . . . . . . . . . . . . . . . . . . . ., ....126Environmental Effects . . . . . . . . . . . . . . . ...128Social Impacts. . . . . . . . . . . . . . . . . . . . . , ..130

Bioenergy and the Displacement of ConventionalFuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132

Current Supply and Demand . ............133Future Supply and Demand. . . . . . . . . . . . ..134Biomass Potential . . . . . . . . . . . . , . .......136

TA BLES

Page 3. Potential Wood Availability by Forest

Region. . . . . . . . . . . . . . . . . . . . . . . . . . . . 634. Illustrative Wood Energy Costs . . . . . . . . . 735. Labor Force Equivalents for Wood

Harvesting and Coal Mining . . . . . . . . . . . 836. jobs Associated With New Wood-and

Coal-Fired Boilers . . . . . . . . . . . . . . . . . . . 837. Occupational injury and Illness Rates,

1976. .............,.. . . . . . . . . . . . . . 858. Cost of Ethanol From Various Sources . . 969. Estimated Costs in 1979 Dollars Of

10.11.

12.

13.

14

151617

Alternative Liquid Fuels . . . . . . . . . . . . . . 103Erosivity of Cropland. . . . . . . . . . . . . . . . . 105Average Crop Residue Quantities Usablefor Energy . . . . . . . . . . . . . . . . . . . . . . . . . 114Potential Excess Grass Production,Assuming 2-Ton/Acre Annual ProductionIncreases. . . . . . . . . . . . . . . . . . . . . . . . . . 115Labor Requirements for HarvestingCollectible Residues. . . . . . . . . . . . . . . . . 121Characteristics Of Various Substrates

for Anaerobic Digestion . . . . . . . . . . . . . . 1241979 Energy Picture. ., . . . . . . . . . . . . . 133U.S. Energy in 2000:Future A. . ....,,.,. 134U.S. Energy in 2000:Future B, . . . . . . . . . . 136

9.

10.

11.

12.

13.

14.15.16.17.

18.19.

20.21.22.23.

24.

25.

26.27.28.

29.

30.

31

32.33.

34.

35.

36.

FIGURES

Major Environmental Risks—Comparisonof Biomass and Coal Fuel Cycles. . . . . . . .Forestland a s a Perc enta ge o f Tota l La ndArea. ..., . . . . . . . . . . . . . . . . . . . . . . . . .Area of Co mmercial Timberland b yRegion and Commercial Growth

Capability as of January 1,1977 . . . . . . . .Forest Biomass Inventory, Growth, and

Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Material Flow Diagram for Felled TimberDuring Late 1970’s. . . . . . . . . . . . . . . . . . .Conversion Processes for Wood . . . . . . . .Select Airblown Gasifier Types . . . . . . . . .Cost Breakdown for Timber Harvest. . . . .Fuel Cost Co mp arison Betw een Wood andFuel Oil . . . . . . . . . . . . . . . . . . . . . . . . . . .Cost Shares of Wood Pellets . . . . . . . . . . .Cost Shares of Wood Methanol.. . . . . . . .Cost Shares of Wood Electricity . . . . . . . .Likely Sources of Fuel Alcohols . . . . . . . .Uses of Alcohol Fuels . . . . . . . . . . . . . . . .Cropland a s a Perce nta ge of Tota l LandArea, by Farm Production Region . . . . . . .Potential Cropland With High or MediumPote ntial for Conve rsion, as a Perce ntageof Total Land Area. . . . . . . . . . . . . . . .Synthesis of Ethanol From Grains andSugar Crops. . . . . . . . . . . . . . . . . . . . . . . .Premium Fuels Balance for Ethanol . . . . .Methanol Synthesis. . . . . , . . . . . . . . . . . .The Estimated Value of Ethanol as anOctane-Boosting Additive to Gasolinefor Various Crude Oil Prices and SubsidyLevels . . . . . . . . . . . . . . . . . . . . . . . . . . . .Crop Switc hing: Two Method s to Produc e

Equivalent Amounts of Animal FeedProtein Concentrate . . . . . . . . . . . . . . . . .Present Use of Land With High andMedium Potential for Conversion toCropland by Farm Production Region. . .Usable Crop Residues and Potential Near-Term Herbage Production. . . . . . . . . . .,Crop Residues by Type . . . . . . . . . .Conversion Processes for Herbage . . . .Types of Animal Manure From ConfinedAnimal Operation . , . . . ., . . . . . . .Anaerobic Digester System . . . . . . . . . . .Fuel Displacement With Biomass .

BOXE.–Two Ways to Calculate the Value of

Ethanol. . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

55

60

61

62

6 3 .646668

70

71

72

728788

88

89

939495

98

99

100

112 s113116

125 :

126138

97



Chapter 4

FUEL CYCLES AND THEIR IMPACTS

Introduction

All the combinations of dif ferent kinds of bioenergy resources, conversiontechnologies, and end uses would lead to numerous fuel cycles—far too many toanalyze in-depth in this report. Consequently, four biomass fuels were chosen —wood, alcohol, herbage, and animal manure—that could play a major role in bio-energy development between 1980 and 2000.

This c hap ter p resents an o verview of som e environm enta l and soc ial imp lica -tions of bioenergy in general, and then reviews the technical, economic, environ-mental, and social considerations specific to each of the four fuel cycles. The chap-ter ends with a consideration of two possible energy futures and the role bioenergycould play within each in displacing conventional fuels.

Environmental Impacts—GenericA major conclusion that can be drawn from

OTA’s analysis of the environmental effects ofbiomass energy (see vol . I I ) is that whi lebiomass fuels may be potentially less harmfulthan the most damaging foss i l a l ternat ive—coal — severe environmental degradation maystilI accompany their use. The Federal Govern-ment wilI have to exercise great care in pro-viding incentives for biomass energy to avoidpromot ing env i ronmental ly harmful pract icesor expansion into vulnerable land areas.

Decentralized Conversion Facilities

The tec hnologies that t ransform raw bio-mass resources into usable fuels or electricityare often somewhat similar to technologies forburning coal or transforming it into syntheticfuels, However, the low quantities of toxic ma-

T terials in the biomass raw materials and theavaiIability of biological as welI as thermo-chemical means of producing gaseous and Iiq-uid fuels generaIIy yield a lower potent ia l f o renvironmental degradation than experiencedw i t h c oa l c onv ers i on t ec hno log ies . On t heother hand, the greater simplicity of the bio-mass technologies and their Iack of demandingphys ical operat ing conditions aIlow sometypes of biomass faciIities to operate at a scaIe

that is much

Concernssmaller than would be pract ical

with coal conversion technologies. This poten-t ial for decentral izat ion is often praised byconsumer and environmental interests, but i tmakes the careful monitoring of environmen-tal condit ions and the enforcement of controlrequ i rements more d i f f i cu l t . Env i ronmenta lprotection authorities can expect to have prob-lems with these facilities similar to those theyenc ounter w ith exist ing sma II p olIu t io ns o u r c e s , F o r e x a m p l e , a u t o m o b i l e o w n e r s

often try to circumvent pol lut ion control sys-tems they perceive to be inconvenient. In deal-ing with autos, State agencies can requireautomobiles to be driven to a central facil ityf o r i ns pec t i on–an op t i on no t av a i l ab le f o r

monitoring emissions from anaerobic digest-ers, for example. The smalI size of many bio-mass conversion facilities also tends to elimi-nate capital-intensive, technologicalIy sophis-ticated options for pollution control However,the smalIer size may open up greater potentialfor using the assimilative capacity of land andwater to dispose of biodegradable wastes. Inm a n y areas of the country, the extensive con-tiguous land areas or high-volume streamsneeded for waste disposaI from Iarge faciIitiesare not available, while more modest Iandareas or streams are.

53




Aside from influencing the pollution controlopt ions avai lable and the regulatory d i f f i -culties encountered, the small size of biomassconversion faci l i t ies wil l affect the nature ofthe env i ronmenta l impacts tha t may occur .Some effects that are primari ly local in na-

ture — to xic w a st e d i sp o sa l p r o b l e m s, i n -creased air polIution and other damages fromsecondary deve lopment , dep le t ion o f loca lwater supplies — wiII be less severe at any sitebut wil l occur at more sites, Regional watersupply problems could be eased because themuItiple plants may have greater fIexibiIity inlocating otherwise-unused water supplies, Thegenerally smaller size of the plant stacks couldallow more of the plant emissions to fall outclose to the plant, in contrast to the 500 ft andhigher stacks of large powerplants which maketheir emissions more of a regional than a local

problem. Thus, regional problems caused bythe products of long-range transport and trans-formation — such as acid rain — might be easedat the expense of increased local problemswith d irec tly emitte d g a ses a nd p a rtic les. Thismight have a saIutary effect on local and Stategovernments’ wiIIingness to require and en-force adequate controls, because the air pollu-t ion damages from uncontrolled faciIities wiIItend to occur within the governments’ jurisdic-t iona l boundar ies ra ther than hundreds o fmiIes away,

Feedstock Production

The growin g and harvestin g of the more con-ventional biomass resources — wood and agri-cuIturaI products and residues — involve pri-mari ly extensions or more intensive applica-tions of present forestry and agricultural prac-t ices, Thus, many of their environmental im-plications are generalIy familiar to the regula-tory agencies, but they are by no means envi-ronmental Iy benign, Al though fo res t ry and

agriculture are not usualIy associated with thesevere environmental damage caused by min-era l and foss i l fue l ex t rac t ion techno log iessuch as coal mining, they can cause severeland degradation and water pol lut ion i f theyare misma nag ed. The extent of a ny da ma gewiII depend more on the behavior of the ex-ploiting industries than on any inherent prob-




Some biomass fuel cycles are direct substi-tutes for nuclear or fossil-fueled electric powergeneration; these cycles include electric gener-ation from wood and wood wastes and resi-dues, agricultural residues, and Iignocellulosecrops. When biomass substitutes for new con-

ven t i ona l gene ra t i on capac i t y , i n mos t i n -stances this capacity will be nuclear- or coal-based because of Federal restrictions on theuse of oil and natural gas by utilities. Currentdifficulties with nuclear power imply that coalwilI become the major fuel for new generationcapacity. In most instances, biomass-generatedelectricity will reduce the need for coal-fired elec-trical generation.

Where biomass is used to produce a premi-um fuel (e. g., alcohol) or is used in a way thatal lows the displacement of oiI (e. g., close-

coupled gasifiers and wood stoves), the fuelcycle may be said to reduce the need for im-por ted o i l o r syn the t ic o i l f rom coa l o r o i lshale.

Carbon Dioxide Balance

One possible benefit of this substitut ion ofbiomass fuels for fossil fuels is said to be a netreduction in the emissions of carbon dioxide(CO ,) from ene rgy use. The c ont inuing b uild upin atmospheric CO 2 concentrat ions associated

with increasing fossil fuel use eventually maycause signif icant changes in the Earth’s cl i-mate. (This issue has been dealt with at somelength in a rec ent O TA repo rt.’)

The e xtent to wh ich a sub stitut ion of b io-mass fuels for coal and other fossiI fuels wouldmoderate the CO 2 buildup depends on the de-gree of substitution and the net carbon bal-ance of the biomass fuel cycle.

The U.S. share of global energy use is aboutone-third of the total and is Iikely to drop in

‘ [he [)lre(

I ow

of( oa / Pro\pect~

and Prob/em\ ot Prod(/ct/on~nd ( ombuj tjon (Washl ngton, D C (lft [c-e of Te[ hnology ,As-w~~ment, Aprl I 1 979), OTA-E -86, G PO ~tock No 052-()() 1-00664-2

the future as the developing nations strive forindustr ial ization and enter a period of rapidenergy growth while the United States restrictsits growth. Also, biomass energy could yield atmost 20 percent of U.S. energy supply by 2000(assuming maximum biomass growth coupled

with strong conservation measures). Thus, theeffect of biomass energy on CO 2 levels can bes i g n i f i c a n t o n l y w i t h v e r y h i g h w o r l d w i d e usage and on l y i n con junc t i on w i th o the rmeasures — promotion of conservation, nucle-ar power, and solar energy—that would yieldthe same type of reduction.

In addition, most of the proposed biomassfuel cycles use fossil fuels and reduce the massof carbon stored in the standing b iomass orsoil— and therefore are net producers of C O2.For example, the agricultural component of acorn-based gasohol fuel cycle consumes largequantit ies of fert i l izers derived from naturalgas as well as diesel fuel, petroleum-basedpesticides, and other fossil fuel products. Theethanol dist i l ler ies may use coal as a boilerfue l , a l though they cou ld be powered wi thwood or crop residues. AgricuItural systemsthat involve forest clearing or wood systemsthat mainta in a younger forest reduce thestanding biomass, while systems that preventthe replenishment of soi l organic matter (byremoving residues) or hasten organic matter

decomposition (by cultivating or merely expos-ing the soil to greater sunlight) cause a de-crease in the soil carbon level.

OTA’s conclusion is that biomass energy usedoes offer some potential for moderating theexpec ted i nc reases i n a tmosphe r i c CO 2 levels, but any actual ef fects would be s igni f icantonly if biomass substitution for fossil fuels wasvery large and if the systems were chosen with

carbon retention in mind. Research on the ef-fects of various agricultural and si lviculturalpractices on soil carbon levels would increase

the potential for designing biomass systemsthat have favorable carbon balances.



Ch. 4—Fuel Cycles and Their Impacts q 5 7

Social Implications—Generic Concerns

Biomass energy development could bring a

variety of changes to society, and its basic in-

stitutions, such as family, community, govern-

ment, and the interrelationships among them.

These include changes that are more likely tobe perceived as important at the local level(such as effects on employment, demography,public services, and quality of life) as well asthose that can be national or international insc op e (e. g ., changes in land and food prices,landownership, and eth ical considerat ions) .Some of these social changes could be seen asbeneficial by those affected while others maybe viewed as drawbacks. This section discussesthe impl icat ions of socia l impacts that arecommon to all four biomass fuel cycles. Those

that are specific to a particular fuel cycle areanalyzed in subsequent sections.

It should be noted that any discussion of thesocial impacts of biomass energy is subject toa number of uncertainties that stem from theinappropriateness of impact assessment meth-odologies that were designed for large-scaleconvent ional energy projects and f rom thelack of knowledge about the magni tude andlocation of future biomass development. Con-sequent y, this report can onIy identify someof the potent ia l socia l changes that could

occur i f b iomass energy technologies wereadopted widely

Quant i tat ive est imates of the employmentincreases associated wi th var ious levels ofbiomass development are given in the individ-ual fuel cycle sections These increases aresignificant because of their impact on ene rgy -re la ted employment , the i r d i f fe rences f romconvent iona l energy deve lopment , and the i r

. impl icat ions for the rura l economy and thequality of life associated with it.

I n general, biomass energy development is

likely to be more labor intensive than the in-creased use of coal, oil, or natural gas. Thus,bioenergy should result in more energy-relatedemployment per Quad than these other energysources, The increased em ployme nt assoc iate dwith biomass wouId occur in forestry and agri-cuIture, in the manufacture, distribution, andservicing of conversion equipment, and in the

construction and operation of large-scale con-version faciIities.

In addi t ion to being more labor intensive,

bioenergy resources a l so tend to be moreh igh l y d i spe rsed than conven t i ona l ene rgysources. Due to the result ing transportat ioncosts, the jobs created in harvesting and inconversion facilities and related industries alsoare likely to be dispersed and are more likelyto al leviate unemployment and underemploy-ment among rural residents than to attract im-migrants. Therefore, bioenergy use may help torevital ize rural economies whiIe avoiding therap id deve lopmen t and the re la ted “boom-town” syndrome of social disruption that can

be associated with large-scale centralized de-velopment of conventional energy sources inrural areas. On the other hand, large biomassfac ilit ies, such a s some co nve rsion p lan ts,could be comparable in scale to some coal-f i red faci l i t ies. If these are located i n ru ra lareas with inadequate infrastructures, tempo-rary shortages of housing, education, and med-ical facilities, and other public and private sec-tor goods and services couId occur during con-struction. These impacts wiII be m i nor, how-ever, compared to those associated with coaland oil shale development in the West.

Where large-scale centralized biomass con-version faciI i t ies are appropriate, they prob-ably wouId be owned by utiIit ies or corpora-t i ons tha t wou ld f avo r l ong - te rm “ cap t i ve ”sources of feedstock supply. Such sources ofsupply could take the form of vertical integra-tion, in which the facility operator would pur-chase timberland or farmland, or they could beobtained through contractual integration — theuse of long-term exclusive contracts with sup-pl iers. I n o the r wo r ds , ve r t i ca l i n t eg r a t i on

would lead d i rect ly to increased corporate

ownership or control of large tracts of biomassresources. Contractual integration could have

a similar but indirect result because facility

operators would prefer to deal with a small

number of large suppliers. 4 There fo re , l a rge -

4H d rolcj t IIrf}lrmy(>r, /n(/IL 1(/IId/ ~ rW>f/OnJ dncl t h e / c onon?~c or -

,W r71ZJ f Ir)n Ot ,fxrlc [1 /f[/rfJ ( I_) rt),i 11,1, I I I ~Jrl II fJriltL {Jt I I I II1OIS I)rtlis,

1 %5 )



60 Energy From Biological Processes

Technical

Today about one-third of the United States — approximately 740 miIIion acres — is for-ested. Of this area, 488 milIion acres are “com-mercial” forest land, that is, land capable of

producing at least 20 ft 3 of wood annually butwhich has not been set aside as parkland orwilderness area. * For illustrative purposes, U.S.forestland may be divided into two regions, theEast and the West. The East includes the Northand South regions (figure 10). This area con-tains about 74 percent of the total commercial

forest acreage in the country (figure 11). Most

Aspects

of the forestland in the East is privately owned,and many of the owners are farmers and otherswho are not primariIy concerned with the com-mercial value of the wood on their property.

The We st, whic h c ont a ins 26 pe rce nt of th ecommercia l forest , is made up of the RockyMountain and Pacific coast regions, plus Alas-ka and Hawaii. Seventy percent of the Westernfores ts a re federa l ly admin is te red (by theForest Service and, to a lesser extent, the Bur-eau of Land Management). About three-quar-ters of the U.S. timber demand is for softwood,which is used in construction and paper pro-duction, while the remainder is for hardwood.

Figure 10.—Forestland as a Percentage of Total Land Area

Pacif ic ,Coast

Rocky Mountain

ITUI \

29

—

61

SOURCE Forest Service U S Department of Agr IL u 11 u rc



Ch. 4—Fuel Cycles and Their Impacts q 61

Figure 11. —Area of Commercial Timberland byRegion and Commercial Growth Capability as of

January 1, 1977

No of ac res

s

2050

s

5085 85 t 20 120 t

Growth capability

(ft 3 commercial timber/acre-yr)

Pc

b

Total



.


Figure 12. —Forest Biomass Inventory, Growth, and Use (billion dry tonnes with equivalentvalues in Quads)

Biomass inventory Biomass annual growth on US. forestlands

Annualmortality

?

Biomass annual harvest and use

SOURCE Ott Ice of Technology Assessrnen(



.

Ch. 4—Fuel Cycles and Their Impacts “ 63

Figure 13.— Material Flow Diagram for Felled TimberDuring Late 1970’s (Quads/yr)

I Felled timber I

Total left I n forest 20 Quads /y r

Total used as energy 1 5 Quads/yr

Unused res idues O 14 Quad/yr

Tota l products 1 7 Quads/yr


Table 3.— Potential Wood Availabilityby Forest Region

A r e a o f Potential woodcommercial for energyforestlanda Percent and nonenergy

(million federally usesb

Forest region acres) owned (Quads/yr)

S o u t h 1884 7.6 3.0-60

N o r t h 170.8 6.6 2.3-4.6P a c i f i c C o a s t 708 50.8 14-2.8Rocky Mountains 578 66.1 0.6-1.3

T o t a l 487.7C20.4 7.3-14.6 c

aCommercial forests are those that have good productive potential and havenot been set as( de as WI Iderness areas parks or land reserves About two-

th!rds of the forest land (n the United States IS classlf!ed as commercialbAssumlng 40 percent of the total growth potent Ial 118 to 36 Quads~yr) Is ac-

cessible (See Forestry Under Btomass Resource Base In VOI II ) Note that

relat Ive productivity factors as follows are assumed Paclf{c coast = 1 South

- 078 North = O 66 Rocky Mountains = O 58 These are calculated from the —

welghtect average product lvlt y potentials for the various Commercial forestlands using data from USDA Foresf Statlsf/cs 1977

Csums may not agree due to round off error

SOURCES Off Ice of Technology Assessment anrt U S Department of Agr!-c u It ure Fores f Sfa tfs t~cs o f fhe U S 1977

Phofo creU/1 USDA B/// Marr

Intensive timber management

The demand for wood energy by other indus-tries as well as other sectors of the economy —residentiaI, commerciaI, and transportation —will probabIy increase to o I n the coming years.

H o w m u c h i t i n c r e a s e s W iII depend on the

a vaiIabiIit y and price of the competing fueIs —

o i I, naturaI gas, and coaI — as weII as incen-

tives to encourage its use and the avaiIabiIity

a n d price of wood for energy

Wood can be burned d i rec t l y to producehome heat and hot water, industrial processsteam, and electricity. It can be gasified i n air-

blown gasifiers to produce a fuel gas that canbe burned in industrial boiIers or for processheat, where oil or natural gas is currently used.Wood can also be converted to Iiquid fuels —including methanol through gasification andsynthesis from the gas, ethanoI through fer-mentation, and pyroIytic oiI through slow heat-ing under pressure (figure 14)




Photo credit Daverman Associates Inc

Proposed electric generating plant fired with waste wood

Figure 14 .—Conversion Processes for Wood




Ch. 4—Fuel Cycles and Their Impacts q65

For each of these uses, the wood can be useddirectly or it can be pelletized first. Pelletiza-t ion reduces the moisture content and im-proves the solid fuel handling characteristics.This enables pellets to be transported longerdistances and easily ground to a small particlesize for relatively automatic operation of facil-ities. These can be imp ortant fea tures for som eusers.

Direct combustion of wood is possible withc omm ercia l Iy a vai Iab le tec hnology. The e f f i-ciency and fIexibiIity of direct combustion canbe Improved, however , th rough R&D in towood drying and the chemistry of combustion

for the development of advanced drying andcombustion units.

The e ffic iency of ho me hea ting units va ries

widely, and consumers need more informationon the performance of avaiIable units as welIas on their safe instaIIation and operation. Air-tight stoves generaIIy achieve more even heat-ing than other units by restricting the combus-t ion air to slow down combustion and cut ex-cess heat loss out the fIue, but w i t h presenttechnology this aIso leads to increased emis-sion of tars and particuIates. These emissions

represent unburned biomass, so their escapef rom the combus t i on chamber l owers thestove’s efficiency below what otherwise wouIdbe achieved with airtight stoves. There is no

fundamental reason, however, why relatively

high-eff iciency units with low emissions can-not be developed and mass produced for homeheating at reasonable costs.

Reliable, high-efficiency, airblown gasifierscouId become commerciaIIy avaiIable i n asfew as 2 to 5 years (figure 15). These gasifierscould provide a more economic means (thandirect combust ion) of conver t ing exist ing o i l -gas boiIers to wood whiIe allowing the flexibiIi-ty to return to oil or natural gas without addi-tional cost if wood is temporarily in short sup-

ply and the oil or gas is available. Furthermore,they could be used for process heat— an op-

tion not currently practical for direct combus-tion.

Faci l i t ies for conver t ing wood to ethanoland methanol could be constructed immedi-ately although none exists in the United States.

The me thanol probab ly would c ost ab out thesame (per Btu) as ethanol derived from grainsand sugar crops (see “Alcohol Fuels”) . Theethanol , however, wouId be more expensivethan ethanol from either grains or more devel-oped wood- to -e thano l p rocesses I f develop-

ment is g iven adequate suppor t , advancedcommercia l wood-to-ethanol faci I i t ies couIdbe available by the mid- to late 1980’s Wood-based methanol is Iikely to be more expensivethan methanol from coal, but it may be com-parable in price to the more expensive synthet-ic Iiquid fuels from fossil sources that can beused as gasoline substitutes.

Direct combust ion or gasi f icat ion of woodcan displace more oiI or naturaI gas per ton ofwood than conversion to synthetic Iiquid fuelsexcept when the Iiquid fuel is used as anoctane-boosting additive to gasoline.* I n orderto achieve wood energy's large oiI displace-ment potent i a 1, however , some l iqu id fue lsproduct ion probably wiII be necessary becausethey can be t ranspor ted more economica l Iythan sol id wood fuels and because they are indemand as transportation fuels.

Pyrolytic oil from wood could be used as aboiler fuel. It wouId compete , however , w i thdirect combust ion and airb lown gasi f icat ionthat probably can supply industrial heat needsat much lower costs. Consequently, pyrolyticoil is Iikely to be limited to users who are will-ing to pay a premium for fully automatic boil-er operation untiI pyrolysis becomes more eco-nomical.

‘ S(Y> ‘ I nt’rgv 11,] 1A n{ f~i to r A 1( ohf)l I u~Il i’ ~ln{ltlr ‘‘( otli (~r~lon

[ (’( tlllologlo\ d 11(I E 11({ u\tJ’ Ill \ 01 I I




Figure 1 S.—Select Airblown Gasifier Types a

Up draft

Fuel

A sh

Down draft

Fuel

Air

Gas A s h

Fluid bed

1.12 inch

750

Less than50%0

Less than30%

Less than50 ”/0

.




. .

Photo credlf Deparlmenf of Energy Schneider

A prototype downdraft, airblown gasifier using wood chips as the fuel




A different type of synergy exists in silvi-culture. Rising prices for primary forest prod-ucts wi l I encourage more in tensive manage-ment of commercial forestland. Stands wil l beharvested for mi l l feedstocks that otherwisewouId be left standing for a much longer peri-od. Less productive species and stands, which

have been degraded by select ive harvest ing inthe past, wil l be clear cut in order to replantmore productive stands. Slash will be removedfrom logging areas and the sites replanted withspecies that wiII hasten regeneration and max-imize its value. Also, standing timber wil l bethinned more often in order to maximize light,moisture, and nutrients available to preferredtrees. All of these practices will make residuesavai lable immediate ly and wi l l eventual ly in-crease mi l l ing wastes as energy byproductsfrom primary production.

At the same t ime, r is ing fuelwood pr icesmake si lvicul tural residues more valuable asfuel . From the v iewpoint of pr imary producteconomics, income from the sale of residueslowers the net costs of silviculture, making itmore prof i table to increase wood product ivi typer acre. However, for this to be signif icant,

owners of forest land must take a long-termperspective. They must want to increase pro-duction of wood that may not be harvested foranother 30 years or more.

If the long view is not taken, and demand fora l l wood products r ises wi thout proper man-agement, then this very bright picture of syner-gy at the mill and in the forest will be cloudedas available wood resources are stretched tome et a ll de ma nds. The m ain p roblem arises forfuelwood users outside of the primary productindustry who cannot shift into and out of mil l

“




Woodlot owners also follow market price quo-tations and, unless they are forced to sell inorder to earn necessary income, they can easi-ly wait for high prices.

This option — to wait— creates price uncer-

tainties for potential wood users. Furthermore,

f luctuat ions in paper and pulp markets can

drive local wood prices up or down sharply

and unpredictably. When prices are extremelyhigh, fuelwood users suffer. When they are ex-tremely low, loggers suffer. As a result, one orboth of these actors in the wood fuel cyclemay not invest in the necessary equipmentwithout long-term contracts that bind wood lotowners to selI needed feedstocks. I n any case,

the prices and costs quoted above, in the rangeof $20 to $60/dry ton, indicate expected aver-age market conditions.

Local conditions have been emphasized be-cause wood has a low energy density com-pared to fossi l fuels, and thus transportat ioncosts per miIIion Btu are relatively high. Green-wood (about 50 percent moisture) has about 8m i I I ion Btu/ton, bituminous coal about 23 mil-l ion Btu/ton, and crude oil about 36 mill ionBtu/ton. As a solid, wood also is difficult tohandle compared to gases and I iquids, al -though it can be converted into these forms.

As a rule of thumb, it costs about $0.10/ton-mile to transport wood So, transport of g r e e n -wood 200 mi Ies adds $20 ‘ ton to the price of

wood and about $2.50/m i I I ion Btu to the fuel

cost. I n other words, i t pays for processors,who would upgrade wood in to a prefer redfuel, or for final users to locate near producingforests. High transportation costs also meanthat local wood markets are somewhat iso-lated and hence local price f luctuat ions arenot easi ly moderated by regional or nat ionaladjustments.

After wood has been removed from the for-

est for fuel, it may be transported to end-usesites, where it is converted directly into usefulenergy products. Or, it may be transported tosites where it is converted or upgraded to ahigher qual i ty , intermediate form of energy.Upgrading is considered first, followed by di-rect conversion.

Among the intermediate or upgraded formsof wood energy, the most Iikely to be economi-caI are wood pellets, methanol, and electricityIntermediate-Btu gas (see below) is not consid-ered as a n intermediate product because it ispractical only when the gasifier is directly at-tached to the f inal combustor. Consequently,i t is pract icaI Iy indis t inguishable from direct

conversion, except that i t can be used for moreend uses . Unl i ke the greenwood feeds tockfrom which they are made, pellets, methanol,or electricity may be transported hundreds ofmiles before final conversion into heat, steam,light, or mechanical motion

Pellets are an ideal wood feedstock for gas-ifiers or finaI combustors because they permitmaximum automation i n equipment and maxi-mum conversion eff iciency for the f inal u s e rTheir uni form shap e a nd low wa ter co ntent

a I so reduce handling and transportation costsOffset t ing these advantages are pel let iz ingcosts, including process energy, equipment,labor, etc. (figure 18) Assuming wood providesprocess heat and that greenwood costs about$15 ‘ton ($2.00/milllon Btu), then

Figure 18. —Cost Shares of Wood

the pel Iets

Pellets

Wood feedstock

I –1. 4 - - -




could cost about $46/ton ($2.90/mil l ion Btu).This ad de d co st of a bo ut 50 percent must becompared to the resulting savings in transpor-tation and to the value of automation and reli-abiIity to the end user.

Methanol is the next most expensive inter-

mediate fuel product , w i th costs in a rangefrom $0.75 to $1 .10/gal ($11 .80 to $1 7.30/mil-l ion Btu) when wood is $30/dry ton and for a40-milIion-gal/yr plant (roughly equivalent to a60-MW electric power station) (figure 19). Thiss ize fac i l i t y would a lso produce e lec t r i c i t yfrom wood, in a cost range 50 to 70 mills/kWh($14.60 to $20.50/million Btu), the most expen-sive form of wood energy that is l ikely to beconsidered (figure 20). In both cases, methanoland electricity, the economic viability of woodenergy depends mainly on the cost of fossi land nuc lear al ternat ives. Because the lat ter

can take advantage of signif icant economiesof scale, wood will be most competitive wherelocal conditions or the need for rapid construc-tion preclude these alternatives.

The e c ono mic at t rac t iveness of intermed i-ate conversion is also region-specif ic due to

Figure 20.—Cost Shares of Wood Electricity

.

Operation

and maint.

10%

SOURCE Olflce of Technology AsscSsrTlerlt

Figure 19. —Cost Shares of Wood Methanol


competition with gasifiers and combusters forlimited greenwood feedstocks. The latter mayrequire the entire local output of the forestsand hence intermediate conversion processes

may be priced out of the feedstock market.

From the viewpoint of end users outside theforest products industry, the relat ive cost ofenergy from greenwood or air-dried wood de-pends on the amount of energy used. For fac i l - .ities using more than the equivalent of 1,000dry ton/d of wood, coal is likely to be less ex-p e n s i v e d u e t o e c o n o m i e s o f s c a l e i n m i n i n g .and transportat ion. For faci l i t ies smaller than1,000 dry ton/d, but larger than very small in-dustrial /commercial faci l i t ies, ei ther wood orcoal may be preferred depending on their rela-

tive market prices, which vary with location.Finally, for very small-scale users, natural gasor fuel oi l may be preferred mainly for thei rconvenience.

The industrial user has a significant advan-tage if operations run more or less 24 hours a




.

d a y (that is, there is a high load factor). This

a llows cap ital costs, wh ich may be two to

three times as great as for oil or gas, to be

spread over the greatest number of Btu. The

space heating user, on the other hand, may use

combustion equipment onIy a third or a quar-ter of the time so reaI capitaI costs are three to

four times larger The industrial user is alsolikely to convert wood into useful energy moreef f ic ient ly because longer operat ing per iodsprovide a greater incentive for superior main-tenance and because t rained mechanics aremore Iikely to be avaiIable to do the job.

Table 4 illustrates a realistic range of costsfor two generic commercial users, assuming awood gasifier is added to an existing oil-firedboiler. Because the intermediate-Btu wood gasis almost a perfect substitute for oil, the rele-vant cost comparison is between the price of

fuel oil and the to tal c ost of the wo od ga s. Thelarger user may presently be using residual (#6)fuel oi l , which could be purchased at around$0.60/gal during the f i r s t quar t e r o f 1980($4.30/mill ion Btu), while the smaller user maybe using #2 fuel oi l , which during the sameperiod could be purchased at about $0,80/gal($5.80/million Btu).9 Prices for these petroleum-based fuels are likely to increase sharply in thefuture.

The costs of gasification equipment in table4 apply to mass-produced, package units pur-

chased for around $10,000/m i I I ion Btu/hourca pa c i ty . The d if ference in c ap ita l co st b e-tween these two users is entirely due to differ-

‘ 1 [}(’I I )1 I l)ri{ f’. I r{ JIII \l t,(,k l\ I’t’t rf JIt{illl \l,1 I LIS I<(,l)f)rl I\(<I r

I 4 I ‘)}{( ) ,1 II( I \lI IIIt 11 II I IjI ,r~~ R t>\ It,L\ I ft)r~l(i r\ I ‘)80 I n(’rg\

lrltt~rfll<l 1011 \ ( l Il l II ) Ii t r,lt I( )11

ent load factors. (It must be added that suchequipment is not yet widely available in themarket. ) Energy from field-erected gasifiers (orboilers) can cost four to five times more (perunit output) than from package units.

As indicated in the table, the industrial user

may be able to obtain wood energy at abouttwo-thirds the cost to a commercial user, andsuch savings can be expected entirely on thebasis of a higher load factor and superior con-version efficiency. They also more than offsetthe assumed difference in the cost of residualand #2 fuel oil, so wood conversion wilI be atleast as attractive for the larger user.

Mass produc t ion has been ach ieved foranother group of wood energy users. Woodstoves for home heating can be obtained at areasonable price but total costs and benefi ts

vary a great deal among users (see figure 17).For those who can obtain low-cost cordwood(often because they collect it themselves), whodo not mind f i l l ing the f i rebox, c leaning outashes, and having the uneven heat of inexpen-sive wood stoves, wood home heating can bevery economical. Wood stoves a I so serve as animportant hedge against rapid price inf lat ionof oil and natural gas.

At all four stages of production, cost estima-tion must be done very carefully and, in manylocat ions, uncertaint ies may be too great to

justify investment. Besides the reasons alreadyment ioned, uncertaint ies ar ise because fuel -wood markets have not yet developed and soproducers cannot be sure that users wi l l bethere to buy, or users cannot be sure that pro-ducers will be there to sell. Even though woodhas always been used for energy, the future

Table 4.—illustrative Wood Energy Costs (per million Btu)

Deliveredfeed stock cost Operating

Total cost ($40/dry ton) Capital cost

$3.60 ‘- $2. -95

cost

M e d i u m - s i z e , i n d u s t r i a l u s e r , $0.40 $0.25

Greenwood use: 250 dry ton/dLoad factor: 90%Energy efficiency: 85°/0

S m a l l e r , c o m m e r c i a l u s e r 5.50 3.60 1.40 0.50

Greenwood use: 30 dry ton/dLoad factor: 25%Energy efficiency: 700/0





Representative Wood Stoves for Home Heating

&

The box stove, a successor to the potbelly

prospects discussed here amount todustry that ma y ap pe ar highly spe c ulative

because it is new.

Potential wood energy users must

a new in- j u s t

also dealwith the performance uncertainties inherent inn e w l i n e s o f c o n v e r s i o n e q u i p m e n t . T h e y a r elikely to have grown accustomed to the auto-mated convenience of liquid and gaseous fuelsystems so that wood energy would appear tob e i n c o n v e n i e n t a n d u n r e l i a b l e . T h e f o r e s t -

products industry is the exception in this re-gard. With its working knowledge of wood har-vesting and conversion techniques, it is in anexcel lent position to capitalize on the econom-ic opportunities,

From the viewpoint of society as a whole,the final uncertainty in wood is the will ingnessor unwi l l ingness of energy users and thei rbankers to make larger investments in conver-sion equipment than they have made in the

past. In effect, subst i tut ing wood for oi l andgas involves the substitution of capital as well.C onse q ue nt ly, t h e f u r t h e r i n t o t h e f u t u reenergy users and their bankers can see, themore fuel savings will effectively offset higherinitial investment costs and the more attrac-tive wood energy will appear to be. From theviewpoint of trying to achieve a maximum sub-

stitution for oil, however, private market deci-sions may very wel l prove too shortsightedand, as a result, wood energy may not expandas rapidly as it could.

Wood-fired furnace for heat and hot water




Environmental Effects

The major environmental issues arising from

the possibility of substantially increased wood

use for energy are the potential for both posi-t ive and negative effects on America’s forests

and the pol lut ion potent ial of wood-to-energyconversion processes.

The rapidly rising use of wood for fuel inNew England and elsewhere has raised bothhopes and fears for the future of America ’sforests Although a portion of these varying ex-pectat ions probably can be explained by di f -fering perspectives about the role of the forestas bo t h a ma t e r i a l and env i ronmen t a l r e -source, the remainder may be explained by al-ternat ive visions of what is actual ly l ikely totake place in the forest —whether, on the one

hand a “scenario” of careful management un-folds, or whether a pattern of shortsighted andd e s t r u c t i v e e x p l o i t a t i o n e m e r g e s U n f o r t u -nate ly, the avai lable in format ion permi ts atbest an educated guess at how the landowners,integrated forest product companies, small-scaIe loggers, regulatory agencies, and othergroups who affect forest management prac-tices wiII respond to an increased demand forwood as an energy resource This, i n turn, pro-hibits a precise assessment of the environmen-taI effects of an Increased demand. I n spite ofthis Iimitation, however, it is possible to iden-

t i fy l ikely problem areas by, f i rst , ident i fyingthe environmental effects associated with spe-cific possible outcomes of an increased woodenergy demand and, second, examining theavaiIable evidence (existing economic and reg-ulatory incent ives, current management prac-tices) that wood suppliers wilI or will not prac-tice good environmental management.

Potential Effects of IncreasedFuelwood Demand

The expec ted c hang es in forest ma nag eme ntcaused by an increase in demand for fuel -wood — more i n t e n s i v e m a n a g e m e n t , morecomplete removal of biomass, increased use ofi mp rovemen t cu t s and conve rs i ons o f l ow -qual i ty stands, increased harvest ing of non-commercia l t imber stands — wi I I have pro-

f ound env i ronmen t a l e f f ec t s on f o res t l and .Some of these effects are strongly posit ive.Where good management is not practiced, ad-verse effects couId be especiaIly severe.

The g eneral lac k of da ta on environme ntalcondit ions on forest land in the United Statesand the complexity of the forest system makeit virtualIy impossible to predict precisely whateffects, both posit ive and negat ive, might oc-cur if as many as 10 Quads/yr of wood were re-moved for energy. Improvements in the knowl-edge of so i I and other environmental parame-ters, current logging practices, and the long-term effects on forest soils and productivity ofa high rate of biomass removal would enhancethe ability to predict the environmental effectsof a wood energy boom.

The major environmental issues associatedwith the expected changes in forest manage-ment and the new f inancial incent ives to ob-

wood for energy are:

poss i b l e so i l dep l e t i on f r om i n t ens i vemanagement procedures,decrease in logging pressures on some en-vironmentaIIy vaIuable or fragiIe forest-Iands that also have valuable t imber re-sources,changed forest “char acter,”

intensif ication of adverse effects of poormanagement,damage to marginal lands, including de-forestat ion,wood poaching, andproblems of small-scale harvesting.

Depletion

The shorter rotat ion t imes and greater re-moval of biomass inherent under “ intensif iedmanagement” have ra ised fears of long-termdepletion of nutrients and organic matter from

forest soils and subsequent declines in forestproduct iv i ty .

The potential for sustaining these effects isnot well understood, although several studieshave demonstrated that long-term nutrient de-p let ion may occur af ter whole- t ree harvest -



76 . Energy From Biological Processes

ing.10 Forestry experts do agree that soil deple-t i on e f fec ts shou ld be a mat te r o f concernunder some condi t ions of in tensive manage-ment , and conceivably could become a con-straint on the intensity of practices used andon the selection of sites and tree species to in-corporate into this type of management, Al-though nut r ient deplet ion may be a l lev iatedby the use of fertilizers, these may not workwell unless the deficiency is fully understood,Also, fertilizer use does not address potentialproblems associated with depletion of organicmatter, which is often characterized as playinga cr i t ica l ro le in mainta in ing the product ivepotent ial of forest soi l .11 In some cases, fer-tilizers used to increase growth will aggravate

nutrient depletion problems by decreasing theforest ’s supply of other nutr ients.

In all but extreme cases, any declines in for-

est product ivi ty* would occur slowly. Thus, i fcause-and-effect relationships between alter-native management practices and any soil de-pletion effects can be established, it should bepossible to deal with any long-term productivi-ty problems by monitoring soiI [and other) con-dit ions and adjusting management strategiesin response to changing condit ions, However,improving the state of knowledge enough toenable detect ion of subt le product ivi ty deteri-orat ion and to a l low necessary adjustmentsmay not be easy. Aside from the complicatingeffects of other forces that act on forest pro-ductivity (such as acid rainfall), the cause-and-effect relationships are likely to be both subtleand extremely site specific. Although it is notnow possible to predict the importance and ex-tent of any future productivity problems asso-ciated with more intensive forest management,

any problems that do occur may be difficult toregulate.

Relief of Logging Pressures

Rising demand for lumber creates signif i -cant pressure at both ends of the logging

spec trum — there is grea ter use of low-qua litywood in chip board and other forms of “manu-f ac t u red ” l umbe r , and g rea t e r p ressu re t oharvest high-qual i ty t imber f rom stands thatalso have signif icant esthet ic, recreat ional,and ecological value. It is widely felt amongfores te rs tha t the demand fo r wood energycould lead to intensif ied management of for-ests (because the availabil i ty of a market forthinnings and logging residues helps to pay formanagement costs) and, eventually, to greateryields of high-quality t imber from commercialforest lands. This expected increase in high-

qual i ty t imber would then be expected to re-lieve the pressure to harvest scenic old-growthstands and other stands that have both highnontimber values and valuable standing tim-ber.

This po tent ial benefit of an increase in inten-sive management (spurred on by a rising woodenergy d ema nd) a pp ea rs to be plausible. OTAestimates that placing 200 m i I I ion acres ofcommercial forestland into intensive manage-ment (full stocking, thinnings every 10 years,30- to 40-year rotations) could allow wood en-

ergy use to reach 10 Quads annually while theavai labi l i ty of wood for nonenergy productsmight double its 1979 value. Alternatively, thesame result might be achieved by using less in-tensive m ana gem ent on a larger ac rea ge. Thenature of any actual benefits, however, is de-pendent on the following considerations:

q Major effects on the availabil i ty of high-qual i ty t imber probably would not occurfor a number of years. Some addi t ionalhigh-qual i ty wood might be avai lable im-med ia te ly f rom s tand convers ions andha rves t o f noncommerc i a l t i mbe r , ands o m e i n a b o u t 2 0 y e a r s f r o m t i m b e rgrowth in stands that required only thin-n ing for stand imp rovem ent . The q uan-t i t ies would not peak, however, beforeabout 30 to 40 years as stands that hadbeen c l ea red and rep l an t ed began t o



Ch. 4—Fuel Cycles and Their Impacts “ 77

reach harvesting age. By this time, most ofthe old-growth stands accessible to log-ging already may have been harvested, al-though signif icant benefits from reducinglogging pressures on o ther va luab le o rfragile lands would still be available.

q A l t h o u g h t h e i n c r e a s e d a v a i l a b i l i t y o fh igh-qua l i t y t imber migh t negate a rgu-ments that these valuable or fragile stands

must be cut to provide sufficient wood tomeet demand, there is no guarantee thatthe wood made available from intensifiedmanagement wil l be less expensive thanthat obta inable f rom these stands, andeconomic pressure to harvest them mightcont inue.

Forest Character

A widespread shi f t to in tensi f ied manage-ment, with increased thinning, whole-tree har-vest ing, and residue col lect ion wi I I create avery different kind of forest from today’s, bothvisualIy and ecologicalIy.

Visual ly, the affected forest areas wi l l bemo re op en a nd pa rklike. The trees, althoug h

fewer in number, wil l be straighter and haveth icker t runks. Downed, dead, and d iseasedtrees and logging slash generally wil l be ab-sent,

Both the wildlife mix and the types of treeswill be signif icantly different. The type of trees




q

q

q

q

in the Southeast.13 Erosion is likely to inten-sify soil depletion effects.Adverse effects on water quality from ero-s ion, fa i lu re to mainta in s t ream buf ferzones, crossing of stream channels by ma-c hines.

Esthetic damage, especial ly when basicmanagement measures (buffer strips, sizelimitations on clear-cut areas, avoidanceof recreational areas, use of shelterwoodharvest ing– leaving a protect ive canopyof trees —when scenic vistas may be dis-turbed) are ignored.Loss of or damage to valuable ecosystems,recreational land, wilderness area, etc.Flooding danger when too high a percent-age of land in a watershed is cut simul-taneously.

Damage to Marginal LandsAs the price of wood fuel grows, there will

be increasing incentive to harvest poor-qualitystands on marginal lands with nutrient def i-c iencies, thin soi ls, and poor cl imatic condi-tions— lands where there is little potential forfuture high-qua lity timb er g row th, The environ-mental impacts of logging these lands are like-ly to be large, because the damage potential ishigher (greater risk of nutrient depletion, ero-sion, etc. ) and the Iikelihood of mismanage-ment is greater (because the logger will not

have a continuing relationship with the land).Much of this land, although “ p o o r ” f r o m t h estandpoint of commercial productivity, is val-uable for its esthetic and recreational values,watershed protection, and other forest values.These values ma y b e lost o r co mp romised bylogging on sites where forest regeneration maybe a problem – for example, on sites in the aridSouthwest. Permanent loss of these forest val-ues is Iikely to be more important than any im-mediate logging impacts, especial ly becausethe immed ia te impac t s c an be reduc ed bygo od logg ing p rac t ic es. These d ang ers are

somewhat tempered, however, by the Federalownership of much of the most fragiIe lands.

Poaching

A rising price for wood fuel will also— inevi-tably — lead to an increase in illegal harvesting.There are no data on such activities today, al-though stories abound about disappearancesof walnut and redwood trees and other high-

quality timber. However, extensive illegal min-ing of coal on public and private lands has oc-curred, despite the substantial length of time itta kes to unc ove r an d m ine a c oa l sea m. Therapidity with which trees can be cut and re-moved f rom a s i te appears to guarantee astrong danger of wood piracy with, certainly, ad isrega rd for environ me nta l va lues. The d a n-ger wiII be especially great in areas where a re-liable and competitive retail supply infrastruc-ture is not established.

Small-Scale Harvesting Problems

Harvesting by individuals, many of them in-experienced in l ogg ing and s i l v i c u l t u re i n

Photo credit USDA. B//l Marr

Wood harvesting by individuals will accompany an increasein the use of wood for home heating




general, will also accompany any substantialincrease in wood use for residential heating. Ifdone properly, this type of harvesting on smallwoodlots has the potent ial to improve t imbervalues in a manner similar to that obtained byintensive management practiced by the forestproducts industry. Where the woodlot is toosmall to sustain a continuous yield or the in-dividual lacks the proper knowledge of whichtrees to cut or how to cut them, damage to theforest and a significant rise in forestry-relatedaccidents will occur. Although, again, no reli-able data exist, foresters are beginning to seean acceleration of these problems that may co-incide with the remarkable growth in residen-tial wood stoves and furnaces. A continued es-calation of such problems appears to be vir-tual ly inevitable unless substant ive measuresare taken to prov ide smal l woodlot owners

wi th easy access to management help. Al -though some access is available through Feder-al-State cooperative programs, this effort cur-rently falls short of what is needed.

Good Forest Management—How Likely Is It?

The a c tual environme ntal effec ts of a great-ly increased harvest of wood for energy will de-pend in large measure on whether or not woodsuppl iers adopt env i ronmenta l l y sound har-vesting and regeneration techniques. At pres-

ent there is no guarantee that a “careful man-agement” strategy will be followed.

Existing economic incentives to practice en-vironmental ly sound management are mixed.There are a variety of positive incentives to usesound harvest ing procedures and to preferh igher qua l i t y s i tes– i f they are ava i lab le .These incentives include lower logging costson flatter— and thus less erosive— lands, thet imber improv ement po ten t i a l i nhe ren t i nproperly managed harvest ing on high-qual i tylands, and the potential for loss of significant

recreational and esthetic values — and subse-quent loss in overall land value— if logging ismismanaged or conducted on vulnerable land,In many situations, however, these incentivesmay be canceled. Although considerable high-qual i ty forest acreage is avai lable on a na-t ional and regional basis, local variat ions in

land availabil ity may expose vulnerable landsto exploi tat ion —especial ly because wood isusually considerably less expensive if obtainedwithin a small radius of the user. The long timeperiod needed to recoup the ful l benefi ts ofgood management as well as the tendency ofsome of the benef i ts (such as prevent ion ofdamage to streams) to accrue to adjacent land-owners or the general public rather than to theinves tor a lso l im i t management incent ives .Also, scient i f ic understanding of the conse-quences of certain harvesting practices — espe-cialIy whole-tree harvesting coupled with shortrotations — is not complete, and proper eco-nomic tradeoffs cannot always be made. Final-ly, an unknown percentage of those involvedin timber harvesting and woodlot managementare more or less ignorant of proper manage-ment procedures and may not use — or may not

have ready access to–trained foresters, Thismay become a part icularly important problemif larger numbers of small landowners beginharves t ing to sat i s fy the i r own res ident ia lwood requirements.

In addit ion to the mixed character of theeconomic signals leading to selection of forestmanagement pract ices, regulatory incentivesfo r c on t ro l l i ng nega t i v e env i ronmenta l im -pacts generally are weak in the United States.Most States, especially those in the East, havefew strong statutes and guidel ines for forest

protect ion, insuf f ic ient manpower for properenforcem ent, or both. Many State ag enc ies fo-c u s m o s t o f t h e i r a t t e n t i o n o n f o r e s t f i r eprevention rather than on environmental man-agement. Although sect ion 208 of the CleanWater Act theoret ical ly should promote con-t rol of eros ion impacts f rom logging, imple-mentation has been slow. Also, the complexityand site-specific nature of logging impacts addto t he d i f f i c u l t y o f c rea t i ng and en fo rc i ngcredible environmental protection regulations.

Assurances that environmentally sound log-

ging practices are likely to be used cannot beobta ined f rom knowledge of cur rent opera-tions, which is inadequate. Management prac-tices of loggers on Federal lands are specifiedand supervised by the Forest Service and thepract ices of the big forest product companiesare considered by many forestry professionals




Social

The p rinc ipal soc ia l impa c ts of the wide-spread use of wood energy are the effects onemployment, on occupational health and safe-ty, and on local tax revenues.

Wood energy harvesting and conversion arel ikely to be more labor intensive than fossi lfuel alternatives. ” For example, table 5 com-pares the average number of workers requiredto harvest the energy equivalent of 1 Quad/yrof wood with the mine labor needed to extractan equivalent amount of coal. As can be seenf rom th is table, a wood-harvest ing operat ioncould require from 1.5 to 30 times more work-ers per Quad of fuel than a coal mining opera-t ion, depending on the wood harvest ing andcoal ext ract ion methods. Assuming that be-tween 5 and 10 Quads/yr of wood energy could

be available, the increased employment in log-ging would be substant ial . Al ternat ively, theuse of wood to produce methanol would re-quire 2,300 to 5,300 workers to harvest enoughwood to produce 1 bi l l ion gaI/yr of methanol(or approximately 0.08 Quad/y r), depending onthe harvest ing method. Associated employ-ment effects for wood harvesting include themanufacture of logging or other equipment aswel l as the transportat ion of sol id and l iquidfuels.

“ InterCroup Consulting Economists, Ltd , L/quid Fuels From/?enewab/e Resources A Feaslb//lty Study (Ottawa Governmentof Canada, Flsherles and Environment Serv!ces, 1978)

Table 5.—Labor Force Equivalents forWood Harvesting and Coal Mining

Impacts

Supp l ies o f wood fo r res iden t ia l hea t ingcould be associated wi th commercia l -scaleoperations that would create jobs, or such sup-pl ies could involve owner or part-t ime har-vesting that would either increase the amountof t ime spent procuring one’s own energy orwould add an addit ional source of family in-come.

Finally, wood energy use will mean more in-tensive forest management that wil l increasethe demand for professional and technician-Ievel foresters.22 .

In addit ion to the jobs associated with har-vesting and management, wood energy conver-s ion wi l l mean increased employment in theconstruction and operation of combustion and

gasif ication facil i t ies as well as the manufac-t u re o f f ac i l i t y equ i pmen t and res i den t i a lunits.

The use o f wo od in stea m-ge nerating p lantsalso would create more jobs per Quad than theuse of coal. Wood-f i red boi lers probably wi l lcont inue to be smal ler than 50 MWe, whi lenew coal-f ired powerplants typically wil l rangefrom 200 to 1,200 MWe. As can be seen in table6, f rom two to f ive t imes more const ruct ionworkers are needed to install an energy equiv-alent capacity of 1 Quad/yr of wood fuel thanare needed for the same capacity burning coal,although the actual number of workers wouldbe less for both fuels because not all sites will

~ZThOrnaS t-l Ripley and R tchard L Doub, “Wood for Energy

An Overview, ” American Forests 84 16, October 1978

Total workersneeded to produce

Ton/ 1 Quad/yrworkday (thousands)

Logging residueSkidder, chipper . . . . . . 18-21 33-38Cable, chipper. . . . . . . . 18-19 35-40

Stand improvementFeller-buncher

Skidder, chipper . . . . . . 16-18 38-43Hand fellCable, chip. . . . . . . . . . . 12-14 49-57

Coal miningUnderground, East . . . . 8-17 11-21Surface, West . . . . . . . . 65-130 2-3

SOURCE: James Bethel, et al., ‘rEnergy From Wood,” OTA contractor report

(1979),

Table 6.—Jobs Associated With NewWood- and Coal. Fired Boilers

Total workers needed for anenergy equivalent of 1 Quad of fuel

used per year (in thousands)

Peak construction Operation

Wooda

. . . . . . . . . . . . . 65-80 8-15Western coalb. . . . . . 17-34 2-3

Eastern coalc. . . . . . . 16-32 2-3

aA~~umln~ a fUel mol~tur~ ~Onten! of M percent, 4,600 Btu/lb, and an 85-per-

cent load factor.bA~~uming a heat value of 9,~ Btu/lb and a load factor of 65 pOrCOnt.

cA~~uming a heat value of 12,500 Btu/[b and a load factor of 65 percent.

SOURCE: Office of Technology Assessment.




b e b u i l t s i m u l t a n e o u s l y a n d c o n s t r u c t i o nworkers will move from site to site. In addition,the const ruct ion workers for wood capaci typrobably would be needed for a shorter periodof time due to the smaller plant size. Similarly,from three to seven times more plant person-nel are required to operate wood-fired facil-ities than are needed for an equivalent capac-i ty of larger coal-f i red plants. Again, someoperat ing and maintenance workers could beshared among several wood-f i red p lants lo-cated near each other. However, at sites whereone large new wood-f i red boiler replaces sever-al old smal l oi l - f i red boi lers, operat ing andmaintenance jobs may decrease. 23

Finally, employment associated with metha-nol plants is expected to be comparable to thatin ethanol distilIeries (discussed in the next sec-tion).

The ma nufac tu re o f wo od energy conver -sion equipment also will represent a number ofemployment opportuni t ies. For example, theWood Energy Institute l ists 7 f irms producingcommercia l wood boi lers, 12 manufactur ingresidential boilers, and 73 companies makingresidential wood stoves. I n addition, the Insti-tute lists several hundred wholesale and retailsuppl iers of wood energy conversion equip-ment. Whi le the current number of employeesin these firms is unknown and future employ-men t i s d i f f i cu l t t o p red i c t , t he oppo r t un i -t ies —especia l ly for smal l business employ-ment — are substan t ia l , and w i l l expand asemerging conversion processes such as gasifi-cat ion and onfarm dist i l lat ion become widelyused,

Based on the d ist r ibut ion of the wood re-source base and the location of existing woodenergy activities, it seems likely that new em-ployment will arise in rural areas, primarily inthe South, North, and Pacif ic coast regions.Where these rural areas currently experienceu n e m p l o y m e n t o r u n d e r e m p l o y m e n t , w o o denergy jobs will be welcomed. For example, be-cause t imber can be harves ted a lmost yearround and is harvested most intensively in the

winter , wood energy may mi t igate seasonalemployment problems in the North. 24

However, a major concern accompanies theincreased employment related to wood energy —the h igh inc idence of occupat ional in juryand i l l ness in wood product ion re la t i ve to

fossi l - fuel-related occupat ions. Table 7 showsthat the rates of reported occupational injuriesand i l l nesses pe r wo rke r i n f o res t r y , l ogg i ng , -

and total lumber and wood products are signif-icantly higher than the national average for allprivate industr ies. The t ota l inc idenc e rat es pe r -worker in logging and in lumber and woodproducts are almost twice those for coal min-ing. In terms of output, the logging and woodproducts sector has 14 times more occupat ion-al injuries and illnesses per Quad of fuel pro-duced than coal mining, and 28 t imes morethan oil and gas extraction. However, recent

experience with the more mechanized equip-ment used for whole-tree harvesting indicatesthat there may be a much lower injury rate forthe production of energy chips than is associ-ated wi th t radi t ional logging, a l though theactual number of injuries could still increase.

Harvest ing and using wood for resident ialheating also could pose safety hazards, Ama-teur wood harvesting can be associated with avariety of accidents including those related toimproper use of saws and axes as well as fall-ing trees. In addit ion, improperly instal led or

maintained wood stoves and fireplaces are re-sponsible for as many as 6,700 explosions andhome fires each year. 25

These safety considerations raise a varietyo f i s sues . Un l ess sa f e r l ogg i ng t echn i ques a re .developed and enforced, the widespread useof wood energy will increase occupational ac-cident rates and the resuIting disruption of per-sonal and family l i fe, as wel l as publ ic expend- “i tures for workmen’s compensat ion insurancean d be nef i ts. These o c c up at ional r isks c ouldbecome an issue in labor-management re la-tions in the woods as they have in the coalmines, and thus cou ld increase the r i sk o f

4 I I)((i‘[]rl~,] 10 ( {)IllIl~Lin I( ,It Iorl M It II ~1 j I Iro A{lr~l intil r,] t I(JII [ ),1 t,1

(’f’ntt’r ll<l~t>f! (Jrl ,1 1 ‘)77 78 flir~ t~} ot t Ir(j (It’[)clrlrnf’rlti 1 1 1 I 5

Jt ‘ltt’\



Ch. 4—Fuel Cycles and Their Impacts . 85

Table 7.—Occupational Injury and Illness Rates, 1976a

—1976 annual

Average number

average Total casesbper Lost workday Total cases

b Lost workday of days lost

employment 100 full-t i me cases per 100 per Quad cases per Quad per lost

(in thousands) workers full-t i me workers produced produced workday case — — — ————

Private sector (allindustries) c . . . . 64,690 9 4 — — 17

Forestry . . . . . . . . . 11 13 5 — — 21Logging . . . . . . . . . . . 84 25 14 — — —

Total lumber andwood products

d. 677 22 10 28 12 17

Bituminous coalmining . 224

Oil and gas. . . . . . . . . 3451313

8

6

2

1

1

0.5

25 45

aThe~e flg “re~ only ,”~ I ~de the o~c upatlonal Injuries and III nesses that are reported the numbers In some sectors are actually higher because of unreported accidents

blncludes fatalitiesCExcludes farms ~[th fewer than 11 employees

dlncludes Iogglng

SOURCE Bureau of Labor Statlstlcs. Char(book on Occupational Injur/es and Illnesses (n 7976, Washington D CU S Department of Labor. report 535 (1978). and Of

flee of Technology Assessment

Photo credit USDA, George Robinson

Wood harvesting can pose safety hazards




labor-related fuel supply interruptions. Similar-ly , in the absence of comprehensive safetystandards and building codes, more frequenthome accidents and fires will cause personalsuffering and increase private insurance claimsand rates for wood-burning homes.

Increased production and use of wood ener-gy could have other impacts as well, includingeffects on local tax revenues and forestlandprices and ownership pat terns, Much of thewood available for energy is privately ownedand is classif ied as noncommercial for localtax purposes. In many areas, producing timber-land is taxed at a lower rate than non-producing, and harvesting this land for energy

wouId shi f t the tax c lass i f icat ion and reducelocal tax revenues. On the other hand, the con-struction of large conversion facilities (such asmethanol plants or powerplants) wi l l contr ib-u te subs tant ia l amounts to loca l revenues .Also, increased demand for wood energy couldincrease the price of forest land. Moreover, inthe regions with the highest potential for standimprovement—the eastern half of the UnitedSta tes – existing w ood lots presently tend to b ehighly dispersed and owned in small units. Aspr ices r i se, these woodlo ts or the i r t imberrights might be bought or leased by the timberproducts industry or conversion faci l i ty oper-ators, or by State or Federal agencies, to facili-tate efficient management.

.

,



.

Ch. 4—Fuel Cycles and Their Impacts q8 9

Figure 24. —Potential Cropland With High or Medium Potential for Conversion, as a Percentageof Total Land Area

. .

Northern ~” ‘ ~=”

Pacific Plains

7

9

11 -

I

t h i s q u a n t i t y o f m e t h a n o l w o u l d d i s p l a c eabout 1 milIion bbl/d of oil, or about 12 per-cent of the current imports. A simiIar displace-m e n t o f i m p o r t e d o i l p r o b a b l y c o u l d b eachieved by converting this type of biomass tofuel ethanol , a l though commercia l processesfor doing this are too poorly defined at presentto make a satisfactory estimate.

There is a lso the possib i l i ty of producingother aIcohoIs and reIated chemicaIs that aresu i tab le as fue ls . A l though fu tu re deve lop-ments couId make these aIternatives more at-

t ract ive economical ly , e thanol current Iy ap-

pears to be superior i n t e rms o f commerc ia Ireadiness, and methanol i n terms of the quan-tities that could be produced in the 1980’s.




blend s. There is, howe ver, no go od wa y to judge the accuracy of this estimate, and, aswith ethanol, the longer term effects are large-ly unknown.

The more serious problems with methanol

blends appear to be at the oil refinery and inthe distribution system. Although both ethanoland methanol blends can separate into twophases (layers) if exposed to water, the meth-anol blends are more sensitive to this problemand more stringent precautions must be takento ensure that the methanol blends remain dry.Alternatively, cosolvents that decrease the wa-ter problem may be developed; one such co-solvent currently is being test marketed withmethanol blends by Sun Oil C 0.29

Another problem with methanol b lends is

the i r h igh vapor p ressure , wh ich increasesevaporative emissions from most cars and in-creases the possibility of vapor lock. The com-position of the gasoline can be adjusted to re-duce the vapor pressure, but this reduces thevolume of usable gasol ine produced f rom agiven amount of crude oi l . Consequent ly, i tmay be preferable to construct new cars to ac-cept blends with high vapor pressures, or touse cosolvents to reduce the vapor pressure. 30

In the 1980’s, if new cars are built to toleratealcohol-gasoline blends and appropriate fuel-

handling techniques are developed and used,these problems should disappear gradually. Ifmore cars are equipped with automatic feed-back carburetor adjustment devices (as in thethree-way catalyst cars in California), gasoholwith an alcohol content of more than 10 per-cent may also become usable.

The addit ion of alcohol to gasoline raisesthe octane of the blend over that of gasoline.The exac t increase d ep end s on the w idely vary-ing compos i t ion o f gaso l ine . Tests ind ica tethat 10 percent ethanol will raise the octane of

“average” gaso l ine by th ree to four oc tanenumbers; a comparable increase results fromme thano l . The d evelop ment in the 1980’s ofautomobile engines that do not require highoctane fuels, however, wouId eliminate any en-

‘*B C Davis and W H Douthut, “The Use of Alcohol Mix-

tures as Gasoline Addltlves, ” Suntech, Inc , Marcus Hook, Pa ,

presented at 1980 NPRA annual meeting, March 1980’01 bld

ergy savings or economic advantage that thiseffect gives alcohol fuels when used in theseengines. Nevertheless, it is likely that a sub-stant ia l f ract ion of the automobi le f leet wi l lcontinue to need relat ively high octane fuelswell into the 1990’s.

Automobiles also can run on pure alcohol.Indeed, cars specifically designed for alcoholw i l l o p e r a t e m o r e e f f i c i e n t l y t h a n t h e i rga soline-burning c ount erpa rts. The eff ic ienc y(miles per Btu) of an ethanol- or methanol-fueled engine can be 20 percent greater thanmost gasoline engines due to the high octaneof these fuels, which allows a higher compres-sion ratio in the engine, and to other modifica-tions tha t imp rove efficienc y. * The ma in hur-dle in their development is overcoming start-ing diff icult ies in cold weather. With over 10

percent of the existing automobiles in captivef l ee ts ,31 there is a considerable potent ia l forusing alcohols in this way before a nationwidecommercial alcohol distr ibution network is inp lace.

Another use for a lcohol fuels is in d ieselengines built or modified for dual fuel use. Themodifications are relatively simple, * * and amodified engine can use up to 30 to 40 percentalcohol while continuing to use straight dieselfuel whe n no a lco hol is a va ila b le. This op tioncould be useful when establishing an alcohol

distribution network, because users would notbe tied to a supply of alcohol.

Alcohols can also be used as a substitute forlight distillate oils and natural gas in gas tur-b ines used for peakload electr ic generat ion.The m od ifica tions need ed to use a lcoho ls arerelatively minor in most cases and there is apotential for displacing about 130,000 bbl/d ofl igh t d is t i l la te o i l and about 100,000 bb l /dequivalent of natural gas. 32 Displacing al l ofthe l ight dist i l late oi l could increase gasolinesupplies by about 130,000 bbl/d, or about 2

percent of current consumption.

“See “Use of Alcohol Fuels” In VO I II

“ Transportation Energy Conservation Databook (2d edftmn,Oak Ridge National Laboratory, October 1977), ORNL-5493q *See “Use of Alcohol Fuels” in VOI Il.JZI-I R Adelman, R K Pefley, et al , “End Use of Fluids From

Biomass as Energy Resources in Both Transportation and Non-

Transportation Sectors, ” contractor report to OTA, January

1979.




Figure 25.—Synthesis of EthanolSugar Crops

G r a i n

1 J

I

From Gra ins and

T

FermentationDilute with

water

1 I

1

IStorage

II I

I

Ethanol

It gasohol is to reduce U.S. dependence on

o i I i reports, it is cruciaI that as Iittle oiI is con-

sumed in the production of et ha no I from grain

or sugar as possible. WhiIe not much can be

done about oil and natural gas consumption in

the growing of ethanol feedstocks, distil leries

shouId be required to use fuels other than pe-troleum as a boiIer fuel. Otherwise, the oiI con-sumed at the distilIery wiII eat up a significantfraction of the oil displaced by ethanol use,even with foreseeable improvements in the en-ergy efficiency of distilIeries. (If naturaI gas isused as a distiIIery fuel, then a significant part

of the o i I dispIacement is achieved at the ex-pense of increased natural gas consumption )

If used as an octane-boosting additive anddist i l led without use of premium fuels, eachgallon of ethanol can displace up to about O 9

gal of gasoline. (This is a displacement of pre-mium fuel only, ) In contrast, if ethanol distil-leries are fueled with oi l and distributors donot take advantage of ethanol octane-boost-ing properties, * gasohol product ion actual lycouId resuIt in a net increase in oiI demand. I fe thanol d is t i l l e r ies are fue led w i th coa l orbiomass, but the ethanol is consumed in en-gines in which it is only useful for its fuel value(e. g., diesel engines or engines not requiring ahigh-octane fuel), then each gallon of ethanolfrom corn would displace, on the average, only0.3 to 0.5 gal o f gaso l ine, depending on theengine used. The net displacement of premium

fuels can be considerably l ower , however , i fmore energy-intensive crops are used.

Because most onfarm uses of ethanol wouldbe as diesel fuel substitutes, emphasizing alco-hol product ion for onfarm use would great ly

decrease the net oi l displacement that couldbe achieved at any given level of ethanol pro-duct ion. Onfarm product ion of wet ethanol (5to 10 percent water) from grains or sugarcaneis relatively simple, but the processes need tobe automated in order to minimize labor re-quirements. Onfarm product ion of dry alcoholcannot be accompl ished economica l l y w i thcommerc ia l I y ava i lab le technology , a l thoughless expensive processes and equipment maybe developed in the future. Consequently, eth-anol would have to be dried at central faci l-ities if it were to be used in gasohol. Numerous

site-specific constraints would also Iimit thenumber of farms where wet ethanol produc-tion wo uld b e e c ono mic. There is, howe ver, in-sufficient experience with onfarm ethanol pro-duc t ion to es tab l i sh t ru ly re l iab le cos t es t i -mates. Nevertheless, farmers may wish to pro-duce ethanol as an insurance against dieselfuel shortages and in the hopes that it wilI raisegrain prices. * *




Figure 26.— Premium Fuels Balance for Ethanol(all numbers are gallons of gasoline energy equivalent per gallon of ethanol)

Energy savings Energy use

Premium fuels balance

Oil or natural gasused as distilleryboiler fuel, ethanolused as standalonefuel, no use ofbyproduct

Coat, biomass, ordirect solar usedas boiler fuel,ethanol used asstandalone fuel,full use of byproduct

Coal, biomass, ordirect solar used asboiler fuel, ethanolused as octane-boostingadditive. full useof byproduct

+0.35b

.

aThls effect results from alcohol s tendency to produce an air/fuel ratio that appears to have more alr and less fuel, this Increases the thermal efficiency of most cars

~Cars wtth automatic carburetor adjustment would not show this effect

‘Uncertainty of * O 3

SOURCE: Of ftce of Technology Assessment



Ch. 4—Fuel Cycles and Their Impacts Ž 95

Commercial processes might b e c o m e a v a i l -able for producing ethanol from wood, grass,crop residues, and other IignocelIulose materi-als at prices comparable to current grain proc-esses by the mid- to Iate 1980’s One process — the Emert process, fo rmer ly the Gu l f O i l

Chemicals process--might be commercia l by1981-85, but signif icant uncertaint ies remainconcerning the ethanol costs from this process.

Methanol

Methano l o r i g i na l l y was p r oduced f r om

wood, but only as a minor byproduct of char-

coal production. Methanol, h o w e v e r , c a n b eproduced from wood with exist ing technology(construct ion t ime: 2 years) using oxygen-blown gasifiers (figure 27) although no plants

exist at present in the United States. Crop resi-dues or grass and legume herbage also are fea-sible feedstocks, but oxygen-blown gasif ierscapab le o f hand l ing them must be demon-strated.

Methanol synthesis consists of gasifying thebiomass to make a carbon monoxide-hydrogenmixture, The ratio of the se two c om po nents isadjusted and the mixture cleaned and pressur-ized in the presence of a catalyst to producemethanol. Although relatively small methanolplants could be constructed, there is a signifi-

cant economy of scale. Fur thermore, p lantswith a capacity of less than about 3 million to10 million gal/yr wilI require a different type ofcompressor than that used in large plants; thiscould increase the costs further. *

Methanol, like ethanol, can be blended with

gasoline and used as an octane-boosting addi-tive. Although methanol contains 25 percentless energy per gallon than ethanol and 50 per-cent less than gasoline, the net displacementof o i l f rom producing and using a gal lon ofmethanol from wood is as much as that for a

gallon of ethanol because it takes less energyto grow, harvest, and transport trees from theforest than it does to produce grains or sugarcrops. I f the methanol is derived from crop

Figure 27. —Methanol Synthesis

Wood or

plant herbage

I Shift gas composition II J

I

Methanol

SOURCE Off Ice of Technology Asses srT~e n I

residues or grasses, the net displacement pergal lon of a lcohol is s l ight ly less than wi thwood due to the larger energy required to ob-tain the farmed feedstocks, but it still falls inthe same range as for the various grains andsugar crops. As with ethanol, the displacementis maximized by using the methanol as an oc-tane-boosting additive, but there are stiII someunresolved questions about the best strategies

for expanding the use of methanol as a fuel.Unlike ethanol, however, there is very l i t t ledanger tha t fue l methano l p roduct ion cou ldlead to an increase in oil consumption.




Figure 29.—Crop Switching: Two Methods to Produce EquivalentAmounts of Animal Feed Protein Concentrate

Ethanol

Methods 1 and 2 provide equivalent amounts of animal feed protein concentrate


corn can be produced on some of the land thatwou ld have been in soybean product ion . *However, the amount of substitut ion is l im-ited by the fact that the distillery byproduct isnot a perfect substitute for soybeans.

Catt le also could be fed more forage andless corn, which would free corn for ethanolproduction, but would reduce the weight gainper animal per day and thereby reduce totalbeef production. Similarly, a reduction in thedemand for grain-fed animal meat would pro-vide additional ethanol feedstocks.

Cultivation on set-aside and diverted acre-age often is cited as a possible source of etha-nol feedstocks. In 1978 there were 18.2 millionacres in these categories and the 1979 totalwas about 11.2 mill ion acres. The quantity ofset-aside and diverted acreage, however, willfluctua te grea tly from yea r to yea r. There is noassurance that this land will be available forenergy production in the future.

OTA estimates that an additional 30 million

to 70 million acres of potential cropland couldbe brought into crop production by the mid-1980’s, over and above the land required forfood, feed, or fiber production (figure 30). In

\ f ’( ’ \ \ tl<l ! I \ I II( I’otf,r)t 1,1 I c)t l)lf)fll<l~i tf)r 1 )l\lJl,l{ Il l: ( I III

\ ( ‘l)! 1( )11,1 I I (11’1 \/ I 11 ( 11 {

the 1990’s, however, the situation may becomemore precarious due to the expected increasein demand fo r food a t t r ibu tab le to a la rgerU.S. population and increased export demandfor U.S. food production. By 1990, the crop-Iand available for energy biomass productioncould range from 9 million to 69 million acresand by 2000, it couId be anywhere from zero to

Photo credit USDA, J Clark

The conversion of cropland to urban and othernonagricultural uses will reduce the amount of cropland

available for energy production




Figure 30. —Present Use of Land With High andMedium Potential for Conversion to Cropland by

Farm Production Region -

Northeas t

LakeStates

Corn Belt

Northern

Plains

A p p a l a c h i a

Southeas t

(11.41)

(7.60)(7.06)

Southern

PlainsJ ( 22)

M o u n t a i n (11.13)

SOURCE: 1977 National Erosion Inventory Preliminary Estimates, Soil Conser-

vation Service, U.S. Department of Agriculture, April 1979.

65 m i l l i on ac res .34 ( T h e u n c e r t a i n t y i n t h eavai labi l i ty of cropland for energy product ioncorresponds to less than plus or minus 10 per-cent of the cropland needs in 2000. Conse-quently, it is unlikely that more accurate pro- jections can be made 20 years into the future.)

With this flexibility in the sources of ethanolfeedstocks, production will be limited primari-ly by the rate at which distilleries can be built

in the next 3 to 5 years. By the 1990’s produc-t ion conceivably could reach a level of 7 bi l-l ion to 10 bil l ion gal/yr of ethanol from grains,but expanding the product ion level beyond 1

bill ion to 2 bil l ion gal/yr could, according toconservat ive economic calculat ions, put etha-nol into increasing competition with other usesfor the farm commodi t ies, ’5 In the mid- tolong-term, this competi t ion could become se-vere. To m aintain or expa nd an e thano l fuel in-

dustry, distilleries might have to turn to cellu-Iosic materials for their feedstock. Constraintshere, however, may be the availabil ity of cap- .ital for the large investments that are Iikely tobe needed to convert distilleries to cellulosicprocesses, and possibly the added cost of thesec o n v e r s i o n p r o c e s s e s . F u r t h e r m o r e , t h e a d d e dcomplexity and equipment cost for these proc-esses are Iikely to make them substantially lesssuited to onfarm or small-scale facil it ies. Nodefinitive judgment can be made, however, un-t i l fu ture ce l lu lose- to-e thanol processes arebetter defined.

At this early stage in the development of theethanol fuel industry, the cost of the feedstockis determined directly by the demand for food.Great ly expanded gasohol demand that re-quires substantially more than 2 billion gal/yrof grain-based ethanol could very well reversethis relationship, however, so that grain pricescould become dependent on the demand forethanol. The extent to which this will occur de-pends crit ically on how much cropland can bebrought into product ion in response to ris ingfood prices, the amount of crop switching that

is practical, how easily grain can be bid awayfrom export markets, changes in eating habits(e.g., less grain-fed meat) and, eventually, thecost of producing ethanol from celIulosic feed-stocks, These and other uncertainties, such asweather, crop yields, and long-term changes indemand for food exports, make it impossibleto predict the ful l impact of large-scale etha-no l produc t ion on food pr ices or the exac t pro- .duct ion level at which food-fuel competi t ionwil l start to become severe. But rough est i-mates based on the expansion of cropland in

the early to mid-1970’s (due to the increaseddemand for U.S. food exports) indicate that do-mestic food consumers could pay $3 to $4 peryear in higher food prices for each addit ional

‘ ‘R I ,\t\wIh I]f)t \\’ I I } nt>r I [ ) I {(Jll,\rl(i, 01) ( It ,]n(i ,Ils(J\t,t, ( II 7

\



Ch. 4—Fuel Cycles and Their Impacts 101

L

.-.,. -

,>

Weather and other uncertainties can affect crop yields

gallon per year o f e thanol * produced abovethe leve l a t which food- fue l compet i t ion be-comes severe, if feed price rises are used tobring more cropland into production and it dis-t i l lery byproducts are ut i l ized poorly. Never-theless, numerous other factors such as a risein the international value of the dollar due to

decreased oi l imports, which lowers the costfor all U.S. imports, could decrease these in-direct costs of ethanol production.

No truly sat isfactory est imates can be de-rived, but the increased food costs caused bythe compet i t ion between food and fuel pro-duct ion could be enormous compared to thequant i t y o f e thanol produced, and caut ion

should be exercised when expanding ethanolproduction from grains and sugars beyond the2-bilIion-gal/yr level.

Some controversy exists over whether thehigher food costs should be characterized asan ind irect c ost of e thano l produc t ion. This

point— that indirect costs for food consumersshould be charged to fuel ethanol — is clearestwhen there is a Government subsidy such asthe present tax credit for gasohol. This taxcredit not only gives distilleries, and ultimatelyfuel users, an advantage, but i t also forcesfood c ons umers t o pay h i gher p r i c es t hanwould be pa id under normal market forces .Wi thout the subs idy , the pr ice pa id idea l l ywould equal the cost of products for al I pur-chasers and, from a market viewpoint, greatereconomic value would be obtained f rom thesame agricultural resources.

Even without Government fuel subsidies, se-rious questions remain about indirect costs tofood consumers. If petroleum prices continueto spiral, expansion of ethanol production maycause unacceptable ineff ic iencies and inequi-t ies due to inelast ic supply and demand forfood. In other words, grain and sugar produc-ers may have di f f icul ty supply ing both foodand fuel needs, which are both relatively in-flexible, so the net result would be that bothfood and feedstock pr ices would r ise to ex-tremely high levels to achieve a market bal-

ance.

Beyond the inc rease in food pr ices , in -creased demand for farm commodi t ies alsowill tend to increase farmland prices and theyear to year fluctuations in commodity prices.The former results from the increased demandfor cropland and is necessary to expand theam ount of c rop land in p rod uct ion. The latteroccurs because demand and supply for farmc ommod i t i es may be re l a t i v e l y i ne las t i c a tlarge ethanol product ion levels and becausethe i nc reas ed p roduc t i on oc c urs on l ands

where productivity is more sensitive to weath-er variations. Unless policies are instituted toincrease the s tabi l izat ion of farm commodi typrices (e. g., by larger buffer stocks), the com-b ina t i on o f h i gher f a rm land p r i c es and i n -creased commodi ty pr ice f luctuat ions wouldput farmers who rent land or who have recent-




Iy bought land in a more precarious situationeconomically. Furthermore, the need for largerbuffer stocks and the higher cost of farm com-modities also could increase Government ex-p e n d i t u r e s n e e d e d t o m a i n t a i n t h e b u f f e rs tocks. On the other hand, farmland ownerscould reap a windfall gain from the increase in

farmland prices. The net result would be an in-come transfer from food consumers and tax-payers to farmland owners and an increase infarming costs due to the higher land costs, thelower product iv i ty of the new cropland, andthe higher risk of farming it.

A l though ethanol produc t ion can lead togreater fluctuations in the price and total sup-ply of farm commodities, it also can provide abuf fer against ext reme deprivat ion. Becausegrain product ion would exceed the food andfeed demand, distillery feedstocks could be di-

verted to food use if severe crop failures oc-c u r red a t home o r ab road . H ow ev er , t h i swould decrease fuel supplies and place a hard-ship on distiIlers and fuel users.

The p roduc t ion o f fuel ethano l can influ-ence a complex and interconnected set of mar-kets. The exact impacts and market responsesare d i f f i c u l t t o quan t i f y and c ompare . D e-creases in U.S. dependence on imported oi la lso would decrease the vulnerabi l i ty of theUni ted States to pol i t ical ins tabi l i t ies in oi l -producing countr ies. However, decreases in

grain exports could more than offset reducedexpenditures for foreign oil. The impacts of in-creased food prices vary from reduction in do-mestic meat consumption to a greater risk ofmalnutri t ion at home and abroad, of windfal lgains for farmland owners, of increased eco-nomic vu lnerab i l i t y o f farmers who rent orhave recently purchased land, and of retal ia-tory internatexports.

ional responses to reduced grain

Methanol

As mentioned above, the economics of ob-taining the methanol feedstocks — wood, grass,crop residues, and other dry plant material —are considered in the descriptions of the otherfuel cyc les. The p roduc tion and end use a rediscussed below.

With methanol feedstock costs ranging from$20 to $60/dry ton, OTA estimates that metha-nol from biomass can be produced for $0.65 to$1.30/gal; and the investment would be rough-ly $100 million (early 1980 dollars) for a 50-mil-lion-gal/yr plant, or somewhat more than a 50-milIion-gal/yr ethanol distilIery using grain

feedstocks. For an average feedstock cost of$ 3 0 / d r y t o n o f w o o d , m e t h a n o l c a n b e p r o - .duced for $0.75 to $1 .10/gal, depending on thef inanc ing of the d is t i l l e ry . About $0.10 to$0.30/gal should be added to this for deliveryof the methanol. .

Based solely on its energy content, methanolcosting $0.90/gal at the plant is roughly equiv-alent to gasoline selling at the refinery gate for$1.77 or $45/bbl of crude oi l . Like ethanol,however, methanol ’s octane-boost ing proper-ties increase the price at which it can be com-

pe tit ive a s an ad ditive to ga soline, which OTAcalls its value. In a manner completely analo-gous to that used to calculate ethanol’s value(see box E), methanol is estimated to have avalue of 1.5 to 2.3 times the average crude oilprices paid by refiners, depending on whetherit is blended at the refinery or at the gasolinesta tion. (The uppe r value o f 2.3 time s the ave r-age crude oi l pr ice is part icular ly uncertain,because there is little marketing experience to

judge the price consumers are will ing to payfor methanol-gasoline blends, or the cost of co-

solvents that ultimately may be used. )Assuming the above range of values for the

alcohol , methanol cost ing $0.95 to $1.40/gal(delivered) would be competitive as an octane-boost ing addi t ive to gasol ine when averagec r u d e o i l p r i c e s a r e $ 1 8 t o $ 2 9 / b b l , o r w h e nunleaded gasoline costs about $1.00 to $1 .90/ ga l. * This calculat ion, however, does not in-c l u d e t h e c o s t s a s s o c i a t e d w i t h a d d i t i v e s o r .w i th changes in the ref inery , automobi le, orthe fuel-handling system that may be neces-sary. I t therefore represents a lower I imit for

the oi l and gasol ine costs at which methanolwould be competi t ive. Although these addedcosts may be relat ively smal l , an adequate




—Photo credit USDA —Soil ConservaflOn Dlstrlc(

Agricultural operations can cause significant soil erosion problems

Table 10.—Erosivity of Cropland— — ——

Acreage now in Current erosion rates in

Soil capability intensive product ion, these capability classes, b Acreage that could be

class a 10’ acres (%) ton/acre-yr added,c 106 acres (O/. )———. . ————

I . . . . . . . . . . . . 28 (9) 3.2 6 (3)II . . . . . . . . . . . 151 (50) 4.3 69 (38)

Ill . . . . . . . . . . . 94 (31) 6.9 74 (40)

Iv . . . . . . . ~ . 27 (9) 11.5 34 (19)

— —aA ~ea~ure of the ~on~tralnts on crop production (1) means excellent capability and few restrictions. ‘hlle (Iv) ‘cans ‘evere

Ilmltatlons on crop choice with spec!al practices requiredbwater.caused erosion only during Intensive production

cpresent ~ropland not now In Intensive use plus land with high and medium potential for swltchlng, this Is likely to be an up”

per bound

SOURCE 1977 National Erosion Inventory




wood are avai lable f rom harvest ing loggingresidues and intensifying forest managementp rac t i ces , t he sho r t - t e rm e f f ec t s o f wh i chpotent ial ly can be quite mi ld i f properly con-trol led (but current regulatory and economicincent ives for control may not be adequate,

and questions have been raised about possiblelong- te rm degradat ion o f fo res t so i l s ; see“Wood Fuel Cycle”). Also, large-scale alcoholproduction based on crop residues and grassesmay be accomplished without replacing otherecosystems, and t he wood p roduc t i on mayalter the character of much of the forest butcan be accompl i shed w i thou t reduc ing theacreage of forested land.

Ethanol Production

Much of the energy required to run an etha-

nol plant is generated onsite in conventionalboilers. Thus, a comparison to electric powergeneration is useful in getting a sense of the airpol lu t ion potent ia l o f the large-scale deploy-ment of new ethanol -manufactur ing capaci ty.New energy-eff icient plants producing ethanolfrom grains or sugar crops probably wi l l re-quire at least 50,000 B t u / g a l o f e t h a n o l p r o -duced to provide electricity and to power thedistilling, drying, and other operations. * A 50-mi l l ion-gal /yr d ist i l lery wi l l consume sl ight lymore fuel than a 30-MW powerplant. * * A 10-b i l l i on -ga l / y r e thano l i ndust ry w i l l consumeabout the same amount of fuel as a 6,000- to7,000-MW electric power output.

The d eg ree of a ir po llution c ontrol and sub-sequent emissions from new ethanol pIants arenot fuIIy predictable, because New Source Per-formance Standards have not been formulatedfor industrial combustion facil i t ies. The mostl ike ly fuels for these p lants wi l l be coal orbiomass (crop residues, wood, etc.). The majorsource of any air pollution problems probablywi l l be their part iculate emissions. Coal andbiomass combust ion sources of the size re-

qu i red fo r d i s t i l l e r ies , espec ia l l y d i s t i l l e r iesbuilt to serve small local markets, will have tobe careful ly designed and operated to avoidhigh emission levels of unburned part iculate

hydrocarbons, including POM. The use of high-sulfur coal as a fuel —quite likely in parts oft he M i dwes t –a l so cou l d l ead t o h i gh l oca lconcentrations of SO2.

Water eff luents from ethanol plants wil l re-quire careful controls. The untreated eff luent

f rom the in i t i a l d i s t i l l a t i on s tep in e thano lproduction —called “sti l l age”- is very high inbio logical and chemical oxygen demand andmust be kept out of surface waters. The st i l -Iage from corn and other grains is a valuablefeed byproduct and it will be recovered, there-by avoiding a potent ial water pol lut ion prob-lem. The st i ll ag e f rom some o ther e tha no lcrops is less valuable, however, and may haveto be s t r i c t l y regu la ted to avo id damage toaquat ic ecosystems. Cont ro l techniques areavai lable for the required treatment, al thoughcontrols for still ages from some crop materialsmay require further development.

If fermentation and disti l lation technologiesare available in a wide range of sizes, small-scale, onfarm alcohol production may becomepo pu lar. The sc ale o f suc h op erat ions mightsimplify water eff luent control by allowing theland disposal of wastes. On the other hand, en-v i ronmenta l con t ro l may in some cases bemore expensive because of the loss of scale ad-v a n t a g e s . I n add i t i on , as no ted above, thesmaller combustion sources are more likely toproduce h igh emissions of unburned part icu-

late hydrocarbons. Finally, the current technol-ogy for the last dist i l lat ion step in producinganhydrous (dry) alcohol uses chemicals such ascyclohexane and ether that could pose severeoccupat iona l hazards a t i nadequate ly oper -ated or maintained distilleries. Although saferdehydrat ing technologies may be developed,special care must be exercised in the meantimeto ensure proper design, operation, and main-tenance of these small onfarm plants.

Ethanol may also be produced from wood,grasses, and other I ignocellulosic sources by

producing fermentable sugars through acid orenzymatic hydrolysis, and then fermenting anddistilling in a manner identical to that used forgrain and sugar feedstocks. Aside from the ini-t ial step, the impacts also would be identical.Because presently available processes are notp a r t i c u l a r l y e f f i c i e n t , f u t u r e p r o c e s s e s f o r




large-scale ethanol production may be signifi-cant ly di f ferent in des ign, wi th uncertain im-pa c ts. The w aste stream s of the p resent p roc-esses do not present any unusual control prob-lems.

Methanol ProductionThere are no facil it ies for converting wood

(or other Iignocellulosic feedstock) to metha-nol in the United States, and a detailed envi-ronmental analysis is not available. Neverthe-less , the components o f the process–woodgasification, various types of gas and water ef-f luent c leanup, and convers ion of synthes isgas to methanol — are moderately well under-stood, and the general environmental diff icul-t ies that may be associated with a methanolplant are predictable.

In contrast to the ethanol disti l lation plant,very Iittle of the energy required for the metha-nol production process is supplied by externalcombustion sources; most of the energy is ob-tained from the heat generated during gasifica-tion of the feedstock and from the final metha-nol synthesis step, and the comparisons to sim-ilarly sized powerplants used for ethanol distil-lation are irrelevant.

The gasification process, which is the majorsource of pollutants, will generate a variety ofcompounds such as hydrogen sulfide and cya-nide, water, carbonyl sulfide, tars and oils con-t a i n i n g a m u l t i t u d e o f o x y g e n a t e d o r g a n i ccompounds (organic acids, aldehydes, ketones,etc.), aromatic derivatives of benzene (such asphe nols), and pa rt iculate ma tter. The c onc en-t rat ions of most of these pol lutants are de-pendent on process condit ions, and improvedcontrol of the gasif icat ion process may be animportant polIution control mechanism.

A s w i t h l o w - B t u w o o d g a s i f i c a t i o n ( s e e“Wood Fuel Cycle”), air quality concerns of abiomass-to-methanol plant focus on acciden-tal leakage rather than stack emissions. Thesmal l concentrat ions of tox ic inorganic andorganic compounds in the gas stream from thegasifier will make raw gas leakage a substan-t ive occupational hazard i f good plant house-keeping is not maintained. On the other hand,cleanup of the gas stream would be necessary

even w i thout s t r i c t a i r qua l i t y regu la t ions ,bec aus e t he f i na l me thano l t rans fo rmat i onstep requires an extremely pure input gas (thepollutants would poison the catalysts and re-duce plant efficiency).

The water effIuent may also require sophisti-cated controls to avoid damage to water qual-i ty. I t appears l ikely that most plants wi l l at-tempt to capture and recycle the tars and oilsin this effluent in order to produce additionalsynthesis gas. The remaining pollutants havenot been character ized adequately , but theywil I include a variety of oxygenated hydrocar-bons as well as small amounts of phenols andother benzene derivatives. Some of the pollut-ants may be controlled adequately with stand-ard industr ia l t reatment methods — aeratedlagoons, or biological reactors similar to those

used in refineries. More sophisticated controlsmay have to be used for the remaining pollut-ants, but the necessity for such controls is notclear at this time.

Alcohol Use

Blends.– The ef fects of alcohol-gasol ineblends on automot ive emiss ions depend onhow the engine is tuned and whether or not ithas a carburetor wi th feedback control . Be-cause the emiss ion changes are ex t remelymixed (some polIutants increase and others de-

crease), i t is dif f icult to assign either a ben-ef ic ial or detr imental net pol lut ion ef fect tothese blends,

The use of alcohol-gasoline blends will havethe following effects on the emissions of mostca rs on the road tod ay: 40

q

q

q

q

inc re ase d e va po ra tive e m issio ns, a l-

though as much as half of the new emis-s ions are not par t i cu lar l y reac t i ve andshouId not contribute significantly to pho-tochemical smog;

decreased emissions of polynuclear aro-matics (proven for methanol blends only);decreased emissions of CO;increased emissions of aldehydes, whichare reactive and conceivably may aggra-vate smog problems; and

q




Crop Residues and Grass and Legume Herbage

Introduction

Crop residues and grass and legume herbage attainable in the near term from existing agri-

are discussed together because they have simi- cultural operations without major environ men-

Iar physical and chemical properties, they both tal or economic disruptions.occur in the farming regions of the Uni tedStates, and farmers can harvest them for ener-

OTA ’s ana l y s i s i nd i c a tes t ha t c rop res i dues .

gy and additional income. For the sake of sim-could supply 0.7 to 1.0 Quad/yr. The energy po-tential of grasses is somewhat greater —l.3 to

pl ic i ty, the use of “grass” or “ l ignocel lulose 2.7 Quads/yr in the short term and perhaps ascrop” refers to both grass and legume herbage. m u c h a s 5 Q u a d s / y r b y 2 0 0 0 , d e p e n d i n g o n -

It should be noted, however, that these are cropland needs for food production.not the only sources of Iignocellulose materialfor energy production. Indeed, such lignocellu- Although crop residues and grasses const i-

Iose plants as short-rotat ion trees also may tute negligible energy supply sources at pres-

yield “high quanti t ies of dry matter per acre. ent, they have the potential for making a note-Only

Iyzed

the energy potential of grasses is ana- worthy contr ibut ion to the bioenergy supply

here, however, because grass is readily (figure 31).

Figure 31 .—Usable Crop Residues and Potential Near-Term Herbage Production (million dry ton/yr)

II

aLess than O 1

bl-he ~alor source ,s sugarcane bagasse ~hlch ,S “Ormally harvested with the sugarcarle Thus this arises as a sugarcane processing byproduct and IS cu r ren t l y bu rned

to generate electr ic i ty and supply process steam to the sugar ref iner ies

SOURCE. Off Ice of Technology Assessment.




Technical

Crop residues are the materials lef t in thef ie ld a f te r harves t–s ta lks , l eaves, and o therorganic debris. About 5 Quads of crop residuesare left on U.S. cropland each year (figure 32).

Over 80 percent of this, however, is needed toprotect the soil from erosion or would be lostduring collection and storage, which leaves 1.0Quad/yr on the average. In addition, crop yieldf luctuat ions can reduce the quant i ty that canbe removed safe ly f rom year to year. Whenthese reductions are accounted for (by assum-ing a plus or minus 20-percent local fluctuationin crop yields), t he re l i ab le supp ly o f c ropresidues is about 0.7 Quad/yr. Consequent ly,t h e p o t e n t i a l s u p p l y o f c r o p r e s i d u e s f o renergy is est imated to be about 0.7 to 1.0Quad/yr . I f food product ion increases by 20

percent in 2000, than the usable crop residueswould total about 0.8 to 1.2 Quads/yr.

Figure 32.—Crop Residues by Type

Total usable residues =78.2 million dry ton/yr

I

I Small

.

Aspects

To compensate for the loss of soil nutrientsthat result from crop residue removal, farmerswi l l have to fe r t i l i ze the i r l and more in ten-sively at an estimated cost of $7.70/ton of resi-

due removed. Furthermore, the harvest ing ofresidues delays the fall plowing. In years whenwinter rains come early, the fall plowing maybe impossible. When this happens, the springplanting is delayed (because of the additionaltime needed in the spring plowing) and, if cornis being grown, yields will decline. Using com-puter simulat ion of the actual weather condi-t ions in central Indiana from 1968 to 1974, itwas estimated that this w o u l d d e c r e a s e t h ecorn yield by 1.6 bu/acre on the average, cost-ing the farmer about $2.70/ton of residue. *Other crops, however, are less sensitive to the

exact planting time and, consequently, are lessIikely to suffer from this problem.

Normal l y many o f the c rop res idues a rep low ed und er dur ing t he fa l l p low ing . Th ispractice renders them useless as a protectionagainst soil erosion. Removal of some of thecrop res idues W ouId a l low var ious t ypes o ffarming pract ices that actual ly could reducethe soil erosion (see “Environmental Effects”).

Most of the usable crop residues are locatedin the most productive agricuItural regions ofthe Midwest and California, Washington, and

Ida ho (see figure 31). The ave rag e qua ntit iesavailable in States having a potential of morethan 0.015 Quad/yr are shown in table 11.

Currently about 125 million acres of pastureand hayland in the eastern half of the UnitedStates have suff icient rainfal l to support in-creased grass product ion. About 100 miI I ionacres of this could be harvested. * Currentpractices usually l imit the annual forage grassproduct ion to about 2 to 3 d ry ton /acre o fgrass. (This supplies sufficient grass to coverthe feed and bedd ing needs fo r wh ich th i s

grass currently is used. ) By applying fertilizersto this land and harvesting the grass one or twoaddi t ional t imes, farmers can increase thei rharvested grass yield by about 1 to 2 ton/acre-

~t’(, Agrl [ IIlt ~lr(~ III k 01 I I

‘ ‘ Jot” Agrl( (II t (1 rt’ I n \ ( J I I I




Table 11 .—Average Crop ResidueQuantities Usable for Energy

Quantity ——

State

Minnesota. . . . . . . . . . . . . . .Illinois . . . . . . . . . . . . . . . . . .

Iowa. . . . . . . . . . . . . . . . . . . .Indiana . . . . . . . . . . . . . . . . .Ohio. . . . . . . . . . . . . . . . . .Wisconsin. . . . . . . . . . . . . . .California . . . . . . . . . . . . . . .Washington . . . . . . . . . . . . .Kansas . . . . . . . . . . . . . . . . .Nebraska. . . . . . . . . . . . . . . .Texas. . . . . . . . . . . . . . . . . . .Arkansas . . . . . . . . . . . . . . . .South Dakota . . . . . . . . . . . .Idaho . . . . . . . . . . . . . . . . . . .Michigan. . . . . . . . . . . . . . . .Missouri . . . . . . . . . . . . . . . .Oregon . . . . . . . . . . . . . . . . .North Dakota . . . . . . . . . . . .Other . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . .

(million dryton/yr)

—

10.29.0

8.56.23.83.73.33.02.52.42.32.32.32.01.71.61.31.3

10.8

78.2

(Quads/yr a) —0.130.12

0.110.080.050.050.040.040.030.030.030.030.030.030.020.020.020.020.14

1.02

aAssumes 13mllllonBtu/cjrytonbsum~

may not agreeduet~ round off error Estimated uncertainty f 20°~

SOURCE Offlceof Technology Assessment

yr on the average. This could resul t in 100million to 200 million ton/yr of grass or about1 . 3 t o 2 . 7 Q u a d s / y r . ( A f t e r d e d u c t i n g t h eenergy needed for cult ivat ion and harvest ing,this corresponds to 1.1 to 2.2 Quads/yr). Theestimated quantities of forage grass that couldbe harvested for energy in the near term areshown in table 12 for those States with a capa-bility of over 0.015 Quad/yr.

By 2000, anywhere from zero to 65 mill ionacres of marginal cropland could be availablef o r e n e r g y p r o d u c t i o n .42 T h i s r a n g e c o r r e - .spends to an uncertainty of less than plus orminus 10 percent in the cropland needs forfood production in 2000, so it is unlikely thatmore accurate pro jec t ions can be made 20years into the future. Assuming average annualgrass yields of 6 ton/acre on this land, any-where from O to 5 Quads/yr of grass could beavailable for energy.

4-() (’ l)fx’rlng,f)t) (II

.




Table 12.—Potential Excess Grass Production,Assuming 2-Ton/Acre Annual Production Increases”

‘Quantity

(mill Ion dryState ton/yr) (Quads/yr)

b

Missouri . . . . . . . . 2 6. 2 0.34Iowa. . . . . . . . . . . . . . . . . . . . 14.2 0.18Wisconsin. . . . . . . . . . . . . . . 13,8 0.18Kentucky. . . . . . . . . . . . . . . 13.6 0.18Minnesota. . . . ~ . . . . . . . 12.7 0.17Tennessee ., . . . . . . . . . . 11.5 0.15Mississippi . . . . . . . . . . . . 8.8 0.11Arkansas. . . . . . . . . . . . . 8.8 0.11Illinois. . . . . . . . . . . . . . . . . . 8.5 0.11

.Florida. . . . . . . . . . . . . . . . . . 8.5 0.11New York. . . . . . . . . . . . . . . 8.2 0.11Alabama . . . . . . . . . . . . . . 8.1 0.11Ohio. . . . . . . . . . . . . . . . . . 7.8 0.10Virginia. . . . . . . . . . . . . . 7.3 0.09Pennsylvania . . . . . . . . . . . 6.8 0.09Indiana . . . . . . . . . 6.3 0.08Louisiana ..., . . . . . . . . . 6.3 0.08Georgia . . . . . . . . . . . . . . . . . 5.9 0.08

Michigan. . ..., . . . . . . . . 5.6 0.07North Carolina . . . . . . . . . 4.0 0.05West Virginia . . . . . . . . . . . . 3.4 0.04South Carolina. . . . . . . . . . . 2.7 0.04Vermont ., . . . . . . . . . . . 1.7 0.02Maryland. . . . . . . . . . 1.2 0.02Other . . . . . . . . . . . . . . . . . 2.6 0.03

Total C. . . . . . . . . . . . . . 204.5 2.66

aAssumesaddltlonal production on all hayland, cropland pasture, and one-half

of noncropland pasture in areas with sufficient rainfall to support the In.creased production

bA55umes 13mflllongtu/dry ton

cEstlmated uncertalflty * 30 ‘O

SOURCE Offlceof Technology Assessment

Crop res idues and grasses can be madeava i lab le wi th ex ist ing tec hnology. They c anbe burned direct ly or together with coal, con-verted to an intermediate-Btu gas, convertedto various Iiquid fuels, or gasified in anaerobicdigesters (figure 33) Some crop residues, suchas rice straw, have special problems (e.g., highsi l ica content that can create a sandblast ef-fect and cause excess ive equipment wear);

. their use may require specialized developmentefforts.

Grasses and crop residues are quite bulky.

Therefore, their most economic use generallywil l be in the area where they are produced.Processes to concentrate these materials intopellets or similar materials could redevelopedbut they wi l l add to the costs of the fuel . *

However, the convenience of using the pelletsmay outweigh the added cost.

Direct combustion of the residues togetherwith coal (cocombustion) has been tested andfound to work sat is factor i ly . In most cases,however, the residues or grasses currently cost

more than the coa l they rep lace. Whi le thegrasses and residues are low in sulfur, leadingto a reduction in sulfur emissions with cocom-bustion, the decrease is not sufficient in mostcases to translate into an economic advantage.

Grasses and residues also can be burned asthe sole fuel for a boiler or home heating. But,their bulkiness may be a constraint in some ap-pl icat ions, although there is l i t t le experienceto judge the severity of this problem.

Grasses and residues also can be gasified (bypartial or incomplete combustion) in interme-d ia te-Btu gas i f ie rs cur rent l y under deve lop-me nt. The resultant fuel g as could be burnedin retrof i t ted oi l- or natural gas-f ired boi lers.Users could then revert to oi l or natural gaswithout additional cost if temporary shortagesof grasses or residues develop and the otherfuels are available. A major problem with grassis its tendency to bridge and clog in the re-actor, but with adequate development supportsuitable gasif iers (and possibly pretreatment)c ou ld be c ommerc ia l l y av a i l ab le i n 2 to 5

years.

The gas from gasifiers also could be used fordry ing crops and other process heat needs.However, farmers would have to be assured ofreliable operation that would under no circum-stances pollute the grain with tars, oils, or par-t iculates. Gaining the operat ing and engineer-ing experience required for these assurancesmay take somewhat longer than for boiler ret-rofit gasifiers.

Gasifiers also have been used in the past tofuel internal combust ion engines wi th woodand charcoal. If used in a diesel engine, some

diesel fuel is sti l l required to ignite the fuelgas. However, spark ignit ion engines can beconverted completely.

The principal use in engines is l ikely to befor crop i r r igat ion pumps, where the farmerwould fill the gasifier once a day with residues




Figure

~ Combustion I

Steam

Hot water

Heat

Me th a n o l

Ethanol

SOURCE: Office of Technology Assessment

,




for the d ay’ s pum ping. The p rincipa l disad van-tage with use in internal combustion engines isthat the gas must be cooled before enteringthe engine (in order for sufficient fuel gas to bedrawn in to the combus t ion chamber and toprevent mis f i r ing). The cool ing process re-

moves considerable energy from the gas, there-by lowering the overall efficiency and raisingthe costs. Nevertheless, if grass and residuegasifiers are developed, they could be com-petit ive with some alternative irrigation pumpfuels.

.

Crop residues and grasses also can be con-verted to methanol, ethanol, and pyrolytic oilswith processes completely analogous to thosede sc ribe d und er “Tec hnica l Aspe c ts” o f Woo dEnergy. Methanol conversion appears to be thenearest term option, but facil it ies require dem-

onstration with these feedstocks primarily be-cause of the feeding and handl ing problemsmen tioned ab ove . The othe r proc esses for liq-uid fuels could be commercially available bythe mid- to late 1980’s with adequate R&D sup-port.

Untreated crop residues generally do not di-gest wel l in anaerobic digesters, which pro-duce biogas—60 percent methane (i . e., thesame chemical as natural gas) and 40 percentCO,. (Manure is more digestible and is dis-cussed in the next sect ion. ) Some types ofgrasses (e. g., Kentucky blue grass), however, dodigest well and could be used as feedstock fora n a e ro b ic d ig e st e rs, b u t lit t le d e v e l o p m e n t

work has been done on digesters aimed atthese grasses. Consequently, the costs or tech-nical problems for such digesters are largelyunknown.

With grasses at $30/dry ton, however, thefeedstock cost alone would run about $4.60/

mil l ion Btu. Thus, i t probably would be pro-hibit ively expensive to sel l the gas producedfrom grass in anaerobic digesters to natural gasdistributors (after removing the CO,) in thenear future. However, increased natural gasprices could change this situation.

Alternatively, digester gas could be used fordirect combustion or to fuel internal combus-

tion engines. Both processes, however, should

be compared to the (partial combustion) gasifi-

e rs cons idered above. Because the (par t ia l

combust ion) gasif iers are considerably more

eff icient than current anaerobic digest ion (85v. 50 percent), relat ively dry feedstocks l ike

grasses can usually be used more economical-

ly in (partial combustion) gasifiers if the prod-uct is to be burned. The low efficiency of (par-tial combustion) gasifiers when used to fuel in-ternal combustion engines would put the twoal ternat ives on a more equal foot ing. More-over, biogas stores well and is easy to use.Under some circumstances, therefore, diges-tion of the grasses may be attractive relative to(partial combustion) gasification. Further workon the anaerobic digestion of grasses and cropresidues is needed, however, before unambigu-ous choices can be made.

Economics

beyondfeed and

Obtaining incremental supplies of herbage The e co nom ics of herba ge fuels are q ui tec u r re n t re q u i re m e n t s f o r l iv e st o c k sim ila r t o t he e c o n o m ic s o f w o o d , t he o t he r

bedding wil l cost $30 to $40/dry ton major source of Iignocellulose for energy. Lig-($2.30 to $3.10/million Btu) 43 not inc luding anycharge for the use of the land. In the case ofresidues, land rent should be paid by revenuesfrom the primary product. Additional supplies

o f he rbage c an be made av a i l ab le t h roughhigher yields with more intensive managementand t he re s hou ld be no add i t i ona l ren ta lcharge for these incremental supplies.

nocellulose of all kinds — and especially herb-a g e — is of low quality compared to fossil fuelsdue to its low energy content per pound, bulki-ness, high water content, and perishability. The

low energy content and bulkiness require thatthe point of end use be near the fuel source.Hence, local market imbalances cannot be rec-t i f ied easi ly by regional integrat ion. On theother hand, herbage is a decentralized, renew-able, and domestic energy source with the ad-vantage, compared to oil, that supplies are not




l i ke ly to be d is rupted for po l i t i ca l reasons .They ca n, how ever, be interrupt ed by unp re-d ic tab le weather pat terns , both dur ing c ropgrow ing seasons and a long t rans por t a t i onroutes between producers and intermediateprocessors and end users. Because herbage is a

bulky, perishable fuel, it also is more difficultto stockpi le as insurance against fuel supplyinterrupt ions.

The inferior fuel c ha rac terist ics of h erba gealso dictate higher costs for end users. Becauseit is bulkier, costs for conversion equipmentand for machinery to handle herbage can bee x p e c t e d t o b e s o m e w h a t h i g h e r t h a n f o rwood. Consequent ly , the load factor, or thenumber of hours a year equipment is operated,is more important in spreading capi tal costsover many Btu of output. As an extreme exam-ple, assume that capital costs for a herbagegasifier per million Btu are 1.5 times as large asfor wood (see table 4). At a 90-percent load fac-tor, the capital cost per mill ion Btu would be$0.75. Decreasing the load factor then leads toan increase in capital costs that is also 1.5times as great as for wood, making capital alarger factor in the total energy costs.

When both o f these economic condi t ions(locat ion and load factor) are favorable, endusers can afford to pay the farmer up to $70/ dry ton ($5.40/million Btu) for herbage, assum-ing that the alternative is fuel oil at $0.90/gal.

This fuel value compares favorably with pro-duction costs of between $30 and $40/dry ton($2.30 and $3.10/mil l ion Btu) for incrementalsupplies of either type of herbage beyond cur-rent requirements for l ivestock feed and bed-ding. I t is important to emphasize, however,that costs vary greatly among local areas.

To o bta in several Qua ds per year of e nergyfrom these two sources would require priceshigher than $40/dry ton, but the necessary in-centive is impossible to estimate precisely. Inany case, as demand for food expands, while

the land base stays the same, the cost of pro-ducing Iignocellulose will increase due to high-

er land rents, which must be paid to meet com-peti t ion from food and feed crops, or due tolower product iv i ty per acre as herbage cropsare relegated increasingly to less product iveland.

T h o s e m o s t l i k e l y t o p a y p r e m i u m f u e l

prices for Iignocellulose are industrial processhea t o r s t eam us ers bec aus e t hey c an ob ta i n .high load factors. If oil fuel prices continue torise as expected, locating industrial plants i nagricultural areas will become more and moreattract ive. .

Farmers are the next most likely end usersbecause they have advantages similar to thoseof the forest products industry in the use offuelwood. Farm appl icat ions general ly wouldnot have high load factors. But many farmersalready produce herbage for feed and bedding,

so they have the necessary handl ing equip-ment and expertise. Using herbage for energyon farms also would cut transportat ion costsand eliminate final transaction costs. That is,the farmer need not accept wholesa le d is -counts on produce sales nor pay retail mark-ups on purchased energy inputs. Moreover,farm vulnerabi l i ty to fuel supply interrupt ionswould be reduced.

Gasif icat ion technology for crop herbage isespecial ly important for ini t ial onfarm appl i-cat ions , such as corn dry ing and i r r igat ion

pumping. Aside from its fuel-switching capa-b i l i t y , the in termediate-Btu gas i f ie r can becoupled to ex is t ing combust ion technologywith very l i t t le loss in performance. In corndrying, the fuel gas can be combusted and theexhaust gases blown through the grain for dry- .ing. In water pumping, the fuel gas can be usedin existing combustion engines with only minorchanges but , as ment ioned above, the cos t (perBtu) would be higher than in process heat ap-pl icat ions because of lower conversion eff i -ciency. Once gasifiers have become familiarmachinery on farms, var ious other appl ica-

tions may evolve, especially space heating forhog farrowing, poultry, and farm homes.




Environmental Effects

.

The conversion of grasses and crop residuesto energy can substitute for oil and natural gas(through close-coupled gasification or conver-sion to methanol) or coal (by cofiring with coal

or used by itself as a boiler fuel) and thus mustbe credited with the benefi ts associated withforgoing the use of these fuels.

Obtaining the Resource

Although the collected grass and crop resi-due resources are comparable in value as ener-gy feedstocks, the impacts of growing and har-vesting them are dissimiIar.

Gras s es .– A l t hough l a rge quan t i t i es o f

grasses probably would be obtained by intensi-f ied product ion measures–regular ly fert i l iz -ing and harvesting several t imes a year— theimpacts of growing and harvesting grasses for

energy are Iikely to be less severe than those

associated with crops such as corn — the major

gasoho l feedstock. Grasses are perenn ia l ,

close-grown crops. As discussed in volume 11,intensive production of grasses, in contrast to

annual row crop production, is not expected to

lead to significant increases in erosion because

the root systems of grasses survive after har-

vest, grasses provide more coverage of the soil,

and grass production does not require erosivecultivation. At the present time, pesticide use

on grasslands is virtualIy nonexistent. Although

it is possible that the added stress caused by

mult iple harvest ing could lead to intensif ied

need for pesticides on these lands, the lowerlevel of runoff and erosion will reduce the lossof pesticides and other chemicals to surfacewaters, Final Iy , most or al l of the intens ivegrass production will occur on land that is nowin some sort of grass product ion, and majorecosystem changes are not expected. (How-ever, a portion of present grass production is in

pasture, is not mechanical ly harvested, andsupports wi ldl i fe that may not survive i f thegrass crop is mechanically fertilized and har-vested several times per year. ) I n conclusion,unless the stresses on the grassland ecosystemsfrom intens i f ied product ion are greater thanexpected, the env i ronmental impacts assoc i -

ated wi th obtaining substant ia l quant i t ies ofgrass feedstocks should be relatively mild. Thisconclus ion is predicated on the assumpt ionthat intensive grass product ion wi l l not e n -

croach to a great extent on lands that are nowin forest or other high-value env i ronmentaluse.

Crop Residues.– The environmental effectsof collecting large quantities of crop residuesfor use as an energy feedstock are complex,large ly because the res idues cur rent l y aretreated in a variety of ways—they are, alterna-tively, left as a cover on the soil, plowed underafter the harvest, coIIected, or burned inp lace–and, when a l lowed to remain on theland, they have a variety of positive and nega-

t ive effects that would be el iminated or mod-erated with colIection.

The mo st w ide ly rec og nized a t t r ibu te o fcrop residues left in place on the land is theirability to reduce soil erosion. For example, ero-sion may be cut in half on conventionally tilledland when the residue is left in place as a pro-tec tive co ver. ” The imp ortant role of resid uesin erosion control accounts for concerns thatthei r col lect ion may lead to increased farm-land erosion.

For a number of reasons, these concerns

should be tempered. First, much of the erosionprotection is lost anyway because the residuesoften are routinely plowed under or removed.Although it can be argued that these practicescould be altered in the future, most are donefor economical ly rat ional reasons. For exam-ple, as noted above, retention of residues onthe surface will hinder soil warming and thusdelay spring planting, which in turn decreasesyields in corn. In some areas and with somecrops, retention leads to “poor seed germina-t io n, st a nd re d u c tio n, p h yt o to xic e ffe c t s,

nonuniform moisture distribut ion, immobil iza-t i on o f n i t rogen i n a f o rm unav a i l ab le t oplants, and increased insect and weed prob-

-1 ~ ,, - ,




.

toxic. As discussed in the earlier section on

gasohol , major ethanol impacts inc lude a i r

po l lu t ion –especia l ly par t icu lates-–from boi l -

ers to power the disti l lery, and a high biologi-cal and chemical oxygen demand effluent thatrequires carefuI disposal.

Conversion to methanol, as described in “Al-cohol Fuels, ” will generate some toxic air andwater pol lutants requir ing sophis t icated con-trols as welI as good plant housekeeping.

An important energy use for grasses andcrop residues may be their direct combustion,either alone or in combinat ion with coal, forthe generation of heat, steam, and electricity.For example, the widespread use of corn forethanol may be accompanied by the use of the

Social

Both grasses and crop res idues could havesignificant employment effects. Intensive man-agement of grasses resulting in yields of 3 to 5ton/acre-yr would require from 29,000 to43,000 workdays per 0.1 Quad/yr. Labor re-quirements for harvesting residues and movingthem to the roadside range from 0.3 hour peracre for corn or grain sorghum col lected inlarge stacks to 2.5 hours per acre for rice resi-dues collected in bales (table 13). Actual labor

needs would depend on whether the grasseswere used in dist i l lat ion or combustion faci l i -ties, Collecting residues need not add signifi-cant ly to farm labor , but cou ld c reate newbusiness for custom operators who work undercontract to farmers who either do not have ac-cess to the necessary equipment or do nothave time to harvest residues.

Table 13.—Labor Requirements for HarvestingCollectible Residues (work hours/acre)a

Large round bales Large stacks

Corn . . . ., . . . . . . . . . 0.7- 0.8 0.3- 0.4Small grains. . . . . . . 0.5- 0.6 0.4- 0.5

G r a i n s o r g h u m . 0.5- 0.6 0.3- 0.4

Rice. . . . . . . . . . . . . . . . . . . 1.5- 2.0 —

Sugarcane . . . . . . . . . . . 2.0- 2.5 —

aA~SU ~es use of current technologY

SOURCES Stanley E Barber et al ‘The Potential of Producing Energy From

Agriculture OTA contractor report May 1979 and the Off Ice ofTechnology Assessment

corn residues to power the distiIleries. Becauseof the lower combustion temperature and lowlevels of sulfur and fuel-bound nitrogen in thefeedstock, the burning of grasses or residuesmay y ield low ni t rogen and sul fur ox ide andmoderate ly h igh carbon monox ide a i r po l lu-tion levels. Particulate levels could be high if,as with wood combustion, significant amountsof pa rtic ulate hyd roca rb ons a re emitted , Thelarger combustion units should be able to con-t ro l pa r t i c u l a te w i t h e l ec t ros ta t i c p rec ip i t a -tors or other devices as well as by maintaininghigh combust ion ef f ic iency (which wi l l a lsoc on t ro l c a rbon monox ide f o rmat i on ) . H ighc ombus t i on e f f i c i enc y may be d i f f i c u l t t omaintain, however, if the boiler was originallydesigned for coal or if a wide variety of feed-stocks is used.

Impacts

As with the farm labor requirements for gas-o h o l , t h e l a b o r n e e d e d t o p r o d u c e f o r a g egrasses and crop residues for energy probablywould involve long-term res idents and wouldbe regarded as a benefit among farmers whofee l they are underproduc ing or who wouldwelcome the added income from each crop.

Addi t iona l employment inc reases assoc i -ated with the production of forage grasses andcrop residues for energy include transportationto the conversion facility as well as the manu-facture of farm machinery, ferti l izer, and otheragricultural inputs. Finally, employment wouldar ise in the manufacture and dis t r ibut ion ofconvers ion equipment and the cons t ruc t ionand op eration o f fac iIit ies. The lab or require-ments for ethanol or methanol plants us inggrasses or residues as feedstock would be simi-lar to grain ethanol distilleries; these are dis-cussed in “Alcohol Fuels. ” The labor needs forconstruct ing and operat ing cocombustion fa-cilities would be comparable to coal- or wood-

fired plants and are discussed in the wood fuelcycle.

The pr inc ipal eco nom ic imp ac t assoc iatedwith energy from grasses and residues is the in-crease in farm income attributable to the saleor use of energy products. Where the grassesand residues are on small tracts, their use for




Anaerobic Digestion of Animal Wastes

Introduction

OTA estimates the energy potential of chick-

en, turkey, cat t le, and swine manure to beabout 0,2 to 0.3 Quad/yr. H ow ev er , t he bene-

. f i t s o f anaerob i c d i ges t i on o f manure a regreater than this figure suggests. Besides pro-ducing biogas, anaerobic digestion is a wastetreatment process and the effluent can be used.as a soil conditioner (low-grade fertilizer), de-watered and used for animal bedding, and per-haps even as livestock feed.

This analysis has centered around digestion

of animal manure on relatively small confined

livestock operations and on digesters suited to

these needs. Other applications, such as mu-nicipal sewage treatment, are subject to dif-ferent condit ions and l imitat ions that usual lydictate different types of digesters. Also, verylarge applications such as the largest feedlotsand k e lp d i ges t i on w i l l hav e t he op t i on o fus ing more technological ly sophis t icated di -gester systems. These and other possibil it iesare considered in more detai l under “Anaero-bic Digestion “ in volume II.

Photo credit USDA

All kinds of confined animal operations could benefit from anaerobic digestion of wastes




Technical Aspects

Anaerob ic d igest ion occu rs when b iomass is ( t ab le 14) . The b est f ee dstoc ks a re va ri ousput into a chamber without access to air. Bac- aquatic pIants, certain types of grass, and ani-teria consume the biomass and, in the process, mal manure. The supply of aquatic plants isrelease biogas—a mixture of 40 percent CO 2 likely to be small in the 1980’s and the cost of

and 60 percent methane, the principal compo- producing grasses (see “Crop Residues andnent of natural gas. Grass and Legume Herbage”) usually will make

b i o g a s p r o d u c t i o n f r o m t h e m u n e c o n o m i c a tC ro p re sid u e s a n d w o o d a re u su a lly p o o r p r e se n t . C o n se q u e n t l y, t h e m o st p r o m i sin g

feedstocks for anaerobic d igest ion, a l though near-term application of anaerobic digestion ispretreatments can improve their d igest ib i l i ty with animal manure as the feedstock.

Table 14.—Characteristics of Various Substrates for Anaerobic Digestion

Feedstock Availability-

Animal wastesDairy. . . . . . . . . . . Small- to medium-sized farms,

30 to 150 headBeef cattle. . . . . . Feedlots, 1,0OO to 100,000

cattleSwine. . . . . . . . . . 100 to 1,000 per farm

Chicken . . . . . . . . 10,000 to 1 million per farm

Turkey . . . . . . . . . 30,000 to 500,000 per farm

Municipal wastesSewage . . . . . . . . All towns and cities

Solid wastes All towns and cit ies

Crop residues

Wheat straw . . Some cropland

Corn stover . . . . . Some crop land

GrassesKentucky blue. . Individual home lawns

Orchard grass. . . Midwest

Alfalfa . . . . . . . . . Throughout the United StatesAquatic plants

Water hyacinth . Southern climates very highreproduction rates

Algae ... . . . . . Warm or controlled climates

Ocean kelp . . . . . West coast, Pacific Ocean,large-scale kelp farmsVarious woods . . . Total United States

Kraft paper . . . Limited

Suitability for digestion —

Excellent

Excellent

Excellent

Excellent

Excellent

Excellent

Organic material otherthan plastics very good

Fair, perhaps bettersuited to directcombustion

Fair, perhaps bettersuited to directcombustion

Good

Fair

Good

Very good

Excellent

Excellent

Poor, better for directcombustion orpyrolysis

Excellent, need toevaluate recyclepotential and otherconversion processes

Special problems

No major problems, some systemsoperating

Rocks and grit in the feed require degritting,

some systems operatingLincomycin in the swine feed will inhibitdigestion—full-scale systems operatingon university farms

Degritting necessary, broiler operationsneed special design due to aged manure,tendency to sour

Bedding can be a problem, manure isgenerally aged, no commercial systemsoperating

Usually too dilute for efficient net energyyield, vast experience

Need separation facilities on the f rent end,commercial system in operation, digestsslowly

Particle size reduction necessary, lowdigestibility, no commercial systems

No commercial systems, no data available,particle size reduction necessary

Distribution of feedstock disperse, nocommercial systems, digests slowly

No commercial systems, no data onsustainability of yields

No data

No commercial operations, needspregrinding

Full-scale operations not proven, no presentvalue for effluentWill not digest

Premixing watering necessary

SOURCE T Abeles, D Ellsworth, and J Genereux, “Biological Production of Gas, ” contractor report to OTA, April 1979




Figure 35. —Anaerobic Digester System

IOther operation

I

I I

1 [ I I I I


Livestock operations, however, might be ableto use or sell the gas for nearby applications,such as greenhouse heating.

The d igester effluent c an b e used as a fer-tilizer, just as manure sometimes is. The ef-fluent also can be dewatered and sold as a fer-tilizer, or used as animal bedding or as an ani-mal feed supplement for its protein content.The a nimal feed op t ion, howeve r, need s fur-ther test ing to determine i f the eff luent is asuitable feed and, if so, what its value is. Therealso is an issue of which digester types producethe most suitable animal feed.

The system analyzed in detail in this report

has sufficient gas storage capacity to vary theelectric generat ion to match dai ly peak elec-t r ic demands. I f proper farm-ut i l i ty interfacesare developed, the ut i l i ty could control thetimes that electricity is being fed into its sys-tem by sending coded signals along the powert rans mis s ion c ab les o r t e l ephone l i nes , o rthrough other load management techniques. In

many cases, however, this couId require someadaptat ion of onfarm energy use to the ut i l i -ty’s needs. Both the interface problem and theoverall effect of decentralized electric genera-tion on the util ity operation will be dealt withfurther in a forthcoming OTA assessment ofdispersed electric generation.

The to tal qua nt i ty of elec t r ic ity gen eratedwould be relatively modest. If half the manureresource were digested and the resultant bio-gas used to generate electricity with an (as-sumed) efficiency of 20 percent, the total elec-t r ic generat ion would be only s l ight ly morethan 1,000 MW of capacity. At the same time,about 0 .08 Quad/y r o f heat would be pro-

duc ed . The principa l imp ac t would b e on thel i ves tock operat ions themselves . Many l i ve-s tock operat ions could become energy sel f -sufficient and some would have the opportuni-ty of expanding into energy- intens ive enter-pr ises such as vegetab le or f lower cu l t i va t ionin greenhouses or possibly onfarm or coopera-tive ethanol distilIation.

Economics

Unlike the three preced ing fue l cyc les, and re jec t in to the environment than raw ma nure

especial Iy in contrast to ethanol f rom grain and it may be preferred as either a fertiIizer orand sugar crops, biomass energy from manure an animal feed, although this has not been ful-

would not compete direct ly with the produc- Iy established.

t ion of other commodit ies. Rather, biogas d i -gest ion ma kes be t t e r use o f a n ex ist ing re - How ever, the ec onomic s o f d igestion remainsource without destroying i ts value for other unclear due to l imited commercial experiencepurposes. Digester ef f luent is at least safer to in the Uni ted Sta tes. The fac t that it is ec o-



Ch. 4—Fuel Cycles and Their Impacts • 127

.

nomical in other countries, where labor costsare much cheaper and where standards of ma-terial comfort are much lower, does not implythat comparab le technolog ies w i l l penet ra teAmerican agr icul ture. One reason for l imi tedcommercial experience is that farmers are re-

l uc tan t t o adop t a new tec hno logy t ha t re -quires a large initial investment. It is perhapsthe most extreme example of biomass capitalintensity considered in this report.

Rising prices for purchased fuels, however,wi l l make digest ion more attract ive. Also, asan onfarm energy resource, biogas would tendto insulate farmers from some fuel supply in-terruptions. FinalIy, biogas may become eco-nomical as a resul t of env i ronmental qual i tystandards that force farmers to sanit ize ma-nure wastes before rejecting them into the en-

v i ronment .In deciding whether or not to install a di-

gester for i ts energy product , economic cal -culat ions depend heavi ly on three aspects ofl ivestock operat ions. Fi rs t , there must be aminimum amount of manure sui table for di -ges t i on , s o t ha t h i gh c ap i t a l c os t s c an bes pread ov er a s u f f i c i e n t l y l a r g e p r o d u c tstream, lowering the cost per unit of energy ob-tained. Second, onfarm ut i l izat ion of biogas,ei ther by di rect combust ion or indi rect ly byelectric generation, enhances its value by dis-placement of purchased energy at retail prices.The alternative is sell ing electricity to util it iesat lower, wholesale rates. Third, to displace themaximum amount of purchased electricity, thera te o f n o n fa rm electricity y consumpt ionshould have a steady (base load) component,assuring a high load factor for generat ing ca-pacity. Sales to electric utilities may offset ani r regu la r l oad pa t t e rn , bu t i f many f a rmerswith the same load characteristics try to selltheir excess power at the same time its whole-sale value could be low.

Looking at digestion for its biogas productalone, its first widespread application may beon large poultry farms in the northern tier ofStates. Poultry manure from this region ac-counts for between 15 to 20 percent of the po-tential energy in manure resources. Digestersmust be able to accommodate the high solidscontent of this manure as well as some asso-

c iated inert mater ial (gr i t ) , but unusual eco-nomic opportunities exist because biogas dis-places premium liquid fuels and electricity forheating, l ight ing, feeding, and manure col lec-t i o n . I n h i g h l y c o n t r o l l e d p o u l t r y e n v i r o n -ments, all activit ies related to biogas produc-

t ion and use can be coordinated and equip-ment sized for maximum load factors. Poultryfarming was the first type of animal husbandryto be automated and, for the same reasons, itmay be the f i rs t to general Iy adopt manuredigest ion i f appropriate digester systems be-come available.

Among the other types of l ivestock farming(beef, dairy, and swine), no one type has a clearoveralI advantage over the others in the adop-tion of digesters. Each type of operation hasboth advantages and disadvantages.

Beef feeding may be an attractive applica-tion because thousands of head often are keptin adjacent pens, making i t possible to usehighly specialized equipment for manure col-lection, digestion, and for storage and disposalof digest ion products. On the other hand, theenergy in beef manure is much greater than theamount of energy used by the feedlot. More-over, feed lot energy consumption is concen-t rated dur ing short per iods of feeding andmanure cleaning, and the fuel used is oftengasol ine or diesel (for tractors and trucks todistribute feed and to remove manure) which

biogas cannot displace easily. Furthermore, ifthe feedlot is not hard surfaced, manure maydry out quickly or be contaminated with soil,gravel, and other nondigestible material. De-spite these disadvantages, digestion may stillbe economical for large lots that are highlye lec t r i f i ed , t ha t hav e s u f f i c i en t v o lume t o

just i fy upgrading gas to pipel ine qual i ty, orthat can combine digestion with ethanol distil-lation, In the latter case, the biogas would pro-vide the heat of dist i l lat ion and the dist i l lersgra in might be fed wet to the cat t le , thusavoiding drying costs. An alternative to diges-tion, for the same purpose of supplying energyto a disti l lation process, would be to combustdried ma nure. The latter app roa ch m ay b e p re-ferred if the value of the digester effluent wereinsignificant and the polIution and other prob-lems associated with manure combustion wereadequately solved




.

The major problem associated with the di-

gest ion process iSwaste disposal and the asso-ciated water polIution impacts that couId re-suIt. As noted above, anaerob ic d iges t ion i sbas i c a l l y a w as te t rea tmen t t ec hno logy - i tbreaks down the organic (volatile) solids initial-

ly present in the manure. However, althoughthe process reduces the organic polIution con-tent of m a nure, it d oe s not el iminate i t . Thecombination of liquid and solid effluent fromthe digester stiII contains organic solids as welIas fai rly high c onc entrat ions of Inorganic sa Its,some concentrate ions of hydrogen suIfide (H2S)and ammonia ( N H3 ), and variabIe amounts ofmetaIs such as boron and copper that may bet o x i c t o p l a n t s .5 2 (The c om p osi t ion o f thewaste stream depends on the diet of the ani-maIs as welI as the efficiency of the digester)For operations where the manure is collected

onIy in termi t tent l y , smalI concentrate ions ofpesticides used for fly control may be con-tained in the manure and passed through tothe waste stream.

A variety of disposal options exist for the Iiq-

u id and sludge wastes of anaerobic digestion.Generally, wastes will be ponded to allow settl-ing to occur. The liquid, which is high in or-ganic content, can be pumped into tank trucks(or, for very large operations, piped directly tof ields) to be used for irr igat ion and fert i l iza-

t ion, although the high salt content and smallconcentrations of metals in the fluid make itnecessary to rotate land used for this type ofdisposal . Large operat ions may conceivablytreat the water and recycle i t , but the treat-ment cost may prove to be prohibit ive. Otherdisposal methods for the liquid include evap-oration (in arid climates), discharge into water-ways (although larger operations are likely tobe subject to zero discharge requirements byE PA), and discharge into public sewage treat-ment plants. Where the Iiquid deliberately ora c c i d e n t a l I y c o m e s i n c o n t a c t w i t h p o r o u s

soils, contamination of the ground water sys-tem is possible. As with virtually all disposalproblems of this nature, this is a design and en-forcement problem rather than a technologi-cal one; for example, evaporat ion ponds can

be lined with clay or other substances to pro-tect ground water resources.

The o rga nic c ontent of the liquid eff luent,which varies according to the efficiency of thedigester, will present a biochemical oxygen de-mand problem if allowed to enter surface wa-

ters that cannot dilute the effluent sufficientlyo r t ha t do no t hav e add i t i ona l as s im i l a t i v ecapacity. SimiIar problems can occur with or-ganics leached f rom manure s torage pi les.However, this problem exists in more severeform in a feedlot or other operat ion that hasno anaerobic digester.

The sludge product can be disposed of in alandf i l l , but i t appears that the s ludge hasvalue either as a fertiIizer or cattle feed. Suc-cessful experience with anaerobically digestedmunicipal sludges (with higher metals concen-

t rat ions) as fert i l izer imply that the s ludgeshould present no metals problem. 53 In areaswhere chemical fertiIizers are unavaiIable ortoo expensive (e. g., in the developing coun-tries), the retent ion of the manure’s fert i l izervalue is a part icularly cri t ical benefi t of thebiogas process,

Although the H2S (and related co mp ounds)content of the effluent may present some odorproblems, this problem, as well as that of thevery small pesticide content, should be negligi-ble. 54

Pol lutant concentrat ions caused by biogascombustion should be of Iitt le consequence topubl ic health. Although the biogas does con-tain small (less than 1 percent each 55) concen-trations of H2S and NH3, neither should pose aproblem. NH, is oxidized to NO X in fairly lowconcentrat ions dur ing combust ion. H2S formsc or ros i v e s u l f u rous and s u l f u r i c ac i ds andmust be scrubbed out before combust ion inorder to allow the gas to be used. Fortunately,simple and inexpensive scrubbing methods areavaiIable.




Leaks of the raw product gas can representan occupational health and safety problem aswe ll as a po tential pub lic nuisanc e, The o c c u-pational health problem is related to the H2Sc onta minant in the raw ga s. The raw b ioga sc a n c o n t a i n H2S in concent ra t ions o f over

1,000 ppm.56 Although exposure to th is fu l lconcentration seems extremely unlikely, con-cent ra t ions o f 500 ppm can lead to uncon-sciousness and death within 30 minutes to 1hour, and concentrations of 100 ppm to respi-ratory problems of gradualIy increasing sever-ity over the course of a few hours. The Occu-pat ional Safety and Heal th Administrat ion’sstandard is a maximum permissible exposurelevel of 20 ppm.57

Although rapid diffusion of the gas will con-f ine heal th problems associated wi th H2S to

occupat ional exposures, vent ing of raw gascan cause severe odor problems to the genera Ipublic. In this case, odor problems associatedwith gas venting shouId be similar to the morece r ta in odo r p rob lems assoc ia ted w i th t heoften haphazard treatment of manure that thebiogas operation replaces.

{ I 1)1(1I 1)1(1

Because methane is explosive when mixedwith air, strong precautions must be taken toavoid biogas leakage into confined areas andto prevent any possib i l i ty of the gas cominginto contact wi th sparks or f lames. Al thoughthis will be a universal problem with biogas fa-

cilit ies, it is particularly worrisome with smallunits.

The insti tut ional problems associated withassuring that there is adequate control of di-gester impacts are very similar to those of eth-anol plants; it is likely that plants will be small,and thus may have some environmental ad-vantages over larger p lants (mainly ease oflocating sites for waste disposal and smallerscale local impacts), but will not be able to af-ford sophisticated waste treatment, are unlike-Iy to be closely monitored, and may be oper-

ated and maintained by untrained personnel.Improved system designs are likely if small on-farm systems become popular and the size ofthe market justifies increased design efforts onthe pa rt o f the ma nufac turers. These w ill prob-ably diminish the safety and health hazards toa certain extent, but the ease and lower cost ofbu i l d ing homemade sys tems coup led w i thfarmers’ tradit ional independence could pro-vide potent competit ion for the manufacturedsystems.

Social Impacts

The primary employment increases associ-ated with the use of manure in anaerobic di-gesters would result from the manufacture,distribution, and maintenance of reliable syS-tems for farm use and in the operation of largefeedlot systems. Because so few digesters arecurrently in use, it is not possible to estimatethe addit ional jobs that would be needed ifreadily available animal waste were converted

to methane, At least 10 firms currently are in-volved in digester research and engineering; itis not known how many employees they haveor how many they expect the digester industryto have in the future. 58 Most c onfined feed ingoperations (such as dairy farms and feedlots)

already are required by State or local law tocollect the animal waste, 59 so the principalnew farm labor input to an anaerobic digestionsystem would be in the operation of the equip-ment. For the few onfarm and feedlot digestersystems now operating, the labor requirementsrange from 4 hours per week for a small farmdigester using 4 ton/d wet manure (100 cows)and producing 2.5 million Btu/d, to 17 people

per year for a feedlot system using 340 ton/dwet manure (50,000 head) and producing 570m i I I ion to 670 miIIion Btu/d methane.60




Bioenergy and the Displacement of Conventional Fuels

The w ay biom ass is converted to useful heator work will strongly affect its technical abilityto substitute for conventional fuels. Currently,

the major use is direct combustion in the resi-dential and industrial sector with a smallamount of conversion to a Iiquid fuel (ethanol)for use in the transportation sector. Existingtechnology l imi ts d i rect combust ion to appl i -cations such as boilers and space heating. Cur-rent policy and economics already are causinga shift away from premium fuels for large com-mercial and industrial boilers so that biomasswiII be joining with coal and direct solar indisplacing oil and natural gas in these markets,Therefore, a substantial penetration of sol id

biomass could be at the expense of coal.For other uses, such as process heat, feed-stocks, and t ranspor tat ion, d i rect combust ionof solid biomass is not now technically feasi-ble. Here, the dominant fuels will continue tobe natural gas and oil. To use biomass in theseappl icat ions, e i t he r new d i r ec t combus t i ontechnologies will have to be developed, or con-version to a gas or Iiquid (alcohol) will be nec-essary. Therefore, i f the major port ion of theavailable biomass fuel supply is to displacesignificant quantities of oil and natural gas, itwill have to be converted to gas or alcohol.

The best way appears to be airblown gasifi-cation in terms of thermal efficiency and therang e o f a pp lic ations that it a llow s. There a resome I imitations here, however, which are re-lated to the low-Btu content of the gas. Thisputs centra l ized product ion and dist r ibut ionthrough a pipeline system at a severe econom-ic d isadvantage re lat ive to h igh-Btu naturaland synthetic gas, making onsite gasificationalmost a necessity. Although oxygen gasifica-tion would increase the Btu content of the gas,it also would increase the costs.

Methano l p roduct ion , a l though less e f f i -cient than gasif ication and direct combustion,does al low use in the transportat ion sector,and has some advantages over gasification interms of the economics of t ranspor t ing thefuel. (The efficienc ies ma y be mo re c om pa r-able, however, if the methanol is used as an

octane-boosting addit ive to gasoline). Unlessmore detailed economic analysis proves other-wise, a multiple conversion approach may be

the best way to maximize biomass use.

Whi le conversion to l iquids and gas wi l lgreat ly expand the potent ia l for b iomass todisplace oil and natural gas, it will be done incompetition with coal. As technologies are putin p lace for conver t ing the major por t ion ofour biomass resource (wood, grasses, and otherI ignocellulose materials) into gas or alcohol,technologies for converting coal to gas or liq-uids wil l also come onstream. Therefore, thereal question wilI be how does the biomass op-tion compare to coal in replacing oil and natu-

ral gas. Besides the important consideration ofthe relative costs of raw biomass and coal, thischoice involves a number of issues that canonly be listed here. Many of these points aboutbiomass are discussed in the remainder of thisreport while some of those about coal are pre-sented in the OTA s tudy The Direc t Use o f

C o a l .64 Ho w e v e r, n o d e ta ile d c o m p a ra t iv e

analysis has been made.

The first issue is reliability of supply. Theuser wilI want to make sure a long-term, steadysupply of the fuel is guaranteed before making

a commitment to the necessary conversion orend-use technologies. Second is the necessaryenvironmental contro ls at the point of use.Which fuel wi l l require the least expensivetechnologies to burn? Third is colIection, trans-portation, and storage costs. Here the densityof the resource, and its proximity are of con-cern. Fourth is the scale of operation. A small-scale operat ion wi th access to b iomass mayfind i t more attractive than coal because ofthe l imi ted quant i ty demanded. F i f th is theissue of renewability of the resource. If it is

determined that the United States must shift torenewable supplies as soon as possible, thenbiomass may be used even where it now is lesseconomic than coal. FinalIy, the relative meritsof the combust ion and conversion technolo-gies must be considered. Gasification of bio-




mass may be less complex and more econom-ical for small-scale operations than coal gasif i-cat ion, and the d ispersed nature of b iomasswil l general ly I imit i ts appl icat ion to smal leropera t ions than fo r coa l . However , coa l canproduce liquids closer to natural crude oil thancan be obtained from biomass. Further, coal

can produce methanol at a cost that is Iikely tobe less than alcohol from biomass.

In connection with conversion to liquids andgases, i t is important to cont inue efforts to

.develop new and more eff icient ways to con-vert wood, grass, crop residues, and other lig-noce l lu los ic mater ia l s to gas and a lcoho l .A l though some processes a re commerc ia l l yready now, the realization of the fulI biomasspotent ial wi l l l ikely require addit ional devel-opments in these areas.

In a related effort, expansion of bioenergyprovides the opportuni ty to look for ways touse the un ique proper t ies o f these fue ls inaltering processes or process steps to increaseindust r ia l energy use ef f ic iency. When coalreplaced wood in the last half of the 19th cen-tury, many industrial processes were changedor developed to take advantage of new proper-t ies that coal brought, such as its coking abil i-ty. These were largely the result of coal’s dif-

ferent c hemica l properties. There ma y b e ana l-ogous opportunities for biomass fuels.

This discussion has indicated some of thegeneral trends and concerns about the poten-tial role of biomass in displacing oil and natu-ral gas. To g et a be tte r pic ture of these c onsid-

erations, two plausible energy supply and de-mand futures for 2000 are presented and theway biomass could fit into these futures is dis-cussed. This is done by substituting the maxi-mum available biomass supply into each sec-to r , one a t a t ime, fo r eac h fu tu re . Th is i shighly unrealistic because considerations suchas proximity of supply, transportation and stor-age o f the raw b iomass, and env i ronmenta lcont ro l requi rements wi l l l imi t the amount ofbiomass that could go to any one sector re-gardless of fuel form. This approach is taken,however, because the way the biomass supply

may ac t ua l l y be d i s t r i bu t ed among sec t o rsc ould not b e p rojecte d. The m ethod wi ll givean upper l imit . In addit ion, i t is quite l ikelythat costs and time needed for install ing thenecessary end use and conversion equipmentu n d e r n o r m a l m a r k e t f o r c e s w i l l l i m i t t h eamount of biomass that could be used to be-low the ma ximum ava ilab le supp ly. Therefore,this analysis also indicates the technical limitfor premium fuels d isp lacement jor sources of biomass by 2000.

from the ma-

Current Supply and Demand

I n table 15, the 1979 energy demand figures put and do not show how much electr ici ty isare given by fuel for each sector along with the used by each of the first three sectors. Becausesupply f igures by fuel . The numbers are in bioenergy will be a substitute for a direct fuel,Quads/yr. These show only the direct fuel in- (although it may displace some electricity) this

Table 15.—1979 Energy Picture (Quads/yr)

Demand sectors

Residential/ supply

Fuel commercial Industrial Transportation Electricity Domestic Import

Oil and NGL . . . . . . . . 6.9 7.4 19.2 3.6 20.5 16.9

Natural gas. . . . . . . . . 7.9 7.8 0. 5 3. 6 19.2 1. 2

Coal . . . . . . . . . . . . . . 0. 2 3.7 — 11.3 17.4 —

Nuclear. . . . . . . . . . . . — — — 2.8 2.8 —

Hydroelectric. . . . . . . — — — 3.1 3.1Biomass. . . . . . . . . . .

—

0.2 1.3 — — 1.5 —

Total . . . . . . . . . . . . 15.2 20.2 19.7 24.4 64.5 18.1

SOURCE Monfh/y Energy Review Energy Information Admlnlstratlon, Department of Energy, May 1980




is the most useful way to display energy supplyand demand balance.

Current ly , b iomass cont r ibutes about 1 .5Quads/yr, nearly all of which is wood used inthe forest products industry. The energy is ob-tained to a large extent as a byproduct of re-

covering paper-pulping chemicals. Substantialquantities of wood also are burned for processsteam and the most pract ical current alterna-tives are residual fuel oil and natural gas. Theboilers also could use coal and some do, butwood has a clear economic advantage in thisindustry due to the need to recover the pulpingchemicals in any case and to wood’s acces-sibility compared to coal in most cases.

Future Supply

One pos s ib l e s upp l y -demand p i c t u re f o r2000 is displayed in table 16. This is based on aforecast given in the report Nat ional EnergyPlan II (NEP Il), by the Department of Energy.This forecast (future A) assumes a world oilprice of $38/bbl by 2000 as measured in 1979dollars. The increases that have occurred thispast year, however, make an even higher pricequite likely. The effect of this possibility is dis-cussed below. The use of the NEP II forecastd oes not indica te that OTA e nd orses it , butrather it is being used solely as a means to ex-plore the potential impact of bioenergy in dis-

placing conventional fuels. An alternative fu-ture wi th cons iderably lower demand also ispresented to see how this changes the poten-tial role of bioenergy.

The major feature in future A of interest tothis analysis is the decline in oil use from 1978

The othe r area s whe re b ioenergy is ma kinginroads are t ransportat ion (v ia gasohol) andresidential /commercial space heating (wood).The former does not provide any signif icantsubst i tut ion for oi l or natural gas, part ia l lybecause the ethanol is not now produced oru s e d i n a w a y t o d i s p l a c e t h e m a x i m u m

amount of these premium fuels. That is, cur-rent d is t i l l e r ies use natura l g a s a s a f u e l , a n d

the oc tane-boos t i ng p roper t i es o f e t hano l ,which can reduce refinery fuel use by refininga lower octane gasoline as the gasohol base,are not b eing ful ly taken a dva ntag e of . OTA’s -analys is indicates that the amount of woodus ed f o r s pac e-hea t i ng i s abou t 0.2 to 0 . 4

Quad/yr, which principally displaces oil.

and Demand

levels by all sectors except transportation. Thisdec l ine would large ly be the resu l t o f in -creased ef f ic iency and subst i tut ion by coal(e i t he r d i rec t l y o r t h rough e lec t r i c i t y ) andsolar. In the residential/commercial and indus-trial sectors oil would be used for space heat-ing, process heat , and chemical feedstocks.

Only in the electric utility sector is any oil usedin boilers. Even this estimate may be high if oilprices rise more than this projection assumes,because there wi l l be even greater incentivesto c onv er t t o c oa l o r phas e o i l p l an t s ou taltogether. Natural gas use is projected to in-

crease in the res ident ial /commerc ial and in-dustrial sectors but decline to zero in the elec-tric utility sector. As with oil, the principal useswill be for space heat, process heat, and chem-ical feedstocks. The largest use of oil in thisp r o j e c t i o n w o u l d b e t h e t r a n s p o r t a t i o n s e c t o r

Table 16.—U.S. Energy in 2000: Future A (Quads/yr)

Demand sectors

Residential/ supply

Fuel commercial Industrial Transportation Electricity Domestic Import

Oil and NGL . . . . . . . . 3.0 5.0 21.0 2.0 22.0 10.0

Natural gas. . . . . . . . . 9.0 12.0 — —

19.0 2.0Coal . . . . . . . . . . . . . . — 9.0 — 30.0 39.0Nuclear. . . . . . . . . . . . —

— — — 17.0 17.0

Hydroelectric. . . . . . . —

— — — 4.0 4.0

Biomass. . . . . . . . . . .

—

0.5 2.5 — — 3.0Solar. . . . . . . . . . . . . .

—

1.0 1.0 — — 2.0 —

Total . . . . . . . . . . . . 13.5 29.5 21.0 53.0 106.0 12.0

SOURCE. Natlorra/ Errergy P/an //, Department of Energy




where very Iittle conversion to new fuel forms

is projected by 2000.

There are a number of uncertainties in fu-ture A that may affect the potential for bioen-ergy. First, domestic oil production is likely tofall well below 22 Quads/yr (11 mill ion bbl/d),

leading to greater imports, reduced demand,and/or the need for substitution by other fuels.The possible shortfall could be as much as 6 to10 Quads/yr. (i. e., production levels of 6 mil-l i on t o 8 m i l l i on bb l / d ) , and c ou ld v i r t u a l l y

remove oi l as a fuel for stat ionary sources i fthe United States chose not to increase im-ports and was unable to reduce transportationfuel use significantly.

The sec ond ma jor unc ertainty is the nuc learsupply projection. Future A shows an increaseof nearly a factor of six over current use, to 17

Quads/yr. In l ight of the economic, env i ron-menta l , and safe ty uncer ta in t ies now sur-rounding nuclear power, this increase may beo p t i m i s t i c . If it does not reach this level, the

alternatives wiII be coal-fired electric power-

plants, and reduced electric demand (through

conservation or direct fuel use).

Other uncertaint ies involve the amount ofnatural gas the Nation wi l l produce and thequa ntity of coa l that c an b e b urned . The p ro- jections show 19 Quads/yr of natural gas to beproduced, which may be high. However, recent

discoveries of natural gas plus the potential forunconventional gas resources make this lessuncertain than oil.

As for coal, the amount projected can beproduced whi le s t i l l meet ing current env i ron-menta l regu la t ions . 65 A major issue here isw he ther emerg ing env i ronmenta l p rob lemssuch as acid rain and increases in atmosphericC O 2 concentrat ions wi l l be serious enough toslow down or halt increased coal combustion.

Finally, the demand figures given here prob-ably are higher than wilI occur. Certainly there

is potential for much greater energy efficiencythan implied by future A. For example, indus-trial energy use, including electric i ty, is fore-cast to be 36.5 Quads/yr compared to 21.8Quads/yr in 1978. This is a 2.6-percent average

““I bl(l

annual increase which compares with the 3.5-percent annual increase from 1960 to 1970,when energy growth was faster than any dec-ade this century, and the 0.8-percent annual in-crease during the 1970’ s.”

To illustrate the effects of these uncertain-

ties, a second supply-demand future (future B)is presented, in which rising prices, full imple-mentat ion of cost-effect ive energy eff ic iencyimprovements, and declining supplies of crudeoi l dampen energy demand growth. Under fu-ture B, energy demand is 90 Quads/yr by 2000,compared wi th 117 Quads/yr in future A orwith 1979’s 79.4 Quads/yr.

Future B assumes a doubling of current coaluse for industry and electric utilities which theOTA coal study states is an easily achievablegoa l ; t he opera t i on o f on l y t hos e nuc lea r

plants currently online or under construction;and a direct solar contribution consistent withthe base case of the recent Domestic PolicyReview of solar energy. 67 In addit ion a syn-thet ic fuel contr ibut ion of 3 mi l l ion bbl /d isassumed. If the current congressional goal of 2million bbl/d by 1992 is reached, this figure for2000 should be easily achieved. This will re-quire an additional 4 to 6 Quads/yr of coal pro-duction as well as 2 to 4 Quads/yr of shale oil.The up pe r bound of 36 Quad s/yr of c oa l (6 forsynfuels, 30 for electricity and industry) is stillreasonable as expressed in the OTA coal study.

On the demand side, OTA assumes a resi-dent ia l / commerc ia l demand cons is tent w i thprojections in the OTA study on residential en-ergy conservation, 68 the current ratio of energyuse by the residential sector to the commercialsector, 69 an industrial energy use growth rateequal to the 1960-79 rate, and a transportationdemand equal to the low-demand case given infuture A. The results of this hypothetical fu-ture are shown in table 17.

.{ l– ]1




Aga in, future B is not m ea nt to be an OTA in future A has be en mainta ined). The d ata inforecast, but rather a plausible lower energy tab le 17 ind ica te a much lower quant i ty o fdemand future in which to view the potential c onve ntio na l l iq u i d s u se d b y s t a t i o n a r ycontr ibut ion of b iomass beyond that a l ready sources — about 3.0 Quads/yr.forecast (the base biomass contribution given

Table 17.—U.S. Energy in 2000: Future B (Quads/yr)—

Demand sectors

Residential/ supply

Fuel commercial

Oil and NGL . . . . . . . . 1.0Natural gas. . . . . . . . . 4.5Coal . . . . . . . . . . . . . . —Nuclear. . . . . . . . . . . . —Hydroelectric. . . . . . . —Solar. . . . . . . . . . . . . . 1.5Syn fuel . . . . . . . . . . . —Biomass. . . . . . . . . . . 0.5

Industrial Transportation

2.011.5

9. 0——1.01.52.5

16.00.5

3.5—

Electricity -

—

0.521.0

7.04.01.51.0

—

Total . . . . . . . . . . . . 7.5 27.5 20.0 35 .0


Biomass Potential

Domestic Import

15.0 4.016.0 1.030.0 —

7.0 —

4.0 —

4.0 —

6.0 —

3.0 —

85.0 5.0

Increased use of b iomass is now considered drying, an ad di tional 0.5 Quad/ yr in the resi-by examining the size and nature of the poten-t ia l supply of b ioenergy and analyzing howtechn ica l ly i t m igh t f i t in to the fu tu res jus tdescribed. To do this the upper l imit of theestimates of the potential supply was consid-ered, which is about 17 Quads by 2000. This in-c ludes 10 Quads/yr of wood, 5 Quads/yr of

grass from haylands and cropland pasture, 1.2Quads/yr o f c rop res idues, 0.4 Q u a d / y r o fethanol, 0.1 Quad/yr from agricultural productprocessing wastes, and 0.3 Quad/yr from ani-mal manure. The estimate for grass from hay-Iands and cropland pasture may be optimistic,because o f increased demand fo r food andfeed crops. This upper l imit was used, how-ever, to i l lustrate the technical l imits in thedisplacement of premium fuels.

First, futures A and B, as given above, con-tain biomass inputs of 0.5 Quad/yr in the resi-

dential/commercial sector and 2.5 Quads/yr inthe industrial sector. All of this is from woodthroug h d irec t c om bustion. OTA b elieves thatexist ing trends project greater use than this,however, wi th no addi t ional incent ives otherthan increased pr ices fo r a l te rna t ive fue ls .OTA estimates an addit ional 1.5 Quads/yr inindustry, including about 0.1 Quad/yr for crop

d e n t i a l / c o m m e r c i a l s e c t o r , a b o u t O t o 0 . 4Quad/yr in transportation (ethanol from grainsand sugar c rops–O to 4 b i l l ion ga l /y r ) andab out 0.1 Qua d/ yr from a nima l ma nure. Thisgives a new basel ine est imate of about 5.5Quads/yr total for bioenergy by 2000. Again,t he p r i nc ipa l con t r i bu t i on wou ld be d i r ec t

combust ion of wood. In th is case, the addi-tional 2.5 Quads/yr of bioenergy could expectto displace 1.4 Quads/yr in the industrial sec-tor, about 0.5 Quad/yr of oil or natural gas inthe residential sector, about O to 0.4 Quad/yro f o i l in the t ranspor ta t ion sec tor , and 0 .2Quad /y r o f na tu ra l gas and o i l i n t he ag r i cu l - tural sec tor. The a d d itiona l bioene rgy used inthe industr ial sector would largely be in thef o r e s t p r o d u c t s i n d u s t r y t o r e p l a c e o i l n o w used, and for future growth of that industry. Inthe latter case, the wood probably would beused instead of coal.

Next, consider what would happen if actionswere taken to reach the practical l imit of theremaining bioenergy supply. As described atthe beginning of this section, this analysis isdone by apply ing a l l of the remainin g supplyto each sector, one at a time, for each future.Because of the projection that about 5 Quads/




ment modification would also be necessary toaccount for the different combustion proper-t i es o f me thano l compared to f ue l o i l , a l -though these should be minor. In this connec-tion, the different combustion efficiencies be-tween methanol and conventional fuels would

have to be considered in determinin g final fueldisplacement just as in the case of gasificationbut these should be small. Again, technologiesfor converting coal to methanol are also avail-able, so the choice is still between biomass andcoal. There are considerations here, however,that were absent in the gasification case. Pri-mary among these are the other liquids thatcan be produced f rom coa l and o i l sha le ,which in turn can be converted into conven-tional fuel oils.

The ma jor ad vanta ge of c onversion to me th-anol, however, is that it allows all forms of thebiomass resource to be a possible s o u r c e f o rt ranspor tat ion fuels. I f a l l 4 .8 Quads /y r o fmethanol were used as a standalone fuel, itwould be the equivalent of 2.2 million bbl/d of

ga soline b ut OTA estimate s that an ad ditional0 .6 Quad/yr o f o i l d isp lacement can occurf rom usin g pa r t o f i t i n b lends and 0 .8 Quad /y r from its higher eff iciency in cars buil t to usemethanol. This raises the total to 6.2 Quads/yr.It would be necessary to make changes in newa u t o m o b i l e e n g i n e s t o b u r n m e t h a n o l a s asta nd a lone fue l . The se a re not sub sta nt ia l ,however , and the same th ing wou ld be re -quired for methanol from coal. As with station-ary uses, the choice here is between syntheticliquids from coal and from biomass. ‘

Summary

The results of the above analysis are sum-marized in figure 36 for the three fuel forms ofd i rect combust ion, gasi f icat ion, and c o n v e r -

sion to methanol. This figure shows the tech-nical potent ia l for d isplacing o i l and naturalgas in the three sectors by allocating the sup-p l y o f b i o m a ss, n o t a lre a d y c o m m it t ed , t oeach sector, in turn, for each future. The re-sults underscore the points raised at the begin-ning of this section about the l imitat ions of

displacing oil and natural gas, the advantagesof gasi f icat ion in making th is d isplacement,and the potential competition with coal, eitherdirectly or as a synthetic fuel. The potential fordisplacement is large, however, and programsdesigned to use biomass in i ts three fuelforms—with preference to gasi f icat ion –andto promote use in all three sectors can prob-ably ensure that a large fraction of our bio-mass supply will be used to help alleviate U.S.dependence on oil and natural gas.

Figure 36.—Fuel Displacement With Biomass(Quads/yr)

Biomass supply Future

Gross After conversion Alosses

B

u4,8




Chapter 5

POLICY



Chapter 5.-POLICY

Page Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141Wood q **** **m. **. ... *. *e*.**.*..*.**.* 145

Introduction. . . . . . . . . . . . . . . . . . . . . . . ...145C u r r e n t P o l i c i e s . . . . . . . . . . . . . . . . . . . . . . . 1 4 6

F o r e s t P o l i c y . . . . . . . . . . . . . . . . . . . . . . . . 1 4 7

E n e r g y P o l i c y . . . . . . . . . . . . . . . . . . . . . . . 1 4 9Policy Options. . . . . . . . . . .............,149New Priorities in Administration and

Research . . . . . . . ..................150The Resource Base: Establishing a Secure

Fuel Supply While Protecting the Forests 151Energy Conversion: Managing Uncertainty 153

Alcohol Fuelsq *. . . . . . . . . ... 156Introduction. . . . . . . . . . . . . . . . . . . . ......156R e s o u r c e B a s e . . . . . . . . . . . . . . . . . . . . . . . . 1 5 6

Current Agricultural Policy . ...........157Agricultural Policy Options . ...........160Environmental Controls . . . . . . . . . . . . . . .166

Conversion and End Use. . . . . . . ..........171

Tax Policies and Other Subsidies . .......171Energy Policies. . . . . . . . . . . . . . . . . . . . . .177Environmental Pol icy. . . . . . . . . . . . . . . . .177

Crop Residues and Grass and Legume Herbage. ..180Introduction. . . . . . . . . . . . . . . . . . . . . . ....180C u r r e n t P o l i c y . . . . . . . . . . . . . . . . . . . . . . . . 1 8 0Policy Options. . . . . . . . . . . . . . . . . . . . . ...181

Page

Resource Base . . . . . . . . . . . . . . . . . . . . ..181Conversion . . . . . . . . . . . . . . . . . . . . . . . . .182

Anaerobic Digestion of Animal Wastes. . .......183Conclusion: Biomass and NationaI Energy Policy. 185

18.

19.

20.

21.

22.

TA BLES

Page Wood Energy Use in the United States. ....146Policy Options: Wood Energy . . . . . . . . . 150Policy Options: Alcohol Fuels . ...,......161Potential lmpacts of Increased CornProduction for Gasohol . . . . . . . . . . . . . . . .165Potential Effects of Alternative ErosionC o n t r o l P o l i c i e s . . . . . . . . . . . . . . . . . . , , . . 1 7 0

23. State Tax lncentives for Gasohol . . . . . . . . .17224. Sources of Public Financing forSmall-

ScaleEthanolProduction. . . . . . . ... ... ..174

FIGURE

Page 37. Operation of the Current Farm Program ...159



Chapter 5

POLICY

Introduction

I t should be clear from the technical anal-ysis presented in preceding chapters that thereis no single “ b ioma ss” e nergy system . Ra the rt he re a re many t ec hno log ies t ha t p rov idemeans of convert ing plant matter and animalwastes into usable forms of energy. Some oft he se t e c h no lo g ie s, su c h a s w o o d - b u rn in gstoves, are welI established in the marketplace,others are being developed, and s t i l l othershold p romise o nly for the d ista nt futu re. Thisreport focuses at tent ion on four fuel cyc les,selected according to their technological read-

iness and their potential to contribute signifi-cant amounts of energy. Each of these involvesd i f ferent raw mater ia ls , produces d i f ferentkinds of fuels, and may therefore be expectedto res pond t o d i f f e ren t i nc en t i v es . Ac c ord -ingly, pol icy opt ions appropriate to each fuelcycle are discussed in detail in separate sec-t ions that fol low. Al l biomass energy forms,however, have some common advantages, andencounter some common diff icuIties; these arereviewed first.

Consider the advantages. Biomass energy

forms are renewable; their use can help to re-l i ev e p res s ure on dep le t i ng f os s i l f ue l re -sources. They are also domestic and can be ex-pected to reduce American dependence on in-secure imported oil, enhance the U.S. balance-of -payments pos i t ion (except where agr icul -tural exports are reduced), and reduce Amer-ica’s vulnerability to supply interruptions. In-s o fa r as b i omas s f ue l s a re impor ted f romabroad, they will l ikely come from non-OPECcountries, such as Brazil, thus diversifying theenergy supply pattern. I n addition, some bio-mass energy sources contribute to the solutionof important pollution or waste disposal prob-lems and most of them are likely to contributeless to the long-term buildup of carbon dioxide(CO,) in the atmosphere than the foss i l fuels y s t e m s t h e y r e p l a c e , b e c a u s e b i o l o g i c a lgrowth processes consume CO 2, balancing, at

least in part, the release of this gas in combus-tion. *

Depending on the technolog ies that areadopted and the scale of product ion chosen,biomass energy may provide the basis for thegrowth of small business enterprises and t hedecentralization of economic activity, both ofwhich are valued by many Americans. Finallymany of the most important biomass energytechnologies are already in use; hence an ex-pansion of U.S. energy supply from these neednot await costly and time-consuming R&D ac-

tivit ies.

Despi te these c lear advantages, biomassfuel cyc les face several ser ious di f f icul t ies .Some of these stem from the character of thetechnologies and their dependence on diversesource materials; others stem from the incom-patibility of the fuel cycles with existing ener-gy distribution and production systems.

Perhaps the most serious general problemconfront ing biomass energy development isthat the source materials upon which the fuelcycles rely— wood and agricultural commodi-ties— are often already in use for nonenergypurposes. Demand for these materials for con-version to energy will have important, but dif-ficult to measure, impacts on existing markets.So will the sale of coproducts, such as distil-ler’s grain, t ha t a re c u r ren t l y impor t an t i nassuring the economic viability of bioenergy.Biomass energy forms are thus linked to exist-ing nonenergy markets in a way that mostfossil fuels are not. This creates uncertainty re-garding economic viability that is unrelated tothe adequacy of the technologies themselves.

I t a lso compl icates the des ign of pol icy op-t ions because the commodi t ies involved arealready affected by laws and regulat ions that

141



Ch. 5—Policy q 74 3

.

.

t ion and commerc ial izat ion. informat ion dis-seminat ion is especial ly important in promot-ing biomass energy because many technicalapplications are attractive only under site-spe-c i f ic or supply-speci f ic condi t ions. This is aproblem for many renewable energy technol-

og ies. The c irc umstan c es tha t m a ke c rop resi-dues attractive in a farming community in Ar-kansas, for example, may be duplicated only inanother community in Idaho. How can the in-formation about the dif ferent technologies orprocesses , and the i r re la t ionsh ip to marketconditions, be brought to these disparate oper-ations? With respect to this goal, the experi-ence with the Agricultural Extension Servicesuggests a useful model,

Commerc ial izat ion of new technologies iseven more diff icult. Policies that support com-

merc ia l i z a t i on us ua l l y a re j us t i f i ed on t hegrounds that technica l , economic , and env i -ronmental uncertainties, some of them due toGovernment po l i c ies , de lay the adopt ion o fmany technologies, especially those requiringlarge capital investments, unt i l increases inenergy prices have made them overwhelminglyattract ive,

Commercialization policies may take manyforms. Some are designed to help establ ishsupply inf rast ructures, some to assure theavailability of capital, and some to reduce the

risks associated with conversion to new energys y s t e m s . S t a n d a r d p o l i c y i n s t r u m e n t s t oachieve these goals include technical assist-ance, tax credits, loan guarantees, and the ad-

justments of regulatory requirements to facili-tate the sale of energy or the adoption of newtechnologies. In some cases incentives such asguaranteed markets or prices have been advo-cated as well.

In assessing commercialization policies, it is

important to distinguish between: 1 ) those inwhich the taxpayers absorb initial risks and the

Government clears hurdles to the demonstra-t ion of technical and commerc ial feas ibi l i ty ,and 2) permanent subsidies. The first are tem-porary supports, based on the assumption thatbioenergy wi l l s tand on i ts own once i t hasbe en introd uc ed , The g oa l is to b ring tec hnol-ogies onl ine more rapidly than would other-

wise be the case, with the publ ic paying theprice required for a limited period of time. Forthese policies, attention to specific time andscale l imitat ions is cri t ical in the formulat ionof legislation.

Outright subsidies, w he ther d i rec t o r i n -di rect , are more controvers ial and must beweighed w i th greater care. Subs id ies havebeen, and cont inue to be, impor tant ins t ru-ments in energy policy. Proponents of domes-tic, environmentalIy acceptable, renewable en-ergy often argue in favor of permanent subsi-dies on the grounds that they are granted toother energy forms and that the external costsof conventional energy systems make them farmore expensive than their market prices sug-gest. Whether biomass fuel cycles should besubs id ized, and i f so , how much suppor t i s

needed to counter the effects of subsidies tofossi l fuels and nuclear energy, are pol i t icalc hoices that the c ountry must m ake, The p ointhere is that the country must choose with theunderstanding that competi t ion among dif fer-ent energy technologies, according to the effi-c iency and cost of each, wi l l be impaired bypermanent subsidies. The Federa l Govern-ment’s lack of experience with commercial iza-tion also should be taken into account. Whereposs ible, therefore, i t would appear best topromote commerc ial izat ion wi th sel f - l imi t ing

subs id ies , and then, i f they are des i red, tochoose permanent subsidies that al low differ-ent renewable energy forms, including biomassenergy, to compete with each other in relative-ly open markets,

Final ly, increasing rel iance on biomass forenergy usual ly means tying energy supply tocomplex markets and to raw mater ials thateither are heavi ly dependent on weather andclimate or can be bid away for other uses. Con-sequently, fIuctuations in the supply of thesemater ia ls are inev i tab le and may become a

serious problem as biomass begins to accountfor a larger port ion of the nat ional energybudget . Under these c i rcumstances, i t wouldappear appropr ia te for the Federa l Govern-ment to explore means, such as establ ishingbuffer stocks of raw materials or even of fuelssuch as alcohol, to assure continuous and reli-




able supplies of food and other products usedas feedstocks, of coproducts, and of energy.

The fo llow ing sec tions review p olicy op tionsfor the product ion and use of energy f romwood, alcohol fuels, grasses and crop residues,and animal manure. Of these, the most com-

plex, and therefore the longest, is the sectionon alcohol fuels, which describes the substan-t ia l body of laws, regulat ions, and programsthat affect the American agricultural system aswelI as those governing soil erosion and air andwater quality, and the analysis of options forliquid fuel end uses. Thus, although both woodand crop residues can be converted to metha-

no l , po l i cy cons ide ra t i ons a f fec t i ng the re -source can be found in the sections on woodand crop residues, respectively, while those in-volving methanol production and use are re-viewed in the section on alcohol fuels. The lastsection of this chapter contains a summary of

the key policy alternatives for bioenergy devel-opment.

A p p e n d i x A r e v i e w s t h e k e y t e c h n o l o g i c a l developments that may help bioenergy reachits ful l potential, while appendix B describesthe computer mode l used to p ro jec t the e f -f ec t s on the ag r i cu l t u ra l economy o f p roduc -ing ethanol from corn.




cussion of policy alternatives. * The introduc-tion of methanol to the Nation’s Iiquid fuel sys-tem would create s t i l l another source of de-mand for wood. Depending on the pr ice andavai labi l i ty of imported oi l , and on the costand avai labi l i ty of coal -based methanol , the

demand f o r w ood f o r c onv ers i on t o l i qu idfuels may also be very large.

To summarize, the United States may expectto produce at least 4 Quads/yr, and most prob-ably about 5.5 Quads/yr, of energy from woodb y 2000. This assumes world oil prices of atleast $30/bbl and no substantial change in cur-rent pol icy orientat ions, and can be expectedto occur primarily as a result of the expansionof wood use in homes and in the forest prod-

‘Currentlv, utlllties produce between 60 and 70 MWe (Mttre,

1979) from wood, and an additional 100 MWe or ~o are on the

drawing boards The overall utllltv market i~ Ilmlted, however, bv

the verv large amountj of wood required by Incilvldua I plantsand by tht~ need t or very ~e( u rt> \u ppl y sou r( es

ucts industry. Although this represents morethan a tripling of current use, it is neverthelessa minimum; much more energy could be ob-tained from this resource. Steeply rising oil andgas prices, carefully designed incentives, andthe rapid commerc ial izat ion of ef f ic ient and

reliable gasifiers — all would contribute to this.U nder t hes e c ond i t i ons , be tw een 8 and 10Quads / y r m igh t rea l i s t i c a l l y be ob ta i ned f romwood by 2000, provided it is harvested as partof an effect ive forest management program.Note tha t OTA est imate s tha t the p rac t ica lmax imum is approx imate ly 10 to 11 Quads /y r -

(table 18). Much of the expansion beyond 4 to5.5 Quads/yr would have to take place in thecommercial/industrial sector outside the forestproducts industry and, depending on pr ivateand Government dec is ions concerning l iquidfuels , in the t ransportat ion sector (wood to

methanol and perhaps later to ethanol).

Table 18.— Wood Energy Use in the United States (Quads)

20001979 Vigorous support and

Sector Business as usual high energy prices

Residential . . . . . . . . . . . . . . . . . . . . . . 0 . 2 - 0 . 4a

1.0 2.0Forest product industries . . . . . . . . . . 1.2- 1.3 2.5- 4.5

b

5Other commercial and industrial . . . . — 0.5-1b

3 -4

Total. . . . . . . . . . . . . . . . . . . . . . . . . 1.4- 1.7 4-5.5 10-11

aEst I mates of current residential use of wood vary considerably The Wood Energy Institute, on the basts of a surveY con

ducted by the Gallup Organ lzatlon, has estimated that as much as 50 m!lllon cords (O 8 Quad) of wood were burned in 1979‘Nonaddltlve


Current

Although interest in solar energy of all kindshas grown rapidly in recent years, current Fed-eral programs give wood energy little emphasisor coordinated di rect ion. Nevertheless, woodcombustion is l ikely to be the most important,and perhaps the most cost ef fect ive, of thesolar conversion technologies in the next twode c ad es. The relative lac k of interest in woo d

energy ref lects, f i rst , the continuing Federalemphasis on large-scale, central ized, techni-cal ly sophist icated energy systems, and sec-ond, the bel ief of many pol icy makers that ,among the solar technologies, wood combus-tion is well understood and likely to grow any-way, whi le other technologies are more de-

Policies

p e n d e n t o n d i r e c t G o v e r n m e n t a s s i s t a n c e i f .they a re to m ake a c ontribu tion. Thus, funding

for current wood energy programs is low– andin some instances declining — and wood energyactivities have been poorly coordinated in andamong the agencies involved. This orientationhas changed to some extent in recent months,especial Iy wi th respect to program def ini t ion

and in teragency coord inat ion, but p lans forfunding and staffing suggest that basic prior-ities have been altered only slightly.

In the fol lowing pages, major current pol -icies and programs that affect wood energy arebr ie f ly rev iewed , be ginn ing w i th forest po l -



Ch. 5—Policy Ž 147

icy— largely the responsibility of the U.S. De-partment of Agriculture (USDA) and its ForestServ ice– and then energy pol icy–the respon-sibility of the Department of Energy (DOE).

Forest Policy

Forest Serv ice pol ic ies and programs areespec ia l l y impor tant in the Western Uni tedStates where a major i ty of the forest land isfederally administered. In managing this landthe Forest Service is guided by a number ofbroad goals ar t i cu la ted in the Organic Ac t(1897), the Multiple Use-Sustained Yield Act(1960), the Resource Planning Act (1974), andthe Nat ional Forest Management Act (1976),among others. Especially important for woodenergy is the “multiple use” principle, a long-

standing guide to land and t imber resourcemanagement that is fo l lowed by the ForestServic e. The g oa l of multiple use manage me ntis to assure the balanced use of forest re-sources by many interests and to prevent over-use by one or a few economica l l y power fu lsectors such as logging and forest productscompanies. The renewable uses for which thenational forests are to be managed are grazing,outdoor recreat ion, t imber, watershed, andwildlife and fish. Note that energy is not one ofthe statutory uses; to the extent that forests areused for energy it is the result of timber opera-

tions that involve residue collection and, to alesser extent, private harvesting of cordwoodthat may be permitted as part of stand thinningand debris clearing,

The Forest Serv ice interprets the Mul t ip leUse Ac t as mandat ing what may be ca l led“dominant use” zoning. That is, while multipleuse applies to an entire forest, particular man-agement areas may emphasize one or anotherof the uses. In pract ice this means that foreach area, such as a Ranger District, the man-ager identifies dominant uses and Iimits others

to the extent that they are compatible with thedominant ones. For example, i f a part icularzone is especial ly valuable as a wi ld turkeyhabi tat , constraints wi l l be placed on otheruses so that they do not interfere with wi ldturkey nesting and management. Clearly, thisapproach to land management has important

impl icat ions for wood harvest ing on Federallands.

A second key Forest Service policy is that ofseeking to assure a “ susta ined yield” of rene w-able resources from national forests and range-lands, Sustained yield has been interpreted as

“even f low” or “nondecl ining yield, ” meaningthat the al lowable t imber harvest on nat ionalforests is limited to a yield no higher than canbe sustained in perpetuity.

Sustained yield management has been thesubject of cons iderable controversy, largelybecause on the western national forests thatcontain large areas of even-aged, old-growtht imber, such management often means delay-ing timber harvests for a long period and, thus,continued low net growth. This can result ingreater wood decay and may sacrif ice poten-

t ia l growth on land wi th mature t rees. Mer-chantable timber on private lands has becomescarcer as these lands have been “mined” bythe forest products industry, leading to grow-ing industry pressure on nat ional forest re-sources. Many environmental ists support thelong-term sustained yield policy as a means oflimiting this logging and retaining the estheticand ecological values of old-growth forests. *

The c ont roversy o ver susta ined yield p ol-icies is compounded by poor information re-garding forest inventories and uncertainty re-

garding the possible consequences of differentt imber y ield al ternat ives. Insofar as currentpol ic ies inf luence the supply of wood prod-ucts, especially sawtimber — and it is l ikelythat they do in a minor way—they also affectwood energy,

An additional area of interest is Forest Serv-ice policies and practices for timber harvest-ing. currently, for example, logging residuesare burned or left to decompose— as much as1.7 Quads, in energy terms, are disposed of thisw ay eac h year— ra the r than c o llec ted and

used for energy. A decision to harvest some ofthese for energy would much improve the ener-gy supply equation in the regions involved.

State a nd p rivate forest ma nag eme nt po l-icies are also of central importance for wood

* S(J(J “ E nklronmentdl F ffectf ” under ‘Wood” In ch 4



—


Photo credit USDA —SoI/ Conservation Service

Much of the forestland in the Eastern United States is privately owned in small lots

energy, particularly in the East where most for-estland is owned in small lots by State govern-ments or private individuals or companies. Asnoted earlier, it is from this area and ownershipclass that a large proportion of new wood ener-gy resources must come if wood is to make asigni f icant ly greater contr ibut ion to the Na-tion’s energy supply. The Cooperative ForestryAssistance Act of 1978 is the latest pol icy

directive that addresses the issue of Federalassistance to, and guidance of, State and pri-

vate forestry. I t provides broad authority tothe Forest Service to administer research, ex-tension, and assistance programs, and some ofthese have been initiated. However, the Feder-al Government has chosen to downplay theseactivities in the overall allocation of funds, as-suming that State and loca l agenc ies and themarket can best allocate forest resources and

determine the level of management on Stateand private lands. *

F inal ly , forest management is af fected bypolicies designed to protect the public healthand welfare and the environment. I n general,environmental contro ls implemented by theForest Service have been init iated by courtsthat st r ic t ly in terpreted the mandates of na-t ional forest legislat ion. For example, the Or-ganic Act of 1897 provides that “no nationalforest shall be administered, except to improve

and protect the forest within the boundaries”

* State tor(’stry po l I( Ie~ vary widely In character and effec-tlvene~s While there are some exceptions, most State programs

pla( e a heavy emphasis on forest fire prevention and are able todo only mlnlmal stand management on private land Some

States, Includlng Indiana and New York, heavily restrict cuttingof wood for any purpose on State lands The~e I Im It access to

State forests bv those ~eek Ing to harve~t even restdue~ for energv

purpose~




or for purposes of watershed management .The c ourts have c onstrued the b asic po lic y be -hind this language to be regard for the futurewelfare, 3 and, accord ing ly , have proh ib i tedpractices that would decrease forest growth orwater supplies.

In response to these judicial mandates forenv i ronmenta l pro tec t ion, Forest Service man-

agement practices have changed significantly

in the last 10 to 20 years. These changes have

been accelerated by legislative directives such

T as the Nat ional Env i ronmental Pol icy Act of1969 (NE PA, described in detail in the sectionon “A l c oho l Fue l s ” ) . Env i ronmenta l impac tstatements (EISs) required by NE PA will playan increas ingly important role in forest man-agement as demand for wood increases.

At the State and local level, environmental

controls on forestry vary widely. Some Stateshave statutes modeled after NE PA that can beused to control the effects of logging on Statelands. Other States have varying degrees offorest protect ion bui l t into the legis lat ion foradmin is ter ing S tate fores ts . In many otherStates, however, the primary impetus to properforest ma nag eme nt on State and private landis section 208 of the Clean Water Act. How-

ever, as discussed under “Alcohol Fuels, ” sec-

tion 208 only applies to nonpoint source water

pollution and not to land quality or other is-

sues, and its implementation has been delayed

due t o po l i t i c a l , adm in i s t ra t i v e , and o the rproblems.

Energy Policy

DOE has the primary responsibil ity for re-.search, development, and demonstrat ion inthe field of bioconversion, and its Biomass En-ergy Systems (B ES) Program has launched anumber of smalI projects aimed at wood ener-

gy deve lopment . Current activities include

‘(J $ v ~h.?nnon, 1 5 1 F 8b 1 (( ( ’ M o n t 1907)

support for the des ign of safe and ef f ic ientwood heaters, research on silvicultural energyplantat ions ( t ree farms), and a very m o d e s tdemonstrat ion of one k ind of wood gas i f ier .The a dm inistration of bioene rgy d eve lopm ent,however, has been def ic ient in a number of

respects. The BES Program has been under-s ta f fed and under funded, and coord inat ionwith other agencies, especial ly in USDA, hasbeen poor, delayed, or nonexis tent . Not sur-prisingly, there also has been a rapid turnoverin management.

Recently the biomass program has been re-structured and granted some additional techni-cal staff — the BE S Program now numbers fiveprofessionals and may increase to eight in thenear future — and a wood resource managerhas been appointed in the Industrial Applica-

t ions Program (of the Solar Appl icat ions Of-f i ce) and charged w i th promot ing the rap idcommerc ia l i za t ion o f sys tems us ing d i rec twood combustion. In the future, DOE intendsto delegate many wood-related responsibil it iesto the regional Solar Energy Centers, while re-taining overall program guidance in Washing-ton. To imp rove c oo rdination of b ioma ss an dwood energy act iv i t ies, USDA and DOE cur-rent ly are working on a memorandum of un-derstanding to clarify the roles and responsibil-ities of the respective agencies involved.

A l though these a c t i v i t i e s a t t e s t t o t h eawakening interest in wood in DOE, it is clearfrom funding decisions that program activit iesconcerning wood retain a very low priority inthe overall Federal energy effort. As indicatedearlier, this reflects, on the one hand, the ad-ministration’s bias in favor of large-scale, cen-t ra l i zed appl i cat ions , espec ia l l y those thathold the prospect of producing synthet ic l iq-uid fuels, and, on the other hand, the beliefthat wood energy is “ready” and requires Iittleaddit ional support in comparison to many ofthe other possible candidates for support.

Policy Options

There a re a numb er of wa ys b y which the Indeed, a combinat ion of pol icy support andGovernment might encourage a nd regulate use high energy prices probab ly will be required i fo f wood energy in the United States ( tab le 19) . the c ont ribut ion o f w ood energy i s to g row




and widely understood, a number of areas re-main in which R&D can make an impor tantcontribution. Five areas, in particular, sti l l re-quire this kind of support: 1 ) wood-harvestingtechnology and demonstrat ion, 2) wood gasifi-cation technology and demonstration, 3) basic

research on the thermochemistry of biomass,4) deve lopment o f fas t -grow ing, h igh-y ie ldplant hybrids as fuel sources, and 5) researchon the conversion of wood and Iignocellulosicmaterials to ethanol. Special ized t imber har-vesting for wood energy is new to most energyusers, and experimentation with different har-vesting strategies and with machines that canharves t t imber e f f i c ient l y and safe ly in d i f -ferent kinds of terrain and at greater distancesfrom roads, is needed. Also, harvest ing pro-grams to demonstrate the costs and benefits ofdi f ferent pat terns of wood col lect ion would

provide useful information, especially to thosecontemplating large-scale conversion alterna-tives.

Perhaps the most important single technicalcontribution to the expansion of wood energyuse would be the development of reliable close-coupled, airblown, intermediate-Btu gasifiers. De -

scribed at greater length in volume I I of this re-

port, this technology is critical because it can

be used to produce process heat for industry(an option for which direct combustion is not

suited), and would al low many current users ofoil and gas to convert to wood at about two-thirds the cost of a new wood boiler, while re-taining the flexibil ity to switch back to oil orga s if nec essary. This might ma ke w oo d ene rgyattractive to a broad range of investors whosebusinesses are located close to wood resourcesbut who are reluctant to commit themselves athigh cost to an uncertain source of supply .Although working gasifiers have been built inthe pas t , they need fur ther deve lopment tomeet the needs of potential users for commer-cial purposes.

Research on the thermochemistry of wood,a lso t reated in vo lume I I o f the repor t , i sneeded for poss ible technical improvementacross the whole range of biomass combustionand gasification technologies, as well as fueland chemical synthesis.

The Resource Base: Establishing aSecure Fuel Supply While

Protecting the Forests

One of the principal obstacles to wood ener-gy outside the forest products industry is the

absence of an establ ished wood fuel supplyand de l ivery inf rast ructure. The ad op t ion ofnew energy technology is often contingent onthe investor ’s sense of conf idence regardinglong-term rel iabi l i ty of supply at predic tablecosts. Such confidence is unwarranted in mostparts of the United States today.

The G overnment might take a numbe r o fstep s to imp rove the sup p ly out look. To b eg inwith, improved inventories of wood resourcesare needed in most areas. As the demand forbiomass grows, it becomes increasingly impor-

tant to be able to assess total wood inventoryand wood growth with more precision than isposs ib le today . The Fores t Serv ice Surveyshould be redesigned to provide a census offorest inventory and forest growth by speciesand qual i t ies on a whole-stem biomass basisnot obscured by arbi t rary assumpt ions con-cerning forest use standards and thresholds ofcommerc ial i ty . In addi t ion, i t would appearadvisable for the Government to: 1 ) improvethe census of forest product use to inc ludewood used for industrial, commercial, and resi-dential fuel; 2) improve the specification, clas-

sif icat ion, and census of wood residues, in-cluding silvicultural, harvesting, and manufac-turing residues; and, 3) careful ly explore thetheoret i ca l feas ib i l i t y o f mul t ip le use fores tmanagement that includes fuel as one of themanagement objectives.

In those regions where the Federal and Stategovernments are major owners and managersof forests, the management agencies might fur-ther encourage the establishment of a fuel sup-ply industry by actions such as providing pro-gram funds to support the establ ishment of

concentration yards. In the case of utilities andlarge institutional energy consumers, the Gov-ernment might make avai lable a guaranteedsupply of fuelwood f rom publ ic ly owned for-est material, logging slash, and the woody resi-dues of site preparation, fire prevention, andstand improvement measures. National forest




decisions regarding the supply of wood can beexpected to affect the overal l wood market,and po l ic ies must be des igned wi th th is inmind. In particular, it is important that the ForestService assess its current and future timber salesprocedures to determine possible impacts of

pricing policies on the market for wood energyand on incentives for forest management in theprivate sector.

Public forests, because of their size and theability of management to make discrete inven-tories and plans, offer excellent opportunitiesin all regions of the United States to design andimplement fuelwood use and forest growth pi-lot projects that can be evaluated for widerpr iva te sec tor adopt ion . F ina l ly , there aremany incentives that might be adopted to sup-port commercial wood supply systems in the

private nonindustr ial forestlands. Direct andindirect help in financing timber harvesting (orthe purchase of mechanized harvesting equip-ment ) , o r incent ives fo r fo res t - th inn ing ac-t ivit ies with the provision that the wood resi-dues be used for energy and the harvest planbe approved by qualified experts, are but twoexamples. Also worth considering are educa-tional programs to improve logger efficiency inconducting integrated harvest operations. Ex-perience in New England has shown that oneof the most significant factors in determiningthe economic viability of harvesting low-qual-

ity material with mechanized equipment is theskill of the logging foreman in planning and ex-ecuting the cut. One way to approach this isthe staging of demonstration harvests to pro-vide loggers with an opportunity to see well-executed operations and to show landownersthe variety of possible management strategiesfor their forests.

The op tions de sc ribed ab ove w ould help toes tab l ish a re l iab le wood fue l supp ly in f ra -structure. In doing so, however, it is critically

impor tan t tha t the pro tec t ion and improve-ment of the forest resource be assured. In-creased demand for wood energy might lead tomore intensive and ef fect ive forest manage-ment that actually would increase the quali tyand quantity of timber resources. Unfortunate-ly, it is by no means clear that such manage-ment will occur automatically, or in a uniform

manner, everywhere in the country. A key un-certainty here is the unpredictable behavior ofthe 4.5 mil l ion private, nonindustr ial woodlotowners who control 58 percent of the forest-Iand and whose resources will be vitaI to woodenergy supplies. Most of these individuals lack

the expertise to make environmentally soundforest management decisions, and it is unclearhow they will respond to increasing incentivesto manage their lands for wood fuel.

Moreover , economic incent ives do not a l -ways favo r sound fo res t managemen t . A l -though the absence of such management maydamage forest product iv i ty , landowners musthave extremely long planning horizons in orderto consider this damage when short-term eco-nomic pressures often favor cutting on vulner-able lands or with environmentally damaging

techniques.Other factors that wi l l a f fect proper forest

management include weak regulatory incen-tives, the often short Ieadtimes for selecting alogging s i te and harvest ing techniques, thelarge number of relatively small sites that willmake careful implementation, monitoring, andenforcement d i f f i cu l t , and the na ture o f thepotential environmental damage, which doesnot lend itself to relatively simple technologi-cal controls or process changes.

There are a num be r of avenues ava ilab le for

environmental control in forest management.These includ e b oth p reventive m ea sures tha tare implemented before any impacts can oc-cur and mit igative controls that alter the eco-system response to impacts. *

On national forest lands, the exist ing pol-icies described above might be expanded toencompass intensive resource management forenergy. The primary legislative change that mightbe considered is including fuel as one of thestatutory forest uses under the Multiple Use Act.This wo uld remove any po tential ob sta c les toincluding wood energy supplies in other forestmanagement d i rect ives and regulat ions, in-cluding those that implement NE PA. However,the degree to which Forest Service practicesconform to existing directives is unclear. Addi-tionally, even though sound management tech-

*Se~ “Re\ource Base” In VO I II



Ch. 5—Policy . 153

niques may be included in an E I S filed underNE PA, there is no assurance that the specified

techniques will be followed.

Forest management practices on State and

private lands are more difficult to control at

the Federal level. Where these activities are

part of a comprehensive Federal program (e. g.,incentives for wood energy use) managementplans could be made a precondition of partici-pation, and an E IS could be required for theentire program. However, just as managementdecisions on national forests often are made.on a s i te-spec i f ic bas is in accordance wi thgeneral guidel ines, techniques for control l ingenvironmental impacts on non-Federal forest-Iand also need to be tailored to a specific site.

I n add i t i on , f edera l l y manda ted c on t ro l swould be most ef fect ive i f they were imple-

mented throughout the forestry system ratherthan only on lands supplying wood for energy.That is, incentives that are t ied only to fuel-wood would be d i f f i cu l t to enforce w i thoutcontinuous supervision of logging because i tw ou Id be near l y impos s ib l e t o p rov e w ha twood came from which land once i t had beencut. I n addition, if the environmental sensitivi-ty of the land is the only variable (and not thek ind or qual i ty of t imber), forest landownerswould just shif t their wood fuel act iv i t ies toless sensitive lands.

At the State and local level, environmental

contro ls could be implemented through log-

ging permit schemes tied to forest manage-

ment plans. Such schemes might include feder-alIy assisted education and demonstration pro-grams. Again, these controls would be easier toimplement and enforce if they apply to all for-estIand.

Finally, as discussed above, vigorous State. and local implementation of section 208 of the

Clean Water Act could be a powerful tool inc on t ro l l i ng nonpo in t s ourc e po l l u t i on f romlogging, but due to a variety of factors it is un-

likely that this will occur.

Energy Conversion: Managing

Uncertainty

Assuming that policies designed to protectand enlarge the resource base and to encour-

age the harvesting, transport, and marketing offuelwood are adopted, a number of obstac lesremain that prevent potential users from con-verting to wood energy. In many cases, remov-al of these requires only minor adjustment inpolicy or program emphasis. One such obsta-

cle, for example, is the lack of public informa-t ion concerning technologies and their appl i-cat ions . Another i s cont inu ing uncer ta in tyabout future Government regulat ions relatedto health, safety, air quality, and similar issues.A continued expansion of Government informa-tion dissemination activities, along with the prep-aration and distribution of accurate and under-standable environmental monitoring and equip-ment test data, plus rapid setting of regulatorystandards would be helpfuI in dispelIing someof this uncertainty. In the residential heatingsector, for example, there is a need for accu-

rate information regarding the safety, efficien-cy, and proper instal lat ion and operat ion ofwood stoves and fireplace inserts, and for cleargu idance regard ing emiss ion s tandards . A l -though wood stoves are already economical inmany parts of the country, the provision of aninvestment tax credi t for th is equipment , aswell as for wood furnaces, would speed the ex-pansion of wood use in home heating.

For those forest products firms with excessenergy resources (i. e., with more residues thanneeded for onsite power), cogeneration to pro-

duce electricity as well as steam may be aneconomical ly at t ract ive al ternat ive. Unfortu-nately, cogeneration often is impeded by util i-ty pricing policies in which backup energy issold at very high prices, whi le energy fromsources such as cogenerators is purchased atvery low prices. Although this problem is ad-dressed in the National Energy Act of 1978, itwill take a long time to change rate structuresand more regulatory support for cogenerat ionis needed.

In the commerc ia l / indus t r ia l sec tors , the

high capital cost of wood combustion equip-ment is a barrier that can be addressed by theprov is ion o f tax c red i ts–some a l ready havebeen author ized, but are not widely used-–loan guarantees, and accelerated depreciational lowances. Wood-f ired systems general ly re-quire three to four t imes the capital of com-




parable oil-fired systems. It would appear thatsmall- and medium-sized businesses, especial-ly, would be able to benefit greatly from suchincentives.

Still another problem for businesses consid-

ering adding large-scale wood-fueled gasifiersto an oil- or gas-fired boiler is the possibilitythat, as a result of fuel-switching regulations ofthe National Energy Act, switching back mightbe prohibited. I f this is the case, turning towood cou ld decrease fue l s t ream f lex ib i l i t yand increase uncertainty.

Most prospective wood energy users outsidethe forest products industry also would benefitfrom a carefully designed program of techni-cal assistance. Such a program would providebasic informat ion and help those interested

work their way through the many complicatedsteps invo lved in a dec is ion to conver t towood. This might include assistance with a re-view of the technology, an assessment of re-source inventories, an investigation of applica-ble Federal and State subsidies and incentives,and perhaps even help with the preparation ofengineering plans. Forgivable loans to small-and medium-sized businesses as wel l as tosmal l u t i l i t ies fo r convers ion s tud ies a lsowould be of assistance. These loans might berepaid from investment funds if a decision is

made to go ahead, and be forgiven if the proj-ect should prove unfeasible.

Finally, wood combustion can be an impor-ta nt sourc e o f loc al a ir po llution. The reg ula-tory structure of the Clean Air Act in regard tos ta t ionary sources is descr ibed in “A lcoho lFuels. ” However, most wood-fired equipmentwil l be too small to be affected by Clean AirAct requirements and legislative or regulatoryaction to reduce emissions may be required asmore homes and businesses turn to wood fuel.The ea siest op tion to imp lement w ould b e New

Source Performance Standards for small woodcombust ion equipment. However, th is opt ionoverlooks the substantial number of combus-t ion faci l i t ies a l ready in p lace. In addition,regardless of how emission Iimits are imple-mented, they will be difficult to monitor andenforce due to the great number of dispersedsources.

What impact would these pol ic ies have i fadopted? The answer is unclear because theuncertainty about key aspects of the wood en-ergy system simply is too great. OTA is confi-dent about the estimate that 4 to 5.5 Quads/yrof energy from wood will be used annually by

2000, but this represents mainly a projection ofcurrent trends. If the forest products firms con-tinue to grow and move toward energy self-sufficiency, as much as 4.5 Quads/yr are likely tobe derived from wood in that sector. OTA alsois confident that the resource base, with prop-er management, is large enough to sustain en-ergy production in the 6- to 10-Quad/yr rangeby 2000 or sooner. But important uncertaintiesremain, and it is critical that these be acknowl-edged and incorporated in policy decisions af-fecting wood.

Only one technical question appears to becrucial at this point: whether a reliable gasifiercan be developed and marketed in the near fu-ture. Other technical innovat ions may helpspeed the use of wood for energy, but do notappear as important in capturing an entirelynew set of users for this resource. The reason isthat gasifiers can be used for process heat andgive fuel-switching flexibility that is essentialin the absence of cer ta inty regarding futurewood supplies. In addition, gasification wouldrequire less initial investment than direct com-

bustion. Clearly, therefore, this represents abottleneck that should be addressed as quicklyas possible if a greater use of wood energy isd esired . The no ntec hnica l unce rtaint ies a remore difficult because they have to do mainlywi th the behavior of d iverse groups of pro-ducers and consumers and wi th the operat ion of complex, multi sector markets.

Perhaps the most important uncertainty con-cerns the crosspoint between wood consump- “t ion and forest depletion. Growth in depend-ence on wood for energy wil l mean drawing

heavily on the 283 million acres of forests nowin the hands of many small- and medium-sizedwoodlot owners, but very little is known abouttheir management objectives, about how theymight respond to incentives to manage theirland, harvest wood, and so forth. Currentlyla rge propor t ions o f wood used fo r fue l inresidences are cut with Iittle or no professional




guidance. Although it may seem economically

sensible from a long-term perspective for theseowners to manage their resources carefully, itis entirely possible that growth in demand f o rwood fuel and a desire to maximize short-termprofits will lead to regional or local deforesta-

tion as well as an overall decline in the qualityof national forest resources. For this reason,and because an increase in the resource baseshould, if at all possible, parallel the growth ofwood energy use, policies to enlarge Govern-ment support for forest management act iv i t ies

. wouId appear prudent despite the uncertain-ties listed here. Programs with this objectivecan always be phased out if private initiativesappear adequate, whereas a lack of adequateforest management would decrease the energypotential obtained from wood and could causesignif icant environmental damage.

If the forests are more intensively managed,t h e o v e r a l l c h a r a c t e r o f t h e s e l a n d s w i l lchange. Extensive management would alter thephysical appearance of woodlands and trans-form the mix of wildlife supportable by forestecosystems. To a degree, it is possible to graspthese changes by observing the character ofwoodlands in parts of Europe where intensivefores t management has been prac t i ced formany years.

Finally, there remains a broad range of mar-

ket uncertainty that stems from the possibilityof changes in the prices of petroleum and nat-ural gas and from continuing competition withnonenergy uses of wood and land. It is qu i t epossible, for example, that as larger amountsof wood are cut, the nonenergy uses for incre-mental wood suppl ies may grow more attrac-tive economicalIy, resulting in far less conver-sion to wood energy than might otherwise beexpected. Because feedstock costs are such animportant part of biomass energy system costs,t he c on t i nu ing pos s ib i l i t y t ha t w ood p r i c esmay rise wiII tend to dampen enthusiasm for

this energy source outside the forest productsindustry.

To summarize, all these uncertainties makeit difficult to predict with any precision or con-f idence either how much energy wi l l be pro-duced f rom wood wi th the adopt ion of even

vigorous promotional pol ic ies or the ful l con-sequences of the success of such policies forthe env i ronment and nonenergy wood mar-kets, This conclusion, in turn, suggests severalimportant principles that should be consideredin the formuIat ion of wood energy pol ic ies.

First, legislators should acknowledge the uncer-tainty about the effectiveness of policy initiativesat the outset by making their commitments tenta-

tive and by including in legislation, where appro-priate, requirements for subsequent assessment

of results. Sunset provisions, price and quantitythresholds for subsidies and incentives, statu-tory requirements for review of exist ing pol-ic ies, and similar provisions might contributeto this goal. For example, policy makers mightrequ i re a formal rev iew of the wood energysystem, the condit ion of the forest resource,and the need for continued incentives for con-

version to wood when 5 Quads/yr of wood en-ergy are being consumed. Second, the UnitedS ta tes s hou ld s imu l t aneous l y mon i t o r w i t hgreat care the responses to promotional pol-icies and other regulations in order to detectproblems and unanticipated impacts. Continu-ous monitoring of the condition of the forestresources, the kinds of technologies being de-ployed, and the environmental and social im-pacts of wood energy use, is essential.

As this report has tr ied to emphasize, the

possible problems and costs associated withincreasing reliance on forest resources are notas well understood as the benefits. I n general,

these appear to be manageable but are of the

kind that are often neglected until it is too late,

The broad tendency in the United States, when

the goal is perceived to be that of “commer-

c ial iz ing” an ec onomic ac t i v i t y , has o f t enbeen to piece together a rough package ofloosely related incentives and then to assumethat the problem has been solved, Wood ener-gy, l ike all biomass energy systems, requiresnot a solut ion but a long-term commitment tothe management and guidance of interdepend-ent systems of economic activity. This, in turndemands careful orchestrat ion of incent ives,controls, and regulations, along with constantmon i t o r i ng o f t he c ons equenc es o f po l i c ychoices.




.

Current Agricultural Policy

Since the 1700’s, American farmers havebeen dissatisfied with the prices of agriculturalcommodities that resuIt from free competitivemarket condit ions. After World War 1, farm

prices and income were low, and farmers be-gan to turn to the Federal Government forprice supports and controls on surpluses. Dur-ing the 1920’s, Congress twice passed legisla-t ion designed to subsidize grain exports, butPresident Cool idge vetoed i t both t imes be-cause he believed foreign nations would takeretaliatory steps. 4

In 1929, under President Hoover, the FederalFarm Board was established to administer aprogram of “orderly marketing” based on stor-ing surplus grain that was depressing grain

prices. Although the grain was stored, the pro-gram failed, partly because grain supplies re-mained uncontrol led and part ly because theanticipated increase in demand did not materi-alize due to the depression. 5 I n 1933, the Feder-al Farm Board was replaced by the New Dealproduction control, price support, and storageprograms. This basic regulatory structure, withthe addition of export subsidies, continues to-day in order to balance the supply and demandof agricultural commodities, maintain farm in-come, and ensure reasonable prices for con-sumers.

The present form of these programs was es-

tablished under the Food and Agr icul ture Actof 1977 (Public Law 95-1 13), one of the mostcomprehensive pieces of farm legislation everpassed by Congress. Under this Act USDA esti-mates the acreage required to meet domestic,export, and inventory needs for a crop year.This “ nat iona l program ac rea ge ” is then d i-vided by the estimated national acreage har-vested for each basic commodity (corn, cot-t o n, p e a n ut s, ric e , t ob a c c o , a n d w h e a t ) inorder to arrive at an allocation factor that isused to determine indiv idual farm programacreage. Since early in 1980, the national pro-gram acreage a l loca t ion has inc luded pro-

4 S Harber, et al , The Pofent/al 01 Procjucing Energy From Agr/-

culfure, contra{ tor report to OTA, May 1979‘Marion Claw~on, Po/Icy Dlrecllon$ Ior U S Agr~culfure (Baltl-

mort~, Md The Johns Hopk in~ Press, 1968)

jected demand for a lcohol fuel feedstocks.Farmers who agree to limit their production tothe allotted acreage are eligible for a variety ofeconomic programs including pr ice supports,loans, and other p aym ents. The p rod uc t ioncontrol and income support programs are de-

scribed below in order to establish the policycontex t w i th in wh ich e thano l feedstock pro-duction must be integrated.

Production Controls

If ethanol production is to be increased bybr inging addi t ional acreage under intensivecultivation, the acreage most Iikely to be usedfirst is the land under production controls. TheUSDA programs designed to control produc-t ion by enforcing the individual farm acreageallotments include set-aside lands, diverted

crop land, and the c rop land ad jus tment p ro-gram.

The set-aside a pp roa c h wa s initiated unde rthe Agricultural Act of 1970 (Public Law 91-524), which required farmers to remove a per-centage of their acreage from production anddevote i t to approved conservat ion uses inorder to be eligible for other farm support pro-grams, including loans and other payments.Farm operators must meet the set-aside re-quirements for all crops (“cross compliance”).Thus, if farmers grow both wheat and feed

grains, they must participate in both set-asideprograms to receive benefits from either. Farmoperators who agree to reduce their acreage by10 to 20 percent are guaranteed a slightly high-er price for their crops than farmers who donot par t ic ipate in USDA programs. In 1978there were 13.3 million acres in the set-asideprogram, but the amount of set-aside acreagevaries annualIy.

Farm operators also may divert other landsto approved conservation uses in return for ad-d i t iona l payments under severa l USDA pro-

grams. In years when the demand for a basiccommodity (such as wheat or feed grains) isprojected to be re lat ive ly low, or when re-serves are high, farmers may voluntarily divertacreage to conserva t ion uses in re tu rn fo rdiversion payments. Approximately 5 mil l ionacres were under cropland diversion in 1978;again, the acreage varies annualIy.




As mentioned above, agricultural policy re-quires set-aside and diverted lands to be con-verted to “ ap proved conserva t ion uses. ” Inpractice, there is a wide range of such uses;some would conf l ic t wi th ethanol feedstockproduction while others specif ical ly provide

for it. In general, set-aside and diverted acre-age must be devoted to c rops or p rac t ices(such as grasses and legumes, small grains,trees or shrubs, terraces and sod waterways,and water storage) that wil l protect the Iandfrom wind and water erosion. Both set-asideacreage and diverted lands also may be de-voted to wi ld l i fe food plots or habi tat or topub l ic recreat ion in accordance wi th s tand-ards developed by USDA in consultation withother agencies. Government assistance often isavailable to help defray the costs of these ac-tivities.

Moreover, under the Emergency Agricultur-al Act of 1978 (Public Law 95-279), USDA maypermit all or any part of the set-aside or di-verted acreage to be used to produce any com-modity (other than the commodit ies for whichacreage is being set-aside or diverted) for alco-hol fuel feedstocks. This energy use of divertedand set-aside lands is permitted under the Actif USDA determines that the production is de-sirable in order to provide an adequate supplyof Iiquid fuels and is not Iikely to interfere with

the other goals of farm programs. Participatingfarmers would continue to receive set-asidepayments for these lands. Dur ing years inwhich there is no set-aside or acreage diversionrequirement, the Act authorizes USDA to for-mu late and administer a program for the pro-duction of commodities for liquid fuels. Undersuch a program, producers of wheat, feedgrains, upland cotton, and rice would receiveincent ive payments to devote a por t ion o ftheir ac rea ge t o ene rgy c rop s. The a mo unt ofthese payments would be determined by thedegree of participation necessary to ensure an

adequa te supp ly o f commod i t i es f o r l i qu idfuels. However, this program has not been im-plemented by USDA.

The third p rod uc tion c ontrol is the c rop landadjustment program. It was authorized by theFood and Agriculture Act of 1965 to reduce thecosts of farm programs; to assist farmers in

converting their land to nonagricultural uses topromote the development and conservation ofsoi l , water, forest, wildl i fe, and recreation re-sources; and to establ ish, protect , and con-serve open spaces and natural beauty. Underthe cropland adjustment program, farm oper-

ators entered into 5- to 10-year contracts tomaintain conservation practices on land takenout of production. I n issuing these contracts,USDA gave priority to practices most Iikely toresult in permanent conversion of the land tononagricultural uses. I n 1976, 1.2 milIion acresremained under cropland adjustment programcontracts.

Income Support Programs*

Many proponents of gasohol argue that i twou ld i nc rease commod i t y p r i ces and thus

farm income, and therefore would be a boonfor farmers. In order to assess this argument, itis necessary to understand USDA programs re-lated to basic commodity prices (corn, cotton,pe anuts, ric e, toba c c o, and w hea t). The ag ri-cultural programs designed to protect farm in-come and consumer interests are price sup-ports, direct income and deficiency payments,loans, and disaster payments.

A target price is used as the basis for pro-v id ing farmers wi th d i rect income paymentstha t vary inverse ly w i th the market p r ice .

Ta rget p r ic es are d ete rmined a nnua lly fromUSDA estimates of production costs (exclud-ing land) and of returns to management. Whenthe average market pr ice received by farmersduring the first 5 months of the marketin g y e a ris less than the target pr ice, el igible farmersreceive deficiency payments based either onthe difference between the two prices or thedifference between the target pr ice and thesupport price, which is determined by the loanrate at which farmers can borrow on their cropproduction. In practice, the loan rate becomes

a price f loor below which the market pr ice isunlikely to fall, because the Government loaneffectively eliminates financial pressure on thefarmer to sell at any price.

To obta in a USDA nonrecourse loan, thefarm operator pledges a specif ied amount of

*Much of the discussion In this section IS from S Barber, et al ,

Op Clt




his crop as collate ral. The a mo unt of th e loa nis equal to the loan rate (or support pr ice)times the quantity of crop pledged. At the endof the loan period (9 to 12 months) the farmermay e i t he r repay t he l oan w i t h i n t e res t o rforfeit the stored crop. Farmers may extend anonrecourse loan and receive a prepaid stor-age payment by signing a 3-year contract toenter the farmer-held reserve program. Underth is program, the farmer ag rees to ho ld thecrop for the contract period or untiI the marketprice reaches the release level (140 percent of

. the loan rate for wheat and 125 percent of theloan rate for corn). The farmer only pays in-terest during the first year of the contract at 7percent. Farmers can release the grain earlierby paying a penalty.

Finally, payments are available when natu-ra l d isas ters e i ther prevent normal p lant ing

operations for basic commodities or result in aharvest of less than 60 percent of normal pro-duction. The disaster payment rate is 50 per-cent of the target price for the deficit of pro-duction below 60 percent of normal.

Operation of the current farm price and in-come program under three circumstances is il-lustrated in f igure 37. In part A, the marketprice is above both the target price and theloan rate. In this situation, farmers would sell

their crops in the market, no loans would be re-quested, and no deficiency payments would bemade . I n part B, the market price is below thetarget price but above the loan rate. Underthese circumstances, p roduc ers w ou ld no telect to take the nonrecourse loan but wouldreceive a deficiency payment equal to the dif-ference between the target price and the mar-ket price times the production from programacreage. In part C, the market price is belowboth the target price and the loan rate. In thissituation, farmers probably would take advan-tage of the nonrecourse loan program, whichwould increase their crop revenue, and theywould rece ive an addi t iona l def i c iency pay-ment on their program acreage equal to thedi f ference between the target pr ice and theloan rate times the program acreage.

The c urrent fa rm program s ha ve two ma ineffects. First, the def ic iency payments repre-sent an income transfer from the general pub-lic to farmers; they have little effect on marketprices. Sec ond , the loan p rogram op erate s as aprice support that tends to increase prices toconsumers up to the level of the loan rates and

transfers income from consumers to farmers.

Thus, the current program splits the incidence

of income t ransfer be tween consumer pay-

ments (if the market price is below the loan

Figure 37.—Operation of the Current Farm Program

A

Pm

P,

P,

P m = average Q a= program

market price acreage production

P, = target price Q b= total production

PI = loan rate

SOURCE S Barber, et al The Potential of Producing Energy from Agriculture contractor report to OTA May 1979




rate) and general tax revenues (for def ic iencypayments).

Reserves and Exports

Agricultural policy also provides for storage

and expor t o f commodi t ies— both potent ia l

sources of alcohol fuel feedstocks. Strategicreserves are maintained as part of the generala gricultural p rogra ms. The sourc es of reservesinclude farmer-held reserves and production inexcess o f farm market ing quotas for bas iccommodities. As discussed above, farmer-heldreserves are s tored under contract and re-leased for sale on the market at a specifiedtime. Under the market quota programs for ba-sic commodities, when production exceeds thefarm al lotment the farmer s tores the excessand uses it the next year to offset the farma l l o tmen t f o r t ha t y ear , o r t he C ommod i t yCredit Corporation (CCC) may acquire the ex-cess as part of its strategic reserve. [n general,the reserves are used in disaster relief and wel-fare assistance or as a hedge against futuresupply deficits.

Agricultural policy also encourages the ex-pansion of international trade to use the abun-dant U.S. agricultural product iv i ty to aid thebalance of payments . In 1978, for example,agriculture had a favorable trade balance of$13 billion. Moreover, concessionary commod-ity exports are subsidized by the Federal Gov-

ernment to provide assistance to developingcountries.

Research, Education, and Extension

In addition to the regulatory programs dis-cussed above, USDA also sponsors research,e d uc a t io n, a n d e x te n sio n se r vic e p r o g r a m sthat cou ld a f fec t the produc t ion o f energycommodi t ies.

The Agricultural Research Service supportsbas ic and appl ied research in a number o f

areas inc luding plant sc iences, entomology,soi l and water conservat ion, and agr icul turaleng ineering. The Coo pe rative Stat e Resea rchService (CSRS) administers congressional lyma nda ted resea rc h in the State Agric ulturalExperiment Stations. Several of the researchprograms sponsored by these agencies could

af fect bioenergy, inc luding research in cropproductivity, and processing, storage, and dis-t rib u t i o n e f f ic i e n c y . C SRS a l so a d m i n ist e r sspecial grants to develop solar technologiesthat can be used in modern farm operations.

The Agricultural Extension Service and SCS

inform farmers of the results of agriculturalres earc h . The Ex tens ion Serv i c e , t h rough t he ~

land grant colleges, gives instruction in agricul-ture and related subjects and encourages useof the information by people not attending thecoIIeges through demonstrations, publications,and direct farm visits. In addition, the Exten-sion Service conducts a model farms programthat includes demonstrations of the effectiveuse of solar energy in agricultural operations.SCS works with county Soil and Water Conser-vation Districts (SWCDs), watershed groups,and Federal and State agencies with related re-sponsibi l i t ies to bring about physical adjust-ments in land use that will conserve soil andwater resources and protect long-term agricul-tural product iv i ty.

Finally, the Economics, Statistics, and Coop-eratives Service performs studies to supportcooperative groups that market farm products,purcha se prod uct ion supp l ies, etc . Tec hnicalassistance is available to farmers on organiz-ing new coop erat ives, improv ing c oop erat iveperformance and eff ic iency, and related busi-ness services.

Agricultural Policy Options

As already indicated, if the United States de-c ides to aggress ively promote ethanol f romgrain and sugar crops as a means of increas ing “domestic energy suppl ies, dist i l lery demandfo r f eeds toc k s mus t be i n t eg ra ted i n t o t hea g r i c u l t u r a l e c o n o m y w i t h o u t s u b v e r t i n g t h e -

goals of the existing policies described above(table 20). There are three main sources of dis-tillery feedstock supplies (see ch. 4): diverting

commodities from export or other markets todist i l leries, bringing current ly idle and poten-t ia l c rop land in to produc t ion, and changingthe mix of crops current ly grown and refor-mulating animal feed. Each of these suppliescan be provided either by modifying agricul-tural policies or by maintaining current policy




Table 20.—Policy Options: Alcohol Fuels

—q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

Action Objective. . . . . , ., . . . --- . . . ,Include alcohol fuel feedstock demand in USDA nationalprogram acreage allocationDivert limited quantities of feedstocks from export, feed,and other marketsDirect or indirect support for domestic sugar crops usedas alcohol fuel feed stocksDirect or indirect support for new cropland planted inalcohol fuel feedstocksStrengthen support for onfarm and cooperative storage

Monitor grain ethanol production and grain prices and re-evaluate incentives as distillery capacity increasesProvide production tax credits for all alcohol fuels

Implement section 208 of the Clean Water Act

Expand farm information, education, and support programson soil conservationRequire approved conservation plans for all cultivated lands

Program support for alcohol fuels used as octane-boosting

additives in gasolineSimplify BATF regulations for alcohol fuel producersUse gasoline tax revenues to support new alcohol fuels pro-duction capacityDirect and indirect support for onfarm and cooperativealcohol fuel productionSupport distilleries that convert from grain to cellulosicfeed stocksLimit number of BATF permits for grain ethanol productionExtend auto warranties to include methanol-gasolineblends and straight alcohol fuelsProvide long-term gasoline supply guarantees to alcoholfuel-gasoline blendersProvide long-term supply guarantees for auto fIeets

Require grain ethanol distilleries to use coal, biomass,solar, or other non premium boiler fuels

Study liquid fuels system vis-a-vis methanol

R&D; Develop high-yield crops that do well on land poorlysuited to food cropsR&D: cellulose-to-ethanol

R&D: Develop inexpensive, safe, highly automated small-scale stills, including the capability to produce dry ethanoland dry distillers’ grain, and to use a wide range of feed-stocksR&D: demonstrate herbage-to-methanol processes

-——SOURCE Off Ice of Technology Assessment

and using end-use subsidies such as the Federal

excise tax exemption to modify market forces

in agr icul ture. Both opt ions are d iscussed

below. A subsequent section outlines market

and regulatory options for controll ing the en-

vironmental impacts that could result f rom theprod uc tion of g rain etha nol. The reade r shouldkeep in mind tha t maintaining long-term stability

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

q

Expand feedstock supplies; integrate feedstock supply intoagricultural production systemExpand feedstock supplies; protect commodity prices

Expand regional feedstock supplies; support domesticsugar producersExpand feedstock supplies; increase farm income

Maintain the ability to moderate short-term supply deficitsfor all grain consumersDetermine correlation between grain ethanol and inflationin food prices; protect consumer pricesEqualize tax treatment between ethanol and methanol andbetween private and commercial production; stimulatealcohol fuel useControl agricultural non point source pollution; protectlong-term agricultural productivityReduce soil erosion; protect long-term agricultural produc-tivityReduce soil erosion; protect long-term agriculturalproductivityIncrease displacement of premium fuels

Reduce cost of alcohol fuels; encourage productionEncourage gasoline conservation; increase alcohol fuelssuppliesIncrease agricultural and rural liquid fuel self-sufficiency

Reduce potential for food-fuel competition

Reduce potential for food-fuel competitionReduce consumer risks; encourage alcohol fuel use

Increase alcohol fuel use

Increase alcohol fuel use; provide controlled situation forstudying fuel effects on autos and emissionsMaximize premium fuel displacement

Determine most economic strategies for using methanol todisplace oilIncrease feedstock supplies; reduce potential for food-fuelcompetitionExpand alcohol fuel supplies; reduce potential for food-fuelcompetitionDecrease the cost and increase the use of alcohol fuels onfarm; increase agricultural and rural liquid fuel self-sufficiency

Expand alcohol fuels supplies; reduce potential forfood-fuel competition

— — .

and productivity in agriculture will require an in-tegrated approach that combines agricultural,energy, and environmental policy initiatives.

If current production of grain and sugarcrops for feed were diverted to distilleries, itwould y ie ld substant ia l quant i t ies of ethanol(up to 30 b i l l ion gal /yr , more than hal f o f i t




f rom corn). Although i t is highly unl ikely thatthis much grain ethanol would be produced atthe expense of t radi t ional agr icul tural prod-ucts, OTA’s analysis indicates that as much as1 bil l ion to 2 bil l ion gaI/yr could be producedwithout significantly inflating food prices.

Part of this 1 billion to 2 billion gal/yr wouldcome from the diversion of commodities fromexpo rt ma rkets. This c ould be do ne e ither byUSDA or through other pol i t ical divers ionssuch as the recent Soviet grain embargo, orc ou ld res u l t f rom d i s t i l l e rs ou tb i dd ing ex -porters. The former would make i t easier toc ontrol the am ount o f grain diverted . The lat-ter would be l imi ted by how much dis t i l lerscan afford to pay for feedstocks in order to re-

main in operat ion. Given the prof i tabi l i ty ofproducing fuel ethanol with current subsidies,the latter market limit may be high, and beforeit is reached, the price of grain feedstuffs in ex-port markets could increase—or grain exportsdecrease — substantialIy.

Reducing commodi ty exports or increas ingtheir price in order to augment U.S. energy sup-plies could result in adverse responses fromimporting countries. Furthermore, the resultingreduction in oil imports would not necessarilyrepresent a net gain in the balance of trade ifc om mo dity expo rts also are red uc ed . That is,there is a relat ive economic advantage in ex-port ing $2.50/bu corn and import ing oi l unt i lthe price of oil reaches $40 to $45/bbl.

An alternative source of feedstocks for grainethanol would result from farmers substitutingone crop for another and reformulating animalfeed. Again, crop switching could be accom-pl ished within the framework of the exist ingnational program acreage al locat ion or couldoccur in response to higher prices for distilleryfeedstocks. The primary constraints on cropswi tching are l imi ts on the degree to whichanimal feed can be reformuIated and st i l l re-t a i n i t s nu t r i t i v e v a lue , and t he amoun t o f

cropland that is suitable for switching to cornor other ethanol feedstock cultivation.

Final ly, i t has been suggested that sugarcrops could be used for fuel ethanol feed-stocks. Although total domestic sugar produc-tion would yield only about 800 mill ion gal/yr

of ethanol at a significantly higher cost thanethanol from corn, the United States is thewor ld ’s la rges t raw sugar impor ter and thedomestic industry current ly is depressed dueto rising land, labor, and other expenses. TheDepar tment o f Labor es t imates that 4 ,500

sugar workers have been laid off in the past 3years, b whi le the Genera l Account ing Of f i cereports that substant ial defaults on Govern-ment loans to domest ic sugar producers areoccurr ing as a resu l t o f low-cos t sugar im-ports. ’ The domestic price of sugar is higherthan the world price due to import tari f fs andother price supports designed to protect do-mestic producers. 8

Either imported or domestic raw sugar couldbe diverted to ethanol production. One optionfor us ing imported sugar would be to al lowethanol producers to purchase raw sugar onthe world market (i.e., without import tariffs).However, this probably would allow the worldmarket price to rise to match the U.S. priceand would increase the price of other productscontaining sugar. Also, there would be a net in-crease in the U.S. balance-of-trade deficit.

Alternatively, domestic sugar sold for etha-nol product ion could be subsidized, al lowingthe growers to recover their costs but provid-ing dis t i l lers a guaranteed cheap feedstock.Due to the physical l imits on sugar crop pro-duct ion in the United States and to the prob-able cost of the ethanol, this option is not like-ly to produce substant ial quanti t ies of l iquidfue l . I t m ight , however , a t t rac t in teres t insugar-producing areas as a means of increasingreg ional a lcohol fue l produc t ion and fur therdiversifying domestic liquid fuels supplies.

The t hi rd m a jor sou rce o f dist i l lery fee d -stocks is cultivation of potential and currentlyidle cropland. As discussed above, approxi-mately 18.3 mill ion acres were under produc-t ion controls in 1978 (but the amount var iesfrom year to year). In addit ion, a 1977 SCS

survey of pr ivate lands c lass i f ied 40 mi l I ion

‘Ernp/oyrnent and Earnlng$ (Washington, D C Department of

Labor, Bureau of Labor Statlstlcs), monthly

‘Questionable Payment> and Loan Default> In ~ugar Programs(Washington, D C General Accounting Office, Mar 16, 1979)

“Reduct/on in the U.S Import fee on Sugar (Washington, D C

(;eneral Accounting Office, July 17, 1979)




acres as having a high potential for being con-ve r t ed t o c rop l and and ano t he r 95 m i l l i onacres as having medium potential. 9

Any program designed to increase agricul-tura l product ion for ethanol feedstocks must

consider several factors. First, the available un-cult ivated lands are subject to problems usual-ly not associated with normal cropland, suchas high erosive potent ial , exist ing land uses,limited size, and drainage, seepage, and flood-ing , tha t w i l l i nc rease annua l var iab i l i t y i n

.yields and the potent ial f o r e n v i r o n m e n t a ld a m a g e . Because of the increased probability ofreduced yields or crop failures, incentives forethanol could include a storage reserve equiv-alent to a 6-month or greater supply of feed-stocks to provide a buffer against short-term sup-ply deficits. This reserve could be implemented

‘I 1 9 7 7 ,Nat Iona/ ~roslon Ink entorv (Washington, D C U S De-

partment of Agrlc ulture, SoIl Conscrvat Ion Service)

through ei ther agricul tural programs or dist i l -lery subsidies. Finally, if the demand for foodand the conversion of cropland to other usescont inues to increase, the quant i ty of landpotentially available for energy crop p r o d u c -

t i on w i ll dec rease. There fo re , p rogram s d e-

signed to promote grain ethanol should either bereversible or be able to accommodate a changein ethanol feedstocks (e. g., to cellulosic feed-stocks), and policymakers should considerways to preserve agricultural land uses.

Given these considerat ions, two pr incipalopt ions for increasing agr icuI tura l product ionto supply ethanol feedstocks are discussed:1 ) expansion of current agriculture programs toinclude energy crops, and 2) elimination of ex-ist ing product ion controls. For these opt ions,the potent ia l impacts on commodi ty produc-t ion and prices and on Government expendi-tures have been projected through computermodeling and the results are presented to fa-cilitate comparison between these options and

“ _- —

Photo credit. USDA, Cal Olson

Problems such as flooding potential increase the annual variability of crop yields




c u rre nt a g ric ultu ra l t re n d s. ’ ” Th e re a d e rshould keep in mind that these modeling re-sults are not pred ic t ions , but pro jec t ions o fhypothetical situations based on assumed val-ues for particular variables (see app. B for de-scription of model). The real future values oft hos e v a r i ab les may be v e ry d i f f e ren t andother factors not built into the models couldproduce radical changes. Note also that themodel shows only the hypothetical effects ofincreased corn production; other ethanol cropscould have different impacts.

The first o ption incorpo rates the exog eno usdemand for grain for ethanol product ion with-in the context of the current commodity pro-gram s. The d ef ic ienc y pa yment , no nreco urseloan, and domest ic grain reserve programscontinue to operate as described above, butset -as ide ac reage may be used to produceg r a in f o r e t h a n o l . Et h a no l f e e d st o c k c ro p swould be purchased by CCC and sold to distil-leries as needed. In this opt ion, the highermarket pr ices created by dis t i l lery demand(stimulated through either conversion processor end-use subsidies) would be the primary in-centive for using set-aside and other idle landsfor ethanol crops.

The sec ond op t ion w ould el iminate p rod uc-t i o n c o n t r o l a n d d e f i c i e n c y p a y m e n t p r o -grams, but increase the loan rates to nearly thelevel of target prices. This would result in a

production incentive and level of farm incomeprotect ion roughly equivalent to those pro-vided by cu rrent a gric ultura l program s. The in-c reas ed l oan ra tes a l s o w ou ld p rov ide t hemeans to increase CCC inventories of corn forsale to distiIIers.

The modeling results for these options areshown in table 21 to compare two means of im-plement ing pol ic ies des igned to s t imulate in-creased production of corn for use as an etha-nol feedstock as well to compare various lev-els of corn production. In the long run, there

are few operat ional dif ferences between thetwo options because, by 1985, the first evolvesto closely approximate the second. That is,over t ime in the f i rs t opt ion the set -as ide

‘[’Ronald L Meek hof, et al , U S. Agricultural POIICY and Ga~o-IIo/ SIrnulaflon of $orne Po/icY A/?ernar/ve$, June 1979

acreage diminishes. Hence, the loan rate be-comes the primary means of ensuring the sta-bility of farm income under both options. In ef-fect, the increased demand for corn obviatesthe need for pure income support (def ic iencypay ments ) , and t he p r i c e s uppor t p rov idesprice stability.

As shown in table 21, either of these optionsresults in substantial impacts on the agriculturalsystem at ethanol production levels of 4 billiongal/yr. Season average corn prices increase 30percent whi le the annual instabi l i ty in cornprices nearly doubles. In addition, strategic re-serves are red uc ed by 55 pe rc ent. Tog ethe r,these effects undermine two of the goals ofagr icu l tura l po l i cy : to mainta in s tab i l i t y incommodity prices in order to protect farm in-come and consumer prices, and to maintainstrategic reserves in order to moderate short-term supply deficits.

Furthermore, several features of these options

may prove to be unacceptable even at the l-bil-lion- to 2-billion-gal/yr level of ethanol produc-tion. The f irst a re the ec ono mic impa cts re-la ted to commodi ty pr i ces and Governmentprogram expenditures. Even at the 2-bil l ion-galleve l , the exogenous demand resu l ts in in-creased corn pr ices that probably would in-crease the price of food to consumers. Underthe first option, Government expenditures for

CCC operations, acreage diversion payments,and farmer-he ld reserve payments a lso in-crease. As discussed in the review of incomesupport programs, consumers would bear mostof these costs. The composition of the expendi-tures also changes signif icant ly because thedef ic iency payments are substant ia l ly abovethose projected for the ex is t ing agr icul turalprograms; these payments reflect the cost andrisk in cultivating new lands and represent ani n c o m e t r a n s f e r f r o m t h e g e n e r a l p u b l i cthrough ta x reven ues. They ha ve l it t le ef fec ton market prices. As the supply commitment

level increases, these costs diminish becauseof higher corn prices, but are more than offsetby i nc reas ing ne t pu rc has e c os t s o f C C C .Under the second option, deficiency and diver-s ion payments are el iminated, but CCC pur-chase costs again increase steadi ly with thelevel of supply commitment, and again, must

e




these results indicate that lower levels of pro-duct ion can be ach ieved fo r a very low re-source cost. Basically, idle agricultural landcan be used at Iittle cost and the current subsi-dies that keep land idle can be transferred to asubsidy for converting grain to ethanol. Thus,

it probably is not necessary to modify agricul-tural pol icy as in the second option. Rather,cur ren t agr icu l tu ra l po l ic ies in con junct ionwith the market forces created by end-use sub-sidies such as the gasohol excise tax exemp-tions (see “Conversion and End Use,”) can beused to increase distilIeries’ share of grain sup-plies. At a minimum, this will reduce the needfor farm income supports and it could changethe focus of agricultural subsidies to maintain-ing reserves as a hedge against food price infla-tion in years with low crop yields, and to con-trol l ing agriculture’s environmental problemsand the conversion of cropland to nonagricul-tural uses.

Assuming the gradual phasing out of presentfa rm commodi ty p r ice suppor ts as d is t i l le rydemand d r i ves p r i ces up above the l eve l sneeded to maintain farm income, the centralpolicy issues will become the size of the gaso-hol tax exemptions, how long they should re-main in effect, and whether they should be re-placed by other incentives or subsidies. Theseissues are discussed in detaiI under “Conver-sion and End Use.”

In the long run, if the demand for food andthe conversion of cropland to other uses con-tinue to increase, the land available for energycrops will dwindle, and, in the absence of sig-nificant changes in consumer behavior, marketintervention may be necessary to prevent infla-t ion in commodity pr ices. Alternatively, dist i l-ler ies could be required to shift to cel lulosefeedstocks. Policy issues related to feedstockconversion also are discussed under “Conver-sion and End Use. ”

Environmental Controls

Agriculture often degrades land quality andpol lutes sur face and ground waters; the twoproblems are closely linked. For example, ero-sion reduces land productivity and is the majorcause of sedimentation in surface waters. Simi-

Iarly, fertilizers and pesticides build up in thesoil and alter its ecology and then enter aqua-t ic ecosystems through agricultural runoff. Asd iscussed above, USDA product ion cont ro lsrequ i re the use o f “approved conserva t ionpractices” on idle agricultural Iand in order to

control wind and water erosion as well as in-sects, weeds, and other pests. These practicesa re des igned and imp lemen ted on se t -as ide lands by SCS through local SWCDs, and aresubsidized by Federal and State cost-sharin g

funds. In addition, SCS and the Extension Serv-i c e p r o v i d e t e c h n i c a l a s s i s t a n c e t o f a r m e r s who request aid in developin g a soil conserva-tion plan for their entire farm, but implementa-tion of the plan is voluntary.

The surface water sedimentation that results

from erosion and the water pol lut ion that canresult from “runoff containing pesticides, fer-tilizers, and other chemicals are regulated un-der the Clean Water Act of 1977 (formerly theFederal Water Pollution Control Act of 1972),which requires States to develop plans for thec o n t r o l o f w a t e r p o l l u t i o n f r o m n o n p o i n tsources. This approach, based on areawidewaste treatment plans, was inaugurated in the1972 Act and reaf f i rmed and strengthenedunder the 1977 Act.

In general, under section 208 of the CleanW a t e r A c t , t h e E n v i r o n m e n t a l P r o t e c t i o nAgency (EPA) establishes guidelines for theident i f icat ion of areas wi th substant ia l waterquality control problems. Local agencies, withState and Federal assistance, then developareawide waste t reatment management p lansfor the prob lem a reas. The loc a l a ge nc y a lso must implement a continuing areawide wastetreatment management planning process thati n c l u d e s i d e n t i f i c a t i o n o f a g r i c u l t u r a l s o u r c e sof water pol lut ion and procedures and meth-ods (including Iand use requirements) to con-

t ro l nonpoint source pol lut ion to the extentpossible. Section 208 is implemented throughbest management practices (BMPs), which aredetermined to be the most effective and prac-t icab le ( inc lud ing techno log ica l , economic ,and institutional considerations) means of pre-venting or reducing nonpoint source polIutionto a level compatible with water quality goals.




A variety of problems, including the politi-

cal sensitivity surrounding any Federal involve-ment in land use planning, a lack of directionin EPA guidelines for determining the degreeand type of nonpoint source polIut ion to con-trol, and short deadlines for developing noveland controversial land use management tech-niques, prevented effect ive implementat ion ofsec t ion 208 following its passage in 1972. *Consequently, more immediate and better un-derstood water pol lut ion problems wi th s t r ic tstatutory control deadl ines, such as sewage

. t reatment and industrial process controls, re-ceived funding priority over section 208, eventhough 208 was intended to provide integratedplanning and management for a l l po l lu t ionsources.

In the intervening years, knowledge aboutnonpoin t sources and the i r cont ro l has im-

proved vastly, and the 1977 amendments re-flect this knowledge in the revisions to section208. These am end me nts includ e a USDA-ad -ministered program to enter into 5- to 10-yearcontracts with rural land operators to instal land maintain BMPs under plans approved by asoi l conservat ion district and consistent withthe areawide plan. In return, the land operatorreceives technical assistance and up to 50-per-c ent c ost sharing. This prog ram ma rks a rad ica ldepar ture f rom the t rad i t iona l approach tononpoint source control in that the plan is im-

pleme nted by a Fed eral, rathe r than a State orlocal agency, whi le the cost-sharing contractrepresents a direct Federal subsidy for landmanagement pract ices that wi l l reduce non-point source polIution.

In the future, EPA implementat ion of sec-tion 208 wilI tend to focus more on regulatory,statewide nonpoint source controls. The 1977cr i ter ia for evaluat ing nonpoint source pro-.grams reinforce the t rend toward regulatorycontrol by allowing permits, l icenses, and con-tracts (as well as voluntary management tech-

niques) to be required when justified by the in-tens i ty , scope, and type of nonpoint sourcepollution as well as by landownership patternsand other physical factors. Nonregulatory con-

q Set’ a Iso “ E nvlronmental I mpac tj” In the “ I ntrocjuctlon ” to

( h 4

t ro l s w i l l be a l l ow ed on l y w hen t hey c anachieve water quality standards. In addition,EPA is developing a 4- to 6-year plan that willemphasize statewide nonpoint source control;in 1978, EPA and USDA began a joint programto demonstrate the effectiveness of statewideBMP coordination in seven model States.

Nevertheless, given farmers’ resistance toregulatory controls, the low priori ty assignedto ag r i c u l t u re ’ s env i ronmenta l p rob lems byState and Federal agencies, and other con-straints on nonpoint source control (see discus-sion in ch. 4), it is unclear whether future im-plementat ion of sect ion 208 will be any moreeffective than it has been in the past. Thus, ifset-aside and other diverted cropland or poten-tial croplands are used to produce grain for etha-nol, the water pollution effects could be substan-

tial. In general, these lands have a highererosive potential than land presently underproduction and therefore are more likely tocontribute to sedimentation of surface waters.In addition, set-aside and other lands may notbe as product ive, requi r ing increased use offert i l izers and pest ic ides11 t h a t c o n t r i b u t e t ochemical water pollution. Finally, these landsmay be tied up in competing land uses.

Because of the potent ial for environmentaldamage and because it usually is not economi-cal in the short term for individual farmers toprotect against such damage, the Government

may want to cons ider in t roduc ing addi t iona lincentives for environmental controls. Theseincent ives cou ld be implemented w i th in thecurrent po l i cy contex t or new env i ronmenta lco ntrol po licies co uld be de velop ed . These o p-t ions inc lude both vo luntary and mandatorycontrols . 12

The policies discussed below share severalcommon considerations. First, any policy thatapplies only to energy crops will be difficult toimplement because farmers could shift thosecrops to their least sensitive Iands. Thus, if envi-

‘‘ For po l IC Ies related to the LJSe of pe~tlcides, see Pest Manage-

ment $trafegm in Crop Protect~on (Washington, D C Off Ice of

Technology Assessment, October 1979), OTA-F-98

‘ ‘Much of the followlng discussion on nonpolnt source control

op t i ons IS from D L Uchtmann and W D Seltz, “Opt ions for

Controlling Non-Point Source Water Pollution A legal Perspe(’-ttve, ” Nafura/ Resoufce$ )ourna/ 19587, ]u ly1979

– I ~ - - J -



Ch. 5—Policy 169

Tax incentives such as credits and exemp-tions also could be offered for environmentalcont ro ls . Current tax law a l ready a l lows adeduction for certain soil and water conserva-tion costs that otherwise would be nondeducti-ble capi tal expendi tures. However, a deduc-t ion alone probably would not be suff ic ient to

achieve more than isolated controls, and a taxcredit equal to a set percentage of the cost ofany env i ronmenta l cont ro ls cou ld be ins t i -tuted. In effect, such a credit would be a cost-shar ing pol icy implemented through the taxsystem, and not l imited by legislat ive appro-priations. The credit could be limited to a per-centage of the actual out lays for equipmentand practices or could also include any lost in-come that might resu l t f rom less in tens ivemanagement, but the latter would be more dif-ficult to calculate and verify.

At the State level, tax incentives also mightinclude exemptions from excise and sales taxesfor any equipment needed to implement non-point source controls, as well as special prop-erty tax provisions for lands on which environ-mental controls are maintained.

Mandatory environmental controls for crop-Iand under intens ive cul t ivat ion inc lude ap-proved conservation plans and economic pen-alties. It should be emphasized at the outsetthat , whi le mandatory nonpoin t source con-trols ultimately may be necessary, it will be ex-

t reme ly d i f f i c u l t t o ge t f a rmers t o ac c ep tthem. In addition, mandatory controls must bephased in wi th great care in order to avoiddamage to farm productivity and income.

As discussed above, SCS and SWCDs pro-vide technical assistance to those farmers whorequest aid in developing a soil conservationplan for their farms. In addition, these agen-cies approve mandatory conservation uses forset-aside and other production control lands.These ma nd ato ry uses c ould, to som e extent,be carr ied over to other croplands, or new

mandatory conservat ion plans could be devel-o p e d . Su c h p la n s c o u ld b e i m p l e m e n t e dthrough the general agr icul tural programs orcould be included in a mandatory contract sys-tem under the 1977 amendments to section 208of the Clean Water Act. Under either system,the approved conservat ion plan would include

a full range of environmental controls basedon numerical standards such as soil-loss toler-ance limits.

Approved conservation plans also must takeinto account the competing uses of the land tobe deve loped. For example, some d iver ted

croplands have been “permanently” convertedto nonagricultural uses such as wildlife habitatand recreation, windbreaks or shelterbelts, per-manent cover and t imber, or water impound-ments. In many cases, these uses should not bedisturbed.

Envi ronmental control p lans should be de-v e loped a t t he f a rm l ev e l t o ac c ommodateregional di f ferences and to prov ide farmerse n o u g h f l e x i b i l i t y t o c h o o s e f r o m t h e f u l lrange of avai lable controls . Guidel ines couldbe provided at the Federal or State level for

various combinations of terrains, weather andclimate, soil types, crops, and other variables.

Manda to ry ec onomic i nc en t i v es i nc l udetaxes or charges for the absence of environ-mental controls. For example, erosion or efflu-ent charges might be based on the absence ofsoil-conserving farming methods, on soil-lossto lerance l im i ts , or on a l lowable leve ls o fsediments and chemical pollutants in the run-off from agricultural land. As discussed above,the effluents are diff icult to measure; changesin farming pract ices would be eas ier to en-

force. Individual farmers w o u l d d e t e r m i n ewhether i t was more cost ef fect ive on thei rfarm to pay a charge or tax, and if it were not,which controls they wouId implement.

A system of charges or taxes based on reg-ulatory eff luent l imitat ions also could be setup on a market basis, allowing those farmerswhose effluents are below the limits to marketthe dif ference to farmers who are unable tome et the l im i ts ec ono mic a l l y . Th is sc hem ewould primari ly be advantageous at high pro-d u c t i o n l e v e l s w h e n a l l a v a i l a b l e l a n d i s

n e e d e d f o r e n e r g y c r o p p r o d u c t i o n b u t astraight charge system would inhibit the cul-tivation of particularly sensitive lands. The pri-mary problem with a market scheme is that iton ly addresses the water qua l i t y cont ro ls .Where erosion degrades land quality, market-ing the rights to do so would seriously threaten




product iv i ty . Other problems wi th a marketscheme are the diff iculty in measuring eff lu-ents and the tendency for sensitive lands to begrouped together, thus subjecting the adjacentecosystems to disproportionate environmentalimpacts.

As with the options to increase corn produc-tion, modeling results are available for the im-pacts of some environmental control options’ 3

and are presented in table 22. Again, it must becautioned that these are hypothetical projec-tions based on assumptions about the valuesof p art icula r va riab les. They a re not p red ic-tions.

These model resul ts are important in theshort term because they suggest that if envi-ronmental controls are imposed on increasedcorn production for use as ethanol feedstocks,

the price of that corn and consequently theprice of the ethanol will be higher than gener-alIy assumed in the gasohol Iiterature. How-ever, the costs indicated by the model do notinclude the reduction in social costs from ac leane r, mo re p rod uc t ive env i ronm ent . Thecumulat ive economic impact of pol ic ies in-tended to s t imu la te energy c rop product ion

‘‘W D Seltz, et al , A/terrratlve Po/icies fo r Contro//ing Nor-r-

poIrrt Sources of Water Po// ut/on (Washington, D C Environmen-tal Protect Ion Agency, April 1978), EPA-600/5-78-005

Policy

2-ton/acre-yr soil loss Iimit

5 ton/acre-yr soil loss Iimit$0.50/ton/yr soil loss tax$4/ton/yr soil loss tax$5/acre subsidy for terracing$40/acre subsidy for terracing100 lb/acre nitrogen applicationI i m i t

100 lb/acre nitrogen application

Iimit combined with5 ton/acre-yr soil loss Iimit

100 lb/acre nitrogen applicationIimit combined with2 ton/acre-yr soil loss Iimit

50 lb/acre nitrogen applicationIimit

50 lb/acre nitrogen application

Iimit combined with5 ton/acre-yr soil loss Iimit

50 lb/acre nitrogen applicationIimit combined with2 ton/acre-yr soil loss Iimit

coupled wi th those to contro l environmentalimpacts has yet to be calculated, nor has theimpact of mandatory erosion control pol icieson the net avai labi l i ty of ethanol croplandbeen quantified.

The model results also suggest that, in the

long term, erosion control policies will result indramatic improvements in the maintenance ofsoi l productivity. But, they indicate that i t isnot economic for individual farmers to adopterosion control practices unless they have ex-tremely long planning horizons and assume avery low discount rate on future income.

Finally, the model results have significantimplications for equity. For example, sensitivecroplands are not evenly distributed geograph-icalIy. Thus in some areas increased produc-tion would be impossible, while in areas with a

very low erosive potential farm income couldincrease substantially. Moreover, policies suchas regulatory controls and taxes are more ef-fective than subsidies in improving the degreeto which individuals pay for benefits receivedor are compensated for social costs incurred.Finally, some of the policies tend to reduce the

income d i f f e r ences w i t h in t he popu la t i on

while others tend to widen the gap.

“See Ibid , for a detailed discussion of the equity implicationsof nonpoint source controls

Table 22.—Potential Effects of Alternative Erosion Control PoliciesPercent change

Corn Soybean SoybeanSoil loss product ion product ion Corn prices prices

– 70- - 6 – 15 ‘- 15 20

–4 5 – 2 - 3 4 5

-30 – — — 1

- 6 7 — — – 1 6— — — —

-27 ~ — — —

– 2 – 2 — 4 —

– 4 5 - 3 - 3 6 3

- 7 4 – 9 - 1 6 17 19

–1 -13 – 9 25 11

– 45 - 1 4 – 12 28 14

– 74 - 2 0 - 2 3 39 26

N it ro ge n Producers ’load surplus a

- 5 $ 15 — 231— – 458

— – 1,506 — 0.11

— 942

- 2 4 20

– 24 247

- 3 0 228

– 48 2,037

– 49 2,180

– 58 1.674

aproducers’ surplus IS equivalent to the land rents from production and terracin9.bconsumers’ surplus IS the difference between what consumers are willing to pay and the market Pricecsubsldlespaid Or t a x e s received Does rrot include cost Of administration.dsum of th

echanges ,n producers, surplus, consumers, surp lus, a nd Gove r nmen t co s ts , Does rro~ Inc lude e t l v l ron rne r l k l l benefits

Millions of dollars

Consumers’ Government Net socialsurplus

bCost

c

Cost d

-$1,205 – -$1,190 – 433 – - 2 0 2

160 $212 - 8 5344 772 – 390

02 8 - 5 6 – 5- 9 – 1,233 - 3 0 0

– 320 – - 3 0 0

-772 – - 5 2 5

– 1,605 — – 1,377

-3,325 – – 1,288

-3,677 – -1,497

– 4,163 — -2,489

SOURCE W D Seltz, et al , Alterrratwe F’ollc~es for Contro/lmg NorrpoIrrt Sources 01 Water Pollutfon (Washington D C , Environmental ProtectIon Agency, April 1978),EPA-600/5-78.005




,

-/

.

I f a lcoholcontr ibut iontives may beof oil) for the

Conversion

fuels are to make a s igni f icantto U.S. energy suppl ies, incen-needed (depending on the priceconstruction of large- and small-

scale conversion facilities as wet I as for the useof these fuels in automobile and other engines.Current and proposed policies already provideincentives to increase conversion capacity andalcohol fuel use. Other policies, however, poseconstraints to alcohol fuels and should be re-v ised i f the Government dec ides to promotesuch fuels aggressively. The current policy con-text for alcohol fuels, as well as policy optionsto stimulate production and use, are discussedbelow.

In general, policies intended to stimulate in-

vestment in conversion faciIit ies or to encour-age the use of alcohol fuels will be the samefor etha nol and me tha nol. Tha t is, the co nver-sion technologies and end uses for these fuelsare s imi lar, and for most issues one pol icywould be suff ic ient. However, issues appl ica-ble only to one of these fuels should be givenspecial attention. For example, ethanol disti l-leries might be required to use alternative fuels(e. g., coal, biomass, solar) in order to maximizepremium fuel displacement , but there is nocomparable problem with methanol faci l i t ies.Similarly, methanol is more l ikely to damage

rubbers and plastics in automobiles and to in-crease evaporative emissions; factory warran-t ies—some of which al ready inc lude ethanoluse— could be expanded to cover methanolblends.

As with the options related to the resourcebase, the policies discussed below share sever-al common considerations. First, both alcoholfuels wi l l displace more premium fuel i f usedas an octane booster. Higher subsidies to alco-hols used as octane-boosting additives wouldencourage this use. Second, both fuels could

affect the drivability of automobiles and coulddamage s ome au to pa r t s . Au to w ar ran t i esmight encompass such problems. Thi rd, var i -ables such as disti l lery size or ownership canbe used by policy makers to influence the de-gree of sectoral or regional energy self-suff i -ciency to be achieved. A size “ceiIing” or Iimit-

and End Use

ing funding to individual or cooperat ive own-e rs h ip w ou ld emphas i z e on fa rm and o the rrural operations, whiIe a size “floor” would en-courage the construct ion of commercial-scale

distilleries. Finally, long-range energy planningby policy makers should incorporate the needto remove subsidies for conversion faci l i t iesand gasohol use as the economics improve orf o r e thano l i f c ompet i t i on w i t h t rad i t i ona lfood crops for agr icul tural land becomes ap r o b l e m ( s e e b e l o w ) . S u c h p l a n n i n g a l s oshould consider the implications of a possiblefuture shif t in feedstock composit ion as wel las those of developing domestic reliance on al iquid fuel whose avai labi l i ty ult imately maybe limited.

Tax Policies and Other Subsidies

Ethanol: Policies to Encourage Production

Current U.S. revenue policy regulates themanner in which alcohol is produced and dis-tributed, and taxes both alcohol and liquidfuels.

The Federal Government has taxed the pro-duct ion of alcohol ic beverages s ince 1791;nearly $5.5 billion was collected in 1976. Thelaws and regulations designed to protect this

source of revenue include restrictions on oper-at ing condi t ions, l icenses and permits, bondand report ing requirements, and dis t r ibut ioncontrols. In general, the requirements for anoperating permit and Iicense include construc-t ion spe c i f ic at ions, such as sec ure premisesand sealed dist i l l ing systems, and operat ingconditions, such as constant supervision by theBurea u o f A l c oho l , Tob ac c o and Fi rea rms(BAT F) , de signed to preve nt u na utho r izeddivers ion of the dis t i l led spi r i ts . In addi t ion,the dis t i l lery operator must post a dis t i l ledspirits bond to ensure payment of penalties or

f ines, and must maintain complete and accu-rate records including detai ls of al l dist i l ledmate r i a l s rec e i v ed , t he quan t i t y o f a l c oho lproduced and denatured, and f inal disposit ionof the denatured spirits. Daily reports of distil-lery act iv i t ies are f i led with the responsibleBATF operator whi le monthly operat ional re-




ports are submitted to the Regional Adminis-trator.

Al l of the above requirements add signif i-cantly to the cost of alcohol production, andcould discourage investment in distilIery capac-

ity. Recognizing this problem, the Energy TaxAct of 1978 (part of the National Energy Act)requires the Treasury Department to recom-mend legislat ion that wil l simplify the regula-tion of fuel alcohol producers while maintain-ing the integrity of the beverage alcohol taxsystem. In addition, the President has directedthe executive branch to simplify and reduceFederal reporting requirements for fuel alco-hol producers. The primary targets in this proc-ess should be the security requirements that in-crease distillery construction costs, permit andother procedures for the manufacture and use

of small-scale st i l ls, and the frequency andlevel of detail in BATF recordkeeping and re-port ing provisions. On the other hand, addi-tional production reports could be required byenergy agencies to moni tor gasohol suppl iesand use and to fac i l i ta te long- range energyplanning.

In addition to the regulations on denaturedspirits, taxes are levied on gasoline and onspecial liquid motor fuels at the Federal, State,and local levels. Gasoline is subject to a Feder-al tax on its sale by any producer. However,

the Energy Tax Act of 1978 exempts gasoholfrom the Federal motor fuel excise tax betweenJanuary 1, 1979, and October 1, 1984; Presi-dent Carter supports a DOE recommendationthat this exemption be extended beyond 1984.A number of States also have exempted gaso-hol from State gasoline taxes or have placedan additional tax on gasoline to subsidize con-struction of fuel alcohol distilleries. As can beseen in table 23, the combined Federal andState tax exemptions represent a substantial($16.80 to $56.70/bbl of ethanol) subsidy for

gasohol.DOE also has revised the crude oil entitle-

ments program to inc lude e thano l p roducedfrom biomass. This provides an incentive equalto about $0.05/gal of ethanol used in gasohol.However, this program expires on September30, 1981, and the incentive is substantial onlyfor those who begin ethanol production soon.

Table 23.—State Tax Incentives for Gasohol

Exemption Total subsidy (Federal(in dollars plus State, in dollars

State per gallon) per barrel of ethanol)

Arkansas . . . . . . . . . . . . .Iowa . . . . . . . . . . . . . . . . .

Indiana. . . . . . . . . . . . . . .Louisiana. . . . . . . . . . . . .Montana. . . . . . . . . . . . . .Oklahoma . . . . . . . . . . . .Colorado . . . . . . . . . . . . .Kansas. . . . . . . . . . . . . . .Nebraska. . . . . . . . . . . . .New Hampshire . . . . . . .North Dakota. . . . . . . . . .South Carolina . . . . . . . .Wyoming. . . . . . . . . . . . .South Dakota . . . . . . . . .Connecticut . . . . . . . . . .Maryland . . . . . . . . . . . . .No State tax exemption .

$0.095

0.085

0.080.080.070.0650.05

0.050.050.05

0.040.04

a

0.04

0.030.010.01

$56.7052.50

50.4050.4046.2044.1037.8037.8037.8037.8033.6033.6033.6029.4021.0021.0016.80

aReduced to$002 in 1982


Revenue policy also provides for a IO-per-cent additional investment tax credit for facil-i t ies that conver t feedstocks ( inc luding coaland biomass) into “synthetic liquid fuels. ” TheInternal Revenue Service (IRS) currently is de-veloping regulations to implement this credit,which was included in the Energy Tax Act of1978. DOE is assisting IRS with technical defi-nitions and interpretations that should ensuretha t fac i l i t ies to p roduce a lcoho l fue ls w i l l

qual i fy for the credi t .

Nontax subsidies and other economic incen-tives available to the emerging gasohol indus-try include loan guarantees, grants, and low-interest loans as well as marketing regulations.Loan guarantees are available for alcohol pro-duct ion fac i l i t ies under two programs. FourGovernment-guaranteed loans of up to $15m i l l i o n w e r e g r a n t e d u n d e r t h e A g r i c u l t u r a l

Act of 1977 to facilit ies that convert agricul-tural products to alcohol. In addition, in May1979, President Carter announced a series of

major initiatives intended to assist small townsand rural areas in approaching energy self-suf-f iciency, including $11 mil l ion in grants, low-interest loans, and loan guarantees for the con-struction of 100 small-scale plants to producefuel alcohol. This program is administered bythe Economic Deve lopmen t Admin i s t r a t i onand the Community Services Administrat ion,



Ch. 5—Policy q 173

w i t h D O E p r o v i d i n g t e c h n i c a l g u i d e l i n e s .Funds became available in fiscal year 1980.

I n addition, DOE gasoline-marketing regula-tions have been revised to allow refiners— aswe ll as reselIers a nd reta ilers — to sell ga soh olas a separate grade of gasoline and to directly

pass on the cost of the alcohol. Under previousrules, refiners had to sell gasohol as unleadedregular gasoline and absorb the alcohol fuelcost by averaging their gasohol-refining costswith the costs of al I refined products.

. New tax incent ives for commerc ia l d is t i l -leries might include investment or energy pro-duct ion tax credits, accelerated depreciat ion,and special deductions for the interest paid onconstruction loans. A special tax on gasolinealso could be imposed and the resulting reve-nue earmarked for dist i l lery construct ion, i n -

cluding direct subsidies such as low-interestloans and guaranteed pr ices for feedstocksand for gasol ine for blending. Author izat ionfor some of these opt ions ex is ts but wouldneed to be expanded in scope for maximum ef-fect; others would require new legislation. Atthe Sta te level, disti ll ing e qu ipme nt a nd feed -stocks could be exempt from any excise andsales taxes. Special property tax classificationsfor fuel alcohol distilleries also could be devel-oped. I n addition, State gasoline tax exemp-t ions could be expanded or spec ial gasol inetaxes imposed.

I n addition to commercial distribution of al-cohol fuels, their production and use on farmsand by cooperatives also is Iikely to be impor-tant in divers i fy ing energy suppl ies. The re-source base is closer to rural areas and gasoholuse there would involve the least transporta-tion and distribution costs. In addition, energyuse in agriculture is structured around criticalt im e “ e n v e lo p e s” ( e .g ., p la n t in g , h a rv e st in g )that reduce short-term f lexibi l i ty or conserva-t i o n p o t e n t i a l a n d m a k e s u p p l y r e l i a b i l i t ycrucial. Even minor energy shortages at critical

per iods could reduce agr icul tural product ions igni f icant ly . 15 Onfarm dist i l lat ion would al le-

‘5 Frederick H Buttel, et al , “Energy and Small Farms A Re-

v Iew of E xlst I ng I Itera tu re and Suggest Ions Concern I ng Future

Rewarch, ” report prepared for the Prolect on a Research Agenda

for Small Farm5, National Rural Center, Washington, D C , 1979

viate this vulnerability. Moreover, onfarm stillsare promoted among farmers as a means of re-ducing grain surpluses and thereby increasinggrain prices and, thus, farm income. 16

Incentives for small-scale st i l ls might in-clude tax deductions or credits for feedstocks

and equipment, special income tax provisionsfor cooperat ive dist i l lery ownership, or directsubsidies such as cost-sharing and interest-freeloan p rog rams. Those tha t a re alrea dy a vaila-ble are shown in table 24. All the incentives foronfarm dist i l lat ion should include informationprograms and technical assistance; these mightbe implemented through the Extension Serviceand the Economics, Stat ist ics, and Coopera-tives Service.

Pol icy makers should consider several fac-tors in promoting onfarm and cooperative use

of ethanol. First, using ethanol in diesel en-gines (e. g., in farm machinery) would negate itsvalue as an octane booster. In addition, only35 percent of the fuel used in retrofitted dieselengines can be displaced by ethanol; more ex-tensive modifications would be needed to dis-place a larger proportion of the diesel fuel. Onthe other hand, only 2 percent of the corn cropfrom a typical farm would provide 35 percentof the farm’s diesel fuel requirements. Onfarmuse also is constrained by its cost relative tothe subsidized price of gasohol sold at thepump and by the lack of relat ively automatic

inexpensive d i s t i l l i n g e q u i p m e n t , b o t h o fwhich operate against farmers’ acceptance ofonfarm distillation. The former could be offsetby production tax credits for alcohol fuels notsold commercially.

Moreover, ethanol product ion cooperat ivesm igh t hav e t he i r ow n s pec ia l bene f i t s andcosts. Co-ops would al low a relat ively largenumber of small farmers to benefit from scaleec onomies and c ou ld enhanc e t he s ens eo f r u r a l c o m m u n i t y . H o w e v e r , i n e q u a l i t i e samong members in large coops may lead to an

inequitable internal distribution of benefits. Inaddition, large co-ops would tend to serve awider market and may evolve to closely resem-ble corporate-owned dist i l leries, thus poten-

“ lo wa Corn Production Board, “Corn Alcohol Farm

Fuel I Things You Need to Know, ” 1979




Table 24.—Sources of Public Financing for Small-Scale Ethanol Production

Organization

U S Department ofAgriculture/Science

& Education Admin

Program

Alcohols & Indus-

trial Hydrocarbons(see 1419 of Food

and Agricultural Actof 1977, Public Law95-1 13)

Applicant eligibility

Colleges and; univer-sities having a de-

monstrable capacity

in food and agri-cultural research

Type of assistance

Grants of 2 to 3 -

years duration forresearch

Eligible activities

Research on the eval-

uation, handling,

treatment, and con-version of biomassresources for manu-facture of ethyl al-

cohol

Purpose of project

To develop improved

processes for pro-

duction of alcoholfrom biomass

Limits of project

$100,000 per grant of

2 to 3 years duration

U S Department ofAgriculture/Science& Education Admin

Energy Research(see 1414 of Foodand Agricultural Actof 1977, Public Law95-1 13)

Colleges and univer-sities having demon-strable capacity infood and agriculturalresearch

Grants of 2 to 3years duration for re-search

Research on fermen-

tation and relatedprocesses for pro-duction of alcohol,other than ethanol,and hydrocarbons

To develop improvedmethods of produc-tion and blending.marketing, and utili-zation of products

$100,000 per grant of

2 to 3 years duration

.U S. Department ofAgriculture/Office of

Energy

No restrictions Ge ne ra l a dvice General advice on

USDA program avail.

abil ity

Biomass production

for alcohol fuels;

conversion and use

of alcohol

Serves as informa-

tion clearinghouse

and provides for

coordinated USDAprograms

None

U S Department ofAgriculture/Farmers

Home Admin

Business & Indus-trial (B&I)

Cooperatives, privateInvestors in town of

less than 50,000

Loan guarantees Fixed costs,

operating capitalCreation of jobs, eco-nomic growth in

communities under50,000 population

$25,000.000 per Proj-ect maximum Priori-ty on small and in-termediate scale of$1,000,000 or less


Home Admin

Operating and FarmOwnership Loans

Farmers, farmer co-operatives

Direct loans at costof borrowing, loanguarantees

Improvement of farmincome $200,000 direct loan,$300,000 loan guar-

antee

Fixed assets, work-ing capital


Home Admin

CommunityFacil ities

Private nonprofit

public entitlesLoans at 5% Construct Ion loans,

working capitalImprovement of thelevels of public serv-ices and economicgrowth

Same as B&l($25,000,000 projectmaximum) priority

on small and inter-mediate scale of$1,000,000 or less

Housing and UrbanDevelopment (HUD)

Urban DevelopmentAct Ion Grant

Distressed cities andurban counties

Grant to city to beused for public im-provements or loansto developer

Fixed assets relatedexpenses

Stimulate employ.ment and tax base indistressed cities

None

Small Business Ad-ministration

Small Business En-ergy Loan Act, Pub-

lic Law 95-313

Small business, in-cluding farmers and

cooperatives for so-Iar and energy con-

servation technolo-gies

Loans and loanguarantees

Working capital, re-

search and supplies,plant construction,

materials, develop-

ment, manufacturingequipment for alco-hol fuels purposes

Promote small busi-

nesses in alcohol

production-related

activities

Direct loans of less

than $350,000, loanguarantees of less

than $500,000, no

more than 30% forR&D, no more than35% for workingcapital

Department of Com-merce/Economic De-velopment Adminis-

tration

Public Works andDevelopment Facil-ities

States. local govern-ments, Indian tribes,non.profit organiza-

tions

Grants for 50 to 80%of a total projectcost depending onneed

Construction andequipment of alcoholfuel plants, prioritieson small. scale plants(less than 1 milliongal/yr)

To stabilize or stimu-late local economy,

agricultural area em.phasis

Generally $300.000per project Must be

EDA Designated re-development Area

Department of Com-merce/Economic

Development Ad-ministration

Business Develop-ment Assistance

Business enterprisesincluding coop-

eratives

Direct loans up to

65%; loan guaran-tees up to 9 0%

Fixed asset and/or

working capital forproduction plants or

auxiliary facilities tosuch plants

Help job situation,Increase crop mar-kets, Increase supply

of transportation fuel

Generally for

$500,000 minimumsize Plants must bein eligible areasThis program nor

really would not beappropriate for indi-vidual farmers

To develop and dis-seminate efficienttechnologies for

small-scale fuel alco-hol production

Grants go only to 5currently funded CSAprojects Phase II

technical assistanceavailable to othereligible organiza-tions

Community ServicesAdministration Currently funded byCSA Rural and SmallFarm Energy

Grantees

Grant (limited)—technical assistance Construction andoperation of demon-

stration plants serv-ing energy needs ofrural low-income res-

idents, provision oftechnical assistanceto other communi-

ties in small alcoholproduction




Table 24.—Sources of Public Financing for Small-Scale Ethanol Production—continued

——.— —Applicant eligibility Type of assistance Limits of projectE ligible ac ti vi ti es Purpose of prefect

R&D for onfarm sys-

terns advanced ener-gy crops collection

and harvesting im-provements, and ad-vanced conversion

technologies

Develop Innovativesmall-scale renewa-ble energy technolo-gies

Develop and test al-

ternative fuels in-cluding alcohols indiesel and Internalcombustion engines

Conduct R&D anddemonstrative tech-niques convertingmunicipal waste togases and Iiquidsenergy

Disseminate state-of-

the-art information —train the public insmall alcohol fuelsfacil ities

Organization Program

Department of Biomass EnergyEnergy Systems Program

Individuals, farmers,businesses institu-tions (no restrictions)

Technical assist

ance competitiveawards

Conversion of bio-mass to alcohol fuels

None

Department of Small Scale Tech-

Energy nology ProgramIndividuals and smallInstitutions

Grants Small-scale renewa-

ble energy sources$50,000 per projectover 2 years

Department of Alternative FuelsEnergy Utilization Program

Individuals, farmers,

businesses Institu-tions (no restrictions)

Competitive awards R&D—also testing of

alternative fuelsNone

Department of Urban Waste ProEnergy grams

Individuals, busi-nesses, institutions,

Competitiveawards—loan guar-an tees are underconsideration

Conversion of urbanand municipal wasteproducts to energy

None

communities (no re-strictions)

No restrictionsDepartment of Office of Consumer

Energy Affairs

Technical, econom-

ic, and regulatoryadvice

Small-scale onfarm

alcohol productionsystems

None

SOURCE:Department of Energy Fuel From Farms, February 1980

t ia l ly negat ing many of the benef i ts

—

grams in determining distillers’ share of com-to the

modity markets. If this in fact occurs, the form,magnitude, and duration of the subsidies be-come critical issues.

First, the form of the subsidy will determineits effect on the indirect cost of ethanol pro-duction. For example, State gasohol excise andsales tax exempt ions could reduce avai lable

highway funds, while a special tax on gasolinecould provide revenue to subsidize the expan-s ion o f d is t i l l e ry capac i ty , spread the cos tamong gasoline users, and encourage conser-vation. On the other hand, such a special taxwould provide a more direct I ink between eth-anol production and food price increases.

Second, when the avai lable subsidies aread de d up they c an be quite large. The $0.04Federal exc ise tax exempt ion alone adds atleast $1/bu to the purchasing power of gasoholusers relative to food consumers or Iivestock

feeders. State tax exempt ions of ten add atleast an additional dollar to fuel users’ relativepurchasing power. Furthermore, many of theethanol conversion and end-use subsidies thathave been proposed or are in place have no ex-piration date. Yet, the need for subsidies couldbe obviated by increased distillery capacity re-

farming community. On the other hand, evensmall co-ops may not have the financial meansto take advantage of economies of scale, andthey may be subject to the problems of themembers’ unwiIIingness to participate active-ly. 1 7

Ethanol: Policies to Limit Production

All the subsidies and incentives discussedabove make it extremely profitable to produceethanol for use as an octane-boosting additivein gasoline. In the short term, these subsidiesmay be just i f ied because they make invest-ments in new ethanol capacity more attractiveand thus increase the rate at which new ca-pacity becomes avai lable. Arguments can bemade for ethanol distillation as one of the syn-fuel technologies that can be used immediate-ly as a hedge against the rising price of im-ported oi l and against the effects of another

oi l import interrupt ion.

As noted above, these conversion and end-use subsidies for grain ethanol are likely tobecome more important than agricultural pro-

‘ ‘Michael Schaat, Cooperatl\es ( W a s h i n g t o n , D C E xplora-

tory Prolect for E conom I( Alternatlk ef, 1977




solving economic questions about grain etha-nol production, by increases in the price of oil,or by increases in the price of or demand forfood requ i r ing tha t d is t i l le r ies swi tch feed-stocks.

Consequently, DOE and USDA should monitorthe economic and other effects of grain ethanolproduction carefully and reevaluate the need forincentives as planned capacity approaches 2 bil-lion gal/yr, and then set new production limitsfor further reevaluation, if appropriate. Policyincentives for ethanol also could be made self-Iimiting with sunset provisions, price or quan-tity thresholds, or similar requirements.

If adverse economic effects do occur, andpolicies are not self- l imit ing, three principaloptions could be used to arrest the growth of

grain ethanol production. First, pol icy makerscould remove grain ethanol subsidies. I f theprice of oil is so high that ethanol productioncontinues to grow without subsidies, taxes onfuel ethanol use could be inst i tuted. Of thethree options, a tax system would represent theleast market interference.

Second, policy makers might require dist i l-leries to switch from grain to cellulosic feed-stocks. Because commercial cellulose-to-etha-nol processes are not yet well defined, i t isuncertain exactly what process changes would

be necessary. But, based on current knowl-edge , c o n v e r s i o n t o c e l l u l o s i c f e e d s t o c k scould cost nearly as much as the initial invest-ment in the grain-based dist i l lery. Moreover,administer ing mandatory conversions wouldbe more expensive than a tax system, and thetaxes might achieve the same goal throughmarket forces.

Third, policy makers could limit permits fornew grain-based distilleries. Although this op-t ion impl ies a h igh degree of market in ter-ference, it would allow subsidies and other in-

cent ives for gra in ethanol product ion to re-main in place up to a specified capacity (e. g., 2bill ion gal/yr) while retaining control over theindust ry ’s g rowth . Moreover , some gasoho lproponents maintain that cellulose-to-ethanolconversion processes wil l be developed suc-cessful ly before grain-based ethanol causesmajor food price increases. I f this develop-

ment in fact occurs, l imi ts on grain ethanoldist i l lery permits would not l imit the overal lgrowth of alcohol fuels. Again, however, mostof these object ives could be accompl ishedthrough a tax system and i ts ef fects on themarket.

Methanol

Many of the above policies for ethanol alsoap ply to metha nol. The ma jor difference b e-tween the two fuels is that methanol could bep roduced i n much l a rge r quan t i t i es , e i t he rfrom biomass or coal, at relatively low costs.Also, there are unresolved technical questionsabout the use of methanol-gasol ine b lends.Therefo re, p olicies should b e d esigned to e n-courage the use of methanol both as a stand-alone fuel and in blends. The more attractiveoptions include using methanol in gas turbinesfor peakload generation (currently fueled withl ight dist i l late oi l) , in appropriately modif iedautomobiles in captive fleets (11.7 percent oft h e a u t o m o b i l e s a n d l i g h t - d u t y t r u c k s i n1976’ 8) , and in d iesel engines modi f ied fordual-fuel use. The first two options increasegasoline supplies while the third increases theavailabiIity of diesel fuel.

Subsidies can reduce the cost of the metha-nol used for fuel, while tax credits or grantscould be made available for converting exist-ing equipment to methanol or applied to theadded cost of new equipment capable of usingmet hano l. The diesel eng ine op tion is pa rticu-lar ly attractive because: 1) diesel fuel usagemay increase sharply in the 1980’s due to an in-creased number of diesel passenger cars, 2) themethanol will reduce visible particulate emis-sions, 3) the diesel engines can continue tooperate normally if methanol supplies are un-available, and 4) a methanol distr ibution sys-tem eventually would enable noncaptive f leetautomobiles to use pure methanol. With incen-t ives for using methanol in blends and as a

standalone fuel, the market could choose themo re a pp rop riate o pt ions. The introd uc tion ofgasoline pumps with the capacity to blend dif-ferent amounts and kinds of alcohol, and evento dispense pure alcohol, also would help in-troduce these fuels.

I E ~ranSPortaflon f~ergy conservation Handbook (Zd ed , OakRidge National Laboratory, October 1977), OR NL-5493




Energy Policies

i n add i t ion to subs id izat ion, gasohol pro-duction and use could be encouraged throughboth supply and market guarantees. DOE al-ready has the authority to provide supply guar-antees to gasohol manufacturers by ordering

oi l companies to prov ide them wi th gasol inefor blending into gasohol . For maximum ef-fect , DOE could mandate long-term supplycontracts between oil companies and disti l lersof all sizes. In addition, DOE could be author-ized to allocate fuel ethanol to areas experi-encing gasoline shortages.

The p rinc ipal ma rket g ua ra ntee op tions aref leet use, mandated levels of use, and pur-chase guarantees. Fleet use would be applica-b le ma in l y t o Gov ernment -ow ned v eh i c l es ,such as motor pools, police, and other public

service cars, or to large private operations suchas rental car agencies, taxicabs, and deliverytrucks, and could involve mandated long-termcontracts for gasohol supplies. Fleet use wouldhave the advantage of prov id ing somewhatcontrol led circumstances for evaluating gaso-hol performance and emissions. Mandated lev-els of use (i. e., requi r ing that al l automot ivefuel sold be at least X percent alcohol) shouldbe l imited to areas with abundant feedstocks.Negotiated purchase guarantees would virtual-ly el iminate any market ing uncertaint ies forthe fuel producer.

Fin a l ly , Fe d e ra l a n d St a t e G o v e r nm e n t sshouId cons ider rewr i t ing the i r regu la t ions(where necessary) to give equal weight to etha-nol and methanol, and to provide for blendsthat contain less than 10 percent alcohol fuels.In addition, R&D funding is needed to deter-mine the best ways of int roducing methanolin to domest ic I iqu id fue l suppl ies f rom fue lproduction and distribution to the various enduses. The results of such a study would enablepo l i c i es t o be d i rec ted t ow ard p romot i ngmethanol fuel use.

Environmental Policy

For the most part, the regulatory structuresto control the environmental impacts of com-merc ial gasohol product ion and use are in

plac e. These include the e nvironm enta l repo rt-ing requirements established under NE PA, theClean Water Act regulations on point sourcedischarges, and the Clean Air Act requirementsfor stationary sources. In addition, the use ofethanol as an automobile fuel is affected byC lean A i r Ac t prov is ions re la ted to mobi lesource emissions.

NEPA is des igned to ensure that Federalagency decision making considers environmen-tal amenities and values along with the tradi-tional economic and technical factors. As partof the NE PA process, all Federal agencies mustinclude a detailed E IS in every Federal action(such as issuing a permit) that significantly af-fects the quality of the human environment. Ifan agency determines that an act ion wi l l nothave a significant impact on the environment,they must publ ish a negat ive dec larat ion to

that effect. Because fuel alcohol dist i l leriesmust o bta in a BATF op erating p ermit, they aresubject to the NE PA requirements. BATF re-quires the permit applicant to fi le supportingenvironmental information upon which the EISdetermination is based. In most cases, an EISwill not be required, and NE PA will not affectthe construction of fuel alcohol plants.

The Clean Water Act establ ishes nat ionalwater quality goals that are structured aroundthe quality necessary for a variety of uses in-c luding publ ic water suppl ies, the protect ion

and propagation of f ish and wildl i fe, and rec-reat iona l , agr icu l tura l , indus t r ia l , and otherpurposes. Each State is required to developand implement, subject to the approval ofEPA, a comprehensive water quality manage-ment plan designed to achieve the nationalgoals through water quality standards for thedesignated uses of the receiving waters andthrough effluent limitations that restrict quan-tities, rates, and concentrations of chemical,physical, biological, and other constituentsthat are discharged from point sources. Efflu-ent Iimitation guidelines for various categoriesof point sources are determined by EPA.

Water quality standards and effluent l imita-tions are implemented through State certif ica-tion programs and through the National Pollut-ant Discharge Elimination System (NPDES). Anapplicant for a Federal permit to conduct any



Ch. 5—Policy q 179

Hence, if it became necessary, distillery boil-

er emissions could be regulated under the

Clean Air Act provisions related to stationary

sources, disti l lery effluents can be controlled

under the Clean Water Act, and automotive

emissions from using ethanol as a fuel addit ivecou ld be regu la ted under the mob i le sourceprovisions of the Clean Air Act. A possible ex-ception would be if NSPS included a size floorthat exempted boilers in alcohol fuel plants.

None of the above regulatory authorities has. been exercised as yet because the scientif ic

data necessary to justify regulation are incom-plete or ambiguous. Although EPA is research-ing the environmental effects of alcohol fuels,the fact that legislative interest in promotinggasohol is at i ts height whi le the resul t ingshort- and long-term implications of doing soare not yet fully understood reflects a continu-ing regulatory problem. That is, the FederalGovernment tends to direct i ts at tent ion andfunding toward exist ing recognized problemareas and, thus, can give very Iittle attention tolong-range planning or to researching emergingand potent ial future problems.




Crop Residues and Grass and Legume Herbage

Introduction

Although the energy potential of grass and

legume herbage and crop residues is not aswidely known as that of wood or gasohol, it iscons iderab le . Forage grasses and legumes,such as big bluestem, orchard grass, broomgrass, tall fescue, alfalfa, hay, clover, and reedcanary grass, could contribute up to 5 Quads/yrof renewable energy by 2000, depending on theavailabi l i ty of cropland, while the crop resi-dues that current ly are lef t in the f ie ld af terh a r v e s t i n g c o u l d c o n t r i b u t e m o r e t h a n 1Quad/yr to domestic energy supplies in 2000.Grasses and residues can be combusted alone

or cocombusted wi th coal or other b iomassfeedstocks in small boilers or used as the feed-stock for gasif iers. Because more oi l is dis-placed by these materials through gasification,this may be the more valuable use. In the longterm, however, both grasses and residues— as

Current

There i s l i t t I e cu r ren t po l i cy r e la ted tograsses and residues. Demand for these materi-als has never been great enough to necessitateregulating their supply or their manner of use.However, a number of considerations relatedto their role in overall agricultural, energy, andenvironmental policy have been raised.

Relative to the resource base, forage cropsplay a minor role in agricultural policy (as de-scribed in the gasohol policy section) to the ex-tent that they can be grown on set-aside lands.In some cases, grasses constitute “approvedconservation uses” for set-aside and other pro-duction control lands because their sod helpsto control erosion. On the other hand, land canonly be designated as set-aside if it produced acrop other than hay or pasture within the previ-ous 3 years, unless it was used for forage cropsin alI 3 years as part of a normal crop rotationpattern.

The p ol ic ies that c ould af fec t the c onver-sion of grasses and residues into energy in-c lude those that d iscourage or restr ic t new

welI as other celIulosic materials — may be-

come more valuable as ethanol or methanolfeedstocks.

If the energy potential from grasses and resi-dues is to be realized, both incentives for sup-ply and demand and funding for R&D might benecessary. I t is possib le that increased oi lpr ices alone wil l be a suff icient incentive tos t imu la te demand, wh ich in tu rn w i l l ra iseprices and elicit a supply of grasses and resi-dues for energy. Policy initiatives such as edu-cation programs and subsidies would acceler-

ate the introduction of these energy sources.This section reviews current policies affectingthe production and use of grasses and residuesfor energy and presents some pol icy opt ionsthat could stimulate their use or manage anyresulting adverse impacts.

Policy

uses of oil or natural gas as well as those thatregulate air polIutant emissions from station-ary combustion sources.

The Fuel Use Act of 1978, part of the Nation-al Energy Act , prohib i ts (wi th cer ta in excep-tions) the use of oil or natural gas as a primaryenergy source in new fuel-burning installationsand the use of natural gas in existing facilitiesafter 1990. But, these prohibitions do not applyto most cogeneration facilit ies or to units thathave a fuel heat input rate of less than 100 mil-l ion Btu/hour. Where combustion or gasif ica-tion facilit ies would be used for cogenerationor wou ld be re la t ive ly smal l , they wi l l no tcome under the Fuel Use Act prohibitions andthe primary incentive to use grasses and resi-dues as a primary fuel in these facilities wouldbe the cost of oil and gas. Where grasses orresidues are cocombusted with coal, however,the facilities could be quite large.

Similarly, the Clean Air Act provisions re-lated to stationary source emissions (as re-viewed in the gasohol policy section) primarily




are applicable to larger sources and, for themost part , would not af fect biomass combus-t ion or gasi f icat ion. I f technological cont ro lsor process changes were required, they couldincrease the cost of conversion. I n addition, it

Policy

Policy incentives for grasses and residueswou ld acce le ra te the i r i n t roduct ion in to do-mest i c energy marke ts and he lp reduce thelong-term investment uncertainties. The impor-.tant policy options are those that would ensurethe development of and investment in conver-sion technologies, as well as those that wouldprovide a reliable supply of feedstocks withoutcausing adverse environmental impacts.

Resource BaseWhi le gasohol must compete in t radi t ional

markets for starch and sugar feedstocks, thereare no establ ished markets for crop residuesand about 75 percent of current forage c r o p

product ion is used onfarm. Thus, l inks be-tween farmers and conversion facil i t ies needto be established. It is l ikely that the develop-ment of conversion technologies such as gasifi-ers wi l l be a suff icient st imulus to the estab-l ishment of a supply infrastructure. At somepoint, however, the Government may choose to

intervene in the market to ensure that, in the longterm, using cropland to produce grass and leg-ume herbage for energy does not conflict withfood needs, or to ensure that residue harvestingdoes not result in increased erosion or reducedsoil productivity.

The tw o source s of fo rage c rops for energyare increased product ivi ty and product ion onset -aside and potent ia l croplands. Demandsfor these crops, stimulated through conversionprocess subsidies, could be suff icient to in-c rease p roduc t i v i t y . I f add i t i ona l i ncen t i ves

are needed, they could include income sup-port programs similar to target prices or defi-ciency payments, or tax credits or deduct ionsfor the costs incurred in more frequent harvest-ing. For the use of set-aside lands, however,forage grass product ion would have to be in-tegrated in to the exist ing agr icu l tura l pol icy

could be d i f f icu l t to s i te conversion faci l i t iesin nonattainment areas, but because these areusually urban areas and the most cost-effec-t ive use of grasses and residues is in ruralareas, these wiII have only a Iimited effect.

Options

struc ture. This c ould me rely ta ke the form o fallowing forage grasses to be grown for energypurposes on product ion cont ro l lands asidefrom their value as an approved conservationuse, or forage grasses could be included in thegeneral agricultural production control and in-come support system.

The op t ions tha t i nvo lve income suppor tpayments (such as def ic iency payments) , orthat use CCC as the middleman between farm-

ers and conversion facilities, would i n c reaseGovernment program expenditures, but wouldtend to make the supply more reliable in thatCCC could monitor product ion and maintainreserves as a hedge against short-term supplyde f i c i t s . A l te rna t i ve ly , convers ion fac i l i t i escould establish long-term contracts with localforage producers or could purchase their owncrop land.

If demand for food continues to increase, lit-tle cropland may be available by 2000 for grassand leg ume herbag e p rod uct ion. Thus, special

attention should be given to R&D support forplant hybrids with high dry matter yields whengrown on land that is poorly suited to food crops.So long as these hybrids do not have signifi-cant ly h igher y ie lds on bet ter qual i ty land,there wi l l be no economic incent ive to d is-place food crop land with them.

Most exist ing agricul tural product ion repre-sents a potent ial source of crop residues forenergy. They c an b e ha rvested afte r the c rop ,but th is method delays fa l l ground prepara-tion, and, if fall rains come early, can prevent

i t a l together and thus delay spr ing p lant ing.A l t e rna t i ve l y , cus t om ope ra t o rs cou l d wo rkunder contract for farmers. As with foragegrasses, an exogenous demand may be suffi-cient to encourage residue harvesting. If addi-t ional incent ives are needed they could in-clude cost sharing, attractive f inancing, or tax




subsidies for the harvesting equipment. Again,residues could be bought and resold by CCC ort h r o u g h l o n g - t e r m c o n t r a c t s d i r e c t l y w i t hfarmers. Compensation programs should be de-veloped for onfarm storage of crop residuestacks.

Although grass and legume herbage cultiva-tion has a much lower erosive potential thangrains and other row crops, achievin g high drymatter yields of I ignocellulose crops may in-crease the potential for chemical water pol lu-tion from fertil izers. The options for control-ling this include education programs, effluentcharges, and fert i l izer application I imits im-p lemen ted th rough app roved conse rva t i onplans or section 208 permits; these are dis-cussed in detail in the gasohol policy section.However, any controls on nitrogen fert i l izer

use will limit productivity of crops other thannitrogen-fixing pIants.

The primary issue surrounding crop residueremoval is ensuring that farmers do not harvesttoo much of the residues and thereby lose ero-s ion pro tec t ion . Educat ion programs spon-sored by the Extension Service probably wouldbe necessary, but not sufficient, because re-search suggests that it is not within the eco-nomic interests of many farmers to protectagainst soil erosion unless they have extremelylong planning horizons and assume a very low

discount rate on future income. Therefore, sub-sidies for residue harvesting also might be linkedto environmental controls such as mandatoryapproved conservation plans, or taxes on resi-due harvest beyond levels determined to pro-

tect soils. Again, these options are discussed indetail in the gasohol policy section.

Conversion

If the energy potential of grasses and residuesis to be realized in the near to mid-term, Govern-ment incentives for the development of and in-vestment in conversion facilities will be neces-sary. For example, RD&D support is needed todevelop gasifiers that can use grasses and resi-dues , t o deve lop i nexpens i ve compac t i on o r pelletization methods to reduce fuel transpor-tat ion costs and improve handling character-istics, to demonstrate the use of grasses as amethanol feedstock, and to improve l ignocel-Iulose-to-ethanol processes. In addition, a fullrange of tax incentives (such as investment tax

credi ts, accelerated depreciat ion, or specia lenergy production credits) as well as subsidiessuch as low- interest loans, cost shar ing, orguaranteed feedstock prices should be consid-ered to spu r investm ent . The g ene ral imp lic a -tions of these options are discussed in detail inthe prev ious sec t ions . The pr imary noneco-nomic incentive to be considered is a guaran-teed supply of forage grasses or crop residuesf o r c o n v e r s i o n f a c i l i t y f e e d s t o c k s , i m p l e -mented either through CCC or direct long-termcontracts.

Finally, where cocombustion of grasses andresidues results in net adverse air quality im-pacts, alternative control strategies for theseshould be developed under the Clean Air Act.




Anaerobic Digestion of Animal Wastes

A review of the analysis in chapter 4 i nd i -cates that anaerobic digestion of manure fromsmal l conf ined animal operat ions could pro-

duce approximately 0.27 Quad/yr of biogas–-amixture of 60 percent methane and 40 percentCO,. Although 0.27 Quad/yr is not a large con-tribution to total U.S. energy demand, it couldmake many l ivestock operat ions energy sel f -sufficient.

b

However, several issues must be resolved be-fore anaerobic digesters could be widely used.First, the basic technological designs should beimproved and the biological reactions better un-derstood so that advanced automatic digesterswill perform reliably with widely varying feed-

stocks. Means of financing digesters that re-duce farmers’ investment costs also might beimplemented. Gas and electric utility rates andpractices must be revised in order to providebackup power at a reasonable cost and to pur-chase excess electricity (or, where applicable,gas) at a fair return. Finally, farmers must beconvinced to change their present waste man-agement practices to include anaerobic diges-t ion systems. Fortunately, the necessarychanges are consistent with emerging trends inconfined animal operat ions.

Farmers can obta in f inanc ia l ass is tancefrom several Federal agencies to defray digest-er costs, including DOE and USDA. In genera],this assistance consists of grants, loans, andloan guarantees. Farm investment tax creditsalso can be used for digesters, but often farm-ers al ready wi l l have appl ied the credi ts toother equipment.

. Manure-handling practices are federally reg-uIated under Clean Water Act prov is ions re-late d to b oth p oint and nonp oint sources. Thegeneral framework of the Act is described inthe gasohol pol icy sect ion. EPA has estab-l i shed ef f luent l im i ta t ion gu ide l ines for thepoint source category of “feedlots.” This cate-gory includes most forms of l ivestock opera-tions such as open and housed lots or barnswith relatively large numbers of animals (e. g.,1,000 head of catt le, 700 dairy cows, 2,500

swine, 55,000 turkeys). I n general, these regula-tions establish a zero discharge limit for newand existing feedlots unless the discharge is to

a sewage treatment plant.Livestock operations of al I sizes can be regu-

lated under the Clean Water Act’s section 208provisions for nonpoint sources. However, asdiscussed under alcohol fuels pol icy, sect ion208 is only now being implemented and it isnot clear what BMPs to control manure-relatedrunoff wiII be. Including anaerobic digestion as aBMP probably would accelerate introduction ofthe technology.

In addition to the provisions of the CleanWater Act, manure-handling practices also areregulated under State laws. State requirementsvary widely ; they may inc lude permi ts , mini -mum runoff storage capacity, maximum landapplication limits, and odor and dust regula-tions. Some States also offer income on invest-ment tax credits or other financial incentives(e. g., grants, loans) for anaerobic digestion sys-tems, as part of either State environmental orenergy policy. For larger systems with high ini-t i a l i nv es tmen t c os t s , innovative financingschemes such as leverage leasing may accelerate

digester use.

In general, the Federal and State regulationsrelated to manure-handling practices have thepotential to encourage anaerobic digestion be-c aus e t hey p rov ide a s t rong i nc en t i v e t ochange such practices; surveys reveal that ademonstrated need for such change is a majorobstacle to farmer acceptance of anaerobic di-gestion. 19 Financing for both the implementa-tion of Federal and State regulations and fornew manure-handl ing systems would help toincrease farmer acceptance.

Utility policies may also pose an obstacle to

digester use. Existing rate structures both forprov id ing backup power and for purchas ingsurplus power discriminate against small indi-

19R H Cole, et al , ‘‘A Surve} of Worces ter County’, Massachw

wtts, Da I ry I a rm f W it h Respect to T hel r Potent la I for Methane

(;enerat Ion, SClence Techno/ogv ReI ie~~, S e p t e m b e r 1 9 7 6

27-45




vidual energy sources such as digesters. Someof these utility policy issues wilI be resolved byimplementat ion of the Publ ic Uti l i t ies Regula-tory Policies Act of 1978, part of the NationalEnergy Act. Others may require additional leg-islation. Policy options related to these issues

are discussed in detai l in OTA’s forthcomingstudy of dispersed electric generation and arenot discussed further here.

Probably the most important policy optionsfor anaerobic digestion are RD&D support for thedemonstration of a wide range of inexpensiveand reliable digester systems and the implemen-

tation of attractive financing schemes. O n c efarmers have been shown that reliable, auto-matic, and relatively inexpensive digesters are

avai lable, and that these systems wil l solveenvi ronmental problems stemming f rom cur-rent manure disposal pract ices, the pr imaryobstacle to anaerobic digest ion — farmer ac-ceptance—wil l have been removed. From thatpoint , ex is t ing incent ives such as DOE and

USDA loans and grants, as well as available taxcredi ts and deduct ions, should be suf f ic ient ,especially if they help farmers overcome thehigh initial investment cost for digesters. Final-ly, it should be recalled that Federal subsidiesfor conventional energy sources are substan-t i a l . T h e s e s u b s i d i e s m a k e b o t h t h e i n t e r n a land external costs of individual energy systemssuch as digesters seem relatively greater thanthey are.



Ch. 5—Policy 185

Conclusion: Biomass and National Energy Policy

The United States today confronts severalbroad policy issues with respect to bioenergydevelopment: 1) whether to adopt policies to

promote the growth of bioenergy beyond thoselevels that will be reached through the opera-

. t ion of market forces in conjunct ion wi th in-centives and subsidies that already have beenapproved; 2) whether to change the characteror size of existing incentives and subsidies that

m affect bioenergy; and 3) whether to adopt newpolicies to manage the impact on soils, forests,the environment, and society that wil l accom-pany the growth of these new sources of en-ergy.

A key conclusion of this report is that there

is a great deal of biomass in the United Statesthat can be converted to useful energy— muchmore than most people realize— and it can bebrought into production quite rapidly if neces-sary. OTA estimates that as much as 5 to 6Quads/yr of bioenergy will be used by 2000 ifprices remain stable (in real terms) at 1980levels, or increase moderately, and if Govern-ment promot ional act iv i t ies remain more orless as they are today. This means that the con-tribution of energy from biomass will more thantriple in less than 20 years even if little or nothingnew is done. OTA’s confidence in this estimateis based on the fact that it projects a continu-a t i on o f cu r ren t t r ends and the expec tedgrowth would take place primarily in the forestproducts industry and in home heating appli-cat ions where technologies are a l ready wel lknown and in use.

Growth of bioenergy beyond this level, how-ever, is likely only if prices increase significantlyor if America adopts policies to promote a muchmore rapid expansion. Those who support sucha course of action do so chiefIy on the groundsthat bioenergy would help displace importedoil and would hasten the transition to relianceon renewable resources. Assuming a major na-tional c om mitment to this go al, OTA e stimate sthat the resource base will sustain the produc-tion of as much as 12 to 17 Quads/yr of energy.

The o bjec t ive in th is c hap ter has be en topoint out those considerations that should be

-

taken into account in making choices aboutthe speed and character of bioenergy develop-ment and to describe and analyze specific ac-

tions that might be taken by the Federal Gov-ernment to further promote and guide that de-velop me nt. The p ag es tha t fol low summ a rizethe key pol icy a l ternat ives that have beenidentif ied.

As noted, Congress already has passed anumber of measures to support the develop-ment of new resources of energy of all kinds,and many of these have improved the pros-pects for investment in bioenergy. The mostimportant of these provide for the phased de-regulation of crude oil and natural gas prices.

Because of the wide range of feedstocks and con-version technologies involved, however, manybioenergy systems can benefit from policiesmore carefully tailored to the needs of the pro-ducers and users of this form of energy. Al-though some legislation with this objective hasbeen passed, a number of addit ional optionsshould be considered.

In the case of wood, a principal concern isthe management and care of the resource base —the Nation’s forest lands. One of the reasonsthat wood energy is attractive is the possibility

that increased demand for it will lead to moreintensive forest management, and thereby toan increase in the quantity and quality of avail-able t imber. Unfortunately, however, i t is notcertain that this will occur, or that the manykinds of environmental damage that may re-sult from wood harvesting, transport, and con-version, can be avoided. Therefore, an increasein the use of wood energy should be accompa-nied by new and expanded programs and incen-tives to encourage–and perhaps even require–good forest management practices, includingmuch more extensive assistance to, and coopera-

tion with, State forestry agencies.

The need for support ive Government pro-grams is especial ly great outside the forestproducts indust ry where inexper ience wi thwood energy may de lay i ts adopt ion evenwhen it is cost effective. Programs to provideinformat ion and technical assistance in con-




q

q

q

credit to the producer. Although there area number of reasons why farm energy au-tonomy is a t t rac t ive , these shou ld beweighed against the increased fuel savingsthat would be achieved by the country asa whole if alcohol is used as an octane

booster in the national gasoline supplystream rather than in pure form as a stand-alone fuel.

The adjustment of the automobile fleetto accommodate alcohol blends.– Experi-ments indicate that at blends as low as 10percent alcohol some cars will experiencedifficulties. There may also be problemsof corrosion of parts in cars as well as inblending and transport facilities (these ares o m e w h a t g r e a t e r w i t h m e t h a n o l t h a nwith ethanol), and the Government may

want to consider means of assuring thatautomobiles are adapted to avoid theseproblems in the future. Early disillusion-ment with gasohol as a result of problemsof this kind — problems that may only ap-pear after the expirat ion of new-car war-ranties — may prevent the rapid accept-ance of this fuel blend.

The passage of regulations to ensure max-imum displacement of imported fuel andthe most favorable net energy balance. — Ofparticular importance, in this respect, isrequiring the use of solar energy, coal, orbiomass fuels in new distil leries built toproduce alcohol for gasohol and requiringthat the alcohol be blended with a loweroctane gasoline than that which the gaso-hol displaces.

The introduction of methanol to the liquidfuel system.— For a number of reasons,methanol produced f rom wood, grasses,residues, and other plant feedstocks ap-pe ars to b e a n attrac tive opt ion. There-fore, a careful study should be made ofthe best ways of introducing methanol to

the Iiquid fuel system of the country, from

the fuel production and distr ibution sys-tem to the various end uses.

In the design of national policies to promoteand manage the development of bioenergy anumber o f b road cons ide ra t i ons a re wo r thhighlighting. The first is that the actual effec-tiveness and impact of policies, whether pro-motional or regulatory, are extremely difficultto anticipate. Because of this it is of the ut-mos t impo r tance tha t t h i s unce r ta in t y beacknowledged a t the ou tse t by mak ing anycommitments tentative and including in legis-lation, where appropriate, detailed provisionsconcerning subsequent monitoring and assess-ment of results. I t is also important to avoidthe pitfall of granting large or permanent sub-sidies that wil l distort the al location of eco-nomic resources in the future. Such measures

a s “sunset” prov is ions , p r ice and quant i tythresholds for subsidies and incentives, andstatutory requirements for review of exist ingpolicies are means that may be employed toaccomplish these goals. A graduated phase-outof incentives for alcohol production, for exam-p le , m igh t beg in when impor ted o i l cos t s$35/bbl (1980 dollars) or in 5 years, whichevercame first. Formal review of wood energy sys-tems and the condition of the forests and soilsmight be required when USDA determines that5 Quads o f wood and o ther I ignoce l lu los icfeedstocks are being consumed annually. Reg-ulatory measures designed to protect the en-vironment serve best i f they are spelled outclearly at the outset of a new kind of economicact iv i ty , and not imposed on investors af terthey have committed themselves. This is espe-c ia l l y impo r tan t i n t he case o f b ioene rgybecause the environmental impacts of harvest-ing and use are so complex and potent ia l lyfa r-reach ing . Fina l ly , pa rt ic u la r a t t en t i on tothe deg ree o f p rem ium fue l d i sp lacemen tach ieved in p roduct ion and consumpt ion isneeded if the development of bioenergy is to

reduce the dependence on imported oil.



Appendixes



.

Appendix A: KEY TECHNOLOGICAL DEVELOPMENTS

NEEDED TO HELP REACH THE BIOENERGYPOTENTIAL

The 1985 bioenergy potential probably can be

achieved with relatively direct development of ex-isting technology, but the quality and success ofthese developments will influence the ease withwhich the potential is achieved. I n the longer term,there are numerous possible developments thatcould improve the potential for energy from bio-mass and help to make it an increasingly attractiveenergy option. I n addition, basic and applied re-search in areas directly and peripherally related tobioenergy can increase the body of knowledge onwhich new and successful developments uItimatelymust be based,

Some of the general areas of technological de-velopment that could be important to bioenergy

use are Iisted below. The basic criteria used inchoosing these are that: 1 ) the RD&D probably canproduce usable results, and 2) it addresses an area

that either constrains bioenergy development orshows promise for important new applications of

biomass for energy. Although all of this RD&D canbe carried out simultaneously, the areas are di-vided into near and longer term needs, based onthe time it may take to achieve commercial appli-cat ions.

Near Term

Resource BaseWood harvesting. –A repertoire of wood-harvest-ing techniques and equipment should be devel-oped. The goals should be to minimize occupa-t ional safety hazards, esthet ic and envi ron-mental damage, and costs, particularly whenhandling small pieces of wood. Additional goalsshould be to ensure that the potential benefits(e.g., increased growth of commercially valuabletimber) accrue as well as to improve the econom-ics of harvesting and colIecting low-quality woodfrom smalI tracts of forest.Surveys.– Surveys should be conducted to deter-mine more accurately the biomass resource, andsubregional supply-demand curves for varioustypes of biomass should be developed. Thisshould include the present and projected avail-ability of cropland and potential cropland forenergy production and the costs associated withusing it.

q

q

Impacts of biomass supply uncertainties. -A com-mon feature of most biomass fuels is the uncer-tainty in supply. For most sources this will pri-marily be a local, short-term uncertainty causedby fluctuations in weather and local demand.But for grains and sugar crops, considerableuncertainty also surrounds future world demandfor food, future crop productivity, and the abilityof agricultural policy to stabilize farm commodi-ty prices as the supply of good cropland that caneasily be brought into production diminishes.These uncertainties should be investigated todetermine their impacts on the biomass supplysectors — particularly agriculture— and on theway that fuel users will respond in order to

reduce their risks. The emphasis should be ondeveloping policy options that can better dealwith these uncertainties.Biomass storage and transport. — Inexpensivemeans of compacting, storing, and transportingwood and particularly herbage and crop residuesshould be investigated in order to overcome theproblems associated with the low energy density(energy per cubic foot) and poor handling char-acteristics of these materials.

Conversion Technology

Methanol from wood, grass and legume herbage,and crop residues.— Conversion processes for

producing methanol from grass and legume herb-age and crop residues should be demonstrated,while those for producing methanol from woodshould be developed further in order to decreasecosts and increase the efficiency (i. e., greater car-bon monoxide-hydrogen yields and lower charand oil formation). Furthermore, small-scale con-version facilities (less than 150 green ton/d input)should be developed in order to gain access to alarger fraction of the biomass resource. (A largerportion of the resource is made accessible withsmalI conversion processes because the dis-persed nature of biomass makes it easier to col-lect small amounts for conversion than to collectthe large quantities required for large-scale con-version facilities. )Airblown gasifiers.— Various sizes of airblowngasifiers should be developed and demonstratedin order to improve the technology and gainoperating experience.

19 7




q

q

q

q

q

Wood stoves.– Wood stoves should be devel-oped further to increase their efficiency and easeof operation and to reduce emissions, safetyproblems, and maintenance. This should also in-clude the investigation and development of heatstorage devices that can provide a steadier, moreeven flow of heat from wood heating systems.

New direct combustion technologies. – New directcombustion technologies for wood and otherfeedstocks that show promise for increased effi-ciency and decreased emissions in industrial ap-pl ications should be developed and demon-strated.Ethanol from wood, grass and legume herbage, and

crop residues. — Development of processes foreconomically converting wood and herbage (in-cluding crop residues) to ethanol should con-tinue. While most of the processes are not cur-rently ready for demonstration, those that areready and appear to be feasible should be dem-

onstrated.Anaerobic digesters.– A variety of onfarm an-aerobic digester systems should be demon-strated. The goals should be to lower installationcosts and improve the digesters’ reliability andfIexibility.Onfarm fuel production.--Onfarm ethanol pro-duction may be popular as a means for farmersto achieve some degree of liquid fuel self-suffi-ciency and to divert crops in times of low prices.If so, then the maximum amount of oil can bedisplaced by using these crops to produce dryethanol as an octane-boosting additive to gaso-line. In order to do this onfarm, relatively auto-

matic distilling equipment capable of producingdry ethanol safely and inexpensively should bedeveloped. For dry and wet ethanol production,facilities should be developed that are capableof producing dry distillery byproduct and usingwood and herbage as a fuel. Solar-powered distil-leries also should be developed.

There is, however, a mismatch between etha-nol and farmers’ liquid fuel needs (e. g., dieselfuel). Although this can be overcome with mod-ifications in the farm equipment, other possibil-ities for onfarm fuel production also should beinvestigated. One example may be cultivation ofsunflowers and the development of small pressesthat can be operated easily and inexpensively toseparate the sunflower seed oiI for use as a dieselfuel substitute, The research should determinewhich farming operations are best suited to on-farm fuel production, how many of each type ofoperation exists in the United States, and whatfuel and energy savings can be achieved in each

category. The emphasis should be on providing a

q

repertoire of possibilities from which individualfarmers can choose the alternative best suited totheir needs.Large-scale ethanol production from grains andsugar crops. — If grains and sugar crops are to beconverted to ethanol, methods for reducing thedistillery energy usage and other ethanol produc-

tion costs should be developed. The most impor-tant, at present, appear to be the development ofmeans for storing sugar crops without deteriora-tion of the sugar due to bacterial attack, proc-esses for continuous fermentation that can beoperated reliably without the need for redundantequipment, and new means for removing theethanol from the fermented solution (distilIationis used at present).

Dry milling processes also should be inves-tigated because of their potential for reducingthe investment cost for distilleries capable ofproducing a distillery byproduct (corn gluten)

that can be used in higher proportions in animalfeeds and for different animals than distillers’grain.

End Use

q

q

Use of alcohol-gasoline blends.– The problemsassociated with using blends of either methanolor ethanol and gasoline should be investigatedfurther. Techniques for keeping the blends dryshould be developed. The automobiles and en-gine designs most Iikely to be adversely affected

by using the blends should be identified, the typeand cost of necessary modifications should be

established, and attempts should be made toident i fy or develop low-cost addi t ives t h a t

minimize the adverse effects. Similar studies of

the distribution systems should be carried out,

Because of the potent ia l ly greater problems

associated with methanol (as compared to etha-

no l ) b lends and the poss ib i l i t ies fo r p roducing

s ign i f ican t ly la rger quant i t ies o f methano l than

ethanol in the 1980’s, the use of methanol fuelshould be examined carefully. The entire systemincluding oil refineries, distribution systems, andvarious end uses should be examined with re-spect to costs and oil savings to determine whichstrategies are best suited to introducing metha-nol into the Iiquid fuels system,Data for National, State, and local decisionmaking. –An important feature of bioenergy is thatfeedstock availability and cost vary considerablywith time and geographic location. Local dataand analyses should be developed that calculatethe costs of using the local biomass for energyand the effects of the supply and cost variations



Appendix A q 1 9 3

on the economics of using biomass. Thesemodels also should contain information on thelocal supply, type, and variation in supply of thebiomass resource. This could aid individuals andbusinesses in making informed decisions on asite-specific basis as to whether or not to utilizethis resource for energy. This will involve con-siderable survey work.

Longer Term

Resource Base

qCrop switching. — Various crop-switching possibil-ities that involve fuel production should be in-vestigated further. One example is the cultiva-tion of corn instead of soybeans. The byproductof producing ethanol from the corn can then besubstituted in animal feed for some of the soy-

beans not produced. Other possibilities includethe cultivation of sugarbeets used for animalfodder. The crop-switching possibilities shouldbe explored to determine the extent to whichthey can be used to produce fuels from agricul-ture without expanding the quantity of croplandcultivated. Included in this should be investiga-tions of the effect of substituting current feed ra-tions with varying amounts of forage — distillers’grain, and forage-corn gluten mixtures.

qCrop development. — A wide variety of crop typesshould be developed, including grasses, legumes,and trees; freshwater and saltwater plants; plantsthat produce or can be converted to liquid fuels

suitable for transportation; and plants that canbe cultivated on lands that are or may becomeunsuitable for food or feed production. Cultiva-tion techniques (especially for aquatic plants)and the development of plant hybrids requirespecial attention, because these unconventionalcrops are Iikely to have both unique potentialsand problems. The criteria should be the net pre-mium fuels (oil and natural gas) displacementper acre cultivated (for land-based plants), theutility of byproducts, the economics, and the en-vironmental impacts. At the same time high-yieldforage grasses and legumes should be devel-

oped, so as to free more pastureland for energyproduct ion.. Ocean farms. — R&D into the engineering criteria

for ocean kelp farms is needed to better under-stand, among other things, the stresses that sucha farm would be subject to, how to build thefarms economically, how to protect the kelpfrom storms and strong currents, and how to min-imize the loss of nutrients applied to the farm.

q

q

q

Environmental impacts of biomass cultivation. –The long-term environmental impacts of culti-vating short-rotation trees on forestland andfarmland and of whole (aboveground) tree re-movals from forestland should be investigated.The emphasis with respect to whole (above--ground) tree removals should be on its effect onthe forest’s nutrient balance and soil organicmatter, and any subsequent long-term effects onthe forest’s productivity and capability of resist-ing stresses.

Because grasses and some other perennialcrops currently appear to be the most environ-mentally benign crops for cropland and becausethere is excellent promise for improved yieldsfrom these types of plants, screening and devel-opment of fast-growing perennial crops such assome grass and legumes could have a positiveenvironmental impact. The emphasis should beon high-yield grass and legumes that can be

cultivated easily and economically on a varietyof cropland types with a minimum of fertilizersand pesticides.Indirect costs.–- Methodologies should be devel-oped to help establish the indirect costs asso-ciated with bioenergy, particularly the competi-tion with food and feed, the effects of increasedforest management, the potential competitionwith the production of traditional forest prod-ucts, and the effects on foreign trade. Develop-ing the data needed for these analyses probablywill involve considerable survey work.Photosynthetic efficiency.– Basic research in pho-tosynthesis and plant growth should be con-

tinued to determine the efficiency of plants inconverting basic photosynthetic material (photo-synthate) to other products (e. g., celIulose, or-ganic carbon, hydrogen, and oils) and to betterunderstand the effects of various stresses (watershortage, heat, cold, poor soil, etc. ) on plantgrowth. Research should also address the rea-sons for the low photosynthetic efficiency ofplants and ways to improve it.

Conversion Technology

q

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Thermochemistry of biomass.–-The chemistry in-volved when biomass is combusted, gasified, orIiquified, as well as secondary gas phase chemis-try should be investigated. Substantial processand efficiency improvements and new applica-

tions in the production of chemicals and fuelsfrom biomass could result.Chemistry and physics of Iignocellulose.--- In-vestigation of the chemical and physical proper-ties of Iignocellulosic materials (e. g., wood,




grasses, legumes, and crop residues) should con-tinue. New ways of separating the various com-ponents of Iignocellulose from one another orexposing them to chemical attack should be re-searched and developed. Inexpensive pretreat-ment that make fibrous materials easier to han-dle should be investigated.

qBiochemical conversions. — The biology and bio-chemistry of the biochemical conversion proc-esses (e. g., fermentation, hydrolysis, and anaero-bic digestion) should be researched in detail sothat these processes can be better understoodand therefore controlled and manipulated. Vari-ous biomass feedstocks should be investigated,novel techniques (e. g., matrix immobilized en-zymes) explored, and new types of bacteria andyeasts developed (e. g., by molecular and tradi-tional genetics).

End Use

qUses for aquatic plants. — Because of the possibili-

ty that large quantities of saltwater and fresh-water plants may be available in the long term,techniques for harvesting the plants and suitableconversion technologies (e. g., anaerobic diges-tion) should be developed. Because large quanti-ties of these plants are not Iikely to be commer-cially available for some time, basic and appliedresearch into the fundamental physical, chemi-cal, and biological properties of these plantsshould precede more advanced development ef-forts. The possibilities for very high yields fromaquatic plants and the possibility of large aqua-

tic energy farms (e. g., in the ocean or on land un-suitable for land plants) probably justify an ac-tive RD&D program even though many currentconcepts are specuIative.

q Use of alcohol fuels.– Alcohols appear to be theliquid fuels that can be produced most easilyfrom the biomass feedstocks in greatest supply.These can be converted further to liquids thatare compatible with gasoline, but the conversionprocesses inevitably involve additional expenseand energy loss. Consequently, vehicles capableof accepting fuels that may vary from pure gaso-line to pure alcohol and all of the intermediateblends should be developed; the changes neededin the Iiquid fuels distribution system to ac-commodate alcohols should be assessed; and thealcohol-to-gasoline processes should be investi-gated in order to judge which is the least expen-sive long-term option for the consumer.

Other

qBasic and applied research in peripheral areas. — Basic or applied research in one area is never

isolated from peripheral areas of research. Thesuccess of research usualIy depends on the bodyof knowledge being developed in related areasand often depends on the results in areas which,at first, seemed totally unrelated. Consequently,the quality of the results and the ultimate suc-cess of bioenergy research is Iikely to depend onthe support given peripheral areas of research.These areas include the biochemistry and biol-ogy of plants, the chemistry (includin g t h e r m o -chemistry) of organic materials, and the physicsof biomass. No one can predict which areas ulti-mately will prove to be of fundamental impor-tance to long-term developments. Bioenergy de-

velopment, however, probably will be enhancedby supporting a wide range of basic and appliedresearch in areas peripheral to the basic objec-tives.

energy from biological processes

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