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Heating the Northeast with Renewable Biomass

By Jennifer Runyon, Managing Editor and Graham Jesmer, News Editor
April 30, 2009 | 13 Comments

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New Hampshire, United States [RenewableEnergyWorld.com] Roughly 30 percent of the energy used in the U.S. is for heating and cooling and a large proportion of the energy used for heat, at least in the Northeast, comes from burning oil. While using renewables to generate electricity and solve transportation issues (the other 70 percent of the equation) receives the lion's share of attention from policymakers, the organizers of the first "Heating the Northeast with Renewable Biomass" conference that took place in Nashua, New Hampshire this week are hoping to change that.

In something akin to the "eat local" movement, it's important that policymakers focus on biomass thermal energy in the Northeast, conference speakers pointed out. In the region there is ample supply of biomass and its winter are extremely cold.

Opening the conference was a keynote by New Hampshire Governor John Lynch, who said that NH is a good place to focus on renewable biomass for heat. The region is comprised of 84% of growing forest and therefore biomass is in large supply. Adding that New Hampshire has been named the most livable state in the union for the 5th year in a row by State Rankings 2008: A Statistical View of America, protecting the state's way of life is a huge concern and he recognizes that moving toward more renewable energy will create jobs and help the region remain sustainable.

Charlie Neibling, General Manager of New England Wood Pellets (NEWP) and a conference organizer explained the purpose of the conference: to exchange information, share new technology, network and explore business opportunities, raise awareness and take action on policy issues and build a stronger industry to help reduce the reliance on fossil energy.

Neibling also unveiled the Biomass Thermal Energy Council (BTEC) a new organization that will work in Washington, DC to bring awareness about and favorable policy for biomass thermal energy.

William Straus, President of FutureMetrics, a firm that performs economic modeling and forecasting, explained that just in the state of Maine, 80% of the homes heat with oil. That adds up to more than $1 billion dollars annually spent on oil with a large proportion of that money going overseas. If you look at the entire Northeast, which includes New England and New York, the number is $13.7 billion annually — all money that is traveling out of the region.

Straus showed a model of a hypothetical scenario in which 1% of the homes in the Northeast converted to biomass thermal heating systems each year for 10 years, with local or federal governments offering a $6,000 tax credit (roughly the difference between a new high-end oil furnace and a pellet furnace). In 10 years time, he explained, the government would be looking at a net benefit to the treasury of approximately $7.1 billion dollars in increased tax revenue and more than one-hundred thousand new jobs.

Former Pennsylvania Congressmen and owner of Warm Home and Hearth, John Peterson, also delivered a keynote at the conference where he stressed the importance of energy remaining affordable in this country. He offered insights for conference attendees into how to work with policymakers. "This is how you work your way in, folks" he said, adding that all biomass industry stakeholders should know their representatives and make sure that their representatives know what is going on in the biomass industry.

The first-of-its-kind Heating the Northeast with Renewable Biomass conference offered access to 26 vendors, 8 breakout sessions and 2 keynote sessions and drew more than 400 attendees. Organizers were pleased with the turnout. "All of the stakeholders are here," said NEWP President and CEO, Steve Walker explaining that it is time for the industry to band together in order to help craft policy that is on par with other renewables.

"We can do this," he said.

Look for an article on Biomass District heating coming up soon on RenewableEnergyWorld.com.

To see clips of the speeches from John Lynch, Charlie Neibling and John Peterson, play the video below.

Bioenergy

13 Reader Comments

Comment
1 of 13

mike-holly-17241

May 1, 2009

This political lobbying would not be necessary if the US had free energy markets. The problem is the US is picking winners (97% utility-scale wind for electricity and cellulose ethanol for vehicle fuels) and losers (biomass, hydropower, geothermal and PV solar that could be used for electricity). The US picks technologies and suppliers through resource planning and competitive bidding controlled by utility monopolies. The bids are rigged in favor of the utility's own generators and that of their affiliates and their political co-conspirators in the independent wind industry. Germany will likely be the world leader in renewable energy for 21st century, because they reward feed-in tariffs to independent power producers to develop a wide range of distributed renewable energies.

Comment
2 of 13

mark-blanding-145543

May 1, 2009

Excelent points. Even though I use Geothermal, and even though I pay extra for renewable electricity from my power company, I recently invested in a pellet stove to reduce my winter electricity use, thus reducing the use of coal for electrical power generation. The tax credit makes this easier to do. If it helps create american jobs, that's a big bonus as well!

Comment
3 of 13

e-henry-beitz-17061

May 2, 2009

One thing puzzles me - how is renewable biomass carbon neutral?

Comment
4 of 13

Anonymous

May 2, 2009

US heating oil usage (at least as of 2006) is 5 billion gallons/year, 82% in the northeast. Nationwide, only 8.5 million (76% of which are in the northeast) of the ~111 million households (~7.7%) rely on heating oil, which is perhaps smaller than one would think given the articles statement that a "large proportion" of heating comes from oil--most heating is by natural gas.

At $6000 in subsidies per household converted, the article proposes spending $3.9 Billion dollars. This would get heating oil use by 10% or cut costs on such by ~$1.37 Billion dollars/year. Somehow the article suggests that this will lead to 100,000 new jobs and $7.1 Billion in new tax revenue (presumably over a 10 year period). I sense some hyperbole here. Even if ALL the savings in oil costs went to fund new jobs, leaving nothing for tax revenue or decreased energy costs (which would be needed to spur conversion) the jobs would only be able to pay $13,700/year. This is not much of a salary for these new "green" jobs. Over the 10 year phase in, total oil costs would be reduced by $7.5 Billion dollars, yet somehow the state will get 7.1 Billion in "net" tax revenue even after paying $3.9 billion in subsidies and with 100,000 jobs funded from this savings. I am forced to conclude the estimates in the article are wrong....

Steven

Comment
5 of 13

Anonymous

May 3, 2009

Comment 4 has some of the numbers right but does not put it together correctly. The commenter also forgets that the money spent on heating fuel stays in the region and does not go to some foreign treasury.

Using the average cost for heating oil over the next 10 years (based on EIA forecasts) the northeast will spend an average of $18 billion per year on heating oil over the next ten years. The EIA also says that 76% of each dollar spent will not stay in the state. That is about $13.7 billion PER YEAR that goes away and adds no value to the regional economy. Over the ten years (at 1% per year conversion) the total net value added to the economy is more than $10.5 billion. That is a combination of the savings on heating costs (roughly $4 billion) and the fact that money that is spent on heating (roughly $6.8 billion) remains in the regional economy.

That money stays in the economy and based on a conservative 3X multiplier will generate about $31 billion in new commerce over the 10 years. Assuming a 30% tax rate and a 1% per year conversion over 10 years, this works out to $7.1 billion.

Seems better, in the case of heating fuel, to buy American and keep the dollars here so they can circulate in our economy and create jobs.

No hyperbole. One can disagree on the assumptions but not the facts that the northeast, if we have business as usual, will consume about 4.8 billion gallons of heating oil which, at the current cost of about $2/gallon will drain 76% of almost $10 billion from not only the local states but, for the most part, from the country.

Comment
6 of 13

Anonymous

May 3, 2009

Regarding the remarks of comment #5:
1) a 1% per annum conversion from $13.7 billion/year fuel costs leaving the region saves (.01+.02+.03+...+.09+.1)*$13.7 billion =$7.5 Billion; the commenter suggests this is $10.5 billion, perhaps he would elaborate on where the additional $3.0 billion comes from....
2) a 3X multiplier seems very optimistic
3) a 30% REGIONAL tax rate is obviously wrong--state taxes are never that high and this neglects the tax LOSES on the reduced oil commerce
4) the article quotes the "net benefit" to the treasury, which should include a deduction for the $3.9 Billion in subsidies
5) Wood is a common commodity in many nearby places, e.g., Canada, so the assumption that all the replacement fuel will be made locally seems optimistic

Thus, these still seem like hyperbolic estimates....
Steven

Comment
7 of 13

keith-barnaby-57954

May 3, 2009

Comment #3 asks an important question. There is no mention in the article of stove pipe emissions. Particularly in mountainous regions such as New England and throughout the Rockies, many communities have over many decades implement moratoriums on wood burning due to the immense particulate pollution that hovers in valley areas. Even were it carried away by high winds, it is still a health and environmental consideration that deserves close examination.

Comment
8 of 13

WilliamStrauss

May 3, 2009

Commenter # 6 insists that the estimates are in error. That is an error.

The average expenditure PER YEAR for ALL households in the northeast (New England plus NY) is expected to be just over $18 billion. 76% of that is $13.7 billion PER YEAR. However that is for all households. By the way that is based on the EIA heating oil forecast which suggests that in 2019 heating oil will be about $4.71 with an average of about $3.59. That seems optimistic...

If 1% per year convert for 10 years, the TOTAL NET (fuel savings plus keeping the spending here) over the entire 10 years is expected to be around $10.5 billion.

So use a 2X multiplier. That is $21 billion for a cost to the treasury of $3.1 billion. The tax rate is FEDERAL. This analysis does not consider the positive effect to state revenues since income taxes and sales taxes vary considerably across these states (NH has neither).

The total consumption of pellet fuel would be about 3.9 million tons per year for all of the states if the 10% conversion rate is reached. According to the government's data, there are about 108 million tons per year of SUSTAINABLE harvest across these states. Maine currently harvests 17 million tons per year at a growth to harvest ratio of 1.1 (forest is growing faster than being harvested). New York and Mass have ratios greater than 2.

The article does not mention emissions but the report that it is based on does. These fully automated central heating systems are identical to the type used in Europe where there are hundreds of thousands of these are currently functioning under very stringent air quality rules. In 2008 Europeans consumed about 3.2 million tons of pellet fuel. In 2007 76% of new homes built in Austria were build with pellet fueled central heating systems. These systems are cleaner that many of the oil boilers currently installed and are almost carbon neutral. These are not wood stoves or pellet stoves. These are sophisticated boiler systems.

Comment
9 of 13

Anonymous

May 3, 2009

In comment 8, William Strauss reiterates, but does not explain, the estimate that was mentioned in comment 6 of $10.5 Billion dollars in savings from a ramped 1% per year conversion of oil to wood pellets.
If we accept his estimate of $13.7 Billion per year for the amount of money headed to foreign sources for all the oil, which seems reasonable, the money diverted from foreign oil bills over 10 years from the fuel conversion is: (.01+.02+.03+...+.09+.1)*$13.7 billion =$7.5 Billion. I asked explicitly where the extra $3 Billion comes from but received no response.

c

In comment #6 an anonymous poster enigmatically states: "That is a combination of the savings on heating costs (roughly $4 billion) and the fact that money that is spent on heating (roughly $6.8 billion) remains in the regional economy." Strauss, in comment #8, also refers to "fuel savings plus keeping the spending here" as contributing to the $10.5 Billion total.

Possibly the $6.8 billion referred to as "spent on heating" is the posters version of my $7.5 billion estimate derived using more refined annual fuel estimates than the quoted $13.7 Billion estimate. However, the reference of "$4 Billion for fuel saving" being added to the injection of funds diverted from foreign oil costs into the "local" economy is confusing as it should not matter how much of the $7.5 Billion is spent on local fuels or on other products--you still can get at most $7.5 Billion more into the local economy (and much of this may go for Canadian wood pellets or some other foreign source).
to be continued...

Comment
10 of 13

Anonymous

May 3, 2009

continued from comment #9....
Naturally, if the reduction in oil usage reduces costs for the other 90% of oil users you would get additional savings, but this is such a small perturbation on the global oil market that the conversion should not be expected to influence oil prices appreciably. Thus, Strauss' estimate seems to involve double counting of savings, but perhaps he would like to elaborate on precisely how he derives this $10.5 Billion estimate.... Steven

Comment
11 of 13

WilliamStrauss

May 3, 2009

I will be happy to email the full paper to any reader. It carefully explains every estimate. The numbers that Steven suggests are wrong are in fact correct. Of course they are estimates but the assumptions and methodology are explicit.

One small point: the analysis assumes 2% annual inflation so one cannot simply add up numbers over the 10 years without accounting for the change in prices.

Comment
12 of 13

Anonymous

May 4, 2009

I downloaded the Strauss report from his website. On page 5 one clearly sees that the $10.5 Billion figure he obtains for 10 year oil savings does not include a deduction for the estimated ~24% of that amount that remains in the US economy before this figure is used (together with a factor of 2 multiplier) to estimate net increases in economic activity. The failure to do this will lead to a significant overestimate of the benefits of the proposed plan. For example, perhaps a guy who gets laid off from an oil delivery position will be hired to deliver wood pellets, but you should not count his new job in NET new economic activity without also accounting for his initial job loss.

Conversion of oil to wood pellets may well make economic sense, but the projections quoted in this article are overly rosy and the authors should have conducted a more critical appraisal of the data before writing their article.
Steven

Comment
13 of 13

WilliamStrauss

May 4, 2009

Steven is correct in that the value for the net increase in savings does not include the 24% that already remains in the region. That 24% is shown in the EIA data as marketing and distribution costs not local manufacturing jobs. There is no refining or any other value added locally to heating oil. For wood pellets all of the value added is in the region.

However, his critical remarks are useful in that the incremental costs of transportation and marketing in the wood pellet business model in which there is substitution from oil to pellets are not a net addition.

We will redo the analysis with an adjustment accordingly.

However, back of the envelope, even if the entire 24% is dropped from the story, that lowers the net savings from $10.5 billion to about $8 billion. Thus the net added is lowered to about $8.33. Using a 2X that yields $16.6 billion NET after a $3.1 billion investment.

The jobs number is still near 100,000.

Seems like the idea still is a good one.

By the way, the paper on the website is an older version (my bad) and will be updated with the latest analysis (including a case in which the 24% is not included) by the end of the week.

It should be noted that the financial analysis does NOT include the purchase of 4000 or more new delivery trucks (currently being built in New England) and 1000 or more fuel storage depots (about $325,000 each). The estimate for new trucks and storage systems is mentioned in the paper. But the financial impact is not included in the cash flow story. That will be added to the analysis since that is a significant omission to the financial analysis also.

It is good to have evolution in thinking to provide the basis for policy.

Thanks.

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Jennifer Runyon

About: Jennifer Runyon is managing editor of RenewableEnergyWorld.com and Renewable Energy World North America magazine, coordinating, writing and/or editing columns, ... more »