IRENA, the International Renewable Energy Agency, has published a study on the costs of biomass power generation, concluding that the most competitive projects can generate electricity at a cost as low as US$0.06/kWh.

Around the world, large quantities of agricultural and forestry wastes go underutilised and the agency argues that using these wastes as a feedstock to provide power and heat can cost less than electricity from the grid.

According to the study, the total installed cost of biomass power generation technologies varies significantly by technology and country. For example, the total installed costs of stoker boilers were between US$1880 and $4260/kW in 2010, while those of circulating fluidised bed boilers were between $2170 and $4500/kW and anaerobic digester systems of between $2570 and $6100/kW.

Operations and maintenance (O&M) costs can make a significant contribution to the levelised cost of electricity (LCOE) and typically account for between 9% and 20% of the LCOE for biomass power plants, the study finds. However, they can account for a lesser percentage than this in the case of co-firing and greater for plants with extensive fuel preparation, handling and conversion needs. Meanwhile, fixed O&M costs range from 2% of installed costs per year to 7% for most biomass technologies, with variable O&M costs of around $0.005/kWh. Landfill gas systems have much higher fixed O&M costs, which can be between 10% and 20% of initial capital costs per year.

A key finding is that secure, long-term supplies of low-cost, sustainably-sourced feedstocks are critical to the economics of biomass power plants. Feedstock costs can be zero for wastes which would otherwise have disposal costs or that are produced onsite at an industrial installation, for example, black liquor at pulp and paper mills or bagasse at sugar mills. Feedstock costs may be modest where agricultural residues can be collected and transported over short distances.

However, citing the trade in wood chips and pellets, the authors note that feedstock costs can be high where significant transport distances are involved due to the low energy density of biomass. The IRENA analysis covers feedstock costs of between $10/tonne for low cost residues to $160/tonne for internationally-traded pellets.

Reducing Costs

Potential for cost reductions in biomass power generation equipment is complicated by the range of technologies available, from the mature to those still at the pilot or R&D stage, and by the often significant variations in local technology solutions, the IRENA analysis states.

Many biomass generation technologies are mature and are not likely to undergo significant technological change, while cost reductions through scale-up will be modest. However, for the less mature technologies, significant cost reductions are likely as commercial experience is gained.

Gasification technologies using wood or waste wood as feedstock may achieve capital cost reductions of 22% by 2020, while those for stoker/BFB/CFB direct combustion technologies will be more modest at between 12% and 16%. By 2015 cost reductions for BFB and CFB gasification technologies could be in the order of 5% to 11%, while for direct combustion cost reductions they may be 0% to 5%. anaerobic digester (AD) technologies could benefit from greater commercialisation, and cost cuts of 17% to 19% might be possible by 2020, with cost reductions of 5% to 8% by 2015.

However, the authors conclude that combustion technologies are well-established and are generally bankable if the project economics are solid. Gasification with low gas energy content and internal combustion engines are an established niche technology in India, but shifting from these simple gasifiers to ones with greater efficiency, using oxygen as a reactive agent, gas clean-up and gas turbines to scale-up this technology to larger power plants still requires more demonstration, especially because it requires expensive gas clean-up, which is currently the main focus of gasification technology improvements. In AD systems, the main technological development needed is linked to the digesters (as better control of the process: enzymes, pH, temperature) and pre-combustion gas clean-up.

According to IRENA, the main question regarding the viability of biomass power plants lies in the development of a reliable feedstock supply chain, especially because long-term feedstock agreements are essential for financing any biomass project. Predicting biomass cost reduction potentials is challenging because many factors are involved, such as the supply chain, resource potential, sustainability criteria and so forth.

Research into cost saving processes is currently underway. For example, it has been shown that denser fuel pellets can offer LCOE savings, but the drawback is that often the pelletisation process results in significant feedstock loss and increased cost. At the same time, the storage and transportation costs of denser pellets are significantly lower than other options, such as baling. Efforts to integrate biomass with traditional agriculture, for example through the use of crop rotation and agricultural intensification, may lead to yield increases and price reductions, the report continues. Sustainable harvesting techniques, such as one-pass harvesting, can reduce harvest site fuel consumption significantly. Further, developing synergies between harvest and transport, for example by using self-compacting wagons for both harvesting and transportation, may also provide cost savings, they add.

Analysis of the potential for biomass feedstock cost reductions for the European market to 2020 suggests that cost reductions of 2% to 25% could be achieved, although average cost reductions for energy crops by 2015 are difficult to estimate. It is assumed that dedicated energy crops will be 5%-10% cheaper as the result of harvesting and logistic improvements by 2015. Trends for forestry and agricultural residue prices and costs are more uncertain due to the complex balance of positive and negative effects.

Competitive Impact

The economics of biomass power generation are critically dependent upon the availability of a secure, long-term supply of feedstock at a competitive cost.

Observing that feedstock costs can represent 40% to 50% of the total cost of electricity produced, the authors note that the lowest cost feedstock is typically agricultural residues. For forestry, the cost is dominated by the collection and transportation costs. The low energy density of biomass feedstocks tends to limit the economical transport distance from a biomass power plant. This can place a limit on the scale of the plant, meaning that biomass struggles to take advantage of economies of scale.