Oklahoma, United States [Renewable Energy World North America Magazine] The European market for biomass-fired power and heating is more developed than that of the United States, mainly due to stringent European regulatory requirements and broad public support for renewable initiatives. Denmark, for example, enacted legislation as early as 1993 requiring increased use of biomass in energy supply. At present, the 27 nations of the European Union (EU) have agreed to raise the share of renewables in the energy mix to 21 percent for electricity and 20 percent for heat by 2020. In 2005, two-thirds of all EU renewable energy came from biomass, which is expected to retain a significant share of EU renewables going forward.
As a result of these regulatory requirements, growing public awareness and the Kyoto protocol, the market for biomass in Europe is strong and growing. According to the European Biomass Association, the EU will increase its biomass consumption from 13 million tons annually today to 100 million tons by 2020. In fact, most large North American biomass pellet plants were built specifically to export to the European biomass market.
Europe is several years ahead of the U.S. in biomass development. However, state-level renewable portfolio standards are now mandating that U.S. utilities begin the process of embracing biomass. It is possible that within several years, the U.S. biomass landscape may more closely resemble that of Europe.
Norbridge recently conducted a study to assess interest in biomass generation and identify some of the issues and challenges pertaining to conversion to biomass. Twenty-five percent of the utilities interviewed stated that their interest in increasing the use of biomass fuel was a “10” on a 1 to 10 scale (with 10 the highest). Across all utilities, the median response was 7.5 out of 10. This level of interest was driven by renewable energy standards as well as many utilities’ limited ability to increase use of hydro, wind and solar power.
The U.S. Energy Information Administration (EIA) expects biomass consumption for power generation to increase significantly in coming years. EIA’s base case forecast–which does not factor in the impact of a potential national cap-and-trade initiative–projects biomass-fueled power to increase from 60 billion kWh in 2008 to 188 billion kWh by 2020, of which 165 billion kWh is to come from “wood and other biomass.” If all of this generation were to come from forest residues (a primary source for biomass), the demand could well exceed the current supply, potentially by a multiple.
In the words of baseball legend Yogi Berra, “It’s tough to make predictions, especially about the future.” As such, it is impossible to know how close EIA’s expectation will come to the realities of 2020. Nonetheless, the analysis makes three issues clear. First, if these forecasted levels are going to be approached much less achieved, a variety of wood and agricultural biomass sources will be required to meet anticipated demand. Second, a supply of purpose-grown biomass sources will be needed as residuals alone will not be sufficient. And third, competition for biomass resources could become fierce. Add in local or geographic implications and the supply equation for any individual utility could become very interesting.
Biomass Conversion Challenges
In the U.S., shifting power generating capacity to biomass will not be easy. Biomass as a fuel source for large-scale power generation is in its infancy. Suppliers and supply chains have not yet been developed on the scale necessary to supply volume of biomass necessary to meet U.S. power needs. Unlike the coal supply chain that has been in place for many years, it is not clear at present how the biomass supply chain will or should develop. This is made more complex as numerous utilities are considering entering the biomass market before it is well understood how the competition for fuels sources could evolve. Key questions for a utility considering a conversion to biomass are likely to include the following:
- Type of biomass: Wood vs. agricultural products, raw vs. pelletized, purpose grown vs. byproduct/residual; torrefaction; specifications (Btu content, moisture content, size, emissions)
- Sourcing: Biomass origins, suppliers, producer facility sizes, pellet plant locations (if applicable)
- Transportation: Modal options, equipment requirements, unloading infrastructure, delivery quantities
- Storage/Handling: Type of fuel storage (indoor for certain types of biomass pellets), conveying infrastructure, dust control systems, fire suppression systems
- Boiler: Type of boiler to use or boiler conversion options.
Each involves a variety of options and trade-offs that must be considered when developing a biomass supply chain. In addition, each may include significant capital requirements. For example, boiler modifications, transportation equipment, unloading infrastructure, storage facilities and other potential requirements could add up to a significant expense depending on the needs of a specific utility or generating facility.
Type of Biomass
Biomass fuel can come in many flavors. The right choice for a particular power plant will depend on biomass availability and cost and fit with boiler and environmental requirements. Wood-based and agriculturally-based biomass are potential fuel sources. However, major regional differences exist in the local availability of potential biomass resources.
For a power plant in the Southeast, a wood-based fuel may be preferred due to the region’s abundance of softwoods. Other forested regions, such as the Midwest and Northeast, consist primarily of hardwoods, which tend to be more expensive. In parts of the Midwest that are agricultural “breadbaskets,” an agricultural product solution may be a better option. But if in doing so the biomass demand sparks a competition for land use, then it could drive up the cost of biomass and alternative land uses.
Biomass can be purpose-grown as fuel or it can be the byproduct of, or residual from, another process. The advantage of purpose-grown biomass is the stability of supply of biomass fiber and increased efficiency in harvesting the biomass. The main disadvantage of purpose-grown biomass is that it can compete with other uses for the land or the product. For example, using some types of roundwood as a fuel source would take that supply “out of circulation” for the lumber and pulp/paper industries. Using residual biomass is typically less expensive and competes less directly with the primary use for that biomass. This is especially important for agricultural products. However residual biomass, such as corn stover and tree branches, is not always harvested with the primary material, making collection difficult.
Biomass fuel can also be “raw” or pelletized. The process of pelletizing the fuel typically increases the Btu content by removing moisture from the biomass. It also standardizes the fuel’s size and shape. However, pelletizing the biomass is typically energy intensive and requires the capital cost of the pellet plant as well as drying and pelletizing equipment.
New technologies could potentially shift the economics of biomass sourcing. One example is torrefaction, a process by which biomass is heated in a low-oxygen environment at 250 C to 320 C before pelletizing. The economics of this process have yet to be proven in large-scale operations, but supporters point to attractive qualities of the torrefaction process: higher energy content (around 11,000 Btu/lb.), lower moisture content and increased stability in storage (indoor storage may not be required).
While biomass is burned for power in the U.S. and Canada, it is done on a relatively small scale. For a utility looking to convert or develop significant generating capacity, it is not at all clear from where or by whom the biomass would be sourced. Some sources may be near a power plant, but they may be unable to provide the quantity required to supply a 100 MW plant or larger. A utility may need to source from multiple suppliers in different geographic areas to obtain the fuel quantities necessary.
In many regions, biomass suppliers for centralized power generation do not yet exist. Some potential fuels suppliers may be active in the agricultural or wood products industries, but are not yet active in the biomass fuels business. In many cases, the suppliers are start-ups with limited operating history. The current credit crisis is inhibiting the ability of some of these new companies to obtain financing.
The way in which the biomass supply industry develops will significantly affect the delivered cost of biomass fuel to North American utilities. For example, pellet plant size and location could be good for one utility but bad for another. Pellet plants can be large–producing up to 500,000 tons a year–or like the more numerous 50,000- to 125,000-ton plants. A key determinant of pellet plant size is the distance from which raw biomass must be harvested to produce the requisite volume of pellets. Since raw biomass can have a moisture content of up to 50 percent, inbound transportation costs to the pellet plant can become significant as distances increase. This will also influence whether pellet plants are located near utilities or near the raw biomass supply. Since the industry is still relatively undeveloped, there may be opportunities for early-moving utilities to shape the supply chain before it is fully established.
Once built, some utilities will have to compete for the biomass with other users. The cyclical availability of biomass will be partially a function of demand in other industries. For example, when demand is low for products such as pulp and paper, the usable by-products of that process will also be lower. During periods of high demand for agricultural or timber land, it could be more expensive to use land for purpose-grown biomass crops, as the opportunity cost for that land could be higher.
Competition for fuel will not only be between North American utilities, but also will involve European utilities. Biomass supply is not infinite. The implications of this supply uncertainty are magnified by long-term investments with multi-year lead times that utilities will need to make to convert to biomass-fueled generation.
Most utilities receive their coal by unit train or by barge; in either case in large quantities. Biomass fuel is much more likely to arrive in smaller quantities from a larger number of suppliers. This will require greater coordination and management at the power plant to efficiently receive the biomass fuel. Railcar blocks will likely be smaller and arrive more frequently. River terminals may have to serve as consolidation points from multiple biomass suppliers. Fuel then would be loaded onto barges and delivered to the utility. Modal options are likely to change as well. Trucks could play a more significant role in biomass fuel transportation than they do with coal, a result of the smaller quantities produced at each location.
Biomass also could require different equipment and unloading infrastructure than most utilities currently use for their coal. Traditional non-torrefied wood pellets, for example, must remain dry, requiring enclosed transport equipment and covered storage. Railcars may have to be covered hoppers instead of the open-top gondolas or hoppers used for coal. Cars will likely be bottom dump with gates (similar to grain cars) instead of doors (as rapid discharge coal cars have today). Trucks will also have to be covered and will either have dumping capability or require a tilt dumping deck at the generating station (as is often used for wood chips at paper plants). Barges will likely have to be covered. So, too, may unloading infrastructure, which also may need to be available for receiving by multiple modes.
Since the cost of biomass can be much higher than that of coal (wood pellets can cost three to 10 times more than coal), transportation costs will likely be a smaller percent of total delivered cost than with coal. As a result, it may be economically viable to source lower-cost biomass from farther away when the biomass product cost savings exceeds the additional transportation cost. As a result, a large number of potential sourcing and transportation option combinations will have to be assessed.
Many types of biomass, such as traditional wood pellets, will require inside storage. A 100 MW plant could burn an estimated 400,000 tons of biomass pellets annually. If three months’ supply was required, or 100,000 tons, a storage warehouse 180 feet wide by 1,200 feet long could be required. Alternatively, 10 10,000-ton silos could be used. If a generating station had units burning both biomass and coal, storage space and infrastructure for each fuel would be required. Other handling equipment, such as conveyors and stacker/reclaimers, may have to be modified or replaced altogether with equipment better suited to the type of biomass fuel selected.
Storage and handling infrastructure also must take into account biomass’s high combustibility. This is true for both pelletized and raw biomass. Wood pellets are not as durable as coal and produce more combustible dust. Dust control systems, temperature sensors and fire suppression systems may be required to support safe operations. In storage and handling design, the distances that pellets are dropped either into storage or through the conveying process should be managed to limit pellet damage and dust creation.
Boiler capabilities and requirements are critical to the success of any biomass-fired power plant. It almost goes without saying that the fuel supplied to the boiler must be a fuel it is capable of burning. While a new biomass power plant can be designed to burn a certain type of biomass fuel, a plant converted from coal to biomass may have greater biomass fuel limitations. There will likely be new or additional permitting and/or environmental requirements that will also need to be addressed.
Laying the Groundwork
While biomass consumption has not yet reached European levels, the groundwork has been laid for a dramatic increase in biomass usage for U.S. power generation. As utilities look to biomass, they must understand the challenges associated with the conversion and the ways in which biomass differs from coal. In addition to selecting the type of fuel to be burned, utilities also must identify fuel sources that balance objectives for total delivered cost control, flexibility and boiler compatibility.
Rather than wait for the biomass supply chain to evolve organically, forward-thinking utilities will act now to ensure that the biomass supply chain evolves in a way that is optimized for their needs.
Lee Clair is a partner with Norbridge Inc.