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  1. Closing the Biomass Power Cost-Price Gap B.R. Bock 3/5/04 Southern Bio-Products Conference Green Power Track Biloxi, MS

  2. Why Biomass Power? • General • Renewable (replenishable) • Cleaner than from fossil fuels—NOx, SOx, Hg, CO2 • Rural economic development • Solve biomass by-product and waste management problems • Other environmental benefits (e.g., energy crops vs. row crops) • Utility Perspective • Possible renewable portfolio standards (RPS) • Limited wind and solar resources in SE US • Biomass—primary large-volume option in SE US • Other renewable mandates (e.g., Federal Executive Order 13123) • Demand for green power (i.e., willingness to pay premium)

  3. Direct Combustion Technologies 1/

  4. ΔCOE: Biomass Co-firingvs. Coal

  5. Options for Closing the Gap • Renewable energy incentives • Mandated use of renewable power(renewables competing with renewables) • Lower feedstock costs (technical, market, policy) • Energy conversion improvements • Increased revenue from co-products • Systems optimization • Environmental credits

  6. Renewable Energy Incentives • Production tax credits (e.g., Section 45~1.8¢/kWh) • Closed loop • Open loop • Renewable energy production tax credit (REPI) • Tradable renewable energy credits • Green power premiums* • Green power tags* • Above generally are mutually exclusive • Other (e.g., accelerated depreciation)

  7. Mandated Use of Renewable Power(renewables competing with renewables) • Federal or state renewable portfolio standards (RPS)* • Proposed levels generally in the 2 to 10% range • Federal Executive Order 13123 • 2.5% of Federal facility electricity consumption from renewables by 2005

  8. Lower Feedstock Costs • Environmental pressures on wastes and by-products • Poultry litter • Swine manure* • Wood waste piles • Commodity surpluses (e.g., small diameter wood) • Higher energy crop yields (lower unit costs of production) • Agricultural policy options for improving energy crop economics*

  9. Energy Conversion Improvements • Higher efficiency (e.g., gasification combined cycle) • Lower capital and O&M costs (e.g., lower cost gas clean-up) • Refining biomass co-firing with coal*

  10. Increased Revenue from Co-products and By-products • Combined heat and power • Bio-refinery concept (power + fuels and chemicals) • Fertilizers and feed supplements from poultry litter ash • Other

  11. Systems Optimization • Economies of scale • Continuous operation • Combined heat and power • Systems integration

  12. Integrated Poultry and Ethanol Production SE U.S. Markets Carbon Dioxide Corn Ethanol DDGS Poultry Litter Combined Heat & Power Poultry Feed Meat Ash Fertilizer

  13. Energy Economics • Ash value offsets poultry litter feedstock costs • 5 MW electricity @ 3.5¢/kWh • 100,000 lb steam/hr @ $3.50/MBtu NG eq. • 65 MBtu hot air/hr @ $3.50/MBtu NG eq. • 18% internal rate of return (before tax)

  14. Environmental Credits • SOx • NOx • CO2

  15. Value of CO2 Credits

  16. Summary: Biomass Power • Wind resources very limited in SE US • Solar very expensive • Biomass is primary large-volume renewable option, but currently has a significant cost-price gap • Gap is smallest for co-firing and combined heat and power • Also relatively small gaps associated with some waste- management and systems-integration opportunities • Emerging incentives, premiums, policies, and environmental credits have good potential for closing the cost-price gap in short- to mid-term • Technological advances can help bridge the gap in the longer term